REGISTRATION DOCUMENT including the annual fi nancial report 2015 CONTENTS 04 SOCIETAL, SOCIAL AND ENVIRONMENTAL INFORMATION 249
Key fi gures 24.1 CSR organizational overview 250 Group history 44.2 Europcar, promoting sustainable, shared mobility 251 4.3 Europcar, renting cars responsibly 255 4.4 Concordance tables 265 01 4.5 Methodology note 267 OVERVIEW OF EUROPCAR 4.6 ILO report 270 AND ITS ACTIVITIES 11 1.1 History and development 12 1.2 Group profi le 14 05 1.3 Presentation of the Group’s market CORPORATE GOVERNANCE 273 and competitive environment 16 5.1 Management and supervisory bodies 274 1.4 Competitive strengths 20 5.2 Role and activities of the supervisory board 293 1.5 Strategy 26 5.3 Compensation and other benefi ts in kind 1.6 Description of the Group’s business 29 received by corporate offi cers 310 1.7 Organization chart 58 5.4 Summary statement of transactions 1.8 Research and development, patents and licenses 62 in Company securities by corporate offi cers 319 1.9 Property, plant and equipment 63
06 02 INFORMATION ON THE COMPANY RISK FACTORS 65 AND ITS SHARE CAPITAL 321 2.1 Risks relating to the Group’s industry and markets 66 6.1 Information on the Company 322 2.2 Risks related to the business 69 6.2 Constitution and bylaws 322 2.3 Risks relating to the Group’s fi nancial structure 6.3 Share capital 334 and profi le 79 6.4 Main shareholders of the company 340 2.4 Regulatory and legal risks 85 6.5 Profi t-sharing agreements and incentive plans 2.5 Regulatory, legal and arbitration proceedings 92 – employee shareholders 344 2.6 Financial risks 94 6.6 Disclosures pursuant to Article L. 225-100-3 of the French Commercial Code 345 2.7 Insurance and risk management 94 6.7 Dividend distribution policy 345
03 07 ACCOUNTING AND FINANCIAL INFORMATION 99 ADDITIONAL INFORMATION 349 7.1 Persons responsible 3.1 Analysis of Group results 100 for the Registration Document 350 3.2 Liquidity and capital resources 120 7.2 Related party transactions 351 3.3 Investments 145 7.3 Signifi cant contracts 353 3.4 Consolidated fi nancial statements 7.4 Statutory Auditors’ Special Report on related and Statutory Auditors’ report 147 party agreements and regulated commitments 354 3.5 Analysis of the results of Europcar Groupe S.A. 218 7.5 Statutory Auditors’ fees 357 3.6 Company fi nancial statements 7.6 Publicly available documents 357 and Statutory Auditors’ report 221 7.7 Concordance tables 3.7 Outlook for fi nancial year 2016 245 (European regulation no. 809/2004, 3.8 Information on mid-term trends and objectives 247 annual fi nancial report, Management Board 3.9 Signifi cant change in the fi nancial report, concordance tables of social, or business position 248 societal and environmental data) 358 3.10 Comments from the Supervisory Board 7.8 Glossary 364 regarding the Management Board’s report and the fi nancial statements for the year ended December 31, 2015 248 REGISTRATION2015 DOCUMENT ANNUAL FINANCIAL REPORT
GENERAL COMMENTS
This Registration Document (hereinafter the “Registration Pursuant to Article 28 of EU regulation 809/2004, the following Document”) also includes: information is incorporated by reference in this Registration Document: a the annual financial report that must be prepared and published by all listed companies within four months of the a the consolidated fi nancial statements of the Group for the start of each fi nancial year, in accordance with Article L. 451-1-2 years ended December 31, 2012, 2013 and 2014, contained of the French Monetary and Financial Code and Article 222-3 of in Section 20.1.1 on page 293, which in turn make reference the AMF General regulation; and to Annex II of the Registration Document fi led with the AMF on May 20, 2015 under number I.15-041 (the “Registration a the annual management report of the Management Board Document”); of Europcar SA, which must be submitted to the General Meeting of shareholders called to approve the financial a the report of the Statutory Auditors on the consolidated fi nancial statements of each fi nancial year, in accordance with Articles statements of the Group for the years ended December 31, L. 225-100 et seq. of the French Commercial Code. 2012, 2013 and 2014, contained in Section 20.1.2 of the Registration Document, on pages 293-294 (inclusive); Two cross-reference tables on pages 358 et 359 identify the information related to these two reports. a the comparison of results for the years ended December 31, 2014 and 2013, contained in Section 9.2 of the Registration In this Registration Document, the terms the “Company,” Document on pages 165-171 (inclusive). “Europcar” and “Europcar Groupe S.A. ” mean the Europcar Group, the holding company of the Group, and the words, The s ections of these documents not included by reference in “Europcar” and “the Group” should be understood as this document are either irrelevant to current investors or are references to Europcar Groupe S.A. and all companies included addressed in another part of the Registration Document. in the consolidation.
Pursuant to its General regulation, notably Article 212-13, the French Financial Markets Authority (the “AMF”) registered this Registration Document on April 14, 2016 under number R. 16-021. This document may only be used in support of a fi nancial transaction if supplemented by a securities note approved by the AMF. It was prepared by the issuer and is the responsibility of its signatories. It was registered, pursuant to the provisions of Article L. 621-8-1-I of the French Monetary and Financial Code, after the AMF had verifi ed that it is complete and comprehensible, and that the information it contains is consistent. It does not imply authentication by the AMF of the accounting and fi nancial information contained therein. Copies of this Registration Document may be obtained free of charge from Europcar Groupe S.A., 2 rue René Caudron, Bâtiment OP, 78960 Voisins-le- Bretonneux, as well as on the websites of Europcar Groupe (www.europcar-group.com) and the AMF (www.amf-france.org). This Registration Document in English is a translation of the French “Document de référence” provided for information purposes. This translation is qualifi ed in its entirety by reference to the “Document de référence”.
EUROPCAR REGISTRATION DOCUMENT 2015 1 KEY FIGURES
A dense network of local stations to serve clients all over the world
Corporate Countries
International Franchises
Partnerships
3,points of600 sales worldwide
Presence in over 140 1,928 1,stations654 operated 140 countries stations operated directly or as franchises by agents
2 EUROPCAR REGISTRATION DOCUMENT 2015 2015 was an outstanding year for the Europcar Group, marked by the success of its IPO. This achievement was driven by the successful roll-out of the fi rst phase of the Group’s transformation plan, Fast Lane. The year also produced excellent fi nancial results, thanks to the contribution of each of the Group’s subsidiaries and the many commercial initiatives rolled out. PHILIPPE GERMOND Chairman of the Management Board One of the world’s largest car rental networks
A205, vehicle fl eet that is400 serviced of65 experience regularly and environmental friendly
Over € 6,employees000 2million ,of142 revenue in 2015
Breakdown of 2015 revenue
Rental income by region (2015)(1) Rental income by customer (2015)(2)
26% 10% 56% Germany Spain Leisure 22% 5% UK Portugal 44% Business 17% 3% France Belgium 10% 7% Italy Australia New Zealand
(1) Rental income excluding franchises (2) 2015 fi gures for the nine Europcar «Corporate Countries» alone
EUROPCAR REGISTRATION DOCUMENT 2015 3 GROUP HISTORY
1971
1949 1957
1970 1951 Founding Europcars of Europcar in Paris by acquires a new Raoul-Louis Mattei Signing of visual identity under the name Creation a cooperation Raoul-Louis Mattei with a new logo «l’Abonnement of the «Europcars» agreement sells Europcars to and a new color: Automobile». brand. with Hertz. Régie Renault. orange.
1949
2001
2003
1989
Europcar becomes Europcar launches the European a new online car rental leader booking tool. thanks to a 1991 This is a strategy based 2004 fundamental on the increase 1996 breakthrough for in the number Europcar: thanks of operating to www.europcar. franchises and the Creation of Acquisition of com (or to local development of Europcar Asia Europcar celebrates Compagnie des The subsidiaries versions), the numerous sales Pacifi c, comprising its 40th anniversary. Wagons-lits by Accor, in Switzerland 200,000 vehicles partnerships with nine countries. The Group replaces who thus becomes and the Netherlands of the fl eet can be travel agents, Europcar also the orange color the shareholder of are acquired accessed in 118 airlines companies, opens up to with green. Europcar International. by franchisees. countries. etc. South America.
4 EUROPCAR REGISTRATION DOCUMENT 2015 1974 1980 1979
The Europcar network now 1988 comprises 212 agencies in France, 1973 743 in Europe, Africa To bolster this The «s» disappears and the Middle image, Europcar and the brand East, with a fl eet of becomes becomes 9,000 vehicles and involved in sports Renault is replaced Creation of «Europcar». more than 1,000 sponsoring. The by Compagnie des subsidiaries in Creation of employees serving Group sponsors a Wagons-lits and Germany, Belgium, subsidiaries in an increasingly Formula 1 Renault then Volkswagen. the Netherlands Spain, the UK, Italy international team and the InterRent and and Switzerland. and Portugal. customer base. Paris-Dakar rally. Europcar merge.
2005
2012
2006
Europcar joins the United Nations Global Compact launched by Kofi Annan 2015 at the World Economic Forum in Davos. The Group has thus adopted the 10 fundamental principles Eurazeo takes Europcar revamps of the Global Compact control of Europcar, its brand with a Success of Europcar’s Initial Public concerning the respect becoming the sole new positioning Offering. The story of Europcar has of Human Rights, Labor shareholder of «Moving your convinced a very broad panel of standards, the environment Europe’s number way», together French and international investors, and the fi ght against one car rental with a change who have joined the Group in its corruption. group. in its logo. new development phase.
EUROPCAR REGISTRATION DOCUMENT 2015 5 KEY FIGURES AND SIGNIFICANT EVENTS OF THE YEAR
Key fi gures
The reconciliation between GAAP and non-GAAP aggregates are provided in Sections 3.1 “Analysis of Group results ” and 3.2 “ Liquidity and capital resources” .
Year ended December 31
(in millions of €) 2015 2014 2013 2012
Total Revenue * 2,142 1,979 1,903 1,936 Rental Revenues * 1,992 1,823 1,756 1,781 Rental Day Volume (in millions) 57.1 52.8 50.7 50.7 Revenue Per Transaction Day (RPD) (in €) (1 ) 34.9 34.5 34.6 35.1 Average Fleet Size in units (in thousands) (2) 205.4 189.3 183.6 186.0 Fleet Financial Utilization Rate (3 ) 76.1% 76.4% 75.6% 74.4% Average Fleet Unit Costs/Month (in €) (4 ) ( 253) ( 248) ( 260) ( 284) Adjusted Corporate EBITDA (5) * 251 213 157 119 Adjusted Corporate EBITDA margin 11.7% 10.8% 8.3% 6.1% Operating income (IFRS) * 222 138 174 141 Net profi t/(loss) * ( 56) ( 112) ( 63) ( 111) Corporate Free Cash Flow (6) 86 159 128 60 Cash fl ow after payment of High Yield interest 21 85 54 ( 7) Total Net Debt (including estimated debt equivalent of fl eet operating leases) (7) * 3,057 3,148 2,818 2,949 Net Corporate Debt (7) 235 581 525 568 Net Corporate Debt/Adjusted Corporate EBITDA 0. 9x 2. 7x 3. 3x 4. 8x
* As set forth in the consolidated fi nancial statements and the notes to the fi nancial statements These fi gures are presented on a reported basis. Please note that changes to certain aggregates can however be infl uenced by changes to exchange rates. Please refer to Chapter 3. (1) RPD (revenue per transaction day) corresponds to rental revenue for the period divided by the Number of Rental Days for the period. This aggregate, like revenue, may be impacted by currency effects, notably in relation to pound sterling. Readers should refer to Section 3.1 “Analysis of Group results ” for a discussion of change in RPD. (2) Average fl eet of the period is calculated by considering the number of days of the period when the fl eet is available (period during which the Group holds or fi nances the vehicles), divided by the number of days of the same period, multiplied by the number of vehicles in the fl eet for the period. (3 ) The fl eet fi nancial utilization rate corresponds to the Number of Rental Days as a percentage of the number of days in the fl eet’s fi nancial availability period. The fl eet’s fi nancial availability period corresponds to the period during which the Group holds vehicles. (4 ) The average fl eet costs per unit per month is the total fl eet costs (fl eet holding costs and fl eet operating cost) excluding Interest expense included in fl eet operating lease rents and insurance costs, divided by the average fl eet of the period, divided by the number of months of the period. (5) Adjusted Corporate EBITDA is defi ned as recurring operating income before depreciation and amortization not related to the fl eet, and after deduction of the interest expense on rental fl eet fi nancing. The Group reports Adjusted Corporate EBITDA, as it believes that this aggregate provides investors with additional information useful in assessing the Group’s performance. The Group believes these indicators are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the Group’s industry. The Group further believes that investors, analysts and rating agencies will use Adjusted Corporate EBITDA to measure the Group’s ability to meet its future debt repayment obligations. Adjusted Corporate EBITDA is not a recognized measure under IFRS, and should not be seen as an alternative to operating income or net profi t as a measure of operating results, or to cash fl ow as an indicator of cash generation. Reconciliation with accounting aggregates is presented in Section 3.1 “Management’s analysis of results of operations and financial condition”. (6) Corporate free cash fl ow is defi ned as free cash fl ow before the impacts of the fl eet and acquisitions of subsidiaries. The Group believes that Corporate free cash fl ow is a useful indicator because it measures the Group’s liquidity based on its ordinary activities, including net fi nancing costs on borrowings dedicated to fl eet fi nancing, without taking into account (i) past disbursements in connection with debt refi nancing, (ii) costs that, due to their exceptional nature, are not representative of the trends in the Group’s results of operations, (iii) fi nancial investments, and (iv) cash fl ows in relation to the fl eet analyzed in a separate manner as the Group makes acquisitions using asset-backed fi nancing. Reconciliation with accounting aggregates is presented in Section 3.2 “Liquidity and capital resources”. (7) Total net debt includes Corporate net debt and net fl eet debt. The latter aggregate includes all fi nancing related to the fl eet, whether or not it is recorded on the balance sheet. In particular, the off-balance sheet fl eet debt, i.e. the estimated debt equivalent of fl eet operating leases corresponds to the net book value of applicable vehicles, which is calculated on the basis of the purchase price and depreciation rates of corresponding vehicles (based on contracts with manufacturers). Reconciliation with the debt recognized in the balance sheet prepared in accordance with IFRS is provided in Section 3.2 “ Liquidity and capital resources”.
6 EUROPCAR REGISTRATION DOCUMENT 2015 Signifi cant events during the year
Europcar Groupe, the European leader in vehicle rental services Eurazeo (1,327,795 shares) and ECIP Europcar Sarl (195,034 and a major player in mobility markets, raised approximately shares) at the offering price of €12.25 per share, corresponding €475 million through its IPO on June 26, 2015. The proceeds to a total amount of approximately €19 million. were used to redeem €324 million in notes bearing interest As a result, a total number of 73,298,339 Europcar common at 11.50% callable only in the event of an IPO. Then the shares was offered in connection with the IPO, representing Group redeemed in advance its second subordinated notes 51.3% of the Company’s share capital and bringing the size of (€400 million bearing interest at 9.375%) through a new bond the offering to approximately €898 million. of €475 million bearing interest at 5.75%. On December 18, 2015 (at the close of trading), Europcar These transactions, which left the Group with only one Groupe entered the SBF 120 index combining the 120 biggest corporate bond, considerably simplifi ed its capital structure and stocks listed on Euronext Paris in terms of liquidity and market signifi cantly reduced its debt and c orporate interest expense. capitalization. The share also joined the MSCI Global Small Cap This new headroom will enable it to accelerate the Index at the close of trading on November 30, 2015. implementation of the strategy initiated in 2012 through the Fast Lane transformation plan. Further major funding transactions Europcar’s successful IPO On May 27, 2015, Europcar Notes Limited set the conditions governing the issue of €475 million in bonds due in 2022, On June 25, 2015, Europcar Groupe announced the namely an issue price of 99.289% of par and a coupon of success of its IPO on the regulated market of Euronext Paris 5.75%. Demand for the New Notes came from a large and (compartment A; ISIN code: FR0012789949; ticker: EUCAR). diversified base of investors. The net proceeds from the The global offering was well received by French and international issuance of the New Notes were available to Europcar once its institutional investors and the offering price was set at €12.25 IPO was completed. Europcar used such proceeds to redeem per share. in full the Outstanding Subordinated Notes due 2018 (1). With this transaction, Europcar Groupe raised approximately The issue of new bonds followed the refi nancing of the existing €475 million by way of an offering of new shares and €404 million Senior Revolving Credit Facility by the new Senior Revolving through the sale of existing shares by Eurazeo (€349 million) Credit Facility (“RCF”) (see Section 3.2.3.1 “Corporate Debt” and ECIP Europcar Sarl. The total amount of the global offering (b) “Senior Revolving Credit Facility”) and the changes to was €879 million before exercise of the over-allotment option. Europcar’s SARF (see Section 3.2.3.2 “Debt related to fleet The main purpose of the offering of the New Shares was to financing” ; together, these initiatives signifi cantly reduced the enable the Group to reduce its indebtedness, strengthen its Company’s fi nancial expense ahead of its IPO. fi nancial structure and increase its fi nancial fl exibility in order This new €350 million Senior Revolving Credit Facility to accelerate its development and continue the deployment of matures on May 28, 2020, and bears interest at a rate of its “Fast Lane” program. EURIBOR + 250bp. Trading of Europcar Groupe’s shares on Euronext Paris in The SARF, which is a fl eet asset-backed fi nancing, has been the form of promesses d’actions started on June 26, 2015. increased from €1.0 billion to €1.1 billion to support operating Settlement and delivery occurred on June 29, 2015. Trading growth and its maturity has been extended by 2 years to of shares started on June 30, 2015. 2019. From mid-June, the interest rate was reduced from On July 24, 2015, Goldman Sachs International, the stabilizing EURIBOR + 220bp to EURIBOR + 170bp. In addition, swap agent, acting in the name and on behalf of the Underwriters, instruments covering the SARF structure have been extended partially exercised the over-allotment option covering 1,522,829 to 2019. additional existing shares. These shares were sold on July 28 by
(1) Including the redemption premium and transaction costs, with the remainder to be used for general corporate purposes.
EUROPCAR REGISTRATION DOCUMENT 2015 7 These transactions are part of the refi nancing program launched Our growth in 2015 by the Group in July 2014, covering debt on its fl eet as well as its corporate debt, in the aim of reducing them, lengthening During the year, Europcar Groupe continued to implement its the maturity of its various instruments, optimizing its fi nancial “Fast Lane” transformation plan, which had reached mid-point expense and improving its credit profi le ahead of its IPO. by the end of 2014. This plan continues to be deployed and to produce benefi ts, in particular in terms of profi table revenue growth and differentiation of the Group’s offer. Uses of proceeds from the IPO and the new refi nancing On the business segment, Europcar Groupe has won several new key accounts and renewed several signifi cant contracts. The net proceeds from the issuance of the new shares, A strong focus has also enabled the Group to progress approximately €441 millions, and from the €475 million senior signifi cantly on the SME segment. In addition, Europcar and notes, at nominal value, due 2022 (1) were mainly used to Ubeeqo, a carsharing company acquired in late 2014 signed redeem the €324 million Outstanding Subordinated Notes Due their fi rst joint agreement with a key account in Belgium. 2017 and to pay a redemption premium of €37 million, and to On the leisure segment, Europcar Groupe has pursued different redeem the €400 million Outstanding Subordinated Notes Due initiatives to sustain the development of its two brands Europcar 2018 and to pay a redemption premium of €19 million. and InterRent. In the framework of the Europcar brand, the The remainder of the net proceeds of the New Shares and the Group has launched “Keddy by Europcar®”, a dedicated service New Notes after the refi nancing transactions (i.e. approximately for tour-operators, travel agencies and brokers; rolled-out an €112 million) was used for the Group’s general corporate ancillary program in all the Corporate Countries ahead of purposes. Of this amount, up to €80 million is intended for summer season, and signed new partnerships. The Group fi nancial investments in strategic initiatives over the 2015-2017 also continued the rollout of InterRent, its low-cost brand, in period, including up to €25 million for Europcar Lab-related its Corporate Countries (75 operating locations to date) and activities. See section 3.3.3 “Future Investments”. through franchises (40 countries affi liated at the end of 2015, compared with 19 at the end of 2014). The redemption notices for the €324 million Subordinated Notes Due 2017 and the €400 million Subordinated Notes Furthermore, the Group continued to improve its customer Due 2018 were released on June, 26 and the full redemption experience and strengthened its presence in the new mobility price for each of such issues of notes was deposited with the solutions market. Key examples include: trustee (The Bank of New York Mellon) on June 29, 2015. a an enriched digital experience with reworked mobile The completion of these transactions brings important benefi ts applications and the Europecar mobile website for simplifi ed to the Group, including significant reduction in its overall browsing, as well as the development of new features on corporate leverage and a signifi cant reduction in its interest the Group’s website, such as 24/7 live chat. The Europcar expense: mobile application moreover obtained the best grade in the category of vehicle rental applications; a the Group has signifi cantly reduced its gearing (2) , which was 0.9x at end December 2015, compared with 2.7x at a the acquisition of E-Car Club by Europcar Lab in July 2015, the end of 2014; that, along with the acquisition of Ubeeqo at the end of 2014, allow the Group to expand its mobility offering with simple a t he interest expense on its corporate notes will be reduced turnkey solutions and offer its customers a differentiated from €75 million to €27 million. offering. As a result of the deleveraging and based on the improved a The creation of the “Customer Experience” position, with the profitability of the Company over recent years, the rating hiring of Jan Löning as Director. His mission is to improve agencies, Moody’s and S&P, revised the Group’s ratings in July. and enrich the customer experience in order to strengthen Moody’s has upgraded the corporate rating (stable outlook) by loyalty and grow Eur opcar’s customer portfolio. 2 notches to B1 from B3 (positive watch). S&P has assigned a B+ corporate rating (stable outlook) from B (positive watch).
(1) Issue price of 99.289%. (2 ) Corporate Net debt / Adjusted corporate EBITDA.
8 EUROPCAR REGISTRATION DOCUMENT 2015 End of the exploitation of the N ational & Alamo to €213 million in 2014. This increase results from excellent trademarks operating leverage, cost management improvement and positive change in fl eet fi nancing costs. In particular, Europcar From 2008 to 2013, the Group also exploited the National and continued to improve its fl eet costs per unit and its variable Alamo trademarks in the Europe, Middle East and Africa (EMEA) costs through efficiency gains made on certain cost lines, region as part of a commercial alliance with Enterprise. This while continuing to invest in commercial development, IT and license agreement and the commercial alliance agreement were marketing, in order to support sustainable growth. the subject of an arbitration proceeding which, after a transitional period agreed by the parties, effectively terminated these Given the specificities of the year 2015 mentioned above, agreements as of March 2015. On April 29, 2015, the Group the Europcar Group estimated an adjusted net profit of and Enterprise Holdings Inc. signed a settlement agreement approximately €128 million. This adjusted net profi t excludes which put an end to this arbitration and to the dispute between exceptional items (operating and fi nancial), before profi ts of the parties. The last of Europcar’s commitments in this respect companies consolidated using the equity method, after pro is the withdrawal of the logo with a lower case “e”, whose use forma adjustment of fi nancing expense, to account for the full- must end completely by April 30, 2016. year effect of the reworking of Group’s fi nancial structure. Net corporate debt is noticeably down to €235 million at December 31, 2015 (compared to €581 million at December 31, Proceedings by the French C ompetition 2014), due to the complete reworking of the Group’s fi nancial A uthority structure following the initial public offering. The French Competition Authority has opened a procedure on Debt linked to the fl eet reached €2,821 million at December 31, potential anti-competitive practices by participants in the vehicle 2015, compared to €2,567 million at December 31, 2014. This rental sector, including Europcar France, to which it addressed change results from the increase in the volume of the fl eet in line a notice of complaint on February 17, 2015. Europcar France with the growth in business and a change in vehicle families. lodged its statement of defense brief on May 20, 2015. Although the Group is contesting the complaints made against it, a Moreover, the Group announced, on February 25, 2016, provision based on an estimate of the fi nancial risk relative to objectives for the year 2016 in line with commitments made at this procedure, if the Competition Authority decides to impose the time of the initial public offering: a fi ne notwithstanding the arguments put forward by the Group, a organic growth in total revenue (2) between 3% and 5%; was accrued in the fi rst quarter of 2015, and unchanged at a December 31, 2015. For a description of this arbitration and the A djusted Corporate EBITDA greater than €275 million; settlement agreement see Section 2.5 “Administrative, Legal a payment of a dividend to its shareholders starting in 2017, and Arbitration Proceedings ”. representing at least 30% of the annual net profit of the previous year. 2015 fi nancial performance and 2016 forecasts The Group also reaffi rmed its strategic ambition through the deployment of its acquisition plan to increase value creation The Europcar Groupe has achieved the fi nancial objectives that for its shareholders. were upgraded in November 2015. Against this background, confi dent in its ability to deliver on (1) Total revenue showed organic growth of 4.9% over that of its strategic plan, the Group could consider allocating fi nancial 2014, reaching €2,142 million. This signifi cant change was resources for a share buyback program. driven by the growth of rental revenues, up 5.9% at constant perimeter and exchange rates. This increase reflects the A detailed description of performance for the year 2015 is success of commercial initiatives launched as part of the shown in Section 3 .1 “ Analysis of Group Results ” . The 2016 Fast Lane transformation plan. outlook is described in Section 3.7 “ Outlook for financial year 2016” of this Registration Document (see also Section 3.8.2 Adjusted Corporate EBITDA had major growth reaching “ Objectives for the year ending December 31, 2017” ). €251 million (+15.6% at constant exchange rates) compared
(1) At constant exchange rates and excluding EuropHall, one of its French franchisees, acquired in the fourth quarter of 2014 and consolidated over two months. In 2014, EuropHall generated standalone revenues of approximately €23 million. (2) Taking into account the current price of gas. EUROPCAR REGISTRATION DOCUMENT 2015 9 10 EUROPCAR REGISTRATION DOCUMENT 2015 01 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES
1.1 HISTORY AND DEVELOPMENT 12 1.5 STRATEGY 26 1.1.1 Corporate name 12 1.5.1 Pursue its “Fast Lane” transformation program 1.1.2 Place and number of registration 12 and its systematic implementation in order to: 26 1.1.3 Date of incorporation and duration 12 1.5.2 Develop drivers for the Group’s growth 28 1.1.4 Registered offi ce, legal form and applicable law 12 1.1.5 History and development of the Group 12 1.6 DESCRIPTION OF THE GROUP’S BUSINESS 29 1.2 GROUP PROFILE 14 1.6.1 Europcar’s Brands 29 1.6.2 Europcar Lab/Mobility solutions 32 1.3 PRESENTATION OF THE GROUP’S 1.6.3 Customers (“Business”/“Leisure”) 33 MARKET AND COMPETITIVE 1.6.4 Distribution Channels 36 ENVIRONMENT 16 1.6.5 Europcar’s network 38 1.3.1 General presentation of the vehicle rental market 16 1.6.6 Group organization 45 1.3.2 Growth drivers and general market trends 17 1.6.7 Fleet 46 1.3.3 Information by Corporate Country 19 1.6.8 Seasonal nature of the business 50 1.6.9 Suppliers 50 1.4 COMPETITIVE STRENGTHS 20 1.6.10 IT system 51 1.6.11 Regulation 52 1.4.1 Market growth supported by structural trends in vehicle rental and mobility solutions 20 1.4.2 Established leadership and innovation 1.7 ORGANIZATION CHART 58 conferring competitive advantages 21 1.7.1 Simplifi ed Group organizational chart 59 1.4.3 Diversifi ed Business Model 22 1.7.2 Subsidiaries and equity investments 59 1.4.4 “Fast Lane” Transformation Program that has set the Foundation for Sustainable Profi table Growth 23 1.8 RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES 62 1.4.5 Strong improvement in fi nancial performance in recent years 24 1.8.1 Research and development 62 1.4.6 Dynamic and Experienced Management Team 25 1.8.2 Intellectual property, licenses, usage rights, and other intangible assets 63
1.9 PROPERTY, PLANT AND EQUIPMENT 63
EUROPCAR REGISTRATION DOCUMENT 2015 11 01 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES HISTORY AND DEVELOPMENT
1.1 HISTORY AND DEVELOPMENT
1.1.1 Corporate name
The name of the Company is “Europcar Group”.
1.1.2 Place and number of registration
The Company is registered with the Registry of Commerce and Companies of Versailles under number 489 099 903.
1.1.3 Date of incorporation and duration
The Company was created on March 16, 2006 for the purpose The Company has a legal life of 99 years as from its registration of Eurazeo’s acquisition of the Europcar Group. with the Registry of Commerce and Companies, subject to early dissolution or extension.
1.1.4 Registered offi ce, legal form and applicable law
The Company’s headquarters are at 2 rue René Caudron, Commercial Code. Before March 9, 2015, the Company was Bâtiment OP, 78960 Voisins-le-Bretonneux (Tel.: 00 33 1 30 44 90 00). a Public Limited Company (Société Anonyme) with a Board of Directors. Since March 9, 2015, Europcar Group is a Public Limited Company (Société Anonyme) with a Management Board The Company’s fi scal year begins on January 1 and ends on and Supervisory Board, organized under French law and December 31 of each year. governed in particular by the provisions of book II of the French
1.1.5 History and development of the Group
The Group’s origins date back to 1949, with the creation in (the holding company acting as franchisor) was changed to Paris of the car rental company L’Abonnement Automobile by Europcar International in 1981. Raoul-Louis Mattei and the pooling in 1961 of the networks In 1988, Wagons-Lits acquired Europcar International from of L’Abonnement Automobile and of Système Europcars, Renault and then sold 50% of the share capital of Europcar another car rental company based in Paris. In 1965, the two International to Volkswagen AG. At the same time, Europcar groups offi cially merged to form the Compagnie Internationale International merged with the German car rental network Europcars. After its acquisition by the French car manufacturer InterRent, whose sole shareholder was Volkswagen AG. Accor Renault in 1970, the Compagnie Internationale Europcars acquired 53 Wagons-Lits in 1991 and became a shareholder was developed throughout Europe, in particular through new with a 50% stake in Europcar International, while Volkswagen subsidiaries and the acquisition of existing business segments. held the remaining 50%. In December 1999, Volkswagen AG The Compagnie Internationale Europcars’corporate name acquired Accor’s stake, thus becoming the sole shareholder of
12 EUROPCAR REGISTRATION DOCUMENT 2015 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES HISTORY AND DEVELOPMENT
Europcar International. Starting in 1999, the Europcar Group In 2013, the Group deployed its low-cost brand in Europe, actively expanded beyond Europe, in particular through the InterRent, dedicated to leisure travelers. InterRent offers a 01 development of franchises. competitive car rental service without compromising the quality of service. As of December 31, 2014, InterRent was deployed On May 31, 2006, Eurazeo acquired, through the Company in six Corporate Countries in Europe (France, Germany, Italy, (created for such purpose) the entirety of the share capital of Portugal, Spain and the United Kingdom) and forty countries Europcar International from Volkswagen AG. through the franchise network. In 2006, the Group continued its expansion through external At the end of 2014, the Group acquired, through its French growth and acquired Keddy N.V. (Belgium) and Ultramar subsidiary Europcar France, 100% of the shares of EuropHall, Cars S.L. (Spain). an important franchisee of Europcar France for the “East” In 2007, the Group acquired the UK headquartered operations region. The Group also acquired a stake of 70.64% in Ubeeqo, of National Car Rental and Alamo Rent A Car covering Europe, a French start-up created in 2008 that offers car-sharing the Middle East and Africa (EMOA zone) from Vanguard Car solutions. Ubeeqo is currently 75.70%-owned by Europcar Rental Holdings LLC (“Vanguard”). Vanguard was subsequently Lab SAS, a French subsidiary of the Group, and operates in acquired by Enterprise Holdings, Inc. (“Enterprise”). From 2008 France, Belgium, Germany and the United Kingdom. to August 2013, the Group had a commercial alliance with On June 26, 2015, Europcar Group was successfully listed on Enterprise relating to the National and Alamo brands operated the regulated market of Euronext Paris. by Europcar. This alliance ended in August 2013, although the Group continued to operate the brands National and Alamo in In July 2015, the Group acquired, via its English subsidiary EMEA until March 2015. Europcar Lab UK, a majority stake of 60.8% in E-Car Club, the United Kingdom’s fi rst entirely electric pay-per-use car club. In addition, in 2007, the Group acquired one of its Spanish franchisees, Betacar. On December 18, 2015, Europcar Group joined the SBF 120 stock market index comprising the 120 top stocks in terms In 2008, the Group expanded its direct present in Asia-Pacifi c of liquidity and market capitalization, listed on Euronext Paris. through the acquisition of ECA Car Rental, its main franchisee in Asia-Pacifi c, operating in Australia and New Zealand. In 2011, the Group started its development of new mobility solutions by establishing a strategic joint venture with Daimler AG to create Car2go Europe GmbH. At the date of this Registration Document, the Group holds 25% of the share capital of Car2go Europe GmbH.
EUROPCAR REGISTRATION DOCUMENT 2015 13 01 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES GROUP PROFILE
1.2 GROUP PROFILE
Europcar Group is the European leader in rental vehicles and and 6% in the Rest of the World, its two operating segments), one of the main players in the mobility sector. With operations additional services revenue generated by its subsidiaries in over 140 countries, Europcar offers its customers one of through directly- or agent-operated rental stations (revenues the largest vehicle rental network, both directly and through its of € 97.4 million in 2015), as well as royalties and fees received franchises and partners. The Group operates through two main from its franchises (€52.7 million in 2015, of which 49% was brands, Europcar® and its low-cost brand, InterRent®. Customer generated in Europe and 51% in the Rest of World). For further satisfaction is paramount for the Group and its employees: information on the composition of the Group’s revenue and the this commitment drives the continuous development of new defi nition of Adjusted Corporate EBITDA, see the Section “Key services. Europcar Lab, for instance, was created to gain figures and significant events of the year” as an introduction a better understanding of the future challenges of mobility to this Registration Document and Section 3.1 “Analysis of through innovation and strategic investments such as Ubeeqo Group results ”. and E-Car Club. The Group provides vehicles for short- and medium-term Europcar’s Brands business and leisure rentals through its network of approximately 3,600 stations (including stations operated by agents and Europcar operates its car rental business through two main franchisees). With an average fl eet of 205,353 vehicles and a brands. volume of 57.1 million rental days in its “Corporate Countries” a Europcar® is the Group’s core brand. It is used worldwide (Germany, Australia, Belgium, Spain, France, Italy, New directly and through its franchisee network to service a wide Zealand, Portugal and the United Kingdom) in 2015, (compared range of market segments, from top of the range to economy, to 189,269 vehicles and 52.8 million rental days in 2014), as well as a large portfolio of diversifi ed customers, from large the Group uses its extensive knowledge of the vehicle rental Key Accounts (corporate customers) to individual leisure industry to provide a wide range of mobility solutions. customers. For the year ending December 31, 2015, the Group generated a InterRent® has been deployed by the Group since 2013 to consolidated revenues of €2,141.9 million and Adjusted target the low-cost leisure segment in order to expand its Corporate EBITDA of €250.6 million. The Group’s revenues customer portfolio. are composed of rental revenue generated by its subsidiaries through directly- or agent-operated rental stations (revenues of The purpose of this strategy is to offer the Group’s customers €1,991 million in 2015, of which 94% was generated in Europe a clearly differentiated and understandable portfolio of brands, to reinforce Europcar’s position in its key markets.
Europcar® Europcar Service Offerings Europcar Customers
Europcar’s goal is to provide the mobility solution that best The Group’s products and services are offered to a large range meets its customers’ needs in a market where expectations of business and leisure customers. Business customers include are constantly changing. large corporate Key Accounts and small and medium-sized Europcar offers mobility solutions ranging from short-term businesses, as well as companies renting vehicles to provide vehicle rental, via its two brands, Europcar® and InterRent®, vehicle replacement services to their customers. Leisure to car-sharing. The acquisitions of Ubeeqo, a car-sharing customers primarily include individuals who rent vehicles for specialist, and E-Car Club, an entirely electric pay-per-use vacation travel and individuals who rent vehicles for other car club, offering a fully electric fl eet of vehicles in the United personal transportation needs, either directly via the Europcar Kingdom, have bolstered the Group’s mobility offering though mobile site, the Europcar websites, the reservation centers, in its Europcar Lab subsidiary. a station or indirectly through travel agencies, tour operators or brokers. Revenue generated by each Corporate C ountries is either weighted to one customer category or the other or balanced between them, depending in particular on the geographic location.
14 EUROPCAR REGISTRATION DOCUMENT 2015 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES GROUP PROFILE
Europcar’s Network (7.8 months for vehicles (cars and trucks) covered by buy-back commitments). The Group purchases its vehicles from a range 01 Europcar’s network consists of 3,582 directly- or agent- of manufacturers with whom it has longstanding relationships, operated and franchise stations. In order to strengthen including primarily Volkswagen, Fiat Group, General Motors, its international operations, the Group has entered into Renault-Nissan, PSA, Hyundai, Daimler and Ford. partnerships (particularly in the US, Canada and Japan) and commercial and general sales agency arrangements. Europcar The Group views fl eet management as a key component of has 7 Corporate Countries in Europe and two in Australia and in its expertise. The Group has signifi cantly increased its fl eet New Zealand. Rental stations within these Corporate Countries financial utilization rate in recent years through focused are mainly directly operated by the Group and by agents. actions: it reached 76.1% in 2015. Fleet management and Franchise stations strengthen the network in certain Corporate the improvement of the fl eet fi nancial utilization rate are based Countries (particularly in France, the Group’s birthplace) and on internal Group procedures, on the Revenue and Capacity especially in other countries. This franchisee network provides Management teams that were established during 2012 at increased brand awareness and revenues, and allows the a centralized level and throughout all operating subsidiaries Group to offer its customers services worldwide. and on the centralized “Greenway” system and its various specialized modules. As of December 31, 2015, the Group had 2,388 stations in Europe, of which 956 were directly-operated, 605 were agent- operated and 827 were franchises. At the same date the Group Europcar Lab had 1,194 stations in the Rest of the World, of which 78 were directly-operated, 15 were agent-operated and 1,101 were The Group created Europcar Lab in the second half of 2014 franchises. to study mobility market usages and search for new mobility solutions opportunities worldwide, whether such opportunities be with customers, partners or technology or transport Europcar Fleet consultants. Europcar Lab is intended to be an incubator for researching new products and services in mobility solutions for During the year ending December 31, 2015, the Group took the Group. It aims to support internal projects and the securing delivery of approximately 278,500 vehicles and operated an of minority and majority stakes in innovative structures. Europcar average rental fl eet of 205,353 leisure and utility vehicles in Lab holds the stakes in Ubeeqo (approximately 76% owned at Corporate Countries (+8.5% over 2014). In 2015, Europcar’s end-2015) and E-Car Club (approximately 61% owned). approximate average vehicle holding period was 8.9 months
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1.3 PRESENTATION OF THE GROUP’S MARKET AND COMPETITIVE ENVIRONMENT
The information about the Group’s market contained in this There may be differences between Europcar’s estimated Section was obtained from various sources, including a KPMG market share per country, as presented in the KPMG Study, report dated February 27, 2015 prepared at the request of and the calculation of market share based on revenues per the Company as part of its July 26, 2015 initial public offering country as a function of the estimated market size in each and updated on November 6, 2015 for the purposes of this country, as presented in this Registration Document. The Registration Document (hereinafter, the “KPMG Study”). The numbers presented in this Registration Document with respect work performed by KPMG in order to prepare its report was to market share and the size of the markets are the mid-point limited to obtaining and analyzing information and data about of the ranges estimated by KPMG. In addition, an essential the Group’s key markets from certain public sources (such source of information used by KPMG to establish the revenues as Eurostat, INSEE, the IMF, the World Bank and the OECD) by company were the published financial statements (or those and non-public sources. KPMG did not conduct an audit or submitted by Europcar and its competitors to regulatory valuation and did not make any recommendations relating to authorities, such as the registry (Greffe) in France or Companies potential market opportunities for the Company or relating House in the United Kingdom). There may be differences in the to the Company’s planned initial public offering. Moreover, revenues presented in this Registration Document and in the certain information contained in this Section consists of publicly published financial statements due to the consideration of other available information that the Company considers reliable but components of revenues. In order to ensure the highest level that has not been verifi ed by an independent expert. The Group of comparability between Europcar and its competitors, KPMG cannot guarantee that a third party using other methods to did not make any adjustments to the published numbers. collate, analyze or compile the market data would obtain the Any adjustment made by Europcar could have resulted in an same results. In addition, the Group’s competitors may defi ne under-or over-estimation of the Group’s market share in the their economic and geographic markets differently. Except as absence of equivalent adjustments being made with respect otherwise indicated, the data in this Section is taken from the to its competitors. As the level of adjustments made by KPMG Study. competitors is unknown, KPMG therefore chose not to make any adjustments for Europcar.
1.3.1 General p resentation of the v ehicle r ental m arket
Present in over 140 countries worldwide in 2015, Europcar is availability and return of vehicles, ease of vehicle reservation, a global operator and the European leader in vehicle rentals. reliability, the location of rental stations and product innovation. The Group’s strategic positioning is based on (i) nine “Corporate In addition, competitive positioning is also influenced by Countries” in which it has long been present and has extensive advertising, marketing and brand reputation. experience (Germany, Australia, Belgium, Spain, France, Italy, The use of technology has increased pricing transparency New Zealand, Portugal and the United Kingdom); and (ii) a among vehicle rental companies by enabling customers to network of franchises, agents, partnerships and general sales more easily compare on the internet the rental rates available agency agreements that enable the Group to reinforce its from various vehicle rental companies for any given vehicle. network in certain Corporate Countries (notably in France) and to extend its presence throughout the world. Accordingly, this network allows the Group to nearly cover the entire world The European Vehicle Rental Market market estimated at approximately €48.6 billion in 2014 (source: Euromonitor). The vehicle rental market in Europe represented approximately €13.1 billion in 2014 (source: Euromonitor). The European The vehicle rental industry is generally characterized by intense Corporate Countries represented a total estimated market of competition with global, local and regional actors. It is based €9.5 billion in value in 2014 (an increase of around 4% over primarily upon price and customer service quality, including the 2013).
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In Europe, the main vehicle rental companies generally operate footprints in certain countries and regions, including Sixt in through a combination of directly operated stations and stations Germany, Enterprise in the United Kingdom and Goldcar, 01 operated by agents or franchisees. The European market is mainly in Spain. The market shares of the leading participants distributed fairly evenly between the business and leisure of the vehicle rental market in the Group’s European Corporate market segments, with some differences from one country Countries (1) were approximately 19% for Europcar, 13% for to the next. The European market is also characterized by Avis (2), 12% for Hertz, 12% for Sixt and 11% for Enterprise the need for an extensive network of rental agencies in order in 2014 (source: KPMG Study, on the basis of the mid-point to cover the entire targeted customer base. Moreover, even of estimated market shares, based on company revenues though they may have regional, continental or global strategies, excluding franchisees). each of the players operating on the European market must (i) ensure that they comply with the laws and regulations of each country, which may change at any time, and (ii) adapt to The m arket in the r est of the w orld the multiple regional differences in consumer habits. The many In 2014, North America represented an estimated market of operating complexities mentioned above represent a challenge €20.3 billion and Asia-Pacifi c was estimated at €8.2 billion, for operators wishing to enter or expand their presence in followed by Africa and South America, estimated at €3.1 billion Europe. and €2.7 billion, respectively (source: Euromonitor). The European market is relatively fragmented compared with In the North American market, the Group entered into the U.S. market. The fi ve largest operators in the European commercial alliances with various partners in order to promote market represented approximately 66% of market share in the cross-referral of customers and offer services in over 140 the Corporate Countries in 2014, whereas the three largest countries. The Group is also present in Asia-Pacifi c (in particular operators in the U.S. market represented approximately in two Corporate Countries, Australia and New Zealand, which 95% of market share in the United States in 2014 (source: together represented a market with an estimated value of AutoRentalNews). This difference is due to the presence in €1.4 billion in 2014, and through a commercial cooperation several European countries of strong local players that have agreement in Japan) and in South America. Moreover, the relatively signifi cant market shares. The Group has two main Group operates in the Middle East and Africa through a well- competitors, Avis Budget Group and Hertz, in each of the developed franchise network as well as partnerships and European countries in which it operates. In addition, other general sales agency arrangements. companies and brands have significant market share and
1.3.2 Growth d rivers and g eneral m arket t rends
Macroeconomic conditions and demand particularly driven by GDP in key markets, through the general for vehicle rentals business climate and expenditures on business travel. In the leisure segment, including vehicle rentals in airports, demand Demand for vehicle rentals is tied to macro-economic conditions is mainly driven by changes in infl ows of international travelers, in the countries where the Group does business. In particular, and is therefore closely correlated with airline activity. demand is correlated with changes in gross domestic product (GDP) and with infl ows of international travelers, which in turn is tied to levels of air and rail traffi c. New mobility solutions
Customer segments’ diversity helps reduce the sensitivity of the The vehicle rental industry has been undergoing structural vehicle rental business to the economic environment: demand in changes tied to technological advances and the resulting the business segment is generally tied to the macro-economic changes in customer preferences and behaviors. Technological environment, with signifi cant differences between countries. It is improvements have enabled providers of mobility solutions to
(1) Excluding Belgium and Portugal. (2) Prior to Maggiore acquisition in Italy in 2015.
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develop innovative new products and services to respond to companies mostly providing longer-term rentals than other the constantly evolving needs of their customers. Consumer companies. Nevertheless, the Group believes that vehicle rental demand has migrated towards more fl exible and economic companies are well positioned to seize growth opportunities mobility solutions with a smaller impact on the environment, in the new mobility solutions market. Indeed, such companies in particular to solve the problem of increased traffi c and to can capitalize on key competitive advantages such as brand adapt to government policies limiting the use of vehicles in recognition, customer diversity, fl eet size and fl eet-management urban areas. expertise, network density and experience in the industry. Accordingly, the way people use the vehicles has been changing over the last few years: The acquisition and ownership The d evelopment of the l ow-cost m arket of vehicles are increasingly irrelevant to actual usage. This s egment change has accompanied the supply and expansion of various services traditionally offered by companies that concentrate As it has been the case in other industries, the European vehicle all their activities on the mobility market, such as vehicle rental rental market has seen the development of low-cost offers in companies and companies offering car-sharing and ride-sharing recent years to meet increased demand for more affordable services, as well as the platforms (like Europcar Group and services. The low-cost market segment may be defi ned as all Ubeeqo). More generally, this market also includes operators low-price rental offers including a reduced number of services whose activities or services are related and complementary and providing less recent vehicles and a more limited selection (such as insurance companies, vehicle leasing companies, of categories, brands and models. This market segment car park operators, car manufacturers, tour operators, travel represented approximately 10% of the vehicle rental market agencies, companies offering micro-mobility, telematics (roughly €0.9 billion in value) in the Corporate Countries in solutions or data storage that develop new mobile applications). Europe in 2014 (1). New mobility solutions are being developed in particular in the This segment is mainly covered by a certain number of following areas: independent players with a business model and brand strategy specifi c to this market segment (less modern vehicles, more a car-sharing, which was initially based on business-to- limited service offering, lower costs). However, the low-cost consumer, or “B2C,” models, as well as peer-to-peer, or segment is characterized by the increased presence of the main “P2P,” models, but now also includes business-to-business, players in the vehicle rental sector through strategies based on or “B2B,” models, and may be based on either a one-way the development of differentiated offerings under another brand or round-trip itinerary; that is clearly identifi ed as low-cost. a intermodal solutions providing a digital platform that brings The Group is present in the low-cost segment through its together different means of transportation (public transport, InterRent® brand. This brand has been progressively deployed rental vehicles, taxis, and other mobility solutions) in order since 2013 and competes with some of the leading players in to be able to offer the best possible itinerary to customers the vehicle rental sector as well as with independent players for any given trip; with varying market shares in different countries. In the United a transportation services offering the possibility of travelling in Kingdom, the principal players include the low-cost brands of a vehicle driven by a professional or private driver, as well as established companies in the industry, such as Greenmotion ride-sharing solutions offering subscribers the possibility of and Easirent. In Germany, the principal players include the sharing rides in vehicles driven by a private individual; low-cost brands of established companies in the sector, such as Firefl y, as well as independent players such as Buchbinder a services that enable individuals, businesses or operators to and Star Car. In France, the Group principally competes with turn their temporarily unused parking spaces into sources of independent companies such as Ada, Ucar, France Cars and revenue by making them available to other users. Rent a Car. In Spain, Italy and Portugal, the low-cost market Accordingly, the new players in the mobility solutions market developed rapidly in order to provide targeted offers at low- and vehicle rental companies are all benefiting from the cost to a signifi cant number of leisure customers. The principal decreasing number of vehicle owners in capitals and large market players in these countries are independent companies European cities. They are currently targeting different user such as Goldcar, RecordGo and Centauro in Spain, and Sicily needs, notably in terms of rental duration, with vehicle rental by Car in Italy and Goldcar and Drive on Holidays in Portugal.
(1) On the basis of revenue generated in 2014 by the “low-cost” brands of the principal participants in the vehicle rental market and local independent companies that disclose their positioning and “low-cost” revenue.
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1.3.3 Information by Corporate Country 01
The vehicle rental market in the Corporate Countries generated FRANCE total revenue of approximately €10.9 billion in 2014, an increase The French vehicle rental market generated total revenue of more than 3% over 2013. It should continue to grow in of approximately €2.6 billion in 2014, (i.e. a growth of value by about 3.1% annually on average for the 2014-2017 approximately 1% versus 2013). period, with each country bringing a positive contribution to this increase. The Group is the co-leader in this market, with market share of approximately 14% in 2014 compared to 15% in 2013. The Below, the Group provides an analysis of the markets in its Group’s main competitors are Avis Budget, Hertz, Sixt and Corporate Countries in Europe and the Rest of the World. Enterprise with respective market shares of approximately 14%, Market share in each Corporate Country is calculated on the 11%, 6% and 4% compared to approximately 13%, 11%, 5% basis of revenue (excluding royalties received from franchisees). and 5% in 2013. Including the franchisee stations that are very common in France, the Group’s birthplace, the Europcar Europe brand’s market share was approximately 19% in 2014.
GERMANY ITALY The German vehicle rental market generated total revenue of The Italian vehicle rental market generated total revenue of approximately €2.2 billion in 2014, (i.e. a growth of 3.0% versus approximately €1.1 billion in 2014 (a near 2% increase over 2013). 2013). The Group is the second largest player in this market, with The Group is the third largest company in this market, with market share of approximately 23% (versus 24% in 2013). The market share of approximately 18% in 2014 (unchanged from Group’s main competitors are Sixt, Hertz, Avis Budget and 2013). The Group’s main competitors are Hertz, Avis Budget, Enterprise, with respective market shares of approximately Maggiore (acquired by Avis in 2015), Sixt and Enterprise, with 29%, 11%, 10% and 5% in 2014, compared to approximately respective market shares of approximately 22%, 21%, 13%, 29%, 11%, 11% and 5% in 2013. 4% and 5% compared to approximately 20%, 19%, 13%, 5% and 3% in 2013. BELGIUM PORTUGAL The Belgian vehicle rental market generated total revenue of approximately €0.2 billion in 2014 (stable in relation to 2013). The Portuguese vehicle rental market generated total revenue of approximately €0.3 billion in 2014 (an approximate 2% The Group is the leader in this market, with market share increase over 2013). of approximately 34% in 2014 (unchanged from 2013). The Group’s main competitors are Avis Budget, Hertz and Sixt with The Group is the leader in this market, with market share of respective market shares of approximately 19%, 13% and 8% approximately 23% in 2014 compared to approximately 22% in 2014, compared to 19%, 14% and 8% in 2013. in 2013. The Group’s main competitors are Avis Budget, Enterprise, Hertz, and Sixt, with respective market shares of approximately 11%, 12%, 11% and 2% compared to SPAIN approximately 14%, 12%, 10% and 1% in 2013. The Spanish vehicle rental market generated total revenue of approximately €1.3 billion in 2014 (a 4.3% increase over 2013). UNITED KINGDOM The Group is the leader in this market, with market share of The British vehicle rental market generated total revenue of approximately 15% in 2014 (unchanged from 2013). The Group’s approximately £1.5 billion in 2014 (a more than 6% increase main competitors are Goldcar, Avis Budget, Hertz, Enterprise over 2013). and Sixt with respective market shares of approximately 13%, 12%, 10%, 10% and 6% in 2014, (unchanged from 2013). The Group is the second largest company in this market, with market share of approximately 23% in 2014 (stable in relation to 2013). The Group’s main competitors are Enterprise, Hertz, Avis Budget and Sixt, with respective market shares of approximately 31%, 11%, 11% and 8% in 2014, compared to approximately 30%, 12%, 12% and 8% in 2013.
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Rest of World NEW ZEALAND The New Zealand vehicle rental market generated total revenue AUSTRALIA of approximately 0.5 billion New Zealand dollars (equivalent to around €0.3 billion), a 5% increase over 2013. The Australian vehicle rental market generated total revenue of approximately 1.6 billion Australian dollars (equivalent to around The Group is the third largest company in this market, with €1.1 billion), a 4% increase over 2013. market share of approximately 5% in 2014 (unchanged from 2013). The Group’s main competitors are Avis Budget and The Group is the third largest company on this market, with Hertz with respective market shares of approximately 31% and market share of approximately 11%, a growth of nearly 1 point 17% in 2014, (unchanged from 2013). over 2013. The Group’s main competitors are Avis Budget and Hertz (1) with respective market shares of approximately 34% and 29% in 2014, compared to approximately 34% and 28% in 2013.
1.4 COMPETITIVE STRENGTHS
1.4.1 Market growth supported by structural trends in vehicle rental and mobility solutions
Vehicle rental market growth in the Corporate Countries percentage of people in the Group’s Corporate Countries should continue to rise in the short- and medium-term due to indicating that they are prepared to no longer own a car and several positive structural factors: increase in GDP, increase use “car-sharing” instead increased signifi cantly between 2010 in the number of leisure trips and in air traffi c as well as new and 2012, from 9% to 33% (source: Observatoire Cetelem – methods of use in terms of mobility. The value of the vehicle 2010 and 2012 reports – based on surveys of respectively rental industry in the Group’s Corporate Countries in Europe 3,600 and 6,000 individuals in Germany, France, Italy, Spain should continue to increase by approximately 2.5% and 2.4% and the United Kingdom). These market dynamics contribute to in 2016 and 2017 respectively (source: KPMG Study). a growing population of potential users of vehicle rental services and to the market trend towards mobility solutions and other Furthermore, the Group believes that changing perceptions of innovative service offerings. This should provide the Group with car ownership should foster increasing growth in the vehicle new revenue opportunities, in particular given the high levels of rental market. These changing perceptions stem in particular urban density in Europe. from the increase in costs related to vehicle ownership and public policies towards car usage in urban centers: the
(1) Including Dollar Thrifty.
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1.4.2 Established l eadership and i nnovation c onferring c ompetitive a dvantages 01
With over 65 years of experience, Europcar has a worldwide due to the multiplicity and diversity of jurisdictions with different presence and is one of the key players in the mobility industry. rules and regulations and with regional differences in consumer The Group has a wide and international network serving a habits. The Group believes that its extensive local presence broad range of customer mobility needs based on sophisticated and professional expertise allow it to respond effectively to the revenue and fl eet capacity management. The Group leverages complex and highly diverse nature of its markets. these strengths to deploy innovative solutions and services to Moreover, the Group’s solid positioning across various countries better serve changing customer mobility usages. in Europe allows it to track and anticipate changing levels of In 2014, the Group was the leading European vehicle rental demand and market trends and therefore to better manage organization. More specifi cally, it is number one in Belgium, Spain the size of its fl eet. and Portugal, co-leader in France, number two in Germany The Group has a global footprint, with approximately 3,600 and the United Kingdom and number three in Italy (source: stations (including franchises) in over 140 countries in 2015 KPMG Study, on the basis of the mid-point of estimated market and numerous general sales agency (GSA) arrangements shares, based on company revenues excluding franchisees). In and partnerships. Franchises enable the Group to extend its 2014, the Group’s competitive positioning within the franchisee network and are a source of high-value growth with lower risk, countries in Europe was also excellent. while its partnerships and alliances provide additional market The chart below sets out the Group’s market share and that penetration in growing markets. of its principal competitors in Corporate Countries in Europe The Group’s GSA strategy, (approximately 30 GSA in 2014: arrangements at end-2015 versus 18 at end-2014) and 2014 MARKET SHARE IN CORPORATE COUNTRIES IN EUROPE partnerships with major airlines and travel intermediaries allow the Group to be present at points of entry for inbound and outbound traveler traffi c. The Group relies on partners in EuropcarAvis Hertz Sixt Enterprise addition to its franchisees, particularly in the United States, Canada and Japan, as well as on commercial and general > 1.5x 19% sales agency arrangements. In the US, the Group concluded a partnership with Advantage Opco (“Advantage”) through 13%* 12% 12% 11% which the Group can service its customers in the United States under its Europcar brand and via the Advantage network, and Advantage can serve its customers under its own Advantage- Rent-A-Car brand via the Europcar network in regions in which the Group operates. This alliance allows the Group to extend its proprietary network and improve its services for its customers in the United States. In February 2015, the Group also entered into a new agreement with a general sales agent in the United * Prior to the impact of Avis’ acquisition of Maggiore in Italy in 2015. States (“Discover the World”), which improves outbound fl ows of United States customers to Corporate Countries. Moreover, Source: KPMG Study, on the basis of the mid-point of estimated in order to develop its activities in China, the Group recently market shares, based on company revenues excluding entered into a two year general sales agency agreement (which franchisees. came into force on April 21, 2014) with an online Chinese travel The Group believes that this leading position in Europe is agency pursuant to which the agency has been appointed to sustainable due to, among other things, the scale of its act as a non-exclusive representative authorized to promote operations (average fl eet of 205,353 vehicles in its Corporate and offer Europcar’s rental services. This agreement allows the Countries in 2015), and the quality of its network, its dual brand Group to promote outbound fl ows of customers from China strategy (Europcar® and InterRent®) and its ability to manage toward its Corporate Countries. complex operating systems and fi nancing structures in a fl exible The Group’s network, particularly in its Corporate Countries, and effi cient manner. Over the 2009 to 2014 period, the Group’s is supported by its proprietary GreenWay® system, a powerful market share in Corporate Countries in Europe remained and effective reservation platform and revenue capacity stable, at between 19% and 20% (source: KPMG Study, on and fleet management tool. The Group’s network is also the basis of the mid-point of estimated market shares, based commercially supported by the use of forecasting models that on company revenues excluding franchisees). The European vehicle rental market is one of the most diffi cult to penetrate
EUROPCAR REGISTRATION DOCUMENT 2015 21 01 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES COMPETITIVE STRENGTHS
help to determine pricing while also optimizing the distribution, The Group leverages this extensive experience and know-how planning, allocation and yield of the fl eet according to demand. in the vehicle rental industry to focus on innovation, enhance the customer experience and seize opportunities arising from The Group has a diversifi ed customer base of approximately new mobility trends. In response to targeted customer mobility 5.5 million drivers in 2015 and reaches them through a wide needs, the Group has established a “Lab” that is designed variety of distribution channels. to draw on these technological innovations proposed by in- The Group’s efficient fleet management benefits from house and external innovators to design new products and central coordination and local initiatives, leveraging strong services in the area of mobility solutions. This enables the Group and longstanding partnerships with vehicle manufacturers. to stay at the forefront of this rapidly evolving and expanding In addition, the Group takes a pragmatic approach to fl eet market. The Group also took a majority stake in Ubeeqo (2014), management, optimizing the mix between pan-regional and a European start-up specializing in fl eet and mobility solutions local contracts, maintaining short- and long-term fl exibility in for business market , and in E-Car Club (2015), fi rst entirely volume commitments and vehicle holding periods to meet electric pay-per-use car club. Europcar is also a stakeholder fl uctuations in demand, particularly seasonal, and adapt to in the Car2go Europe joint venture with Daimler, in order to changing economic conditions. This efficiency also relies establish a position in the consumer car-sharing market. on repurchase commitments the Group has obtained from manufacturers that give it the fl exibility required to react to changes in demand.
1.4.3 Diversifi ed Business Model
The Group’s business model is based on a well-balanced Europcar® in the medium and upscale markets and is deploying and complementary revenue base, which optimizes fleet its InterRent® brand in the low-cost market. utilization as well as its network and its related costs and limits The Group’s revenue base is also geographically diverse. dependency on specifi c sectors or industries. The Group’s rental revenue (excluding royalties received from The Group has a broad customer base, well balanced between its franchisees) in Corporate Countries for the year ending business and leisure customers (which generated 44% and December 31, 2015 was as follows: 56%, respectively, of total Group rental revenue in 2015). This BREAKDOWN OF GROUP RENTAL REVENUE IN CORPORATE mix helps the Group manage seasonality over the year (with COUNTRIES IN 2015 leisure peaks during the summer and business demand more stable throughout the year) and during the week (weekend for leisure and weekdays for business). The Group’s contractual 26% 10% relationships with numerous large corporate customers, as well Germany Spain as with small and medium-sized businesses across multiple industries contribute to the stability of the Group’s business 22% 7% rental revenue, in particular during periods outside of tourist UK Australia/ New Zealand seasons and during business days. The Group’s leisure activity 17% 5% involves rentals that are longer in duration and generate more France Portugal revenue per transaction day than business rentals. The Group 10% 3% also addresses the leisure segment through its portfolio of Italy partnerships with recognized leaders in the travel industry, Belgium including major European airlines, tour operators and hotel groups, such as easyJet, TUI, Accor and Aeroflot. Within the leisure segment, the Group benefi ts from its core brand Source: Company.
22 EUROPCAR REGISTRATION DOCUMENT 2015 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES COMPETITIVE STRENGTHS
The Group’s revenue base is optimized between airports, where buy-back period deliberately chosen by the Group in order customer traffi c is relatively higher, and non-airport locations. to manage the seasonality inherent to the business. The 01 In 2015, the Group’s network included directly- and agent- sourcing of the Group’s fl eet is diversifi ed in terms of automobile operated stations in 264 airports. These stations represented manufacturers and brands: in 2015, approximately 30% of 16% of corporate and agent-operated stations in 2015, and yet its fl eet was acquired from Volkswagen, 15% from General generated 42% of the Group’s rental revenue in the same year. Motors, 13% from Fiat, 11% from Renault, 9% from Peugeot Citroen, 7% from Daimler, 6% from Hyundai, 3% from Ford This diversifi cation, along with the Group’s operating expertise and the remaining 7% from other manufacturers. The Group and effective management and information systems, contributes can periodically and opportunistically enter into multiyear to a high fl eet fi nancial utilization rate of 76.1% in 2015. framework contracts (generally for a two-year term) with certain The Group’s diversified customer base and network are manufacturers to ensure fl eet availability. In order to optimize its supported by a flexible fleet that has one of the highest fi nancing conditions, the Group uses diversifi ed asset-backed proportions of buy-back commitments in the industry, a fi nancing represented by the fl eet, including securitization, diverse fl eet supply and fl exible fl eet fi nancing. Approximately capital market financing (bond financing), revolving credit 92% of Europcar’s 2015 fl eet vehicles delivered were covered facilities and operating leases. by such buy-back commitments. This high level of buy- This wide diversification of sources of revenue, fleet and back commitments not only limits risk by providing greater fi nancing provide the Group with a business model tailored fleet cost visibility, but it also increases flexibility, with the towards the limitation of risks and optimization of revenue and commitments generally allowing for a five to eight month costs.
1.4.4 “Fast Lane” Transformation Program that has set the Foundation for Sustainable Profi table Growth
Since 2012, the Group has been implementing a transformation Group’s profi tability dynamics by re-energizing the commercial program called “Fast Lane” designed to strengthen its activities of each of the segments in which it operates, and with market footprint and prepare its transition from a pure car increased selectivity of customer contracts, a “variabilization” rental company to a mobility services provider benefiting of costs and more generally a noticeable reduction in fi xed from sustainable growth and improved profi tability. The Fast costs. As such, the main work areas of the fi rst phase of the Lane program has helped foster a business culture based on transformation plan concerned the creation of a Revenue & improvement, due to defi ning key priorities that are monitored Capacity Management Department at the Group level and in precisely and continuously. Fast Lane has helped transform the all of its operating subsidiaries to manage customer demand organization, rendering it more effi cient and more focused on and the related pricing terms, and to ensure the alignment of the customer and on cash generation. the fl eet with demand (category/price and optimized distribution within the network), and the progressive implementation of a The fi ve strategic pillars supporting the Fast Lane program commercial strategy per customer segment and distribution prongs are as follows: channel. The pan-European Shared Services Center opened a g row the Group’s top line by prioritizing business volume and in Portugal in early 2014 to handle transactions, accounting improved profi tability; and cash collection activities, and optimized management of fl eet costs. Initiatives implemented concerning the fl eet mainly a d ifferentiate the brands and offerings by providing a better included an improvement in the fl eet mix by vehicle category, quality customer experience; optimization of the buy-back programs to lower vehicle a i mprove the Group’s cost structure and operating model acquisition and disposal costs, but also to improve the match fl exibility; of the fl eet mix to customer demand and associated prices. a o ptimize the allocation of capital employed; and Implementation of the fi rst phase of the Fast Lane program has been a success. The initial targets have been signifi cantly a i mproving organizational effi ciency. exceeded. Over the 2012-2014 period, the Group estimates During the 2012-2014 period, management focused on that the Fast Lane program has had a positive impact of restoring the fundamentals of the business model and the more than €90 million on its Adjusted Corporate EBIDTA (as
EUROPCAR REGISTRATION DOCUMENT 2015 23 01 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES COMPETITIVE STRENGTHS
compared to an initial objective of €50 million). Similarly, the a the continued development of the Shared Services Center actions taken with respect to cash management have led to concept with the broadening of transferred functions and the improvements in non-fl eet working capital requirements of implementation of uniform procedures, to further improve the €90 million (as compared to an initial objective of €60 million). operational effectiveness of the Group as a whole; At this stage, the impact of the Fast Lane transformation a the launch of an in-depth review of the network in the country plan is only partially refl ected in the Group’s results and the subsidiaries aiming to optimize coverage but also improve Group estimates that the plan had reached the half-way sales dynamic and operating effectiveness of the stations point at end 2014. Related to the success of the initial public (project initiated in Germany); offering, the Group thus has solid foundations to accelerate a the creation of the “Customer Experience” position, to the implementation of the second phase of its transformation improve and enrich the customer experience, strengthen plan with new projects that will progressively enrich the different loyalty and develop Europcar’s customer portfolio. focuses of the transformation plan. The operating and fi nancial performance recorded by the Group in 2015 is the tangible Europcar plans to continue deployment of the second phase result of the continuation of the Fast Lane dynamics. of its Fast Lane plan, to support profi table organic growth. Growth should be sustained by strengthening the commercial In 2015, the Group continued, or launched, the following strategy by segments of the Group and cost management initiatives in particular: including optimization of its network and extension of its shared a an acceleration of the commercial strategy per segment that services logic . Special attention will be given to enriching and showed results due to better analysis of “Business” customer improving customer experience through the Group’s digital needs leading to the reworking of the approach to SME and transformation. The Group plans to be able to offer a dedicated “Van & Trucks” segments; customer experience entirely on mobile devices within two years. In addition, the Group plans to allocate investments a enhancement of the “Leisure” customer segment due to of approximately €10 million over the 2016-2018 period to the healthy dynamics of the Group’s distribution channels, the reworking of its customer relations management system. a major development of the low-cost brand, InterRent, and Better knowledge of customers, differentiation of products and the success of the launch of Keddy; services through innovation, transparent and fl uid customer a strengthening of the Group’s presence worldwide with more relations, simplified procedures and custom help are the than 25 representation agents, allowing the Group to improve keywords of this transformation focus. In this context, the the visibility of its brand and benefi t from the tourist fl ow from Group also plans to strengthen its commercial strategy via emerging countries; its direct channels to offer services adapted to new customer expectations in terms of mobility and create a stronger link between its brands and customers and thereby increase the loyalty rate.
1.4.5 Strong i mprovement in fi nancial p erformance in recent y ears
The Group’s financial performance has seen considerable In a context of modest growth in volumes, and relatively stable improvement since 2012 thanks to the implementation of the RPD, this optimization, combined with contained network fi rst phase of the Fast Lane transformation program. The Group and headquarters costs, and optimized fl eet fi nancing costs, has managed to signifi cantly lower its fl eet costs (including drove a 4.6 point increase in the Group’s Adjusted Corporate fl eet depreciation), which declined from €639 million in 2012 EBITDA margin between 2012 and 2014. 2014 was marked to €567 million in 2014 and its fleet operating and related by a strong acceleration in the deployment of the Fast Lane holding costs per unit, which decreased from €284 per month program, which enabled the Group to return to growth in its in 2012 to €248 per month in 2014. The improvement of the revenues, which increased 2.4%, 4.3% and 7.1% at constant fl eet fi nancial utilization rate, from 74.4% in 2012 to 76.4% in exchange rates in the second, third and fourth quarters of 2014, was a key part of this cost optimization. 2014 respectively, compared to the corresponding quarters of
24 EUROPCAR REGISTRATION DOCUMENT 2015 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES COMPETITIVE STRENGTHS
2013. The following chart presents the changes in the Group’s performance. The Group thus generated total revenue of consolidated revenue and Adjusted Corporate EBITDA margin €2,142 million for organic growth of 4.9% (1) over that of 2014 01 over the 2008 to 2014 period: and an EBITDA margin of 11.7%, up 0.9 points. See Chapter 3, Section 3.1 “ Analysis of Group results ” .
(12.8)% 6.6% (0.2)% (1.7)% (1.7)% 4.0% The Group’s experience with respect to the management 2,122 of its fl eet and operating costs, together with its diversifi ed 1,973 1,969 1,936 1,979 1,851 1,903 fl eet fi nancing (including operating leases) and its ability to control non-fl eet working capital requirements (in particular 10.8% by harmonizing payment terms across the Group) have
8.2% contributed to stronger cash generation. This has also 6.5% 6.1% allowed the Group to manage its total net debt recorded 5.7% 5.7% 4.7% on the balance sheet (consisting both of its fleet financing debt, which is asset-backed, and its corporate debt), giving the Group a sound fi nancing foundation as well as fi nancial 2008 2009 2010 2011 2012 2013 2014 fl exibility. In particular, the ratio of the Group’s Corporate Net Year-on-year growth (%)Revenue (€m) Adj. Corp. Debt to Adjusted Corporate EBITDA decreased from 4.8x EBITDA margin as of December 31, 2012 to 2.7x as of December 31, 2014, due to the improvement in operating performance. The initial Source: Company. public offering and the associated refi nancing transactions facilitated a clear improvement in this ratio, which was 0.9x as of December 31, 2015. In 2015, the Group continued to deploy its transformation plan as it entered its second phase, to support profitable The Group believes that this track record positions it well to organic growth, which allowed it to obtain a record fi nancial benefi t from future market growth.
1.4.6 Dynamic and Experienced Management Team
The success of the Group’s strategy and growth depends on of managers with extensive business and operating expertise, the experience and strength of its management team. The a deep understanding of the vehicle rental services industry, Group’s senior management team has been renewed over and a strong track record of execution in respect of the Fast the last four years and is now composed of complementary Lane program. The Group’s top management is supported by backgrounds at top-tier companies in various industries. an organizational structure consisting of highly complementary Mr. Philippe Germond, CEO since October 2014 and international and local teams who have the knowledge, passion now Chairman of the Management Board following the and vision to lead the Group in the execution of its strategy. transformation of the Company’s governance, leads a team
(1) At constant exchange rates and excluding EuropHall, one of its French franchisees, acquired in the fourth quarter of 2014 and consolidated over two months. In 2014, EuropHall generated standalone revenues of approximately €23 million. EUROPCAR REGISTRATION DOCUMENT 2015 25 01 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES STRATEGY
1.5 STRATEGY
Europcar Group is a global player and the European leader a the strengthening of its leading position in Europe and in vehicle rental. It is positioned at the center of new mobility thought leadership throughout the world: solutions and aims to become a major player in mobility a development of the network worldwide, particularly through services. the use of franchisees, partnerships, and general sales The Group’s initial public offering and the associated agent arrangements in order to optimize the capture of optimization of the balance sheet structure are major steps in incoming and outgoing traffi c and to guarantee signifi cant the Company’s growth, providing the resources to accelerate competitive advantages to Europcar in an industry with its strategy through: high entry costs and potential for consolidation, a a the continued implementation of the Fast Lane transformation greater capability to finance the Group’s development program: and growth operations and to strengthen its innovation capabilities in a market undergoing considerable a this program was initiated in 2012 and, during its initial transformation marked by the acceleration of new trends in phase, provided the opportunity to lay the foundations for consumption, mobility and sharing, with a dedicated sum sustainable and profi table growth. of €80 million reserved for strategic initiatives, acquisitions a The Group will continue to deploy the second phase of its and partnerships, including up to €25 million for activities transformation plan to support profi table organic growth. associated with Lab Europcar for the 2015-2017 fi nancial This growth will be supported by the strengthening of the years, commercial strategy by segments of the Group and cost a financial resources tied to the natural “deleveraging” management including, for example, the optimization of its expected due to the Group’s results while initiating the network and the broadening of its shared services center; payment of dividends starting in 2017 based on the net profi t/(loss) for 2016.
1.5.1 Pursue its “Fast Lane” transformation program and its systematic implementation in order to:
Reinforce its position as a leader to allow Group plans to adopt a targeted approach specifi c to each sustainable growth customer category: a a The Group intends to pursue its targeted brand strategy, with respect to “large corporates”, by focusing on gaining based on the development of its offer of services under its signifi cant new contracts as well as on increasing customer Europcar® and InterRent® brands, in order to support growth loyalty in order to support sustainable growth; in the volume of activity and to improve its visibility with a with respect to “SMEs”, by seizing new opportunities existing and potential customers. This strategic positioning through the development of new products specifically is intended to present a clearly differentiated portfolio of intended for this category of customers and, to that end, brands, to reinforce Europcar’s position in its key markets by capitalizing on its reenergized sales teams; and and to capture the volume increase in the “leisure” segment. a with respect to the “vehicle replacement” segment, by broadening its current customer base through the a The Group plans to strengthen its commercial efforts in the conclusion of new agreements. business segment, with the deployment of new commercial a The Group intends to strengthen its attractiveness in the tools and the implementation of targeted actions. The leisure segment, by optimizing its digital and mobile strategy, Group is currently developing its existing business customer its distribution channels and its revenue and capacity base, relying on the reorganization and revitalization of its management system. To support this strategy, the Group sales teams and the implementation of new commercial continuously adapts its digital distribution channels to ensure processes, supported by the recent deployment of they are responsive to changing customer behavior, which commercial productivity tools as well as the deployment of is trending towards an increasingly simplifi ed process of training programs adapted to its commercial strategy. The
26 EUROPCAR REGISTRATION DOCUMENT 2015 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES STRATEGY
reserving and accessing a vehicle. The Group intends to recently recruited a Customer Experience offi cer. The Group continue to strengthen its focus on “leisure” customers while is also implementing projects targeting people and talent 01 continuously optimizing its distribution network, including via management, in order to foster a corporate culture based new distribution channels such as new mobile applications, on accountability and the sharing of ideas. smartphones and tablet computers to respond to new a The Group intends to continue improving the architecture customer consumption patterns (for more information of its IT system in order to better support the development on the Group’s distribution channels, see Section 1.6.4 of new service offerings. In recent years, the Group has “Distribution Channels” of this Registration Document). This invested in the development of its IT system to guide and development of distribution channels will be accompanied facilitate the implementation of new products and services. by the optimization of the processes for demand and The Group has already implemented a 2020 plan to renovate availability management of the fl eet (“Revenue & Capacity the architecture of its IT system in order to make it more Management”), which allows the Group to adapt its offers open and fl exible and facilitate the integration of third-party (in terms of price, availability, etc.) to fl uctuations in demand applications. A number of changes are being analyzed to and to the composition of the Group’s fl eet. capitalize on the Group’s operating excellence, promote a The Group intends to continue to improve its service offerings data-based decisions, adapt products and prices in real to best meet customers’ new expectations in terms of mobility. time and, more generally, accelerate digital development and The Group is planning to continue to develop targeted strengthen customer relationship management. products and services, based on its thorough knowledge a The Group intends to rationalize its semi-fixed cost base, in of the vehicle rental sector and of uses in its local markets. particular by expanding the scope of the Shared Services The Group will continue to develop and deploy its innovative Center and optimizing its non-fleet purchases. The Group has products and services to meet these new expectations, such a detailed roadmap to further rationalize its semi-fi xed costs as the recent innovations ToMyDoor, ToMyCar, FitRent and base, in particular via the transfer of additional functions to Keddy by Europcar®. These developments will be supported its Shared Services Center in Portugal and the optimization by the progressive implementation of new management and of the activities of its operating subsidiaries’ headquarters. customer portfolio analysis tools. This optimization is based on the nature of its business and a The Group intends to implement new customer relationship the use of its exclusive Greenway® system, which offers a management tools and to improve its customer loyalty single solution covering all the functional areas of vehicle programs. The objectives of implementing these new rentals. Furthermore, the Group will continue to optimize its tools are to refi ne its understanding of customer profi les to non-fl eet purchases and network, which it has already begun improve the targeting of marketing campaigns and real time in certain countries, in order to better serve the needs of its transmission of customer data to agents to enable them to existing and potential customers (for example, by opening better handle each customer’s needs, and, if applicable, offer downtown rental stations). The optimization of its network will additional services (up-selling). The segmentation and data also aim to strengthen and improve customers’ experiences, mining tools implemented will allow for customer actions, via innovative tools and processes, in connection with the with priority on digital actions, towards prospects having a Group’s marketing and sales strategy. profi le similar to that of valued customers in our database a The Group intends to continue rationalizing its fleet costs, (searching for “peers”). As part of improving its customer in particular by harmonizing management processes relationship management efforts, the Group also intends to throughout its rental stations. The Group plans to harmonize continue to improve its customer loyalty programs, including the management processes in its rental stations, such as its “Privilege” program, expanded in 2014, and designed to the inspection of returned vehicles, in order to improve the improve customer loyalty of both individuals and businesses. customer experience. Moreover, the scope of the Shared Services Center in Portugal will include certain activities Pursue operational excellence related to fl eet vehicles, such as processing insurance claims. a The Group intends to continue improving its organizational efficiency. The Group continues to optimize the management of its customer relationships and network. The next step of the Fast Lane program will emphasize strengthening the management teams and sales teams, in order to ensure that they benefi t from a full range of tools that allow them to effectively contribute to the Group’s profi table growth. The Group created international teams responsible for sales and marketing to coordinate and ensure that the Group’s marketing efforts are consistent at the local level, and more
EUROPCAR REGISTRATION DOCUMENT 2015 27 01 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES STRATEGY
1.5.2 Develop drivers for the Group’s growth
Develop and strengthen its network of agents, a Expand the Group’s mobility solution offerings and capitalize franchises and sales agents on its existing offers to better respond to consumer’s new mobility needs. a Capitalize on its network of agents, franchises and sales representatives to continue to strengthen and expand As part of its “Fast Lane” transformation program, the Group it internationally. The Group will continue to optimize its is preparing its transition from a rental vehicle company to network of existing franchises via initiatives such as the a mobility services provider. It seeks to extend its offerings sharing of better practices, inter-country conferences of innovative solutions in order to respond to changes in among franchisees and an improvement of administrative the mobility market and consumer expectations. The Group management via the Shared Services Center. Furthermore, aims to create an ecosystem of mobility services that the Group aims to extend its presence in international complements Europcar’s principal activity of vehicle rentals. markets, by developing its network of international franchises The Group plans to leverage key competitive advantages in selected regions and countries where opportunities exist. such as its brand recognition, customer diversity, fl eet size, For example, the Group is currently looking to expand its fl eet management expertise and density of its network to presence in Latin America and the Asia-Pacific region, seize opportunities resulting from new mobility trends. The particularly in China, through various types of partnerships. Group will focus in particular on intermodal solutions using a Moreover, the Group will continue to explore expansion digital platform aggregating different means of transportation opportunities beyond its international network of franchises (such as public transportation, rental vehicles, taxis and other and continue its joint marketing efforts with international mobility solutions) in order to offer its customers the best partners and client companies, including, for example, joint possible itinerary for a given route and alternative solutions advertising campaigns and online promotional offers. to vehicle ownership, ensuring access to a nearby vehicle as well as solutions that aim to generate value on unused third-party vehicles and unused parking spaces. The Group Develop new mobility solutions will rely upon the experience it has already acquired in this fi eld to propose innovative internal solutions or make targeted a Accelerate the implementation of innovative mobility solutions acquisitions of companies whose services complement those with support from the “Lab”. The Group recently created a of the Group’s. “Lab”, designed as an incubator of ideas for research into new products and services in mobility solutions. The Lab aims to support internal projects and the securing of minority and Accelerate the Group’s growth via external majority stakes in innovative structures. The Lab’s activities development operations are intended to meet the transportation challenges of the a Group’s customers through: The fi nancial headroom now enjoyed by the Group allows it to plan external growth transactions aimed at acquiring a a multi-modal proposition to provide the customer with customer bases or accelerating certain go-to-market fully integrated transportation solutions that fully connect initiatives. the customer and the offer in real time; and a The Group may also acquire companies in regions where it a a local transportation solution focused on a well-defi ned considers that such acquisitions will be profi table, considering, ecosystem: this solution already exists for the Group with in particular, that the European market is relatively more its “Excel London” partnership, under which Europcar fragmented than the U.S. market (the fi ve largest market offers specific vehicle rentals at this London business participants in Europe represented approximately 66% of center. the market in the Corporate Countries in 2014 (source: The Group intends to continue investing in the Lab in order to Euromonitor), whereas the three largest market participants seize opportunities for new mobility solutions in the market. represented approximately 95% of the U.S. market in 2014 The fi rst evidence of this commitment was the acquisition of (source: AutoRental news)). a majority stake, alongside the founders, in Ubeeqo, a French start-up specializing in B2B car-sharing and a pioneer in this market, and E-Car Club, the United Kingdom’s fi rst entirely electric pay-per-use car club.
28 EUROPCAR REGISTRATION DOCUMENT 2015 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES DESCRIPTION OF THE GROUP’S BUSINESS
1.6 DESCRIPTION OF THE GROUP’S BUSINESS 01
1.6.1 Europcar’s Brands
The Group has decided to focus its strategy on its two main The purpose of this strategy is to offer the Group’s customers brands, Europcar® and InterRent®, targeting a wide range of a clearly differentiated and understandable portfolio of brands, customer segments for vehicle rentals: to reinforce Europcar’s position on its key markets. a Europcar® is the Group’s core brand. It is used worldwide directly and through its franchisee network in order to serve 1.6.1.1 The Europcar brand® a wide range of market segments, from the high-end to the cost-conscious, as well as a large portfolio of diversifi ed Europcar® is the Group’s core brand and offers mobility customers, from large corporate customers to individual solutions ranging from short-term vehicle rental to car sharing. “leisure” customers. The Group aims to maintain customers’ Europcar® offers a wide variety of recent models of passenger brand trust by offering high quality innovative services and cars, vans and trucks for rental on an hourly, daily, weekly or simple and transparent offers and services. To promote the monthly basis, with rental charges computed on a limited or brand, the Group uses highly visible sponsorships, particularly unlimited mileage rate. While vehicles are usually returned to in sports (such as its sponsorship of Arsenal, the English the location from which they are rented, the Europcar network soccer team, and Benfi ca, the Portuguese soccer team), as also allows one-way rentals from and to selected locations. well as co-marketing campaigns with car manufacturers. The To increase the visibility of the Europcar® brand, the Europcar Group also has international partnerships with airlines, major Groupe is developing various initiatives via a variety of channels: hotel groups, railway companies and credit card companies traditional media, such as radio and print advertising; Internet that both promote the brand and generate demand. and email marketing and mobile device applications. Europcar a InterRent® has been deployed by the Group since 2013 to develops co-marketing initiatives with car manufacturers, such target the low-cost leisure (“low-cost”) segment in order as through its “Be the fi rst” advertising platform for every major to expand its customer portfolio. The “low-cost” market international model launch and its mobility partnerships with represents approximately 10% of the vehicle rental market PSA, Renault Nissan and Smart. Sports sponsorship such as (approximately €0.9 billion in value) in the Corporate Countries the English football team Arsenal and the Portuguese football in Europe in 2014 (source: KPMG study, on the basis of team Benfi ca have also contributed to the attractiveness of revenue generated in 2014 by “low-cost” brands of the the Europcar brand® and its image around the slogan “Moving principal market participants in the vehicle rental market and your way”. The Group also has international partnerships with local independent companies that disclose their positioning airlines, major hotel groups, railway companies and credit card and “low-cost” revenue). As of December 31, 2015, the companies that both promote the brand and generate demand. brand had been launched in six Corporate Countries in The Group has been recognized with numerous awards Europe, with 75 stations located primarily in airports and since 2000, including at the World Travel Awards, an event train stations, and an average fl eet of 7,776 vehicles in 2015. that recognizes excellence in the global travel and tourism In addition, the brand is available in 40 franchised countries. industry. Europcar has recently received awards for World’s The brand, whose motto is “drive, save, enjoy”, targets Leading Car Hire, World’s Leading Green Transport Solution cost-conscious leisure travelers with a customized offer. The Company, World’s Leading Leisure Car Rental Company, ® InterRent brand uses a separate website and reservation Europe’s Leading Car Hire, Europe’s Responsible Tourism ® system that are managed independently from the Europcar Award, Australasia’s Leading Car Hire, Africa’s Leading Car ® brand platform. Some InterRent stations are separate from Hire, Middle East’s Leading Car Hire and Mexico & Central ® Europcar stations while others are a separate counter at America’s Leading Car Hire. a Europcar® station. The purchase and maintenance of vehicles as well as administrative functions are managed at In June 2015, the Group’s French subsidiary received the the Group level in order to benefi t from economies of scale TripAdvisor® “2015 Travelers’ Choice of travel essentials” award and a better cost-effi ciency ratio. for the category “Car Rental Agencies”.
EUROPCAR REGISTRATION DOCUMENT 2015 29 01 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES DESCRIPTION OF THE GROUP’S BUSINESS
In December 2015, Europcar received the Grand Prix a E-ready: a service that allows the customer to fi ll out an “Communication & Enterprise” jury award in the “External digital online customer profi le (including, in particular, his driving strategy award” category for the international digital campaign license number). The station can then prepare the rental #MyEuropcarRoadTrip. The campaign also received the contract prior to the customer’s arrival and thus limit time Communication award from the jury in the “Best communication at the counter. The “E ready” customer has access to a on social media” category. dedicated sales counter; a premium services: E UROPCAR SERVICE OFFERINGS® a Selection: a premium mobility service that offers customers
TARGETED, DIFFERENTIATED OFFERINGS a unique rental experience by delivering high-end cars (Luxury & Fun). The proposed service offering is customized The Group uses its knowledge of the market to develop and and is structured around 5 pillars: a guaranteed model, progressively roll out new mobility products and services. special counters at stations, exclusive phone service for Examples of innovative Europcar® branded products and customers, a network of dedicated “Selection” stations services include: and a dedicated digital platform (available from the 1st a customized packages: quarter of 2016), a Chauffeur services: a service targeting “business” and a FitRent: a mid-term (minimum of 30 days) rental product “leisure” customers, providing a chauffeur and additional targeting small and medium-sized enterprises (SMEs). services along with a vehicle rental. This service was This product was launched at the beginning of 2014 and launched in the United Kingdom in 2014 and is also is available in France, Portugal, Belgium, Spain, Italy and available in France and Germany as well as in various Germany. It offers car and truck rentals, fl exible terms, a franchises in Switzerland, Russia, Austria, Denmark and simple, all-inclusive offer (in particular mileage, insurance, Dubai; additional driver) and convenient monthly reporting and a targeted broker products: billing, a ® a AutoLiberté: a subscription-based car rental product Keddy by Europcar : this product, launched in March 2015, targeting urban customers in France. This service offers, is available in Germany, France, Spain, Portugal, Belgium on a monthly fi xed-price basis, two levels of subscription and the United Kingdom. It is tailored for tour operators, according to vehicle category. This product guarantees travel agencies and online brokers that market to leisure fi xed rates on rentals. With this product, the Group aims customers who are price-sensitive but looking for more to increase customer loyalty and benefi t from customers’ services than typically available in the “low-cost” segment. growing demand for mobility solutions other than individual OTHER ANCILLARY PRODUCTS AND SERVICES car ownership; The Group offers its customers a range of additional services a timesaving services: and equipment on a fee basis, including those described below: a ToMyDoor: a service for both business and leisure a protection: The Group offer its customers a range of optional customers that enables the customer to be delivered insurance products and coverage such as physical damage the rental vehicle and/or return it at a chosen location, insurance, theft protection, headlight and tire protection, eliminating the need for the customer to come to the rental supplemental liability insurance and Personal Accident station. It is available in France, Spain, Portugal and the Insurance, which provides accidental death, permanent United Kingdom, disability and medical expense protection (which can include a ToMyCar: a service that allows direct access to the rental personal effects coverage); vehicle via smartphone (virtual key), eliminating the need to go to the counter. This product targets leisure and business a equipment: The Group also offers navigation systems, child customers. It was launched in the United Kingdom in seats, winter equipment and roof racks as well as other March 2015, equipment depending on the agency and availability; a other services: the Group also invoices its customers for additional services, such as fueling or specifi c locations such as airports (“surcharge”). Fees for certain categories of drivers such as, for example, young drivers may also be charged.
30 EUROPCAR REGISTRATION DOCUMENT 2015 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES DESCRIPTION OF THE GROUP’S BUSINESS
LOYALTY PROGRAM 1.6.1.2 InterRent® Brand ® 01 The Europcar brand has a free loyalty program, called InterRent® targets the “low-cost” segment and aims at ® (1) “Privilege ” , that provides customers with a range of rewards enhancing the Group’s customer portfolio. The “low-cost” and services. This program, which was revamped in 2014, market represents approx. 10% of the vehicle rental market is designed to improve customer retention in an industry (approx. €0.9 billion in value) in the Corporate Countries in characterized by a low retention rate of leisure customers. The Europe in 2014 (source: KPMG study, on the basis of revenue program provides specifi c benefi ts such as free upgrades and generated in 2014 by “low-cost” brands of the principal market weekends with free rentals depending on four levels of loyalty participants of the vehicle rental market and local independent (Privilege Club, Privilege Executive, Privilege Elite and Privilege companies that disclose their positioning and “low-cost” Elite VIP) based on a number of rentals or rental days. There are revenue). specifi c benefi ts for each loyalty level. In addition to fostering loyalty, information generated by the program enables the The brand, whose motto is “drive, save, enjoy”, targets Group to develop new offers targeted to customer demand and cost-conscious leisure travelers with a customized offer. The ® improve commercial synergies among Europcar users in the InterRent brand uses a separate website and reservation ® “business” and “leisure” segments. As of December 31, 2015, system that are managed independently from the Europcar ® the Privilege program had 1.6 million members. brand platform. Some InterRent stations are separated from Europcar® stations while others are a separate counter at a Europcar® station. The purchase and maintenance of vehicles CUSTOMER SATISFACTION as well as administrative functions are managed at the Group The Group tracks customer satisfaction levels based on its level in order to benefi t from economies of scale and a better “promoter score” program in place since 2011 that gathers cost-effi ciency ratio. feedback from customers as to whether they would recommend InterRent® offers a simple and direct customer service that Europcar to friends and family. The Group’s continued efforts meets the requirements of cost-sensitive leisure customers. to improve the customer experience was refl ected by a net Cars available are often not as new as those offered under the increase in the Group’s “promoter score” (determined by Europcar® brand, with a more limited selection of categories collecting customer opinions after each rental and based on (mini, economy, compact and family), brands and models. In the percentage of customers who indicated that they were “very keeping with the low-cost model, InterRent® offers customers likely” or “extremely likely” to recommend Europcar), from 58% the lowest prices, although the service offering is more limited in 2011 to 66% in 2012, 72% in 2013 and 79% in 2014. Since than under the Europcar® brand. For example, one-way rentals 2015, Europcar has made changes to customer satisfaction are not available. Rentals must also be prepaid. InterRent® measurement by monitoring a more structured performance reservations must be made through the brand’s separate indicator, driving towards excellence, the “Net Promoter Score”, website and reservation system. Front-office InterRent® i.e. the difference between the “promoters” and “critics” of operations are managed separately from the Europcar® brand, the brand. Detailed analyses of the NPS allowed Europcar to while fl eet sourcing, maintenance and back-offi ce functions identify ways to improve and monitor the performance of the are managed by the Group together with the operations of actions undertaken. The method of gathering customer option the Europcar brand to benefi t from economies of scale and a was harmonized (Email channel), thus in 2015, the Group’s better cost-effi ciency ratio. NPS score was at 44.9. The InterRent® Brand was fi rst deployed in Spain and Portugal All Group employees are committed to this Net Promoter Score end of 2011. The InterRent® brand was deployed beginning via a part of their variable compensation. Station scores are 2013 in six Corporate Countries in Europe and was available reviewed weekly and action plans implemented based on such at 75 rental stations, primarily at airports and train stations, reviews. as of December 31, 2015 (refer to Section 1.6.5 “Europcar’s The Group has also launched online reviews and ratings on network” for the geographical distribution) with an average fl eet its websites to foster transparency, interaction and customer of 7,776 vehicles in 2015 against 4,730 vehicles in 2014. confi dence. The Group is also actively developing its InterRent® franchise network, with franchises in place in 40 countries as of December 31, 2015 (against 19 at the end of 2014), including Malta, Cyprus, Turkey, Morocco, Croatia and covering the Mediterranean basin, but also with the desire to reinforce the brand’s presence particularly in Europe and the Middle East. InterRent® is managed from Madrid by a dedicated team in charge of defi ning the brand’s strategy worldwide to further improve its competitiveness. The Group is currently investing in online marketing projects and campaigns to promote the brand through its website.
(1) The “Privilege” brand is Europcar’s registered brand in English for all the countries in its worldwide network. EUROPCAR REGISTRATION DOCUMENT 2015 31 01 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES DESCRIPTION OF THE GROUP’S BUSINESS
1.6.2 Europcar Lab/Mobility solutions
The Group seeks to extend its offerings of mobility solutions The founders continue to manage Ubeeqo’s development in order to respond to changes in the market and consumer with the support of Europcar. The shares are subject to expectations. The Group focuses in particular on developing reciprocal put and call options between the founders and intermodal solutions with digital access to local mobility the Company. The Group’s holding in Ubeeqo is accounted solutions from a defi ned local area, guaranteed proximity of for using the equity method. a vehicle and ability to extract value from unused cars and Through its solutions and technologies, Ubeeqo encourages parking spaces. individuals to travel differently, by making better use of cars The Group has created a Europcar Lab to study mobility market when they are indispensable, or by using an alternative where usages and search for new mobility solutions opportunities possible. In plain terms, Ubeeqo, present in France, Belgium, worldwide, whether such opportunities be with customers, as well as in the United Kingdom and Germany since 2015, partners or technology or transportation consultants. Europcar offers various services such as a mobility app (location, Lab is intended to be an incubator for new products and reservation and payment for mobility solutions from a single services in mobility solutions for the Group. Europcar Lab aims app), car sharing services (general public or in companies) to support internal projects and secure minority and majority or connected fl eet management solutions for companies. stakes in innovative structures. Europcar Lab is structured Ubeeqo also plans to expand into Southern Europe and around a dedicated team of 6 individuals including a director countries in Europe where Europcar benefi ts from a network responsible for supervising the Group’s team and employees. of franchises, to build a global footprint. Europcar Lab is a Group legal entity with its own premises. It is Thus, Ubeeqo proposes innovative and complementary managed by Fabrizio Ruggiero, a member of Europcar Groupe’s solutions to companies, in particular: Management Board and General Manager of Europcar Italy. a “Bettercar Sharing”: a car-sharing solution that promotes The Lab’s activities are intended to meet the transportation private fleet sharing within a business and among challenges of the Group’s customers through: businesses; a a a multi-modal proposition to provide the customer with fully “Bettercar Connected”: a fl eet management solution based integrated transportation solutions that fully connect the on onboard telematics enabling the analysis of vehicle fl eet customer and the offer in real time; and usage and costs, aimed at generating cost savings for businesses; and a a local transportation solution focused on a well-defi ned a “Mobilities Benefits”: a multimodal alternative to the ecosystem: this solution already exists for the Group with its Company car, providing employees with access to a fl eet “ExCel London” partnership, under which Europcar offers of shared cars and a mobility stipend to fund personal specifi c vehicle rentals at this London business. travel needs (including train, taxi and car rental, among others), along with a one-stop application. Existing Mobility Solutions Its current customer base includes several blue chip French companies, such as Danone, L’Oréal, Airbus, Michelin. Its The Group’s specifi c mobility solutions currently include: solutions aim to provide customers with signifi cant savings, enhanced employee satisfaction and a reduced impact on a Ubeeqo the environment. In November 2014, the Group acquired a 70.64% interest More recently, the Company invested in the private market by in Ubeeqo, a French start-up company established in 2008 opening its multimodal reservation platform for individuals in and one of the pioneers in mobility and fl eet management Paris and London. With the Ubeeqo app, users may choose services for companies and more recently for individuals. the means of motorized transport most suited to them: car The acquisition is part of Europcar’s strategy to expand its sharing via “Matcha”, car rentals at stations via Europcar mobility solution offering to respond to customer needs by or cars with drivers via Allocab (the fi rst national network of providing simple, turnkey solutions. This acquisition allowed cars with drivers (VTC) and motorcycle taxis) in Paris or a the Group to sustain Ubeeqo’s development in new mobility taxi in London. The platform, which also includes payment technologies in Europe. In 2015, Europcar Lab increased and invoicing, intends to expand its services over the next its interest in Ubeeqo to 75.7% via a capital increase not few months. This service will be gradually extended to other subscribed by the founders who hold the balance shares. urban capitals of Europe.
32 EUROPCAR REGISTRATION DOCUMENT 2015 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES DESCRIPTION OF THE GROUP’S BUSINESS
The car sharing service, Matcha, is a closed-loop courtesy a Car2go Europe car offer (at the end of the reservation, the car must be Through Car2go Europe, a joint-venture with Daimler in which 01 brought back to its start location). The vehicles are available the Group holds a 25% stake, the Group has developed in the city, in the business districts and at railway stations. car-sharing services for individuals. Car2go Europe is a car- Using the Ubeeqo app or on the website, the customer sharing service aimed at making rental vehicles available to may reserve a vehicle for a few hours or days. The pricing subscriber customers in European cities. Initially launched in depends on the services utilized during the period (starting Hamburg and Vienna in 2011, the service was rolled out in a at €4 an hour, with or without subscription). number of major European cities including Turin and Madrid a E-car Club in 2015. Car2go Europe is in particular present in Germany, Austria, and Italy. In July 2015, Europcar Lab acquired a majority stake in the share capital of E-car Club, the UK’s fi rst entirely electric This car-sharing service does not require a reservation, pay-per-use car club. E-Car Club’s vision is to improve although a car may be reserved up to 30 minutes prior to local mobility, while reducing costs and the environmental the rental through a smartphone application. Cars are easy impact of its users’ travel. The Company deployed its original to fi nd through the smartphone application, with rental use car-sharing solution in several British agglomerations like charged by the minute (and a lower per-minute price charged London, Hertfordshire, Northamptonshire, Oxfordshire, for a stopover during a rental). The service offers one-way Buckinghamshire, Warwickshire and Fife, around ecosystems driving and easy parking (including pre-paid on-street parking such as universities, local public authorities or even residential in certain locations). building programs. E-car Club will be able to rely on The Group records its stake in Car2go Europe under the Europcar’s support to implement an ambitious deployment equity method. The Group invested a total of €12.5 million plan. in Car2go Europe in 2015.
1.6.3 Customers (“Business”/“Leisu re”)
The Group’s products and services are offered to a large range of Consolidated revenue generated by the “business” and “leisure” business and leisure customers. Business customers primarily customer segments remained relatively stable during the last include large corporates, small and medium-sized businesses, few years. For the year ended December 31, 2015, leisure as well as entities renting vehicles to provide temporary vehicle rentals accounted for approximately 56% of the Group’s replacement services. “Leisure” customers primarily include rental revenue (excluding fees received from franchises), with individuals renting vehicles for their personal needs, in particular business rentals accounting for the remaining 44% (against for travel during holidays and weekends, directly or indirectly 55% and 45% respectively in 2014). via tour operators, brokers and travel agencies. Certain of the Corporate Countries in Europe (Germany and The “business” and “leisure” segments have different and Belgium) are more geared towards business customers, while complementary characteristics, particularly in terms of others (Spain, Italy and Portugal) are more geared towards seasonality of demand, which allows for better management leisure customers and others (France and the United Kingdom) of the Group’s network (both in terms of stations and the have a balance between business and leisure customers. The fl eet utilization rate). The Group believes that maintaining an Corporate Countries in the Rest of the World (Australia and appropriate balance between “business” and “leisure” rentals New Zealand) are more geared towards leisure customers. The is important to maintain and enhance its overall profi tability table below shows the breakdown of the Group’s revenues and the consistency of its operations throughout its network.
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from rental activities (excluding fees received from franchisees) by “business” and “leisure” customer segments in the Corporate Countries for the year ended December 31, 2015:
BREAKDOWN OF THE GROUP’S RENTAL REVENUE BY CUSTOMER SEGMENT IN THE CORPORATE COUNTRIES IN 2015
Year ended December 31, 2015
Corporate Countries Business Leisure
Germany 61% 39% United Kingdom 50% 50% France 41% 59% Italy 35% 65% Spain 29% 71% Australia/New Zealand 19% 81% Belgium 60% 40% Portugal 23% 77%
TOTAL 44% 56%
With approx. 5.5 million drivers recorded in Europcar’s needs. When the volume of rental transactions with a particular reservation system in 2015, the Group believes that its customer is signifi cant, Europcar may locate an “implant” rental customer portfolio is one of the strongest and most diverse in station directly on the customer’s premises. the European vehicle rental industry. Vehicle rental contracts are typically signed by large corporates based on competitive tenders at the end of which one or more Business customers suppliers are selected. As part of its transformation program “Fast Lane”, the Group reviewed and rationalized its portfolio Business customers who rent a vehicle from the Europcar of contracts with large corporates aiming to improve its overall network include large corporations, small and medium- profi tability, particularly in 2012 and 2013. sized companies as well as vehicle-rental companies offering The Group organizes the structure of its sales teams for large replacement services. Most business customers rent cars corporates based on the general requirements of different from the Europcar network on terms that the Group has industry sectors to ensure that it uses its knowledge of these negotiated (either directly or, in the case of small and medium- sectors to propose appropriately tailored offers. The Group sized enterprises, through travel agencies). The Group also focuses on satisfying the needs of its large corporate customers categorizes rentals to customers of companies offering support and considers that it has a satisfying track record of retaining its services and vehicle replacement as business rentals. large corporate accounts. The Group plans to take advantage Revenue from business customers tends to be primarily of its sales force management system. concentrated during the period from Tuesday through Thursday each week. Revenue from business customers is less subject SMALL AND MEDIUM-SIZED BUSINESSES to seasonal change. Europcar is the exclusive or preferred provider of rental vehicles LARGE CORPORATES to employees of numerous small and medium-sized businesses at pre-negotiated rates and conditions. This customer segment Europcar has several contracts with many large corporates is characterized by a large number of accounts, which limits (such as Renault, Airbus, Total, Siemens and Accor , as well exposure to any single customer. The Group is focused on as Eng ie and Thales signed in 2015), to serve as the exclusive further penetrating this customer segment, in which it sees or preferred provider of rental vehicles to their employees or opportunities for profi table growth. An example, in 2014, the members, sometimes at the global level. Group launched its FitRent product specifi cally tailored for ® These contracts are concluded at pre-negotiated rates and small and medium-sized enterprises (SMEs) (see “Europcar ®” subject to agreed service-level guarantees. Many of the Group’s Offerings” under Section 1.6.1.1 “The Europcar brand ). The business customers have direct access to Europcar’s IT system Group also plans to lead targeted actions at the local level and via dedicated micro-sites, providing such customers with to capitalize on the experience gained by its marketing directors reservation and invoicing interfaces specifi cally tailored to their
34 EUROPCAR REGISTRATION DOCUMENT 2015 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES DESCRIPTION OF THE GROUP’S BUSINESS
through the “Europcar Master Sales Certifi cation Program” to PARTN ERSHIPS TO REACH “LEISURE” CUSTOMERS generate additional revenues and contracts. Europcar has partnerships with several players in order to 01 offer mobility services to their customers. These exclusive VEHICLE REPLACEMENTS or preferential partnerships allow Europcar to expand its The vehicle replacement rental business principally involves the “leisure” customers. Business is generated through Europcar’s rental of vehicles to insurance and leasing companies, vehicle distribution on partners’ channels or through participation in dealers and other entities offering vehicle replacement services partners’ loyalty programs. to their own customers. Via insurance companies, the Group Europcar currently has international partnerships in different offers its services to individuals, whose vehicles were damaged sectors that represent a signifi cant portion of its rental revenue, in accidents, are being repaired or are temporarily unavailable. including: In order to strengthen this business, Europcar has entered into a several agreements with insurers, dealerships, repair shops in the airline sector, partnerships with airline companies and long-term vehicle leasing companies. The Group seeks such as easyJet (exclusive partnership in place since 2003 to further develop its activities in this customer segment by and renewed in April 2014 for a three-year term), Aerofl ot, expanding its existing customer base (including in franchised (exclusive partnership signed in December 2013 for a fi ve- countries) and through the implementation of incentives and year term), Emirates (partnership signed in March 2014, special offers through the Group’s seven principal partners. under which Europcar customers receive miles in Emirates’ frequent fl ier programs for every car rental), Qatar Airways (in the context of the Qatar Miles program) and more recently “ Leisure” customers Air Caraïbes;
Leisure customers primarily include individuals renting vehicles a in the hotel sector, partnerships with large groups such as for their personal needs, in particular for travel during holidays Accor for business, marketing and communication purposes and weekends, directly or indirectly via tour operators, brokers (partnership established January 1, 2000 and renewed and travel agencies. The Group also serves a portion of its most recently in 2015 for three years with tacit renewal for leisure customers through partnerships to expand its customer successive two year periods) and Hilton (in the context of the base. Hilton Honors program); and Leisure rentals are typically longer in duration and generate a in the railway sector, partnerships with Thalys. more revenue per transaction than business rentals (other than The Group also has marketing partnerships with credit card vehicle replacements). Leisure rental activity is more seasonal companies, credit institutions or organizations offering loyalty than business rental activity, with heightened activity during the programs such as HSBC and Citibank. spring and summer (particularly in France, Southern Europe, Australia and New Zealand , in December and January for Europcar’s contractual relationships with its principal these two countries). Leisure rental activity also tends to be commercial partners typically have terms of between two and higher on weekends than mid-week. For further discussion four years. of the seasonality of the Group’s business, see Section 1.6.8 The Group plans to increase its development on this customer “Seasonality of the business”. segment through the signature of partnerships in new sectors (cruise ships, banks, insurance, etc.). INDIVIDUALS This segment includes all individual customers contracting TOUR-OPERATORS, TRAVEL AGENTS directly with Europcar. Individuals book directly under the AND BROKERS ® Europcar brand through the brand’s website or using the Europcar works in close collaboration with various tourism- ® Europcar app, cell phones or tablets, through call centers and industry intermediaries, leveraging their marketing positioning ® car rental stations and under the InterRent brand through the to improve the Group’s visibility and reputation and to enter ® brand’s dedicated website or the InterRent app, cell phones additional distribution channels. or tablets (see “Europcar’s Direct Distribution Channels” under Section 1.6.4 “ Distribution Channels”). The Group plans to Europcar has agreements at the international and national levels further develop its activities in this customer segment following with several travel agencies (including online travel agencies) the reorganization of its e-commerce department in order to that work directly with Europcar or through tour operators or build on the trend in reservations on websites and mobile brokers to offer car rentals to end customers, either on a stand- applications and the signing of new agreements with general alone basis or as part of packages. sales agents in order to stimulate international demand, in particular in China, India, Russia and Brazil.
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In addition, Europcar has multi-year agreements with certain The Group considers that it maintains ongoing, balanced major tour operators to serve their customers’ leisure- relationships with these different intermediaries. These relations destination needs. Tour operators are traditional partners, based on a multi-brand or multi-product strategy allow the combining car rental with hotels and fl ights to offer packages Group to benefit from additional contributions made to its to end customers. activities, in particular during low season, or for certain partners, from intermediaries’ early payments especially during high Brokers are leisure intermediaries who sell vehicle rental season, a period when the Group guarantees them a certain services to end customers on their own behalf or on behalf of level of vehicles. the vehicle rental companies.
1.6.4 Distribution Channels
The Group’s customers have access to various mobility offers BREAKDOWN OF RESERVATIONS BY DISTRIBUTION of Europcar through a variety of distribution channels. CHANNEL FROM 2005 TO 2015
® They may book rental vehicles under the Europcar brand in the 9% 11% 14% 17% 21% 23% worldwide network through local, national or toll-free telephone 7% 9% 26% 27% 28% 30% 32% 9% 10% 19% calls handled by call centers; directly through stations; or, in the 18% 11% 13% 18% 17% 15% case of replacement rentals, through a proprietary dedicated 18% 21% 22% 16% 17% 22% system serving the insurance industry. Additionally, customers 30% 16% 29% 26% 23% 15% 20% 15% 14% may make reservations for rentals worldwide through the 19% 15% 17% 15% Group’s websites and using its apps or cell phones and tablets. 13% 13% 13% These channels are known as “direct” booking channels as they 34% 33% 32% 33% 32% 28% are controlled by the Group. 25% 24% 23% 21% 18%
Customers may also book vehicles through indirect distribution 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 channels, such as travel agents, brokers, or other third-party travel websites. Such third-party actors often utilize a third-party Internet - Direct Internet - Indirect Indirect / GDS operated computerized reservation system, known as a global Call centers Stations distribution system or “GDS”, to contact Europcar and make the reservation on behalf of the customer. Source: Company. Reservations for the InterRent® brand are all made and prepaid As shown, the Group uses varied distribution channels to better over the brand’s specific website. The Group mainly uses service its customers. Online reservations (direct and indirect indirect distribution channels for the InterRent® brand through Internet as well as GDS reservations) represented 69% of the brokers, travel agents and tour operators and is targeting a Group’s total number of reservations in 2015. progressive shift to direct distribution channels in order to optimize profi tability. Europcar’s direct distribution channels The following chart sets out the breakdown in reservations by distribution channel including direct channels “controlled” by the Group (stations, call centers, Europcar-controlled Internet INTERNET sites) and indirect distribution channels (intermediaries’ Internet The Group has invested in its websites and applications, to sites and GDS) over the period from 2005 to 2015 in the answer to the growing role of e-commerce. In 2014, it has Corporate Countries. migrated 15 websites to a new harmonized platform and revamped its iPhone, iPad and Android applications. The Group continues to develop mobile applications, thus in 2015, more
36 EUROPCAR REGISTRATION DOCUMENT 2015 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES DESCRIPTION OF THE GROUP’S BUSINESS
than 70 websites operated for the franchisees of Europcar and Belgium, France, Italy, Spain and the United Kingdom) are its partners were also migrated to the new platform. These outsourced and handle approximately 80% of calls from 01 initiatives also include the increasing digitalization of customer Europcar customers who wish to make a reservation or request. transactions from one-click booking to mobile check-in and As part of the “Fast Lane” program, the Group continues to check-out. The Group has also deployed online reviews and rationalize its call centers in order to adapt them to consumer ratings on all sites and rolled out online chat to improve the habits and to improve the profi tability and effi ciency of such customer experience and the conversion rates of websites and centers. mobile applications. Finally in 2015, Europcar launched a B2B portal on its websites to serve its customers better and capture online “Business” customers especially on the SME market. Indirect distribution channels (Internet, GDS)
Over the past several years, customers’ booking habits have Classic indirect distribution channels are represented by car evolved by means of Internet/e-commerce. Europcar uses its rental brokers and intermediaries such as travel agents and websites to both inform and serve its customers, providing tour operators, who use computerized reservation systems, online reservation systems and information about its services. also called global distribution systems (GDS), which allow Europcar accepts reservations from customers via its country- reservations on the Europcar network. The Group pays third specifi c websites, including Europcar. com and Europcar. biz, party distributor fees for each reservation. mobile applications, as well as through Internet micro-sites accessible (i) by customers of the partners with whom it has Over the last few years, the percentage of reservations made an exclusive relationship and (ii) by employees of Europcar’s via GDS has decreased from 17% of the Group’s total number large corporate accounts. Such micro-sites dedicated to of reservations in 2010 to 15% in 2015. Inversely, indirect business accounts enable Europcar to address the needs of reservations via the Internet have increased from 13% of the customers without intermediaries. Europcar also offers direct Group’s total number of reservations in 2010 to 22% in 2015 reservations through the websites of its partners, such as (unchanged compared to 2014). ® EasyJet. Reservations for the InterRent brand are all made Although these indirect distribution channels provide the Group and prepaid over the brand’s specifi c website. with access to a broader customer base than through its direct Online reservations facilitate price comparisons, thereby distribution channels alone, the indirect customer segment increasing competitive pressure in the industry. Nevertheless, can face stronger competition, as intermediaries and partners sales through these channels carry lower direct distribution generally distribute rental vehicles from several players in the costs than traditional distribution channels and result in a sector. Therefore, Europcar seeks to conclude exclusive or simplifi ed and enhanced customer experience. privileged “strategic” partnerships, under which the Company is the only or the fi rst rental vehicle service provider. In 2015 the Europcar Groupe received the “Best car rental website” award from World Travel Awards. Europcar has signed local agreements with large tour operators and travel agents, which target “business” customers in TRADITIONAL DIRECT DISTRIBUTION CHANNELS particular. Europcar is not an exclusive supplier for these tour- operators and agents, who choose to make reservations for Although vehicle reservations are increasingly moving towards “business” customers who do not have a direct agreement e-commerce, Europcar continues to maintain its traditional with a vehicle rental company, at local level. When a customer direct distribution channels. Traditional direct distribution has a relationship with both Europcar and a tour-operator, the channels include Europcar® call centers and car rental latter acts as the distribution channel and makes reservations in stations. These channels remain important indeed and are accordance with the conditions negotiated with the customer. complementary to Internet channels since, among other things, they are more conducive to the sale of ancillary services. Tour-operators generally offer vehicle rentals as an independent service or as part of a global offering including other The Europcar® call center network consists of Group call services such as air tickets or hotel rooms and are generally centers located in Germany, Portugal, Belgium (partially compensated by the difference between its resale price to outsourced), Australia/New Zealand and the United Kingdom. customers and Europcar’s selling price to tour operators. Travel The call centers in Berlin and Cologne, Germany (covering agents and most of the brokers, who act as Europcar agents, Germany), in Madrid, Spain (covering France, Italy, Spain and rent vehicles at a price determined by Europcar and receive a the United Kingdom) and in Sofi a, Bulgaria (covering Australia, commission on this price.
EUROPCAR REGISTRATION DOCUMENT 2015 37 01 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES DESCRIPTION OF THE GROUP’S BUSINESS
Third party travel websites have also grown in importance as a and the brand, and the proximity of services offered to distribution channel for Europcar. Currently, the Group is partner customers to the places where they need mobility favors of several major travel portals on the internet, which offer three the adoption of balanced partnerships between the car rental distinct marketing benefi ts: company and intermediaries in the tourism sector addressing a complementary target ; a expand the geographical zone addressable by the Group and thus increase Europcar’s network of potential customers a car-rental companies are able to adjust their fl eet sizes to from the non-European market; match demand, in particular when their cars are acquired through buy-back programs, which is the case for the majority a implement dynamic pricing strategies sensitive to short term of Europcar’s fl eet. The Group believes that it has variable demand and supply trends of vehicles at specifi c locations vehicle capacity, as contrasted with the fi xed capacity that with the global service offering of these travel portals; may characterize other sectors, such as the hotel sector, a indirectly benefi t from the links between these travel portals which enables it to manage its various distribution channels and airlines, which are not yet partners in the Europcar consistently; network. a car-rental companies benefi t from volume commitments in The development of the indirect digital distribution channels has the low season and prepayments in the high season from also benefi ted from the growing presence of car rental brokers intermediaries, which offers them guaranteed availability in in the market. Europcar has signed agreements with most of the high season; and the major car rental brokers in Europe. Customers have access a in their principal markets, agents rent Europcar’s vehicles at to a large range of offers from car rental companies and can a price determined by Europcar and receive a commission directly reserve via the broker’s website. on this price. The Group enjoys balanced relationships with intermediaries The size of Europcar’s network, the availability of its fl eet and from the tourism industry. These include the following: the quality of its service are the principal factors of its success a the car rental industry in Europe consists, as regards the in this distribution channel. The Group intends to reinforce its major players, of companies operating under strong and presence in this distribution channel by developing its Keddy recognizable brands, including Europcar. Moreover, these by Europcar® offer and by signing new partnerships with companies have developed attractive geographical networks tour operators, travel agencies and brokers (including in the for customers. This direct relationship between customers franchised countries).
1.6. 5 Europcar’s n etwork
The Group operates directly mainly in Europe through its directly- The density of the Europcar network in the Corporate Countries operated and agent-operated stations and internationally enables to address customer demand for proximity and through its franchises as well as via partnerships and general convenience in such countries, while the international scope sales agency arrangements. The Group’s directly- and agent- of the Europcar network provided by franchisees, partnerships operated stations are located in the countries which the Group and other commercial and sales agency agreements refers to as “Corporate Countries” and where the Group has a signifi cantly enhances the Group’s ability to capture business long standing local presence and expertise: Australia, Belgium, from customers traveling outside of their home countries France, Germany, Italy, New Zealand, Portugal, Spain and the and provides a basis for the Group’s continued growth and United Kingdom. Franchise stations expand the network both expansion. in Corporate Countries (particularly in France) and around the The organizational structure of the Group’s operations in each world, providing increased brand awareness and revenues. country is tailored to local market dynamics, in particular the This broad network gives the Group extensive geographic nature of the customer base, which may be more business or coverage of both business and leisure customers, with leisure based and more local or tourist based, and also refl ects individual Corporate Countries either weighted to one customer the historical development of the Group (including the corporate category or the other or balanced between them, depending versus agent/franchise mix of the stations in each country). on the geographic location.
38 EUROPCAR REGISTRATION DOCUMENT 2015 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES DESCRIPTION OF THE GROUP’S BUSINESS
In addition to airport stations, the Europcar network includes are more geared towards leisure customers and others (France agencies at other major travel points such as railway terminals, and the United Kingdom) have a balance between business 01 city and suburban centers, hotels, resorts and offi ce buildings. and leisure customers. The Corporate Countries in the Rest of The Group is continuing to optimize its network in order to the World operating segment (Australia and New Zealand) are better serve the needs of its customers and to attract new more active in the leisure market. ones. In particular, the Group is strengthening its network of The Group believes that maintaining a balance between downtown rental stations in order to capture growth related to business and leisure customers is an important part of the changing user habits for vehicles, which presuppose far less preserving and enhancing the profi tability of its business and purchase and possession. Certain of the Corporate Countries the consistency of its operations. The locations of stations in Europe (Germany and Belgium) are more geared towards (airports or other locations) also refl ect the specifi cities of each business customers, while others (Spain, Italy and Portugal) country’s customer base.
The following map presents the Group’s network (defi ned broadly to include - in addition to directly-operated - agent-operated and franchise stations, strategic partnerships and general (or global) sales agency arrangements) throughout the world:
Corporate Countries
Partnerships
International Franchise
Global Sales Agents
Through this network of franchises, strategic partnerships and in the vehicle rental market in 2014 (source: Euromonitor, on general sales agents, the Group was the fourth actor worldwide the basis of the companies’ revenues).
EUROPCAR REGISTRATION DOCUMENT 2015 39 01 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES DESCRIPTION OF THE GROUP’S BUSINESS
The following table sets out the number of rental stations (broken down by type) for the year ending December 31, 2015:
2015
Stations
of which Group Agents Franchises Total InterRent
Europe Germany 229 234 0 463 10 United Kingdom 264 8 9 281 32 France 253 74 211 538 19 Italy 24 188 0 212 8 Spain 142 34 0 176 16 Belgium 15 17 0 32 0 Portugal 29 50 0 79 7 Franchises outside of Corporate Countries - - 607 607 - TOTAL EUROPE 956 605 827 2,388 92 of which stations in airports 199 24 --- Rest of World Australia 62 10 59 131 - New Zealand 16 5 0 21 - Franchises outside of Corporate Countries 0 0 1,042 1,042 - TOTAL REST OF THE WORLD 78 15 1,101 1,194 - of which stations in airports 34 7
TOTAL GROUP 1,034 620 1,928 3,582 92
Promoting cross-border activity and inbound through cross-country conferences between franchisees, the traffi c in Corporate Countries development of international business is supported through joint marketing efforts with international partners and business The density of the Group’s network in the Corporate Countries customers, including, for example, coordinated advertising enables the Group to address customer demand for proximity, campaigns and special online promotional offers, as well as while the international coverage of its network considerably through campaigns with vehicle manufacturers in connection enhances its ability to capture business from customers with the launch of new car models. traveling outside of their home countries. The chart set forth below shows the breakdown of 2015 The Group is maintaining and growing its domestic rental revenue between domestic business and inbound business business (reserved vehicles, checked out and returned in a from Corporate Countries and the rest of the World (including single country), and is actively developing its international rental franchised countries). For the purposes of this table, domestic business (in which vehicles are reserved through its direct and rentals are defi ned as rentals that are reserved, checked-out indirect Europcar distribution channels in one country and and returned in the same country, while rentals from Corporate checked out in another country). Internationally sourced rentals Countries and from the rest of the World (including franchised represent an additional source of reservations and revenue for countries) are rentals in which vehicles are (i) reserved through the Group’s domestic operations. the Group’s direct and indirect distribution channels by In order to develop the Group’s international business, customers resident in a given country and (ii) checked-out in management has defi ned key regional markets outside the another country. Corporate Countries in which it is actively promoting the development of cross-border inbound business to the Corporate Countries. In addition to the promotion of international business
40 EUROPCAR REGISTRATION DOCUMENT 2015 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES DESCRIPTION OF THE GROUP’S BUSINESS
2015 RENTAL REVENUE BREAKDOWN IN THE LEISURE 1.6.5.2 Stations operated directly SEGMENT BY SOURCE by the Group or by its agents 01
(A) STATIONS OPERATED DIRECTLY 46% BY THE GROUP Revenue from domestic business As of December 31, 2015, the Group directly operated 1,034 30% stations, all located in the Corporate Countries. Each of these Revenue from other countries stations is managed through one of nine local operating (including franchisees) subsidiaries, which owns (or leases) the rental fl eet and station 24% sites and employ the stations’ staff. The General Manager of Revenue from each operating subsidiary is responsible for managing the fl eet Corporate Countries in the relevant Corporate Country and for overseeing the local sales and marketing, Human Resources and legal functions. Directly-operated stations are primarily located in larger airports and cities. Source: Company. The revenue generated by stations directly operated by the Group is included in the Group’s consolidated revenue. It 1.6.5.1 Operating models represented 83% of the revenue generated by rental activities in 2015 (stable versus 2014). As indicated above in this Registration Document, the Group’s network is based on different o perating models: directly- (B) AGENT-OPERATED STATIONS operated, agent-operated or franchise, as may be further extended through partnerships, commercial cooperation As of December 31, 2015, agents operated 620 stations, all agreements and general sales agency arrangements. In located in the Corporate Countries. Agent-operated stations use general, directly-operated stations are located in larger airports a Group rental fl eet. The sites and employees of agent-operated and cities, while franchise and agent-operated stations are stations are the responsibility of the agents. Relationships with located in smaller airports and cities to provide full coverage agents are managed by the General Manager of the relevant for the Group’s customers throughout the Corporate Countries. operating subsidiary. Agent-operated stations are primarily located in smaller airports and cities to provide widespread The Group’s revenues are composed of vehicle rental revenues coverage. generated by its directly-operated rental stations or by the agent-operated rental stations of its subsidiaries (€1,992 million The revenue generated by these stations is included in the in revenues in 2015, of which 93.4% was generated in Europe consolidated revenue of the Group and agents are paid a and 6.6% in the Rest of the World, the Group’s two operating commission (which is accounted for as an expense in the segments), additional services revenue generated by its directly- consolidated fi nancial statements of the Group) based on the operated and agent-operated rental stations (€97 million of revenue of the relevant stations. It represented 17% of the revenues in 2015), as well as royalties and fees received from its revenue generated by rental activities in 2015 (stable versus franchisees (€53 million in 2015, of which 62% was generated 2014). in Europe and 38% in the Rest of the World).
EUROPCAR REGISTRATION DOCUMENT 2015 41 01 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES DESCRIPTION OF THE GROUP’S BUSINESS
(C) STATION LOCATIONS Airport locations are important for the Group, as they enable it to offer convenience to customers travelling by air and to benefi t The Europcar network rents vehicles to its customers from from the growth in business in these areas. This is one of the stations located in airports, railway terminals, hotels, resorts, Group’s main sources of revenues. Airport stations generally offi ce buildings, and other urban and suburban locations. The generate higher revenue than other stations. locations vary depending on local market dynamics as well as on the density of the Group’s network in the country.
The following charts provide a breakdown in percentage of the number of directly- and agent-operated stations and of the Group’s rental revenues in Corporate Countries (excluding fees received from franchises) between stations located at airports and other locations in 2015:
BREAKDOWN BY REVENUE BREAKDOWN BY NUMBER OF STATIONS
58% 84% Off-Airport Off-Airport 42% 16% Airports Airports
Source: Company.
The following table presents a breakdown of the Group’s rental revenue in Corporate Countries (excluding fees received from franchises) between stations located at airports and other locations in 2015:
BREAKDOWN OF THE GROUP’S RENTAL REVENUE IN CORPORATE COUNTRIES BETWEEN STATIONS LOCATED AT AIRPORTS AND OTHER LOCATIONS IN 2015
Corporate Countries Airports Off-Airport
Germany 21% 79% United-Kingdom 37% 63% France 41% 59% Italy 60% 40% Spain 62% 38% Australia and New Zealand 76% 24% Belgium 29% 71% Portugal 55% 45%
TOTAL 42% 58%
Source: Company.
AIRPORT CONCESSIONS airlines support this business (see Section 1.6.3 “ Customers” (“Business”/“Leisure” ). Through its extensive network of airport stations, Europcar benefi ts from its exposure to airports’ high passenger volumes. In order to operate airport stations, Europcar (or the relevant The number of rental stations in airports as a percentage of the agent or franchisee) has entered into a concession or similar Group’s total number of stations remained stable at between leasing, licensing or other such agreements or arrangements 14% and 16% over the period from 2011 and 2014. Airport granting it the right to conduct a vehicle rental business at the business is highly related to the levels of air travel at the relevant relevant airports. Europcar’s concessions are granted by the airport, and customers often make car rental reservations at airport operators, following either negotiation or bidding for the same time as their fl ight reservations. Partnerships with the right to operate a vehicle rental business in such airports.
42 EUROPCAR REGISTRATION DOCUMENT 2015 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES DESCRIPTION OF THE GROUP’S BUSINESS
Access to airports is relatively costly, and the airports’ operators 1.6.5.3 Franchises control the number of locations made available to car rental 01 companies. The terms of an airport concession agreement During the year ending December 31, 2015, franchisees typically require payment to the airport’s operator of concession operated approximately 1,928 stations, including 827 stations fees based upon a specifi ed percentage of revenue generated in Europe and 1,101 stations in the Rest of the World. Fees from by Europcar at the airport, subject to a minimum annual fee. franchisees received by the Group stood at €52.7 million for the Under most concession arrangements, Europcar must also pay year ending December 31, 2015, of which 62% was generated fi xed rent for terminal counters or other leased properties and in Europe and 38% in the Rest of the World. Please refer to the facilities. Some concession arrangements are for a fi xed length of map presented in Section 1.6.5 “ Europcar’s network” . time (generally three to fi ve years), while others create operating Franchise arrangements have provided the Group with a rights and payment obligations that, as a formal matter, may cost-effective route to expand into small and medium-sized be terminated at any time. Concession arrangements generally local or regional markets and internationally. The franchise impose on Europcar specifi c covenants which include certain network changes in accordance with any franchise buyouts, price restrictions and quality of service requirements. Under the performance of franchisees and the market in which they most concession agreements, if the revenue generated by the are situated, as well as the policy for extending the network. concessionaire increases or decreases, the airports’ operators may modify the concession, in particular with respect to the The Group continues to expand the Europcar network (i) by number of parking lots granted to the concessionaire and the adding new franchisees in the few countries in which it has rate of concession fees. a limited or does not have a presence and (ii) by developing its service offering under the ®Europcar brand to allow Group The terms of concession arrangements typically permit Europcar franchisees to better address market needs. The current to seek complete or partial reimbursement of concession fees focus of the Group’s international network expansion includes from customers to the extent permitted under local regulations. important markets in Latin America and the Asia Pacifi c region.
OTHER STATIONS The Group is also developing its InterRent® franchise network, with franchises in place in 40 countries as of December 31, In addition to airport stations, the Europcar network includes 2015 (compared to 19 at end 2014), including Malta, agencies at other major travel points such as railway terminals, Cyprus, Turkey, Morocco, Croatia and Greece, covering the city and suburban centers, hotels, resorts and offi ce buildings. Mediterranean basin, but also with the desire to reinforce the This market is considerably more fragmented than the airport brand’s presence particularly in Europe and the Middle East. market, with numerous smaller vehicle rental businesses, each with limited market share and geographical distribution, competing with larger organizations such as Europcar. When MANAGEMENT OF THE FRANCHISES compared to airport stations, other stations typically deal with The Group manages its franchise network based on a regional a greater range of customers, use smaller rental facilities with approach, with four regional directors and with annual global fewer employees and, on average, generate fewer transactions and regional franchise conferences. per period than airport locations. Rental stations located at or near railway terminals are operated pursuant to concession Compliance with the terms of the Group’s franchise agreements agreements similar to those described above for airport and the uniformity of service quality across the network are stations. Railway stations, particularly those serving high-speed controlled through informal visits to franchisee locations and trains, generally generate higher traffi c volume than other non- through regularly scheduled audits by the Group’s Internal airport stations. A dense network in the outskirts of big cities Audit Department. Regional franchisee conferences are held is also essential as it brings us closer to customers and their on an annual or semi-annual basis to establish best practice needs, in particular small- and medium-sized businesses. guidelines and to promote inter- and intra-regional business within the Europcar network.
The Group supports the promotion of the corporate image by franchisees through: a local marketing with advertising assistance and resources; a branding and signage;
EUROPCAR REGISTRATION DOCUMENT 2015 43 01 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES DESCRIPTION OF THE GROUP’S BUSINESS
a product structuring; Other than in a very limited number of cases, franchisees are exclusive to the Europcar network, meaning that they agree a airline and hotel partnerships; and not to work with any other vehicle rental group or to operate a a access to card programs to promote customer loyalty. vehicle rental business under their own name for the duration of the franchise agreement. Most of the franchise agreements Franchisees participate in the costs associated with brand concluded by the Group provide that when a Europcar network initiatives. customer makes a reservation relating to the territory of a The Group has implemented initiatives aimed at further franchisee, that customer becomes a customer of the said integrating franchisees, including information via an intranet franchisee. platform and monthly newsletters. Franchisees hold (or rent from third parties) and fi nance their The Group also seeks to encourage cross-border sales fl eet independently from the Group. Franchisees may benefi t between franchisees and directly-operated stations. It also from agreements with buy-back commitments signed at the aims to build on its franchise network to increase inbound and Group level, but are free to conclude their own fl eet supply outbound fl ows as part of the development of general sales agreements with automobile manufacturers. Franchise agency arrangements worldwide. contracts provide that franchisees are required to respect the Group’s fl eet standards (mileage, maintenance, safety etc.). In CHARACTERISTICS OF FRANCHISE OPERATIONS order to ensure that franchisees respect the Group’s standards, an exhaustive review of their fl eet is realized based on operating Franchisees operate using their own fl eet and employees and data (mileage, holding period) and, through sampling, a physical have the exclusive right to use the relevant brand of the Group verification of the fleet is carried out during visits of rental pursuant to a license. Franchise agreements generally cover a stations operated by franchisees. specifi c portion of a country (e.g., a region or a city) or the entire country, in which case each franchisee may operate directly or In general, the Group’s franchise contracts do not permit the through sub-franchise or agency agreements between it and franchisee to terminate the agreement prior to the expiration of third parties. the agreed term. In most cases, local franchisees are entitled to be indemnifi ed by the Group (either pursuant to applicable Franchisees initially pay an entrance fee, and, upon renewal law or under the terms of the franchise agreement) should the of their contracts, a territory fee, for the exclusive right to use franchise agreement be terminated by the Group before the the franchise rights in the area covered by the agreement. expiration of its term. The Group retains the right in most cases The franchisees pay royalties representing a percentage of to terminate a franchise agreement in the event the franchisee the revenue generated by the vehicle rental operations, a fails to meet its contractual obligations, notably payment of reservation fee based on the number of reservations made royalties and fees, or takes actions that risk damaging the through the Group’s reservation system and, if applicable, a fee Group’s brand and reputation. Franchisees may generally also to use the Group’s IT systems. Franchisees are required to send terminate the agreements concluded with the Group in the monthly fi nancial reports to the Group, which form the basis event of a material breach of the agreement by the Group. of the calculation of royalties. In return for the payment of fees and royalties, franchisees benefi t from access to the Group’s reservation system, worldwide network, international brand, 1.6.5. 4 Commercial cooperation agreements customer base and information technology systems. Royalties and fees paid by Europcar network franchisees in the Corporate The Group has entered into commercial cooperation Countries and Franchised Countries totaled €52.7 million for the agreements with certain entities to provide cross-referrals year ending December 31, 2015 (versus €53.3 million for the and cross-services in various countries. These agreements year ending December 31, 2014). See Section 3.1.2.2 “ Analysis allow the Group’s customers to be served in certain locations of Group results ”, (A) “ Revenue” . The underlying rental revenue while also increasing in-bound fl ows. Revenue generated by generated by the franchisees is recorded as revenue only by the strategic partnerships represented less than 1% of the revenue franchisees themselves. Franchising arrangements throughout generated by the Group’s rental activities in 2015, unchanged the Europcar network follow a standard format under which from 2014. the Group grants licenses for use of the brand name, know- In parallel with the termination of the alliance with Enterprise how, corporate identity and international operating systems and in August 2013, the Group entered into two commercial procedures within a defi ned geographical region for a period of cooperation agreements to allow its customers to be served time (usually fi ve and up to ten years). in the United States, through an agreement entered into with Franchise Services North America in June 2013 relating to
44 EUROPCAR REGISTRATION DOCUMENT 2015 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES DESCRIPTION OF THE GROUP’S BUSINESS
the Advantage-Rent-A-Car brand (which was subsequently 1.6.5.5 Commercial and general sales agency transferred to The Catalyst Capital Group, Inc.), and in Canada arrangements 01 through an agreement entered into with Discount Car and Truck Rentals Ltd in October 2013. A key part of the Group’s sales strategy is the development of its network of general sales agents. The Group strives to Under the agreement regarding the Advantage-Rent-A-Car enter into commercial and general sales agency arrangements brand, Europcar brand customers are served by the Advantage- in countries where it has limited or no presence, in order to Rent-A-Car brand in the United States, and Advantage-Rent-A- ensure signifi cant commercial presence in such countries and Car customers are served by Europcar in the rest of the world. to benefi t from the travel fl ows from the United States and Pursuant to the agreement with Discount Car and Rental emerging countries to Europe and Australia. General sales Trucks Ltd., the partners seek to expand the leisure business agents (GSAs) sell the Group’s services, in exchange for a in Canada. commission. All costs related to running the GSA’s business are the responsibility of the GSA including but not limited to The Group has had an exclusive long-term partnership with insurance, rent, general offi ce expenses and any travel within Times Car Rental (previously Mazda Car Rental) since 2006, the country or region needed to promote or sell the product. through which it seeks to encourage cross-referrals and offer cross-border services. Times Car Rental is a leading At the end of 2015, a total of approximately 30 agreements had Japanese car rental company. At end April 2015, it operated been signed worldwide, including in the United States and Asia. a fl eet of approximately 26,139 vehicles and over 465 rental For example, in order to develop its business activities in China, stations throughout Japan. This partnership is visible through the Group entered into a two-year GSA with a Chinese online co-branding at certain of the partner’s Europcar partnered travel agency which, pursuant to the terms and conditions locations (of which there are 172 as of December 31, 2015). of this agreement, was appointed as non-exclusive-agent The partner provides in-bound and out-bound support and also authorized to promote and sell Europcar vehicles. It receives works closely with the Group’s GSA partner in Japan. a commission paid by the Group and based on the volume of vehicle rental services sold to its customers.
1.6.6 Group organization
GENERAL MANAGEMENT OF THE GROUP line teams interact with customers at the Group’s stations and AND CORPORATE COUNTRIES in the Group’s markets, developing loyalty and relationships with business customers and a robust understanding of leisure The Group’s commercial and development strategy is customers. determined and overseen by senior management. Functional Boards at the Group level (Human Resources, Fleet, Finance, This organization is designed to ensure a strong local presence Operations & Network, Commercial, IT and Legal) also oversee and offer customers differentiated services targeted to local execution of the Group’s strategy. Operations at the local level needs, while based upon an umbrella international strategy, are managed by an operating subsidiary, which implements the as well as centralized back-offi ce functions to ensure cost- strategy and objectives set by the Group. The management effectiveness. The Group relies on three key departments. The of the Group’s activities outside of the Corporate Countries Marketing Department is responsible for developing innovative consists of managing franchisees, partnerships and commercial mobility products and services, developing the customer and general sales agency agreements. The objective is to boost portfolio and ensuring consistency of the brand and services the Group’s growth and geographical coverage and to promote worldwide. The Sales Department is responsible for prospecting its brands. and securing Key (corporate) Accounts and for developing partnerships to increase the Group’s market share worldwide. Some of the managers of the Corporate Countries also hold The Group’s Revenue and Capacity Management Department roles at the Group level, in order to ensure that the Group works closely with the marketing and sales departments to benefi ts from their practical experience and knowledge in terms increase the Group’s revenue and to better match the Group’s of sales, marketing and international development. Local front- offer with customer demand.
EUROPCAR REGISTRATION DOCUMENT 2015 45 01 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES DESCRIPTION OF THE GROUP’S BUSINESS
IMPACT OF THE FAST LANE TRANSFORMATION cash management, billing, supplier payments, travel expenses, PROGRAM credit & risk management, key accounts collection, and insurance billing and collection. These functions were deployed Since 2012, the Group has been implementing a transformation in 2014 and 2015 for all of the European Corporate Countries. program called “Fast Lane”, designed to strengthen its market footprint and prepare its transition from a pure car The Group intends to extend the scope of the Shared Services rental company to a mobility services provider, benefiting Center to data entry and updating the price grid, so as to further from sustainable growth and improved profitability. See optimize its cost position and business model fl exibility. These Section 1.4.4 “Fast Lane. Transformation Program that has services were transferred for the United Kingdom in the last set the Foundation for Sustainable Profitable Growth” for more quarter of 2014 and the roll-out continued in 2015 for France, detailed information. With the implementation of this program, Spain, Italy and Belgium. Additional initiatives are being studied the Group aims to further centralize the back-offi ce functions for implementation by 2017. while maintaining key local skills close to customers. A centralized purchasing department, focusing on process The pan-European Shared Services Center was opened improvement while accelerating purchasing centralization at in Portugal in early 2014 to handle transaction, accounting a Group level, was created in early 2014. Tools allowing cost and cash collection activities. The migration of services and optimization at Group level are currently being deployed. employees to the Shared Services Center continued throughout A significant portion of the cost savings realized through 2014. Approximately 280 people were employed at the the Fast Lane program comes from the optimization of fl eet Shared Services Center as of December 31, 2015 (versus management (see Section 1.3 “Presentation of the Group’s approximately 230 at end 2014), with employees transferred market and competitive environment”). Fleet-related initiatives from Portugal, Spain, France, the United Kingdom, Belgium include streamlining the mix per category of vehicle, the and Germany, with ongoing transfers from Italy. The Group optimization of the buy-back program and a better management decided to use a Shared Services Center given its single line of of maintenance fees. Those fleet improvement measures business and use of one integrated system, ®Greenway, which were coupled with the creation of the “Revenue and Capacity facilitates implementation of shared services and also enables Management” department allowing a better match of the greater rationalization of its processes. Group’s fl eet mix to customer demand and an optimization of The processes that are or will be handled by the Shared demand management and generation related to management Services Center include general and management accounting, of the fl eet’s capacity and distribution.
1.6.7 F leet
Unless otherwise indicated, this Section relates solely to the Europcar’s fl eet was acquired from the Volkswagen group, 14% fl eet operated directly by Europcar under the Europcar® and from General Motors, 13% from Fiat, 11% from Renault, 9% InterRent® brands, and not to the fl eet operated by franchisees, from Peugeot Citroen, 7% from Daimler, 6% from Hyundai, 3% which is independently owned or leased from third parties (for from Ford and the remaining 7% from other manufacturers. more information about the fl eet of franchisees, see paragraph The Group currently uses 39 different models provided by 19 “Characteristics of franchise operations” under Section 1.6.5.3 car manufacturers. “ Franchises” ). The diversity of Europcar’s fl eet allows the Company to meet Europcar believes it is to be one of the largest purchasers the rental demands of a broad range of customers. The fl eet of vehicles in Europe. Europcar’s fleet is sourced from consists of 11 main vehicle categories, based on general various manufacturers, including Volkswagen (with the industry standards - mini, economy, compact, intermediate, brands Volkswagen, Audi, Seat and Skoda), General Motors, standard, full-size, premium, luxury, mini-vans, trucks and Fiat, Renault-Nissan, PSA (Peugeot, Citroën, DS), Daimler convertibles. The fl eet varies by brand, with the fl eet offered (Mercedes, Smart), Ford, BMW and Toyota . Volkswagen under the Europcar® brand covering the full range of vehicles AG is Europcar’s largest supplier of vehicles in 2015. During (from the mini category to the Selection category, comprising the year ending December 31, 2015, approximately 30% of “prestige” and “fun” vehicles), and the fleet offered under
46 EUROPCAR REGISTRATION DOCUMENT 2015 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES DESCRIPTION OF THE GROUP’S BUSINESS
the InterRent® brand corresponding to the most frequently The Group believes that Europcar is one of the largest purchasers requested types of vehicles in the “low-cost” segment. of European vehicles and the largest in the European vehicle 01 InterRent’s offer is limited to four categories: mini, economy, rental industry. During the year ending December 31, 2015, compact and intermediate. Some cars are used only for the Group took delivery of approximately 278,500 vehicles and the InterRent® brand. These vehicles do not have the same operated an average rental fl eet of 205,353 passenger and equipment as those rented under the Europcar® brand and utility vehicles (up by 8.5% versus 2014). For the year ended often have longer holding periods and higher mileage. See December 31, 2015, Europcar’s approximate average vehicle Section 1.3 “Presentation of the market and Competitive holding period was 8.9 months (7.8 months for vehicles - cars environment” of this Registration Document. and trucks - covered by buy-back commitments). Some of the sourcing agreements with manufacturers allow Europcar’s The following chart illustrates the diversity of the Group’s franchisees to benefi t from the terms and conditions of these fl eet in terms of deliveries by manufacturer (expressed as a agreements, including the buy-back provisions. For more percentage of total acquisitions by the Group) for the year information on the buy-back programs with manufacturers, ending December 31, 2015. see Section 1.6.7.2 “Fleet sourcing and planning”).
30% 7% Volkswagen Others 14% 7% Opel Daimler 13% 6% Fiat Hyundai 11% 3% Renault Ford 9% PSA
Source: Company.
The following table provides a breakdown of the Group’s average fl eet size by Corporate Country between the categories “cars” and “utility vehicles” for 2015:
Year ending Dec. 31, 2015
Corporate Countries Cars Utility Vehicles
Germany 90% 10% United Kingdom 87% 13% France 81% 19% Italy 95% 5% Spain 97% 3% Australia/New Zealand 96% 4% Belgium 91% 9% Portugal 92% 8%
Source: Company.
1.6.7.1 Fleet management Europcar’s fleet is managed to optimize costs, including economic depreciation, acquisition and disposal costs, Europcar’s central fl eet department, supported by the local maintenance and repair costs, taxes and financing costs, fl eet departments in each of the Corporate Countries, manages against a set of pre-defi ned needs and constraints, including the overall fl eet planning process. In addition to negotiating marketing needs, maximum fl eet movements (i.e., the maximum the acquisition of fl eet vehicles from manufacturers, the fl eet quantity of vehicles that can be in-fl eeted or de-fl eeted during a department is involved in the process of planning and the given period) and maximum exposure to a single manufacturer. geographical deployment of vehicles, vehicle in-fl eeting and This process relies extensively on data collected and processed de-fl eeting, and the monitoring of fl eet utilization rates. by the Greenway® IT system (see Section 1.6.10.1 “Greenway® system” ).
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Europcar is able to respond to seasonal fl uctuations in demand 1. 6.7.2 Fleet sourcing and planning through continuous optimization of fl eet management (see Section 1.6.8 “Seasonal nature of the business”). Through its The fl eet sourcing and planning processes are supervised locally daily management, Europcar is able to adjust its fl eet size by by the fl eet department of each subsidiary/country. Purchase modifying acquisition plans and/or holding periods to meet contracts are negotiated depending on the manufacturers, both expected and unforeseen variations in demand. Through either at country or international level. The annual or multi-year its fl exible contracts with vehicle manufacturers, Europcar can agreements defi ne the acquisition and disposal terms and the increase its orders for vehicles in advance of the peak season, volumes of vehicles and model mix to be acquired over the and use the fl exibility of the holding periods, ranging generally contractual period. Over half of the volumes purchased by from fi ve to eight months to de-fl eet the vehicles once demand the Group are purchased through pan-European agreements. is less pronounced. Europcar is also able to react rapidly to The Group also relies on its local teams to negotiate local geographical changes in demand by re-directing the delivery agreements and maintain suffi cient fl exibility to benefi t from of new vehicles to sites where demand is especially strong. spot deals. The Group makes every effort to optimize the fl eet fi nancial The Group considers at-risk purchases when appropriate, utilization rate, which refl ects the Number of Rental Days per based on its systematic analysis of at-risk purchases versus available days for the period from the fi rst date of service of a buy-back mechanisms. It considers the choice of models vehicle to its sale date. and options as well as second hand market dynamics and its The Group has signifi cantly increased its fl eet fi nancial utilization capacity to absorb resale volumes. rate through targeted actions and it stood at 76.1% in 2015 (a Purchase contracts for the coming year are generally concluded slight decrease versus 2014) in a context of signifi cant increase at the end of each calendar year, in order to anticipate market of the average fl eet to 205,353 vehicles (a 8.5% increase versus trends, and are readjusted throughout the year on a monthly 2014). Although the Group believes that its fi nancial utilization basis to ensure maximum reactivity to market demand. The rate is close to the optimum rate achievable in the industry, Group is therefore able to adapt its fl eet capacity to rental it continues to regularly study ways to improve it in each of market demand. the Corporate Countries and for both of its brands. Current initiatives to this end include focusing on reducing the time The Group records all of its vehicle fl eet either on the balance between receipt of the new vehicle and fi rst rental use of the sheet or, with respect to vehicles acquired through leases that vehicle, the time between each rental and the time between meet the defi nition of an operating lease, off balance sheet. last rental and disposal of the vehicle, as well as on improving The following table summarizes the Group’s fl eet asset and the processes for accident and repair management and fi nancing structure: optimization of the process for InterRent brand vehicles. Fleet asset base Net operating debt The Group calculates its fl eet fi nancial utilization rate as the percentage of the total actual rental days of the fl eet out of the theoretical total potential Number of Rental Days of its fl eet of vehicles. The theoretical total potential number is equal to the Rental fleet number of vehicles held over the period, multiplied by the total On-balance sheet fleet financing debt (EF Finance number of days over the period. Another methodology used On balance sheet Notes, SARF, UK fleet in the industry is based on the Number of Rental Days per financing, Asset financing in Australia, etc.) actual available days of fl eet, which excludes the days when Fleet working capital the fl eet is held but not available for rental (vehicle preparation requirements due at in-fl eeting, maintenance periods and vehicle preparation at to buy-back commitments de-fl eeting). This would lead to a better fl eet fi nancial utilization rate than the aforementioned rate reported by the Group. Europcar operates central logistics centers for in-fl eeting and Off-balance Fleet finance under Debt equivalent de-fl eeting of vehicles, including car parks at various locations, sheet operating leases of fleet operating leases typically airports, in the Corporate Countries. From these locations, vehicles are either transported by logistics companies or driven to the rental station where they are needed. Source: Company.
48 EUROPCAR REGISTRATION DOCUMENT 2015 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES DESCRIPTION OF THE GROUP’S BUSINESS
The Group finances the acquisition of the vehicles in its potential residual risk with respect to vehicles purchased under fl eet by various means, in particular through asset-backed the programs, allow Europcar to arrange fi nancing on the basis 01 financing (see Section 3.2 “Group cash and equity” and of the agreed repurchase price and provide Europcar’s fl eet Note I “Accounting policies - Rental fleet related receivables”, managers with fl exibility to respond to changes in demand. paragraph (i) “Vehicles purchased with manufacturer or dealer In addition, the high percentage of buy-back vehicles in buy-back commitment” in the consolidated fi nancial statements Europcar’s fl eet allows the Group to be less dependent on the included in Section 3.4 “ Consolidated financial statements used car market. These programs operate to the benefi t of and Statutory Auditors’ report ”). The Group benefi ts from a the car manufacturers as well, since the return of the vehicles fl exible asset-backed fi nancing structure with a ratio of loans to them within a short time period enables them to resell the to value (i.e. the indebtedness of Securitifl eet Holding, the vehicles more quickly through their dealership networks as Securitifl eet Companies and EC Finance Plc divided by the total newer models. value of the net assets on the balance sheets of the Securitifl eet Approximately 92% of Europcar’s fl eet delivered in units in companies) of between 86.3% in the 1st quarter and 94.6% in 2015 (stable compared with 2014) was covered by buy-back the 3rd quarter of 2015: commitments, i.e. one of the highest rates of all vehicle rental The diversity of fi nancing available to acquire the fl eet vehicles companies (1). allows the Group to limit the impact of such acquisitions on the The visibility and fl exibility conferred by the Group’s buy-back Group’s cash fl ows. Please refer to Section 3.2 “Liquidity and strategy are important. The Group has long been committed to capital resources” of Chapter 3. maintaining a high rate of fl eet purchases in units acquired under buy-back commitments. On average, the Group estimates that 1.6.7.3 Vehicle buy-back commitments over 93% of the vehicles purchased over the past ten years were covered by buy-back commitments. Europcar acquires, subject to availability, a majority of its vehicles pursuant to various fleet purchase programs established with the manufacturers. Under these contractual programs, 1.6.7.4 “At risk” vehicles Europcar purchases vehicles from the vehicle manufacturers A number of vehicles are acquired by Europcar from vehicle or dealers. Manufacturers or dealers undertake, subject to manufacturers or dealers without the benefi t of any buy-back certain terms and conditions, to grant Europcar the right to sell commitment. These vehicles fall under the category of “at risk those vehicles back to them at a pre-determined price during a vehicles”. See Section 2.2.5 “ Risks related to the holding of specifi ed time window (after which the repurchase transaction vehicles not covered by repurchase programs” . is automatically triggered if it has not already occurred). If the vehicle is bought from a vehicle dealer, the obligations of The Group considers at-risk purchases when appropriate, the vehicle dealer under the buy-back commitment must be based on its systematic analysis of at-risk purchases versus guaranteed by a vehicle manufacturer. Vehicles purchased by buy-back mechanisms. It considers the mix of models needed vehicle rental companies under a buy-back commitment are for its fl eet as well as remarketing capabilities and second hand referred to as “buy-back vehicles”. The minimum buy-back market dynamics. Europcar disposes of “at risk vehicles” period under these buy-back commitments generally varies through a variety of channels, including sales to individuals, from fi ve to eight months for passenger cars and from six to wholesalers, brokered retail sales and auctions. To meet market twenty-four months for utility vehicles. demand, Europcar has set up an electronic platform for on-line sales: 2ndmove. eu Repurchase prices for buy-back vehicles are contractually based on either (i) a predetermined percentage of original vehicle price and the month in which the vehicle is repurchased 1.6.7.5 Maintenance or (ii) the original capitalized price less a set economic depreciation amount, in either case subject to adjustments Europcar arranges for each vehicle to be inspected and cleaned depending upon the condition of the car, mileage and holding at the end of every rental and to be maintained according to period requirements. the manufacturer’s recommendations. Europcar must follow the maintenance specifi cations of the respective manufacturers in The proportion of the fl eet covered by buy-back commitments order to maintain the warranty and repurchase commitment on can differ by Corporate Country. In addition, the proportion of the vehicle. Europcar operates vehicle maintenance centers at the total fl eet covered by buy-back commitments at any given certain rental stations in the Corporate Countries. These centers time may be less than the proportion of vehicles purchased provide maintenance and light repair facilities and monitoring with buy-back commitments during the year given that “at and processing of more seriously damaged vehicles for which risk vehicles” generally have a longer holding period (twelve to repairs are handled by specialized bodywork companies. The twenty four months). Repurchase programs limit Europcar’s objective is, on the basis of detailed appraisals, to optimize
(1) Source: publications by Avis, Hertz and Sixt.
EUROPCAR REGISTRATION DOCUMENT 2015 49 01 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES DESCRIPTION OF THE GROUP’S BUSINESS
repair costs and lead times in order to limit the impact on the choice is made between repairing the vehicle or selling it in its use of the vehicle. For the most badly damaged vehicles, the current condition.
1.6.8 Seasonal nature of the business
The Group’s revenue fl uctuates throughout the year in line with in demand during the summer vacation months, although it is customer demand. The busiest months of the year for vehicle more concentrated in mid-week (Tuesday through Thursday). rentals are June through September. The leisure business is Management of seasonality is a key part of Europcar’s business characterized by higher demand for vehicle rentals during the model. The Group aims to capture business during high season summer period and school holidays, in connection with more while also taking into account fl eet holding costs in the periods significant activity in the transportation sector. As a result, before and after the high season (known as the “shoulder”), the Group’s revenue for these periods is higher compared to with the goal of keeping its fl eet fi nancial utilization rate under the average for the rest of the year. The leisure market is also control. characterized by increased demand on weekends as compared with the workweek. In a complementary manner, the business Please refer to Section 3.1.1.2 : “Key factors affecting the activity is fairly stable throughout the year, with a slight decrease Group’s results”.
1.6.9 Suppliers
This Section discusses suppliers and the volume of purchases, of expenses generally proportional to its share in the Group’s excluding expenses related to the acquisition, registration and annual consolidated revenue. As a result, the Group currently insurance of the fl eet (“cost of purchases excluding fl eet”). has relationships with a multitude of suppliers (currently around For more information on the fl eet and the Group’s insurance 20,000) for a very broad range of categories of products and arrangements, see Section 1.6.7 “Fleet” and Section 2.7 types of services. The share of value added services relating “Insurance and risk management” of this Registration to labor intensive activities is close to 50%. Document. Since 2014, the Group has attempted to rationalize the The Group’s cost of purchases excluding fl eet and taxes (1) is, necessary volume for its activities and to optimize its cost of on average, approximately one quarter of the total consolidated purchases. In the context of the Group’s new purchase strategy annual revenues of the Group. These costs are broken down and the implementation of the Shared Services Center in 2014 as follows: 40% related to indirect purchases or overheads (see Section 1.4.4 “Fast Lane” Transformation Program that has (IT and telecommunications, call centers, real estate and set the Foundation for Sustainable Profi table Growth”) the Group maintenance of the station network and its installations at fi rst created a coordination function at the end of 2014 for the an operating capacity, sales and marketing, communications Group’s purchases in order to enable it to control purchases and and advertisement, offi ce supplies, uniforms, consulting and increase cooperation among countries. Following amendments services) and 60% related to direct purchases related to to the Group’s purchase policy, currently being implemented in customer service and the maintenance of the Group’s fl eet all countries in which the Group operates, the second step of in operating condition, as well as making the fl eet available the strategic purchase plan is the Group’s implementation of a (maintenance and repair, intense repair services following P2P (“Purchase-to-Pay”) solution for the complete processing accidents, preparation and cleaning services, transportation of orders and supplier invoices excluding fl eet. This project, services for the geographic redistribution of the fl eet according launched in 2014, seeks to bring, for both operating purchases to the needs of the Group’s customers). See 1.6.10 “IT system” and those directly linked to customer services, transparency as for a description of the Group’s IT needs and “Europcar’s to the nature and volume of expenses, in order to facilitate the direct distribution channels” under Section 1.6.4 “Distribution engagement process while ensuring the control and fl exibility of Channels” for a description of the call centers. Supplier Accounting within the Shared Services Center. The operating needs of the Group so far have been processed on a country-by-country basis with an annual average volume
(1) Expenses for goods and services incurred by the Group’s corporate-operated rental stations only, excluding stations operated by agents or franchisees.
50 EUROPCAR REGISTRATION DOCUMENT 2015 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES DESCRIPTION OF THE GROUP’S BUSINESS
In accordance with its strategic purchasing plan, in addition to 3. initialization of a supplier risk evaluation process, as a the P2P project, 2015 saw a certain number of achievements: fi rst step towards implementation of a detailed supplier 01 management process, and lastly; 1. r evision of the Group’s purchasing policy in order to provide it with a Corporate Social Responsibility (CSR) policy and 4. i ncreased use of competitive procedures. common principles for monitoring the Group’s performance In the near future, the Group also intends to defi ne a common (“Controlling & Reporting”); purchase strategy (“Source-to-Pay”) per purchase category, 2. alignment of the purchasing resources at head offi ce and supplemented by a program to manage the supplier base, the Corporate Countries in order to encourage teamwork which may take place through the consolidation, development with the operating departments and to control expenses; and signing of multi-jurisdiction contracts, once the P2P solution has been consolidated for a majority of Corporate Countries.
1.6.10 IT system
IT systems and telecommunications are vital parts of Europcar’s 1.6.10.1 The Greenway® system management of its network of points of sale and customer reserva tions via multiple distribution channels. Part of the IT Europcar’s IT systems are built around the centralized GreenWay solutions are designed, developed, implemented, operated and application, which offers a common and single solution covering maintained by the Group’s IT Department, which is ISO 9001 all functional areas of vehicle rental: customer management, Quality certifi ed. individuals and companies , management of pricing packages, fl eet management, management of reservations and distribution Europcar continuously invests in improving its IT system in order systems, management of rental station operations as well as to further enhance its ability to offer innovative and cost-effective billing and invoicing. The proprietary system was designed services. All IT projects are centrally and regularly evaluated specifi cally for Europcar’s vehicle rental business and was fi rst against business needs. Technical projects, which are aimed implemented in 1994. at establishing and ensuring the continuity of services, are given special attention. Application projects, which are aimed Greenway, which has been in operation since 2014 on a highly at maintaining and enhancing system operating capabilities, scalable architecture (Java/Linux), allows for over 10,000 are assessed against the expected added value to the Group, concurrent user connections. Today, the system manages including growth of revenues, reduction of costs and mitigation more than 12 million reservations and 10 million rentals on a of risks (legal, regulatory, obsolescence or performance related). yearly basis. More than 10,000 people are Greenway users and most of them are located in the 1,600 stations of the Europcar To support its efforts to develop and implement innovative network. 200,000 vehicles are continuously monitored by the mobility solutions, the Group has implemented a plan to system in order to optimize fl eet utilization. The full functionalities revamp its IT system’s architecture by 2020, making it more of the Greenway system are available 24/7 at the head offi ces open and fl exible and thereby facilitating the integration of and rental stations of the nine Corporate Countries as well as in third-party applications. Several modules and innovations franchises in Switzerland, Austria and Norway. The majority of are being analyzed in order to build on the Group’s operating the Europcar network’s franchise sites are linked to GreenWay excellence (new mobile applications or applications that are for reservations. being improved or developed on other platforms), promote ® data-based decisions (Big Data), adapt products and prices InterRent operates an IT platform that is distinct from in real time (Dynamic Pricing) and, more generally, accelerate Greenway. It is externalized and based on a system operated digital development and strengthen the customer relationship as “Software as a Service”. management strategy (Cloud CRM).
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1.6.10.2 Other IT applications and systems Careful attention is paid to security systems and the protection of proprietary data against destruction, theft, fraud or abuse. Other major applications and systems used by the Group are Operating systems ensure 24/7 protection against computer “Oracle Financials” for fi nancial management and accounting, viruses, spam, phishing and denial of service attacks. “Datawarehouse” for in-depth analyses of Company data and “Ataraxia” for the management of accidents, damages and The majority of the Group’s IT systems, including Greenway, maintenance of vehicles. internet sites, Oracle Financials and Datawarehouse, are operated on proprietary infrastructure, centralized in two The Group also uses collaborative cloud computing solutions production centers operating in parallel 24/7. Each center such as “Google Apps” for offi ce needs and the “Salesforce” operates infrastructure necessary to the delivery of the entirety software to optimize business relationships for the sales teams. of production application services and ensures in real-time Cloud solutions are also being implemented, as part of the a complete physical duplication of production data. These digital transformation of the business (such as connected cars, production centers are located near Paris, France, and comply keyless access to cars, mobile applications and social media with the following minimum safety rules: a distance of 30 and leveraging). 60 km between the two centers, independent and multiple The Group’s main suppliers of IT include Cap Gemini (hosting electric power supplies, redundant cooling systems, and production centers and maintenance of the Greenway software), double electric power supplies for all computer equipment. Sopra Steria (production info-management), Unisys (installation The objective is to maintain at least 99.98% up-time for each and maintenance of workstations), Dell & Lenovo (servers of the centers. and workstations), IBM (servers), Hitachi (storage), CISCO The Group periodically verifi es its disaster recovery plan by (network equipment), Colt and Telstra (telecom networks for carrying out annual unit tests for each application group, and data transfer). by carrying out a large scale test of one of the two production centers every 18 months. Each of the simulation tests is 1.6.10.3 Continuity of IT system services covered by a report entailing, if need be, the implementation of an improvement plan. Signifi cant safety measures are in place to ensure the security of Europcar’s systems, applications and data (and that of its customers).
1.6.11 Regulation
The Group’s business is subject to numerous regulatory CONSUMER PROTECTION REGULATIONS regimes throughout the world, in particular with respect to IN THE EEA the environment, personal data, consumer protection and franchise operation. Compliance with these rules, which may NON-DISCRIMINATION ON PRICES differ considerably from one country to the next, is generally Directive 2006/123/EC of the European Parliament and of managed at the local level by each of the Group’s Corporate the Council of December 12, 2006 on services in the internal Countries, subject to supervision and review by the Group’s market prohibits unjustifi ed discrimination in the provision of legal department. a service on the basis of a consumer’s nationality or place of residence in all of the European Union Member States. 1.6.11.1 Consumer Protection Regulations The European Commission is particularly vigilant with respect to compliance with the principle of non-discrimination in the The Group offers services to individual consumers and is single market. In a press release dated August 11, 2014, the therefore subject to Consumer Protection Regulations. European Commission announced that the car rental industry was not sufficiently compliant with the non-discrimination
52 EUROPCAR REGISTRATION DOCUMENT 2015 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES DESCRIPTION OF THE GROUP’S BUSINESS
principle and sent a letter to industry companies, including This effort to improve transparency is also being applied to the Group, instructing them to end certain practices that it the presentation, content and scope of the offers made to 01 considered “discriminatory” and which seemed to it to lack consumers in respect of damage waiver offers. These new offers justifi cation by objective criteria and preventing consumers were launched at the end of the fi rst semester of 2015. The in the European Union from obtaining the best price offered Group is in regular contact with the European Commission on online, wherever their place of residence, and therefore from the implementation of this policy. The discussions between the fully benefi ting from the opportunities of the single market. As of European Commission and the major vehicle rental companies, September 2014, the Group implemented, in accordance with including the Group, ended in July 2015. The discussions dealt its commercial strategy, a single pricing policy by sales location, with the practices of the vehicle rental industry and the various regardless of the European residence of the customer and the commitments made by vehicle rental companies, including country within Europe from which the reservation was made. Europcar, to clarify their documentation and contractual conditions in order to improve the customer experience. On Moreover, the European Commission invited Member States’ July 13, 2015 the European Commission published a press relevant authorities to take the measures necessary to ensure release setting forth the result of these exchanges. compliance with European Union and national legislation related to consumer protection. To date, no legal proceedings have UNFAIR CONTRACT TERMS been initiated against the Group by the European Commission or any national authorities with respect to this issue. Directive 93/13/EC of the Council of April 5, 1993 on unfair terms in contracts concluded with consumers (modifi ed by In parallel, in the context of the global cooperative process Directive 2011/83/EU of December 12, 2011 on consumer between the national authorities of Member States of the rights) aims to protect European consumers against unfair European Union that are responsible for enforcing legislation terms in the contracts they conclude with professionals. The to ensure consumers protection pursuant to regulation EC regulations concerning unfair contract terms apply to the No. 2006/2004, a dialogue was opened by the European vehicle rental agreements proposed by the Group’s companies Commission with the players in the short-term vehicle rental to its individual consumer customers. industry, seeking to improve consumer experiences (in particular the transparency and suitability of contractual terms) within the In France, the Unfair Terms Commission, placed under the European Union. In this respect, the Group submitted proposals responsibility of the Minister for Consumer Affairs, examines of commitments to the European Commission, including the the agreements proposed in a business sector and then publication of new general rental conditions by early 2016 and issues recommendations for eliminating unfair terms in the the clarifi cation of the insurance and contractual guarantee sector’s agreements. In its recommendation no. 96-02 of policy in the event of damage caused to the vehicle. The June 14, 1996 on vehicle rental, the Unfair Terms Commission dialog ended in early 2015 and on July 13, 2015 the European recommended the elimination of 44 clauses concerning the Commission published a communication setting forth the result formation, execution and termination of rental agreements, and of these exchanges with the different players in the short-term the related pricing, payment and insurance. vehicle rental industry. In early 2016, Europcar put forward new The provisions of the Group’s general rental conditions are rental conditions that comply in full with its commitments. regularly reviewed in order to ensure their compliance with the regulations on unfair contract terms. UNFAIR COMMERCIAL PRACTICES
Directive 2005/29/EC of the European Parliament and of the CONSUMER PROTECTION REGULATIONS Council of May 11, 2005 on unfair commercial practices by IN AUSTRALIA AND NEW ZEALAND companies towards consumers in the internal market sets the principle of a general prohibition against unfair commercial Europcar Australia is required to comply with the Competition practices towards consumers, in particular misleading and Consumer Act of 2010 (the “CCA”), which applies to practices. most of its activities in the Australian market, in particular its commercial dealings with its partners and customers. The In order to ensure free and informed consent by the consumer, primary purpose of the CCA is to ensure consumer protection the Group is committed to providing consumers with easily and to improve competition between economic players. In this accessible and totally transparent offer documentation. With regard, it lays down some general rules on anti-competitive the intent of offering its consumers even more transparency, the agreements between competitors, anti-competitive restrictions Group revised its general rental conditions in order to simplify in the vertical procurement chain, unilateral anti-competitive and modernize them, and to harmonize them between the conduct, objectionable conduct, untruthful or misleading various countries in which it operates. These new general conduct, protection of consumers as regards unfair contract rental conditions were introduced at the start of January 2016.
EUROPCAR REGISTRATION DOCUMENT 2015 53 01 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES DESCRIPTION OF THE GROUP’S BUSINESS
terms and other unfair commercial practices, and consumer The personal data directive applies to both automated and guarantees. Europcar New Zealand is subject to similar rules non-automated processing of personal data where such data in New Zealand. is intended to be contained in a file. The directive defines “personal data” broadly to include any information regarding an identifi ed or identifi able natural person, whether identifi able 1.6.11.2 Protection of personal data directly or indirectly, whatever the country or residence or In the course of its business, the Group gathers and processes nationality of that person. It requires controllers of personal information that is subject to laws and regulations on the data established in a Member State of the EEA or using means protection of personal data, both in Europe and in other regions of processing located on the territory of a Member State to take where the Group does business. The Group generally limits certain measures upstream of the data collection, during its the use of the data that it collects from customers, including preservation and until its deletion. Pursuant to the personal data the circumstances under which it communicates with them. directive, a “controller” (as opposed to a mere data processor Personal data concerning the Group’s customers is principally working for a third party) means the person or entity that, alone processed using Europcar’s information system, “Greenway®,” or jointly with others, determines the purposes and the means and in the Group’s databases used for statistical purposes, for of processing the personal data. marketing and for customer relations management. Where a Group entity acts as a controller of personal data (for The collection of personal data from the Group’s customers example, with respect to its customers’ personal data, such is carried out both on behalf of the Group’s companies and as driver’s license information or identifi cation documents), it on behalf of its business customers and commercial partners. is subject to obligations including the following: In the case of business customers, the Group collects data, a processing is permitted only in accordance with one of the fi rst, for necessary purposes relating to the performance of following criteria set out in the personal data directive: (i) the its commercial obligations (to perform a rental agreement, for data subject must have consented to the processing; or (ii) example) and, second, for reporting purposes, to respond to the processing must be necessary: (a) to perform a contract the needs of its business customers. In the case of commercial with the data subject; (b) to comply with a legal obligation; partners (such as airlines), the Group’s companies collect data (c) to protect vital interests; (d) to perform a mission in the on existing customers of their commercial partners, again for public interest; (e) to achieve a legitimate interest; reporting reasons, such as keeping track of the rights acquired a to ensure that the personal data is processed in an honest by customers who are members of loyalty programs. The and legal manner, is collected for specific, explicit and Group’s international franchisees also undertake to collect legitimate purposes and in a manner proportionate to those and process customer data in accordance with the Group’s purposes, is true and, if necessary, is updated and kept in a privacy policy and more generally with European regulations form that enables identifi cation of the individuals concerned on personal data protection. They also ensure the preservation for a period of time that does not exceed the time necessary of the Group’s image and reputation. to achieve the purpose of its collection and processing; PROCESSING PERFORMED WITHIN a to take specifi c precautions before processing sensitive data THE EUROPEAN ECONOMIC AREA (such as data on health, racial or ethnic origin, or political, philosophical or religious opinions), which is generally Directive 95/46/EC of the European Parliament and of the prohibited by the Member States. Such precautions include Council dated October 24, 1995 on the protection of individuals ensuring that the data subjects have explicitly expressed with regard to the processing of personal data and on the their consent or that the processing falls within the scope free movement of such data (the “personal data directive”), of an exception under the national laws transposing the supplemented by Directive 97-66 of the European Parliament personal data directive (for example, where the processing and of the Council dated December 15, 1997 concerning the is necessary for the protection of the vital interests of the data processing of personal data and the protection of privacy in the subject or of another person or relates to data that manifestly telecommunications sector, provides the framework for data has been made public by the data subject or is necessary protection in all of the countries of the European Economic for the establishment, exercise or defense of a legal claim); Area (the “EEA”). In France, the personal data directive was transposed through several amendments to Law No. 78-17 a to implement appropriate technical and organizational dated January 6, 1978 on computers, fi les and freedom, the measures to protect the personal data from accidental or principal one of which was adopted by Law No. 2004-801 illegal destruction, loss, alteration, disclosure or unauthorized dated August 6, 2004. access;
54 EUROPCAR REGISTRATION DOCUMENT 2015 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES DESCRIPTION OF THE GROUP’S BUSINESS
a except in certain cases listed in the personal data directive, authorities with respect to personal data of which they have to inform data subjects of (i) the identity of the data controller; become aware during the year and that are being monitored 01 (ii) the purposes of the processing; (iii) the data recipients; by the Group’s legal department (see Sections 2.7.2 “Risk and (iv) whether it is mandatory or optional to respond to the Management” and 5.2.3 “Internal Control”). questions asked when the data is collected; Where data processing affects the Group, the matter is handled a to guarantee the data subjects their rights to access, rectify by the Group’s legal department in order to ensure consistency and object to data concerning them; in the Group’s approach. a to retain personal data for a period not exceeding the period Regular training and information on personal data protection of time necessary to achieve the purpose of the processing; law is provided within the Corporate Countries as well as at the Group level. a not to transfer personal data outside of the EEA unless the recipient country has been deemed by the European Commission able to provide an adequate level of protection PROCESSING PERFORMED OUTSIDE or if the transfer is covered by standard contractual clauses OF THE EUROPEAN ECONOMIC AREA established by the European Commission; and The Group is present in numerous countries outside of the a to carry out the required formalities with the national EEA, where it has occasion to process personal data both on authorities in charge of the protection of personal data in its own behalf and on behalf of its business customers and their respective countries (such as the National Commission commercial partners. on Computers and Freedom in France) prior to processing Although there is no international law harmonizing all of the the data. These formalities vary from country to country, principles applicable to the protection of personal data, the from a simple filing with a governmental authority or the regulatory framework applicable within the EEA serves as a requirement to keep internal records to a requirement to reference, fi rst, because it is stringent and was a pioneer in obtain authorization or approval prior to conducting certain this area of regulation, and, second, because it has infl uenced types of processing, in particular processing that may present legislation in numerous countries that have used it as a model, particular risks to the rights and liberties of the data subjects. in particular in North Africa, Latin America and Asia. Violation of these obligations by a data controller may result in administrative, civil or criminal penalties, including fi nes of up TRANSFER OF PERSONAL DATA OUTSIDE to €1.5 million for legal entities in France. OF THE EUROPEAN ECONOMIC AREA The Group may also act as a “data processor” within the The Group transfers personal data to its franchisees outside of meaning of the personal data directive. In this case, the Group the EEA solely in connection with the strict execution of rental processes personal data provided to it by its partners and agreements concluded between its franchisees and customers. for which those partners are the only data controllers. In that The franchise agreements to which the Group’s companies are situation, the data controller’s obligations described above apply parties contain a personal data protection provision pursuant to solely to the partners, but the Group nevertheless warrants which 124 the franchisees undertake to comply with the same that it will (i) implement technical and organizational measures obligations as those incumbent upon ECI and Europcar France. intended to protect the personal data communicated to it In connection with its collaboration with Advantage OpCo against accidental loss, alteration or unauthorized disclosure (“Advantage”) in the United States, ECI agreed to the standard or any malicious or illegal access; and (ii) process the data contractual clauses prepared by the European Commission solely in accordance with the data controller’s instructions and in order to be able to transfer personal data. In order to be in accordance with the defi ned purpose. authorized to receive data originating from the European Union, Although personal data law has for the most part been in addition to agreeing to a set of safe-harbor principles for harmonized in the EEA, the transposition of the “personal data” the protection of personal data negotiated between the U.S. directive into the national laws of the Member States has led authorities and the European Commission in 2001, Advantage to regimes that can vary and may be more restrictive than the also adhered to said standard contractual clauses established regime imposed by the personal data directive. by the European Commission by concluding an international personal data transfer agreement with ECI integrating said When data processing is local, it is carried out by the Corporate clauses. Country in question in accordance with local law. Each year, the executive offi cers of the Corporate Countries sign compliance The Group may also transfer data to other countries that do letters in which they (i) expressly attest that, to their knowledge, not ensure a level of protection of personal data equivalent their Corporate Countries are in compliance with local personal to that provided by the EEA, in particular in connection with data legislation and (ii) list inquiries or requests from competent collaboration agreements involving airline loyalty programs
EUROPCAR REGISTRATION DOCUMENT 2015 55 01 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES DESCRIPTION OF THE GROUP’S BUSINESS
(such as Aeroflot Bonus, Emirates Skywards, and Qatar (in other words, to require compliance with certain technical Privilege Club) and in connection with agreements with general provisions); (iii) to monitor; and (iv) to impose penalties. sales agents. In that regard, the Group enters into international Regulation of classifi ed installations is expected to change data transfer agreements that include the standard contractual under Directive 2012/18/EU of the European Parliament and clauses prepared by the European Commission. of the Council dated July 4, 2012 on the control of major- accident hazards involving dangerous substances, called the 1.6.11.3 Environmental regulation “Seveso III” directive, which entered into effect on August 13, 2012. The purpose of the Seveso III directive is to align the As of December 31, 2015, the Group used approximately 267 list of dangerous substances covered by the directive with the fuel storage installations in its Corporate Countries. new classifi cation system for dangerous substances contained Each Corporate Country is responsible for ensuring that its in regulation (EC) No. 1272/2008 of the European Parliament storage facilities comply with local regulations in that country and of the Council dated December 16, 2008 on classifi cation, in order to ensure that they (i) are properly reported to the labeling and packaging of substances and mixtures, known as competent authorities of the countries in which they are the “CLP regulation”, and to progressively replace the current located; and (ii) have been replaced or upgraded to comply system by June 1, 2015. The CLP regulation establishes new with applicable requirements on the detection of leaks and methods for the classifi cation of substances and creates new protection against spills, overfl ows and corrosion. The Group categories of hazards that have been incorporated into the has the necessary authorizations and registrations for its Seveso III directive. Seveso III was transposed into French law activities. In France, for example, stations with tanks do by Law No. 2013-619 dated July 16, 2013, with the articles not require prior authorization but must be reported to the entering into force on June 1, 2015, by Decree No. 2014- competent authorities. Depending on the volumes pumped 284 dated March 3, 2014 and by Decree No. 2014-285 of and the nature and amount of product storage used, some March 3, 2014 modifying the nomenclature of classified are considered “classifi ed installations” for the protection of the installations for the protection of the environment. environment. Similarly, each Corporate Country is responsible Directive 2008/98/EC dated November 19, 2008 on waste for any remediation obligations that it may incur under local defi nes the hierarchy for waste prevention and management regulations. as follows: prevention, reuse, recycling, other recovery (in particular energy recovery) and disposal. This provision was ENVIRONMENTAL REGULATION WITHIN THE EEA transposed into French law by Article L. 541-1 of the French Environmental Code. It also specifi es the obligations of waste The use of tanks to store petroleum products, including producers and waste holders with regard to the waste hierarchy, gasoline, diesel and used oil; the use, storage and handling of requires producers and holders to classify their waste and to various dangerous substances (including fuels and lubricants); package and label their hazardous waste, and prohibits mixing and the production, storage, transport and disposal of waste of hazardous waste with other waste or materials outside of a (including used oils, mud from washing vehicles and used water) classifi ed installation for the protection of the environment. In are regulated by Directives No. 96/82/EC dated December 9, managing its waste, the Group takes all necessary measures 1996 (the “Seveso II” directive), which was repealed by Directive to ensure that its activities comply with applicable regulations. 2012/18/EU, and Directive 2008/98/EC of the European Parliament and of the Council dated November 19, 2008 on Europcar has obtained the ISO 14001 certification (the waste. environmental management standard of the International Organization for Standardization) for its environmental Pursuant to Seveso II, any industrial or agricultural operation management systems in Germany, the United Kingdom, Italy, liable to create risks or result in pollution or nuisance, in particular Spain, Portugal, Belgium and France. The certifi cation also for the health and safety of local residents, is a classified covers rental stations operated directly by the Group. installation. Activities that are governed by the legislation on classifi ed installations are listed following a nomenclature that The Corporate Countries monitor and, if necessary, perform classifi es them as requiring either authorization, registration remediation relating to the disposal of waste and/or substances or reporting, depending on the significance of the risks or originating from installations that they currently rent or hold problems that may be caused. The legislation on classifi ed or that they have in the past rented or held. The cost of such installations gives the State the authority (i) to authorize or remediation as well as costs relating to environmental harm refuse to authorize the operation of an installation; (ii) to regulate caused by the activities of a Corporate Country could be significant. The Group’s estimated probable losses in that
56 EUROPCAR REGISTRATION DOCUMENT 2015 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES DESCRIPTION OF THE GROUP’S BUSINESS
regard are the subject of provisions in its consolidated fi nancial generating leaks that may be diffi cult to detect. Generally, the statements. As of December 31, 2015, the total amount regulatory framework is intended (i) to implement preventive 01 provisioned to cover the Group’s environmental liabilities was measures to reduce the risk presented to human health and €275,000, representing the estimated cost to study any on- to the environment resulting from the operation of underground site environmental problems that may require monitoring and/ tanks; (ii) to conserve resources and detect leaks quickly in or remediation, as well as the estimated costs of carrying out order to avoid the need for extensive remediation work; (iii) to that remediation. Cost estimates are prepared site by site on remediate sites when the regulated activity has ceased; and the basis of precedents, and are refi ned as the environmental (vi) to ensure that businesses governed by the regulations use study at the site in question progresses. best practices. In order to meet these objectives, obligations are imposed such as the installation of leak-detection systems, In France, the Group maintains an updated table listing the the performance of groundwater testing and the preparation of oil installations and classifi ed installations that it operates in a written, auditable plan for the protection of the environment order to ensure that they are monitored. In that regard, periodic by each regulated installation. The reporting and information regulatory inspections of classifi ed installations are performed system for leaks must also be the subject of a written plan. every fi ve years by an approved organization (Dekra until 2015 The removal of underground oil tanks must be reported to and Bureau Veritas thereafter). In the event of non-compliance, local authorities and is governed by the Australian Standard the Group carries out remediation. AS 4976-2008. In connection with its activities, the Group is also subject to Europcar New Zealand is subject to environmental rules in New European energy effi ciency regulations (Directive 2012/27/ Zealand that are similar to those applicable in Australia. EU of the European Parliament and of the Council on energy effi ciency dated October 25, 2012). The directive establishes a common framework for the promotion of energy effi ciency STORAGE TANK COMPLIANCE PROGRAM in the European Union. Pursuant to Article 8 of the directive, Each of the operational subsidiaries in the Corporate Countries transposed by Article L. 233-1 of the French Energy Code, has implemented a storage-tank compliance program intended all large businesses such as the Group must perform energy to ensure that tanks are properly registered with the competent audits covering the entire business every four years (and for the authorities of the countries in which such tanks are located and fi rst time by December 5, 2015 at the latest). Article 13 of the are either replaced or brought into compliance with applicable directive, transposed in Article L. 233-4 of the French Energy requirements for the detection of leaks, spills and overfl ows Code, provides for penalties in the event that these audits are and protection against corrosion. However, there can be no not performed in a timely manner. For the Group, these penalties assurances that these tank systems will remain at all times free could consist of fi nes of up to 2% of the Group’s revenues of undetected leaks or that the use of these tanks will not result (excluding taxes) in France for the most recently closed fi scal in signifi cant spills. The Corporate Countries regularly work with year. These audits must be performed by external consultants third party organizations to verify or certify, where necessary, or by qualifi ed internal auditors. The energy effi ciency directive the compliance of their classifi ed installations. is in the process of being transposed into French law. Employee training in environmental risk management is implemented and managed at the level of the Corporate ENVIRONMENTAL REGULATION IN AUSTRALIA Countries. AND NEW ZEALAND In Australia, the operation of oil tanks, in particular underground tanks, is regulated at both the state and the federal level. 1.6.11.4 Regulation of franchises The regulations consist of a combination of specific rules The Group has a large network of franchisees and is therefore and general principles contained in environmental laws. required to comply with franchise regulations. Environmental regulation is relatively uniform and is tied to the Australian Standard AS 1940-1993. The European Union has not implemented any specific regulation of businesses operated as franchises. The operation of underground oil tanks is a particular focus of regulation due to the risk of contaminating groundwater and
EUROPCAR REGISTRATION DOCUMENT 2015 57 01 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES ORGANIZATION CHART
Franchising is governed by the laws of the various countries who provides another person with a trade name, trademark where the Group operates through franchisees. Certain laws or brand while requiring from that other person a commitment require franchisers to provide a signifi cant amount of information of exclusivity or quasi-exclusivity in order to carry on business to potential franchisees but do not require registration. Other must provide that other person with information prior to signing laws require registration or the provision of information in any contract concluded in the common interest of both parties. connection with the establishment of franchises. In order to This provision applies to franchise agreements, which include ensure harmonized management of its franchise network, the an obligation of exclusivity on the part of the franchisee. The large majority of franchise agreements that the Group enters Group’s franchise agreements that are governed by French law into internationally are governed by French law. Article L. 330-3 comply with this obligation. of the French Commercial Code provides that any person
1.7 ORGANIZATION CHART
Europcar Groupe S.A. , the Group’s non-operational holding Resources management, accounting, fi nance, operations and company, directly or indirectly holds all of the entities comprising legal services. In consideration for these services, the Company the Group and as such lays down certain broad policies. For receives monthly payments from Europcar International SASU. instance, it determines the Group’s strategy and the resources Europcar Groupe S.A. was listed on the regulated market of necessary for its implementation, as well as its commercial Euronext Paris on June 26, 2015 (Compartment A; ISIN code: policy. FR0012789949; Ticker: EUCAR). Trading in Europcar Group Europcar Groupe S.A. assists its subsidiaries through a number shares began on June 26, 2015 in the form of “promesses of support functions. On September 28, 2006, it concluded with d’actions” (“Europcar Prom”). Settlement and delivery of the Europcar International SASU a services agreement pursuant to shares in the global offering took place on June 29, 2015, and which the Company provides ECI with its know-how regarding market trading of the share commenced on June 30, 2015. fl eet management, sales, marketing, communications, Human The offering price was set at €12.25 per share.
58 EUROPCAR REGISTRATION DOCUMENT 2015 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES ORGANIZATION CHART
1. 7.1 Simplifi ed Group organizational chart 01
The following chart presents the legal organization of the Group as well as the percentage that Europcar Groupe S.A. holds directly or indirectly in the share capital of its subsidiaries as of the date of this Registration Document.
EUROPCAR GROUPE S.A. (France)
E-Car Club Europcar Lab 100% E-Car Club Ltd 100% 60.8% 100% Holding Ltd UK Ltd (UK) (UK) (UK) Europcar Lab 100% EUROPCAR 100% EUROPCAR S.A.S. INTERNATIONAL HOLDING S.A.S.U. S.A.S. (France) (France) (France) Ubeeqo S.A.S. (UK) 75.7%
25% 100% 100% 99% 99.99% 0.01% 74.22% 100%100% 100% 100%
Europcar Europcar Car2go Europe Europcar Europcar IB. International Europcar France Europcar S.A. Internacional Europcar Italia. Europcar UK. GmbH Holding PTY Ltd SA S.A.S. Aluguer de SpA Ltd S.A.S.U. und Co. OHG (Belgium) (Germany) (Australia) (Spain) (Germany) (France) Automoveis. SA Italy (UK) (Portugal)
100% 1% 0.01% 100%
Europcar 100% PremierFirst Australia Vehicle Rental PTY Ltd 100% Europcar EMEA Holdings Ltd (Australia) Services. Unipessoal. (UK) 100% Lda Europcar 25.77% (France) Autovermietung 100% GmbH (Germany) PremierFirst G1 Holdings Vehicle Rental SMJV Ltd PTY Ltd Holdings Ltd (Nouvelle-Zélande) (Australia) (UK)
100% 100% Europ-Hall 100% S.A.S. CLA Holdings BVJV Ltd (France) Europcar Group PTY Ltd (Nouvelle-Zélande) UK. Ltd (Australia) (UK) 100%
CLA Trading PTY Ltd (Australia)
Holding company Operational company
1.7.2 Subsidiaries and equity investments
1.7.2.1 Signifi cant subsidiaries Companies Register under number 542 065 305. The Company directly holds 100% of the share capital and voting The Company’s principal direct and indirect subsidiaries are rights of ECI. ECI’s main role is as an operational holding described below. company for the Group. It directly or indirectly holds the a Europcar International SAS (“ECI”) is a French single- Group’s subsidiaries and equity investments. At the date shareholder simplifi ed stock company (Société par actions of this Registration Document, ECI is the holder of some ® simplifiée), the registered offi ce of which is located at 2 rue of the Group’s principal trademarks, including Europcar . René Caudron, Bâtiment OP, 78960 Voisins-le-Bretonneux, It negotiates and manages the Group’s international France, and registered with the Versailles Trade and agreements and partnerships. It manages and operates the principal information systems.
EUROPCAR REGISTRATION DOCUMENT 2015 59 01 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES ORGANIZATION CHART
a Europcar Holding SAS is a French single-shareholder a Europcar Group UK Ltd is an English limited liability simplifi ed stock company (Société par actions simplifiée), the company, the registered offi ce of which is located at James registered offi ce of which is located at 2 rue René Caudron, House, 55 Welford Road, Leicester LE2 7AR, United Bâtiment OP, 78960 Voisins-le-Bretonneux, France, and Kingdom, and registered with the Registrar of Companies of registered with the Versailles Trade and Companies Register England and Wales under number 1089053. The Company under number 428 713 937. The Company indirectly holds indirectly holds 100% of the share capital and voting rights of 100% of the share capital and voting rights of Europcar Europcar Group UK Ltd. Europcar Group UK Ltd’s principal Holding SAS. Europcar Holding SAS directly or indirectly business is short-term vehicle rental in the United Kingdom. holds some of the Group’s subsidiaries and centralizes the a Europcar Italia S.p.A is an Italian single-shareholder stock Group’s fi nances. company, the registered offi ce of which is located at 32 Corso a Europcar France SAS is a French single-shareholder Italia, 39100 Bolzane, Italy, and registered with the Bolzane simplifi ed stock company (Société par actions simplifiée), the Trade Register under number 207101. The Company registered offi ce of which is located at 2 rue René Caudron, indirectly holds 100% of the share capital and voting rights Parc d’Affaires “Le Val Saint Quentin”, Bâtiment L, 78960 of Europcar Italia S.p.A. Europcar Italia S.p.A’s principal Voisins-le-Bretonneux, France, and registered with the business is short-term vehicle rental in Italy. Versailles Trade and Companies Register under number 303 a Europcar Internacional Aluguer de Automoveis SA is a 656 847. The Company indirectly holds 100% of the share Portuguese limited liability corporation, the registered offi ce capital and voting rights of Europcar France SAS. Europcar of which is located at 17 Rua Carlos Alberto Mota Pinto, France SAS’s principal business is short-term vehicle rental Lisbon, 10996095, Portugal and registered with the Lisbon in France. Trade Register under number 500074135. The Company a Europcar International SASU und Co OHG is a German indirectly holds 100% of the share capital and voting rights of partnership, the registered offi ce of which is located at 81 Europcar International Aluguer de Automoveis SA. Europcar Tangstedter Landstrasse, 22415 Hamburg, Germany, and Internacional Aluguer de Automoveis SA’s principal business registered with the Hamburg Trade Register under number is short-term vehicle rental in Portugal. HRA83202. The Company indirectly holds 100% of the share a Europcar IB SA is a Spanish company, the registered capital and voting rights of Europcar International SASU und offi ce of which is located at 16-18 Avenida del Partenon, Co OHG. Europcar International SASU und Co OHG is the 2a planta, Campos de las Naciones, Madrid, 28042, Group’s holding company in Germany. Spain, and registered with the Madrid Trade Register under a Europcar Autovermietung GmbH is a German limited number 5999. The Company indirectly holds 100% of the liability company, the registered offi ce of which is located at share capital and voting rights of Europcar IB SA. Europcar IB 81 Tangstedter Landstrasse, 22415 Hamburg, Germany, and SA’s principal business is short-term vehicle rental in Spain. registered with the Hamburg Trade Register under number a CLA Trading Pty Ltd is an Australian limited liability HRB42081. The Company indirectly holds 100% of the company, the registered offi ce of which is located at 158 share capital and voting rights of Europcar Autovermietung Mickleham Road - Tullamarine, Victoria, VIC 3044, Australia, GmbH. Europcar Autovermietung GmbH’s principal business and registered with the Victoria Trade Register under number is short-term vehicle rental in Germany. ACN 282 220 399. The Company indirectly holds 100% of a Europcar SA is a Belgian limited liability corporation (Société the share capital and voting rights of CLA Trading Pty Ltd. anonyme), the registered offi ce of which is located at 281 CLA Trading Pty Ltd’s principal business is short-term vehicle rue Saint-Denis, 1190 Forest, Belgium, and registered with rental in Australia. the Belgian Trade Register under number 0 413 087 168. a BVJV Ltd is a New Zealand limited liability company The Company indirectly holds 100% of the share capital whose registered offi ce is located at 848 Colombo street, and voting rights of Europcar SA. Europcar SA’s principal Christchurch, New Zealand and is registered with the business is short-term, medium-term and long-term vehicle commercial registry under number AC 117 1885. The rental in Belgium. Company indirectly holds 100% of the capital and voting a Europcar UK Ltd is an English limited liability company, rights of BVJV Ltd. The main business of BVJV Ltd is short the registered offi ce of which is located at James House, term car rental in New Zealand. 55 Welford Road, Leicester LE2 7AR, United Kingdom, and For a description of the Group’s other consolidated subsidiaries, registered with the Registrar of Companies of England and see Note 34 “Group Entities” to the 2015 fi nancial statements Wales under number 875561. The Company indirectly holds included in Section 3.4 “ Consolidated financial statements and 100% of the share capital and voting rights of Europcar UK Statutory Auditors’ report” . Ltd. Europcar UK Ltd is the Group’s holding company in the United Kingdom.
60 EUROPCAR REGISTRATION DOCUMENT 2015 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES ORGANIZATION CHART
1.7.2.2 Acquisitions and disposals France, and registered with the Rouen Trade and Companies of subsidiaries in 2015 Register under number 443 071 816. Securitifl eet SASU is a 01 special purpose, autonomous company set up in connection In July 2015, the Group acquired, via its UK subsidiary Europcar with the Group’s securitization structure and has as its sole Lab UK, a majority stake of 60.8% in E-Car Club, the United purpose the acquisition and ownership of vehicles to be Kingdom’s fi rst electric pay-per-use car-sharing company. leased to Europcar France S.A.S.; and a Securitifleet S.p.A is an Italian stock company, the 1.7.2.3 Ownership registered office of which is located at 32 Corso Italia, 39100 Bolzane, Italy, and registered with the Bolzane Trade As of the date of this Registration Document, the Group Register under number 205586. Securitifleet S.p.A is a holds 25% of the share capital and voting rights of Car2go special purpose, autonomous company set up in connection Europe (GmbH), consolidated by the equity method in with the Group’s securitization structure and has as its sole the Group’s consolidated financial statements included in purpose the acquisition and ownership of vehicles to be Section 3.4 “Consolidated financial statements and Statutory leased to Europcar Italia S.p.A. Auditors’ report” . Securitifl eet GmbH and Securitifl eet S. L are, respectively, 90% and 95% held by Securitifl eet Holding Bis SASU, itself controlled 1.7.2.4 EC Finance Plc by Structured Finance Management Corporate Services Ltd, a special purpose, autonomous vehicle governed by Irish law. EC Finance Plc (“ECF”) is a special-purpose, autonomous fi nancing vehicle formed in connection with the issuance of a Securitifl eet GmbH is a German limited liability company, the EC Finance Notes, which are used to fi nance part of the the registered offi ce of which is located at 81 Tangstedter Group’s fleet. All of EC Finance Plc’s common shares are Landstrasse, 22415 Hamburg, Germany, and registered with held by TMF Trustee Ltd, an English entity, in its capacity as the Hamburg Trade Register under number HRB 91341. trustee for a charitable trust established under English law. Securitifleet GmbH is a special purpose, autonomous EC Finance Plc has no material operations. The Company is company set up in connection with the Group’s securitization deemed to indirectly control EC Finance Plc, which is included structure and has as its sole purpose the acquisition in the Group’s scope of consolidation. For more information on and ownership of vehicles to be leased to Europcar the EC Finance Notes, see Section 3.2.3 “Description of the Autovermietung GmbH; financing as of December 31, 2015”. a Securitifl eet S., L is a Spanish limited liability company, the registered offi ce of which is located at C/Trespaderne, 1.7.2.5 Securitifl eet Entities 19 Madrid, Spain, registered with the Madrid Trade Register, Sheet M-310,150, Book 17,955, page 92, and holding Tax Securitifl eet S.A.S.U. and Securitifl eet S.p.A are, respectively, Identifi cation Code B-83382549. Securitifl eet S. L is a special 100% and 94% held by Securitifl eet Holding SA, which in turn purpose, autonomous company set up in connection with is controlled by State Street Administration Services Limited, the Group’s securitization structure and having as its sole a special purpose, autonomous vehicle governed by Irish law: purpose the acquisition and ownership of vehicles to be leased to Europcar IB SA. a Securitifl eet SASU is a single-shareholder simplifi ed stock company (Société par actions simplifiée), the registered offi ce The above-mentioned Securitifl eet entities are included in the of which is located at 57 avenue de Bretagne, 76100 Rouen, Group’s scope of consolidation.
EUROPCAR REGISTRATION DOCUMENT 2015 61 01 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES
The following organizational chart sets forth the legal organization of the Securitifl eet Companies at the date of this Registration Document. For a presentation of the links between the Europcar operating entities and the Securitifl eet companies, please see the graphic shown in Section 3.2.3 “Description of the financing as of December 31, 2015”.
Structured Finance Sanne Capital Management Corporate Europcar Groupe S.A. Market Ireland Ltd Services (Ireland) Ltd (France)
100% 91.70% 100%
Securitifleet Europcar Securitifleet 8.26% Europcar Holding Bis S.A.S.U Autovermietung GmbH Holding S.A. International S.A.S.U. (France) (Germany) (France) (France)
5%
90% 5% 100% Securitifleet 100% Securitifleet GmbH SFL S.A.S.U. S.A.S.U. (Germany) (France) (France)
95% 5% 94% Securitifleet S.L. Securitifleet S.p.A. (Spain) (Italy)
6%
Europcar Italia S.p.A. (Italy)
Ad hoc entities
Securitifleet holdings
Securitifleet operational companies
1.8 RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES
1.8.1 Research and development
The Group does not conduct any research and development P lease see Section 1.6.2 “Europcar Lab / Mobility solutions” activities. However, it is constantly searching for innovative for a description of Europcar Lab. solutions. In 2014, it created the “Europcar Lab,” an idea incubator to support the Group’s strategic projects.
62 EUROPCAR REGISTRATION DOCUMENT 2015 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES PROPERTY, PLANT AND EQUIPMENT
1.8.2 Intellectual property, licenses, usage rights, and other intangible assets 01
The Group holds most of the material intellectual property rights (iv) Ostergaard Biller A/S in Denmark, the Faroe Islands and us ed in connection with its business, which enables it in the Greenland) and (v) InterRent AS in Norway, and where the vast majority of cases to provide services to its customers services provided so require, ECI grants its partners and without dependence on third parties. franchisees a license to certain of its intellectual property rights (in particular to its trademarks and Greenway technology) Most of these rights are held by ECI and ECG, with the in a given territory. ECI is also party to a cross-licensing remainder (for distinctive marks used in a particular country) agreement with Advantage OpCo (“Advantage”) pursuant to held by local Group entities. which (i) Advantage grants ECI an exclusive license to certain The Group’s intellectual property rights primarily comprise: “Advantage” trademarks in the countries where the Group is present or has a franchise, with the exception of the United (i) rights to distinctive marks, such as trademarks or domain States (although the license does cover Puerto Rico) and (ii) ECI names, in particular those including the names “Europcar,” grants Advantage an exclusive license to certain “Europcar,” “InterRent” and “Keddy”. These intellectual property rights “Privilège” and “Moving your way” trademarks in the United are registered or in the process of being registered in most States (but not covering Puerto Rico). The licenses are non- of the countries where the Group does business, in order exclusive and non-transferable for a duration equal to the term to protect them appropriately for the related activities; and of the joint venture or franchise agreements in connection with (ii) rights relating to the “GreenWay®” technology, the Group’s which they are granted. These licenses are not the subject of complete commercial software solution, principally in the specifi c fees, but instead are taken into account in the overall areas of fl eet management, e-commerce, reservations and negotiation of the partnership or franchise agreements to which global distribution, as well as rental activities. they apply. In connection with several partnerships and franchise For details of the valuation of the Group’s brands, see agreements outside of France (in particular with (i) Discount Note 14 “Intangible assets” to the 2015 fi nancial statements” Car & Truck Rentals Ltd in Canada, (ii) AMAG Services AG included in Section 3.4 “ Consolidated financial statements and in Switzerland and Lichtenstein, (iii) ARAC GmbH in Austria, the Statutory Auditors’ report” .
1.9 PROPERTY, PLANT AND EQUIPMENT
As of December 31, 2015, the Group held property, plant and years and three months, beginning on October 1, 2012. The equipment with a gross value of €282.1 million. The Group initial nine year three month duration is fi xed and irrevocable; also leases some of its asset write-offs, in particular certain the Company waived its right to terminate the lease for the buildings and technical equipment. For 2015, rental charges fi rst three three-year term there under. Europcar also rents totaled €67.1 million. registered offi ces, sales offi ces and service facilities in each Corporate Country. In addition, the Group owns buildings in Tangible fi xed assets held or leased by the Group consist mainly some Corporate Countries, in particular in Germany, Spain of: and the United Kingdom, in which the registered offi ces for a administrative buildings and offices, for the Group’s those Corporate Countries are located; administrative and commercial needs, in all of the countries a rental stations, primarily located in or near airports and train where the Group does business. The Company’s registered stations, as well as in business and residential neighborhoods. offi ce is in Voisins le Bretonneux, Saint-Quentin-en-Yvelines, Europcar rents or operates the majority of the 1,034 stations France, and occupies Bâtiment OP of the “Parc d’Affaires le that the Group directly manages, pursuant to concessions Val Saint-Quentin,” which includes 5,900 square meters of awarded by governmental authorities and leases with private rental offi ce space, as well as parking spaces. The Company entities. The leases and concession agreements generally rents this building pursuant to a commercial lease for offi ce require the payment of rent or minimum concession fees, space entered into on May 4, 2011, for a fi xed term of nine
EUROPCAR REGISTRATION DOCUMENT 2015 63 01 OVERVIEW OF EUROPCAR AND ITS ACTIVITIES PROPERTY, PLANT AND EQUIPMENT
and in certain countries also require the relevant Europcar a fueling equipment and car-washing facilities at all of the entity to pay or reimburse operating fees, additional rent, Group’s stations. or concession fees that are greater than the guaranteed This tangible fi xed property is used as security for the Group’s minimum, calculated based on a percentage of revenues or corporate fi nancing, as explained in more detail in Note 15 to the sales at the locations in question; 2015 fi nancial statements included in Section 3.4 “Consolidated a technical infrastructure for servers and data centers; and financial statements and Statutory Auditors’ report” .
64 EUROPCAR REGISTRATION DOCUMENT 2015 02
RISK FACTORS
2.1 RISKS RELATING TO THE GROUP’S 2.5 REGULATORY, LEGAL INDUSTRY AND MARKETS 66 AND ARBITRATION PROCEEDINGS 92
2.2 RISKS RELATED TO THE BUSINESS 69 2.6 FINANCIAL RISKS 94
2.3 RISKS RELATING 2.7 INSURANCE AND RISK MANAGEMENT 94 TO THE GROUP’S FINANCIAL STRUCTURE AND PROFILE 79
2.4 REGULATORY AND LEGAL RISKS 85
EUROPCAR REGISTRATION DOCUMENT 2015 65 02 RISK FACTORS RISKS RELATING TO THE GROUP’S INDUSTRY AND MARKETS
Investors should consider all of the information set forth in this Registration Document, including the following risk factors, before deciding whether to invest in the Company’s shares. Such risks are, as of the date of this Registration Document, the risks that the Company believes, were they to occur, could have a material adverse effect on the Group, its business, fi nancial results, fi nancial condition and prospects. The Group believes that, as of the date of fi ling this Registration Document, there are no signifi cant risks other than those presented in this Chapter. Additional risks that are not known at the date hereof, or that the Group currently considers immaterial based on the information available to it, may have a material adverse effect on the Group, its results of operations, fi nancial condition or prospects.
2.1 RISKS RELATING TO THE GROUP’S INDUSTRY AND MARKETS
2.1.1 Risks related to the high level of competition in the vehicle rental industry
The vehicle rental industry is a competitive market. The Group to demand can result in intense pricing pressure as vehicle competes at the international level primarily with a number of rental companies seek to maintain high fl eet utilization rates global vehicle rental companies such as Hertz, Avis, Enterprise by rapidly adapting their fl eet capacity to demand. Vehicle and Sixt. The Group also competes in specific regions or rental companies adjust fl eet size based on their demand and countries with a number of smaller regional companies (such supply forecasts as well as competitive positioning strategies. A as GoldCar in Europe). Enterprise, which regained control number of variables complicate the accuracy of such forecasts, of its National and Alamo brands in Europe, the Middle including the variability of other vehicle rental companies’ fl eet East and Africa in December 2014, could become a more sizes and the relative dispersion of the European market, which signifi cant competitor in several of the Group’s main markets. may lead to mismatches between supply and demand. In particular regions, some of the Group’s competitors and The Group’s competitors may also seek to compete aggressively potential competitors may have greater market share, more on the basis of price in order to protect or gain market share. technical staff, larger customer bases, lower cost bases, more The Group risks losing rental volume to the extent that its established distribution channels or greater brand recognition competitors reduce their prices and the Group does not match and may adapt more rapidly than the Group does to respond to or provide competitive pricing or if price increases the Group expectations and changes in demand in the regions in which they seeks to implement make it less competitive. To the extent operate. On a worldwide basis, some of these competitors and that the Group does not match or remain within a competitive potential competitors may have greater fi nancial or marketing margin of its competitors’ prices, it could lose rental volume. If resources. The market shares of the leading participants of competitive pressures require the Group to match competitors’ the vehicle rental market in the Group’s European Corporate prices but the Group is not able to reduce operating costs Countries were approximately 19% for Europcar, 13% for Avis, correspondingly, then the Group’s results of operations and 12% for Hertz, 12% for Sixt 11% for Enterprise in 2014 (source: fi nancial condition could be materially and adversely affected. KPMG Study, on the basis of the mid-point of estimated market shares, based on company revenues excluding franchisees, Furthermore, the emergence of new mobility solutions creates refer to Section 1.3 “Presentation of the Group’s market and opportunities but also carries risks. The arrival of new potential competitive environment”). competitors such as companies offering car-sharing and car- pooling services and their growing presence in the mobility Price is one of the industry’s main competitive factors. Pricing is market may also affect the Group’s competitive position. signifi cantly affected by the supply of vehicles available for rent relative to demand, and oversupply of rental vehicles relative
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2.1.2 Risks related to structural changes in the vehicle rental market
The vehicle rental market has been undergoing structural and best and clearest terms from vehicle rental companies changes that have affected its competitive dynamics in recent for any given trip. This increase in transparency is ongoing years. and may continue to increase the intensity of competition as 02 well as the homogenization of offers such that price could The increasing use of the Internet for vehicle rental reservations increasingly become the primary, or even sole, differentiating is a signifi cant structural change that has increased and will factor. Trends in regulation with respect to consumer rights likely continue to increase competitive transparency and thus may also push the market towards a homogenization of offers. potential price pressure in the vehicle rental industry. The See “ Consumer Protection Regulations in the EEA” under percentage of vehicle rental reservations made through the Section 1.6.11.1 “Consumer Protection Regulations” of this Internet (including through rental brokers) has significantly Registration Document. These trends could have a material increased in recent years, from 27% of the Group’s reservations adverse effect on the Group’s business, results of operations, in 2008 to 54% in 2015 . The Internet’s popularity is due, fi nancial condition and prospects. among other things, to its ease of use (including for last minute bookings) and the fact that it enables price and service In parallel with increased pricing transparency and the recent comparisons. In addition, the Group seeks to maintain good economic downturn, individuals and businesses have been relationships with brokers, based on a multi-brand and multi- increasingly focused on low-cost travel and many companies product strategy. In particular, the Group benefi ts from support have implemented measures to reduce business travel costs. during low seasons and certain prepayments and offers brokers As a result, the vehicle rental market has also witnessed in this respect guaranteed availability during high seasons. The increased demand for smaller economy vehicles, which has Internet also enables cost-conscious customers, in particular required providers to adjust their fl eet. Failure to adapt to these business travelers who generally make reservations through market changes, together with increased competition, could their purchasing departments, to obtain the lowest rates have a material adverse effect on the Group’s profi tability.
2.1.3 Risks related to the weakening of macro-economic conditions or in travel demand in Europe or the other areas in which the Group operates
Europcar benefi ts from an international network and operates risk of stagnation or deflation, as well as the possibility of primarily in Europe. Of Europcar’s total revenue (before the reemergence of a sovereign debt crisis. In particular, in intra-group eliminations and holdings) for the year ended January 2015, the International Monetary Fund (IMF) released December 31, 2015, 92.7% and 7.3% was generated in its forecasts of growth in the Euro-zone of 1.2% in 2015 and Europe and the Rest of the World, respectively. Demand 1.4% in 2016. A defl ationary environment in Europe would limit for vehicle rentals in a given region, and corporate rentals in the Group’s growth prospects and any deterioration in the Euro- particular, is affected by trends in the gross domestic product zone economy could adversely affect the Group’s business, (GDP). Declines in or stagnation of GDP negatively impacts the results of operations, fi nancial condition and prospects. level of vehicle rental demand. For example, the vehicle rental Vehicle rental demand, particularly in the leisure segment, is industry in general and the Group in particular were negatively also affected by trends in air travel, which themselves are in affected by the global fi nancial and ensuing economic crisis turn affected both by macroeconomic conditions as well as by beginning in 2008/2009 and again in Europe in 2011/2012 by specifi c factors such as fl ight ticket prices, fuel price trends, the sovereign debt crisis. Such crises resulted in a tightening work stoppages, terrorist incidents (or a perceived heightened of the credit markets, a reduction in business and leisure travel, risk of incidents), natural disasters, epidemics, military confl icts reduced consumer spending and an increase in volatility of or government responses to any of these events. The Group fuel prices, all of which negatively affected the vehicle rental believes that the impact of terrorist acts, such as the Paris industry, particularly corporate rentals. Although macro- attacks in November 2015, on its fi nancial performance in economic conditions improved globally and in the Group’s key fi scal year 2015 was very limited. Nevertheless, if repeated markets in 2014 and 2015, current conditions in and outlook attacks were to occur in Europe, it could have a signifi cant for the Euro-zone economy remain uncertain, with a persistent
EUROPCAR REGISTRATION DOCUMENT 2015 67 02 RISK FACTORS RISKS RELATING TO THE GROUP’S INDUSTRY AND MARKETS
adverse effect on the Group’s activities, results of operations is strongly correlated with the level of air traffi c. Any event that and fi nancial position. Rentals at its airport rental stations were disrupts or reduces business or leisure air travel could therefore responsible for 42% of the Group’s total rental revenue for the have a material adverse effect on the Group’s business, results year ended December 31, 2015. Europcar has significant of operations, fi nancial condition and prospects. alliances and partnership arrangements with a number of major Uncertainty and volatility with respect to economic conditions airlines that generate a signifi cant source of demand for its and air travel frequency levels also complicate demand trend services. Accordingly, a substantial portion of Group revenue projections and hence fl eet management.
2.1.4 Risks related to the highly seasonal nature and sensitivity to weather conditions of the vehicle rental business
The third quarter of the year has historically been the Group’s in demand due to poor weather may not be anticipated by the strongest quarters due to higher levels of leisure travel in Group’s fl eet management planning, and could have a material the summer months. As an example, for the year ended adverse effect on the Group’s revenues and profi tability. December 31, 2015, the third quarter accounted for 32.3% The Group purchases vehicles for its fl eet based on anticipated of the Group’s revenue for the year and 61.5% of its Adjusted fl uctuations in demand, in particular seasonal fl uctuations. The Corporate EBITDA. Any occurrence that disrupts rental activity necessary variation in fl eet levels also results in higher levels of during the second or third quarters could have a signifi cant debt in the summer months compared to other times of year, material adverse effect on the Group’s revenues and profi tability, as additional capital is required to fund fl eet acquisitions. The given the existence of substantial fi xed costs. Group manages its cost base and investment decisions in line Vehicle rental demand is also highly sensitive to weather with forecast activity levels and prior experience. Any difference conditions. The tendency towards last minute reservations between forecasted and actual activity, in particular during peak (itself resulting in part from the increasing weight of Internet- periods, could have a material adverse effect on pricing both based distribution channels) has increased this sensitivity. Bad during the peak periods and in the “shoulder” periods before weather, particularly in the summer months, could reduce and after them and therefore on the Group’s business, results demand during this critical period of the year. A sharp reduction of operations and fi nancial condition.
2.1.5 Risks related to the rapid development of the vehicle rental industry, in particular due to the advent of new mobility solutions
The vehicle rental industry has been evolving and is facing Registration Document ), to the extent that the Group could fail further and potentially substantial structural changes due to adapt quickly enough to meet customer expectations and to changing customer preferences and usages combined seize opportunities in this evolving market. In addition, there is with and driven by technological change. The evolution a risk of cannibalization of products or services proposed by of the mobility solutions market poses risks in addition to new entrants in the vehicle rental market or by other parties in opportunities, (see Sections 1.3 “Presentation of the Group’s related markets, which may gain more market acceptance and Market and Competitive Environment” and 1.5 “Strategy” of this could result in the decline of vehicle rental use.
68 EUROPCAR REGISTRATION DOCUMENT 2015 RISK FACTORS RISKS RELATED TO THE BUSINESS
In order to keep pace, the Group must concentrate its resources and E-Car Club. However, joint ventures and acquisitions are on the products, services and technologies that it believes, themselves subject to risks inherent to this type of structure or according to its estimates, will provide the most value or will transaction (see Section 2.2.11 “Risks related to the deployment achieve substantial customer acceptance and in which it has or of the Group’s strategy” of this Registration Document). can acquire or develop the appropriate technical expertise for The Group’s prospects depend in part on its ability to maintain their operation (see Section “Europcar Lab / Mobility Solutions” a product and service portfolio that is attractive to its existing 02 of this Registration Document). Due to the evolving nature of and prospective customers and to continue to introduce the technologies and customer usages, however, the Group’s new products and services successfully on a timely basis. efforts and investments may not turn out to be appropriately The Group’s failure to keep pace with change in the vehicle focused on products and services that could gain market rental business or to invest in products or technologies that acceptance. will become commercially accepted with a view to ensuring As part of the Group’s strategy to expand into new mobility the successful marketing of new services within the desired solutions, it has entered into and may continue to enter timeframe, may lead to a loss of market share and could into long-term agreements and joint ventures with strategic adversely affect the Group’s business, results of operations, partners, such as the Car2go Europe joint venture with Daimler, fi nancial condition and prospects. and make acquisitions, such as its recent acquisition of Ubeeqo
2.2 RISKS RELATED TO THE BUSINESS
2.2.1 Risks related to the Group’s ability to develop and maintain favorable brand recognition
The Group invests in its brands and incurs substantial expense the Internet or social media, could damage the Group’s brands to promote its brands, including through partnerships and and accordingly have a material adverse effect on its business, advertising campaigns. Factors affecting brand recognition are results of operations, fi nancial condition and prospects. often outside the Group’s control, however, and such efforts The risk of reputational damage to the Group’s brand is magnifi ed may not be successful (for examples, see Sections 2.4.3 by the existence of its extensive network of franchisees, agents “Risks related to the protection of intellectual property rights” and independent partners (see Section 1.6.5 “Europcar’s and 2.5 “Regulatory, legal and arbitration proceedings” of this Network” of this Registration Document). While the Group has Registration Document). The Group is also in the process of implemented Brand Guidelines that specify the conditions under deploying its InterRent® brand, and no assurances can be which its partners, franchisees and agents may reproduce and/ given that the InterRent brand will become as well-established or represent its brands and it ensures, in particular via Internet as the Europcar brand in its targeted segment. The Group is monitoring, that franchisees, agents and partners adhere to its also rolling out the Keddy brand, launched in March 2015 to standards and thereby uphold and promote its brands that they market a targeted broker product specifi cally aimed at tour use under license, any failure by them to do so could adversely operators, travel agencies and on-line brokers. More generally, affect the brands’ reputation. This could in turn make it more unfavorable publicity concerning the Group’s brands or the diffi cult for the Group to attract new franchisees, agents or industry, and in particular, as the Group’s leisure rental activity partners and thus compromise its growth strategy. is increasingly reliant on online sales, any negative publicity on
EUROPCAR REGISTRATION DOCUMENT 2015 69 02 RISK FACTORS RISKS RELATED TO THE BUSINESS
2.2.2 Risks related to the potential inability to continue operations on acceptable terms at major airports and train stations
For the year ended December 31, 2015, revenue generated be adjusted and there can be no assurance that they will be by rentals from airport stations represented 42% of total renewed on similar terms (in particular due to an upward trend Group rental revenue in Corporate Countries. The number in commissions paid to airports refl ecting infl ation to be passed of rental stations in airports as a percentage of the Group’s on to the end consumer, where applicable). A potential inability total number of stations remained stable at between 16% to continue operations on acceptable terms at major airports over 2015. The Group operates airport and train station rental and train stations currently within the Europcar network could locations pursuant to concessionary arrangements that have have a material adverse effect on the Group’s business, results terms typically of three to fi ve years. While historically such of operations and fi nancial condition. arrangements have been renewed, the commercial terms may
2.2.3 Risks related to fl eet supply and fi nancing
The Group’s fl eet is composed of vehicles purchased from a rental industry or improve the profi tability of such sales (e.g., by number of automobile manufacturers. During the year ended offering lower discounts or repurchase prices), and there can December 31, 2015, the Group acquired approximately 30% of be no assurance that the Group will be able to pass on such its fl eet from Volkswagen, 15% from General Motors, 13% from increased costs to its rental customers. If the Group is unable Fiat, 11% from Renault, 9% from Peugeot Citroen, 7% from to obtain favorable pricing and other terms when it acquires Daimler, 6% from Hyundai, 3% from Ford and the remaining 7% vehicles and is unable to pass on increased costs to customers, from other manufacturers, with the fl eet mix by manufacturer the Group’s results of operation and fi nancial condition could varying by country. Any of these automobile manufacturers may be materially adversely affected. For further information on decide to signifi cantly curtail production or sales to the vehicle the Group’s expenses related to vehicle purchases and costs rental industry as a result of a number of factors. Generally related to purchasing and selling vehicles, see Sections 3.3.1 speaking, car manufacturers limit the number of vehicles sold “Historical Investments” and the information under “Cost to short-term rental companies to a percentage of their total Structure and Operational Efficiency” in Section 3.1.1.2 “Key sales of new vehicles. The percentage varies between 8 and factors affecting the Group’s results” of this Registration 15% based on the manufacturer. In addition, depending on Document . market conditions, sales of vehicles to rental companies may The terms of the Group’s fl eet fi nancing vary widely, depending be less profi table for automobile manufacturers than other on the supplier and the market in which the vehicles are to sales channels or may not suit their marketing and branding be used. While the Group has benefited from credit terms strategy at a given time. Indeed, sales to the vehicle rental that are in line with its activity, there can be no assurance industry have historically been relatively less profitable for that the Group’s principal fl eet suppliers will continue to offer automobile manufacturers due to sales incentive and other credit, through their fi nancing divisions, on the same terms discount programs that allow fl eet purchasers such as Europcar in the future. Adverse changes to credit terms have in some to decrease the average holding costs for their vehicles. instances resulted and may in the future result in an increase Fleet supply and holding costs could increase if automobile in the Group’s debt funding requirement, which the Group may manufacturers implement strategies to limit sales to the vehicle not be able to satisfy by other means on more attractive terms.
70 EUROPCAR REGISTRATION DOCUMENT 2015 RISK FACTORS RISKS RELATED TO THE BUSINESS
2.2.4 Risks related to the fi nancial condition of automobile manufacturers and dealers upon which it relies to supply its fl eet
The Group relies to a significant extent on contractual Furthermore, although the aforementioned U.S. automobile 02 agreements with a limited number of automobile manufacturers manufacturers that benefi tted from Chapter 11 bankruptcy and dealers; Volkswagen, Fiat, General Motors and Renault protection under U.S. law in 2009 have always been able represented approximately 69% of the purchases made by the to meet their buy-back arrangements with the Group, the Group to supply its fl eet in 2015. Group could incur material expenses following a manufacturer or dealer default under its agreements with the Group as a The automobile industry has, in the past, been signifi cantly result of bankruptcy proceedings or otherwise, or in the event impacted by the economic recession, which seriously a manufacturer or dealer is unwilling to repurchase vehicles challenged U.S. automakers in particular, and ultimately led to whose residual value has decreased. In these circumstances, fi lings for Chapter 11 bankruptcy protection by Chrysler and the Group may be unable to dispose of its vehicles at the prices General Motors in 2009. Although such automakers have since specifi ed under the repurchase program or calculated based seen improvements in their fi nancial conditions and benefi ted on the guaranteed depreciation, or it may be unable to receive from funds received as part of the U.S. federal government contractual premiums. Failure by a manufacturer or dealer automobile industry bail out, they and other automakers outside to fulfi ll its aforementioned obligations could leave the Group the U.S. could be vulnerable to uncertain market conditions and with a substantial and uncertain unpaid claim particularly with risks associated with renewed economic downturns in the U.S. respect to vehicles that have been (i) resold for an amount less and Europe. Furthermore, changes in the automotive sector than the amount contractually guaranteed and therefore subject could accelerate the concentration of automakers, ultimately to a payment obligation from the manufacturer or dealer for the resulting in the disappearance of certain brands or models. loss incurred by the Group or (ii) returned to the manufacturer Any economic or fi nancial distress affecting manufacturers, or dealer but for which the Group may risk not receiving any dealers and their suppliers of vehicle components, could also payment or only partial payment. Such failure to perform could cause them to raise the prices the Group pays for vehicles or to lead the Group to incur a substantial loss. reduce their supply. As a result, there is no guarantee that the In the case of insolvency or default of a vehicle manufacturer or Group will continue to be able to obtain vehicles at competitive dealer, it may not be possible to recover all amounts owed to terms and conditions or in the form of the particular vehicle the Group under buy-back agreements in certain jurisdictions. sales arrangements on which the Group currently relies. In If an automobile manufacturer or dealer were to become particular, the Group relies on buy-back arrangements (whereby insolvent, applicable bankruptcy laws may prohibit the Group the Group’s vehicles are repurchased by the manufacturer or from asserting its rights with respect to the buy-back agreement dealer on pre-established terms after a certain pre-determined under certain circumstances. Where the payment claims are period) to limit potential residual risk with respect to vehicles secured by a retention of title provision, the enforcement of the purchased under the programs, to enable fi nancing on the security may be signifi cantly delayed due to the time necessary basis of the agreed repurchase price and to provide fl exibility for to regain control of vehicles. Moreover, in some jurisdictions, fl eet management. If vehicle acquisition costs increase and the the Group may still be subject to certain residual liabilities as Group is unable to pass on all or part of increased costs to its a matter of law. The default probability of a manufacturer is customers, or if the Group is unable to supply itself with vehicles monitored on a monthly basis through ratings by Standard & by benefi ting from buy-back arrangements at competitive terms Poor’s and Moody’s. However, a downgrade of one or more and conditions, the Group’s results of operations and fi nancial manufacturers would have a material adverse effect on the condition may be materially and adversely affected. eligibility of vehicles for fi nancing and on the advance rate of the fi nancing, and therefore on the Group’s liquidity.
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2.2.5 Risks related to the vehicles not covered by repurchase programs
Approximately 92% of Europcar’s fleet purchased in 2015 The Group relies on repurchase programs for a substantial was covered by Buy-Back Commitments. Residual values of portion of its fl eet fi nancing. If the Group were to fail to purchase the remaining vehicles not covered by repurchase programs, a signifi cant part of its fl eet through repurchase agreements at referred to as “risk vehicles”, are exposed to adverse pricing acceptable conditions, vehicle related debt fi nancing would conditions and uncertainties in the used vehicle market. The become more difficult to obtain on acceptable terms. See Group’s ability to sell its vehicles in the used vehicle market Section 2.3.3 “Risks related to the Group’s potential inability place could become severely limited as a result of a number to continue financing vehicle acquisitions for its fleet via asset- of factors, including the macro-economic environment, backed financing, or to any unfavorable changes in asset- model changes, legislative requirements (e.g., changes to backed financing terms” of this Registration Document . environmental legislation or vehicle taxes), and oversupply by Fleet holding costs represent a signifi cant portion of the Group’s manufacturers of new vehicles. A decline in used vehicle prices operating expenses and repurchase programs enable the or a lack of liquidity in the used vehicle market may severely Group to determine a substantial portion of its fl eet holding hinder the Group’s ability to resell “risk vehicles” without a cost expense in advance. Any increase in the proportion of loss on investment and could adversely affect the Group’s “risk vehicles” in the Group’s fl eet would decrease the Group’s profi tability. ability to determine its fl eet holding cost expense in advance. Although the Group has entered into several multi-year In addition, any reduction in the residual values of “risk agreements for the buy-back of vehicles, the current relatively vehicles” could cause the Group to sustain a loss during the low percentage of “risk vehicles” in the Group’s rental fl eet could ultimate resale of such vehicles and would affect its liquidity by increase as a result of market conditions or if manufacturers decreasing the value of the asset base upon which fi nancing is were reluctant to agree to sales with buy-back agreements or based. Any increase in the share of “risk vehicles” in the Group’s if they offered less attractive buy-back terms. Market trends in fl eet would increase its exposure to fl uctuations in the residual certain jurisdictions tend towards greater demand for low-cost value of used vehicles. vehicles, which may result in an increase in the percentage of Repurchase programs provide increased fl exibility to adjust the “risk vehicles” in the Group’s fl eet, since they are less costly to size of the Group’s fl eet to respond to seasonal fl uctuations in purchase than vehicles purchased in the context of repurchase demand or in the event of an economic downturn, because programs. Automobile manufacturers may cease granting such programs typically allow vehicles, under certain conditions, repurchase programs or modify the terms of repurchase to be returned sooner than originally expected without risk of programs from one year to another, rendering the purchase of loss. This fl exibility has enabled the Group to optimize its fl eet vehicles in the context of such programs less attractive. The holding costs and increase its profi tability. There can be no Group’s vehicles covered by repurchase programs may also assurance that the Group will be able to maintain the current fail to meet repurchase conditions, in particular condition and percentage of buy-back vehicles in its rental fl eet or that the mileage requirements for returned vehicles. Vehicles that fail same level of fl eet-management fl exibility will be maintained in to meet repurchase conditions become “risk vehicles”. For the the future, which could have a material adverse effect on the year ended December 31, 2015, the percentage of vehicles Group’s results of operations and fi nancial condition. covered by buy-back programs converted into “risk vehicles” was 2.08%.
72 EUROPCAR REGISTRATION DOCUMENT 2015 RISK FACTORS RISKS RELATED TO THE BUSINESS
2.2.6 Risk related to manufacturer recalls
Vehicles in the Group’s fl eet may be subject to recalls by their The Group could also potentially face liability claims if recalls manufacturers. Under certain circumstances, recalls may cause concern vehicles that it has already re-sold. Depending on the Group to attempt to retrieve rented vehicles from customers their number and severity, recalls could materially adversely 02 or to decline to rent available vehicles until the steps described affect the Group’s revenue, reduce the residual value of the in the recalls can be applied. If a large number of vehicles vehicles involved, create customer service problems and harm are the subject of simultaneous recalls, or if the necessary the Group’s general reputation and the consumer’s view of the replacement parts are not in adequate supply, the Group may Group’s brand. struggle to serve its customers for a period of several months.
2.2.7 Risks related to the contractual relationships with certain key partners and distribution channels
In the leisure segment, the Group relies on a number of key a distribution channels such as traditional and online travel targeted partnerships and distribution channels, which generate agencies or global distribution systems that connect travel signifi cant rental revenue and accounted for 37% of its vehicle agents, travel service providers and corporations to the rental reservations in 2015 (for more information on the Group’s Group’s reservation system. partnerships in the leisure segment, see the information under In the business segment, the Group also has numerous “Partnerships to Reach “Leisure” “Customers” in Section 1.6.3 exclusive or non-exclusive contracts with large corporations, “Customers” (“Business”/“Leisure”) of this Registration which cumulatively generate a substantial portion of the Group’s Document), including, in particular: consolidated revenue. a in the airline sector, partnerships with airline companies The loss of certain of these partnerships, distribution channels such as easyJet, Aerofl ot, Emirates, Qatar Airways and Air or contracts, unfavorable changes in their terms, including Caraïbes; commission schedules or fi nancial arrangements, the potential a in the hotel sector, partnerships with large groups such as termination of certain of these contracts (a certain number of Accor and Hilton; which may be terminated at any time by partners), a reduction in the volume of sales from certain partners or channels, or a in the railway sector, partnerships with Thalys; a party’s inability to process and communicate reservations a marketing partners such as credit card companies, credit to the Group could have a material adverse effect on the institutions or membership organizations such as American Group’s business, results of operations, fi nancial condition Express, HSBC and Citibank; and and prospects.
2.2.8 Risks related to contractual relationships with certain key suppliers in addition to automobile manufacturers
The Group has a number of contractual agreements with Spain write such policies. See Section 2.4.2 “Risks Related suppliers other than automobile manufacturers, in particular to Liability and Insurance” and Section 2.7.1 “Insurance” of insurance providers, information technology suppliers and call this Registration Document . The Group also has important center suppliers. The Group relies mainly on AIG and in Spain relationships with several suppliers of software and services depends on Allianz in relation to the mandatory insurance cover that it uses to operate its systems, manage reservations and for its business to the extent that few insurance companies in its fl eet and provide certain customer services. The Group has
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outsourced a number of its call centers and is reliant on such The Group cannot guarantee that the suppliers on which it suppliers with respect to a signifi cant portion of its calls from relies will properly provide the services and products it needs customers. for the operation of its business on competitive terms or at all. The occurrence of any of these risks may create operational The suppliers on which the Group relies may be unwilling to problems, damage the Group’s reputation, result in the loss of extend contracts that provide favorable terms to the Group, or customers and have a material adverse effect on the Group’s they may seek to renegotiate existing contracts with the Group. business, results of operation and fi nancial condition.
2.2.9 Risks related to key contractual relationships with franchisees and agents
Royalties received from franchisees represented €52.7 million enforceability of certain terms and provisions of these agency for the year ended December 31, 2015. In addition to an agreements have been and may in the future be challenged entrance fee, and, upon renewal of their contracts, a territory by the Group’s agents or third parties. To the extent a court fee, franchisees pay royalties representing a percentage of or regulatory authority were to fi nd a term or provision to be rental revenue generated by their vehicle rental operations, and invalid or unenforceable and if such fi nding were determined a reservation fee based on the number of reservations booked to be applicable to all of the Group’s agency agreements in a through the Group’s reservations systems. Approximately 28 particular jurisdiction, the Group’s results of operations could Europcar branded franchise contracts are due for renewal in be materially adversely affected. 2016, 21 in 2017, 16 in 2018 and 25 in 2019. The Group cannot In addition, the Group faces risks with respect to the actions guarantee that franchisees will continue to renew their contracts of, or failures to act by, its franchisees and agents. Although or will renew them on identical terms. The Group may lose the Group monitors the activities of these third-party operators, franchisees to competitors who may offer more favorable terms and under certain circumstances is entitled to terminate and conditions. If one or more of the Group’s franchisees were their agreements in case of failure to adhere to contractual to leave the Group’s network, and if the Group were unable operational standards, the Group may be unable to detect to secure agreements with replacement franchisees at terms signifi cant problems as they arise. Moreover, the actions of and conditions that are at least equally favorable, the Group’s third-party operators may not be clearly distinguishable from profi tability and prospects could be adversely affected. The loss the Group’s own, which may expose the Group to liability or of certain franchisees could also weaken the Group’s brands. reputational damage. It is the Group’s policy to disassociate Moreover, franchises are independent operators and their itself, when possible, from such claims involving its franchisees employees are not Group employees. Consequently, the and agents and to pursue indemnity for any adverse outcomes Group’s franchisees may not operate in a manner fully that affect the Group. Failure of franchisees and agents to consistent with the Group’s standards and requirements or may comply with laws and regulations may expose the Group not hire and train qualifi ed managers and other personnel. If this to liability, damages and unfavorable publicity that could were to occur, the Group’s image and reputation could suffer. adversely impact the Group’s business, results of operations or fi nancial condition. For further information on the management The Group also operates certain rental stations through agents and operation of franchisee activities, see Section 1.6.5.3 in its Corporate Countries. From time to time the validity or “Franchises” of this Registration Document .
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2.2.10 Risks related to the Group’s potential inability to improve its operating effi ciency
Since 2012, the Group has been implementing a transformation and internal reorganization of the Group. Certain initiatives entail program called “Fast Lane”, seeking in particular to improve costs (particularly reorganization charges, which amounted to 02 the Group’s operating efficiency via the optimization of its €24 million in 2015). If the Group is unable to implement such fl eet management and reduction of its vehicle acquisition and initiatives for cost-related reasons or any other reason, its ability maintenance costs. The initiatives implemented include or may to improve its operating effi ciency and profi tability could be include headcount reductions, business process re-engineering limited.
2.2. 11 Risks related to the deployment of the Group’s strategy
The Group’s strategy depends in part on its ability to continue or other partnership arrangements. See Chapter 3.2 “Liquidity to expand into geographic areas where the Group has little or and Capital Resources” of this Registration Document . no experience and where competitive pressures, particularly In the event that the Group chooses to expand by means on prices, may be substantial. It also depends on its ability to of a franchise agreement, the Group could face additional identify and successfully exploit opportunities in the changing risks, including (i) possible conflicts of interests with the mobility solutions markets and more generally to adapt its new franchisees, (ii) lack of expertise in local franchise laws, commercial strategy to evolving customer preferences and (iii) unfavorable commercial terms, (iv) the Group’s diffi culty customer mix in its existing markets. The Group has a global in maintaining uniform standards, control procedures and presence in over 140 countries (directly and through franchises policies and (v) the possible failures of a franchisee to fulfi ll and partnerships) and may expand into additional countries its contractual obligations. An expansion into new markets in connection with its development strategy, including into or customer segments through a new franchise agreement emerging markets in Asia, Africa, Latin America and Eastern could also involve a signifi cant amount of management time, Europe. For more information on the Group’s development potentially disrupting ongoing business. strategy, see Section 1.5.2 “Develop drivers for the Group’s growth” of this Registration Document . Operations in emerging In the event that the Group chooses to expand by means of markets are inherently subject to higher economic, political and one or more acquisitions, the Group could face additional legal risks than in developed markets. risks, including: (i) potential disruption of the Group’s ongoing business, changing, in particular, the Group’s business profi le The Group’s forays into new markets or market segments may in ways that could have unintended negative consequences, take the form of franchise arrangements in line with the Group’s and monopolization of management’s time; (ii) potential failure traditional approach, a joint venture or partnership with another to achieve anticipated synergies; (iii) diffi culty integrating the company, or the acquisition of an existing business. However, acquired businesses; and (iv) exposure to unknown and/ the Group may not be successful in identifying appropriate or contingent or other liabilities, including litigation arising in opportunities, potential franchisees, joint venture partners, connection with the acquisition and/or against any businesses alliances or agents, or in entering into agreements with them. the Group may acquire. The Group’s partners may also have economic or business interests or goals that are inconsistent with the Group’s If the Group makes acquisitions in the future, acquisition- or they may be unable or unwilling to fulfi ll their obligations related accounting expenses may affect the Group’s fi nancial under the joint venture or other agreements. Furthermore, condition and results of operations. In addition, the fi nancing they may benefi t from knowledge acquired under these joint of any significant acquisition may result in changes in the venture agreements. In addition, certain of the Group’s debt Group’s capital structure, including the incurrence of additional instruments and facilities place certain limitations on the indebtedness. The Group may not be successful in addressing Group’s ability to make acquisitions, enter into joint ventures these risks or any other problems encountered in connection with any acquisitions.
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Any one of these factors could result in delays in implementation and have a material adverse effect on the Group’s results of of the Group’s growth strategy, increased costs or decreases operations, fi nancial condition and prospects. in the amount of expected revenues related to the expansion
2.2.12 Risks related to personnel cost, a material part of the Group’s operating expenses
The Group’s fi nancial performance is affected by trends in wage Due to competitive conditions in the Group’s business, any levels and benefi ts granted to personnel. The Group has a such increases in labor and benefi ts costs could be diffi cult substantial number of employees who are paid wage rates for the Group to recover through contemporaneous price at or slightly above the statutory minimum wage. If statutory increases, and there can be no assurance that the Group minimum wage rates increase in one or more countries in which would be able to absorb such cost increases through efforts the Group directly operates, the Group would then be required to increase effi ciencies in other areas of its operations. For the to increase the wages of its employees in order to meet the year ended December 31, 2015, the Group’s personnel costs minimum wage requirements, and impacting also wages paid totaled €374.4 million, (or 19% of the Group’s total operating to employees whose wage rates are slightly above minimum expenses for the year). Accordingly, increased labor and wage. A shortage of qualifi ed employees also could require benefi ts costs, particularly in Germany, France and the United the Group to increase wages and benefi t offerings in order Kingdom, where the Group has more employees, could have to compete effectively in the hiring and retention of qualifi ed a material adverse effect on the Group’s results of operations employees or to retain more expensive temporary employees. and fi nancial condition.
2.2.13 Risks related to the Group’s ability to retain the members of its senior management team and retain and attract key personnel and high-quality staff
The Group relies on a number of key employees, both in Company implemented two free share grant plans subject the Group’s management and the Group’s operations, with to performance for the members of the Group’s Executive specialized skills and extensive experience in their respective Committee and the Group’s 100 main executives. fi elds. The Group believes that the growth and success of its Moreover, for several years the Group has made use of its business will depend on the Group’s ability to attract highly “Europcar University” program, which offers different training skilled and qualifi ed personnel with specialized know-how in programs depending on the relevant public as well as its the vehicle rental industry. The Group’s senior management “Europcar Master Sales Certifi cation Program” intended for team has extensive industry experience, and the Group’s Sales Directors, Leaders and Large Account Representatives. success depends to a signifi cant degree upon the continued This program, which lasts nine months and leads to a training contributions of that team. If the Group were to lose any certifi cate, is designed to develop negotiating skills, competence members of its senior management team, the Group’s ability in Group procedures and tools, and ability to generate additional to successfully implement its business strategy, fi nancial plans, revenue and contracts. The marked seasonality of the rental marketing and other objectives, could be signifi cantly affected. vehicle industry requires the Group to adjust staffi ng levels While the Group places emphasis on retaining and attracting throughout the year in line with business needs, particularly talented personnel and invests in extensive training and through the use of temporary employees. Should the Group development of its employees, there can be no assurance that encounter any diffi culty in retaining and attracting suffi cient staff the Group will be able to retain or hire personnel with equivalent or experience labor disputes or stoppages, its business and expertise. For example, following the initial public offering, the results of operations may be adversely affected.
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2.2.14 Risks related to the potential failure or unavailability of the Group’s centralized information systems, or the Group’s inability to keep pace with new information technology developments 02 The Group relies heavily on information systems to record its information systems in order to meet market needs and reservations, process rental and sales transactions, manage keep pace with new information technology developments. its fl eets of vehicles, account for its activities and otherwise This may require investment in and development of new conduct its business. The Group has centralized its information proprietary software or other technology, the acquisition of systems and relies on communications service providers to link equipment and software, or upgrades to the Group’s existing its systems with the business locations these systems serve. systems. The Group has invested in its information systems, See Section 1.6.10 “IT System” of this Registration Document . including under its “Fast Lane” program (with IT development A major failure of IT or other systems, or a major disruption expenses excluding software and hardware of €7.4 million in of communications between the system and the locations it 2015), but no assurance can be given that the Group will be serves, could cause a loss of reservations, slow rental and sales able to anticipate such developments or have the resources to processes, interfere with the Group’s ability to manage its fl eet acquire, design, develop, implement or utilize, in a cost-effective and otherwise materially adversely affect its ability to manage its manner, information systems that provide the capabilities business effectively. The Group’s systems design and business necessary for the Group to compete effectively. In addition, continuity plans may not be suffi cient to appropriately respond regulatory changes may require the Group to bring its IT system to any such failure or disruption. to applicable standards, which may entail signifi cant costs. Any failure to adapt to technological developments could have an In addition, to achieve its strategic objectives and remain adverse effect on the Group’s business, results of operations competitive, the Group must continue to develop and enhance and fi nancial condition.
2.2.15 Risks related to the Group’s potential failure to protect customer data against security breaches and cyber-attacks
The Group’s systems regularly possess, store and handle protect customer transaction data. In addition, anyone who customer data, including personal data concerning millions of is able to circumvent the Group’s security measures could individuals and non-public data concerning many businesses. misappropriate proprietary information or cause interruptions in Failure by the Group to maintain the security of the data it the Group’s operations. See Section 1.6.10 “IT System” of this holds, whether as the result of the Group’s own error or the Registration Document for further information on the Group’s malfeasance or errors of others, could harm the Group’s IT system. reputation and give rise to signifi cant liabilities. Third parties In addition, the payment card industry (“PCI”) imposes strict may have the technology or expertise to breach the security customer credit card data security standards to insure that measures put in place by the Group to protect customer the Group’s customers’ credit card information is protected. transaction data. The Group’s security measures may not Failure to meet the PCI data security standards could result prevent security breaches that could result in substantial in substantial increased fees to credit card companies, other harm to its business and results of operations and damage liabilities and/or loss of the right to collect credit card payments. to its reputation. The Group intends to rely on encryption and/ or authentication technology licensed from third parties to Any failure to protect customer data could damage the Group’s securely transmit sensitive data, including credit card numbers. reputation and brand or result in administrative investigations However, advances in technology, new discoveries in the fi eld or material civil or criminal liability, which would substantially of cryptography, or other developments may compromise or harm the Group’s business, results of operations and fi nancial affect the effectiveness of the technology the Group uses to condition.
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2.2.16 Risks associated with the international nature of its customer base and operations
The Group has operations (directly or through franchises) in controls and the protection of the Group’s trademarks and over 140 countries and may expand into additional countries other intellectual property; (ii) the effect of foreign currency in connection with its development strategy. Operating in translation risk, as well as limitations on the Group’s ability many different countries exposes the Group to varying risks, to repatriate income; (iii) varying tax regimes, including which include: (i) multiple, and sometimes confl icting, foreign consequences from changes in applicable tax laws; (iv) local regulatory requirements and laws that are subject to change in ownership or investment requirements, as well as diffi culties each of the countries in which the Group operates, including in obtaining fi nancing in foreign countries for local operations; laws relating to taxes, automobile-related liability, consumption, and (v) political and economic instability, labor strikes, natural marketing, insurance rates, insurance products, consumer calamities, war, and terrorism. The effects of these risks may, privacy, data security, fight against money laundering and individually or in the aggregate, materially adversely affect the corruption, employment matters, cost and fee recovery, price Group’s business, results of operations or fi nancial condition.
2.2.17 Currency fl uctuation risks that could adversely affect its profi tability
Although the Group reports its results in euro, the Group of Financial Risk—(i) Foreign exchange risk” to the consolidated conducts business in countries that use currencies other than fi nancial statements included in Section 3.4 “Consolidated the euro, and the Group is therefore subject to risks associated financial statements and Statutory Auditors’ report” of this with currency fl uctuations. Of the Group’s total consolidated Registration Document . revenue for the year ended December 31, 2015, 28.2% was The Group’s results are also exposed to foreign currency generated outside the Euro-zone. translation risk as its sales in several countries are invoiced in The Group’s results of operations may be affected by both currencies other than the euro while its consolidated revenue is the transaction effects and the translation effects of foreign reported in euro. Therefore, the Group’s fi nancial results in any currency exchange rate fl uctuations. The Group is exposed to given period are materially affected by fl uctuations in the value transaction effects when one of the Group’s subsidiaries incurs of the euro relative to the British pound, Australian dollar and costs or earns revenue in a currency different from its functional other currencies. Currency exchange rates have been especially currency. The Group is exposed to currency fl uctuation when volatile in the recent past. Currency fl uctuations may make it the Group converts currencies that the Group may receive from diffi cult for the Group to predict and/or provide guidance on its operations into currencies required to pay the Group’s debt, the Group’s results. If the value of the euro declines against or into currencies which the Group uses to purchase vehicles, currencies in which the Group’s obligations are denominated incur fi xed costs or pay for services, which could result in a or increases against currencies in which the Group’s revenue gain or loss depending on fl uctuations in exchange rates. See is denominated, the Group’s results of operations and fi nancial Section Note II “Significant Accounting Policies—Management condition could be materially adversely affected.
2.2.18 Risks related to changes in the assumptions used to determine the carrying amount of certain assets, especially assumptions resulting from an unfavorable market environment
As of December 31, 2015, the Group had €457.1 million of goodwill and intangible assets during the fourth quarter of goodwill and €719.1 million of intangible assets, including 2015, the Group concluded that there was no impairment €699 million with respect to the Europcar® trademark, recorded related to its goodwill and intangible assets. on its balance sheet. Following annual impairment tests for
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The Group reviews its goodwill and intangible assets for be received inside the Europcar network (Corporate Countries, impairment whenever events or changes in circumstances domestic and international franchisees). indicate that the carrying amount of these assets may not be If management’s projections underlying these calculations recoverable and at least annually. Goodwill is tested based on change, the estimate of the recoverable amount of goodwill the higher of its fair value less costs to sell and its value-in- or the intangible asset could fall significantly and result in use determined using the discounted cash fl ow method; the impairment. While impairment does not affect reported cash 02 value- in-use calculations depend on certain key assumptions, flows, the decrease of the estimated recoverable amount including assumptions regarding Adjusted Corporate EBITDA, and the related non-cash charge in the income statement non-fl eet capital expenditure and capitalized IT expenditure. could have a material adverse effect on the Group’s results of Trademarks are tested based on the net royalty method, operations or fi nancial condition. determined based on fi ve-year projections of the royalties to
2.2.19 Risks related to natural disasters that could disrupt the Group’s supply chain
Natural disasters affecting countries that are important suppliers vehicles from one or more manufacturers from which it does of electronics or other key components to global automobile not typically purchase vehicles. There can be no guarantee that, manufacturers could result in disruptions to the supply of in such a circumstance, the Group would be able to purchase vehicles by manufacturers. For example, the earthquakes and a suffi cient number of vehicles at purchase prices equal to related disasters in Japan in 2011 resulted in a disruption of those for the vehicles the Group currently purchases, or at the supply of electronic components for automobiles from all. If the Group is not able to purchase suffi cient quantities of Japanese manufacturers and, as a result, in the supply of vehicles on competitive or acceptable terms and conditions, or vehicles. if a manufacturer from whom it purchases a signifi cant number of vehicles or equipment is unable to continue to supply the In the event that one or more of the Group’s vehicle suppliers Group with vehicles, then the cost of purchased vehicles may were unable to satisfy the Group’s purchase requirements, increase. These rising costs could have a material adverse the Group would have to increase the number of vehicles it effect on the Group’s results of operations and fi nancial position. purchases from other manufacturers, or start purchasing
2.3 RISKS RELATING TO THE GROUP’S FINANCIAL STRUCTURE AND PROFILE
2.3.1 The Company is a holding company whose ability to generate cash comes from its subsidiaries
The Company is a holding company and its principal assets from its subsidiaries. If the profi ts of these operating subsidiaries consist of direct and indirect stakes in its different subsidiaries decrease, the Group’s profi ts and cash fl ow could be affected. that generate the Group’s cash flow (see Section 1.7.1 The cash flow of the Group’s parent company is primarily “Simplified Group Organization Chart” of this Registration derived from dividends, interest and repayments on intra- Document). The Company’s ability to generate cash to meet group loans and asset transfers by its subsidiaries. The ability its debt service obligations or to pay dividends on its common of the Group’s operating subsidiaries to make these payments stock is dependent on the earnings and the receipt of funds
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depends on economic, commercial, contractual, legal and material adverse effect on the ability of the subsidiaries or the regulatory considerations. Any potential decrease in profi ts, or Company to repay their debt and meet other obligations, which potential failure by the Group’s subsidiaries to make payments could have a material adverse effect on the Group’s business, to other Group subsidiaries or to the Company could have a results of operations and fi nancial condition.
2.3.2 Risks related to the Group’s substantial indebtedness
In connection with the Company’s initial public offering, the is estimated at €1,323.4 million at December 31, 2015. Group refi nanced and repaid certain of its outstanding debt, See Section 3.2 “Liquidity and Capital Resources” of this in particular in order to reduce the Group’s interest expense Registration Document for more information on the Group’s and to improve its leverage ratio. The Refi nancing is described debt structure on- and off-balance sheet. in Section 3.2.1 “General Presentation” of this Registration The following chart provides a summarized view of the Group’s Document . fi nancial debt structure (including the estimated debt equivalent As of December 31, 2015, the Group’s total consolidated of operating leases) as of December 31, 2015. Each fi nancing fi nancial liabilities stood at €2.065 billion. The Group has also is described in Section 3.2.3.1 “Corporate Debt” (for corporate entered into off-balance sheet commitments under operating debt) and Section 3.2.3.2 “Debt Related to Fleet Financing” (for lease financing arrangements, whose outstanding amount fl eet debt) of this Registration Document .
80 EUROPCAR REGISTRATION DOCUMENT 2015 RISK FACTORS RISKS RELATING TO THE GROUP’S FINANCIAL STRUCTURE AND PROFILE
Fleet debt Eurazeo Corporate debt and other investors
100%
EUROPCAR €475 m - 5.77% GROUPE S.A. 2022 debt(c) (France) 02 €350 m Senior Revolving Credit Facility(a) 100%
Europcar €350 m - 5.125% International SASU EC Finance Notes 2021 (ECI - France)
€1.1 bn - SARF(b)
EC France
EC Germany
Fleet operating leases €1.3 bn EC Spain
EC Portugal
EC Belgium
€525 m UK EC United Kingdom Asset Financing Facilities
AU$300 m Australia Asset Financing Facilities EC Australia
(a) The Existing Senior Revolving Credit Facility was repaid on May 28, 2015 with the Senior Revolving Credit Facility (RCF), which has an amount of €350 million. Margin of 2.50% if the leverage ratio (as defi ned in the terms of the RCF) is lower than 2.0; 1.0 or 2.75% if greater than 2.0:1.0. (b) Amendments to the SARF were signed on May 12, 2015. These amendments include, among other things, an increase in the amount of FCT Senior Notes that may be issued by the FCT Issuer under the SARF from €1 billion to €1.1 billion, and a decrease in the applicable margin in respect of the FCT Senior Notes from 2.2% to 1.7% (before the amortization period). (c) The Notes were issued on June 10, 2015 for a total principal amount of €475 million. The proceeds of this issue were used to redeem the Outstanding Subordinated Notes Due 2018.
The total amount of the Group’s fi nancial liabilities that relate fl eet fi nance facilities agreements, €350 million in the form of to fl eet fi nancing at December 31, 2015, is €1.659 million. secured senior subordinated notes issued by EC Finance plc These liabilities are mostly backed or secured by assets, (the “EC Finance Notes”), $AUD 113.0 million (€75.8 million) mainly vehicles. They consist of €81 million under the under the Australia and New Zealand fl eet fi nance facilities €350 millions Senior Revolving Credit Facility (the “Senior agreements and €26.8 million under the Portugal fl eet fi nance Revolving Credit Facility”, or “RCF”), €658.3 million under the facilities agreements. The Group also fi nances its vehicle fl eet Senior asset Revolving Facility (the “SARF”, of a total amount by means of operating lease fi nancing agreements recorded that may be refi nanced by senior notes backed by assets of off-balance sheet with an estimated outstanding value of €1,100 million), £262.0 million (€356.8 million) under the UK €1,323.4 million (1) as of December 31, 2015.
(1) The estimated debt equivalent of fl eet operating leases corresponds to the net book value of applicable vehicles, which is calculated on the basis of the purchase price and depreciation rates of corresponding vehicles (based on contracts with manufacturers).
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Furthermore, a signifi cant portion of the assets of the Group is a increasing the Group’s vulnerability to both general and pledged to secure the consolidated debt referred to above. The industry-specifi c adverse economic conditions; SARF and, indirectly, on a second ranking basis, the EC Finance a limiting the Group’s ability to borrow additional funds and Notes, are secured by the Securitifl eet Collateral, as defi ned increasing the cost of any such borrowing; and below under Section 2.3.4 “Risks related to covenants included in the Group’s debt instruments” of this Registration Document. a restricting the Group from making strategic acquisitions or The Securitifl eet Collateral includes certain of the shares and exploring business opportunities. assets of the special purpose entities established in the context Any of these or other consequences or events could have a of the Group’s asset-backed fi nancing and controlled by trusts material adverse effect on the Group’s results of operations (the “Securitifl eet Companies”), to purchase and own vehicles and/or fi nancial condition. and lease them to the local Europcar operating companies in France, Germany, Italy and Spain including the vehicle In addition, the Group may incur substantial additional fl eets in these jurisdictions, subject to certain exceptions. The indebtedness in the future to the extent that such indebtedness Securitifl eet Companies benefi t from a performance guarantee is incurred in compliance with certain covenants included in (in the form of a joint and several guarantee) from Europcar the Group’s debt instruments (see Section 3.2.3 “Description International SASU (“ECI”). The EC Finance Notes also benefi t of the financing as of December 31, 2015” of this Registration from the ECI guarantee. The Senior Revolving Credit Facility is Document for a description of the Group’s debt instruments) secured by shares held in certain subsidiaries (in particular, an including covenants under its credit facilities or under operating effective fi rst ranking basis for the shares of ECI) and the bank lease fi nancing arrangements (as the Group calibrates drawings account balances of certain subsidiaries. under its revolving credit facilities and leasing to correspond to the Group’s fleet needs. See Section 3.2 “Liquidity and The Group’s substantial debt could have important Capital Resources” of this Registration Document . If new consequences, in particular: debt is added to the Group’s current debt levels, the risks a requiring the Group to dedicate a substantial portion of the that the Group now faces could intensify. Although, following Group’s cash fl ow from operations to payment of the Group’s the initial public offering and the associated refi nancing, the debt, thereby reducing the funds available for (i) working ratio of net debt to the Group’s Adjusted Corporate EBITDA capital, (ii) distributing dividends, (iii) capital expenditures and has decreased signifi cantly, these risks may have. a material (iv) other general corporate purposes such as purchasing adverse effect on the Group’s business, results of operations and leasing vehicles; and fi nancial condition. For further information on the Group’s debt, see Section 3.2 “Liquidity and Capital Resources” of this a limiting the Group’s fl exibility in planning for or reacting to Registration Document . changes in the rental vehicle business; a placing the Group at a competitive disadvantage compared to any of the Group’s competitors that might be less leveraged;
2.3.3 Risks related to t he Group’s potential inability to continue fi nancing vehicle acquisitions for its fl eet via asset-backed fi nancing, or to any unfavorable changes in the Group’s asset-backed fi nancing terms
The Group relies signifi cantly on fl eet asset-backed fi nancing financing or continue to finance new vehicle acquisitions to purchase vehicles for its domestic and international vehicle through asset-backed financing on favorable terms, or at rental fl eets. Currently, the Group mainly relies on the SARF and all. The Group’s asset-backed fi nancing capacity could be the outstanding EC Finance Notes. See Section 3.2 “Liquidity decreased, or fi nancing costs could be increased, as a result of and Capital Resources” of this Registration Document . risks and contingencies, many of which are beyond the Group’s control, including, without limitation: If the Group’s access to asset-backed fi nancing were reduced or the cost of such fi nancing were to increase, the Group may a requirements by the rating agencies that provide credit not be able to refi nance or replace its existing asset-backed ratings for the Group’s asset-backed indebtedness to change
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the terms or structure of the Group’s asset-backed fi nancing, a legislative changes that negatively impact the Group’s asset- including increased credit enhancement (i) in connection with backed fi nancing structure. the incurrence of additional or refi nancing of existing asset- Any disruption to the Group’s ability to continue to fi nance backed debt, (ii) upon the occurrence of external events, new vehicle acquisitions through asset-backed fi nancing, or such as changes in general economic and market conditions any negative development in the terms of the asset-backed or deterioration in the credit ratings of the Group’s principal financing available to the Group could cause the Group’s 02 vehicle manufacturers, including Volkswagen, Fiat, General cost of fi nancing to increase signifi cantly and have a material Motors, Renault or Peugeot Citroën, or (iii) otherwise; adverse effect on the Group’s fi nancial condition and results a the insolvency or deterioration of the fi nancial condition of of operations. The assets that collateralize the Group’s asset- one or more swap counterparties or fi nancial institutions backed fi nancing may not be available to satisfy the claims of acting in certain capacities under the asset-backed fi nancing the Group’s unsecured creditors. The terms of the Group’s of the Group; outstanding indebtedness permit the Group to finance or refinance new vehicle acquisitions through other means, a the occurrence of certain events that, under the agreements including secured fi nancing that is not limited to the assets governing the Group’s existing asset-backed fi nancings, of special purpose subsidiaries. The Group may seek in the could result, among other things, in (i) an amortization event future to fi nance or refi nance new vehicle acquisitions through pursuant to which payments of principal and interest on the such other means. No assurances can be given, however, as relevant indebtedness may be accelerated, or (ii) a liquidation to whether such fi nancing will be available, or as to whether event of default pursuant to which the security trustee or the terms of such fi nancing will be comparable to the existing relevant creditors would be permitted to require the sale of asset-backed fi nancings. fl eet vehicles that collateralize the asset-backed fi nancing; or
2.3.4 Risks related to covenan ts included in the Group’s debt instruments
The Group and the Group’s subsidiaries are subject to agreements and certain of the Group’s other indebtedness restrictive covenants contained in the Group’s debt instruments. also require the Group or certain of the Group’s subsidiaries These covenants restrict, in certain circumstances, the ability to maintain specifi ed fi nancial ratios and satisfy fi nancial tests. of certain of the Group’s subsidiaries to make payments to The Group’s ability or the ability of the Group’s subsidiaries to the Group which could, in turn, affect the Group’s ability to satisfy these fi nancial tests can be affected by events beyond make payments under the Group’s debt instruments. These the Group’s control, and there can be no assurances that the covenants, however, do not include requirements to maintain Group or its subsidiaries will satisfy them. a certain rating or any repayment or interest step-up clauses A breach of any of these covenants, ratios, tests or restrictions based on a downgrade in the Group’s credit rating. For example, could result in an event of default under the Senior Revolving in January 2012, the Standard & Poor’s downgrading of the Credit Facility, the outstanding Notes, EC Finance Notes or Group’s credit rating from B+ to B with negative outlook did hinder the Group’s ability to borrow under the Senior Revolving not result in any direct deterioration of the Group’s existing debt Credit Facility or other indebtedness, which could have a (no event of default). However, this downgrade did occur while material adverse effect on the Group’s ability to operate the the Group was refi nancing its debt, and the Group’s fi nancing Group’s business and to make payments under the Group’s costs with respect to the debt raised during such refi nancing debt instruments. Upon the occurrence of any event of process were affected. default under the Senior Revolving Credit Facility, the lenders The Senior Revolving Credit Facility and the indentures thereunder could cancel the availability of the facilities and elect governing the outstanding Notes and EC Finance Notes contain to declare all amounts outstanding thereunder, together with customary default provisions and provide that any payment accrued interest, immediately due and payable. If the Group event of default or acceleration with respect to aggregate was unable to repay these amounts, the lenders could, subject indebtedness of €35 million or more (in the case of the Senior to the terms of the applicable intercreditor agreement, proceed Revolving Credit Facility and the Notes) or €30 million or more (in against the collateral granted to them to secure repayment of the case of the outstanding EC Finance Notes) of the Company these amounts. If the lenders under the Senior Revolving Credit or its subsidiaries is also an event of default there under. The Facility demand repayment of these amounts, there can be no Senior Revolving Credit Facility, the UK fl eet fi nance facilities assurances that the assets of the Group’s subsidiaries would
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be suffi cient to repay those amounts in full, or to satisfy all of The obligations of Securitifl eet Holding under the SARF together the Group’s other liabilities which would be due and payable. with its obligations to repay the proceeds borrowed under a proceeds loan between EC Finance plc and Securitifleet The SARF also includes substantial restrictive covenants Holding (the “Securitifleet Proceeds Loan”) (which would applicable to certain of the special purpose entities established allow EC Finance plc to repay the proceeds of the EC Finance in the context of the Group’s asset-backed fi nancing, including Notes) are secured directly or indirectly by the following shared Securitifl eet Holding SA (“Securitifl eet Holding”), the special collateral: purpose entity providing financing for the fleet purchasing and leasing activities of the Securitifl eet Companies in France, a a first priority share pledge over a limited percentage of Italy, Spain and Germany. Failure to satisfy these covenants shares of Securitifl eet Holding held by ECI; and conditions could result in a decrease in the advance rate a a fi rst priority security interest over a limited percentage of and an increase in the margin under the SARF, or a default shares held by each of the Group’s operating companies in thereunder. In addition to customary default provisions, the the relevant Securitifl eet entity in its jurisdiction (other than SARF provides that any acceleration with respect to the Senior the limited percentage of shares held by Europcar Italy in Revolving Credit Facility, the Notes, or the EC Finance Notes Securitifl eet Italy with respect to the EC Finance Notes); will constitute a “level 2” event of default under the SARF. See Section 3.2 “Liquidity and Capital Resources” of this a a fi rst priority security interest over receivables (including bank Registration Document. A breach of any of these covenants, accounts and the fl eet vehicles) in respect of each of the ratios, tests or restrictions could result in an event of default Securitifl eet Companies (other than in respect of Securitifl eet under the SARF or hinder the ability of Group companies to Italy with respect to the EC Finance Notes) ; borrow under such facilities. Upon the occurrence of any event a a first priority pledge over Securitifleet Holding’s bank of default under the SARF (including as a result of acceleration accounts; of the Senior Revolving Credit Facility or the Notes), the lenders thereunder could cancel the availability of the facilities and elect a a first priority security interest over certain receivables to declare all amounts outstanding under the SARF, together (including under buy-back agreements from vehicle with accrued interest, immediately due and payable. manufacturers) of each of the Securitifl eet Companies (other than Securitifl eet Italy with respect to the EC Finance Notes), The Group’s debt instruments include covenants whose aim subject to certain exceptions in Spain; and is to, inter alia, limit the ability of the Company and certain of its subsidiaries to: a a fi rst priority security interest over certain assets (including bank accounts and the vehicle fl eet) of each Securitifl eet a incur additional indebtedness; Company from time to time (other than Securitifl eet Italy a pay dividends or make any other distribution; with respect to the EC Finance Notes), subject to certain exceptions in Spain. a make certain payments or investments; All assets subject to the liens in the foregoing paragraph are a issue security interests or guarantees; collectively referred to herein as the “Securitifl eet Collateral”. a sell or transfer assets or shares; The Securitifleet Collateral secures the SARF and the a enter into transactions with affi liated companies; and Securitifleet Proceeds Loan (and, hence, indirectly the EC Finance Notes) on a shared pari passu basis and enforcement a merge or consolidate with other entities. proceeds from such collateral would be paid fi rst to the senior These limitations are subject to various conditions and lenders under the SARF and then to EC Finance plc under exceptions, including the ability to distribute dividends and the Securitifl eet Proceeds Loan (and, as a result, indirectly to make investments under certain circumstances. However, the holders of EC Finance Notes) pursuant to the priority of these covenants could limit the Group’s ability to fi nance its payments in the Intercreditor Agreement. Such senior lenders, future operations and capital needs and its ability to pursue in addition, benefi t from direct security interests over the assets business opportunities and activities that may be in its interest. of Securitifleet Italy. The holders of the EC Finance Notes In addition, the Group’s ability to comply with the covenants indirectly benefi t only from a negative pledge in respect of the in its debt instruments may be affected by events beyond its assets of Securitifl eet Italy. control.
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2.3.5 Risks related to the Group’s ability to generate cash and/or secure fi nancing to fund its indebtedness or foreseeable liquidity requirements
The Group’s ability to make payments on and to refi nance Policies—Management of Financial Risk—(i) Liquidity risk” 02 its indebtedness, to acquire vehicles in its fl eet and to fund Section 3.4 “Consolidated financial statements and Statutory planned capital and development expenditures or opportunities Auditors’ report” of this Registration Document . that may arise, such as acquisitions of other businesses, will The Group believes that it will have sufficient resources to depend on its future performance and its ability to generate repay or refi nance the current portion of its debt and lease cash and/or obtain fi nancing, which to a certain extent, are obligations and to fund its foreseeable liquidity requirements subject to macro-economic, fi nancial, competitive, legislative, over a 12-month period from the date of fi ling this Registration legal, regulatory and other factors, as well as other factors Document. However, as the Group’s debt matures, the Group discussed in this Section, many of which are beyond the anticipates that it will seek to refi nance or otherwise extend its Group’s control. debt instruments’ maturities. The Group’s ability to invest in There can be no assurances that the Group will generate its businesses and refi nance maturing debt obligations could suffi cient cash fl ows from operations or that future borrowing require access to the credit and capital markets and suffi cient will be available in an amount suffi cient to enable it to pay its bank credit lines to support cash requirements. The Group debts, or to fund other liquidity needs. If future cash fl ows may also experience diffi culties in obtaining fi nancing in foreign from operations and other capital resources are insuffi cient to countries for local operations. If the Group is unable to access pay the Group’s obligations as they mature or to fund liquidity the credit, securitization and capital markets, the Group could needs, the Group may be forced to reduce or delay its business experience a material adverse effect on its liquidity, fi nancial activities and capital expenditures, sell assets, obtain additional position or results of operations. In addition, the Group’s debt or equity capital or restructure or refi nance all or a portion available fi nancing could be decreased, or its fi nancing costs of its debt. There can be no assurances that the Group would increased, as a result of factors which are beyond its control, be able to accomplish any of these measures in a timely manner including the insolvency, deterioration of the fi nancial condition, or on commercially reasonable terms, if at all. In addition, the a change in law or a change in credit policy of one or more terms of the Group’s existing and future indebtedness may limit of the Group’s lenders, certain of which are local or regional its ability to pursue any of these alternatives. For a description lenders. of the Group’s fi nancial liabilities, including hedging derivatives by relevant maturity based on the remaining contractual periods at December 31, 2015, see Section II “Significant Accounting
2.4 REGULATORY AND LEGAL RISKS
2.4.1 Risks r elated to Compliance with Current or Future regulations Applicable to the Group’s Business
As it operates in over 140 countries worldwide, the Group any changes in the decision-making process of the competent is subject to a vast array of international, national and local authorities could give rise to the Group’s liability or have a laws and regulations. See Section 1.6.11 “Regulations” of this material and unforeseeable impact on its business in France, Registration Document . within the European Union or in other jurisdictions. Changes to laws, regulations or other applicable rules, as well as the review Changes to laws, regulations, case law or any other rules of case law or changes in how it is applied and interpreted applicable to the Group’s activities, as well as, more broadly,
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could have a signifi cant adverse effect on the Group’s operating Moreover, in the context of the cooperative process between costs, competitive position or outlook. While the Group keeps the national authorities of Member States of the European Union track of and monitors the regulations it is subject to, its activities that are responsible for applying legislation for the protection in France or abroad may be in breach of the applicable laws of consumers pursuant to regulation EC No. 2006/2004, a and regulations and give rise to liability. Non-compliance by the dialogue was opened by the European Commission aimed at Group with the laws and regulations to which it is subject, both improving consumer experiences (in particular the transparency in France and abroad, could potentially also lead to different and suitability of contractual terms) within the European Union. types of sanctions, including the restriction, suspension or In this respect, the Group submitted proposals of commitments ban of certain activities and the imposition of fi nes, payment to the European Commission on June 17, 2015, including the of compensation or other penalties. Any of these incidents publication of new general rental conditions and the clarifi cation could have a material adverse effect on the Group, its fi nancial of the insurance and contractual guarantee policy in the event condition, results of operations or prospects. Even if the of damage caused to the vehicle. On July 13, 2015, the changes to laws, rules or regulations do not apply directly to European Commission published a press release setting forth the Group, their effects on its customers or partners may have the result of these exchanges with the different players in the an indirect and material impact on how the Group carries out short-term vehicle rental industry, and in which the authorities its business or the associated costs, as well as on the demand praised the Group’s commitments. In early 2016 the Group for the services the Group supplies. put in place new rental conditions in full compliance with its commitments. If they conclude that the Group has made insuffi cient changes to its sales policy it could have a material 2.4.1.1 Risks r elated to Compliance with adverse effect on the Company’s revenue and operating results Consumer Protection Regulations (see “Consumer Protection Regulations in the EEA” under Section 1.6.11.1 “Consumer Protection Regulations” of this The Group’s business and its business practices are highly Registration Document ). regulated with respect to consumer protection and any changes in these laws, regulations or their interpretation, in particular in Finally, in most jurisdictions in which the Group operates, the terms of rules related to price transparency, non-discriminatory Group passes various costs on to its customers, including pricing, unfair terms or misleading advertising, could affect the airport concession fees, as separate fees in connection with Group’s reputation as well as its business both in terms of vehicle rentals. Nevertheless, the sector may in the future be logistics and costs, which could have a material adverse effect subject to potential legislative or administrative changes that on the Group’s fi nancial condition and results of operations. may limit, constrain and/or prohibit the possibility to indicate, For example, the adoption of regulations affecting or limiting bill and collect these separate fees, which would result in such the sale of supplementary insurance or a new interpretation costs being reallocated back to the Group. If such measures of regulations by the competent authorities could entail a were adopted at the European level, they could have a material reduction or loss of these revenue sources and have a material adverse effect on the Group’s revenue, results of operations adverse effect on the Group’s profi tability. or prospects. The European Commission is particularly attentive to price discrimination by market participants in the rental vehicle sector 2.4.1.2 Risks r elated to Compliance with at the European level. In a press release dated August 11, Personal Data Protection Regulations 2014, the European Commission requested that participants in the vehicle rental sector end certain practices considered to Changes in the regulations for protection of personal data could be “discriminatory” and requested that the relevant authorities also have a material adverse effect on the Group’s business. of Member States take any necessary measures to ensure European directives and regulations as well as national rules compliance with European Union and national regulations in the various countries where the Group operates restrict the with respect to consumer protection. As of September 2014, types of data it can collect on people it deals with or wishes the Group implemented, in accordance with its commercial to deal with, as well as the way it collects, stores and uses the strategy, a single European pricing policy by sales location, data that it is allowed to collect. In addition, the centralized regardless of the residence of the customer and the European nature of the Group’s IT systems requires a regular cross-border Union country from which the reservation was made. To date, no fl ows of customers’ and prospects’ data beyond the country legal proceedings have been initiated against the Group by the where it was taken. If this data fl ow becomes illegal or starts to European Commission or any national authorities with respect generate additional infrastructure costs the Group’s capacity to to this issue (see Section 1.6.11.1 “Consumer Protection serve its customers may be materially affected for an indefi nite Regulations in the EEA” of the Registration Document). period.
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Other legislative changes on customer data confi dentiality and 2.4.1.3 Risks r elated to Environmental data security could also have a material adverse effect on the and Health & Safety Rules Group’s business. Confi dentiality and security of customer data is a fast-evolving area of law and new standards, some of The Group has its own installations for storing petroleum which are likely to be hard for the Group to apply, are frequently products as well as centers for washing and maintaining being proposed and in some cases adopted. For instance, on vehicles. The Group’s businesses are subject to environmental 02 January 25, 2012, the European Commission proposed a draft laws and regulations, particularly as regards (i) owning and regulation defi ning a new legal framework for all companies operating petroleum product storage facilities, e.g. gasoline and processing personal data in Europe. On March 12, 2014, the diesel, and (ii) production, storage, transportation and disposal European Parliament passed the proposed regulation on its of waste, including sludge from vehicle washes, waste water first reading. This regulation still needs to be approved by and other hazardous substances. the European Council. If it is, it will replace Directive 95/46/ Environmental legislation has progressed signifi cantly in recent EC dated October 24, 1995 on the protection of individuals years and continues to develop. Public authorities and courts with regard to the processing of personal data and on the can impose fi nes or civil or criminal penalties, and order repairs free movement of such data. Adoption of this regulation could or clean-ups of pollution in the event of non-compliance with affect the Group’s activities, notably with the transposition of environmental regulations. Also, in some cases, the authorities a number of technical and operational changes. The draft can amend or revoke the Group’s operating licenses, which regulation would, for instance, force the Group to (i) put in place could force it to close down temporarily or permanently the internal rules and mechanisms to guarantee and demonstrate installations in question and pay the resulting costs of closure, its compliance with the regulation to its customers, the people maintenance and repair. Bringing the Group into compliance concerned and personal data protection authorities, (ii) carry with environmental law and regulations could have an effect on out impact studies on data protection before processing begins its results of operation and fi nancial position. presenting the risks and (iii) notify any breaches of personal data protection rules particularly any security failings. Any such Each Group Corporate Country is responsible for ensuring changes to the legal and regulatory frameworks in any of the that its storage facilities comply with local regulations in that countries where the Group operates, regarding (i) privacy or country in order to ensure that they (i) are properly reported personal data of customers and/or (ii) data security and cross- to the competent authorities of the countries in which they are border data fl ows, could have a material adverse effect on the located; and (ii) have been replaced or upgraded to comply with Group’s business, chiefl y through the deterioration of its sales applicable requirements on the detection of leaks and protection and transaction processing activities. On this point, following against spills, overfl ows and corrosion. However, there can be no the striking down of the Safe Harbor data exchange agreement assurance that daily use of these tank systems may not result in by the European Court of Justice on October 6, 2015 (Case leaks which, while insignifi cant on a daily level, have a cumulative C362/14), the Group has had to revise its contracts to bring material effect as the months and years go by. transfers of personal data with US partners and suppliers into Furthermore, international law and regulations have historically compliance with the new rules, introducing, where necessary, and will likely continue to contemplate numerous measures standard clauses approved by the European Commission. related to greenhouse gas emissions and climate change. If Also, although the Group has in place procedures to keep rules designed to cap emissions or tax the companies seen as personal and banking data secure, data theft, piracy of security responsible should come into force, it could affect demand for systems, identity fraud or theft of customers’ banking data the Group’s services and the vehicle fl eet and/or other costs could have a material adverse effect on the Group’s reputation, could rise with adverse implications for its results of operation revenues, results of operations or prospects. and fi nancial position.
2.4.1.4 Risk related to Compliance with regulation of Franchises
Franchising helps the Group achieve wide territorial coverage and contributes to its revenue. Changes to law, regulations or to the application or interpretation of texts governing such
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contractual relationships, particularly changes in precedents Although independent, franchisees must comply with the limiting the franchiser’s ability to cancel or renew or transfer knowledge requirements and procedural rules issued by the agreements (e.g. by requiring compensation if an agreement is Group obliging them to respect the laws and regulations cancelled) could have a material adverse effect on the Group’s applicable to the sector. Non-compliance by franchisees with business, fi nancial position and results of operations. these guidelines could have a material adverse effect on the Group’s reputation and business in the countries affected.
2.4.2 Risks related to liability and insurance
The Group’s business generates signifi cant risk with respect to Europrogramme, accidents, or the share of accidents related automobile civil liability. Vehicles from the Group’s fl eet entrusted to automobile civil liability, less than or equal to €500,000 per to its customers or employees may be involved in cases of accident are “self-insured” by the Group. In this case, AIG physical injury and death or property damage caused to third covers third parties, under local insurance policies subscribed parties. The Group has purchased an automobile insurance to by the Group’s subsidiaries, and is then reimbursed by the program covering civil liability for bodily injury (including death) Group. There can be no assurance that the remaining amount and property damage to third parties resulting from the use payable by the Group will not significantly increase in the of its rented vehicles. If the Group were not able to renew future. Furthermore, with respect to insured risks, there can its automobile insurance under acceptable commercial terms, be no assurance that current or future liability claims will not or to find alternative and equivalent coverage, it would be exceed the Group insurance policy levels. The occurrence of unable to rent its vehicles. Historically, automobile insurance such an event could have a material adverse effect on the premiums calculated per rental day, have both trended upward Group fi nancial condition. See Section 2.7 “Insurance and Risk and downward, refl ecting trends in the insurance market and Management” of this Registration Document. the Group’s own loss ratio. The availability and cost of coverage Moreover, the Group bears the risk of damages to vehicles should remain the controlling factors in the future. Furthermore, it owns and to its business beyond its automobile fl eet. The there are only a limited number of insurers that are prepared to Group has decided not to purchase an insurance policy against offer multinational automobile insurance programs. For example, these risks. Over the long run, the Group considers that insuring the Group has implemented an insurance program in Belgium, property damage to its fl eet and theft of vehicles would be France, Germany, Italy, Portugal and the United Kingdom (the greater than or equal to actual costs of damages and theft. “Europrogramme”) with AIG Europe Ltd. (“AIG”). There can be Nevertheless, there can be no assurance that the Group will not no assurance that the Group’s insurance premiums will not be exposed to non-insured damages from asset-related risks, increase in the future, in particular in countries where signed whose levels may be greater than historical levels, and which insurance policies are not profi table for insurance companies. could have a material adverse effect on the Group’s fi nancial Historically, a signifi cant share of the Group’s exposure to civil condition and results of operations. See Section 2.7 “Insurance liability, in particular automobile civil liability, has remained the and Risk Management” of this Registration Document. Group’s responsibility under its insurance policies. As part of the
2.4.3 Risks related to the protection of intellectual property rights
The Group’s business and its future growth depend in particular licenses of its trademarks and other intellectual property on its ability to obtain, maintain and protect its trademarks, rights (including those it uses under licenses) to its franchises, domain names, “Greenway®” technology (see Section 1.6.10.1 agents and service providers (see the Section 1.8.2 “Intellectual “The GreenWay® System” of this Registration Document) and Property, Licenses, Usage Rights, and Other Intangible Assets” other intellectual property rights. The Group grants operating of this Registration Document). Royalties received by the Group
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from franchises (including with respect to intellectual property Group’s business. Moreover, the Group relies on this third party rights) for the year ended December 31, 2015 totaled €52.7 to take adequate measures in order to protect and enforce its millions. The Group, its franchises, agents or service providers intellectual property rights, which it has granted to the Group may not be able to adequately protect these trademarks and under a license. It is also possible that disputes arise as part of other intellectual property rights against challenges to their the Group’s use of trademarks subject to licenses, particularly validity, violations and abusive use by third parties, in particular when the interests of the licensor and those of the Group diverge 02 in markets in which the Group has not been active in the past. as market conditions change. The Group may be ordered to pay signifi cant damages and interest, discontinue the sale of Furthermore, certain intellectual property rights that the Group services violating the intellectual property rights in question and uses were granted to it by Advantage OpCo under a reciprocal incur additional expenses to sign, where applicable, licenses license agreement under which ECI is granted an exclusive allowing it to use the disputed intellectual property rights. license on certain “Advantage” brands in countries in which the Group operates or has a franchise, excluding the United Similarly, any material violation of the Group’s intellectual States (see Section 1.8.2 “Intellectual Property, Licenses, property rights could entail disputes, which may also result in Usage Rights, and Other Intangible Assets” of this Registration costs and commercial uncertainty for the Group. Any of these Document). An inability to continue using these intellectual incidents could have a material adverse effect on the Group, its property rights could have a material adverse effect on the fi nancial condition, results of operations or prospects.
2.4.4 Risks related to regulatory, legal and arbitration proceedings
In the ordinary course of its business, the Group is involved its fi nancial condition, results of operations and prospects. In or at risk of being involved in a certain number of regulatory, addition, any provisions recorded by companies of the Group, legal or arbitration proceedings, the more signifi cant of which with respect to regulatory, legal and arbitration proceedings in are described in Section 2.5 “Regulatory, Legal and Arbitration its fi nancial statements could be insuffi cient (for a description Proceedings” of this Registration Document. In certain of these of these disputes, see Section 2.5 “Regulatory, Legal and proceedings, claims of a signifi cant amount have been made Arbitration Proceedings” of this Registration Document), which against companies of the Group and sanctions, in particular could have a material adverse effect on the Group’s business, administrative ones, could be imposed on companies of the results, fi nancial condition, liquidity or prospects, independently Group. The imposition of sanctions on companies of the Group of the claim’s underlying validity. could have a material adverse effect on the Group’s business,
2.4.5 Risks related to competition law
The Group’s activities may be subject to legal action or prospects. Certain Group entities are subject to investigations investigations with respect to competition, marketing practices by different administrative authorities relating to competition law and price setting, which could impact the Group’s business, and/or marketing practices and price setting. results of operations and fi nancial condition. The Group could The French Competition Authority has opened a procedure be held liable for any failure to comply with competition law, on potential anti-competitive practices by participants in the either directly or indirectly (including because of a failure by one vehicle rental sector, including Europcar France, to which it of the Group’s agents, franchisees or partners), which could addressed a notice of complaint on February 17, 2015. See result in significant negative consequences for the Group, Section 2.5 “Regulatory, Legal and Arbitration Proceedings” of particularly with respect to its reputation, fi nancial condition or
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this Registration Document. The Group recorded a provision in would not be signifi cantly higher than the amount estimated its fi nancial statements at December 31, 2015, refl ecting the and provisioned, which could have a material adverse effect Company’s best estimate of the fi nancial risks at this stage of on the Group’s results, or that damage claims would not be the procedure in the event that the ADLC were to impose a brought at a later date. The imposition of fi nes or damages fi ne, notwithstanding Europcar France’s arguments in defense which could potentially be payable by the Group as a result of its position. See Note 32 of the financial statements at of the procedure could have a material adverse effect on the December 31, 2015 in Section 3.4 “Consolidated financial Group’s liquidity and financial condition, leading it to seek statements and Statutory Auditors’ report” of this Registration additional fi nancing or resources. Document. There is no guarantee that the amount of any fi ne
2.4.6 Tax risk
By operating in many countries, the Group is subject to multiple Several European countries in which Europcar operates have and complex tax situations. The Group is located in countries implemented restrictive rules with respect to the tax deductibility where the laws and tax regulations in effect as well as the legal of loan interest and other similar fi nancial expenses. These decisions of courts and/or local tax authorities are constantly changes could have an impact on Group companies that have evolving. relatively high debt levels. As an example, many countries have recently introduced maximum tax limits on interest deductibility. This environment does not always allow the Group to In general, these rules limit the deduction of interest under net establish clear or defi nitive guidelines with respect to the tax fi nancial expenses that exceed a certain threshold such as a regulations applicable to its business, transactions or intra- percentage of EBITDA, or which do not respect debt/equity group reorganizations (past or future) which could as a result ratios. be based on an erroneous interpretation of French or foreign tax laws and regulations. Even when regulations of a particular regime allow for a deferral of the rejected interest deductions over future fi scal periods, As such, the Group cannot guarantee that these interpretations the Group’s ability to make tax deductions of this interest could will not be called into question by the relevant tax authorities. depend on a number of factors, such as its ability to record More generally, any failure to comply with tax laws and future taxable income as well as restrictions related to the regulations in countries in which the Group or Group companies duration of the permitted deferral. are located or operate may lead to tax reassessments, the payment of default interest, fi nes and penalties. In addition, With respect to French tax regulations, Articles 212 bis and 223 tax laws and regulations may change or be modifi ed in their B bis of the French General Tax Code, created by Article 23 interpretation and in their application by the relevant courts of Finance Law no. 2012-1509 for 2013, limit the portion of and authorities, in particular with respect to initiatives decided net fi nancial expenses that can be deducted from corporate at an international or community level (such as the OECD, G20 income tax, subject to certain conditions and exceptions, to or European Union). Any 36 of these elements may lead to an 85% for tax years ended as from December 31, 2012 and to increase in the Group’s tax burden and have a material adverse 75% for tax years starting from January 1, 2014. effect on its fi nancial condition and results. In addition, as provided for in French regulations on Taxation applicable to the ownership and commercial use of undercapitalization, the deduction of interest paid on loans vehicles in Europe is rapidly evolving over time and varies from granted by a related party and, subject to certain exceptions, country to country. In the context of its operating activities, on loans granted by third parties but guaranteed by a related Europcar may be subject, in particular but not exclusively, to party, is authorized under certain conditions but subject to fl eet, circulation or registration taxes, also known as “ecological limitations, pursuant to the provisions of Article 212 of the taxes”. These taxes could have a material adverse effect on the French General Tax Code. Group’s results of operations in that this additional tax burden The impact of all such regulations on the Group’s ability to would not be passed on to its customers. deduct interest paid on loans could increase the Group’s tax French and foreign tax rules could limit the Group’s ability to burden and have a material adverse effect on the Group’s benefi t from tax deductions on interest, which may lead to a effective tax rate, fi nancial condition and results. Nevertheless, reduction in the Group’s net cash. given current regulations and the Group’s tax situation, the
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Group does not expect these limits to have a signifi cant impact the balance between income and losses, (ii) the general limit on its cash. applicable to French tax loss carryforwards, under which the percentage of losses that can be carried forward to offset The Group’s future results, French and foreign tax regulations the portion of taxable income exceeding €1 million is limited and tax audits or disputes could limit the Group’s ability to to 50% for fi scal years ending as from December 31, 2012, use its tax loss carryforwards and, as a result, have a material as well as certain more specifi c restrictions related to using adverse effect on the Group’s fi nancial condition. 02 certain categories of defi cits, (iii) limits to the use of 37 tax The Group has significant tax loss carryforwards (whose losses that may be imposed by foreign laws and regulations, tax impacts are described in Notes 12 to the Group’s 2015 (iv) consequences of present or future tax audits or disputes consolidated financial statements set forth in Section 3.4 and (v) potential changes in applicable laws and regulations. “Consolidated financial statements and Statutory Auditors’ These factors could increase the Group’s tax burden and have report” of this Registration Document). a material adverse effect on the Group’s effective tax rate, The ability to effectively use these losses will depend on various fi nancial condition and results. factors including (i) the ability to record taxable income and
2.4.7 Risks related to labor law
With an average annual headcount of 6,324 in 2015, the Group past or present, of the laws and regulations applicable in is subject to multiple and complex national labor laws. The France or abroad is correct and will not be contested on Group also uses a number of temporary workers and outsources different grounds by its employee-representative bodies, its services, mainly for the moving and cleaning of vehicles in high employees or former employees before the relevant authorities. season and in compliance with the legislation applicable to the If such claims were heard, the Group could be exposed to the countries in which the Group operates. The Group is located questioning of its practices and/or sanctions, which could have in countries where laws, applicable regulations as well as their a material adverse effect on the Group’s business, results of interpretation by the relevant courts or authorities may rapidly operations, fi nancial condition and prospects. change. The Group cannot guarantee that its interpretation,
2.4.8 Risks related to retirement pensions
The Group has obligations relating to defi ned benefi t pension in cash the retirement regimes of the Group and other post- plans, in particular in the United Kingdom. The Group’s fi nancial employment benefi t plans may be more signifi cant than the obligations depend on the future performance of the assets, the amounts estimated at December 31, 2015 (see “Employee level of interest rates used to determine future commitments, Benefi ts” in Section II “Significant Accounting Policies” of the actuarial forecasts and experience, changes in the retirement consolidated financial statements included in Section 3.4 regimes and applicable regulations. Given the large number of “Consolidated financial statements and Statutory Auditors’ variables that determine the fi nancial obligations of retirement report” of this Registration Document). If this were to occur, regimes, which are diffi cult to forecast, and given that there such fi nancial obligations may have an adverse effect on the may be regulatory changes, the future obligation to fi nance Group’s fi nancial condition or results of operations.
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2 .5 REGULATORY, LEGAL AND ARBITRATION PROCEEDINGS
The Group is involved in a number of legal, regulatory and At the date of this Registration Document, the Group is not arbitration proceedings in the ordinary course of its business. aware of any legal, regulatory or arbitrage proceedings other In accordance with the accounting standards applied to the than those mentioned below, that might have or have had in the Group, a provision is recognized in the statement of fi nancial last twelve months a material adverse effect on the Company’s position when the Group has an obligation as a result of a past or Group’s fi nancial position or results. event, it is probable that an outfl ow of economic resources will be required to settle the obligation, and the amount can be reliably estimated.
Procedure of the French anti-trust authorities
The French Competition Authority (Autorité de la concurrence of defense brief on May 20, 2015. Following this fi ling, the – ADLC) has initiated a procedure in the vehicle rental sector. case-handler for the French anti-trust authorities should submit As a result, inspection visits were made to Europcar France’s a report to the College in the fi rst semester 2016. Europcar registered offi ce in January 2008 and documents seized. The France will then have two months to respond to this report. The Group launched legal proceedings to challenge aspects of how French anti-trust authority’s decision would then be expected these inspections were conducted in 2008 and this led to a to be issued several months later, following a hearing before its ruling by the First President of the Paris Court of Appeal on College. Europcar France may appeal any decision imposing May 6, 2015, annulling the inspections, ordering that all items a fi ne. This would not in principle suspend the obligation to seized be returned and forbidding their use in evidence by pay the penalty, unless there is an exceptional procedure to any person or authority. The ruling specifi ed that there was suspend the payment pending appeal. An unfavorable decision no reason to cancel the investigation and its processes as a could be followed by damages claims brought by third parties. result of the appeal against the conduct of the inspections. The Group recorded a provision in its fi nancial statements at On February 17, 2015, the French anti-trust authorities sent a December 31, 2015, refl ecting the Company’s best estimate notifi cation of grievances to Europcar France and a number of of the fi nancial risks at this stage of the procedure in the event its current and past parent companies. They charge that, for that the ADLC were to impose a fi ne, notwithstanding Europcar several years (dating back to 2003 in the fi rst case and 2005 in France’s arguments in defense of its position. See Note 32 to the second), they, fi rst, received periodic information from airport the fi nancial statements at December 31, 2015. There is no operators on the activities of their competitors in these airports guarantee that the amount of any fi ne would not be signifi cantly and, second, applied a surcharge in railway stations which higher than the provision recognized or that damage claims the French anti-trust authorities allege was agreed with some would not be brought at a later date. of their competitors. Europcar France lodged its statement
Proceeding by the Italian competition authority
On July 29, 2015, the Italian competition authority performed a information and a possible agreement between members of search at the offi ce of Europcar Italy as part of an investigation the association who conduct long-term rental, of a nature that mainly targeting the leasing business, involving ANIASA (the may be liable to restrict competition. Europcar Italia S.p.A. is Italian Association of Car Rental Companies) and its members. awaiting the notifi cation of grievance. This procedure relates to a potential exchange of commercial
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Proceedings in the Federal Court of Australia
The Australian Competition and Consumer Commission (ACCC) was insuffi ciently precise. Europcar Australia has accepted brought a case before the Federal Court of Australia against some of the facts alleged and is cooperating with the ACCC. CLA Trading Pty i (“Europcar Australia”). The ACCC charges Europcar Australia has also proposed new general terms and 02 Europcar Australia’s rental agreements contained unfair clauses conditions which the ACCC has not objected to. Europcar regarding contractual guarantee policy and consumer liability Australia and the ACCC submitted a shared presentation of in the event of damage caused to the vehicle. The Authority the facts and made a joint fi ling to the hearing on October 26, also considers that some statements on the Europcar Australia 2015. A decision is expected early in 2016 setting the amount website were misleading as the information provided to of the fi ne. consumers on the scope of their liability in the event of damage
Dispute with former franchisee and sub-franchisees in Brazil
Two of the Group’s sub-franchisees in Brazil, Rentax Locação e In the court of fi rst instance, it was found that the suit fi led Comércio de Veículos Ltda. (“Rentax”) and Horizon Distribuidora by Rentax and Horizon was not time-barred and that if ECI Veículos Ltda. (“Horizon”), have fi led a suit against ECI and its were found liable it would have no recourse against EC-BR. former Brazilian franchisee, Cia Ec Br de Franquias e Locação On appeal, this ruling was partly overturned by the Court of de Veículos Ltda. (“EC-BR”), claiming unfair termination of the Appeal, which found that ECI could seek recourse against EC- franchise agreement between ECI and EC-BR. Rentax and BR, claiming back from EC-BR any payment ECI would make in Horizon are claiming BRR 19,525,151, (around €6 million). ECI compliance with a court ruling against it. ECI, considering that is seeking to have the case dismissed on statute of limitations the Appeal Court had failed to consider all its arguments about grounds and, in particular, arguing that (i) there is no contractual the statute of limitations, appealed to the Saõ Paulo Court of relationship with these two sub-franchisees, and (ii) there was Justice on September 8, 2014. In a ruling handed down on nothing improper in the termination of the EC-BR contract. March 17, 2015, the Saõ Paulo court upheld the ruling that the plaintiffs’ suit was not time-barred. No date has yet been set for the court of fi rst instance hearing on the substance of the case.
Labor Disputes
The Group faces individual disputes related to dismissals on for dismissals on economic grounds in the context of internal personal grounds as well as individual disputes in the ordinary restructurings carried out in prior years, as well as individual or course of business. The Group also faces individual disputes collective disputes relating to restructurings.
Litigation with twenty-four former employees
The Group is defending proceedings for interim relief brought June 24, 2015, the ombudsman’s council dismissed the before the Rambouillet ombudsman’s council in which twenty- employees’ demands. On July 17, 2015, they appealed. The four employees and their union are challenging the automatic appeal hearing took place on February 9, 2016 and the decision transfer of their employment contracts following the transfer is expected to be handed down on April 12, 2016. of APS Greenway’s business to an IT services provider. On
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Litigation with Mr. Philippe Guillemot
Following his dismissal as CEO on February 13, 2012, Mr. instance, the Versailles Commercial Court ruled in favor of Mr. Philippe Guillemot sued the Company for payment of around Guillemot. In a ruling dated July 1, 2014, the Versailles Court €2.5 million in termination of employment compensation set out of Appeal dismissed this ruling in its entirety and found for the in his contract. The Company claimed that Mr. Guillemot had Company. Mr. Guillemot has appealed in turn seeking to have been dismissed for gross misconduct and was therefore not the appeal court ruling set aside. The case is currently before entitled to any contractual compensation. In the court of fi rst the Court of Cassation.
2.6 FINANCIAL RISKS
The Group’s activities expose it to a variety of fi nancial risks: the Management Board has approved the transactions, market risk (in particular foreign exchange risk and interest Group Treasury is responsible for setting up the hedges. This rate risk), credit risk, price risk and liquidity risk. The Group’s procedure is prepared and monitored for the management of all overall risk management program seeks to mitigate the material fi nancial risks, and in particular interest rate and credit potential negative impacts of volatility in the fi nancial markets risk, as well as for the use of derivative and ordinary fi nancial on the Group’s fi nancial performance. The Group’s overall risk instruments, and the short-term investment of surplus cash. management program seeks to mitigate the potential negative The Group does not use derivative fi nancial instruments for impacts of volatility in the fi nancial markets on the Group’s any purpose other than managing its exposure. All hedging financial performance. The Group uses derivative financial operations are either coordinated or carried out by Group instruments to hedge certain risk exposures. Treasury. Risk management is handled by the Group Treasury The Group continuously assesses the fi nancial risks identifi ed Department, which submits proposed fi nancial transactions (including market risk, credit risk and liquidity risk) and to the Management Board for approval. The Group Treasury documents its exposure in its consolidated fi nancial statements. Department identifi es, evaluates and recommends derivative The Group considers that its exposure at December 31, 2015 instruments to hedge fi nancial risks in close collaboration with has not changed signifi cantly during the last 12 months and the Group’s operational units. The Management Board, taking therefore continues its policy to mitigate against such exposure note of the recommendations of the Investment Committee, unchanged from prior years. A detailed analysis of these risks then decides whether to authorize such proposals based on can be found in Section II “Significant accounting policies” formal documentation describing the context, purpose and in the Consolidated fi nancial statements for the year ended main characteristics of the proposed transactions. Once December 31, 2015.
2.7 INSURANCE AND RISK MANAGEMENT
2.7.1 Insurance
In the ordinary course of business, the Group is exposed A dedicated insurance and risk management department to three principal categories of risks that may be subject to oversees in a centralized manner the insurance strategy of insurance policies: (i) motor vehicle liability, (ii) damage to the Group’s fl eet as well as the other business related risks property (vehicles owned by the Group) and (iii) risks related to management processes. This centralized management is its business (excluding its fl eet). carried out in connection with dedicated personnel located in each Corporate Country. The Group does not manage insurance covering its franchises, which remains their own
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responsibility in accordance with the terms of the standard The share of claims triggering the Group’s motor vehicle liability franchise contracts implemented by the Group. that exceed the threshold of €500,000 per claim is transferred to AIG. The maximum coverage limit provided for by the In countries in which the Group operates, it is generally required insurance policy, including the amount of €500,000 per claim by liability laws to purchase insurance covering its risks related that is the Group’s responsibility as described above, stands to motor liability against bodily injury and accidental death or at a total of at least €100 million per member country of the property damage caused by its customers to third parties and 02 Europrogramme, £85 million in the United Kingdom and, may, resulting from the use of its vehicles, whether they are owned, in certain countries, exceed this amount when required by local rented or loaned. If these vehicles are not insured by the Group, legislation. they cannot be put into circulation. As a result, coverage of the Group’s motor vehicle liability is critical for the running of For the year ended December 31, 2015, the estimated total its business. cost of the Europrogramme was €95.1 million. The insurance policies comprising the Europrogramme were renewed as from January 1, 2016 for 3 years ahead of the original expiry date 2.7.1.1 Motor vehicle liability of December 31, 2016, on more favorable terms than those struck in 2014. This new long-term agreement, which entered EUROPROGRAMME (BELGIUM, FRANCE, into force on January 1, 2016, defi nes the general framework GERMANY, ITALY, PORTUGAL AND of the Europrogramme and its annual renewal conditions, in THE UNITED KINGDOM) particular the factors that determine the amount of premiums and fees payable by the Group for each year of the program. To address the risk of its motor liability, the Group has implemented an insurance program in Belgium, France, Germany, Italy, Portugal and the United Kingdom, the SPAIN “Europrogramme”. The Europrogramme is a corporate Europcar Spain’s motor vehicle liability is not covered within insurance program allowing each subsidiary operating in each the Europrogramme. Since January 1, 2009, it has been country participating in the program to benefit from motor insured through a standard risk transfer policy purchased from vehicle liability insurance from its local AIG Europe Ltd. (“AIG”) Allianz Spain. This insurance policy expires on December 31, branch, established in the country in which the subsidiary 2017 and stipulates, in particular, the amount of premiums operates. and fees payable by Europcar Spain in order to benefi t from Under the Europrogramme, third party claims or the share of this coverage. The limits of this policy stand at €70 million for third party claims related to motor liability less than or equal bodily injury and €15 million for property damage, which may to €500,000 per accident are “self-fi nanced”. In this case, AIG be increased under certain conditions with additional coverage covers third parties, under local insurance policies purchased of €50 million (“voluntary” coverage) for bodily injury, accidental by the Group’s subsidiaries, and then recovers sums up to this death and property damage. The total cost of the insurance amount, according to the relevant subsidiary, by: premium for the year ended December 31, 2015 stood at €8.5 million. (i) Euroguard Cell 0, acting as deductible fund manager on behalf of Europcar Belgium, France, Italy and Portugal, AUSTRALIA/ NEW ZEALAND up to a maximum of €500,000 per accident and within an annual aggregate limit actuarially set each year by country, in The motor liability risks which the Group is exposed to as accordance with the Deductible Funding Agreement (DFA); a result of its operations in Australia and New Zealand are covered by the “Third Party Bodily Injury” mandatory regime (ii) Europcar Germany, up to a maximum of €100,000 per claim, administered by the State and automatically purchased during a and Europcar UK up to a maximum of €500,000 per claim, vehicle’s registration, combined with an “Own Damages” policy according to Loss Reimbursement Agreements (LRA); covering the vehicle’s market price and a “Third Party Property (iii) Euroguard Cell 9, the Group’s reinsurance captive within Damages” policy with a limit of approximately AUD 30 million the Euroguard Protected Cell Company (PCC), a company (or approximately €20.5 million), executed on May 1, 2014 with separate from the Group, intervenes in order to cover: Allianz for a period of one year and placed with QBE on May 1, 2015 for a period of one year. a. a layer of €400,000 in excess of €100,000 for Europcar Germany claims, For the year ended December 31, 2015, the total cost (including the share of “self-fi nanced” risks and premiums) of b. part of claims exceeding €500,000 m the annual the Group to cover its risks and mainly its motor liability risk aggregate limit for the DFA of Belgium, France, Italy (Europrogramme, Spain, Australia and New Zealand combined) and Portugal.
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was €99.9 million, of which €95.1 million for the countries being to its fl eet and theft of vehicles would be greater than or equal part of the Europrogramme that corresponds to the coverage to actual costs of damages and theft. The Group’s rental of accidents “self-financed” by the Group, the insurance agreements generally stipulate that the customer is, subject to premium of the AIG excess layer, claims management fees, certain exceptions, responsible for any deterioration or damage administrative and brokerage fees as well as related taxes. In (including damage as a result of theft) to the rented vehicles. 2015, for Spain the insurance cost to cover in particular motor The cost of damages related to collisions for which third parties vehicle liability risk was €8.5 million and for Australia and New are not involved and the cost of stolen or missing vehicles, as Zealand the cost was €0.2 million. The average claims maturing well as damages caused to the Group’s property, are expensed time during which the costs of claims are borne by the Group is as they are incurred. For the year ended December 31, 2014, approximately three years. Liability insurance is by nature long- expenses related to damages caused to the fl eet (including tail insurance and the most severe claims may remain active repair work) and to the loss or theft of vehicles, net of recoveries, for several years, or even tens of years or more in extreme was €95 million. cases. Motor liability insurance cost, stated on a comparable basis (per rental day) have historically trended both upward and The cost of damages to property or of theft not insured by the downward, refl ecting (i) the cost of the market capacity in terms Group is partly offset by (i) proceeds from the sale of damage of motor liability insurance and (ii) the Group’s own motor liability or theft waivers and (ii) the recovery of deductibles that remain claims records, these two factors being signifi cantly infl uenced applicable (see Section 2.7.1.4 “Optional coverage offered to by the availability of insurance capacity on the market and customers” below). increases in property damage claims and especially severe bodily injury claims (cases of death and disability). The Group estimates that these two factors will continue to influence 2.7.1.3 Risks related to the Group’s business insurance costs in the future. (excluding its fl eet) Since 2011, the Group has undertaken a voluntarily plan to In order to manage other risks related to the Group’s business, reduce claims frequency and improve claims management or to comply with applicable laws, the Group has purchased processes effi ciency in coordination with its partners. Such and implemented other insurance programs, including a general an improvement focused on aspects such as repudiating liability insurance program, an environmental liability insurance fraud, reducing claims notifi cations delays, accelerating the program, an employer’s practice liability insurance program closing of claims fi les or reducing the number of dormant fi les. related to employment practices, an insurance program Reducing the claims frequency involves actions focused on covering fraud, a directors and officers liability insurance business customers or young drivers, customer categories program and a property damage and loss of earnings program. with high claims frequency records. These actions by country These insurance programs have been purchased from non- are presented to actuaries who partly factor them in their affi liated insurance companies for amounts deemed by the recommendations. These actions, combined with legal Group as reasonable given its risk profi le, and secured terms changes or road accident prevention campaigns in certain and conditions considered by the Group as reasonable. countries in which the Group operates, have resulted in a decrease in its insurance costs. The development of this cost Furthermore, as part of the IPO of the Company’s shares on line nevertheless depends on changes in the economic, social Euronext Paris in June 2015, the Company has purchased a and legal environment as well as the motor liability risk that specifi c IPO-related directors and offi cers insurance program insurers are prepared to provide cover against. for the Company’s executives and major shareholder in order to cover certain risks related to this fl otation. It covers, in particular, defense and investigation fees, damages and interest, as well 2.7.1.2 Property damage – vehicles owned as insurable fi nes and penalties related to claims fi led by the by the Group Company’s new shareholders and proceedings initiated by the relevant stock market authorities following noncompliance with In most countries in which the Group operates, the Group does applicable regulations. This insurance policy took effect as of not insure the property damage to its vehicles and is taking the date of the admission to trading of the Company’s shares the charge related to the risk of damage to its fl eet. Over the on Euronext Paris for a six-year term. long run, the Group considers that insuring property damage
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2.7.1.4 Optional cover offered to customers PERSONAL ACCIDENT INSURANCE (“PAI”) AND SUPER PERSONAL ACCIDENT INSURANCE (“SPAI”) WAIVERS IN THE EVENT OF DAMAGE OR THEFT The Group proposes insurance products that allow occupants of its vehicles or their beneficiaries to receive lump sum The Group generally proposes ancillary products to its indemnities in the event of accidental death or permanent customers, such as damage and theft protection, according to disability following an accident occurring during the rental 02 which the Group waives or limits its right to hold its customers period. These products also contain a “medical expenses” fi nancially liable for damage to the vehicle or losses to the component. Group. The purchasing of this type of product transfers, for an additional fee or premium, the customer’s total or partial cost Such indemnities will be granted in addition to the compensation liability to the Group. received by passengers considered third parties by the mandatory motor liability insurance regime and by a not-at- PROTECTION AGAINST COSTS RELATED TO FLAT fault driver of the vehicle rented from the Group. TIRES, BROKEN WINDSHIELDS AND HEADLIGHTS In the event where the driver of the vehicle rented from the Group The Group proposes a product that covers the customer’s is at fault, and as a result not covered under the mandatory fi nancial liability in the event of a fl at tire, broken windshield and motor liability insurance regime, insurance offered by the Group headlight during the ordinary use of the rented vehicle. represents the driver’s sole source of compensation (excluding a social security regime or insurance purchased elsewhere by the individual for personal use). These three broad categories of products are available in sales agencies and from Europcar’s website. The Group has purchased PAI/SPAI from a leading market insurer. The program was standardized for all Corporate Countries in March 2015 to enhance clarity for customers.
2.7.2 Risk management
Risk management relates to measures implemented by the the Board of Directors through the Company’s Audit Committee. Group to identify and analyze the risks to which it is exposed Since the changes made to the Company’s governance, the in the ordinary course of business. Risk management is Supervisory Board (through the Audit Committee) is responsible considered a priority by the Group’s management and is for monitoring the effectiveness of the internal control and risk closely followed by the Group Internal Audit Department. The management systems put in place by the Management Board. Group’s internal control and risk management procedures are The Audit Committee ensures the relevance, reliability and based on a set of measures, policies, procedures, behaviors implementation of internal control procedures, the identifi cation, and customized actions aiming to ensure that the necessary hedging and management of the Group’s risks in relation to its measures are taken to: activities as well as accounting and fi nancial information. The Company has established and manages, under the supervision a ensure the effi ciency of operations and the effi cient use of of the Internal Audit Department and the Chairman of the resources; and Management Board, the risk map and the risk management a identify, analyze and control risks that could have a program. material effect on the Group’s assets, results, operations or The Group’s risk management program integrates, in particular, achievement of its objectives, whether they are operational, the unpredictable nature of fi nancial markets, and seeks to commercial, legal or fi nancial or related to compliance with minimize their potentially negative effects on the Group’s laws and regulations. fi nancial performance by using derivative fi nancial instrument The Group’s internal control system is based on the Committee in order to hedge certain exposures, in particular those related of Sponsoring Organizations of the Treadway Commission to interest rate fl uctuations. On the fi nancial front, the Group’s (COSO) principles as well as international standards, as Treasury Department is tasked with managing fi nancial risks defi ned by the Institute of internal auditors (IIA). The Group’s risk under the stewardship of the Group Deputy CEO, Finance. The management and internal control process was spearheaded by Group’s Treasury Department identifi es, evaluates and hedges
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fi nancial risks, in close collaboration with the Group’s operating and analyzes the actions and specifi c monitoring of certain units. All of these hedging operations are either coordinated and risks (see Section 5.2.3 “Internal Control” of this Registration validated centrally or directly executed by the Group’s Treasury Document). Department. Controlling risk exposure in each country in which the Group’s Fraud prevention and fi ght against corruption companies operate depends on local management teams, who and money-laundering are as close as possible to the risks related to the activities they exercise or supervise. The Group’s Internal Audit Department oversees identifi cation and fraud prevention processes for all of its activities. This process was strengthened in 2015 by a Fraud Prevention Plan, The Risk Map the fi rst part of which, covering station fraud, was implemented in the fi rst semester. The risk map was established at the Group by the Internal Audit Department on the basis of global risks as identifi ed by The Group has implemented a signed reporting policy. Under management. In 2015, 17 highly critical risks and 26 moderately this policy, the managers of the Group’s different subsidiaries critical risks, either internal or external to the Group, were sign an annual compliance letter. The purpose of the compliance identifi ed. Risks are ranked depending on the estimated impact letter is in particular to (i) report and analyze the situations and of each risk and the likelihood of its occurrence. Risks identifi ed risks of non-compliance, as well as to present any implemented as having severe impacts and a strong probability of occurring corrective measures; (ii) ensure that all employees have received are mapped as “highly critical”. Conversely, risks identifi ed as training related to the Group’s charter of values, confl icts of having little impact and a weak probability of occurring are interest, personal data protection and competition law over mapped as “moderately critical”. The resulting map obtained the course of the fi scal year; and (iii) certify, in particular, the for a given year provides a comparative tool with the previous absence of any confl icts of interest and compliance with anti- year’s map, and helps in understanding the development of corruption rules, personal data protection, labor laws and risks to which the Group is exposed. The map allows the Group human rights. to set up a dashboard with the estimated degree of control of Moreover, in the context of its compliance program (including each of the identifi ed risks and to identify those that must be anti-corruption, compliance with economic sanctions, anti- dealt with in priority, as well as to ensure that internal control fraud), the Group has recently adopted a data-processing tool is adequate to prevent and detect them. The risk map also allowing for the identifi cation of at-risk commercial partners. helps to update the audit plan, in particular on topics that are identifi ed as requiring increased supervision. Risks related to operations of the Group’s international franchisee network are subcontracted to an external audit fi rm. The Group’s Internal Audit Department regularly updates the At times, external auditors are called upon to cover certain risk map at the level of the Group and its related subsidiaries business sectors with respect to technical issues that cannot on a rolling basis. The risk map is presented to the Group’s be covered internally. Audit Committee and Management Board, which then studies
98 EUROPCAR REGISTRATION DOCUMENT 2015 03 ACCOUNTING AND FINANCIAL INFORMATION
3.1 ANALYSIS OF GROUP RESULTS 100 3.7 OUTLOOK FOR FINANCIAL YEAR 2016 245
3.2 LIQUIDITY AND CAPITAL RESOURCES 120 3.8 INFORMATION ON MID-TERM TRENDS AND OBJECTIVES 247 3.3 INVESTMENTS 145 3.9 SIGNIFICANT CHANGE IN THE 3.4 CONSOLIDATED FINANCIAL FINANCIAL OR BUSINESS POSITION 248 STATEMENTS AND STATUTORY AUDITORS’ REPORT 147 3.10 COMMENTS FROM THE SUPERVISORY BOARD REGARDING 3.5 ANALYSIS OF THE RESULTS THE MANAGEMENT BOARD’S OF EUROPCAR GROUPE S.A. 218 REPORT AND THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2015 248 3.6 COMPANY FINANCIAL STATEMENTS AND STATUTORY AUDITORS’ REPORT 221
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3.1 A NALYSIS OF G ROUP RESULTS
The information presented below on the Group’s results of generally accepted defi nition. The Group believes that Adjusted operations and fi nancial condition should be read in conjunction Corporate EBITDA, which takes into account all costs relating with the consolidated financial statements for the years to the vehicle fleet, including depreciation expenses and ended December 31, 2015 and 2014 included in Section 3.4 interest costs associated with the fl eet, provides investors “Consolidated financial statements and Statutory Auditors’ with valuable insight into the Group’s performance, especially report” of this Registration Document. given that the Group uses this fi gure to monitor its performance (see “Adjusted Corporate EBITDA” under Section 3.1.1.3 This Section presents certain financial information and “ Description of the principal line items in the Group’s income other data for the periods indicated in order to facilitate the statement”). Moreover, the Group has identifi ed certain impacts understanding of the Group’s activity. In particular, it presents from exchange rate fl uctuations (primarily in the pound sterling, Adjusted Corporate EBITDA, defi ned as recurring operating the Australian dollar and the New Zealand dollar) and presents income before depreciation and amortization not associated certain information for the year ended December 31, 2014 by with the vehicle fl eet after deduction of the interest expenses applying the exchange rates for the year ended December 31, on liabilities related to rental fl eet fi nancing. Adjusted Corporate 2015. EBITDA is a non-IFRS indicator that does not have a single
3.1.1 General presentation
3.1.1.1 Overview customer contract and fl eet management, and daily operational management: With over 65 years of experience, Europcar Groupe is the a European leader in the vehicle rental industry and one of the the Europe operating segment includes the European key players in the mobility industry. With operations in over countries where the Group operates its fleet directly 140 countries, Europcar offers its customers one of the largest (Germany, Belgium, Spain, France, Italy, Portugal, and vehicle rental networks, both directly and through its franchises the United Kingdom), organized around common service, and partners. The Group operates through its Europcar® brand customer and distribution criteria, as well as the franchised and its low-cost InterRent® brand. Customer satisfaction is at European countries (Austria, Denmark, Finland, Greece, the core of the Group’s and its employees’ mission and drives Ireland, Luxembourg, the Netherlands, Norway, Sweden, the continuous development of new services. Europcar Lab, Switzerland and Turkey), which have similar economic for instance, was created to gain a better understanding of the characteristics and offer synergies in terms of fl eet negotiation, future challenges of mobility through innovation and strategic customer management, and seasonality of activity. During investments such as Ubeeqo and E-Car Club. the year ended December 31, 2015, the Group generated consolidated revenue in Europe of €1,992.2 million (or 92.7% With an average fl eet of 205,353 vehicles (cars and vans & of the Group’s consolidated revenue before intragroup trucks) and a volume of 57.1 million rental days in its Corporate eliminations and holdings) and Adjusted Corporate EBITDA Countries (Germany, Australia, Belgium, Spain, France, Italy, of €191 million (or 76.2% of the total); New Zealand, Portugal and the United Kingdom) in 2015, a the Group uses its extensive knowledge of the vehicle rental the Rest of World operating segment includes the other industry to provide a wide range of mobility solutions. countries in which the Group operates directly (Australia and New Zealand), as well as all of the franchised countries that The Group is organized around two main operating segments, are not included in the Europe operating segment. During Europe and Rest of World, within which the nature of the the year ended December 31, 2015, the Group generated services provided, the categories of targeted customers consolidated revenue in Rest of World of €156.1 million (or and the seasonality are identical. The distinctions between 7.3% of the Group’s consolidated revenue before intragroup the two segments are mainly based on criteria related to the eliminations and holdings) and Adjusted Corporate EBITDA characteristics of the economic zone, the organization of of €32.1 million (or 12.8% of the total). customers, interdependency between countries with respect to Eliminations and Holdings encompasses the departments supporting the two operating segments, Europe and Rest of World, including IT, legal, tax, e-commerce, fl eet, fi nancing,
100 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION ANALYSIS OF GROUP RESULTS
insurance, marketing, sales and transformation. It includes distribution channels and in order to strengthen their ability to personnel costs, IT costs, and sales and marketing costs, and, offer innovative and less costly services. The Group regularly in return, management commissions paid by the two operating invests in improving its IT system, which was built around segments. During the year ended December 31, 2015, the centralized Greenway system, and has implemented a Eliminations and Holdings represented Adjusted Corporate plan for 2020 to continuously modernize the architecture of EBITDA of €27.6 million (or 11% of the total). its information system. a Demand trends in the high-end and low-cost segments. 3.1.1.2 Key factors affecting the Group’s The Group believes that consumers in the transportation results sector tend to group themselves around either high-end offers or low-cost offers. Growth in demand in the high- 03 Certain key factors as well as past events and transactions end market provides new growth opportunities for vehicle have affected and may continue to affect the Group’s operating rental companies that are able to capitalize on their brand results, including (i) the dynamics of the vehicle rental industry recognition to develop new services and enter into key and the attractiveness of the Group’s services; (ii) macro- partnerships with large players in the tourism industry. economic conditions; (iii) the Number of Rental Days and The Group believes that it benefits from the established amount of revenue per day generated by rental activities; (iv) recognition of its principal brand, Europcar®, to develop new the seasonal nature of the vehicle rental business; (v) the effects high-end services such as its Prestige offer and chauffeur of the Fast Lane transformation program; (vi) the Group’s cost services (see Section “ Europcar® service offerings” under structure and operational effi ciency; (vii) fi nancing expenses; Section 1.6.1.1 “The Europcar brand®” ). Moreover, demand and (viii) changes in the Group’s scope of consolidation. Each is also increasing for low-cost and small economy vehicles, of these factors is discussed in greater detail below. which drives the companies in the industry to adapt their fl eet composition and to develop new low-cost offers. Given these INDUSTRY D YNAMICS AND ATTRACTIVENESS trends, the Group began deploying its InterRent brand on the OF THE GROUP’S SERVICES low-cost market at the start of 2013. As of December 31, 2015, the brand operated in six Corporate Countries in The vehicle rental sector is evolving rapidly, due in particular Europe, with 75 stations located primarily in airports and train to changes in consumer habits and technological advances. stations, and in 40 franchised countries (see Section 1.6.1.2 a The growth of e-commerce. Customers’ booking habits have “The InterRent® brand”). changed in recent years due to e-commerce. E-commerce a New mobility solutions. The vehicle rental sector has enables the Group to adapt to its customers’ continually undergone structural changes due to technological evolving needs. The Group has invested in its websites and improvements and the resulting changes in consumer applications, with a view to the growing role of e-commerce. preferences and behavior (see Section 1.3.2 “Growth drivers It has also entered into local arrangements with certain large and general market trends”). These industry dynamics have tour operators and travel agents specifi cally targeting leisure created growth opportunities for vehicle rental companies customers and into partnerships with several leading Internet which can concentrate their investments on the products, travel portals (see “Europcar’s direct distribution channels” services and technologies that they believe will have strong under Section 1.6.4 “ Distribution Channels” ). The percentage added value or that many consumers will like and for which of vehicle rental reservations made via the Internet (including they have or are able to develop the necessary technical through brokers) has substantially increased in recent years expertise to operate. The Group relies on its extensive and was 54% in 2015 compared with 52% in 2014. Online experience and know-how in the vehicle rental industry to reservations facilitate price comparison and may thus innovate and seize opportunities arising out of new mobility further increase competitive pressure in the industry. These trends. The Group’s innovations include new products channels, however, also generate lower costs than the and services under its Europcar® brand such as FitRent, traditional channels. AutoLiberté, ToMyDoor, ToMyCar and Keddy by Europcar® a Technological changes and changes in offerings. In order (see Section 0 “Europcar® offerings”). Moreover, in response to remain competitive, vehicle rental companies have to to its customers’ specifi c mobility needs, the Group created a develop management models integrating information and Lab to design innovative mobility solutions and capitalize on telecommunications systems that are both effective and existing ones, in particular through Ubeeqo, E-Car Club and complementary with those of their partners, both with respect Car2go (see Section 1.6.2 “Europcar Lab/Mobility solutions”). to the customer’s ability to make reservations through multiple
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a Pricing dynamics. The vehicle rental market is competitive, REVENUE GROWTH INDICATORS and pricing is one of the principal competitive factors. The Revenue includes (i) income from vehicle rentals net of Group seeks to capitalize on the density of its network, its discounts and rebates, (ii) commissions on related services, expertise in the industry, its operating excellence and its and (iii) royalties received from Europcar franchisees. brand recognition to increase its capacity to offer an attractive price-quality ratio while improving profi tability. Supply and The following indicators are generally used to analyze changes in demand affect both the Group’s fl eet fi nancial utilization rate the Group’s consolidated revenue: (i) activity volume, measured and its price positioning. In periods of high demand or when by the number of rental days, and (ii) average revenue per day demand is greater than supply, the fl eet fi nancial utilization generated by vehicle rental activities. rate increases and competitive pressure on prices decreases. Conversely, if demand decreases or supply exceeds demand, NUMBER OF RENTAL DAYS downward pressure on prices may occur. The management The “Number of Rental Days” is calculated as the n umber of capacity of the available fl eets (size and regional distribution) r ental days invoiced to customers including each day or period of the various vehicle rental market participants also affects of less than a day for which a vehicle rental is invoiced to a the Group’s fl eet fi nancial utilization rate and price positioning. customer. For more information on the Group’s fl eet fi nancial utilization rate, see “Cost structure and operating effi ciency” under The Number of Rental Days is impacted by a number of Section 3.1.1.2 “ Key factors affecting the Group’s results” . factors including those described in “Industry dynamics and attractiveness of the Group’s services” under Section 3.1.1.2 a Regulatory changes. The Group is subject to numerous “ Key factors affecting the Group’s results” and “Macroeconomic regulatory regimes throughout the world, in particular with conditions” above, under Section 3.1.1.2 “Key factors affecting respect to the environment, personal data, consumer the Group’s results”, the seasonal nature of the business, protection and franchise operation (see Section 1.6.11 changes in the services offered by the Group and its customer “Regulation”). Changes in regulations may affect the Group’s portfolio, and the Group’s efforts to achieve profi table growth activities and results of operations, in particular when new in line with its strategy (see Section 1.5 “Strategy”). requirements are imposed. REVENUE GENERATED PER DAY BY RENTAL ACTIVITIES MACROECONOMIC CON DITIONS Revenue per day is calculated as the consolidated revenue Demand for rental vehicles, particularly in the business generated by rental activities divided by the Number of Rental segment, is driven by shifting macroeconomic conditions (such Days for the period in question (“RPD”). The change in RPD as changes in GDP) in the countries where the Group operates is calculated by reference to the previous year and may be and especially in Europe, which in 2015 represented 76% of presented at constant exchange rates to correct for fl uctuations consolidated Adjusted Corporate EBITDA. For example, the in exchange rates (primarily for impacts relating to the pound global fi nancial crisis and resulting economic slowdown in 2008 sterling, the Australian dollar and the New Zealand dollar). and 2009 had a negative effect on the vehicle rental business RPD primarily depends on the following factors: as a whole and on the Group. a The Group’s price positioning. The Group’s prices generally Demand is also driven by changes in air and rail traffi c and the refl ect (i) positioning of the Group’s services and related pricing factors underlying those changes, such as currency fl uctuations policy, (ii) sales of additional services and equipment such as or geopolitical events, that can impact passenger fl ows (see insurance products, optional protection and equipment, (iii) Section 1.3.2 “Growth drivers and general market trends”). specifi c market conditions and the structure of the customer During the year ended December 31, 2015, airport stations base in the regions where the Group operates, (iv) revenue operated directly by the Group or by agents represented 42% and capacity management to manage customer demand of rental revenue, whereas non-airport stations represented and related pricing terms and to ensure the alignment of 58% of such revenue due to the capillarity of its network in the the fl eet (category/price and optimized distribution within the nine Corporate Countries. The Group has also entered into network), (v) competitive pressure, and (vi) average rental signifi cant alliances and partnerships with several large airlines. duration; As a result, a signifi cant portion of the Group’s revenue is tied to the level of air traffi c.
102 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION ANALYSIS OF GROUP RESULTS
a Composition and diversity of the Group’s fleet. The Group’s SEASONALITY fl eet includes 11 main categories of vehicles, based on general The vehicle rental business is very seasonal and sensitive to industry standards: mini, economy, compact, intermediate, weather conditions (see Section 1.6.8 “Seasonality”). Activity standard, full-size, premium, luxury, mini-vans, trucks and generally peaks in June through September. The leisure convertibles. The fl eet varies by brand with the Europcar® market is characterized by higher demand during the summer brand covering a full range of vehicles and the InterRent® months and school holidays, in line with greater activity in brand offering a more limited range of vehicles which are the transportation industry generally. As a result, the Group’s also perceived as being less expensive by customers. The revenue and Adjusted Corporate EBITDA are higher during diversity of the Group’s fl eet enables it to meet rental demand these periods than during the rest of the year. For example, from a large range of customers. Generally, rentals in the the Group generated 61.5% of its Adjusted Corporate EBITDA higher categories have higher RPD than rentals of vehicles in 03 during the third quarter of the year ended December 31, 2015 the lower categories. However, the lower categories generate (compared with 65% in 2014). The leisure market is also lower costs for the Group, generally resulting in comparable characterized by increased demand on weekends as compared profi tability; with the workweek. The business market complements the a Type of customer: business or leisure (see Section 1.6.3 leisure market as it is relatively stable throughout the year “Customers (business/leisure)”). Leisure rentals tend to be with a slight dip during the summer months and more activity of longer duration and have a higher RPD than business midweek (Tuesday through Thursday). rentals. In addition, longer rentals usually generate lower For the year ended December 31, 2015, leisure rentals RPD than shorter rentals but have a different cost structure represented 56% of rental revenue compared with 44% for which generally gives them comparable profitability (see business rentals. “Cost structure and operating effi ciency” below): Good management of seasonality is an important aspect of the a Geographical diversity. The Corporate Countries serve Group’s fi nancial model. The Group seeks to take advantage different types of customers and use different price and fl eet of activity during weekly and annual peaks (high activity) while composition strategies. In Europe, Germany and Belgium remaining attentive to the fl eet holding costs before and after generate a larger percentage of their revenue in the business these periods (low or normal activity) with the objective of market, while Spain, Italy and Portugal generate more of their maintaining a sound fl eet fi nancial utilization rate (for example revenue in the leisure market. Lastly, France and the United 73-80% for each quarter). The Group meets these fl uctuations Kingdom have a fairly even balance between business and in demand through fl exible agreements with vehicle suppliers. leisure customers. The Corporate Countries in the Rest of These agreements provide for the Group to increase its vehicle World operating segment (Australia and New Zealand) are orders in advance of the busier months and include short-term more active in the leisure market; and buy-back clauses (generally varying from fi ve to eight months) a Fluctuations in certain exchange rates. Since RPD is to lower the number of vehicles once strong demand has measured in euros, it can be affected by fluctuations in decreased (see Section 1.6.7 “Fleet”). exchange rates, in particular between the euro and the pound sterling and between the euro and the Australian dollar. As a result, the Group generally monitors RPD at constant exchange rates.
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The following graph shows changes in consolidated revenue, than €90 million on Adjusted Corporate EBITDA (compared with in millions of euros, in the fl eet fi nancial utilization rate and in an initial objective of €50 million) in 2012-2014 and contributed the average fl eet per quarter in 2014 and 2015: approximately €90 million to improving non-fl eet working capital requirements (compared with an initial objective of €60 million). Average fleet 156 190 225 185 172 209 243 196 The Group considered its transformation program to have (in thousands) 693 reached its midpoint at the end of 2014. 646 The Fast Lane program is described in detail in Section 547 1.4.4 . “Fast Lane” Transformation Program that has set the 495 489 464 Foundation for Sustainable Profi table Growth. 414 374 79.8% 79.7% COST S TRUCTURE AND OPERATING EFFICIENCY 77.1% 76.4% Operating costs as presented in the management income 73.7% 73.7% 73.6% 73.6% statement essentially comprise fl eet holding costs (excluding estimated interest included in operating lease payments which the Group analyzes as fl eet fi nancing costs included in Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Adjusted Corporate EBITDA (1)), fl eet operating costs, rental costs, revenue-related costs, personnel costs, and network and Quarterly revenues (€m) Fleet utilization (%) head offi ce overhead. Accordingly, they do not include other operating income and expenses (recorded in a separate item The following graph shows changes in quarterly Adjusted in the income statement), non-recurring income and expenses Corporate EBITDA in millions of euros for the years 2014 and (recorded in a separate item in the income statement), or fl eet 2015: fi nancing expenses.
180 Operating costs as presented in the management income 154.2 160 138.6 statement accounted for 87% of the Group’s revenue in 2015. 140 The Group believes that its “operating cost base” is 70% 120 variable and 30% fi xed or semi-fi xed, as described below. 100 80 63.8 The following costs are considered variable: 60 51.7 32.7 36.3 Fleet holding costs (which represented 29% of the operating 40 cost base and 26% of revenues in 2015). These costs include: 20 0 a costs related to rental fl eet agreements which represented -20 -10.2 -3.7 25% of the operating cost base for 2015 and consist of (i) Q1 Q2 Q3 Q4 depreciation expenses relating both to vehicles purchased with manufacturer or dealer buy-back commitments and at- 2014 2015 risk vehicles (based on monthly depreciation rates negotiated under the buy-back agreements net of volume rebates for FAST LANE TRANSFORMATION PROGRAM vehicles purchased with a buy-back commitment, and on the difference between the acquisition cost of the vehicles and Beginning in 2012, the Group deployed a transformation their estimated residual value for at-risk vehicles, the value program called “Fast Lane” seeking to reinforce the Group’s of at-risk vehicles being adjusted monthly on the basis of market presence and manage the transition from a vehicle the vehicles’ market values) and (ii) charges under operating rental company to a larger role as a mobility services provider, leases; with sustainable growth and improved profi tability. The strategic a initiatives aim to improve the Group’s fi xed and variable cost acquisition and sales-related costs which represented 3% structure and to re-energize its commercial strategy. of the operating cost base for 2015 and mainly include (i) the cost of vehicle accessories, (ii) costs relating to the The Fast Lane program has surpassed its original objectives. conditioning of new vehicles, and (iii) costs relating to the The Group believes that Fast Lane had a positive impact of more
(1) In the IFRS income statement, payments under operating leases are recorded in full under fl eet holding costs with no distinction between the amortization expense and the estimated fi nancial expense component. 104 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION ANALYSIS OF GROUP RESULTS
disposal of used vehicles and vehicles purchased under buy- Costs considered fi xed or semi-fi xed include personnel costs, back programs; and head offi ce and network overhead, and IT costs which together represented 30% of the operating cost base for 2015. These a taxes on vehicles which represented 2% of the operating charges and costs may vary based on numerous factors, cost base for 2015. including changes in the number of employees, the launch of These costs are considered variable because the Group is able marketing campaigns, the implementation of the Fast Lane to adapt and adjust its fl eet using the fl exibility provided for under program and the launch and deployment of the Shared Services its buy-back agreements with car manufacturers. Europcar has Center. Charges incurred within the network of stations may the ability to increase its vehicle orders in anticipation of the also vary depending on activity. high season and to use the variability in holding periods, which 03 generally range from fi ve to eight months, to sell back vehicles COST STRUCTURE AND OPERATING EFFICIENCY once demand decreases. Europcar is also able to react to short- INDICATORS term peaks in demand by optimizing new-vehicle distribution (see Section 1.6.7.1 “Fleet management”). The Group monitors In connection with the Fast Lane transformation program, the the following principal indicators for these costs: (i) average fl eet Group achieved signifi cant savings in fl eet unit costs and other size; (ii) average fl eet costs per unit per month; and (iii) the fl eet operating expenses expressed as a number of vehicle rentals fi nancial utilization rate (as discussed below). or as a percentage of revenue. Fleet operating, rental and revenue related costs (which The Group uses the following indicators to monitor and optimize represented 39% of the operating cost base and 34% of its fl eet-related costs: revenues in 2015). These costs include: a Average fleet during the period. The average fl eet during the a fl eet operating costs which represented 13% of the operating period is calculated as the number of days during the period cost base for the year ended December 31, 2015 and when the fl eet was available divided by the number of days which include insurance costs (the costs of car insurance in that period, multiplied by the number of vehicles in the covering civil liability and damage to vehicles as well as fl eet during the period. The size of the average fl eet during self-insurance costs), repairs and maintenance costs, costs the period, and therefore fl eet holding costs, vary based on incurred for damaged and stolen cars, and costs incurred predicted demand and the Number of Rental Days and in for reconditioning vehicles for repurchase by the car particular on the effect of seasonality. manufacturer or dealer. These costs vary with the average a Average fleet cost per unit per month. The average fl eet fl eet size and to a lesser extent with the Number of Rental cost per unit per month corresponds to total monthly fl eet Days; costs (fl eet holding costs and fl eet operating costs excluding a revenue-related commissions and fees, which include interest included in rental payments under operating leases commissions paid to agents, covering personnel costs and insurance fees) divided by the average fl eet over the and station overhead (excluding vehicle fleet), as well period. The Group also separately calculates monthly per-unit as commissions paid to travel agents, brokers and other fl eet holding costs (excluding estimated interest included in commercial partners and fees and taxes paid for airport and rental payments on operating leases) and monthly per-unit train station concessions. These costs represented 14% of fl eet operating costs (calculated without taking into account the operating cost base for 2015 and vary with the revenue insurance costs). The average fl eet cost per unit per month is generated by the underlying rental activity; and affected both by the macro-economic conditions that affect car manufacturers and by the Group’s negotiating power a rental related costs which represented 12% of the operating in its vehicle supply agreements with manufacturers. The cost base for 2015 and include the cost of transferring average per-unit cost for small economy cars tends to be vehicles from one site to another, vehicle washing costs and lower than the average per-unit cost for larger cars. fuel costs. Rental related costs are generally incurred once a per rental, with the result that a shorter-term rental will have Fleet financial utilization rate. The fl eet fi nancial utilization rate about the same level of these costs as a longer-term rental. means the Number of Rental Days over the number of days in which the fl eet is considered fi nancially available (the period during which the Group holds the vehicles). The higher the fl eet fi nancial utilization rate, the fewer vehicles are needed to
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generate a given Number of Rental Days (see Section 1.6.7 pay-per-use car club. This new acquisition is fully in line with “Fleet”). The optimized management of fl eet size through Europcar Lab’s strategy to develop mobility market usages, the acquisition and disposal of vehicles and a higher rate of search for new mobility solutions opportunities worldwide and long-term rentals contribute to increasing the fl eet fi nancial make investments in strategic initiatives allowing the Group to utilization rate. strengthen its leadership in the mobility market. E-Car Club has been fully consolidated since July 1, 2015. Fleet management and improvements in the fleet financial utilization rate rely on the Group’s internal procedures, on its On October 31, 2014, the Group acquired 100% of the shares Revenue and Capacity Management teams that were set up of EuropHall SAS through its French subsidiary Europcar France in 2012 in connection with the Fast Lane program, and on SAS. With revenue of €23 million in 2014, EuropHall has been the centralized GreenWay system and its specialized modules. a signifi cant franchisee of Europcar France in Eastern France since 1978. EuropHall has been fully consolidated since early FINANCING COSTS RELATING TO FLEET November 2014. FINANCING AND OTHER LOANS In addition, on November 30, 2014, the Group acquired a Financing costs include the following: majority stake in Ubeeqo, a French startup formed in 2008 that provides car-sharing solutions. This 75.7% equity stake (as at a financing costs relating to fleet financing which vary in December 31, 2015) is consolidated under the equity method. accordance with the selected or available fi nancing option, namely, financing through operating leases, which relies primarily on the fi nancing capacity of carmakers and dealers 3.1.1.3 Description of the principal line items (and, to a lesser extent, of banks and other companies in the Group’s income statement specialized in vehicle leasing), or fi nancing through debt or securitization for vehicles recorded on the balance sheet. The description below is based on the Group’s income The type of fi nancing used affects recognition of fi nancing statement prepared in accordance with IFRS unless stated costs under IFRS accounting standards. In the IFRS income otherwise. statement, payments under operating leases, including the estimated portion corresponding to interest, are recorded REVENUE in operating income under fleet holding costs, whereas In this document, income generated from ordinary activities is expenses relating to other types of fi nancing relating to the referred to as revenue or consolidated revenue. fl eet of vehicles recorded on the balance sheet are recorded in net fi nancing costs under gross fi nancing costs. To make Revenue includes rental revenue (net of discounts and rebates it easier for the Group to monitor its performance, these two and excluding intragroup sales, value-added taxes and sales types of fi nancial expenses are grouped in a dedicated line taxes), fees from the provision of services incidental to vehicle in the Adjusted Corporate EBITDA formula (see “Adjusted rental (including fuel), and income received from the Europcar Corporate EBITDA” under Section 3.1.1.3 “ Description of franchise network: the principal line items in the Group’s income statement” ) in a rental revenue (or vehicle rental income) includes rental the management income statement; revenue generated by the stations operated directly by the a fi nancial expenses related to the high yield bond used for Group and by the rental stations operated by agents; corporate fi nancing; a fees from the provision of services complementary to a other financial income and expense, in particular costs vehicle rental include, in particular, revenue from fuel sales pertaining to other loans, amortization of transaction costs, and commissions received for fl eet management of large any redemption premiums, and foreign exchange differences. accounts; and a income from franchisee rental activity includes annual CHANGES IN THE GROUP’S SCOPE royalties, import and territorial duties and other costs (such OF CONSOLIDATION as reservation fees) invoiced by Europcar; recovery fees; and On July 9, 2015, Europcar Lab, the Europcar Group unit fees for IT services provided to franchisees. Royalties paid dedicated to innovation, announced the acquisition of a by franchisees to the Group are determined on the basis of majority stake in E-Car Club, the UK’s fi rst entirely electric the rental revenue generated by the franchisees within their territories.
106 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION ANALYSIS OF GROUP RESULTS
FLEET HOLDING COSTS AMORTIZATION AND DEPRECIATION EXPENSES EXCLUDING VEHICLE FLEET Fleet holding costs include depreciation charges on vehicles acquired under agreements with buy-back clauses and on at- Amortization, depreciation excluding vehicle fleet primarily risk vehicles, costs relating to vehicle rental agreements, costs includes amortization of intangible assets (software and relating to vehicle acquisitions and disposals, and taxes on operating systems owned by the Group), depreciation of vehicles (see “Cost structure and operating effi ciency” under property, plant and equipment (IT equipment). Section 3.1.1.2 “ Key factors affecting the Group’s results” ). OTHER INCOME AND EXPENSES FLEET OPERATING, RENTAL AND REVENUE Other income and expense includes net revenue from certain RELATED COSTS 03 commercial agreements; reversals of excess provisions; capital Fleet operating, rental and revenue related costs comprise gains and losses on disposals of property, plant and equipment; the costs of operating the fl eet (including insurance costs), and other items (such as rental agreement retrocessions and commissions and fees relating to income from ordinary tax penalties). activities, and costs relating to rental. See “Cost structure and operating e ffi ciency” under Section 3.1.1.2 “Key factors OTHER NON-RECURRING INCOME AND EXPENSES affecting the Group’s results” . Other non-recurring operating income and expenses include expenses relating to the acquisition of businesses, restructuring PERSONNEL COSTS costs and other operating costs. Personnel costs include wages and salaries (including Acquisition-related expenses include charges incurred in expenses relating to bonuses and profi t sharing), social security connection with the integration of acquisitions, such as legal contributions, post-employment benefits and other items. and accounting fees, severance and consultancy costs related Personnel costs are monitored separately for (i) employees of to headcount reductions due to the streamlining of the rental the rental stations , (ii) personnel costs relating to employees station network and its support functions, asset write-offs and working for the network, (iii) employees based at the head transfer costs, lease termination and building refurbishment offices of each of the Group’s operating subsidiaries, (iv) costs carried out for the purpose of integrating acquisitions. employees at the Group’s head offi ce or (v) employees at the Shared Services Center in Portugal established in 2014. Reorganization expenses include charges incurred in connection with business restructurings carried out in NETWORK AND HEAD OFFICE OVERHEAD COSTS response to economic downturns or to adapt local or corporate organizational structures to changing business conditions. They Network and head offi ce overhead includes costs relating to include headcount reduction expenses, consultancy fees, asset rental stations (including rental costs and general network write-offs and transfer costs and early lease termination costs costs) and costs relating to the head offi ces of the Group and incurred as part of restructuring programs. its Corporate Countries (including rental charges, travel costs, and audit and advisory fees at the local and parent company Unusual, abnormal and infrequent items of signifi cant amounts levels), as well as the related sales and marketing costs, costs are presented separately under other non-recurring income relating to IT systems, and telecommunications costs. and expenses in order to provide a clear picture of the Group’s performance. The head offi ces of the Group’s Corporate Countries carry out a number of marketing and operational activities defi ned by the NET FINANCING COSTS Group and tailored to local needs, such as management of large customer accounts and sales administration; Revenue and Net fi nancing costs include gross fi nancing costs, which in turn Capacity Management activities; reservations and customer include net fi nancing expense on fl eet fi nancing loans and net service; e-commerce and marketing; and vehicle acquisition, fi nancing expense on other loans (excluding estimated interest logistics and maintenance, as well as support functions such included in rental payments under operating leases, which as fi nance and Human Resources. are recorded in operating results), as well as other fi nancing expenses and other fi nancing income. Other fi nancing expenses
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and income include gains and losses on derivative fi nancial In addi tion to the IFRS fi gures detailed above, the Group also instruments, amortization of fi nancing transaction costs, foreign uses non-GAAP measures, in particular Adjusted Corporate exchange gains and losses, the fi nancial component of pension EBITDA, to better refl ect the performance of its operations. charges (discounting and the expected return on plan assets), dividend income, gains and losses on fi nancial instruments ADJUSTED CORPORATE EBITDA recognized in the income statement, the ineffective portion of the gain or loss on cash fl ow hedging instruments, and other To evaluate its performance, the Group uses an indicator it charges including the refi nancing/early repayment of certain calls Adjusted Corporate EBITDA which it defi nes as recurring fi nancing facilities. operating income before depreciation and amortization not related to the fl eet and after deduction of interest expenses related to rental fl eet fi nancing. Adjusted Corporate EBITDA INCOME TAX BENEFIT/(EXPENSE) includes all vehicle fl eet related costs (including impairment Income tax on profi t or loss for the year comprises current and charges and fl eet-related interest). deferred tax. Income tax is recognized in the income statement The Group believes that Adjusted Corporate EBITDA is a except to the extent that it relates to items recognized directly key indicator, because it measures the performance of the in equity, in which case it is recognized in equity. Group’s ordinary activities including all expenses relating to fl eet Current tax is the expected tax payable on the taxable income fi nancing (namely, fl eet depreciation expenses included in fl eet for the year, calculated using tax rates enacted or substantially holding costs and interest expenses relating to fl eet fi nancing, enacted at the reporting date, and subject to any adjustment which are included in net fi nancing costs in the IFRS income to tax payable in respect of previous years. statement), without taking into account charges relating to past disbursements (depreciation and amortization not related to the The amount of deferred tax recognized is based on the fl eet) or that by their unusual nature are not representative of expected pattern of realization or settlement of the carrying the trends in the Group’s results of operations. amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date. Adjusted Corporate EBITDA is a non-IFRS indicator that does not have a single generally accepted defi nition. It should not A deferred tax asset is recognized only to the extent that it is be considered a substitute for operating income or net profi t or probable that future taxable profi ts will be available against loss as a measure of operating results or for net cash generated which the tax asset can be utilized. This probability is assessed from operating activities as a measure of liquidity. Other issuers based on: may calculate Adjusted Corporate EBITDA differently from a the existence of time-related differences that will give rise to the Group. The reconciliation of this fi gure with the recurring taxation in the future; and operating income stated in the IFRS income statement is presented in Section 3.1.2.2 below. a forecasts of taxable profi ts.
SHARE OF PROFIT/(LOSS) IN COMPANIES 3.1.1.4 Signifi cant accounting policies ACCOUNTED FOR UNDER THE EQUITY METHOD For a description of the Group’s significant accounting Share of profi t/loss of associates is the share of the profi ts of the policies, see Note II “Signifi cant Accounting Policies” to the entities over which the Group has signifi cant infl uence without Group’s consolidated fi nancial statements for the year ended controlling them, in particular Car2go Europe and Ubeeqo. December 31, 2015, included in Section 3.4 “Consolidated financial statements and Statutory Auditors’ reports”.
108 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION ANALYSIS OF GROUP RESULTS
3.1.2 Comparison of results of operations for the years ended December 31, 2015 and 2014
3.1.2.1 Key operating indicators
Year ended December 31, Change at constant 2015 2014 Change currency 03 Revenues (in millions of euros) 2,142 1,979 8.2% 5.8% Rental Revenues (in millions of euros) 1,992 1,823 9.3% 6.8% Rental Day Volume 57.1 52.8 8.1% - RDP (€) (1) 34.9 34.5 1.1% (1.2)% Average duration (day) 6.0 5.7 4.1 %- Average Fleet (thousand) (2) 205.4 189.3 8.5% - Average Fleet Unit Costs/Month (€) (3) (253) (248) 1.8% (0.7)% Financial utilization rate (4) 76.1% 76.4% (0.3) pt - Adjusted Corporate EBITDA (in millions of euros) 251 213 17.8% 15.6% Adjusted Corporate EBITDA Margin 11.7% 10.8% +0.9 pt -
(1) RPD (revenue per transaction day) corresponds to rental revenue for the period divided by the Number of Rental Days for the period. (2) Average fl eet of the period is calculated by considering the number of days in the period when the fl eet is available (period during which the Group holds or fi nances the vehicles) divided by the number of days in the same period multiplied by the number of vehicles in the fl eet for the period. As of December 31, 2015, the fl eet amounted to 181,783 vehicles (+4.8 % compared to December 31, 2014). (3) The average fl eet costs per unit per month is the total fl eet costs (fl eet holding costs and fl eet operating cost) excluding interest expense included in fl eet operating lease rents and insurance fees divided by the average fl eet of the period divided by the number of months in the period. (4) The fl eet fi nancial utilization rate corresponds to the Number of Rental Days as a percentage of the number of days in the fl eet’s fi nancial availability period; the fl eet’s fi nancial availability period corresponds to the period during which the Group holds vehicles.
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3.1.2.2 Management’s analysis of results of operations The analysis in this Section is based on the Group’s income statement prepared in accordance with IFRS as well as on management fi gures that are monitored to help inform strategic decisions. Management fi gures are prepared in order to refl ect and to improve understanding of the Group’s economic performance.
IFRS INCOME STATEMENT
All data in millions of euros FY 2015 FY 2014 Change
Total revenue 2,141.9 1,978.9 8.2% Fleet holding costs (547.2 ) (496.3) 10.3 % Fleet operating, rental and revenue related costs (727.0) (686.3) 5.9% Personnel costs (347.4) (318.2) 9.2% Network and head offi ce overhead (218.5) (199.3) 9.6% Other income 14.2 6.9 105.8% Depreciation – excluding vehicle fl eet (32.8) (31.8) 3.1% Recurring operating income 283.3 253.9 11.6% Other non-recurring expenses (61.8) (115.7) (46.6)% Operating income 221.5 138.2 60.3% Net fi nancing costs (227.6) (232.7) (2.2)% Loss before tax (6.1) (94.5) (93.5)% Income tax (37.6) (10.7) 251.4% Share of loss of associates (12.1) (6.5) 86.2%
NET LOSS (55.8) (111.7) (50.0) %
NET LOSS ATTRIBUTABLE TO EUROPCAR OWNERS (55.6) (112.3) (50.5)%
110 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION ANALYSIS OF GROUP RESULTS
MANAGEMENT INCOME STATEMENT
In millions of euros 2015 2014 Variation
Revenue 2,141.9 1,978.9 8. 2 % Change at constant exchange rates - - 5. 8 % Fleet holding costs, excluding estimated interest included in rental payments under operating leases (491.9) (442.7) 11. 1 % Fleet operating, rental and revenue related costs (727.0) (686.3) 5. 9 % Personnel Costs (347.4) (318.2) 9. 2 % Network and head offi ce overhead costs (218.5) (199.3) 9. 6 % 03 Other income 14.2 6.9 105. 8 % Personnel costs, head offi ce and network costs, IT and other (551.7) (510.6) 8. 0 % Fleet-related fi nancing expenses (65.5) (72.9) (10. 2) % Estimated interest included in operating leases (55.2) (53.6) 3. 0 % Fleet-related fi nancing costs, including estimated interest included in operating leases (120.7) (126.5) (4. 6) % Adjusted Corporate EBITDA 250.6 212.8 17.8 % Margin 11.7% 10.8% +0. 9 pt Depreciation, amortization and impairment expense (32.8) (31.8) 3. 1 % Other non-recurring expenses (61.8) (115.7) (46. 6) % Net fi nancing costs excluding fl eet fi nancing (162.1) (159.8) 1. 4 % LOSS BEFORE TAX (6.1) (94.5) (93. 5) % Income tax expense (37.6) (10.7) 251. 4 % Share of loss in companies accounted for under the equity method (12.1) (6.5) 86. 2 %
NET LOSS (55.8) (111.7) (50.0) %
The table below presents a reconciliation of adjusted recurring the Group believes that investors, analysts and rating agencies operating income, Adjusted Corporate EBITDA and Adjusted will consider adjusted recurring operating income, Adjusted Consolidated EBITDA to recurring operating income. The Consolidated EBITDA and Adjusted Corporate EBITDA useful Group presents adjusted recurring operating income, Adjusted in measuring the Group’s ability to meet its debt service Consolidated EBITDA and Adjusted Corporate EBITDA because obligations. None of adjusted recurring operating income, the Group believes they provide investors with important Adjusted Consolidated EBITDA or Adjusted Corporate EBITDA additional information to evaluate the Group’s performance. is a recognized measurement under IFRS and should not be The Group believes these indicators are frequently used by considered as alternative to operating income or net profi t as securities analysts, investors and other interested parties in the a measure of operating results or cash fl ows as a measure of evaluation of companies in the Group’s industry. In addition, liquidity.
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All data in millions of euros FY 2015 FY 2014
Adjusted Consolidated EBITDA 766.0 695.0 Fleet depreciation IFRS (184.4) (164.2) Fleet depreciation included in operating lease rents (1) (210.3) (191.4) Total Fleet depreciation (394.7 ) (355.6) Interest expense related to fl eet operating leases (estimated) (1) (55.2) (53.6) Net fl eet fi nancing expenses (65.5) (72.9) Total Fleet fi nancing (120.7) (126.5) Adjusted Corporate EBITDA 250.6 212.8 Amortization, depreciation and impairment expense (32.8) (31.8) Reversal of Net fl eet fi nancing expenses 65.5 72.9 Reversal of Interest expense related to fl eet operating leases (estimated) 55.2 53.6 Adjusted recurring operating income 338.5 307.4 Interest expense related to fl eet operating leases (estimated) (55.2) (53.6) Recurring operating income* 283.3 253.9
* As set forth in the consolidated profi t and loss statement . (1 ) Fleet operating lease rents consist of a fl eet depreciation expense, an interest expense as well as, under several operating lease contracts, a small administration fee. For those fl eet operating lease contracts entered into by the Group that do not provide the precise split of the rents amongst the depreciation expense, the interest expense and the administrative fee, the Group makes estimates of this split on the basis of information provided by the lessors. Furthermore, because the interest expense component of the lease rent is in substance a fl eet fi nancing cost, Europcar’s management reviews fl eet holding costs and the adjusted operating income of the Group excluding this expense.
(A) REVENUE The following table shows the Group’s consolidated revenue for 2015 and 2014 as a total and by product type:
Year ended December 31 Change at constant All data in millions of euros 2015 2014 Change currency
Rental revenues 1,991.9 1,822.8 9.3% 6.8% Other revenue associated with car rental 97.4 102.8 (5.3)% (8.2)% Franchising business 52.6 53.3 (1.3)% (2.0)%
REVENUES 2,141.9 1,978.9 8.2% 5.8%
Revenue was €2,142 million in 2015, an increase of 8.2% from The Group believes that the increase in revenue generated by 2014. Based on constant exchange rates for the pound sterling rental activities resulted primarily from the initiatives launched and the Australian dollar, revenue increased 5.8%. Excluding in connection with the Fast Lane program, the most signifi cant the consolidation of EuropHall (1), a French franchisee acquired of which were the following: in the fourth quarter of 2014, the Group’s consolidated revenue a the implementation of new sales tools to better organize increased by 4.9% at constant exchange rates. This signifi cant and coordinate with business customers, in particular SMEs; rise was driven by the growth of vehicle rental income, up 5.9% at constant scope and exchange rates. a the development of the Group’s digital distribution platform which enables a higher retention rate of business customers
(1) Europcar France acquired EuropHall , one of its French franchisees, in the fourth quarter of 2014 and fully consolidated it over two months. In 2014, EuropHall generated standalone revenues of approximately €23 million. 112 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION ANALYSIS OF GROUP RESULTS
and an expansion of the direct-to-brand offering in the leisure Other revenue associated with vehicle rental was impacted by segment; the fall in oil prices with however no signifi cant consequences for operating income in light of the savings in oil supplies. a the continued development of strategic and commercial partnerships to attract international customers to the Group Revenue from the franchising business was slightly down, in and its franchisees; particular due to the reduction in royalties invoiced for revenue generated by the National and Alamo brands which the Group a the implementation of a new strategy for the vans & trucks continued to operate in the EMEA region until December 2014 segment with a view to increasing the return on investment pursuant to a brand license agreement with Enterprise. for this vehicle type; a ® the accelerated expansion of the InterRent brand; (B) FLEET HOLDING COSTS 03 a the launch of new products targeting specific customer IFRS fl eet holding costs were up 10.3% at reported exchange profi les, in particular Keddy by Europcar, a dedicated service rates (up 7.6% at constant exchange rates) to €547.2 million in for brokers launched in March 2015, and Autoliberté, a 2015. These costs include fl eet depreciation charges (vehicles subscription-based urban mobility solution; and acquired and fi nanced through funding recorded on the balance a the implementation of a program for the sale of additional sheet) and payments on operating leases for vehicles including services such as supplementary insurance products and their financial component in accordance with accounting specifi c equipment (for example navigation systems, winter standards (vehicles fi nanced through leasing). equipment and child car seats, etc.). Rental payments under operating leases, by their nature, have Rental revenue, up 6.8% at constant exchange rates, benefi ted an interest component. As explained below, the accounting from an 8.1% increase in the Number of Rental Days with of fl eet fi nancing expenses is based on the type of fi nancing 57.1 million rental days in 2015. Both the business and leisure (operating lease or other type of fi nancing). To increase clarity, markets contributed to this growth in each of the Corporate the Group groups together all fl eet fi nancing expenses in its Countries, representing 44% and 56%, respectively, of management income statement and analyzes them in Adjusted consolidated rental revenue in 2015 compared with 45% and Corporate EBITDA (see “Adjusted Corporate EBITDA” under 55%, respectively, in 2014. In particular, the growth of revenue Section 3.1.1.3 “Description of the principal line items in the generated by rental activities was driven by: Group’s income statement”) and excludes these expenses from its analysis of fl eet holding costs. a increased volumes for the business segment, in particular for SMEs and vehicle replacement, in line with the sales efforts Excluding the estimated fi nancing expense included in the implemented by the Group; payments on operating leases (€55.2 million and €53.6 million, respectively, in 2015 and 2014), the change in fl eet holding a increased demand in the leisure segment supported by the costs was a result of increased activity, continued optimizing Europcar brand on all distribution channels, the accelerated of the monthly per-vehicle cost, and a slight fall in the utilization ® expansion of the InterRent brand and the successful launch rate: of the Keddy product. a fleet holding costs excluding the estimated financing on At constant exchange rates, Revenue Per Transaction Day (RPD) operating leases increased by 8.3% at constant exchange was down 1.2% in 2015. The fall in RPD was mainly driven by rates in line with the increased level of the fl eet which jumped the changing mix of customer segments (business and leisure) sharply by 8.5% to accompany growth in revenue; and brands (Europcar and InterRent) and by a longer average a rental period (+4.1%) without impacting profi tability. The Leisure fleet holding costs per vehicle improved slightly with segment benefi ted from a high RPD supported notably by the a decrease of 0.1% in the holding cost per unit monthly deployment of the ancillary program, while the deployment of average (at constant exchange rates) at €198.5 per vehicle. InterRent, which provides a lower facial RPD, continues to grow This continued improvement was due to the rationalization signifi cantly. The Business segment benefi ted from the higher of fleet composition by category to better align it with contribution of the Vehicle Replacement business that has a customers’ needs, better logistics in fl eet-in and fl eet-out longer duration than the average for the segment and which phases, harmonization of procedures for monitoring the drives a lower RPD, and from the implementation of a new mileage of vehicles covered by buy-back programs, and strategy for the vans & trucks segment with a view to renting optimization of buy-back programs; smaller vehicles for longer periods to optimize the utilization rate.
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a the rate of fl eet fi nancial utilization rate fell slightly by 0.3 and sales of additional services. At constant exchange rates, points to stand at 76.1%. Given the very sharp increase the increase in personnel costs was only slightly higher than in the average fl eet level, the Group’s operating excellence the Number of Rental Days despite the increase in the and in particular the expertise of the Revenue and Capacity minimum wage in the United Kingdom and the consolidation Management Department (present in every Corporate of EuropHall, a franchisee acquired in late 2014; Country) helped to maintain the fi nancial utilization rate in a the remainder of the increase was due to expenses relating the best standards of the sector (1) by better matching the to employees working at the head offi ces of the Group and Group’s fl eet composition with customer demand, optimizing its subsidiaries and at the Shared Services Center created in management of this demand and optimizing fl eet distribution. 2014 and includes the cost of performance shares granted Initiatives are continuing in this respect by reducing idle time to Executive Committee members and the Group’s top 100 between the delivery of new vehicles and their fi rst rental, managers. The allocation of these free shares is subject to between rentals and between the last rental and the sale or the achievement of multi-annual fi nancial targets and the return of vehicles, by improving procedures for managing relative performance of Europcar’s share price. See Note 6 accidents and repairs, and more generally by improving the to the consolidated fi nancial statements for the fi scal year fl eet utilization rate operated via the low-cost InterRent brand. ended December 31, 2015.
(C) FLEET OPERATING, RENTAL AND REVENUE (E) NETWORK AND HEAD OFFICE OVERHEAD RELATED COSTS COSTS Fleet operating, rental and revenue related costs increased by Network and head offi ce overhead costs increased by 9.6% 5.9%, (3.5% at constant exchange rates), reaching €727 million to €218.5 million. in 2015 in the context of a substantial increase in revenue. This increase was primarily due to the increase in marketing a fl eet operating costs increased by 1.6% at reported exchange expenses intended to support revenue growth, notably with the rates and fell by 0.9% at constant exchange rates principally expansion of InterRent and the launch of Keddy by Europcar®, due to better management of vehicle damage and a reduction a dedicated service for tour-operators, travel agencies in maintenance costs. Insurance costs per day continued to and brokers. In addition, the Group continued to invest to fall in 2015 primarily due to changes in the franchise buy- strengthen its IT system to better address its customer needs. back policy and better fraud detection on damage caused This increase also includes expenses related to the opening of by Europcar customers to third-party vehicles; InterRent stations and, to a lesser extent, Europcar stations, a rental related costs increased by 6.5% (3.5% at constant and to the effect of the consolidation of EuropHall, acquired in exchange rates) despite an increase of over 8% in the Number late 2014 and integrated in early 2016. of Rental Days. This performance was made possible by an optimization of transport costs and vehicle-washing costs in (F) AMORTIZATION AND DEPRECIATION a context of increase in average rental length. It also refl ects EXPENSE, EXCLUDING VEHICLE FLEET the fall in the price of oil; Amortization and depreciation expense excluding vehicle fl eet a revenue related fees and commissions increased by 9.5% at increased by €1 million to stand at €32.8 million in 2015. This reported exchange rates and by 6.8% at constant exchange change is explained by the slight increase in amortization rates, an increase that was in line with that of vehicle rental relating to the Group’s IT systems linked to the increase in revenue. investments in this fi eld.
(D) PERSONNEL COSTS (G) OTHER INCOME Personnel costs stood at €347.4 million in 2015, an increase Other income and expenses increased by €7.3 million to of 9.2% (7.2% at constant exchange rates). The €23.5 million stand at €14.2 million for the year ended December 31, 2015. increase at constant exchange rates is linked primarily to the This line item includes income from commercial agreements, Group’s network of stations due to increased activity and to a capital gains or losses from disposals of fi xed assets, and other lesser extent the implementation of a gradual increase in the operating income and expenses including a bonus due to a minimum wage in the United Kingdom. lapsed debt. a almost 70% of that increase was the result of personnel costs in the network to sustain increased business volumes
(1) Source: publications by Avis, Hertz and Sixt.
114 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION ANALYSIS OF GROUP RESULTS
(H) OTHER NON-RECURRING INCOME (I) ADJUSTED CORPORATE EBITDA AND EXPENSES Adjusted Corporate EBITDA is defi ned as recurring operating In 2015, other non-recurring income and expenses amounting income before depreciation and amortization not related to the to €(61.8) million included the following: fl eet, and after deduction of the interest expense on liabilities related to rental fl eet fi nancing. a restructuring costs of €24 million including severance costs relating to the implementation of measures to streamline the Adjusted Corporate EBITDA increased by 17.8% (15.6% German network and some local headquarters; at constant exchange rates) from €212.8 million in 2014 to €250.6 million in 2015. Adjusted Corporate EBITDA margin a fees relating to the initial public offering for €11.5 million. as a percentage of revenue continued to grow, increasing Other fees were deducted from issuance premiums for from 10.8% in 2014 to 11.7% in 2015. This increase refl ects 03 €23.8 million; excellent operational leverage, cost management and positive a a provision of €45 million based on the best estimate of the change in fi nancing costs achieved by the Group even as it fi nancial risk (at the current stage of the procedure with the continues to invest in IT, sales and marketing development in French Competition Authority) in the event that the French order to support profi table growth. Competition Authority were to impose a fi ne notwithstanding Given the signifi cant growth in revenue, the margin after variable the Group’s arguments in defense of its position (see Note 32 costs(1) increased by €55.9 million at constant exchange rates. to the consolidated fi nancial statements for the fi scal year The margin rate also continued to rise to stand at 43.1% due ended December 31, 2015); and specifi cally to an improvement in the monthly unit cost for a a net reversal of €23.4 million relating to the execution of holding and operating fl eet (2) which stood at €253, down 0.7% a settlement agreement with Enterprise on April 29, 2015 at constant exchange rates. This performance was also made putting an end to all legal proceedings with that c ompany possible by optimized management of the vehicle utilization rate (see Note 32 to the consolidated fi nancial statements for the which stood at 76.1% in 2015, down by 0.3 points from 2014 year ended December 31, 2015). despite a signifi cant increase in the level of the fl eet operated. In 2014, other non-recurring income and expenses amounting Fleet fi nancing (estimated interest under operating leases and to €(115.7) million including the following: fi nancing expenses relating to fi nancing the fl eet on the balance sheet) fell by 4.6% from €126.5 million in 2014 to €120.7 million a restructuring costs of €22.8 million resulting in part from in 2015 despite an 8.5% increase in average fl eet level in 2015 the measures implemented by several of the Group’s compared with 2014. The Group refi nanced the whole of its entities or announced before the end of the year to lower fl eet-fi nancing debt between July 2014 and mid-2015, thus the head offi ces’ cost structure. Moreover, the Group used signifi cantly lowering its cost (see Section (J) “Net fi nancing outside service providers for a total of €9.8 million in 2014 costs” and Section 3.2 “Liquidity and capital resources” of this in connection with the restructuring of the head offi ces and Registration Document). the network; These positive items were partially offset by the increase a a net charge of €59.4 million in 2014 in connection with the in expenses related to network staff due to the increase in litigation and arbitration with Enterprise including attorneys’ business, the acquisition of EuropHall and the marketing and fees, the cost of removing the logo from certain stations, the communications investments set out above. one-off impairment of the remaining value of the right to use the National and Alamo brands, and a provision in an amount equal to the risk of certain of the damages that the Group was reasonably able to estimate as of the closing date (see Note 10 to the Group’s consolidated fi nancial statements for the year ended December 31, 2015); a a charge of €23.9 million relating to a multi-year compensation program whose objectives were achieved in 2014.
(1) The margin after variable costs corresponds to consolidated total revenues net of fl eet holding costs (excluding estimated interest included in operating lease rents) and costs relating to the operation, rental and proceeds of fl eet activities. (2) Excluding interest expenses included in charges relating to fl eet operating leases and excluding insurance costs.
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(J) NET FINANCING COSTS (L) SHARE OF PROFIT/(LOSS) IN COMPANIES ACCOUNTED FOR UNDER THE EQUITY IFRS net fi nancing costs amounted to €227.6 million in 2015 METHOD compared with €232.7 million in 2014. In 2015, they mainly included: The share of profi t/loss of companies accounted for under the equity method represented a loss of €12.1 million in a €65.5 million in interest charges relating to the fi nancing of 2015 compared with a loss of €6.5 million in 2014 due to the the vehicle fl eet recorded on the balance sheet, compared increase in losses generated by Car2go Europe which is in the with €72.9 million in 2014, down in spite of the substantial geographic development phase. In 2015, this item included the increase in average fl eet due to the fi nancing implemented result of Ubeeqo, acquired in November 2014. between mid-2014 and May 2015. Overall, the maturity of these instruments was extended and their cost signifi cantly reduced. See Section 3.2.3 “Liquidity and capital resources” ; (M) NET PROFIT/(LOSS) FOR THE PERIOD a €56.3 million in interest charges relating to other borrowings Net profi t/loss presented a loss of €55.8 million in 2015 compared (subordinated notes in corporate debt) compared to with a loss of €111.7 million in 2014. This signifi cant improvement €78.5 million. This substantial drop is linked to the was driven by growth in operating performance and a signifi cant restructuring of corporate debt that took place in mid-2015 reduction in fi nancing costs. However, net profi t for 2015, which in connection with the IPO. Since the end of June 2015, the was a transitional year for the Group, includes non-recurring Company has only one corporate bond issue for €475 million items, in particular the costs associated with the IPO and the bearing interest at 5.75% (see Section 3.2.3 “ Liquidity and reshape of the capital structure (approximately €95 million), capital resources ” ); the net negative impact of some proceedings (approximately €22 million) . In 2014, net profi t also included non-recurring items a €56 million redemption price linked to the repayment of both specifi cally related to proceedings (provisions and impairment of the €324 million of outstanding subordinated notes due 2017 intangible assets in relation to disputes with Enterprise) and the bearing interest at 11.5% and the €400 million of outstanding cost of refi nancing fl eet-based debt. subordinated notes due 2018 bearing interest at 9.375%; a €15.4 million in respect of current amortization of transaction (N) ADJUSTED NET PROFIT/(LOSS) FOR 2015 costs for the notes; and Given the specifi city of 2015 for the Group in relation to its IPO a €26.9 million in respect of the write-off of transaction costs and the overhaul of its fi nancial structure, an adjusted net profi t relating to the notes redeemed. of approximately €128 million was estimated. This adjusted net profi t excludes exceptional operating and fi nancial items before In 2014, fi nancing expense also included repayment premiums profi ts from companies consolidated using the equity method paid following the early repayment of the fleet-based after pro forma adjustment of fi nancing expense to account for €350 million bond issue and its refi nancing which took place the full-year effect of the repayment of the €324 million note, in October 2014 (€17.1 million) and the complete amortization the refi nancing of the €400 million note by way of the issuance of transaction costs related to the notes. of a senior note for €475 million bearing interest at 5.75%, and
(K) INCOME TAX BENEFIT/(EXPENSE) Income tax increased by €27 million from €10.7 million in 2014 to €37.6 million in 2015. The improvement in the performance of the Group and Corporate Countries led to a rise in tax liabilities but also allowed the recognition of tax assets in respect of tax loss carryforwards for certain countries. The 2015 tax expense also takes account of some provisions related to ongoing tax audits.
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the refi nancing of RCF and SARF credit facilities on better terms. The table below shows the reconciliation of IFRS net income to the estimated pro forma net profi t/(loss):
All data in millions of euros FY 2015
IFRS NET LOSS (56) Pro forma on Interest on c orporate h igh y ield bonds 26 Pro forma t ransaction cost amortization 7 Reversal of c orporate h igh y ield b onds redemption premium 56 Reversal of the write off associated with c orporate h igh y ield b onds reimbursement 27 03 Reversal of other exceptional income / expenses * 56 Reversal of s hare of profi t/(loss) of associates 12
ESTIMATED PRO FORMA NET INCOME 128
* Includes notably costs associated with the IPO, the net impact of some proceedings and provisions for ongoing tax audits.
3.1.2.3 Revenue and a djusted Corporate EBITDA by o perating s egment In this Section, the revenue of each Corporate Country includes revenue from franchising business on its territory.
(A) EUROPE The table below shows (i) the allocation of revenue generated in Europe by Corporate Country and other European countries and (ii) Adjusted Corporate EBITDA generated in Europe for the years ended December 31, 2015 and 2014:
Year ended December 31 Change at constant In millions of euros 2015 2014 Change exchange rates
Revenue Germany 544.5 518.3 5.1% 5.1% United Kingdom 465.2 410.4 13.4% 2.1% France 360.8 325.4 10.9% 10.9% Italy 219.5 205.8 6.7% 6.7% Spain 218.0 200.3 8.8% 8.8% Portugal 103.8 94.3 10.1% 10.1% Belgium 62.5 60.3 3.6% 3.6% Other European countries (franchises) 17.9 21.4 (16.4)% (17.7)%
TOTAL EUROPE 1,992.2 1,836.2 8.5% 5.9%
ADJUSTED CORPORATE EBITDA (EUROPE) 191.0 151.4 26.2% 22.6%
REVENUE brand mixes. The performance of total revenue was however affected by falling oil prices which were behind the 5.7% drop Revenue of the Europe operating segment increased by 8.5% in other proceeds associated with car rentals to €100.1 million (5.9% at constant exchange rates) to €1,992 million. Proceeds (up 4.9% at constant exchange rates) with no signifi cant impact from vehicle rental activities stood at €1,860 million, up 9.6% on Adjusted Corporate EBITDA. (7% at constant exchange rates and 5.9% excluding EuropHall, the French franchisee acquired in the fourth quarter of 2014). Germany This increase can be seen in each of the Corporate Countries The Group’s revenue in Germany increased by 5.1% to and is primarily the result of a signifi cant increase in the Number €545 million. This increase was due primarily to the increase of Rental Days. The business and leisure markets had similar in the Number of Rental Days as well as a favorable trend in increases in revenue. At constant exchange rates, RPD RPD. Performance was supported in particular by development decreased slightly due to changes in the regional, segment and initiatives in the SME sector and the implementation of sales
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tools for complementary products sold directly in the leisure Spain segment. This growth in activity was accompanied by a Revenue generated by the Group in Spain increased by comprehensive review of the network aimed at optimizing €17.7 million, or 8.8%, to €218 million for the year ended station geography and deploying business skills to allow gains December 31, 2015. This increase was driven by the signifi cant in productivity. increase in the Number of Rental Days in the leisure and United Kingdom business segments. Buoyed by the growth of tourism, the InterRent brand continued its expansion. In parallel, Spain The Group’s revenue in the United Kingdom increased by 2.1% at launched many initiatives that helped develop the business constant exchange rates to €466 million for 2015. This increase segment, particularly in terms of SMEs and car replacement/ was due to a signifi cant increase in the Number of Rental Days leasing. RPD dipped during the period mainly due to the primarily supported by growth in vehicle replacement activity success of InterRent and an increase in average rental length. and the vans & trucks segment, the expansion of InterRent, and the launch of the product specifi cally targeting brokers, Keddy Portugal by Europcar, which more than made up for the winding-up of The Group’s revenue in Portugal increased by €9.5 million, operations at National and Alamo in the fi rst quarter of 2015. or 10.1%, to stand at €104 million for the year ended This change to the business mix had an adverse effect on RPD December 31, 2015. This significant increase was driven which was partially offset by the continuation of the program to fi rstly by a substantial increase in the Number of Rental Days increase sales of additional services. and secondly by sustained growth in RPD despite heightened France competition. The Group’s revenue in France increased by 10.9% to Belgium €361 million. Excluding EuropHall (acquired in the fourth The Group’s revenue in Belgium increased by 3.6% to stand quarter of 2014), growth was 5.1% supported by the increase at €62.5 million for the year ended December 31, 2015. This in the Number of Rental Days in both the business segment increase was caused primarily by the growth in the Number of (notably for SMEs) and leisure segment due in particular to the Rental Days, specifi cally in the business segment, supported expansion of InterRent with a slight increase in RPD supported by initiatives to develop the van and trucks segment and SME by the program to increase sales of additional services. In customers. RPD fell during the period due to changes in the addition, new stations were opened in city center locations to business mix and an increase in average rental length of 5.6%. capture the growth related to changes in how vehicles are used This increase was achieved despite the impact of the threat of and new products were launched (for example the Autoliberté terrorist attacks that paralyzed the Belgian capital for several subscription package and electric vehicle rentals). Activity in the days in the fourth quarter of 2015. fourth quarter of 2015 was slightly impacted by the attacks in November, but the very balanced nature of operations in terms Other European countries (franchises) of geographies (airport/off-airport) and customer segments Revenues from franchisee business in other European countries (business vs. leisure) helped to offset the slight slowdown in (i.e. excluding Corporate Countries) fell by €3.5 million to stand activity witnessed by some agencies in the fi rst few weeks at €18 million for the year ended December 31, 2015. Overall, after these events. there was a slight improvement in Europcar franchises in other Italy European countries due in part to the Group’s initiatives under the Fast Lane program which also benefi ted the franchisee The Group’s revenue in Italy increased by €13.7 million, or 6.7%, network. However, this improvement was limited by the to stand at €220 million for the year ended December 31, 2015. reduction in royalties invoiced for revenue generated by the This growth was driven by an increase in the Number of Rental National and Alamo brands run by the Group in Europe, the Days seen across customer segments thanks in particular to Middle East and Africa until December 2014 pursuant to a the expansion of InterRent and initiatives launched to boost license agreement with Enterprise (see Section 2.5 “Regulatory, the vans and trucks segment. RPD fell over the period as a Legal and Arbitration Proceedings”). result of the effects of the business mix, which are refl ected favorably in the associated fl eet cost, and by the increase in For information, revenue from franchising business in the average rental length in a context of sustained competition. Corporate Countries totaled €14.5 million in 2015 compared In this context, Italy continued to encourage direct sales and with €14.9 million in 2014 with the acquisition of EuropHall, a optimize its costs, in particular unit fl eet costs which were down French franchisee, in the fourth quarter of 2014 offsetting the nearly 10% in 2015 compared with 2014. rise in royalties.
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ADJUSTED CORPORATE EBITDA leverage, the favorable impact of fl eet refi nancing operated between July 2014 and mid-2015, the continued improvement In 2015, Adjusted Corporate EBITDA in Europe increased by of per-unit fleet holding costs, and the first benefits of the €40 million (up 26.2%, or 22.6% at constant exchange rates). implementation of the Shared Services Center in Portugal All Corporate Countries contributed to this improvement. The in early 2014 despite the increase in personnel costs and European Adjusted Corporate EBITDA margin improved by investments in sales and marketing to support activity. 1.4 pt to 9.6%. This increase refl ects the effect of operational
(B) REST OF WORLD The table below shows revenue and Adjusted Corporate EBITDA generated in the Rest of World for the years ended December 31, 2015 03 and 2014:
Year ended December 31, Change at constant In millions of euros 2015 2014 Change exchange rates
Revenue Australia and New Zealand 137.3 132.3 3.8% 4.2% Other Rest of World countries (franchises) 18.8 17.7 6.2% 6.2%
TOTAL REST OF WORLD 156.1 150.0 4.1% 4.4%
ADJUSTED CORPORATE EBITDA 32.1 27.9 15.1% 15.0%
REVENUE in the existing franchise network, the collective benefi t of the initiatives taken in connection with the Fast Lane program over Australia and New Zealand the entire network, and the integration of new franchisees. As The Group’s revenue in Australia and New Zealand increased by of the end of 2015, the Group was present in 114 other Rest 3.8% (4.2% at constant exchange rates) to stand at €137 million of World countries. for the year ended December 31, 2015. This growth was the result of an increase in the Number of Rental Days in both ADJUSTED CORPORATE EBITDA the leisure and business segments and of the very marked The Group’s Adjusted Corporate EBITDA in the Rest of World increase in RPD due to the increase in sales of additional increased by 15.1% (15.0% at reported exchange rates), or services. Revenue from franchising business in Australia was €32.1 million, for the year ended December 31, 2015. The €1.4 million for the year ended December 31, 2015. Group’s Adjusted Corporate EBITDA margin increased by Other Rest of World countries (franchises) 2 points to 20.5%. This improvement in Adjusted Corporate EBITDA margins was the result of substantial growth in revenue Revenue from franchising business in the other Rest of World in Australia and New Zealand and of significant growth in countries increased by 6.2% to €18.8 million for the year ended revenue from franchising business. December 31, 2015. This increase was due to organic growth
(C) ELIMINATION AND HOLDINGS The table below shows revenue recorded in Elimination and Holdings and the Adjusted Corporate EBITDA of Elimination and Holdings for the years ended December 31, 2015 and 2014:
Year ended December 31,
In millions of euros 2015 2014 Change
REVENUE (6.3) (7.3) (13.7)%
ADJUSTED CORPORATE EBITDA 27.6 33.5 (17.6)%
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REVENUE ADJUSTED CORPORATE EBITDA Between 2014 and 2015, Elimination and Holdings revenue Adjusted Corporate EBITDA of Elimination and Holdings increased by €1 million to €(6.3) million for the year ended decreased by €5.9 million to stand at €27.6 million for the December 31, 2015. This change was primarily due to changes year ended December 31, 2015. This fall is linked primarily in the elimination of intragroup royalties billed with respect to to the recognition of the cost of performance shares granted revenue generated by the National and Alamo brands (see to members of the Executive Committee and the top 100 above ). managers of the Group as part of the Group’s IPO. The allocation of these free shares is subject to the achievement of multi-annual fi nancial targets and the relative performance of Europcar’s share price.
3.2 LIQUIDITY AND CAPITAL RESOURCES
3.2. 1 General o verview
The IPO on June 29, 2015 made it possible for Europcar to SARF’s maturity was extended by two years to 2019. The reshaped its capital structure and enhanced its corporate interest rate on the FCT Senior Notes (before the amortization credit profi le. Thanks to the implementation of its Fast Lane period) decreased from Euribor+220bps to Euribor+170bps. In transformation plan, Europcar strengthened its business model addition, swap instruments covering the SARF structure have leading to a strong improvement of its fi nancial performance been extended to 2019. and credit profi le. The completion of these transactions brings signifi cant benefi ts Europcar has thus fully redeemed its 11.5% senior subordinated to the Group, including: notes due 2017 in an aggregate principal amount of €324 million a a signifi cant reduction in its overall corporate leverage; and its 9.375% senior subordinated notes due 2018 in an aggregate principal amount of €400 million (including a payment a a signifi cant reduction in its interest expense; of redemption premium for a total amount of €56 million) with a an extension of the maturities on most of its indebtedness; a portion of the proceeds of the €475 million capital increase from the IPO (€441 million net proceeds) and the proceeds of a the establishment of a simpler and more fl exible long-term the 5.75% notes due 2022, issued on June 10, 2015 (1). capital structure; and During the fi rst half of 2015, Europcar also implemented its a the extension and increase of the hedging of the exposure New Senior Revolving Credit Facility (RCF). Signed on May 12, to interest rate fl uctuations. 2015, it entered into effect on May 28, 2015. The proceeds Consequently, the Group considerably reduced its were used to repay the Existing Senior Revolving Credit Facility corporate debt leverage (4) which stood at 0.9x at the end of (€300 million as of December 31, 2014). This new €350 million December 2015 compared with 2.7x at the end of 2014. Senior Revolving Credit Facility matures in 5 years and bears interest at a rate of Euribor+250bps (2 ). As a result of the deleveraging and based on the improved profi tability of the Company over recent years, rating agencies Finally the Group amended its Senior asset Revolving Facility Moody’s and S&P revised the Group’s ratings in July 2015. (SARF) (3 ). The amendments signed on May 12, 2015, entered Moody’s has upgraded the corporate rating (stable outlook) by into effect on June 17, 2015. The amount of FCT Senior 2 notches to B1 from B3 (positive watch). S&P has assigned Notes that may be issued by the FCT Issuer under the SARF, a B+ corporate rating (stable outlook) from B (positive watch). which is a fl eet asset-backed fi nancing, was increased from €1 billion to €1.1 billion to support operating growth, and the
(1) Issue price of 99.289%. (2 ) For a leverage ratio below 2x and Euribor +275 bps for leverage above 2x. (3 ) The line, intended for fl eet fi nancing, is rated A by the S&P agency. (4 ) Corporate Net debt / Adjusted corporate EBITDA.
120 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION LIQUIDITY AND CAPITAL RESOURCES
3.2.1.1 Financial Resources was €2,065 million (compared with €2,171 million as of December 31, 2014). The Group considers €1,659 million The Group’s principal fi nancing needs include fl eet fi nancing, of that amount to relate to fl eet fi nancing (compared with working capital requirements, capital investment, interest €1,396 million at the end of 2014). In that regard, this payments and loan repayment. The Group may also need indebtedness is generally secured or backed by assets, fi nancing for acquisitions. primarily vehicles. In addition, in order to fi nance its fl eet, the The Group’s principal regular sources of liquidity are its Group also uses operating leases, the outstanding amount (1) operating cash fl ows as well as its fi nancings, a substantial of which totaled €1,323 million as of December 31, 2015 portion of which is dedicated to and secured by the portion of (compared with €1,284 million as of December 31, 2014). the fl eet that is recorded on the balance sheet. The Group’s In accordance with IFRS, this amount is not recorded on 03 ability to generate cash fl ow from its operating activities in the the balance sheet. See Section 3.2.3 “Description of the future will depend on its future operating performance which financing as of December 31, 2015” of this Registration depends to a certain extent on external factors including Document for a more detailed description of the Group’s the risk factors described in Section 2 “Risk factors” of the fi nancing. Registration Document . The Group also has cash and cash The Group believes that its financing needs for its daily equivalents to fi nance its ongoing requirements related to its operations in 2016 will primarily include working capital activity. Moreover, the Group has cash and cash equivalents requirements, interest expense and the repayment of loans. that are considered restricted. Restricted cash is cash that is (i) used to cover future settlement of insurance claims or (ii) not immediately available to fi nance the activity of subsidiaries. This 3.2.1.2 Debt includes, in particular, cash that is held within certain special purpose vehicles set up for vehicle rental activities. As of December 31, 2015, the total amount of the Group’s consolidated corporate net debt was €235 million compared In 2015, the Group’s primary sources of fi nancing were as with €581 million as of December 31, 2014. follows: On the same date, the total Net Fleet Debt, which is asset- a Cash generated from operating activities, which totaled backed, amounted to €2,821 million compared with €10.9 million in 2015 compared with €108.5 million in €2,567 million as of December 31, 2014. Of this amount, 2014. Operating profi t before changes in working capital €1,498 million was recorded in the balance sheet with the requirement increased by €42.1 million to €266.2 million, remainder of €1,323 million corresponding to operating leases. reflecting improved Group performance. However, fleet- The estimated debt equivalent of fl eet operating leases, which related effects recorded on the balance sheet to support is recorded off-balance sheet, corresponds to the net book activity and effects related to changes in working capital value of the applicable vehicles calculated on the basis of their excluding fl eet affected by non-recurring items more than purchase price and depreciation rates (according to contracts offset this increase; with carmakers). In accordance with IFRS, this amount is not a Available Cash. Cash and cash equivalents totaled recorded on the balance sheet. In addition, the loan-to-value (2) €146.1 million as of December 31, 2015 (compared with ratio (LTV) as of December 31, 2015 was 94% (compared €144 million as of December 31, 2014). The Group also has with 88.5% as of December 31, 2014). In 2015, total average restricted cash (defi ned as cash used to cover the future net debt for the fl eet stood at €3,127 million. settlement of insurance claims or cash that is not immediately available to fi nance the activity of subsidiaries) which totaled €97.4 million as of December 31, 2015 (compared with 81.8 million as of December 31, 2014); a Indebtedness. As of December 31, 2015, the total amount of the Group’s consolidated gross indebtedness
(1) The estimated debt equivalent of fl eet operating leases corresponds to the net book value of applicable vehicles, which is calculated on the basis of the purchase price and depreciation rates of corresponding vehicles (based on contracts with car manufacturers). (2) Corresponds to the net debt of Securitifl eet Holding, Securitifl eet companies and EC Finance plc (aggregate amount of €1,019 million at the testing date) divided by the total value of the net assets on the balance sheets of these companies (€1,084 million as of December 31, 2015).
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The table below presents a breakdown of Net Corporate Debt and Total Net Debt (including the estimated outstanding value of the fl eet fi nanced through operating leases):
As at December 31,
In millions of euros 2015 2014
Senior Subordinated Secured 11.50% Notes due in 2017 (1) - 324 Senior Subordinated Unsecured 9.375% Notes due in 2018 (1) - 400 Senior Unsecured 5.75% Notes due in 2022 475 - Senior Revolving Credit Facility 81 201 FCT Junior Notes (2), accrued interest, capitalized costs of fi nance agreements and other (3) (4) (150) (150) GROSS CORPORATE DEBT ON BALANCE SHEET (A) 406 774 Cash in operating and holding entities and short-term investments (5) (171) (193) NET CORPORATE DEBT ON BALANCE SHEET (B) 235 581 EC senior secured notes 5.125%, due in 2021 350 350 Senior asset Revolving Facility 658 418 FCT Junior Notes (2) , capitalized costs of fi nancing contracts and other 142 132 Financing of the fl eet in the United Kingdom, Australia and other fl eet fi nancing facilities 509 497 GROSS FLEET DEBT RECORDED ON THE BALANCE SHEET (C) 1,659 1,396 Cash in fl eet-holding entities and short-term investments in fl eet (161) (113) NET FLEET DEBT RECORDED ON THE BALANCE SHEET (D) 1,498 1,283 Gross debt on balance sheet (A)+(C) 2,065 2,171 Net debt on balance sheet (B)+(D) 1,733 1,864 ESTIMATED DEBT EQUIVALENT OF FLEET OPERATING LEASES OFF BALANCE SHEET (6) (E) 1,323 1,284 NET FLEET DEBT INCLUDING FLEET-RELATED OFF BALANCE SHEET COMMITMENTS (D)+(E) 2,821 2,567
TOTAL NET DEBT INCLUDING FLEET-RELATED OFF BALANCE SHEET COMMITMENTS (B)+(D)+(E) 3,057 3,148
(1) Notes redeemed or refinanced over the first half of 2015 in connection with the IPO. See Section 3.1.2. (2) The subscription proceeds of the FCT Junior Notes subscribed by Europcar International SAS (“ECI”) provide the overall credit enhancement and, when applicable, an additional liquidity requirement. The FCT Junior Notes are used only to finance the fleet debt requirement. FCT Junior Notes are subscribed for by Europcar International using available cash or drawings on the Senior Revolving Credit Facility. (3) For countries where fleet costs are not financed through dedicated entities (i.e. Securitifleet entities), the cash used to finance the fleet, which could have been financed by fleet debt, is restated from the net fleet debt with a de-risk ratio. (4) Including non-accrued interest on held-to-maturity investments (Euroguard). (5) Specifically includes the Group’s insurance program (see Section 2.7 “Insurance and Risk Management”). (6) The estimated debt equivalent of fleet operating leases corresponds to the net book value of applicable vehicles, which is calculated on the basis of the purchase price and depreciation rates of corresponding vehicles (based on contracts with car manufacturers). The Company’s financial management verifies the consistency of the external information that is provided.
3.2.2 Analysis of c ash fl ows
3.2.2.1 Analysis of management c ash fl ows past disbursements in connection with debt refi nancing, (ii) fi nancial costs which due to their exceptional nature are not The Group believes that corporate free cash fl ow is a useful representative of the trends in the Group’s results of operations, indicator because it measures the Group’s liquidity based on its (iii) fi nancial investments, and (iv) cash fl ows in relation to the ordinary activities including net fi nancing costs on borrowings fleet analyzed in a separate manner as the Group makes dedicated to fleet financing without taking into account (i) acquisitions through asset-backed fi nancing.
122 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION LIQUIDITY AND CAPITAL RESOURCES
The table below shows the calculation of corporate free cash related needs. This presentation differs from the IFRS statement flows, as well as the regrouping of certain items deemed of cash fl ows primarily due to the analytic regrouping carried out signifi cant in analyzing the Group’s cash fl ow, including cash and the items that do not affect cash fl ow which vary based on fl ow relating to changes in the rental fl eet, in fl eet-related trade the fi nancial indicator used as the starting point (in this case, receivables and trade payables, and in fl eet-related fi nancing Adjusted Corporate EBITDA compared with pretax profi t in the and other working capital facilities, principally used for fl eet- IFRS statement of cash fl ows).
MANAGEMENT CASH FLOWS All data in millions of euros FY 2015 FY 2014 03 Adjusted Corporate EBITDA 251 213 Non-recurring expenses (73) (28) Acquisition of intangible assets and property, plant and equipment, net of disposals (24) (22) Changes in provisions and employee benefi ts 111 Changes in non-fl eet working capital (29) 16 Income tax paid (40) (31) Corporate operating free cash fl ow 86 158 Cash interest paid on corporate High Yield bonds (65) (74) Cash fl ow before change in fl eet asset base, fi nancing and other investing activities 21 84 Change in fl eet assets base, net of drawings on fl eet fi nancing and working capital facilities (87) (56) Proceeds from disposal of fi nancial asets, net (8 ) (10 ) Aquisition of subsidiaries, net of cash acquired (24) (46) Capital increase 448 - Change in High Yield (308) (17) Transaction cost cash out and other (20) (19) Net change in cash before FX effect 22 (63) Cash and cash equivalents at beginning of period 206 267 Effect of foreign exchange conversions 12
CASH AND CASH EQUIVALENTS AT END OF PERIOD 229 206
CORPORATE FREE CASH FLOW a Other non-recurring operating income and expenses. This item included the cash out related to the reorganization Corporate free cash fl ow is defi ned as free cash fl ow before programs initiated in the context of Fast Lane. In 2015, it also the impacts of the fl eet and acquisitions of subsidiaries. Free included the payment of €12.5 million to Enterprise following cash fl ow was refl ected in the generation of €86 million of cash the signing of a settlement agreement putting an end to all in 2015 (compared with €158 million in 2014) also affected by legal proceedings with that company (see Note 10 to the non-recurring items: fi nancial statements for the year ended December 31, 2015), a Adjusted Corporate EBITDA. The increase in Adjusted and bonus payments relating to the multi-year compensation Corporate EBITDA amounted to €38 million, rising from program arising from the success of the Fast Lane plan over €212.8 million in 2014 to €250.6 million in 2015. This increase the period 2012-2014 (approximately €23 million); refl ects excellent operational leverage, cost management a Changes in non-fleet working capital represent a cash and positive change in financing costs achieved by the outfl ow of €29 million, due in particular to the signifi cant Group even as it continues to invest in sales and marketing increase in the Group’s activity. This item is also affected development in order to support profi table growth; by approximately €8 million due to the settlement of tax payables relating to previous years;
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a Acquisition of intangible assets and property, plant and Cash outfl ow relating to acquisitions of subsidiaries net of cash equipment, net of disposals. This item consists mainly of IT acquired totaled €24 million in 2015 compared with €46 million investments and is slightly up on 2014 in line with the Group’s in 2014. In 2015, these items included the Group’s investments desire to strengthen its digitalization program to support the in new mobility solutions, in particular the subscriptions Group’s transformation; to the capital increases of Ubeeqo (€5 million) and Car2go (€12.5 million) to support their development and the acquisition a Income taxes paid. In 2015, income taxes paid represented of E-Car Club. In 2014, these items included cash outfl ows a cash outfl ow of €40 million compared with a cash outfl ow resulting from the acquisitions of Ubeeqo and EuropHall (French of €31 million in 2014. This increase is due primarily to the franchisee) and the subscription to Car2go’s capital increase. Group’s improved operating and fi nancial performance in the Group’s various country subsidiaries. In addition to the usual fi nancing transactions primarily related to the rental fl eet, the IPO and the reshaping of the Group’s OTHER COMPONENTS OF CASH FLOW capital structure strongly impacted cash flows in 2015. In particular: Net interest paid on High Yield borrowings fell sharply due to the a repayment of the €324 million and €400 million notes and the the IPO gross proceeds amounted to €475 million. As of issuance of a new €475 million bond loan on June 10, 2015. December 31, 2015, the net proceeds after related fees This bears interest at 5.75%. Interest accrued on this loan are already paid amounted to €448 million. As a reminder, part paid twice a year, in June and December. of the fees for the IPO (approximately €24 million) were deducted from issuance premiums; The item “Changes in the fl eet recorded on the balance sheet, a rental fl eet related receivables and payables, and borrowings the new €475 million senior notes due 2022 were issued at dedicated to fl eet fi nancing and working capital” covers: 99.289% resulting in a cash infl ow of €471.6 million. They bear interest at 5.75%; a on the one hand, elements relating to the fl eet. Given the a asset-backed financing, the net impact of the various the proceeds from both the IPO and these new notes were components (change in the fl eet, working capital and fl eet mainly used to redeem both the €324 million Outstanding fi nancing) is primarily the result of temporary lags between Subordinated Notes Due 2017 and the €400 million (i) the delivery of a vehicle and payment for this delivery, and Outstanding Subordinated Notes Due 2018 and to pay the (ii) entry into securitization and fi nancing of these vehicles. associated redemption premiums for an aggregate amount Changes from one year to the next may thus be signifi cant; of €56 million. and Finally, payments of financing transaction and other costs a o n the other hand, changes in credit facilities. totaled €20 million in 2015 and €19 million in 2014 as a result of the refi nancing transactions carried out during those two years. In 2015, the net impact of these two subjects represented a cash outfl ow of €87 million, compared with a cash outfl ow of €55 million in 2014. The change refl ects in particular reduced 3.2.2.2 Analysis of c ash fl ows a ccording use of the Senior Revolving Credit Facility (RCF) given the cash to IFRS available following the capital increase. The Group’s principal cash flow drivers are its operating Acquisitions and proceeds from the disposal of financial performance as refl ected in its operating profi t before changes assets represented a net cash outfl ow of €8 million in 2015 in working capital, cash related to financing transactions, compared with €10 million in 2014. This item primarily includes interest on its corporate debt, cash fl ow relating to acquisitions acquisitions of financial assets by the captive insurance and disposals of the fl eet and cash from (used by) investments. company Euroguard.
IFRS
In millions of euros 2015 2014
Net cash generated from (used by) operations (166.1) (89.7) Net cash used by investing activities (55.2) (76.6) Net cash generated from (used by) fi nancing activities 243.3 103.3
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS AFTER EFFECT OF FOREIGN EXCHANGE DIFFERENCES 22.0 (63.0)
124 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION LIQUIDITY AND CAPITAL RESOURCES
(A) NET CASH GENERATED FROM (USED BY) OPERATIONS The table below summarizes the Group’s net cash generated from operations for the years ended December 31, 2015 and 2014.
IFRS
In millions of euros 2015 2014
Operating income before changes in working capital 266.2 224.0 Changes in rental fl eet and in fl eet working capital (198.0) (165.5) Changes in non-fl eet working capital (57.3) 50.0 Cash generated from operations 10.9 108.5 03 Income taxes received/paid (39.7) (31.4) Net interest paid (137.3) (166.8)
NET CASH GENERATED FROM (USED BY) OPERATIONS (166.1) (89.7)
CASH GENERATED FROM OPERATIONS INCOME TAX RECEIVED/(PAID) Net cash generated from operations represented a cash Income taxes paid represented a cash outfl ow of €39.7 million infl ow of €10.9 million in 2015 compared with a cash infl ow of in 2015 compared with a cash outfl ow of €31.4 million in 2014. €108.5 million in 2014. While operating profi t before changes in This increase is due primarily to the Group’s improved operating working capital requirements generated an additional resource and fi nancial performance. of €42.2 million due to improvements in the Group’s operating profi tability between the two years, this change was largely NET INTEREST PAID offset by non-recurring items affecting changes in working Net interest paid represented a cash outfl ow of €137.3 million capital requirements and by an increase in the resources in 2015 compared with a cash outfl ow of €166.8 million in needed to acquire new fl eet so as to sustain the signifi cant 2014. This improvement refl ects the benefi t of the complete rise in the Group’s operations. refinancing of the corporate debt, which took place at the Cash outfl ow from changes in rental fl eet and in fl eet working end of the fi rst half of 2015, and of the refi nancing of the fl eet capital totaled €198 million in 2015 compared with €165.5 million debt, which took place between July 2014 and mid-2015, in in 2014. This change was the result of increased activity at the a context of a notable increase in activity. See Section 3.2.1. end of 2015 compared with the end of 2014, refl ected in the In particular: 6% increase in the Number of Rental Days in the last quarter of a 2015 compared with the last quarter of 2014, and of fi nancing with respect to the corporate debt, the Group is carrying no that increase principally through balance sheet debt. At the end more than one bond loan of €475 million bearing interest of December 2015, the total net fl eet debt recognized in the at 5.75% compared with two bond loans of €324 million balance sheet was €1,498 million, representing an increase of and €400 million which bore interest at 11.5% and 9.375%, 16.8% compared with December 31, 2014. respectively; a Changes in non-fleet working capital represented a cash with respect to fl eet debt, the refi nancing of the senior notes outfl ow of €57.3 million in 2015. In addition to the impact of tied to €350 million during the summer of 2014 made it the substantial increase in Group activity, the year was marked possible to reduce the interest rate from 9.75% to 5.125%. by several non-recurring items including the bonus payment This saving, associated with the reduction of the cost of the relating to the multi-year compensation program arising from SARF and United Kingdom fi nancings, made it possible to the success of the Fast Lane plan for the period 2012-2014 absorb the impact of the increase of the fl eet acquired by (approximately €23 million recognized in profi t for 2014) and the Group in order to support the development of its activity. the settlement of tax payables relating to previous years of approximately €8 million.
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(B) NET CASH USED BY INVESTING ACTIVITIES The table below summarizes the Group’s net cash used by investing activities for the years ended December 31, 2015 and 2014.
IFRS
In millions of euros 2015 2014
Acquisition of intangible assets and property, plant and equipment (29.2) (23.6) Proceeds from disposal of intangible assets and property, plant and equipment 5.4 3.5 Proceeds from disposal of fi nancial assets (7.6) (9.6 Other investments and loans - (1.2) Acquisition of subsidiaries, net of cash acquired (23.9) (45.8
NET CASH USED BY INVESTING ACTIVITIES (55.2) (76.6)
Net cash fl ow linked to investment activities represented a cash subscriptions to the capital increases of Ubeeqo (€5 million) outfl ow of €55.2 million in 2015 compared with a cash outfl ow and Car2go (€12.5 million) to support their development and of €76.6 million in 2014. the acquisition of E-Car Club. In 2014, these items included cash outfl ows resulting from the acquisitions of Ubeeqo and Acquisitions and proceeds from the disposal of financial EuropHall (French franchisee) and the subscription to Car2go’s assets represented a net cash outfl ow of €7.6 million in 2015 capital increase. compared with €9.6 million in 2014. This item primarily includes acquisitions of financial assets by the captive insurance Acquisition of intangible assets and property, plant and company Euroguard. equipment net of disposals includes IT investments in particular. This item increased slightly compared with 2014 in line with Cash outflow relating to acquisitions of subsidiaries net of the Group’s wish to reinforce its IT systems. It also included cash acquired totaled €23.9 million in 2015 compared with purchases of furnishings or fi xtures for the stations and for the €45.8 million in 2014. In 2015, these items included the head offi ces. Group’s investments in new mobility solutions, in particular the
(C) NET CASH GENERATED FROM (USED BY) FINANCING ACTIVITIES The table below summarizes the Group’s net cash generated from (used by) fi nancing activities for the years ended December 31, 2015 and 2014.
IFRS
In millions of euros 2015 2014
Capital increase 448.2 - Inssuance of bonds 471.6 350.0 Redemption of bonds (780.0) (367.1) Change in other borrowings 123.3 139.7 Payment of transaction costs (19.8) (17.3) Cash payment S wap - (2.0)
NET CASH GENERATED FROM (USED BY) FINANCING ACTIVITIES 243.3 103.3
Net cash connected to fi nancing activities represented a cash periods, the IPO and the restructuring of the Group’s funding infl ow of €243.3 million in 2015 compared with a cash infl ow of strongly impacted cash fl ow generated by the fi nancing activity. €103.3 million in 2014. In addition to the customary fi nancing These impacts are analyzed in Section 3.2.2.1 “Analysis of transactions primarily related to the fleet over these two management cash flows” .
126 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION LIQUIDITY AND CAPITAL RESOURCES
3.2.3 Description of the fi nancing as of December 31, 2015
The Group uses various fi nancing arrangements to fund the arrangements are described below, with the corporate fi nancing acquisition of its fl eet and other non-fl eet fi nancing needs. The arrangements described fi rst followed by a description of the Group’s corporate (non-fl eet) fi nancing is currently composed fl eet fi nancing arrangements. primarily of senior subordinated notes and the Senior Revolving Crédit Agricole Corporate and Investment Bank (formerly Credit Facility (RCF). The Group’s fleet financing consists known as CALYON), Deutsche Bank AG, London Branch, BNP primarily of the Senior asset Revolving Facility (the “SARF”) Paribas, RBS, Lloyds, HSBC, Crédit Industriel et Commercial and the related securitization, senior secured notes, operating and Société Générale, and certain of their affi liates, among 03 lease arrangements and specific UK and Australian/New other lenders, are the main lenders of the Group. Zealand fl eet fi nancing facilities. The Group’s main fi nancing
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The following table presents a summary of the Group’s fi nancial debt (on balance sheet and the estimated debt equivalent of fl eet operating leases off-balance sheet) as of December 31, 2015.
Amount at December 31, 2015 On or off Corporate Interest Rate Financing balance Collateral or Asset- or Fleet Non- Before the (in millions of euros) sheet backed Financing Current current Refi nancing Maturity
Outstanding Subordinated On balance Yes (S ecurity interest on ECI Corporate - 475.0 5.75% 2022 Notes Due 2022 sheet shares held by Europcar Groupe S.A. ) (Guaranteed by certain subsidiaries) Senior Revolving Credit On balance Yes Corporate 81.0 Euribor plus a margin 2020 Facility (RCF) sheet (S ecurity interest and Fleet that varies based on certain assets) on a leverage ratio (2.50% at the date of this document) Of which fi nancing of the On balance - Fleet 86.2 - 2020 FCT Junior Notes (1 ) sheet
Capitalized fi nancing --Corporate (7.9) (24.0) - - agreement transaction costs and Fleet Accrued interest - - Corporate 11.3 - - - and Fleet SARF/FCT Senior On balance Yes Fleet 658.3 Euribor plus a margin 2019 Notes sheet (Securitifl eet Collateral) of 1.70% that varies based on fi nancing by FCT Junior or Senior Notes and certain events (2.20% in case of certain breaches) EC Finance Notes On balance Yes Fleet - 350.0 5.125% 2021 sheet (Securitifl eet Collateral) UK fl eet fi nancing On balance Yes Fleet 356.8 - Mainly LIBOR + 2% Various dates (2 ) sheet Asset fi nancing in Australia On balance Yes Fleet 75.8 - Various conditions Renewed and New Zealand sheet depending on the lenders annually Asset fi nancing On balance Fleet 26.8 - Various conditions Renewed in Portugal sheet depending on the lenders annually Other debt On balance Fleet 47.6 0,2 - sheet Bank overdrafts On balance Corporate (14,1) - Eonia + 0.75% - sheet and Fleet
TOTAL GROSS 1,263.8 801.2 ON-BALANCE SHEET DEBT Estimated outstanding value Off balance - Fleet 1,323.4 - - Mainly renewed of the fl eet fi nanced through sheet annually operating leases (3 )
(1) FCT Junior Notes are issued by the FCT and subscribed for by ECI which fi nances them through cash on-hand at the Group and RCF drawdowns. These notes fi nance the amount that is not fi nanced by the SARF and the EC Finance Notes. (2 ) See Section 3.2.3.2 «Debt related to fl eet fi nancing», paragraph (F) “Signifi cant operating leases – Europcar Group UK fl eet fi nancing” of this Registration Document for further information. (3 ) The estimated debt fi nanced through operating leases represents the carrying amount of the vehicles concerned and is calculated based on the purchase prices and depreciation rates of corresponding vehicles (based on contracts with car manufacturers).
128 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION LIQUIDITY AND CAPITAL RESOURCES
The following chart presents the Group’s fi nancial debt as of December 31, 2015.
EUR 350 m - 5.125% EUR 475 m - 5.75% Outstanding Subordinated EC Finance Notes Due 2021 Eurazeo Group Notes Due 2022 (c) and other Equity EC Finance Trustee Investors
ECI Guarantee 100% EUR 350 m - Senior EUR 1.1 bn - SARF (b) Revolving Credit Facility (a) 100% EURIBOR +170bp EURIBOR +250bp Guarantee 03 Europcar Groupe S.A. (France) EUR 20 m overdraft CIC EONIA +75bp EC Finance PLC ECI Subordinated Loan
100% The Securitifleet On-Loan Agreements Europcar Holding Europcar International S.A.S. (France) FCT (securitization S.A.S.U. 100% mutual fund) FCT Junior (ECI – France) Notes ECI Performance Guarantee Master Operating Lease 8% 6HFXULWLÁHHW)UDQFH Europcar France 6HFXULWLÁHHW+ROGLQJ 100% Share Trustee I 6HFXULWLÁHHW Master Operating Lease Holding S.A. 92% 6HFXULWLÁHHW,WDO\ 6% Europcar Italy 94% Securitifleet Advances Master Operating Lease 5% 6HFXULWLÁHHW Germany 5% Europcar Germany 6HFXULWLÁHHW+ROGLQJ 6HFXULWLÁHHW 90% Master Operating Lease Share Trustee II Holding 100% Bis S.A.S. 5% 6HFXULWLÁHHW6SDLQ Europcar Spain 95%
Ownership Securitization entities GBP 525 m UK Asset Financing Facilities Funds Flow consolidated in the Group's consolidated LIBOR GBP 1M + 200bp Operating companies Contractual relationship financial statements (Portugal, Belgium, AUD 300 m Australia Russia, Australia) Asset Financing Facilities Note: Percentages have been rounded (Australia)
In analyzing its liquidity, the Group uses corporate available cash fl ow (free cash fl ow).
Rating The agency upgraded the issue rating on EC Finance’s €350 million senior secured notes due 2021, intended for the fi nancing of the fl eet, from ‘B’ to’ B+’. STANDARD & POOR’S They raised the issue rating on the €475 million senior notes On July 8, 2015, Standard & Poor’s Ratings Services raised due 2022 to ‘B-’ from ‘CCC+’. its long-term corporate credit ratings on Europcar Groupe and wholly owned fi nancing subsidiary Europcar International to The issue ratings on the RCF, the senior secured notes, and ‘B+’ from ‘B’. It removed the ratings from CreditWatch, where the senior notes have also been removed from CreditWatch it had placed them with positive implications on May 26, 2015. with positive implications. The outlook is stable. Moreover, the SARF, intended for the fi nancing of the fl eet, is The agency upgraded the issue rating on Europcar Groupe’s rated ‘A’. €350 million revolving credit facility (RCF) from ‘B+’ to ‘BB’. This rating was upgraded again on January 29, 2016 to ‘BB-’.
(a) The Existing Senior Revolving Credit Facility was repaid on May 28, 2015 with the new Senior Revolving Credit Facility (RCF) which has an amount of €350 million. Margin of 2.50% if the leverage ratio (as defi ned in the terms of the RCF) is lower than 2: 1 or 2.75% if the leverage ratio greater than 2: 1. (b) Amendments to the SARF were signed on May 12, 2015. These amendments include, among other things, an increase in the amount of FCT Senior Notes that may be issued by the FCT Issuer under the SARF from €1 billion to €1.1 billion, and a decrease in the applicable margin in respect of the FCT Senior Notes from 2.2% to 1.7% (before the amortization period). (c) The Notes were issued on June 10, 2015 for a total principal amount of €475 million. The proceeds of this issue were used to redeem the Outstanding Subordinated Notes due 2018.
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MOODY’S a effectively subordinated to all existing and future indebtedness of the Company that is secured by property and assets that On July 7, Moody’s Investors Service upgraded Europcar do not secure the Notes (including indebtedness under the Groupe’s corporate family rating (CFR) to “B1” from “B3”. RCF and the SARF) to the extent of the value of the assets Concurrently, Moody’s changed the instrument rating on the securing such indebtedness; €475 million Senior Notes due 2022, the obligations of which a effectively subordinated to all existing and future indebtedness have been transferred to the Company from Europcar Notes and other liabilities (including trade payables) of each Limited after the completion of the IPO, to defi nitive “B3” from Company subsidiary that is not a guarantor of the Notes provisional (P)“B3” and upgraded EC Finance Plc’s instrument (including indebtedness under the RCF and the SARF); and rating on the €350 million Senior Secured Notes due 2021 to “B2” from “B3”. a rank senior in right of payment to all existing and future indebtedness of the Company that is expressly subordinated The outlook on the ratings is stable. in right of payment to the Notes.
3.2.3.1 Corporate Debt OPTIONAL REDEMPTION OF THE NOTES Before June 15, 2018, the Company may redeem early all (A) SENIOR NOTES or part of the Notes, upon not less than 10 nor more than 60 days’ notice before the redemption date, at a redemption Within the framework of the Refi nancing, on June 10, 2015, price of 100% (expressed as a percentage of par) increased by Europcar Notes Limited, a limited liability special-purpose interest accrued and not paid and by additional amounts due, vehicle under Irish law (the “Note Issuer”), issued senior notes if applicable, on the redemption date through the payment of for an amount of €475 million bearing interest at an annual rate a make-whole premium. of 5.75% repayable in June 2022 (the “Notes”) under the terms Moreover, the Company may, prior to June 15, 2018, redeem of a bond issue agreement (indenture) dated June 10, 2015 early, with the net cash proceeds from an equity issue (other between the Note Issuer, as issuer, and The Bank of New York than an IPO), up to 40% of the principal amount of the Notes Mellon, as trustee. These Notes were listed for trading on the issued, upon not less than 10 nor more than 60 days’ notice Euro MTF Market of the Luxembourg stock exchange. before the redemption date, at a redemption price of 105.75% The proceeds from the issue of these Notes were allocated to of the principal amount increased by interest accrued and not redeem in full the Outstanding Subordinated Notes due 2018 paid without paying a make-whole premium, if applicable, on and to pay an early redemption premium of €19 million and the redemption date, provided that: approximately €10 million of issuance costs with the remainder (i) at least 60% of the principal amount of the Notes originally to be used for general corporate purposes. issued (excluding Notes held by the Company and its SECURITY AND GUARANTEES OF THE NOTES affi liates) remains outstanding immediately after any such redemption; and The Notes are secured by a second-priority security interest on ECI shares held by the Company subordinated to the fi rst- (ii) the Company makes such redemption not more than 90 priority security interest on ECI shares held by the Company days after the consummation of any such equity offering. from which lenders under the RCF benefi t. At any time after June 15, 2018, the Company may redeem all or part of the New Notes upon not less than 10 nor more than RANKING OF THE NOTES 60 days’ notice before the redemption date, at the following The Notes are: redemption prices (expressed as percentages of the principal a equal in right of payment to all existing and future amount thereof), plus accrued and unpaid interest at the indebtedness that is not subordinated in right of payment to redemption date (subject to the right of holders of record on the Notes (including indebtedness under the Senior Revolving the relevant record date to receive interest due on the relevant Credit Facility); a secured by a second-priority security interest on ECI shares ranking junior to the fi rst-priority security interest on such shares in favor of the lenders under the RCF;
130 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION LIQUIDITY AND CAPITAL RESOURCES
interest payment date), if redeemed during the 12-month period EVENTS OF DEFAULT commencing on June 15 of the years set out below: The indenture pertaining to the Notes contains the customary Year Redemption Price events of default, including nonpayment of the principal or interest of the Notes, certain failures with respect to other 2018 102.875% notes under the indenture pertaining to the Notes or contracts 2019 101.438% pertaining to the collateral, failure to pay certain debts or to A s from 2020 100. 000% execute certain orders, and the bankruptcy of the Company or of a signifi cant subsidiary or of any collateral ceasing to exist (as Moreover, in the event of certain changes to tax regulations, the such terms are defi ned in the indenture pertaining to the Notes). Company may redeem in full the New Notes at a price of 100% The occurrence of an event of default will permit or require the 03 (expressed as percentages of the principal amount thereof) plus accelerated repayment of all of the Notes. accrued and unpaid interest and any additional amounts due, if applicable, to the redemption date. (B) SENIOR REVOLVING CREDIT FACILITY
CHANGE IN CONTROL AND SALE OF ASSETS The Senior Revolving Credit Facility was agreed on May 12, 2015 with BNP Paribas, Crédit Agricole Corporate and Upon the occurrence of certain cases of change in control, Investment Bank, Crédit du Nord, Crédit Industriel et Noteholders may require the Company to redeem all or part of Commercial, Deutsche Bank AG, London Branch, Goldman their Notes at a purchase price equal to 101% (expressed as Sachs International, HSBC France and Société Générale (the a percentage of par) plus accrued interest on the redemption “RCF Lenders”) and became effective on May 28, 2015 (RCF). date. The Company will be required to inform holders of the The RCF consists of a revolving credit facility, covered by a fi rst- change of control and the terms of this optional repurchase priority guarantee of an amount of €350 million, providing for within 30 days of the occurrence of a change of control event. credit advances (“Advances under the Senior Revolving Credit After the listing of the Company’s shares, a “change of control” Facility” or “RCF Advances”) or letters of credit (“RCF Letters of means any person or group of persons acting in concert (within Credit”) denominated, in both cases, in euros, pounds sterling, the meaning of Article L. 233-10 of the French Commercial US dollars or in any other currency agreed with the RCF lenders, Code) (other than Eurazeo or a member of the Eurazeo Group) for a maximum outstanding amount of €350 million at any time obtaining the direct or indirect control within the meaning of and made available, as applicable, under certain conditions, to Article L. 233-3 of the French Commercial Code of the share Europcar Groupe, ECI and certain Group operating subsidiaries. capital or voting rights of Europcar Groupe. The Senior Revolving Credit Facility is divided into two sub- facilities: a €250 million sub-facility, which may be drawn down COVENANTS solely through RCF Advances (the “Revolving Sub-Facility”), The indenture pertaining to the Notes contains commitments and a €100 million sub-facility, which may be utilized through (covenants) that will limit the ability of the Company its RCF Advances or RCF Letters of Credit (the “L/C Sub-Facility”). subsidiaries to: The maximum aggregate amount of the RCF Letters of Credit shall not exceed €100 million. The available amount of the a incur additional indebtedness; Facility is equal to the total available commitments of the RCF a make restricted payments; Lenders, less any “Excess Securitization Amount”. Unless stated otherwise, capitalized terms set forth and used in the this a sell assets and use the cash proceeds thereof; Section entitled “Senior Revolving Credit Facility” have the same a merge, make acquisitions or consolidate; meaning as set forth in the Senior Revolving Credit Facility. a engage in transactions with affi liates; The Group will be entitled to request from time to time additional credit commitments (“Incremental Commitments”) a create security guarantees; and in an aggregate principal amount not exceeding €100 million a restrict the payment of dividends by subsidiaries. provided that certain conditions are satisfi ed, namely: (i) that no case of default has arisen or continues to exist under the These covenants are subject to important exceptions and Facility; (ii) that the Additional Commitment is authorized under qualifi cations. As of the date of this Registration Document, the indenture pertaining to the Notes, the EC Finance Notes all the Company’s subsidiaries are restricted subsidiaries (as and the SARF; and (iii) that if the Additional Commitments are defi ned in the indenture pertaining to the Notes).
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incurred for a separate tranche, the opening commission fees The purpose of the RCF is to fi nance (i) the Group’s working and the margin (and any applicable ratchet) on such tranche do capital requirements and general corporate needs, (ii) interest not exceed the initial margin of the facility (and any applicable payments due by the Company or any other borrower, ratchet) by more than 1%, and the maturity date of such a (iii) repayment of inter-company loans, and (iv) permitted tranche does not precede that of the facility (such date may acquisitions, it being specifi ed that the RCF may not be used be extended, if applicable). to fi nance the prepayment, repayment, purchase, defeasance or redemption of the Notes. The Incremental Commitment may be provided (i) either by way of increase of the Revolving Sub-Facility commitments or RCF ADVANCES the L/C Sub-Facility commitments or (ii) by way of a separate tranche (“Incremental Facility Tranche”). It may be only by way The RCF Advances are made available to the Company, ECI, of RCF Advances. Europcar Holding S.A.S., Europcar Autovermietung GmbH, Europcar International S.A.S.U. und Co. OHG, Europcar France A “Qualifying Listing” refers to any Listing of all or part of the S.A.S., and Europcar IB S.A.U., as the initial borrowers, and share capital of Europcar Groupe on any public exchange or under certain conditions, to other subsidiaries of Europcar public market provided that: Groupe (each a “Borrower under the RCF” or “RCF Borrower”). (i) following such listing, the Leverage Ratio (x) on the previous RCF Advances may be granted in euros, pounds sterling or US Quarter Date (pro forma for the repayment of financial dollars or any other currency requested by the RCF Borrowers indebtedness occurring on or about the date of such listing) and agreed by the Agent provided that such currency is or Leverage Ratio (y) within six months following such listing available and freely convertible into euros on the wholesale is less than 2.00: 1; and market on the relevant dates of quotation and utilization. (ii) the proceeds of such listing are used to, inter alia, redeem RCF LETTERS OF CREDIT in full the Outstanding Subordinated Notes Due 2017. RCF Letters of Credit may be issued under the RCF at the “Quarter Date” means any of March 31, June 30, September 30 request of an RCF Borrower. and December 31 of each year. RCF Letters of Credit may be issued in euros, pounds sterling “Leverage Ratio” on each Quarter Date means the ratio of Total or US dollars or any other currency requested by the Borrowers Net Debt (as defi ned in the RCF) to Corporate EBITDA (as and agreed by the Agent provided that such currency is defi ned in the RCF) on such Quarter Date for the 12-month available and freely convertible into euros on the wholesale period ending on such Quarter Date. market on the relevant dates of quotation and utilization. “Total Net Debt” is equal, without accumulation, to the total The aggregate amount of the RCF Letters of Credit issued shall amount in circulation of (i) the Notes less the capitalized not exceed €100 million. fi nancing costs connected to such bonds, (ii) the amounts of the RCF Advances made available less the Junior FCT Notes, The expiry date of the RCF Letters of Credit falls on or before (iii) bank overdrafts drawn by Europcar Holding, (iv) for the fl eets thirty (30) calendar days before the maturity date of the facility of the United Kingdom, Australia and New Zealand, gross total (as extended, as the case may be). debt less the net book value of the fl eet and (v) any debt not The term of RCF Letters of Credit is 12 months or less or, for intended for the fi nancing of the fl eet less cash deposited into RCF Letters of Credit whose aggregate amounts do not exceed a Group account opened at a bank ranked at least “P-2” by €30,000,000, 18 months or less. Moody’s or “A-2” by S&P (with the exception of the cash of the Securitifl eet companies) and cash equivalents from which GUARANTEES each of the Group’s entities benefi ts. Guarantees have been granted by Europcar Groupe, ECI, “Excess Securitization Amount” means the portion of any Europcar Holding S.A.S., Europcar Autovermietung GmbH, Securitization proceeds received by any member of the Group Europcar France S.A.S., Europcar International S.A.S.U. exceeding an aggregate amount of €50,000,000. und Co. OHG, Europcar IB S.A.U., Europcar Italia SpA and “Securitization” means any factoring programs, receivables Europcar UK Limited. securitization or other receivables financing of the Group In addition, other subsidiaries of Europcar Groupe may accede, on a recourse basis not exceeding an aggregate amount of under certain conditions, to the new Senior Revolving Credit €150,000,000. Facility as guarantors in the future.
132 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION LIQUIDITY AND CAPITAL RESOURCES
INTEREST CANCELLATION The interest rates per annum applicable to NSRCF Advances Undrawn amounts under the RCF may be cancelled by the under the New Senior Revolving Credit Facility are based on Company at any time in whole or in part on fi ve business days’ EURIBOR (or LIBOR for drawings in currencies other than euros) notice on condition that the cancelled amount must be for a plus a borrowing margin, it being specifi ed that EURIBOR or minimum amount of €10 million. LIBOR will be deemed equal to zero in the event of a negative interest rate. SECURITY The applicable margin is 2.75% for an RCF Advance to any The RCF is secured, subject to certain applicable limitations, RCF Borrower if the Leverage Ratio is equal to or greater by (a) a fi rst-priority security interest on (i) the shares of ECI than 2: 1, and 2.50% if no event of default has occurred or and of certain direct or indirect subsidiaries of ECI (Europcar 03 is occurring under the RCF and the Leverage Ratio for the 12 Holding SAS, Europcar France, Europcar UK Limited, Europcar months preceding the most recent Quarter Date is less than Autovermietung GmbH, Europcar Italia S.p.A., Europcar IB 2: 1. S.A.U. and Europcar International S.A.S.U. und Co. OHG) and (ii) the bank accounts of Europcar Groupe, ECI, Europcar MATURITY AND REPAYMENTS OF RCF ADVANCES Holding SAS, Europcar France, Europcar International S.A.S.U. & Co. OHG, Europcar IB S.A.U., Europcar Italia SpA, and by (b) The Senior Revolving Credit Facility will mature 5 years from its a fi rst-priority security interest on intra-group receivables under effective date (the “RCF Maturity Date”). certain cash management agreements (cash pooling) entered Each RCF Advance must be repaid on the last day of the into between Europcar Holding SAS, as cash pool manager, interest period relating thereto but may be repaid by way of and other subsidiaries of Europcar Groupe. a new Advance. Each RCF Advance repaid (except pursuant On the occurrence of a Qualifying Listing, all the security to a mandatory prepayment), will thereafter be available for interests mentioned (other than those granted on the shares redrawing until one month prior to RCF Maturity. All RCF in signifi cant subsidiaries or the receivables under the cash Advances must be repaid at the RCF Maturity. pooling arrangements) may be released at the request of MANDATORY PREPAYMENT Europcar Groupe.
Subject to certain exceptions, the RCF will be automatically FEES AND COMMISSIONS subject to mandatory prepayment and cancellation in full upon The Company must pay the following fees: (i) fees on the the occurrence of one of the following events: unused revolving loan commitments of the lenders, (ii) letters a a change in control; or of credit participation fees on the outstanding amount of each Letter of Credit, (iii) the fronting fees due to the issuing bank a the listing of the shares of any of the Group’s members on a for each Letter of Credit, and (iv) other customary fees of the regulated market or other trading market; or RCF (including arrangement fees, coordination fees and agents’ a on a disposal of all or substantially all of the assets of the fees). Group. RANKING Furthermore, if, at any time, as a result of any Securitization, the outstanding amounts of the RCF Advances and RCF The RCF ranks senior to all other subordinated debt of each Letters of Credit exceed the available amount of the Facility, RCF Borrower. the Borrowers must repay (without cancellation) within three The RCF ranks pari passu with hedging transactions in right of business days the outstanding RCF Advances up to such payment and in connection to its security (except the above- excess amount or reduce the amount of the Securitization mentioned fi rst-priority security interest on ECI shares which proceeds. The Borrowers shall be entitled to redraw any RCF does not secure hedging transactions). Advances which has been so repaid. RCF lenders rank at least pari passu with all amounts owed to A “change in control” is deemed to have taken place if any unsecured creditors except for those amounts benefi ting from person or group of persons acting in concert (under article a higher rank under law or an intercreditor agreement. L. 233-10 of the French Commercial Code), other than Eurazeo or a member of Groupe Eurazeo, obtains direct or indirect FINANCIAL COVENANT control of the capital or the voting rights of the Company under The RCF specifi es that the Group must maintain a ratio of cash article L. 233-3 of the French Commercial Code. fl ow to total debt service of no less than 1.10: 1. Total debt service will be defi ned as the aggregate of the interest and associated fees during any given 12 month period plus repayment of fi nancial liabilities, the latter being subject to certain limitations.
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COVENANTS sole purpose of fi nancing fl eet acquisition and maintenance in France, Italy, Germany and Spain through the Securitifl eet Subject to certain exceptions related to materiality tests, companies. grace periods and carve-outs, the Senior Revolving Credit Facility specifi es certain undertakings (covenants), namely: Certain additional amendments to the SARF were signed on (i) a negative security interest in respect of Group assets, (ii) May 12, 2015 and became effective on June 17, 2015 (the a limitation on fi nancial indebtedness, (iii) a restriction on the “2015 Amendments”). The 2015 Amendments (i) reduced the payment of dividends, issuing stock, payments to shareholders applicable margin with respect to the FCT Senior Notes from and investor debt, (iv) restrictions on asset disposals, and (v) 2.2% to 1.7% (before the amortization period) and from 2.75% limitations on mergers, acquisitions and permitted investments. to 2.25% (after the amortization period), (ii) reduced the rate of non-use from 1% to 0.75% in the potential event where the EVENTS OF DEFAULT rate of use would be less than or equal to 50% and from 0.75% The Senior Revolving Credit Facility contains, subject to to 0.5% in the potential event where the rate of use would exceptions related to materiality tests, grace periods and be greater than 50%, (iii) extended the maturity of the SARF carve-outs, a certain number of customary events of default to the settlement date following January 2019, (iv) increased including the following: (i) failure to pay the principal amount, the amount of the Senior Notes which could be used by the interest, fees and other amounts, (ii) noncompliance with certain FCT Issuer under the SARF of €1 billion to €1.1 billion, and commitments and other obligations, (iii) substantial inaccuracy (v) enabled the participation of two new banks, Lloyds Bank in representations and warranties, (iv) cross defaults or defaults and HSBC France (or, if applicable, Regency Assets Limited, which are accelerated with another signifi cant debt, (v) certain its sponsored conduit supplying asset-backed commercial cases of insolvency, (vi) the actual or presumed invalidity of paper), the latter replacing Barclays Bank plc. ECI and the any collateral or subordination clause under the terms of the banks also agreed to (i) allow the sub-leasing of vehicles by Intercreditor Agreement, (vii) a signifi cant audit qualifi cation, and a local subsidiary (namely Europcar France SAS, Europcar (viii) the occurrence of a signifi cant unfavorable event. Autovermietung GmbH, Europcar Italia SpA or Europcar IB SA) to another local subsidiary, except for Europcar Italia SpA, GOVERNING LAW under intragroup master operating sub-lease agreements, and The Senior Revolving Credit Facility is governed by French law. (ii) treat such sub-leased vehicles as eligible vehicles for the amended SARF. The Senior Facility Lending Bank assigned its claims arising 3.2.3.2 Debt related to fl eet fi nancing under the SARF, together with all security and ancillary rights related thereto, to the FCT Issuer which in return issued (i) (A) SENIOR ASSET REVOLVING FACILITY “FCT senior notes” to be subscribed for from time to time by OR SARF Crédit Agricole Corporate and Investment Bank (or, as the case may be, LMA, its sponsored multi-seller asset-backed The SARF was entered into between Crédit Agricole Corporate commercial paper conduit), The Royal Bank of Scotland plc, and Investment Bank, as “Lending Bank” and Securitifleet Société Générale, Deutsche Bank AG, London Branch, Natixis, Holding as borrower. (or, as the case may be, Magenta, its sponsored multi-seller The SARF was initially entered into on July 30, 2010 asset-backed commercial paper conduit), BNP Paribas (or, and amended on August 26, 2010, November 4, 2010, as the case may be, Matchpoint, its sponsored multi-seller January 11, 2011 and April 5, 2012. The SARF was further asset-backed commercial paper conduit), HSBC France (or, amended on March 4, 2014 in certain respects, principally to if applicable, Regency Assets Limited, its sponsored asset- (i) add two additional banks to the facility, (ii) reduce the margin backed commercial paper conduit), and any other entity of senior notes issued by the FCT Issuer under the facility from which may subscribe for or acquire FCT Senior Notes as 2.70% to 2.20% (before the amortization period) and from senior subscriber(s) in an aggregate amount of €1.1 billion 3.75% to 2.75% (after the amortization period), (iii) reduce the (after the 2015 Amendments), and (ii) “FCT Junior Notes” to maximum amount of senior notes that may be issued by the be subscribed for from time to time by ECI. FCT Issuer from €1.1 billion to €1 billion, (iv) provide the borrower with fl exibility to request weekly advance and repayment dates FINAL MATURITY DATE rather than monthly settlement dates only, and (v) extend the The SARF will be terminated on the earlier of the following maturity of the SARF from July 2014 to January 2017. The dates: (i) the settlement date in January 2017 (or January 2019 Senior asset Revolving Facility provides a committed facility after the signature of the 2015 Amendments), (ii) the start of of €1.0 billion to Securitifleet Holding. Drawings are made a Non-Enforcement Amortization Period (namely, the date on available to Securitifl eet Holding (the “SARF Borrower”) for the
134 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION LIQUIDITY AND CAPITAL RESOURCES
which a Level 1 Event of Default is declared (as defi ned below)), below), the Borrower Asset Value is calculated monthly as the (iii) the start of an Enforcement Amortization Period (namely, the aggregate of the following items: date on which a Level 2 Event of Default is declared (as defi ned a the vehicle fleet residual value—which comprises the below)), and (iv) the date on which an RCF is repaid (unless all or aggregate residual value of the vehicle fl eet plus capitalized part of such facility is refi nanced in amounts equal to or greater costs for any purchased vehicles for which registration is than the existing amount of such facility), the fi rst of such dates pending, less any aggregate provisions for badly damaged, being the “SARF Termination Date”. The fi nal maturity date of stolen or converted vehicles—of the vehicle fl eet owned by the Senior asset Revolving Facility will be the date occurring the relevant Securitifl eet Company; six months after the Senior asset Revolving Facility Termination Date (the “SARF Final Maturity Date”). a the amount of the vehicle provider receivables—which comprise the receivables owed to such Securitifl eet Company 03 SARF ADVANCES, REVOLVING PERIOD AND AMORTIZATION by any car dealer or manufacturer pursuant to the relevant PERIOD Securitifl eet Company’s disposal of any vehicle under any During the period between March 4, 2014 and the SARF buy-back agreement—payable to the relevant Securitifl eet Termination Date (the “SARF Revolving Period”), advances Company; (“SARF Advances”) are made to Securitifl eet Holding subject a the amount of VAT receivables, which comprise any VAT to the terms and conditions set out in the SARF as amended repayment receivables owed or to be owed by a taxation on March 4, 2014. Following the occurrence of the Senior asset authority to the relevant Securitifleet Company that are Revolving Facility Termination Date and until the SARF Final payable to such Securitifl eet Company; Maturity Date (the “SARF Amortization Period”), Securitifl eet Holding is required to apply all available amounts towards M inus the amortization of the outstanding Advances in accordance a the aggregate amount of any debt outstanding and due with the priority of payments set out in the SF Intercreditor by the relevant Securitifl eet Company to vehicle providers Agreement (as defi ned below), as described below. All SARF (excluding any amount in respect of VAT related thereto) Advances will be fully due and payable on the SARF Final to the extent the maturity date of such payables falls after Maturity Date. the second succeeding SARF settlement date (as defi ned below); and SARF ADVANCE RATE a the aggregate amount of the capitalized costs related to The rate of SARF Advances (the “SARF Advance Rate”) is each vehicle fl eet (excluding the vehicle fl eet of Securitifl eet determined in light of the aggregate “Borrower Asset Value” GmbH) delivered and accounted for by a Securitifleet (as defi ned below) of all Securitifl eet companies, the credit Company (excluding Securitifl eet GmbH) but for which the enhancement mechanics confi rmed with Standard & Poor’s, corresponding invoice has not yet been received or booked; and the concentration limits applicable to carmakers and and vehicles as defi ned in the SARF, the master operating lease agreements and the terms and conditions of the FCT Junior a the aggregate amount of all VAT payments owed by the Notes. relevant Securitifleet Company to a taxation authority in its relevant jurisdiction at such time (excluding for the In particular, the SARF Advance Rate is calculated by reference avoidance of doubt such VAT payments due by Europcar to the “Senior Asset Funding Limit” which is sized principally Autovermietung GmbH in relation to the resale by Securitifl eet on the basis of (A) the aggregate Borrower Asset Value of all GmbH of its vehicles). Securitifl eet Companies (subject to certain limitations) as the same is reduced by (B) the applicable “Credit Enhancement MARGIN Amount”. The Credit Enhancement Amount is determined by aggregating (i) the amount determined by the application of the The interest rate applicable to the FCT Senior Notes is equal to rate determined using Standard & Poor’s Credit Enhancement the sum of the EURIBOR rate applicable to the relevant interest Matrix applicable to the corresponding Credit Enhancement period plus 1.70% (in each case before the SARF Amortization Asset, and (ii) the amount exceeding the concentration limits Period) or 2.25% (in each case during the SARF Amortization applicable to carmakers and vehicles defi ned in the SARF. Period). In the case of breach of certain obligations (subject to reservations pertaining to their importance, the grace period BORROWER ASSET VALUE and other exceptions) with respect to a vehicle fl eet availability service agreement or a fee agreement concerning the provision Drawing under the Senior asset Revolving Facility by Securitifl eet of legal services in Germany (a “DSP Material Breach”), the Holding will depend on the aggregate of all Borrower Asset margin applicable to the FCT Senior Notes (for the interest Values of the Securitifl eet Companies. periods terminating before the SARF Amortization Period) In relation to any Securitifl eet Company acting as borrower will be automatically and immediately 2.25% from the date under the Securitifleet On-Loan Agreements (as defined
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of the DSP Material Breach until the DSP Material Breach is vehicle providers under manufacturer buy-back agreements in remedied or waived. Italy and Catalonia, as well as the bank accounts of Securitifl eet Italy and the shares held by Europcar Italy in Securitifl eet Italy. The interest rate applicable to the FCT Junior Notes is equal to The Noteholders do not benefi t, either directly or indirectly, from the sum of the EURIBOR rate applicable to the relevant interest this additional Securitifl eet collateral. period plus 2.25%. FEES FLEET SERVICING The SARF Borrower pays fees on the unused underwriting All Europcar operating companies in France, Germany, Spain commitments of holders of FCT Senior Notes, documentary and Italy (each an “Operating Company”), pursuant to servicing credit fees, and other customary fees in respect of the SARF agreement (each a “Servicing Agreement”), acts as a services (including arrangement fees, ticking fees and agency fees). provider (each, in such capacity, a “Services Provider”) in respect of the vehicle fl eet (and other assets) owned by the RANKING related Securitifl eet Company. The Senior asset Revolving Facility ranks senior to the Upon implementation pursuant to the terms of a vehicle fl eet Securitifl eet Proceeds Loan both in interest and principal and disposal services agreement, and of an engagement letter any other subordinated indebtedness of each SARF Borrower. and fee agreement regarding the provision of legal services See “SF Intercreditor Agreement”. in Germany, a disposition services provider provides certain disposition services in relation to the recovery of the fl eet under COVENANTS certain conditions. The covenants applied to Securitifleet Holding are divided ECI PERFORMANCE GUARANTEE into Level 1 Undertakings and Level 2 Undertakings. Any breach of a Level 1 Undertaking, which is not cured within its ECI granted in favor of each Securitifleet company certain applicable grace period (if relevant), shall result in a Level 1 performance guarantees (together the “ECI Performance Event of Default, and correspondingly any breach of a Level 2 Guarantee”) pursuant to which it guarantees as co-surety Undertaking, which is not cured within its applicable grace the full payment when due of all amounts (including, without period (if relevant), shall result in a Level 2 Event of Default. limitation, rental payments under the master operating leases, expenses, fees, costs, indemnity and other amounts due as a The Level 1 Undertakings relate to delivery of financial result of the non-performance or incomplete performance by statements, compliance with accounting policies, notifi cation the relevant Operating Company of any of its obligations) due to of Level 1 defaults and maintaining bank accounts with each Securitifl eet company by the relevant Operating Company suitably rated banks. The Level 2 Undertakings include in with respect to certain of their respective payment obligations, particular (i) information obligations (including notifi cation of a in particular under the master operating lease agreements Level 2 Event of Default), (ii) the maintenance of the necessary and the management services agreements, up to an amount authorizations, licenses and consents, (iii) compliance with laws equal to the available cash. The benefi t of the ECI Performance and regulations, in particular tax laws, (iv) a negative pledge Guarantee was assigned in favor of the Senior Facility Lending regarding the assets or business of Securitifl eet Holding, (v) Bank acting as the fronting bank under the SARF but not in restrictions on the granting of loans by Securitifl eet Holding, (vi) favor of the trustee for the Outstanding Subordinated Notes a limitation on the fi nancial indebtedness of Securitifl eet Holding, or the holders of the EC Finance Notes, directly or indirectly. (vii) a limitation on the granting of guarantees by Securitifl eet Holding, (viii) restrictions on the rights of Securitifl eet Holding In case of the occurrence of any event of default under the as shareholder of certain Securitifl eet companies, and (ix) the Senior asset Revolving Facility, the SARF borrower can maintenance of bankruptcy-remoteness criteria including be directed by the facility instructing party to call the ECI restrictions on mergers. Performance Guarantee and exercise any right it is entitled to exercise in accordance with the terms of the ECI Performance The agreement also provides for two levels of representations Guarantee. and warranties. The Borrower Level 1 Representations and Warranties relate to the accuracy of historical fi nancial SECURITY statements, ranking, no confl icts, and no events of default and no withholding. The Borrower Level 2 Representations Securitifleet Holding’s obligations under the SARF are and Warranties relate to other representations and warranties. secured by the Securitifl eet collateral described below under “Securitifl eet Collateral” which also indirectly benefi t holders of EC Finance Notes. In addition, however, the obligations of Securitifl eet Holding under the Senior asset Revolving Facility are also secured by the vehicle fl eet and receivables held against
136 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION LIQUIDITY AND CAPITAL RESOURCES
EVENTS OF DEFAULT a extending the duration of any base operating lease or sub- lease in force on the amortization commencement date, There are two levels of event of default under the Senior asset and Revolving Facility Agreement: a entering into any new base operating lease or sub-lease (i) a “Level 1 Event of Default” which, subject to any agreed with the relevant Securitifleet Company or Operating exceptions, materiality tests, grace periods and carve-outs, Company. consists of (i) misrepresentations made under b orrower The occurrence of a Level 2 Event of Default will trigger an Level 1 Representations and Warranties, (ii) breach of “Enforcement Amortization Period” during which (i) the relevant any Level 1 Undertaking, and (iii) the replacement of the instructing party will be entitled to accelerate all advances Lending Bank without a replacement assignee bank being granted to Securitifleet Holding in accordance with the 03 appointed; and provisions of the SF Intercreditor Agreement, and (ii) all securities (ii) a “Level 2 Event of Default” which, subject to any agreed granted to the FCT Issuer will be enforceable in accordance exceptions, materiality tests, grace periods and carve-outs, with the provisions of the SF Intercreditor Agreement. consists of (i) non-payment of amounts due under the SARF, (ii) misrepresentations made under borrower Level 2 GOVERNING LAW Representations and Warranties, (iii) the violation of any The Senior asset Revolving Facility Agreement is governed by Level 2 Undertaking, (iv) the occurrence of an insolvency French law. event of Securitifl eet Holding, (v) enforcement of security or security ceasing to be valid, binding and enforceable or (B) THE SECURITIFLEET COLLATERAL losing the benefi t of a priority ranking, (vi) the occurrence of a material adverse change affecting Securitifl eet Holding, (vii) The undertakings of Securitifleet Holding under the SARF any audit qualifi cation by the Statutory Auditors concerning together with its obligations to repay the proceeds of the EC Securitifl eet Holding’s fi nancial statements to the extent it Finance Notes to EC Finance Plc (as defi ned below) under a materially adversely changes the current or future value loan agreement (the “Securitifl eet Loan”) are secured directly of Securitifleet Holding’s assets, (viii) breaches relating and indirectly by: to Securitifleet Holding’s obligations under Securitifleet a a fi rst priority security interest on the shares of Securitifl eet shareholder arrangements and to compliance with the Holding held by ECI; recommendations made by the Senior Facility Lending Bank or the FCT Issuer as part of its consultation procedure, (ix) a a fi rst priority security interest on the shares in each of the misrepresentations and/or breaches by Securitifl eet Holding Securitifl eet Companies (other than shares held by Europcar in relation to any security or encumbrance, (x) acceleration Italy in Securitifl eet Italy); under the Senior Revolving Credit Facility of the outstanding a a first priority security interest on receivables held by EC Finance Notes or of Notes, and (xi) termination or breach Securitifl eet Holding in respect of each of the Securitifl eet of any material operating license. companies (other than in respect of Securitifl eet Italy); The occurrence of a Level 1 Event of Default will commence a a fi rst priority security interest on the balances in Securitifl eet a “Non-Enforcement Amortization Period” during which, in Holding’s bank accounts; particular: a a fi rst priority security interest on certain receivables (including (i) any outstanding advance will become a term advance under buy-back agreements from carmakers) of each of the repayable on a monthly basis during the amortization period Securitifl eet Companies (other than Securitifl eet Italy), with via all cash collections received; certain exceptions in Spain; and (ii) each Securitifl eet company will be prohibited from ordering a a fi rst priority security interest on certain assets (including bank new vehicles from vehicle providers and granting new account balances and the vehicle fl eet) of each Securitifl eet advances under the SARF; and Company from time to time (other than Securitifl eet Italy), (iii) each Operating Company, acting as lessee under the with certain exceptions in Spain. relevant master operating lease agreement and an All above-mentioned assets subject to security interests are intragroup sub-lease agreement, will be prohibited from, due collectively referred to herein as the “Securitifl eet Collateral”. The to the prohibition that applies to Securitifl eet Companies: Securitifl eet Collateral secure the Senior asset Revolving Facility and the Securitifl eet Proceeds Loan on a shared pari passu basis and enforcement proceeds from such collateral will be paid fi rst to the senior lenders under the Senior asset Revolving Facility pursuant to the amortization priority of payments in the SF Intercreditor Agreement. Such senior lenders, in addition, benefi t from direct security over the assets of Securitifl eet Italy.
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The holders of the EC Finance Notes indirectly benefi t only from account following an EC Finance Notes interest payment date a negative pledge in respect of the assets of Securitifl eet Italy. may be remitted to Securitifl eet Holdings for investment in the Securitifl eet Companies. Pursuant to the ECI Subordinated The security agent for the EC Finance Notes acts as agent Loan, ECI has the option to extend to ECF amounts suffi cient for the trustee for the EC Finance Notes and the holders of to enable ECF to satisfy its payment obligations under the EC such EC Finance Notes in respect of the EC Finance Notes Finance Notes that are not funded through payments on the Collateral (as defi ned below). A common security agent acts Securitifl eet Proceeds Loan. as the agent for the SARF creditors and the EC Finance Notes trustee and as the security agent for the EC Finance Notes Each Securitifl eet Company has been created with a limited and the holders of EC Finance Notes in respect of the shared corporate purpose and is required by the terms of the Securitifl eet Collateral and in accordance with the provisions Securitifl eet On-Loan Agreements to which it is a party, which of the SF Intercreditor Agreement. incorporate limitations substantially similar to those provided in the EC Finance Notes Indenture (as defi ned below), to use the (C) THE SECURITIFLEET ON-LOAN proceeds of the relevant Securitifl eet Advances made available AGREEMENTS under its Securitifl eet On-Loan Agreement to acquire and lease vehicles to the Europcar operating company in its jurisdiction. Securitifl eet Holding acts as the fi nancing entity for the vehicle fleet purchasing and leasing activities of the Securitifleet (D) FCT JUNIOR NOTES Companies. Securitifl eet Holding has used the proceeds from funding under the Securitifl eet Proceeds Loan related to the The subscription proceeds of the FCT Junior Notes subscribed EC Finance Notes, together with drawings under the SARF, to by ECI set forth the overall credit enhancement and, as on-lend, directly or indirectly, as required by certain jurisdictional applicable, the remuneration of the FCT accounts (in the event limitations, said amounts to the Securitifleet companies of a negative interest rate being applicable to these accounts) (each such transaction a “Securitifl eet Advance”) under the as well as an additional liquidity requirement, which is an “Securitifl eet On-Loan Agreements”. amount determined by application of a fi xed percentage of the vehicle fl eet residual value (which, for each Securitifl eet Securitifl eet Holding has entered into revolving facilities with Company, is comprised of the aggregate residual value of a Securitifl eet Spain, Securitifl eet Italy, Securitifl eet France and given Securitifleet Company’s vehicle fleet plus capitalized Securitifl eet Germany pursuant to which Securitifl eet Holding costs for any purchased vehicles for which registration is has advanced funds to Securitifl eet Spain, Securitifl eet Italy, pending, less any aggregate provisions for badly damaged or Securitifl eet France and Securitifl eet Germany from time to time. stolen vehicles or vehicles the value of which has decreased Except as otherwise required by law, all payments under significantly, with the amount equal to the product of the the Securitifl eet Advances are made without deductions or percentage of the loss adjustments and the residual value of withholding for, or on account of, any applicable tax. In the the fl eet being deducted),to the amount of the securitization event that any Securitifleet company is required to make fi nancing (as defi ned below) at the level of the FCT Issuer, on a any such deduction or withholding, it is further required to cross-collateralized basis among all the Securitifl eet Companies gross-up each payment to Securitifl eet Holding to ensure that (including any residual risk, such as interest rate risk). The Securitifl eet Holding receives and retains a net payment equal amount and rate of the credit enhancement and liquidity to the payment which it would have received had no such required amount is calculated monthly (such amount being deduction or withholding been made. adjusted on the date on which each advance is made under the Senior asset Revolving Facility) and is applied towards the Each Securitifleet On-Loan Agreement provides that the determination of the amount of the FCT Junior Notes to be Securitifleet Companies will make all payments pursuant issued in connection with each advance drawdown from time thereto on a timely basis in order to ensure that Securitifl eet to time under the Senior asset Revolving Facility on the basis Holding can satisfy its payment obligations under the Senior of the advance rate and the liquidity required amount. asset Revolving Facility and the Securitifl eet Proceeds Loan, taking into account administrative and timing concerns and The FCT Junior Notes are issued for a nominal amount of limitations, including under the SF Intercreditor Agreement. As €1,000. They accrue interest on the basis of the principal the SF Intercreditor Agreement only permits payments to be amount issued for each interest period which ends on made on a settlement date falling on the 17th of each month, each settlement date. The amount of interest due on each semi-annual interest payments on the EC Finance Notes are settlement date for each FCT Junior Note is calculated on a funded by Securitifl eet Holding to ECF on the settlement date date immediately preceding this settlement date as follows: preceding the relevant semi-annual interest payment date on (A) an amount equal to (i) the sum of all interest amounts due to the EC Finance Notes (which is on the fi rst of the following be received under the SARF Agreement on such settlement month). ECF is permitted to invest such funds in highly-rated date; plus (ii) the swap fl oating amount due to the FCT liquid securities held in an account pledged for the benefi t Issuer by the swap counterparties on such settlement of the EC Finance Noteholders. Any surplus funds in such date, (iii) the aggregate interest amount accrued on a
138 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION LIQUIDITY AND CAPITAL RESOURCES
liquidity enhancement cash reserve account and an Italian The ECI Guarantee is subordinate to any existing or future debt withholding tax reserve account up to such calculation date; and any other liabilities of ECI secured by the property and plus (iv) the FCT “Additional Amount” due to be paid by assets of ECI and its subsidiaries to the extent of the value of Securitifl eet Holding to the FCT on such settlement date the property and assets securing this debt, including the Senior (being an amount payable by Securitifl eet Holding to the Revolving Credit Facility and certain fl eet fi nancing contracts. transaction administrator for the account of the FCT Issuer, In the event of bankruptcy or insolvency, the secured lenders deemed to be €140,000 per month, subject to certain have a priority claim over all collateral of ECI securing the debt modifi cations); less (v) the swap fi xed amount due to be they hold. paid by Securitifl eet Holding to any swap counterparties The obligations of Securitifl eet Holding under the Securitifl eet on that settlement date; less (vi) the aggregate of all Senior Proceeds Loan are secured directly or indirectly by the Note coupons due to be paid in relation to all Senior Notes 03 Securitifl eet Collateral. See Section “The Securitifleet Collateral”. on such settlement date; divided by (B) the aggregate outstanding amount of all Junior Notes; RANKING OF THE EC FINANCE NOTES multiplied by The EC Finance Notes: (C) the principal outstanding amount of such Junior Notes. a are general senior obligations of ECF; a are guaranteed on a senior unsecured basis by ECI; (E) EC FINANCE NOTES a rank equally in right of payment with all existing and future On July 31, 2014, EC Finance plc (“ECF”) issued €350,000,000 indebtedness of ECF that is not subordinated in right of 5.125% Senior Secured Notes due 2021 (the “EC Finance payment to the EC Finance Notes; and Notes”). The EC Finance Notes are admitted to trading on the Euro MTF market of the Luxembourg Stock Exchange. a rank senior in right of payment to all existing and future indebtedness of ECF that is subordinated or otherwise junior The EC Finance Notes were issued pursuant to an indenture, in right of payment to the EC Finance Notes. dated as of July 31, 2014 (the “EC Finance Notes Indenture”) among ECF as issuer, The Bank of New York Mellon as EC FINANCE NOTES COLLATERAL trustee, transfer and principal paying agent, and The Bank of New York Mellon (Luxembourg) S.A. as registrar and as EC Finance Notes benefi t directly from the security interests Luxembourg paying and transfer agent. The EC Finance Notes granted to the notes security agent on behalf of the EC Finance are obligations of ECF, and are guaranteed by ECI on a senior Notes trustee and of holders of the EC Finance Notes (the “EC unsecured basis. Finance Notes Collateral”) in the following rights, property and assets: Under the Securitifl eet Proceeds Loan Agreement between a ECF and Securitifl eet Holding the Securitifl eet Proceeds Loan the balance in English bank accounts of ECF and ECF’s rights funding was made available to Securitifleet Holding in an under the ECI Subordinated Loan; and amount equal to the aggregate principal amount of the EC a ECI’s rights under the Securitifl eet Proceeds Loan. Finance Notes. Securitifl eet Holding then makes Securitifl eet Advances to Securitifl eet Companies. ECF and ECI entered into As lender under the Securitifl eet Proceeds Loan, ECF (and the “ECI Subordinated Loan” pursuant to which ECI has the indirectly the EC Finance Noteholders) also benefi ts, indirectly, option to extend to ECF amounts suffi cient to enable ECF to from the Securitifl eet Collateral. See Section “The Securitifleet satisfy its payment obligations under the EC Finance Notes that Collateral”. are not funded through payments on the Securitifl eet Proceeds OPTIONAL REDEMPTION Loan. Except as described below, the EC Finance Notes are not GUARANTEES redeemable before January 15, 2017. Thereafter, ECF or ECI The EC Finance Notes are the obligations of ECF and are may redeem all or, from time to time, a part of the EC Finance guaranteed on a senior unsecured basis by ECI (the “ECI Notes upon not less than 10 nor more than 60 days’ notice Guarantee”). The ECI Guarantee is a general senior obligation prior to the redemption date, at the following redemption prices of ECI, which ranks equally in right of payment with all existing (expressed as percentages of the principal amount thereof), and future indebtedness of ECI that is not subordinated in plus accrued and unpaid interest to the redemption date right of payment to the ECI Guarantee and in the event of (subject to the right of EC Finance Notes’ holders of record on an enforcement of the ECI Guarantee, the ECI Performance the relevant record date to receive interest due on the relevant Guarantee. Such ECI Guarantee ranks senior in right of payment to all existing and future indebtedness of ECI that is subordinated or otherwise junior in right of payment to the ECI Guarantee.
EUROPCAR REGISTRATION DOCUMENT 2015 139 03 ACCOUNTING AND FINANCIAL INFORMATION LIQUIDITY AND CAPITAL RESOURCES
interest payment date), and which vary according to the periods affecting withholding taxes applicable to payments on the EC set out below, commencing on January 15, 2017: Finance Notes, ECI may redeem the EC Finance Notes in whole but not in part at any time at 100% of the principal amount of Year Redemption Price the EC Finance Notes plus accrued and unpaid interest at the January 15, 2017 to July 15, 2017 103.844% redemption date. July 15, 2017 to July 15, 2018 102.563% Any optional redemption made under this Section shall be July 15, 2018 to July 15, 2019 101.281% irrevocable.
July 15, 2019 and thereafter 100.00% CHANGE OF CONTROL AND ASSET SALES
At any time prior to January 15, 2017, the EC Finance Notes Upon the occurrence of certain change of control events, may also be redeemed or purchased (by ECF or any other each holder of the EC Finance Notes may require ECF or ECI person) in whole or, from time to time, in part, at ECF’s or to repurchase all or a portion of its EC Finance Notes at a ECI’s option at a price equal to 100% of the principal amount purchase price equal to 101% of the principal amount of the thereof plus the applicable premium as of, and accrued but EC Finance Notes, plus accrued and unpaid interest to, but unpaid interest, if any, to the date of redemption or purchase not including, the date of purchase. ECF or ECI must inform (subject to the right of EC Finance Notes’ holders of record on holders of the change of control and the terms of this optional the relevant record date to receive interest due on the relevant repurchase within 30 days of the occurrence of a change of interest payment date). Such redemption or purchase may be control event. made upon notice mailed by fi rst-class mail to each ECF Notes’ If ECI sells assets under certain circumstances, ECI is required holder’s registered address, not less than 10 nor more than 60 to make an offer to purchase the EC Finance Notes at 100% days prior to the date of redemption. of the principal amount of the EC Finance Notes, plus accrued On or prior to January 15, 2017, ECF or ECI may, at their interest to, but not including, the date of purchase, with the option, redeem during each 12-month period commencing with excess proceeds from the sale of the assets. the issue date of the EC Finance Notes (or six-month period in COVENANTS the case of the period remaining from July 15, 2016 through January 15, 2017) up to 10% of the aggregate principal amount The EC Finance Notes Indenture contains covenants that, of the EC Finance Notes outstanding, upon not less than 10 among other things, limit the ability of ECF, ECI, Securitifl eet nor more than 60 days’ prior notice, at a redemption price Holding, Securitifleet Companies and their Restricted equal to 103% of the principal amount of the EC Finance Notes Subsidiaries to: redeemed, plus accrued and unpaid interest and additional a respect a maximum loan-to-value ratio of all Securitifl eet amounts, if any, to the date of redemption, subject to the rights companies’ indebtedness over the total value of certain of of holders of the EC Finance Notes on the relevant record date the Securitifl eet Companies’ assets of 95%, compliance to to receive interest due on the relevant payment date. be tested on a quarterly basis; In addition, any time, or from time to time, on or prior to a respect covenants limiting the activities of ECF and the January 15, 2017, ECF or ECI may, at their option, use the net Securitifl eet Companies; cash proceeds of one or more equity offerings to redeem up to 35% of the principal amount of the EC Finance Notes issued a incur additional indebtedness; under the EC Finance Notes Indenture at a redemption price a make restricted payments, including dividends or other of 105.125% of the principal amount thereof plus accrued and distributions; unpaid interest and additional amounts, if any, to the date of redemption (subject to the right of the EC Finance Notes’ holder a create certain security interests; of record on the relevant record date to receive interest due on a sell assets; the relevant interest payment date); provided that: a in the case of restricted subsidiaries, enter into arrangements (1) at least 65% of the principal amount of EC Finance Notes that restrict dividends or other payments to the Company; originally issued under the EC Finance Notes Indenture (excluding EC Finance Notes held by ECF, ECI and their a in the case of restricted subsidiaries, guarantee or secure respective affi liates) remains outstanding immediately after debt; any such redemption; and a engage in transactions with affi liates; (2) ECI makes such redemption not more than 90 days after a consolidate, merge or transfer all or substantially all of the the consummation of any such equity offering. Company’s assets and the assets of its subsidiaries on a In addition, in the event that ECI becomes obligated to pay consolidated basis; and additional amounts (as defined in the EC Finance Notes a take any action that would materially impair the security Indenture) to EC Finance Notes’ holders as a result of changes interest.
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These covenants are subject to important exceptions and The Group’s main operating lease agreements with fi nancial qualifi cations. Currently, all of the subsidiaries of ECF, ECI, institutions are described below. Securitifl eet Holding and Securitifl eet Companies are Restricted Subsidiaries (as defi ned in the EC Finance Notes Indenture). CM-CIC AGREEMENTS IN GERMANY AND BELGIUM The operating lease agreements with CM-CIC are the Group’s EVENTS OF DEFAULT main operating leases with fi nancial institutions. The Group’s The EC Finance Notes Indenture contains customary events of German Operating Company and CM-CIC Leasing GmbH, default, including, among others, the non-payment of principal Frankfurt/Main entered into a vehicle sale and leaseback master or interest on the EC Finance Notes, certain failures to perform agreement dated January 30, 2009 (as amended from time to or observe any other obligation under the EC Finance Notes time), for a term of three years, for the sale and leaseback of 03 Indenture or security documents, the failure to pay certain vehicles to be purchased from the manufacturers Volkswagen indebtedness or comply with judgments and the bankruptcy or AG, Audi AG, Seat Deutschland GmbH, SkodaAuto Deutschland insolvency of ECF, ECI, a Securitifl eet Company or a signifi cant GmbH, Volkswagen AG Marke Volkswagen Nutzfahrzeuge and subsidiary. The occurrence of any default event would permit Volkswagen Gebrauchtfahrzeughandels- und Service GmbH or require the acceleration of all obligations outstanding under under certain purchase agreements. Over the course of 2011, the EC Finance Notes Indenture. the line was extended to Belgium and France with a volume of up to € 500 million. Local operating lease agreements were SF INTERCREDITOR AGREEMENT entered into by CM-CIC and Europcar entities in France and In connection with entering into the SARF and the issuance of Belgium. The parties agreed to extend the term of the line for the EC Finance Notes, an intercreditor agreement was entered Germany and Belgium until the end of 2014 and to reduce into with, inter alias, the Senior Facility Lending Bank under the the line to €410 million; the maturity of the line was further SARF and the trustee for the EC Finance Notes on July 30, extended to mid-2015. In August 2015, the parties entered into 2010, which agreement was amended on March 4, 2014, a global framework agreement setting out the general terms July 31, 2014 and again on May 12, 2015 (the “SF Intercreditor and conditions of the leases until mid-2016 which have been Agreement”). supplemented by local lease contracts. Discussions between ECI and CM-CIC are ongoing to extend the maturity date of The SF Intercreditor Agreement sets out, among other things: the global framework agreement and the local lease contracts. a the relative ranking of certain of Securitifl eet Holding’s debt; OPERATING LEASES WITH CAR MANUFACTURERS’ FINANCIAL a when payments can be made in respect of Securitifleet ENTITIES Holding’s debt; Europcar International S.A.S.U. and some of the Group’s main a when and under what terms enforcement action in respect car suppliers, such as Daimler, Volkswagen, Fiat and Renault of this debt can be taken; have put in place, at the local level, operating lease agreements between the Group’s local operating companies and the car a the terms on which any part of this debt will be subordinated suppliers’ fi nancial entities. These operating leases are entered upon the occurrence of certain insolvency events; into on the basis of a detailed fl eet plan per country agreed a turnover provisions; between the parties. These agreements roll on a yearly basis. a security amendment principles setting out when security In addition, the Group has entered into several base operating and guarantees may be modifi ed by the common security lease agreements for the purpose of purchasing and leasing agent without prior consent from the trustee or holders of activities of the vehicle fl eet. EC Finance Notes; and a limitations to any petition action in certain time periods and (G) INTEREST RATE SWAP AGREEMENTS to the recourse which may be taken against Securitifl eet As of the date of this Registration Document, the Group has Holding and any of the Securitifl eet companies. entered into two interest rate swap agreements. The fi rst interest rate swap agreement was originally entered (F) SUBSTANTIAL OPERATING LEASES into by the Group in December 2010. Pursuant to this swap The Group fi nances a portion of its fl eet in all of its Corporate agreement, amended several times over the years, the Group Countries through operating leases. The Group has entered into pays a fi xed interest rate ranging from 0.823% to 0.893% on large framework operating lease agreements, respectively, with the outstanding nominal amount of €900 million and receives fi nancial institutions and the fi nancing arms of the Group’s main interest income equal to the EURIBOR one-month rate. The car suppliers, which are negotiated at a Group level. maturity date of this swap agreement is July 17, 2017.
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On May 28, 2015, the Company amended this swap agreement (H) EUROPCAR UK GROUP FLEET FINANCING to raise the nominal amount to €1 billion, extend the maturity The Group currently fi nances its UK fl eet on a stand-alone date from July 17, 2017 to July 17, 2019 (the “Extension basis through its UK subsidiaries including Europcar Group Period”) and lower the interest rate payable to an average of UK Limited (“ECGUK”), Europcar UK Limited (“ECUK”) and 0.64%. certain subsidiaries of ECUK (the “Europcar UK Group”) under In July 2011, the Group entered into the second interest rate an overdraft facility (for an amount of £5 million), a revolving swap agreement, with a start date of December 19, 2011. credit facility (for an amount of £15 million) and seven leasing Pursuant to this swap agreement, amended several times over facilities (in the total aggregate amount of £540 million). the years up to the date of this Registration Document, the Group pays interest at a fi xed rate of 1.099% on the outstanding nominal amount of €600 million and receives interest income equal to the EURIBOR six-month rate. The maturity date of this agreement is July 19, 2020.
The following table presents the Group’s fl eet fi nancing arrangements in the United Kingdom, which are described below:
On- or off- Amount drawn at Amount available at balance Collateral December 31, 2015 December 31, 2015 Interest Financing sheet or Asset-backed Term/Maturity (in millions of pounds ) (in millions of pounds ) Rate Club Facility On balance Yes 2018, one option 246.6 178.4 Libor + 2.00% sheet (fi nanced fl eet to extend (approx. €335.9 million) (approx. €243 million) and other assets) by one year
Santander Facility On balance Yes 2018, one option 14.8 15.2 Libor + 2.00% sheet (title of fi nanced fl eet) to extend (approx. €20.2 million) (approx. €20.7 million) by one year
Lex Autolease Facility Off balance Yes 2019 41.6 13.4 Libor + 2.00% sheet (title of fi nanced fl eet) (approx. €56.7 million) (approx. €18.3 million)
Lloyds Facility Of which On balance Yes Reviewed 0.5 4.5 Libor +1.75% Overdraft Facility sheet (title of fi nanced fl eet annually (approx. €0.7 million) (approx. €6.1 million) and other assets) Of which On balance Yes September 2016 15.0 0.0 Libor +1.75% the revolving sheet (title of fi nanced fl eet (approx. €20.4 million) credit facility and other assets)
THE “CLUB” FACILITY a £100 million for the facility with United Dominion Trust Limited; and On October 1, 2014, ECGUK entered into a committed vehicle funding agreement the “Club Vehicle Funding Agreement” a £75 million for the facility with GE Capital Equipment Finances with Lombard, United Dominion Trust, HSBC and GE Capital Limited. (hereafter the “Club Vehicle Funders”) pursuant to which the The Club Vehicle Funding Agreement has a term of three years Club Vehicle Funders granted to ECGUK, as hirer (the “Club with two successive options to extend for a further 12-month Hirer”), a £425 million aggregate facility, to fi nance the purchase period at each of the fi rst and second anniversaries of the of the Group’s UK fl eet vehicles, consisting of four bilateral start date. On October 1, 2015, ECGUK exercised the fi rst agreements with the following facility sizes: extension option to push the maturity date of the facility to a £150 million for the facility with Lombard North Central PLC; 2018. The obligations of the Club Hirer under the Club Facility are guaranteed by ECUK, PremierFirst Vehicle Rental EMEA a £100 million for the facility with HSBC Equipment Finance Holdings Limited, PremierFirst Vehicle Rental Holdings Ltd., Limited; PremierFirst Vehicle Rental Franchising Ltd. and Provincial Assessors Ltd. (collectively the “Club Guarantors”).
142 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION LIQUIDITY AND CAPITAL RESOURCES
SECURITY This facility is on the same commercial terms as the “Club” facility but does not benefi t from the same security package. The Club Hirer’s obligations under the facility are secured by way of: (i) title in the assets funded, (ii) fi xed charges on the bank SECURITY account into which such proceeds are paid, (iii) guarantees from the Club Guarantors, (iv) debentures from each of the The Santander Hirer’s obligations under the facility are secured Club Hirer, PremierFirstVehicle Rental Franchising Limited and by way of title in the assets funded. Provincial Assessors Limited, and (v) a security assignment of COVENANTS the manufacturer’s buy-back commitments relating to assets funded by the Club Vehicle Funders. The facility contains affirmative and negative covenants customary for this type of facility including restrictions on 03 COVENANTS the creation of security interests over the assets of certain The facility contains affirmative and negative covenants members of ECGUK, the periodic delivery of financial and customary for this type of facility including restrictions on other information, and certain fi nancial covenants and fl eet creation of security interests over the assets of certain tests. Subject to certain permitted exceptions, the facility also members of ECGUK, the periodic delivery of fi nancial and other includes restrictions on making distributions (including by way information, and certain fi nancial covenants and fl eet tests. of dividend). The facility includes a change of control clause with respect to ECGUK, providing that in the event of a change of In particular, ECUK must ensure that: control without the prior express consent of Santander Asset a the net assets of ECGUK are not less than GBP 60 million; Finance PLC, Santander Asset Finance PLC may withdraw its commitments under the agreement. As an exception, the a the ratio of earnings before interest, tax, depreciation and initial public offering is a permitted change of control under the amortization to fi xed charges must not be less than 1.00, and agreement. a the ratio of coverage of the fl eet must be no more than 1.00. EVENTS OF DEFAULT ECUK was in compliance with these covenants at The facility contains events of default customary for these types December 31, 2015. of agreements, including, (i) breach of any of the Santander Subject to certain permitted exceptions, the facility also Vehicle Funding Agreement, (ii) breach of the terms of the includes restrictions on making distributions (including by way fi nancing, subject to cure periods, (iii) breach of certain other of dividend). funding or rental agreements, and (iv) insolvency and cross default provisions. EVENTS OF DEFAULT The facility contains events of default customary for these THE LEX AUTOLEASE FACILITY types of agreements, including, (i) breach of the terms of the On October 1, 2014 ECGUK entered into a master contract hire Club Vehicle Funding Agreement, (ii) breach of certain other agreement with Lex Autolease Limited to fi nance the purchase funding or rental agreements, (iii) insolvency and cross default of the Group’s UK fl eet vehicles via an operating lease facility provisions, (iv) repayment default and (v) non-compliance with of £55 million. The master contract hire agreement ends on covenants. December 31, 2019.
THE SANTANDER FACILITY The borrowers’ obligations under the new Lex Autolease facility is secured by way of title in the assets funded. The facility On October 10, 2014, Europcar Group UK Limited entered into contains affi rmative and negative covenants customary for this a committed vehicle funding agreement with Santander Asset type of facility. The facility also contains customary events of Finance PLC (the “Santander Vehicle Funding Agreement”) default for this type of facility. pursuant to which Santander Asset Finance PLC granted to ECGUK (the “Santander Hirer”) a £30 million facility to fi nance THE LLOYDS FACILITIES the purchase of the Group’s UK fl eet vehicles. The Santander On October 1, 2014, ECGUK entered into two working capital Vehicle Funding Agreement has a term of three years with two facilities with Lloyds: an overdraft with a limit of £5 million and successive options to extend for a further 12-month period at a revolving credit facility with a limit of £15 million. each of the fi rst and second anniversaries of the start date. On October 1, 2015, ECGUK exercised the fi rst extension option to push the maturity date of the facility to 2018.
EUROPCAR REGISTRATION DOCUMENT 2015 143 03 ACCOUNTING AND FINANCIAL INFORMATION LIQUIDITY AND CAPITAL RESOURCES
THE OVERDRAFT FACILITY the interest charges, commitment fees are payable. Interest is payable on all amounts owing under this revolving credit facility On October 1, 2014, ECGUK and PremierFirst Vehicle Rental at the annual rate which is the sum of the applicable margin Holdings Limited, as borrowers, and Lloyds, as lender, entered and the then applicable base rate. into an overdraft facility agreement pursuant to which Lloyds provided a £5 million net/£10 million gross overdraft facility to Obligations under this revolving credit facility are secured by ECGUK and certain of its subsidiaries for general overdraft English law debentures granted by certain members of ECGUK purposes (the “Overdraft Facility”). Lloyds reviews the facility in favor of Lloyds. periodically and at least once a year. This revolving credit facility contains affi rmative and negative Interest is payable on all advances under the Overdraft Facility covenants customary to this type of agreement including at the annual rate which is the sum of the then applicable periodic delivery of fi nancial information and maintenance of margin, LIBOR and the mandatory costs (if any). In addition to certain fi nancial performance targets. the interest charges, commitment fees are payable. Interest is It also contains events of default customary for these types of payable on all amounts owing under the Overdraft Facility at facilities, including, events of default for non-payment, breaches the annual rate which is the sum of the applicable margin and of representations and warranties and undertakings, and the then applicable base rate. insolvency related events. The Overdraft Facility may be cancelled by Lloyds at any time and all outstanding advances, together with accrued interest, (I) ASSET FINANCING IN AUSTRALIA may become immediately due and payable. AND NEW ZEALAND On the occurrence of certain events, including a change On March 31, 2015, National Australia Bank (the NAB), Toyota of control, the Overdraft Facility may be cancelled and all Financial Services (TFS), Volkswagen Financial Services, outstanding advances, together with accrued interest, may Alphabet Financial Services, St George Bank, Mercedes Benz become immediately due and payable. Finance, Nissan Finance and other Australian and New Zealand Obligations under the Overdraft Facility are secured by English fi nancial institutions provided Europcar Australia and Europcar law debentures granted by certain members of the Europcar New Zealand with senior credit facilities (the “Australian and UK Group in favor of Lloyds. New Zealand Asset Financing Facilities”) including revolving and non-revolving fl eet operating and fi nance leases of up to The Overdraft Facility contains affirmative and negative AUD 300 million. These facilities are renewed annually and covenants customary to this type of agreement including fi nance the fl eet in Australia and New Zealand. periodic delivery of fi nancial information and maintenance of certain fi nancial performance targets. The facilities are secured by fi xed and fl oating charges over Europcar Australia and Europcar New Zealand assets, including The Overdraft Facility letter sets out events of default customary goodwill and uncalled capital and called but unpaid capital, for these types of facilities including, subject to certain cure together with the relative insurance policy assigned. There are periods, events of default for non-payment, breaches of also performance guarantees for the facilities. representations and warranties and undertakings, and insolvency-related events. These facilities include covenants. In particular, Europcar Australia must ensure that: THE REVOLVING CREDIT FACILITY a its minimum net worth, i.e., total shareholders’ equity, is On October 1, 2014, ECGUK, as borrower, and Lloyds, as always greater than AUD 58 million; lender, entered into a revolving credit facility agreement pursuant a its fl eet utilization rate is above 70% on average over the to which Lloyds provided a £15 million revolving credit facility year; and to ECGUK and certain of its subsidiaries for general corporate purposes. The revolving credit facility has a termination date a its minimum cumulative net profi t before tax is within 85% of of September 29, 2016. the Company’s budget. Interest is payable on all advances under this revolving credit Europcar Australia was in compliance with these covenants at facility at the annual rate which is the sum of the then applicable December 31, 2015. margin, LIBOR and the mandatory costs (if any). In addition to
144 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION INVESTMENTS
3.2.3.3 Equity associated with the IPO and the reshaping of the capital structure (approximately €95 million), the net negative impact of S hareholders’ equity attributable to the owners of the Group some proceedings (approximately €22 million), and provisions totaled €561.4 million as of December 31, 2015 compared with for ongoing tax audits. See Section 3.1.2.2. €157.2 million as of December 31, 2014.
The rise in the Group’s equity is linked primarily with the 3.2.3.4 Contractual obligations €475 million capital increase carried out as part of the IPO and off-balance sheet commitments on June 26, 2015. The associated costs of approximately €24 million were deducted directly from the issuance premiums. See Section 3.2.3 “Description of the financing as of In addition, the Group recorded a net loss of €55.6 million. December 31, 2015” and Note 32 to the consolidated fi nancial 03 These losses included non-recurring items, notably the costs statements for the year ended December 31, 2015.
3.3 INVESTMENTS
3.3.1 Historical Investments
The Group’s capital expenditures relate primarily to the Group’s The Group’s expenses relating to the purchase of vehicles are information technology infrastructure and equipment as well as not accounted for as capital expenditures but as operating to fi xtures and improvements in its offi ce and rental stations. expenses if the acquisition is recorded on the balance sheet.
3.3.1.1 Rental fl eet The Group records all of its vehicle fl eet either on the balance are primarily fi nanced through specifi c fi nancing arrangements. sheet or, with respect to vehicles acquired through leases that Repayment of these loans is based on the proceeds of the meet the defi nition of an operating lease, off balance sheet. sales of the vehicles at the end of their period of use. These The Group’s gross expenses relating to the acquisition of net amounts resulted in the use of €76 million of cash in 2015 vehicles totaled €2.4 billion and €1.9 billion for the years ended compared with €55 million in 2014. December 31, 2015 and 2014 respectively. These expenses
The Group’s rental fl eet is composed of vehicles that are acquired or fi nanced in different ways, as shown in the following table:
% of total volume of vehicles purchased
Type of acquisition and related fi nancing 2015 2014
Vehicles purchased with manufacturer or dealer buy-back arrangement fi nanced via the balance sheet 46% 43% Vehicles purchased with manufacturer or dealer buy-back arrangement and fi nanced through rental agreements qualifying as operating leases 46% 49% TOTAL FLEET PURCHASED WITH BUY-BACK ARRANGEMENTS 92% 92% Vehicles purchased without manufacturer or dealer buy-back arrangement (at-risk vehicles) 7% 7% Vehicles fi nanced through rental agreements qualifying as fi nance leases 1% 1% TOTAL PURCHASES OF RENTAL FLEET 100% 100%
EUROPCAR REGISTRATION DOCUMENT 2015 145 03 ACCOUNTING AND FINANCIAL INFORMATION INVESTMENTS
F or more information about the Group’s fl eet, see Section 1.6.7 3.3.1.3 Acquisitions/Joint Ventures “Fleet” and Section 3.2 “Liquidity and capital resources” . On July 9, 2015, Europcar Lab, the Europcar Group unit dedicated to innovation, announced the acquisition of a 3.3.1.2 Capital expenditures majority stake in E-Car Club, the UK’s fi rst entirely electric pay-per-use car club. This new acquisition is fully in line with The Group’s capital expenditure (acquisitions of tangible and Europcar Lab’s strategy to develop mobility market usages, intangible assets net of sales) increased to €23.8 million in search for new mobility solutions opportunities worldwide and 2015 compared with €20.1 million in 2014. Capex included make investments in strategic initiatives allowing the Group to expenditures for the development of IT, excluding software and strengthen its leadership in the mobility market. equipment and expenditures on other equipment (IT software and equipment, furniture, interior layouts and fi xtures). On October 31, 2014, the Group acquired 100% of the shares of EuropHall SAS through its French subsidiary Europcar France The Group’s IT development expenditures relate in particular SAS. With revenue of €23 million in 2014, EuropHall has been to projects to develop new functionalities in the Group’s a signifi cant franchisee of Europcar France in eastern France application portfolio. In 2014 and 2015, tools for managing since 1978. This company has been fully consolidated since the sales teams and pricing in real time were put in place in early November 2014. the Sales & Marketing departments. The fl eet department was equipped with a sales site for at-risk vehicles and a tool for In addition, on November 30, 2014, the Group acquired a vehicle fl eet optimization. In e-commerce, the Internet sites of majority stake in Ubeeqo, a French startup formed in 2008 that the Europcar brand were renewed and a content manager was provides car-sharing solutions. Following its capital increase put in place while referencing on Internet sites was improved. fully subscribed by the Group in 2015, the Group’s stake stood at 75.7% as of December 31, 2015. In addition, in 2015 and 2014, the Group subscribed to capital increases of Car2go Europe amounting to €12.5 million and €5.7 million respectively.
3.3.2 Ongoing Investments
See Section 3.3.3. below.
3.3.3 Future Investments
The Group plans to continue its Fast Lane transformation The Group plans to continue to invest in strategic initiatives. program aimed at strengthening the Group’s market presence As announced in May 2015 as part of its planned IPO, the and preparing the transition from a vehicle rental company Group will invest up to €80 million over the 2015-2017 period to a mobility services player (see Section 1.4.4 “Fast Lane” including up to €25 million in Europcar Lab. The Group also Transformation Program that has set the Foundation for plans to increase non-fl eet capital expenditure to approximately Sustainable Profi table Growth). €40 million in 2017 compared with approximately €28 million in 2015. As part of its development strategy, the Group plans in particular to continue to develop innovative services and products in However, the Outstanding Subordinated Notes and the response to consumers’ new expectations in terms of mobility Senior Revolving Credit Facility contain provisions limiting and to seize opportunities for external growth that present an the Group’s ability to make certain investments, in particular attractive yield profi le in order to widen the Group’s mobility acquisitions (see Section 3.2.3 “Description of the financing services offering (see Section 1.5 “Strategy”). as of December 31, 2015”).
146 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION CONSOLIDATED FINANCIAL STATEMENTS AND STATUTORY AUDITORS’ REPORT
In order to support the Group’s efforts to develop and implement As of the date of this document, other than commitments related innovative mobility solutions, the Group intends to continue to the purchase of vehicles fi nanced by specifi c fi nancing, the its investments under its 2020 plan aimed at improving its IT repayment of which will be fi nanced by the sale of such vehicles systems architecture with the goal of making it more open at the end of their period of use, the Company does not have and fl exible in order to facilitate the integration of applications any signifi cant, fi rm commitments to make investments in the developed by third parties (see Section 1.6.10 “IT system”). future (see Note 32 “Off-balance sheet commitments” to the Group’s 2015 consolidated fi nancial statements).
03
3.4 CONSOLIDATED FINANCIAL STATEMENTS AND STATUTORY AUDITORS’ REPORT
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated fi nancial statements for the year ended December 31, 2015 and notes to the fi nancial statements
As at As at In thousands of euros Notes Dec. 31, 2015 Dec. 31, 2014
Revenue 2,141,923 1,978,870 Fleet holding costs 3 (547,186) (496,264) Fleet operating, rental and revenue related costs 4 (726,990) (686,279) Personnel Costs 5 (347,388) (318,153) Network and head offi ce overhead costs 7 (218,475) (199,339) Depreciation, amortization and impairment expense 8 (32,781) (31,824) Other income 9 14,216 6,879 Current operating income 283,319 253,890 Goodwill impairment expense Other non-recurring income 10-- Other non-recurring expense 10 (61,774) (115,729) Operating income 221,545 138,161 Gross fi nancing costs (121,768) (151,424) Other fi nancial expenses (117,780) (90,650) Other fi nancial income 11,956 9,393 Net fi nancing costs 11 (227,592) (232,681) Profi t/loss before tax (6,047) (94,520) Income tax benefi t/(expense) 12 (37,637) (10,655) Share of profi t/(loss) of associates 16 (12,074) (6,523) Net profi t/(loss) for the period (55,758) (111,698) Attributable to: Owners of ECG (55,602) (112,273) Non-controlling interests (156) 575 Basic earnings/(loss) per share attributable to owners of ECG (in euros ) 25 (0.449) (1.082) Diluted earnings/(loss) per share attributable to owners of ECG (in euros ) 25 (0.449) (1.082)
EUROPCAR REGISTRATION DOCUMENT 2015 147 03 ACCOUNTING AND FINANCIAL INFORMATION CONSOLIDATED FINANCIAL STATEMENTS AND STATUTORY AUDITORS’ REPORT
Consolidated statement of comprehensive income
As at Dec. 31, 2015 As at Dec. 31, 2014
Tax Tax income/ income/ In thousands of euros Before tax (expense) After tax Before tax (expense) After tax
Net profi t/(loss) for the period (18,121) (37,637) (55,758) (101,043) (10,655) (111,698) Items that will not be reclassifi ed to profi t or loss 4,179 (1,087) 3,092 (21,802) 5,985 (15,817) Actuarial gains/(losses) on defi ned benefi t pension schemes 4,179 (1,087) 3,092 (21,802) 5,985 (15,817) Items that may be reclassifi ed subsequently to profi t or loss 3,574 (20) 3,554 (282) (4,713) (4,995) Foreign currency differences 12,271 - 12,271 13,598 - 13,598 Effective portion of changes in fair value of hedging instruments (8,697) (20) (8,717) (13,922) (4,713) (18,635) Net change in fair value of available-for-sale fi nancial assets - - - 42 - 42 Other comprehensive income for the period 7,753 (1,107) 6,646 (22,084) 1,272 (20,812) TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE PERIOD (10,368) (38,744) (49,112) (123,127) (9,383) (132,510) Attributable to: a Group (48,934) (133,085) a Non-controlling interests (178) 575
148 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION CONSOLIDATED FINANCIAL STATEMENTS AND STATUTORY AUDITORS’ REPORT
Consolidated statement of fi nancial position
As at As at In thousands of euros Notes Dec. 31, 2015 Dec. 31, 2014
ASSETS Goodwill 13 457,072 449,389 Intangible assets 14 713,136 721,732 03 Property, plant and equipment 15 89,236 88,204 Equity-accounted investments 16 22,035 17,323 Other non-current fi nancial assets 17 57,062 38,934 Deferred tax assets 18 55,730 47,395 TOTAL NON-CURRENT ASSETS 1,394,271 1,362,977 Inventories 19 15,092 16,141 Rental fl eet recorded on the balance sheet 20 1,664,930 1,402,660 Rental fl eet and related receivables 21 574,652 530,098 Trade and other receivables 22 357,200 325,912 Current fi nancial assets 17 37,523 49,477 Current tax assets 33,441 33,347 Restricted cash 23 97,366 81,795 Cash and cash equivalents 23 146,075 144,037 TOTAL CURRENT ASSETS 2,926,280 2,583,467
TOTAL ASSETS 4,320,551 3,946,444 Equity Share capital 143,155 446,383 Share premium 767,402 452,978 Reserves (74,341) (77,926) Retained earnings (losses) (274,821) (664,250) Total equity attributable to the owners of ECG 561,395 157,185 Non-controlling interests 962 950 TOTAL EQUITY 24 562,356 158,135 LIABILITIES Financial liabilities 26 801,183 1,043,069 Non-current fi nancial instruments 30 52,090 41,928 Employee benefi t liabilities 27 119,295 124,759 Non-current provisions 28 25,168 10,114 Deferred tax liabilities 18 131,132 131,005 Other non-current liabilities 306 365 TOTAL NON-CURRENT LIABILITIES 1,129,174 1,351,240 Current portion of fi nancial liabilities 26 1,263,783 1,127,545 Employee benefi ts 27 2,944 2,744 Current tax liabilities 24,511 34,560 Rental fl eet related payables 21 662,722 581,957 Trade payables and other liabilities 29 424,974 449,866 Current provisions 28 250,087 240,397 TOTAL CURRENT LIABILITIES 2,629,021 2,437,069 TOTAL LIABILITIES 3,758,195 3,788,309
TOTAL EQUITY AND LIABILITIES 4,320,551 3,946,444
EUROPCAR REGISTRATION DOCUMENT 2015 149 03 ACCOUNTING AND FINANCIAL INFORMATION CONSOLIDATED FINANCIAL STATEMENTS AND STATUTORY AUDITORS’ REPORT
Consolidated statement of changes in equity
Attributable to owners of ECG
Trans- Non- Share Share Hedging lation Retained Treasury controlling Total In thousands of euros capital premium reserve reserve earnings shares Total interests equity BALANCE AT JANUARY 1, 2014 446,383 452,978 (18,136) (54,753) (539,278) 287,194 3,451 290,645 Net profi t/(loss) for the period ----(112,273) - (112,273) 575 (111,698) Foreign currency differences - - - 13,598 - - 13,598 - 13,598 Effective portion of changes in fair value of hedging instruments - - (13,922) - - - (13,922) - (13,922) Net change in fair value of available-for-sale fi nancial assets ----42-42 -42 Actuarial gains/(losses) on defi ned benefi t pension schemes ----(21,802)-(21,802) -(21,802) Income tax relating to components of other comprehensive income - - (4,713) - 5,985 - 1,272 - 1,272 Other comprehensive income/(loss) --(18,635) 13,598 (15,775) - (20,812) - (20,812) Change in non-controlling interests - - 3,076 - 3,076 (3,076) - Transactions with owners ------BALANCE AT DECEMBER 31, 2014 446,383 452,978 (36,771) (41,155) (664,250) 157,185 950 158,135
150 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION CONSOLIDATED FINANCIAL STATEMENTS AND STATUTORY AUDITORS’ REPORT
Attributable to owners of ECG Non- Share Share Hedging Translation Retained Treasury controlling Total In thousands of euros capital premium reserve reserve earnings shares Total interests equity
BALANCE AT JANUARY 1, 2015 446,383 452,978 (36,771) (41,155) (664,250) 157,185 950 158,135 Net profi t/(loss) 03 for the period -- - -(55,602) - (55,602) (156) (55,758) Foreign currency differences -- - 12,271 - - 12,271 (22) 12,249 Effective portion of changes in fair value of hedging instruments - - (8,697) - - - (8,697) - (8,697) Net change in fair value of available-for-sale fi nancial assets ------Actuarial gains/(losses) on defi ned benefi t pension schemes -- - - 4,179 - 4,179 - 4,179 Income tax relating to components of other comprehensive income - - (20) - (1,087) - (1,107) - (1,107) Other comprehensive income/(loss) --(8,717) 12,271 3,092 - 6,646 (22) 6,624 Capital increase preferred shares 73 1,437 - - - - 1,510 - 1,510 Capital increase by “incorporation de primes” 99,406 (99,406) ------Capital decrease (441,483) - - - 441,483 -- -- Capital increase IPO 38,776 436,224 - - - - 475,000 - 475,000 IPO fees (23,832) - - - - (23,832) - (23,832) Share-based payments -- - - 2,624 - 2,624 - 2,624 Cancellation of treasury shares -- - - - 31 31 - 31 Purchase of shares from non-controlling interests -- - - (1,457) - (1,457) (1,835) (3,292) Change in non-controlling interests -- - - (711) - (711) 2,025 1,314 Transactions with owners (303,228) 314,423 441,939 31 453,165 190 453,355 BALANCE AT DECEMBER 31, 2015 143,155 767,402 (45,488) (28,884) (274,821) 31 561,395 962 562,356
EUROPCAR REGISTRATION DOCUMENT 2015 151 03 ACCOUNTING AND FINANCIAL INFORMATION CONSOLIDATED FINANCIAL STATEMENTS AND STATUTORY AUDITORS’ REPORT
Consolidated cash fl ow statement
As at As at In thousands of euros Notes Dec. 31, 2015 Dec. 31, 2014 Profi t/(loss) before tax (6,047) (94,520) Reversal of the following items Depreciation and impairment charge on property, plant and equipment 15 15,277 12,834 Amortization and impairment charge on intangible assets 14 17,893 36,183 Impairment charge on goodwill 13-- Changes in provisions and employee benefi ts 27, 28 999 46,865 Recognition of share-based payments 2,624 - Costs related to the IPO 8,692 - Profi t/(loss) on disposal of assets (394) (1,311) Total net interest costs 127,303 160,011 Redemption premium 56,010 17,063 Amortization of transaction costs 42,340 29,237 Amortization of bond issue premiums - 1,415 Other non-cash items (1) 1,465 16,258 Financing costs 227,118 223,984 Operating income before changes in working capital 266,162 224,035 Changes to the rental fl eet recorded on the balance sheet (6) 20 (232,851) (91,466) Changes in fl eet working capital 21 34,869 (74,025) Changes in non-fl eet working capital ( 57,243) 50,018 Cash generated from operations 10,937 108,562 Income taxes received/paid (39,669) (31,447) Net interest paid (137,334) (166,798) Net cash generated from (used by) operations ( 166,066) (89,683) Acquisition of intangible assets and property, plant and equipment 13,14,15 ( 29,172) (23,578) Proceeds from disposal of intangible assets and property, plant and equipment 5,384 3,491 Other investments and loans - (1,158) Proceeds from disposal of fi nancial assets (7,563) (9,614) Acquisition of subsidiaries, net of cash acquired (2) (23,872) (45,778) Net cash used by investing activities ( 55,223) (76,637) Capital increase (net of related expenses) (3) 448,203 - Issuance of bonds (5) 471,623 350,000 Redemption of bonds (4) (780,010) (367,063) Change in other borrowings 123,310 139,699 Payment of transaction costs (19,820) (17,336) Swap cash payment - (2,000) Net cash generated from (used by) fi nancing activities 243,306 103,300 Cash and cash equivalent at beginning of period 23 206,317 267,038 Net increase/(decrease) in cash and cash equivalents after effect of foreign exchange differences 22,018 (63,020) Effect of foreign exchange differences 1,033 2,299 Cash and cash equivalents at end of period 229,368 206,317
(1) Of which, €1.5 million (€14 million in 2014) of swap fair value adjustments reclassifi ed from other comprehensive income to profi t and loss (see Note 30). (2) Of which, in 2014, the acquisition price net of cash acquired of Ubeeqo (€17.3 millions) and EuropHall (€22.5 million) and the subscription to the capital increase of Car2Go (€5.7 million), and, in 2015, the subscription to the capital increase of Car2Go (€12.5 million), the payment of the balance of the acquisition price of EuropH all (€5.4 million), the subscription to the capital increase of Ubeeqo (€5 million) and the payment of the acquisition of E-Car Club (3) Corresponding to capital increases on May 15 and June 26, 2015, for a total of €476.5 million (see Note 24) net of fees paid (€8.7 million in other non-recurring expenses and €19.6 million out of the €23.6 million allotted to the share premium). (4) Early redemption of high-yield bonds of €324 million and €400 million, and payment of their redemption premium of €56 million (see Note 26). (5) High-yield bond issue of €475 million at 99.289% (see Note 26). (6) Given the average ownership period for the fl eet, the Group reports the vehicles as current assets at the beginning of the contract. Their change from period to period is therefore similar to operating fl ows generated by activity.
152 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION CONSOLIDATED FINANCIAL STATEMENTS AND STATUTORY AUDITORS’ REPORT
Signifi cant accounting policies
Europcar Groupe S.A. (“ECG”) was incorporated on On May 27, 2015 €475 million in subordinated notes due 2022 March 9, 2006 with an initial share capital of €235,000 and were issued at a price representing 99.289% of par in the was converted into a French société anonyme (joint-stock Company Europcar Notes Limited. Following the Company’s corporation) on April 25, 2006. ECG’s registered offi ces are listing on June 29, 2015, the net proceeds of the issue held located at 2 rue René Caudron, 78960 Voisins le Bretonneux, in an escrow account until then were released and partially France. allocated to the redemption of subordinated 2018 notes in the principal amount of €400 million, and the payment of a 03 The Europcar Group leverages all of its experience in the car redemption premium of €19 million. rental sector to provide vehicles for short- and medium-term corporate and leisure rentals. Under the Europcar and InterRent The remainder of the net proceeds of the New Shares and trademarks, the Group covers a wide range of markets and the New Notes after these refinancing transactions (i.e., customers - both private and business. Its offering ranges from €112 million) will be used for the Group’s general corporate low-cost to luxury rentals. purposes. Of this amount, up to €80 million will be allocated to strategic growth investments, including acquisitions and Between 2008 and 2013, the Group also serviced the National partnerships within the framework of strategic initiatives during and Alamo trademarks in the EMEA region under a license from the 2015-2017 period. Enterprise, with National targeting mostly the business segment and Alamo the leisure broker segment. This partnership was In 2014, the Group created the “Lab,” the purpose of which is terminated in August 2013, although the Group continues to to promote innovation and improve customer mobility. service the National and Alamo brands in the EMEA regions on In 2015, a dedicated legal entity known as “Europcar Lab” was the basis of a license agreement with Enterprise. This license established to house these activities. agreement and the commercial alliance agreement were the subject of an arbitration proceeding which, after a transitional In July 2015, the acquisition of E-Car Club (sharing of electric period agreed by the parties, effectively terminated these vehicles in the United Kingdom) by Europcar Lab illustrates its agreements as of March 2015. (See Note 32.4 ) strategy of identifying key opportunities to enhance its mobility offer for its customers. The Company was listed on the regulated market of Euronext Paris on June 26, 2015 (Compartment A; ISIN code: FR0012789949; ticker: EUCAR). Trading in Europcar Groupe I - Basis of preparation shares begun on June 26, 2015 in the form of “promesses d’actions” (“Europcar Prom”). S ettlement and delivery of the The consolidated fi nancial statements of Europcar Groupe shares in the global offering occurred on June 29, 2015 and for the year ended December 31, 2015 were approved by market trading commenced on June 30, 2015. The offering the Management Board on February 24, 2016, and examined price has been set at €12.25 per share. by the Oversight Committee on February 24, 2016, and are subject to the approval of the General Shareholders’ Meeting The IPO included the issuance of new shares as part of a cash of May 10, 2016. capital increase in the approximate amount of €475 million, corresponding to estimated net proceeds of approximately €441 million, and the sale of existing common shares by the II - Signifi cant accounting policies Selling shareholders in the gross amount of approximately €404 million. The consolidated fi nancial statements of Europcar Groupe were prepared in accordance with the principles defi ned by the IASB The main purpose of the Global Offering and the listing of the (International Accounting Standards Board) as adopted by the Company’s shares on Euronext Paris is to enable the Group European Union. This framework is available on the website to reduce its indebtedness, strengthen its fi nancial structure of the European Commission: http://ec.europa.eu/fi nance/ and increase its fi nancial fl exibility in order to accelerate its accounting/ias-evaluation/index_en. htm. development and continue the deployment of its “Fast Lane” program. The international framework comprises IFRS (International Financial Reporting Standards), IAS (International Accounting The net proceeds from the issuance of the New Shares was Standards) and their SIC (Standing Interpretations Committee) notably used to redeem in full the €324 million in principal due and IFRIC (International Financial Reporting Interpretations from the Company in respect of the subordinated notes due Committee) interpretations. 2017 and to pay a redemption premium of €37 million.
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The fi nancial statements were prepared under the historical The effects of applying IFRS 16 to leasing agreements as from cost convention, except for the valuation of certain fi nancial January 1, 2019 (subject to adoption by the European Union) instruments. will be assessed in 2016 These consolidated financial statements are presented in Furthermore, the presentation of aggregates associated with euros (€), which is ECG’s functional currency and the Group’s the fl eet and fi nance lease debt has been amended in relation to presentation currency. All fi nancial information presented in that used in previous publications. It now distinguishes between euros (€) has been rounded to the nearest thousand euros the rental fl eet recorded on the balance sheet (Note 20) and unless otherwise stated. receivables and payables related to the rental fl eet (Note 21), as well as between “other borrowings dedicated to fl eet fi nancing” BASIS OF MEASUREMENT and “fi nance lease liabilities” (Note 26) so as to better refl ect the substance of the underlying items. The accounting policies used to prepare the consolidated fi nancial statements are consistent with those used for the USE OF ESTIMATES AND JUDGMENTS year ended December 31, 2014, with the exception of the following standards which are mandatory for accounting The preparation of fi nancial statements requires management periods beginning on or after January 1, 2015: to make judgments, estimates and assumptions which impact the amounts presented for existing assets and liabilities in a IFRIC 21 – Levies; the consolidated statement of financial position, income a Annual improvements 2011-2013. and expense items in the consolidated income statement, and disclosures in the notes to the consolidated financial Application of these new standards and amendments did not statements. have a material impact on Europcar’s consolidated fi nancial statements. Due to the uncertainty inherent to all measurement processes, these estimates are reviewed on an ongoing basis. Revisions to In 2015, the Group did not elect to apply ahead of time the accounting estimates are recognized in the period in which the amendments approved by the European Union, in particular estimate is revised and in any future periods affected. as regards: The Group formulates assumptions and, on this basis, a amendments to IAS 1 – Disclosure initiative, presentation of regularly prepares estimates relating to its various activities. fi nancial statements; These estimates are based on past experience and factor a amendments to IAS 16 and IAS 38 – Clarifications on in the economic conditions prevailing at the period-end and acceptable methods of depreciation and amortization; the information then available. Those economic trends are specifi cally reviewed on a country-by-country basis. a amendments to IAS 19 – Employee contributions; Depending on changes in assumptions, or in the eventuality a annual improvements 2010-2012 and 2012-2014; of conditions differing from those that were initially expected, a amendments to IFRS 11 – Accounting for acquisitions of amounts recorded in future fi nancial statements may differ from interests in joint operations. current estimates. Future results may also differ from these estimates. Europcar is currently determining the potential impacts of these standards, amendments and interpretations on the Group’s With respect to the vehicle rental business, estimates consolidated fi nancial statements. specifi cally cover: The following standards, amendments and interpretations, a the residual value of at risk vehicles (see “rental fl eet”); published and mandatory after 2015 but not yet adopted by the a the fair value of vehicles purchased with a manufacturer or European Union may affect the Group’s fi nancial statements: dealer buy-back commitment when badly damaged or stolen a IFRS 9 – Financial instruments; (see “rental fl eet”); a IFRS 15 – Revenue from contracts with customers; a the evaluation of the ultimate cost of claims made against the Group for self-funded insured accidents using actuarial a IFRS 16 – Leases. techniques generally accepted and used in the insurance The effects of applying IFRS 15 to the accounting of revenue industry. as from January 1, 2018 are currently being assessed. These should be immaterial given the nature of the Group’s business. The effects of applying IFRS 9 to fi nancial instruments as from January 1, 2018 are also being assessed.
154 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION CONSOLIDATED FINANCIAL STATEMENTS AND STATUTORY AUDITORS’ REPORT
In addition, estimates also cover: the acquiree and, where applicable, the acquisition-date fair value of the acquirer’s previously held equity interest in the a fair value measurement of assets and liabilities during acquiree revalued through profi t or loss; allocation of the acquisition cost of business combinations; a and the acquisition-date fair value of the identifi able assets a the value of non-listed equity investments available for sale required and liabilities assumed; (see Note 17) and derivative fi nancial instruments recorded at fair value in the Group’s statement of fi nancial position is recorded as goodwill. (see Note 30); If the difference arising from the calculation above is negative, a estimates of future cash fl ows as part of impairment tests it is recognized directly in the income statement. for goodwill recorded in the statement of fi nancial position Accounting policies of subsidiaries are amended where 03 and capitalized assets including trademarks (see Notes 13 necessary to ensure consistency with the policies adopted by and 14); the Group. a amounts of deferred taxes that may be recognized in the statement of fi nancial position (see Note 18); (II) TRANSACTIONS AND NON-CONTROLLING INTERESTS a measurement of post-employment benefits and other The Group treats transactions with non-controlling interests as employee benefi ts (see Note 27); transactions between equity owners of the Group. In the case of an additional acquisition of shares in a previously-controlled a provisions for disputes and litigation and valuation of entity, the difference between the consideration paid and the contingent liabilities (see Notes 28 and 32.4). corresponding share acquired in the carrying amount of net assets of the subsidiary is recorded in equity. When the Group BASIS OF CONSOLIDATION ceases to exercise control, any remaining interest in the entity is remeasured to its fair value, with the change in carrying amount (I) SUBSIDIARIES recognized in profi t or loss. Europcar Groupe’s fi nancial statements include the accounts The minority shareholders of certain fully consolidated of the parent company, ECG, and its subsidiaries for the year subsidiaries benefi t from commitments made by the Group ended December 31, 2015. to purchase their shares. In the absence of specifi c provisions Subsidiaries are all entities (including special purpose entities), under IFRS, the Group recognizes these commitments as directly or indirectly controlled by ECG. Control exists when follows: - the value of the commitment at the balance sheet date ECG has the ability to direct an investee’s relevant activities, is is recorded in “Other non-current liabilities”; - the corresponding exposed to variable returns and has the ability to affect those non-controlling interests are canceled. For acquisitions where returns through power over an investee. In assessing control, control was gained after January 1, 2010, and in application of substantive potential voting rights that are currently exercisable IFRS 3 revised and IFRS 10, the corresponding entry for this or convertible are taken into account. The fi nancial statements liability is deducted from equity attributable to non-controlling of subsidiaries are included in the consolidated financial interests up to the carrying amount of the relevant non- statements from the date that control commences until the controlling interests and deducted from total equity attributable date that control ceases. to the owners of ECG to cover any additional amounts. The liability is revalued at each balance sheet date at the current The acquisition method of accounting is used to account for redemption value, i.e. the present value of the exercise price the acquisition of subsidiaries by the Group. At the acquisition of the put option. Any change in value is recognized in equity. date, ECG transfers the consideration, acquires the assets and This accounting method has no effect on the presentation of assumes the liabilities of the acquiree. non-controlling interests in the income statement. The assets acquired and the liabilities assumed (including (III) ASSOCIATES contingent consideration) are valued at fair value at the acquisition date. Associates are entities over whose fi nancial and operating policies the Group has signifi cant infl uence, but not control Acquisition-related costs are expensed as incurred. or joint control (generally corresponding to a shareholding of On an acquisition-by-acquisition basis, the Group recognizes between 20% and 50% of the voting rights). any non-controlling interests in an acquiree either at fair value The Group’s interests in associates are consolidated using the or at the non-controlling interest’s proportionate share of the equity method. The investment is recorded at cost and adjusted acquiree’s net assets. Depending on the nature of the business for changes subsequent to the transaction in accordance with combination, the Group may elect to use either of these options. the investor’s share in the net assets of the associate. When At the acquisition date, the difference between: the Group’s share of losses exceeds its interest in an associate, the Group’s carrying amount is reduced to nil and recognition a the fair value of the consideration transferred (including of further losses is discontinued except to the extent that the contingent consideration), plus non-controlling interests in
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Group has a legal or constructive obligations to make payments FOREIGN CURRENCY TRANSLATION on behalf of an associate. (I) FUNCTIONAL AND PRESENTATION CURRENCY (IV) PARTNERSHIPS Items included in the financial statements of each of the Joint ventures are entities over whose activities the Group Group’s entities are measured using the currency of the primary has joint control, established by contractual agreement. The economic environment in which the entity operates (“the Group’s interests in joint ventures are accounted for under the functional currency”). The consolidated fi nancial statements equity method, as is the case for related companies. are presented in euros (€),which is ECG’s functional currency and the Group’s presentation currency. The Group does not have any joint activities. (II) FOREIGN CURRENCY TRANSACTIONS AND BALANCES (V) SPECIAL PURPOSE ENTITIES Transactions in foreign currencies are translated into the Special purpose entities (SPEs), such as SecuritiFleet functional currency at the foreign exchange rate at the companies, Euroguard, the Protected Cell Insurance & transaction date. Monetary assets and liabilities denominated Reinsurance SPE, FCT Sinople and EC Finance plc are in foreign currencies at the reporting date are translated consolidated when the relationship between the Group and into euros at the foreign exchange rate at that date. Foreign the SPE indicates that the SPE is in substance controlled by exchange differences arising on translation of monetary assets the Group. SPEs are entities which are created to accomplish and liabilities are recognized in the income statement. Non- a specifi cally-defi ned objective. monetary assets and liabilities measured at historical cost (VI) RECLASSIFICATION OF EXCHANGE GAINS/LOSSES IN in a foreign currency are translated using the exchange rate PROFIT AND LOSS at the transaction date. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value Exchange gains/losses recognized in other comprehensive are translated into euros at the foreign exchange rate at the fair income are reclassifi ed in profi t and loss only in the case of a value measurement date. total disposal. A partial disposal is defi ned by the Group as the disposal of an interest in a subsidiary (and not as a decrease (III) FINANCIAL STATEMENTS OF FOREIGN OPERATIONS in the investment). The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated into euros at the foreign exchange rate at the reporting date, while equity is translated at historical rates. The revenues and expenses of foreign operations are translated into euros at weighted average rates. All resulting exchange differences are recognized as Other comprehensive income within equity.
(IV) EXCHANGE RATES The following exchange rates were used for the years ended December 31, 2014 and December 31, 2015:
December 31, 2015 December 31, 2014
Average rate Closing rate Average rate Closing rate
Sterling (GBP) 1.377 1.362 1.240 1.284 Australian Dollar (AUD) 0.677 0.671 0.679 0.674
Source : Banque de France.
(I) GOODWILL A CGU is defi ned as the smallest identifi able group of assets that generates cash infl ows that are largely independent of the Goodwill recognized in local currency is not amortized and is cash infl ows from other assets or groups of assets. Goodwill subject to an impairment test performed at least annually, or is allocated by operating segment and within the corporately- more frequently if there is evidence that it may be impaired. owned rental business segment by country. For the purpose of impairment testing, goodwill is allocated to cash-generating units (CGU) or groups of cash-generating units The recoverable value of a CGU is based on the higher of its that are expected to benefi t from the business combination in fair value less costs to sell and its value in use determined using which the goodwill arose. the discounted future cash fl ow method. When this value is less
156 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION CONSOLIDATED FINANCIAL STATEMENTS AND STATUTORY AUDITORS’ REPORT
than its carrying amount, an impairment loss is recognized in Costs that are directly associated with the development of the income statement. The impairment loss is fi rst recorded identifi able and unique software products controlled by the as an adjustment to the carrying amount of goodwill allocated Group, and that will probably generate economic benefits to the CGU and the remainder of the loss, if any, is allocated exceeding costs beyond one year, are recognized as intangible to the other long-term assets of the unit on a pro rata basis. assets. These costs include the costs of the employees allocated to developing the software and a portion of relevant Goodwill arising from acquisitions of associates is included in overheads directly attributable to developing the software. “Investments in associates” and the total amount of goodwill is tested for impairment. Computer software development costs recognized as assets are amortized over their estimated useful lives (see below). Any impairment of goodwill is recorded in “Goodwill impairment 03 expense”. (III) INTANGIBLE ASSETS Other intangible assets that are acquired by the Group are INTANGIBLE ASSETS OTHER THAN GOODWILL stated at cost less accumulated amortization (see below) and (I) TRADEMARKS AND LICENSES impairment losses. They include the right to operate trademarks acquired under a business combination. Trademarks with an indefi nite useful life (IV) AMORTIZATION The Europcar trademark has been recognized at cost with an indefi nite useful life and is not amortized. It is tested annually for Intangible assets are amortized from the date they are available impairment based on the relief-from-royalty method. for use. Estimated useful lives are as follows: Impairment charges for trademarks are accounted for in “Other a trademarks with a fi nite useful life: 10 years; non-recurring income and expenses” in the consolidated a leasehold rights: 10 years; income statement. a computer software: 3 years; Trademarks with a fi nite useful life a operating systems: 5 to 10 years. The contractual right to operate the National and Alamo trademarks as part of a brand license agreement with Enterprise Holdings Inc. was recorded in “Other intangible assets”. PROPERTY, PLANT AND EQUIPMENT Following the resolution of the dispute between Enterprise (I) DIRECTLY OWNED ASSETS Holdings Inc and the Company, the residual value of the right to use the National Alamo brand was written off in full in 2014. Items of property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses. The Group no longer owns any trademarks with fi nite useful lives. Where parts of an item of property, plant and equipment have different useful lives, these are accounted for as separate items Trademarks and licenses that have a finite useful life are of property, plant and equipment and depreciated over their carried at cost less accumulated amortization. Amortization is own useful lives. Repairs and maintenance costs are expensed calculated using the straight-line method to allocate the cost as incurred. of trademarks and licenses over their estimated useful lives, or over the life of the underlying contract (10 years). They are (II) LEASED ASSETS tested for impairment if there is evidence that they may be impaired. IAS 17 defi nes a lease as being an agreement whereby the lessor conveys to the lessee in return for a payment, or series (II) COMPUTER SOFTWARE AND OPERATING SYSTEMS of payments, the right to use an asset for an agreed period of time. Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire them and bring them into Leases under which the Group assumes substantially all the use. These costs are amortized over their estimated useful lives risks and rewards of ownership are classifi ed as fi nance leases (see below). Costs associated with developing or maintaining (lessee accounting). Owner-occupied property acquired by way computer software programs are recognized as an expense of a fi nance lease is stated at an amount equal to the lower of its as incurred. fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation and impairment losses.
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(III) SUBSEQUENT COSTS Such agreements are treated for accounting purposes as operational pre-paid vehicle leases insofar as: The Group recognizes within the carrying amount of an item of property, plant and equipment, the cost of replacing part of a the Group does not have control of the vehicle because it such an item when that cost is incurred, if it is probable that cannot sell it; the Group will gain future economic benefi t from the item and a the contract only gives it the right to use the asset over a the cost of the item can be measured reliably. All other costs limited time; and are expensed in the income statement as and when they are incurred. The cost of repairs and interest on borrowings are a the asset retains a signifi cant part of its value at the time of recorded as current expenses. its repurchase by the manufacturer.
(IV) DEPRECIATION This accounting method is consistent and symmetrical with the recognition adopted by manufacturers, which consider the risks Land is not depreciated. Estimated useful lives are as follows: and rewards of ownership not to have been transferred since a buildings: 25 to 50 years; they retain the residual risk on the asset’s value and since this risk is signifi cant. a technical equipment and machinery: 6 to 12 years; The amount recorded represents the acquisition cost of the a other equipment and offi ce equipment, including specialized vehicles (net of volume rebates) and is the sum of two amounts tools: 3 to 15 years. representing distinct current assets: The useful life is reviewed annually. a the “Vehicle buy-back agreement receivable”, representing the agreed buy-back price (the obligation of the manufacturer RENTAL FLEET or dealer); Repurchase prices for buy-back vehicles are The group operates a large fl eet purchased with or without a contractually based on either (i) a predetermined percentage buy-back commitment. IFRS treats the accounting of assets of the original vehicle price and the month in which the vehicle and liabilities differently depending on how these acquisitions is repurchased, or (ii) the original capitalized price less a set are fi nanced. Accordingly, vehicles purchased via debt recorded economic depreciation amount, in either case subject to in the balance sheet or via fi nance leases are reported in the adjustments depending upon the condition of the vehicle, balance sheet under current assets given the duration of the mileage and holding period. group’s operating cycle. Vehicles fi nanced via operating leases a the “Deferred depreciation expense on vehicles”, representing are not reported in the balance sheet. Related commitments the difference between the acquisition cost of the vehicle are then recorded as off-balance sheet commitments. and the agreed buy-back price. This asset is depreciated through the income statement on a straight-line basis over (I) DIRECTLY OWNED RENTAL FLEET the contractual holding period of the vehicle. The fl eet operated by the Group is acquired through two types In view of the length of time for which these assets are held, of agreement: the Group recognizes these vehicles as current assets at the a with a manufacturer or dealer buy-back commitment (known outset of the contract. as buy-back vehicles): For stolen vehicles, the Group recognizes an impairment charge a without a manufacturer or dealer buy-back commitment (at against the value of the corresponding “Vehicle buy-back risk vehicles): agreement receivable” over a three-month period following the event. For badly damaged vehicles, the Group adjusts the value Vehicles purchased with a manufacturer or dealer buy-back of the corresponding receivable on the basis of independent commitment appraisal of the damaged vehicle. One of the characteristics of the automotive industry is the Vehicles purchased without a manufacturer or dealer buy- back sale/purchase of vehicles with a buy-back commitment from commitment (at risk vehicles): the manufacturer or dealer after a predetermined duration, generally less than 12 months. Vehicles purchased without manufacturer or dealer buy-back commitment are reported by the Group as “at risk” vehicles. The value of the vehicles is initially measured at cost, including any import duties, non-refundable purchase taxes and any costs directly attributable to bringing the vehicle to the rental location and preparing it for rental. Upon acquisition, at risk vehicles are depreciated on a straight-line basis based over their planned holding period and projected residual value. Over
158 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION CONSOLIDATED FINANCIAL STATEMENTS AND STATUTORY AUDITORS’ REPORT
the holding period, the residual value is regularly reviewed a the full amount of the Group’s VAT receivables, since the taking into account the state of the used vehicle market, and major portion of these are fl eet-related. is adjusted if necessary. Rental fl eet payables are amounts due to car manufacturers or In most cases, the holding period for a car does not exceed dealers. These payables are recorded at fair value and fall due 12 months. For vans and trucks, the holding period can range within one year. Rental fl eet related payables include the full from 12 to 24 months. Accordingly, although “at-risk“ vehicles amount of the Group’s VAT payables, since the major portion are similar to fi xed assets, the Group classifi es these vehicles of the Group’s VAT payables is fl eet related. in the balance sheet as current assets under “Fleet included in In addition, the rental fl eet and related payables and receivables the balance sheet” – see Note 19. include the effects of a major operating lease signed in 2009 03 (II) FLEET FINANCED UNDER LEASES under which the group acquires vehicles from a manufacturer and sells them immediately to the lessor. The receivable The operated fl eet can be fi nanced through leasing contracts (from the manufacturer) and payable (to the lessor) amounts with financial institutions or the finance divisions of car recorded at inception of the lease are settled when the vehicles manufacturers meeting either finance criteria or operating are returned to the manufacturer according to the buy-back lease criteria. The accounting principles are in such cases arrangement. The asset from the manufacturer and liability to identical to those mentioned in the Section on property, plant the lessor are of an equivalent amount that cannot be offset in and equipment – leased assets. the balance sheet in the absence of an enforceable right held Operating lease by the group. Contracts where lessors do not transfer to Europcar TRADE AND OTHER RECEIVABLES substantially all the risks and rewards of ownership meet in substance the lease criteria as defi ned by IAS 17. Accordingly, Trade receivables are amounts due from customers for the vehicles concerned are not recorded in the balance sheet. services performed in the regular course of business, which Rents paid for these vehicles are disclosed in Note 32.1 are recognized initially at fair value and subsequently measured “Operating leases.” at amortized cost using the effective interest method, less any provisions for impairment. A provision is recognized in respect Finance lease of impairment of trade receivables when there is objective By contrast, when Europcar is exposed to a signifi cant residual evidence that the Group will not be able to collect all amounts value risk under leasing arrangements with fi nancial institutions due according to the original terms of a receivable. Signifi cant or the fi nance divisions of car manufacturers, the arrangement fi nancial diffi culties of the debtor, probability that the debtor is considered to be a fi nance lease. will enter bankruptcy or fi nancial reorganization, and default or delinquency in payments are considered to be indicators that In this case, such contracts are recognized in the balance sheet a trade receivable is impaired. offsetting a liability. These assets are depreciated over their expected useful lives on the same basis as owned assets or The impairment loss is recognized in the consolidated income over the term of the relevant lease, if shorter. statement in “Fleet operating, rental and revenue related costs” (see Note 4). As is the case for “at-risk” vehicles, their average holding period generally does not exceed 12 months. Therefore, vehicles fi nanced under fi nance lease arrangements are recorded as CASH current assets. Cash includes cash and cash equivalents and restricted cash.
RECEIVABLES AND PAYABLES RELATED (I) CASH AND CASH EQUIVALENTS TO THE RENTAL FLEET Cash comprises cash in hand. Rental fl eet related receivables include: Cash equivalents include short-term and highly liquid a fleet receivables, due by car manufacturers or dealers investments such as marketable securities and obligations with repurchasing the vehicles after the vehicle has been returned a maturity of less than three months at the acquisition date, to the car manufacturer at the end of the holding period readily convertible to a known amount of cash and subject to (buy-back agreements). The fl eet receivables are recorded an insignifi cant risk of a change in value. Financial instruments at fair value, which corresponds to their nominal value. These classifi ed as cash and cash equivalents are accounted for at receivables fall due within one year and are impaired if their fair value through profi t and loss. carrying amount is greater than the estimated recoverable amount;
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(II) RESTRICTED CASH (III) AVAILABLE-FOR-SALE FINANCIAL ASSETS Cash and cash equivalents are considered as restricted when “Available-for-sale fi nancial assets” is essentially a residual they are (i) used to cover the future settlement of insurance category for those fi nancial assets that do not meet the criteria claims or (ii) not immediately available for fi nancing the activity of the other categories or that are designated as available-for- of the subsidiaries. Therefore, cash located in the following fl eet sale. This category includes investments in non-consolidated and insurance SPEs is considered restricted: companies (see Note 17). a Securitifl eet Holding and Securitifl eet Holding Bis; Financial instruments classified as “available-for-sale” are measured at fair value. Gains and losses arising from changes a FCT Sinople (securitization mutual fund); in fair value are included as Other comprehensive income within a EC Finance Plc; and equity except for impairment losses and monetary items such as foreign exchange gains and losses. When these investments a Euroguard, a captive insurance structure. are derecognized, the cumulative gain or loss inventoried in Restricted cash and restricted cash equivalents are presented equity is transferred to the income statement. Where these separately from cash and cash equivalents. investments are interest bearing, interest determined using the effective interest method is recognized in the income statement. FINANCIAL INSTRUMENTS Available-for-sale equity investments (e.g., investments in Financial instruments are contracts that give rise to a fi nancial unconsolidated companies) that do not have a quoted market asset in one entity and a fi nancial liability or equity instrument price in an active market and whose fair value cannot be in another entity. reliably measured are measured at cost, less any accumulated impairment losses. The Group classifies its financial assets in the following categories: fi nancial instruments at fair value through profi t or Impairment of available-for-sale fi nancial assets loss, loans and receivables, held-to-maturity investments and In the case of available-for-sale equity securities, a signifi cant or available-for-sale fi nancial assets. prolonged decline in the fair value of the security below its cost Financial liabilities are classifi ed in the following categories: is also considered in determining whether impairment exists. fi nancial liabilities at fair value through profi t or loss and other Where such evidence exists, the cumulative net loss previously fi nancial liabilities. Management determines the classifi cation of recognized directly in equity is transferred out of equity and fi nancial assets and liabilities at initial recognition. recognized in the income statement. Impairment losses recognized in the income statement on (I) LOANS AND RECEIVABLES equity instruments are not reversed through the income This category is for non-derivative fi nancial assets with fi xed statement until the sale of the equity instrument. Increases in or determinable payments that are not quoted on an active the fair value of equity securities after impairment are recognized market, which arise from the lending of money, or supply of directly in equity. goods or services. They include loans acquired, receivables and marketable securities not classified as cash and cash (IV) FINANCIAL LIABILITIES AT AMORTIZED COST equivalents. Loans and receivables are initially recognized at These fi nancial liabilities include: fair value, including transaction costs. These are subsequently a valued at amortized cost, using the effective interest rate loans and borrowings; method. a trade and other payables; For short-term receivables, amortized cost generally equals a bank overdrafts. the nominal amount. For short-term trade and other payables, amortized cost (II) HELD-TO-MATURITY FINANCIAL ASSETS generally equals the nominal amount. Held-to-maturity investments are non-derivative fi nancial assets Borrowings are initially recognized at fair value, net of transaction with fi xed or determinable payments and a fi xed maturity that costs. Borrowings are subsequently measured at amortized the entity has the positive intention and ability to hold to maturity. cost. The effective interest rate calculation takes into account These instruments are measured at amortized cost. Held-to- interest payments and the amortization of transaction costs. maturity investments are reported as non-current investments Transaction costs are amortized on an effective interest rate if the maturity is greater than 12 months. Otherwise they are basis over the term of the borrowings. reported as current investments (see Note 17).
160 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION CONSOLIDATED FINANCIAL STATEMENTS AND STATUTORY AUDITORS’ REPORT
Bank overdrafts that are repayable on demand and form an to the reporting date (a “loss event”), and said loss event has integral part of the Group’s cash management are included an impact on the estimated future cash fl ows of the fi nancial as a component of current borrowings for the purposes of the asset or the portfolio that can be reliably estimated. statement of fi nancial position and statement of cash fl ows. Impairment of trade receivables is described in Note 21 and Borrowings are classifi ed as current liabilities unless the Group impairment of available-for-sale assets is described above. has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. TREASURY SHARES
(V) DERIVATIVE FINANCIAL INSTRUMENTS Europcar Groupe shares held by the parent company are recorded at cost and deducted from consolidated equity. The Group uses derivative fi nancial instruments to manage 03 On disposal, the gain or loss and the related tax impacts are its exposure to interest rate and foreign exchange risks. In recorded as a change in equity. accordance with its treasury management policy, the Group does not hold or issue derivative financial instruments for trading purposes. EMPLOYEE BENEFITS When derivatives are held for risk management purposes and The Group provides post-employment benefi ts through defi ned when transactions meet the required criteria, the Group applies contribution plans as well as defi ned benefi t plans. fair value hedge accounting, cash fl ow hedge accounting or (I) DEFINED CONTRIBUTION PLANS hedging of a net investment in a foreign operation as appropriate to the risks being hedged. A defi ned contribution plan is a pension plan under which the Group pays fi xed contributions to an independent entity or a At the inception of the transaction the Group documents the fund. The Group has no legal or constructive obligation to pay relationship between hedging instruments and hedged items, further contributions after its payment of the fi xed contribution as well as its risk management objectives for undertaking if the fund does not have suffi cient assets to pay all employee the hedging transactions. The Group also documents its benefi ts relating to employee services in the current and prior assessment, both at hedge inception and on an ongoing periods. The Group contributes to state pension plans and basis, of whether the derivatives that are used in hedging insurance schemes for individual employees that are deemed transactions are highly effective in offsetting changes in fair to be defi ned contribution plans. Contributions to the plans are values or cash fl ows of hedged items. The fair values of various recognized as an expense in the period in which the services derivative instruments used for hedging purposes are disclosed are rendered by the employees. in Note 30. At December 31, 2015, the Group did not hold any derivative (II) DEFINED BENEFIT PLANS instruments eligible for fair value or net investment hedge Plans that do not meet the defi nition of a defi ned contribution accounting. plan are defined benefit plans. The defined benefit plan operated by the Group defi nes the amount of pension benefi t Cash fl ow hedge accounting that an employee will receive on retirement by reference to For qualifying cash fl ow hedges, the fair value gain or loss length of service and fi nal salary. associated with the effective portion of the cash fl ow hedge is recognized initially in shareholders’ equity (see consolidated The legal obligation for any benefi ts remains with the Group, statement of comprehensive income), and recycled to the even if plan assets for funding the defi ned benefi t plan have income statement in the periods when the hedged item will been set aside. Plan assets may include assets specifi cally affect profi t or loss. Any ineffective portion of the gain or loss on designated to a long-term benefi t fund. the hedging instrument is recognized in the income statement The valuation of the Group’s commitments with respect to immediately in “Net fi nancing costs” (see Note 11). defi ned benefi t plans is performed by an external independent actuary using the projected unit credit method. This method (VI) IMPAIRMENT OF FINANCIAL ASSETS requires specifi c actuarial assumptions that are detailed in The Group assesses at each reporting date whether there is Note 27 – Employee Benefi ts. These actuarial valuations are objective evidence that loans and receivables are impaired. performed at the period end for each plan by estimating the Impairment losses are incurred only if there is objective present value of the amount of future benefi ts that employees evidence of impairment as a result of one or more loss events have earned in return for their service in the current and prior that occurred after the initial recognition of the asset and prior periods and factoring in the effects of future salary increases.
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Plan assets are usually held in separate legal entities and PROVISIONS measured at fair value as determined at each period end. A provision is recognized in the statement of financial In accordance with IAS 19, the liability recognized in the position when the Group has a present legal or constructive statement of fi nancial position for defi ned benefi t plans is the obligation as a result of a past event, it is probable that an present value of the defi ned benefi t obligation at the reporting outflow of economic benefits will be required to settle the date less the fair value of plan assets. obligation, and the amount can be reliably estimated. If the effect is material, provisions are determined by discounting From one accounting period to the next, any difference between the expected future cash fl ows at a pre-tax rate that refl ects the projected liabilities and their re-estimated amounts, and current market assessments of the time value of money and, the expected level of dedicated assets and their actual level where appropriate, the risks specifi c to the liability. constitute actuarial differences, which are cumulated at the level of each pension plan. These actuarial differences may result Provision is made for the estimated value of uninsured losses either from changes in actuarial assumptions used at the period from both known and incurred but not reported third-party end or from experience-related adjustments based on changes claims on an actuarially determined basis. Where these claims in prior-period assumptions. are expected to be settled over a longer period of time, the provision made represents the present value of the expected The Group recognizes actuarial gains/losses in the consolidated expenditure required to settle the obligation. Any excess of statement of comprehensive income in the period in which this prepayment over the estimated liabilities is subject to an they occur. assessment of recoverability, and a provision is set aside if Past service costs are recognized immediately as operating necessary. expenses in “Personnel Costs ”. In the normal course of its business activities, the Group Unwinding of discounts and the expected return on plan assets is subject to certain claims and investigations relating to are recognized as fi nancial expenses (see Note 10). compliance with laws and regulations in various jurisdictions, including some with fi scal or competition authorities. The Group (III) LONG-TERM SERVICE BENEFITS generally records a provision whenever a risk represents a the The Group’s net obligation in respect of long-term service probability of a cash disbursement towards a third party without benefi ts, other than for pension plans (or post-employment compensation and when the possible loss that may result can benefi t plans), is the future benefi t that employees have earned be estimated with suffi cient accuracy. in return for their service in the current and prior periods, such A provision on vehicle buy-back and reconditioning costs is as long-service awards (médailles du travail) in France and recognized over the holding period of the vehicles. jubilee awards in Germany. The obligation is calculated using the projected unit credit method and is discounted to its The impact of discounting provisions is recognized in other present value. The provision is recorded net of the fair value fi nancial expenses. of any related assets (i.e., all actuarial gains/losses and past service costs are recognized immediately in the consolidated REVENUE income statement). Revenue includes vehicle rental incomes, fees from the (IV) PROFIT-SHARING AND BONUS PLANS provision of services incidental to vehicle rental (including fuel), and fees receivable from the Europcar franchise network, net The Group recognizes a liability and an expense for bonuses of discounts and excluding inter-company sales, VAT and sales and profit-sharing, based on a formula that takes into taxes. consideration the profi t attributable to ECG’s shareholders after certain adjustments. The Group recognizes a provision when Revenue from services rendered is recognized proportionally required by a contractual obligation. over the period in which the vehicles are rented out based on the terms of the rental contract. The stage of completion is The related expenses are recognized in Personnel costs (see assessed on the basis of the actual service provided (number Note 5 “P ersonnel C osts”). of days of rental in the accounting period). When vehicle rental income is generated by intermediaries (such as travel agencies), the gross revenue is recognized in the consolidated income statement when Europcar: a has the ability to determine the price; a performs part of the service; and a has discretion in intermediary selection.
162 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION CONSOLIDATED FINANCIAL STATEMENTS AND STATUTORY AUDITORS’ REPORT
The commission fees are recorded in the Fleet operating, rental (II) FLEET OPERATING, RENTAL AND REVENUE RELATED COSTS and revenue-related costs line item in the income statement Fleet operating costs relate to costs incurred during the fl eet (see Note 4). operating cycle for: No revenue is recognized if there are signifi cant uncertainties a reconditioning; regarding recovery of the consideration due. a repairs; The Group has launched a loyalty program covered by IFRIC 13 — Customer Loyalty Programs. a maintenance; This program provides a free weekend rental or discount a impairment of badly damaged and wrecked vehicles, thefts; coupons after a certain number of rentals eligible for the and 03 program have been accumulated. These benefi ts can be used a insurance. as from the next rental and are valid for 12 months. Rental costs include fuel, vehicle transfers, vehicle washing, Given its recent nature, the Group considers that the impacts etc. Costs related to revenue from ordinary activities include of applying this standard, consisting of: commissions, and airport and rail station fees, etc. a considering the benefi t accruing to the customer – such as a free weekend of car rental to be used within one year – as (III) PAYMENTS IN RESPECT OF FINANCE LEASE CONTRACTS a separate component of a sale transaction; Minimum lease payments are apportioned between the fi nance a allocating some of the proceeds of the initial sale to the charge and the reduction of the outstanding liability. The fi nance award, and deferring this portion of the proceeds until the charge is allocated to each period during the lease term so as Group has fulfi lled its obligations; are not material. to produce a constant periodic rate of interest on the remaining balance of the liability. For this reason, no impact was reported as such in the consolidated financial statements as of the end of OPTION PLAN AND SIMILAR December 2015. The Group has established plans granting free shares to EXPENSES management and certain employees. The fair value of these plans is equal to the value of the free shares as of the grant (I) FLEET HOLDING COSTS date, taking into account the valuation of the restriction during the potential lock-up period (see Note 6). These plans result in Fleet holding costs include vehicle costs such as costs related the recognition of a personnel expense spread over the vesting to rental fleet agreements either with car manufacturers period. The estimated cost to be recognized takes into account through the recognition of vehicle depreciation charges (see the employee turnover rate over the vesting period. “rental fl eet”) or with providers of funding (via lease rents), taxes applicable to the rental fl eet and the costs incurred for the purchase or sale of vehicles. OTHER NON-RECURRING INCOME AND EXPENSES Costs related to rental fl eet agreements mainly consist of vehicle (I) ACQUISITION-RELATED CHARGES depreciation expense net of rebates and off-balance sheet fl eet Acquisition-related expenses include charges incurred in operating lease expenses (see Signifi cant Accounting Policies connection with the integration of acquisitions, such as legal – “the rental fl eet”). and accounting fees, severance and consultancy costs related Costs related to the acquisition and disposal of vehicles to headcount reductions due to the streamlining of the rental include the cost of vehicle accessories and costs relating to station network and its support functions, asset write-offs and the conditioning of new vehicles and the disposal of used cars. transfer costs, lease termination and building refurbishment costs carried out for the purpose of integrating acquisitions. Payments made under operating leases are recognized in the consolidated income statement in “Fleet holding costs” on a straight-line basis over the term of the lease.
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(II) REORGANIZATION EXPENSES AND OTHER NON-RECURRING enacted at the reporting date, and subject to any adjustment COSTS to tax payable in respect of previous years. Reorganization expenses include charges incurred in The amount of deferred tax is based on the expected pattern connection with business restructuring carried out to adapt of realization or settlement of the carrying amount of assets local or corporate organizational structures to changing and liabilities, using tax rates enacted or substantively enacted business conditions. They include headcount reduction at the reporting date. expenses, consultancy fees, asset write-offs and transfer A deferred tax asset is recognized only to the extent that it is costs and early lease termination costs incurred as part of probable that future taxable profi ts will be available against restructuring programs. which the tax asset can be utilized. This probability is assessed Unusual, non-recurring items in material amounts are presented based on: separately in Other non-recurring income and expenses to a the existence of temporary differences that will give rise to provide a clearer picture of the Group’s performance. taxation in the future; NET FINANCING COSTS a forecasts of taxable profi ts. Net fi nancing costs comprise interest payable on borrowings EARNINGS PER SHARE calculated using the effective interest rate method, dividend income, foreign exchange gains and losses, financing Basic earnings per share is calculated by dividing net income arrangement costs, gains and losses on fi nancial instruments (attributable to shareholders of the parent company) by the that are recognized in the consolidated income statement, any average number of shares outstanding during the year. Treasury ineffective portion of the gain or loss on cash fl ow hedging shares are not taken into account in the calculation of basic instruments, and the fi nancial component of pension charges or diluted earnings per share. Diluted earnings per share is (unwinding of discounts and the expected return on plan calculated by dividing net income attributable to shareholders assets). of the parent company by the average number of common shares outstanding during the period, plus the average number Interest income is recognized in the income statement as of shares that would have been issued had all outstanding it accrues, using the effective interest method. The interest dilutive instruments been converted. expense component of fi nance lease payments is recognized in the income statement using the effective interest rate method. INDICATORS NOT DEFINED BY IFRS INCOME TAX BENEFIT/(EXPENSE) Adjusted corporate EBITDA, defi ned as recurring operating income before non-fl eet depreciation and amortization, after Income tax on profi t or loss for the year comprises current and deduction of the interest expense on certain liabilities related deferred tax. Income tax is recognized in the income statement to rental fl eet fi nancing. See Note 2, “Segment reporting” for except to the extent that it relates to items recognized directly a reconciliation of Adjusted corporate EBITDA to the amounts in equity, in which case it is recognized in equity. reported in the consolidated income statement. Current tax is the expected tax payable on the taxable income for the year, calculated using tax rates enacted or substantially
Financial risk management
The Group’s activities expose it to a variety of fi nancial risks: the Group’s operational units. The Management Board decides market risk (including currency risk, fair value interest rate risk, whether to authorize these recommendations based on formal cash fl ow interest rate risk and equity price risk), credit risk and documentation describing the context, purpose and main liquidity risk. The Group’s overall risk management program characteristics of the transactions. Once the Management Board seeks to mitigate the potential negative impacts of volatility in has approved the transactions, Group Treasury is responsible the fi nancial markets on the Group’s fi nancial performance. The for implementing the hedges. This procedure is prepared and Group uses derivative fi nancial instruments to hedge certain risk monitored for the management of all material fi nancial risks, and exposures. in particular interest rate and credit risk, as well as for the use of derivative and ordinary fi nancial instruments, and the short-term The Group Treasury Department is responsible for risk investment of surplus cash. The Group does not use derivative management, and submits its proposals for fi nancial transactions fi nancial instruments for any purpose other than managing its for approval by the Management Board. The Group Treasury exposure. All hedging operations are either centrally coordinated Department identifi es, evaluates and recommends derivative or carried out by Group Treasury. instruments to hedge fi nancial risks in close collaboration with
164 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION CONSOLIDATED FINANCIAL STATEMENTS AND STATUTORY AUDITORS’ REPORT
The Group continuously assesses the fi nancial risks identifi ed MARKET RISK (including market risk, credit risk and liquidity risk) and documents its exposure in its consolidated fi nancial statements. (I) FOREIGN EXCHANGE RISK The Group considers that its exposure at December 31, 2015 The Group operates in several countries internationally and is has not changed signifi cantly during the last 12 months and exposed to foreign exchange risk arising from various currency therefore the policy implemented to mitigate such exposure exposures, primarily with respect to the GBP. Foreign exchange remains consistent with prior years. risk arises from translation into euros of the results and net assets of the subsidiaries having a functional currency other than the euro. The foreign exchange risk related to intragroup financial 03 transactions and, to a lesser extent, transactions with franchisees is somewhat limited with each subsidiary operating in its own market and functional currency. As at December 31, 2015, the Group did not have any investments in foreign operations whose net assets are exposed to foreign currency translation risk other than in the United Kingdom, Australia and New Zealand.
GROUP SUMMARY OF QUANTITATIVE EXPOSURE TO FOREIGN EXCHANGE RISK ARISING FROM TRANSLATION OF BALANCES INTO THE FUNCTIONAL CURRENCY
In thousands of euros GBP AUD Total 2015
Trade and other receivables (including fl eet) 122,670 10,607 133,277 Other fi nancial assets: Non-current investments 338 54 392 Derivative fi nancial instruments --- Other fi nancial assets 2-2 Cash and cash equivalents 6,689 19,101 25,790 TOTAL FINANCIAL ASSETS 129,699 29,762 159,461 Trade and other payables (including fl eet) 105,842 16,866 122,708 Loans and borrowings 375,089 75,774 450,863 Impact of hedging derivatives --- TOTAL FINANCIAL LIABILITIES 480,931 92,640 573,571
NET EXPOSURE (TO EXCHANGE RISK) FOR NON-EURO COMPANIES (351,232) (62,878) (414,110)
In thousands of euros GBP AUD Total 2014
Trade and other receivables (including fl eet) 105,988 11,386 117,374 Other fi nancial assets: Non-current investments 1,657 43 1,700 Derivative fi nancial instruments --- Other fi nancial assets 2-2 Cash and cash equivalents 17,797 17,695 35,492 TOTAL FINANCIAL ASSETS 125,444 29,124 154,568 Trade and other payables (including fl eet) 112,889 17,138 130,027 Loans and borrowings 347,635 102,668 450,033 Impact of hedging derivatives --- TOTAL FINANCIAL LIABILITIES 460,254 119,806 580,060
NET EXPOSURE (TO EXCHANGE RISK) FOR NON-EURO COMPANIES (334,810) (90,682) (425,492)
At December 31, 2015, if the euro had appreciated or depreciated by 15% against sterling, with all other variables held constant, net loss for the year would have increased/decreased by €3.9 million (2014: €1.1 million) and equity would have increased/decreased by €78.3 million (2014: €74.7 million).
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(II) INTEREST RATE RISK Based on the various scenarios, the Group manages its cash fl ow risk on interest rates by using variable-fi xed interest rate With the exception of investments in bonds in the Euroguard swaps. These swaps convert variable rate debt to fi xed rate insurance program (see “Insurance risks”), the Group does debt. Generally, the Group raises long-term borrowings for not hold any signifi cant interest-bearing assets. Accordingly, revolving fl eet fi nancing facilities at fl oating rates and swaps its revenue is not signifi cantly subject to changes in market them into fixed rates that are generally lower than those interest rates. available if the Group borrowed at fi xed rates directly. The Group is exposed to risk that rates on its variable rate The Group is protected against the risk of rising interest rates fi nancing might rise: on revolving lines of credit. on the one via two interest rate swap contracts: hand, but also from operating leases for vehicles. Borrowings issued at variable rates expose the Group to cash fl ow interest a a n interest rate swap with a nominal principal amount of rate risk. Borrowings issued at fi xed rates expose the Group to €1,000 million maturing on July 17, 2017, extended to fair value interest rate risk. July 17, 2019 subject to the entering into effect of the SARF’s extension, for which the Group pays a fi xed interest In accordance with its hedging policy, and in respect of rate of 0.8059% until July 17, 2017 and 0.6418% from certain of its debt instruments bearing interest at variable July 17, 2017 to July 17, 2019 and receives a variable interest rates (specifically the SARF, the RCF and most operating rate corresponding to the one-month EURIBOR; and leases), the Group hedges a signifi cant portion of the risk of fl uctuations in the benchmark rate, which is generally based on a an interest rate swap with a nominal principal amount of EURIBOR. In 2015 and 2014, a signifi cant part of the Group’s €500 million maturing in July 2018, for which the Group pays borrowings at variable rates were denominated in euro and a fi xed interest rate of 1.489% and receives a variable interest based on EURIBOR. The Group may also hedge its exposure rate corresponding to the six-month EURIBOR. This swap to fl uctuations in LIBOR and/or the Australian benchmark rate was amended, extending its maturity to July 2020, increasing in respect of its fi nancing facilities in the UK and Australia. the nominal to €600 million and reducing the fi xed interest rate to 1.0990%. The Group analyzes its interest rate exposure on a dynamic basis. Various scenarios are simulated taking into consideration, An outstanding amount of €700 million in swaps outstanding among other things refi nancing, renewal of existing positions, is backed by variable-rate lines of credit (see table below) and alternative fi nancing and hedging. Based on these scenarios, an outstanding amount of €900 million is backed by rents from the Group calculates the impact on profi t and loss of a defi ned variable-rate leases. interest rate shift. For each simulation, the same interest rate shift is used for all currencies. The scenarios are run only for liabilities that represent the major interest-bearing positions.
At closing, the distribution of loans by rate type was as follows:
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Non-current liabilities Fixed rate borrowings 812,118 1,047,682 Variable rate borrowings (10,935) (4,613) Of which variable rate hedged (11,087) (4,916) Of which variable rate not hedged 152 303
801,183 1,043,069 Current liabilities Fixed rate borrowings 6,653 7,644 Variable rate borrowings 1,257,130 1,119,901 Of which variable rate hedged 735,353 614,700 Of which variable rate not hedged 521,780 505,201
1,263,783 1,127,545
All interest rate swaps reported by the Group are classifi ed as cash fl ow hedges.
166 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION CONSOLIDATED FINANCIAL STATEMENTS AND STATUTORY AUDITORS’ REPORT
Tests performed in connection with such hedging instruments CREDIT RISK showed ineffi ciency estimated at €1.8 million recorded in the Credit risk is managed on a Group-wide basis. Credit risk arises 2015 income statement. on: At December 31, 2015, if interest rates had strengthened by 100 a cash and cash equivalents; basis points, the fair value recognized in other comprehensive income would have increased by €58.5 million (€38.0 million a derivative fi nancial instruments; at December 31, 2014). a deposits with banks and fi nancial institutions; At December 31, 2015, if interest rates had weakened by 100 a arrangements with car manufacturers and dealers; basis points, the fair value recognized in other comprehensive income would have decreased by €61.6 million (€39.2 million a customer receivables, particularly outstanding receivables 03 at December 31). and pending commitments. In the year ended December 31, 2015, if interest rates had For banks and fi nancial institutions, only counterparties that varied by +/- 1%, interest expense on the unhedged portion of are independently rated are accepted. The utilization of credit borrowings, all other constants being equal, would have varied limits is regularly monitored. by +/- €5.1 million.
LOANS AND RECEIVABLES CREDIT RISK ANALYSIS
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Neither past due nor impaired (1) 1,699,488 1,459,322 Past due but not impaired 125,417 139,290 Impaired 39,310 36,899
TOTAL 1,864,215 1,635,511
(1) Net of provisions for stolen and badly damaged cars (see Note 21).
The maximum exposure to credit risk at the reporting date is a the risk of having to self-fi nance the receivables referred to the carrying amount of loans and receivables. The Group does in the previous point; and not hold any collateral as security. a the risk of bankruptcy of a significant supplier and the Loans and receivables neither past due nor impaired relate to subsequent uncertainty surrounding future supplies. a number of independent counterparties for whom there is no No single customer accounts for 10% or more of Europcar recent history of default or expected default. Groupe’s revenue in 2015. The Group’s credit risk exposure to car manufacturers and dealers primarily arises from: a the risk of non-recoverability of receivables relating to buy- back commitments received from car manufacturers;
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In addition, the Group has implemented procedures to monitoring reporting. The aged analysis of loans and receivables monitor and reduce credit risk exposure that include customer past due but not impaired and excluding fi nancial loans and credit limits in the information system, monthly tracking of receivables is as follows: car manufacturer credit ratings and overdue receivable risk
Less than Between 3 More than 3 months and 6 months 6 months In thousands of euros Not yet due past due past due past due Total
Vehicle buy-back agreement receivables 1,024,072 - - - 1,024,072 Fleet receivables 444,957 52,969 85 3,511 501,522 Rental receivables 136,290 47,391 13,442 12,092 209,215 Trade receivables 15,719 1,522 412 6,376 24,029 Other receivables 53,715 26 21 13 53,775
TOTAL AS AT DECEMBER 31, 2015 1,674,753 101,908 13,960 21,992 1,812,613
Less than Between 3 More than 3 months and 6 months 6 months In thousands of euros Not yet due past due past due past due Total
Vehicle buy-back agreement receivables 832,196 - - - 832,196 Fleet receivables 387,896 63,436 6,280 2,426 460,038 Rental receivables 127,582 37,116 12,322 4,467 181,487 Trade receivables 18,937 4,503 301 6,832 30,573 Other receivables 48,900 19 8 1 48,928
TOTAL AS AT DECEMBER 31, 2014 1,415,511 105,074 18,911 13,726 1,553,222
PRICE RISK The budget, on which is based the cash forecast for fi scal year 2016, has been built on assumptions taking into account the The Group is not exposed to equity price risk given the impact of the currently uncertain economic environment. non- material amounts of its fi nancial investments classifi ed as either available-for-sale or at fair value through profi t or loss. The liquidity risk management strategy is based around The Group is not directly exposed to commodity price risk but maintaining suffi cient available lines of credit and guaranteed is exposed to the risk of increasing holding costs for vehicles. credit facilities for appropriate amounts. Given the dynamic nature of the underlying businesses—particularly seasonal LIQUIDITY RISK fl uctuations—fl exible fi nancing arrangements are provided by guaranteed medium- to long-term revolving lines of credit. Europcar Group is currently followed by Moody’s and Standard & Poor’s, which have respectively awarded it B1 stable outlook The following table presents the Group’s fi nancial liabilities and B+ stable outlook ratings. including hedging derivatives by relevant maturity, based on the remaining period from the balance sheet date to the Management monitors rolling forecasts of the Group’s liquidity contractual maturity date. The amounts disclosed in the table reserve on the basis of expected cash fl ows determined on a are the contractual undiscounted cash fl ows. Balances due consolidated basis. Each operational entity produces liquidity within 12 months are equal to their carrying values, as the and cash forecasts for internal reporting purposes. Those impact of discounting is not signifi cant. forecasts are consolidated at Group Treasury level and analyzed by Group management and operational units.
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From 1 year Up to 1 year to 5 years Later than 5 years Total Carrying In thousands of euros Value Principal Interest Principal Interest Principal Interest Principal Interest
December 31, 2015 Notes issued 818,771 - 45,250 - 181,000 825,000 51,432 825,000 277,682 Bank borrowings and fi nance lease liabilities 529,939 102,810 15,700 437,937 (1) 32,642 - - 540,747 48,342 Senior asset fi nancing facility 653,856 - 19,300 658,284 (1) 49,858 - - 658,284 69,158 Other borrowings 62,400 62,400 -----62,400-03 Derivative liabilities 52,090 - - - 52,090 - - - 52,090 Trade and fl eet payables 882,234 882,234 -----882,234 - Deposits 37,379 37,379 -----37,379-
TOTAL FINANCIAL LIABILITIES 3,036,669 1,084,823 80,250 1,096,221 315,590 825,000 51,432 3,036,044 447,272
From 1 year Up to 1 year to 5 years Later than 5 years Total Carrying In thousands of euros Value Principal Interest Principal Interest Principal Interest Principal Interest
December 31, 2014 Notes issued 1,055,324 - 112,850 724,000 215,026 350,000 27,654 1,074,000 355,529 Bank borrowings and fi nance lease liabilities 671,357 124,706 15,874 552,018 (1) 26,607 - - 676,724 42,841 Senior asset fi nancing facility 414,153 - 14,040 417,600 (1) 20,298 - - 417,600 34,338 Other borrowings 29,780 29,780 -----29,780- Derivative liabilities 41,928 - - - 41,928 - - - 41,928 Trade and fl eet payables 794,333 794,333 -----794,333 - Deposits 42,875 42,875 -----42,875-
TOTAL FINANCIAL LIABILITIES 3,049,750 991,694 142,764 1,693,618 303,859 350,000 27,654 3,035,312 474,276
(1) Revolving credit facilities are classifi ed on the balance sheet as current liabilities given their nature.
The table below shows the credit limits and balances with the three major counterparties at the reporting date:
As at Dec. 31, 2015 As at Dec. 31, 2014
In thousands of euros Credit limit Utilized Credit limit Utilized
Revolving credit (1) 350,000 94,400 300,000 214,300 Senior asset fi nancing lines related to fl eet fi nancing 1,100,000 658,284 1,000,000 417,600 Financing other than senior asset fi nancing lines related to fl eet fi nancing (2) 1,224,661 877,171 1,235,159 884,201
(1) Amounts drawn include €81.0 million on the revolving credit facility at December 31, 2015 (2014: €201 million) and guarantees given in the course of the Group’s operations. (2) Primarily relates to fl eet operations in the United Kingdom fi nanced through credit lines other than the senior fi nancing asset loan.
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CAPITAL RISK MANAGEMENT to the main countries in which the Group operates, with the exception of Spain, Australia and New Zealand for the reasons The Group’s objectives when managing capital are to safeguard set out above): the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other a operating a large fl eet entails signifi cant risk of the occurrence stakeholders and to maintain an optimal capital structure to of multiple small third party claims. The expense stemming reduce the cost of capital. from these small claims can be predicted with a good level of certainty by actuaries, factoring into their projections In order to maintain or adjust the capital structure, the Group the variation in activity and trends witnessed in the various may adjust the amount of dividends paid to shareholders, countries. A line of €500,000 per claim is self-insured in this return capital to shareholders, issue new shares or sell assets manner; to reduce debt. a operating a large fl eet also entails the risk of the more random INSURANCE RISKS occurrence of costly events, essentially bodily injury claims from third parties invoking Europcar’s liability. Such events The Group’s operating subsidiaries located in France, the cannot be anticipated by actuaries with a satisfactory level of United Kingdom, Portugal, Belgium, Italy and Germany buy certainty, which is why the portion of risk exceeding €500,000 local motor third party liability insurance policies through AIG is borne by the insurer. Europe Limited entities, which reinsure part of such risks with a reinsurance structure hosted by Euroguard, a protected The trend in the markets where Europcar operates is towards cell reinsurance company. The Group owns a reinsurance an increase in the unit cost of bodily injuries for economic, legal cell (9) within Euroguard, which has been consolidated since and social reasons. January 2006. Local Europcar entities fund a significant (II) SOURCES OF UNCERTAINTY IN THE ESTIMATION OF FUTURE portion of the risk through a Deductible Funding mechanism CLAIM PAYMENTS managed via another cell (0) located within Euroguard, which acts simply as a fund manager. The funds hosted in this cell Claims falling within the scope of motor third party liability are also consolidated. insurance policies give rise to compensation payable on a case-by-case basis. The Group, by virtue of the self-insurance The Spanish, Australian and New Zealand subsidiaries buy component of the program, fi nancially bears all claims insured insurance cover in their local markets using classic risk transfer up to €500,000 per claim over the period. Part of the claims mechanisms. occurring during a given insurance period materializes after the (I) FREQUENCY AND SEVERITY OF CLAIMS expiry of this period due to the late notifi cation of claims and changes during the period subsequent to the period covered The Group uses its auto fl eet liability insurance programs to (usually due to a deterioration in the health status of the victim insure against property damage and bodily injury caused to or the judicial character of the case). As a result, liability claims third parties by the drivers of Europcar vehicles. Because auto are settled over a long period of time and a larger element of liability insurance is mandatory, the risk is initially transferred the claims provision relates to incurred but not reported claims from ground up to the insurer, but partly funded and reinsured (IBNR). by Europcar as a group on the back end side through various risk self-fi nancing techniques. (III) CHANGES IN ASSUMPTIONS AND METHODOLOGY The cost of Europcar’s auto fl eet liability risk is based on a The Group did not change any of the main assumptions or combination of frequency and severity events. Europcar has methodologies for the insurance contracts disclosed in this developed a strategy based on self-fi nancing frequent risks and note in 2015, other than updating its cost in light of the time effectively transferring severity risk to the insurer (applicable value of money.
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Notes
CONTENTS 03 NOTE 1 CHANGES TO SCOPE OF CONSOLIDATION 172 NOTE 2 SEGMENT REPORTING 172 NOTE 3 FLEET HOLDING COSTS 175 NOTE 4 FLEET OPERATING, RENTAL AND REVENUE RELATED COSTS 175 NOTE 5 PERSONNEL COSTS 175 NOTE 6 SHARE-BASED PAYMENTS 176 NOTE 7 NETWORK AND HEAD OFFICE OVERHEAD COSTS 177 NOTE 8 AMORTIZATION, DEPRECIATION AND IMPAIRMENT EXPENSE 177 NOTE 9 OTHER INCOME AND EXPENSES 177 NOTE 10 OTHER NON-RECURRING INCOME AND EXPENSES 178 NOTE 11 NET FINANCING COSTS 178 NOTE 12 INCOME TAX 179 NOTE 13 GOODWILL 180 NOTE 14 INTANGIBLE ASSETS 182 NOTE 15 PROPERTY, PLANT AND EQUIPMENT 184 NOTE 16 EQUITY-ACCOUNTED INVESTMENTS 185 NOTE 17 FINANCIAL ASSETS 186 NOTE 18 DEFERRED TAX ASSETS AND LIABILITIES 187 NOTE 19 INVENTORIES 188 NOTE 20 RENTAL FLEET RECORDED ON THE BALANCE SHEET 189 NOTE 21 RECEIVABLES AND PAYABLES RELATED TO THE RENTAL FLEET 189 NOTE 22 TRADE AND OTHER RECEIVABLES 190 NOTE 23 CASH AND CASH EQUIVALENTS AND RESTRICTED CASH 191 NOTE 24 CAPITAL AND RESERVES 192 NOTE 25 LOSS PER SHARE 195 NOTE 26 LOANS AND BORROWINGS 195 NOTE 27 EMPLOYEE BENEFITS 200 NOTE 28 PROVISIONS 204 NOTE 29 TRADE PAYABLES AND OTHER LIABILITIES 206 NOTE 30 DERIVATIVE FINANCIAL INSTRUMENTS 206 NOTE 31 OTHER DISCLOSURES RELATING TO FINANCIAL ASSETS AND LIABILITIES 207 NOTE 32 OFF-BALANCE SHEET COMMITMENTS 210 NOTE 33 RELATED PARTIES 211 NOTE 34 GROUP ENTITIES 213 NOTE 35 STATUTORY AUDITORS’ FEES 215 NOTE 36 SUBSEQUENT EVENTS 215
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NOTE 1 CHANGES TO SCOPE OF CONSOLIDATION
IN 2015 a Creation of Europcar Lab SASU and Europcar Lab UK in 2015, Europcar Groupe entities devoted to innovation. This transaction also included the acquisition of a majority stake (60.80%) in the capital of E-Car Club Holding, giving the Group full ownership of the capital of E-Car Club, the leading car-sharing company, offering a fl eet of fully electric vehicles in the United Kingdom, on a pay-per-use model. This new acquisition is fully in line with Europcar Lab’s strategy to develop mobility market usages, search for new mobility solutions opportunities worldwide and make investments in strategic initiatives allowing the Group to strengthen its leadership in the mobility market. These companies are all fully consolidated. a Creation of Europcar Inc, wholly owned and fully consolidated by Europcar Groupe, based in the United States. The purpose of this company will be to manage outbound traffi c to Europe. a EIS E.E.I.G. was the object of a full transfer of assets (TUP ) with retroactive e ffect to January 1, 2015 by Europcar International. a The German company Travset Business Travel + Service GmbH was also the object of a TUPE dated July 1, 2015 by Europcar Autovermietung GmbH.
IN 2014 a On October 31, 2014, the Group acquired 100% of the capital of EuropHall for an amount of €13.5 million (payable in two installments with the outstanding portion of €5.4 million due in 2015). EuropHall was fully consolidated from the acquisition date. EuropHall is the second largest company in the franchisee network by revenue and size and is a longstanding partner of Europcar France. The acquisition generated goodwill of €10.3 million. a On November 30, 2014, the Group acquired a 70.6% stake in the French startup Ubeeqo, specialized in corporate car-sharing solutions, through the acquisition of shares and subscription to a capital increase for a total amount of €17 million. Following a capital increase at the end of 2015, the proportion of the shareholding rose to 75.7%. Ubeeqo currently operates in France and Belgium. The Company is accounted for using the equity method in the Europcar Group consolidated fi nancial statements.
NOTE 2 SEGMENT REPORTING
Europcar operates a car rental activity: between the two segments is mainly based on criteria related to the dynamics of the economic zones, the organization of a using its own fl eet of vehicles based in nine countries; and customers, interdependencies between the countries as a through a franchisee network present in the countries in regards the management of customer contracts and the fl eet, which Europcar operates directly (“domestic franchises”), as well as daily operational management. but particularly in other countries (“international franchises”). a Europe: European countries in which the Group operates In total, Europcar is present in 145 countries. its fl eet directly (Belgium, France, Germany, Italy, Portugal, Spain and the United Kingdom), organized on shared service, The chief operating decision maker within the meaning of IFRS 8 customer and distribution criteria, as well as franchised – Operating Segments, is the Group Executive Committee. European countries (Austria, Denmark, Finland, Greece, The Group is monitored and managed on a day to day basis Ireland, Luxembourg, Netherlands, Norway, Sweden, using reporting data provided by the individual countries. The Switzerland and Turkey) which have similar economic Group presents two segments: Europe and Rest of World. characteristics and offer synergies in terms of fl eet negotiation The nature of the services provided and the category of and customer management. customers are identical for these two segments. The distinction
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a R est of the world: all countries other than those cited above, a adjusted corporate EBITDA: recurring operating income including Australia and New Zealand, where the Group before depreciation and amortization, after deduction of the operates the fl eet directly. interest expense on liabilities related to rental fl eet fi nancing. The Executive Committee members regularly review the Consequently, and as required by IFRS 8, the Group discloses operating and fi nancial performance of the segments, which a global reconciliation of its segment reporting information to are measured as follows: its IFRS consolidated fi nancial statements. a revenue: includes vehicle rental income, territorial fees, other commissions related to the Group’s trademarks and billed to franchisees, and fuel sales; 03
SEGMENT REPORTING INFORMATION
December 31, 2015
Eliminations Rest of & Holding Segment In thousands of euros Note Europe w orld companies total
Segment revenue 1,992,155 156,095 (6,327) 2,141,923 Current operating income 235,975 34,490 12,857 283,322 Reversal of depreciation and impairment charges 11,580 1,047 20,154 32,781 Net fl eet fi nancing expenses 11 (56,550) (3,463) (5,441) (65,454) Adjusted corporate EBITDA of the segments 191,005 32,074 27,570 250,649 Total assets 1,608,640 108,234 2,605,897 4,322,861 Total liabilities 1,699,585 94,898 1,960,791 3,755,274
December 31, 2014
Eliminations Rest of & Holding Segment In thousands of euros Note Europe w orld companies total
Segment revenue 1,836,161 149,996 (7,287) 1,978,870 Current operating income 206,625 31,996 15,270 253,890 Reversal of depreciation and impairment charges 10,716 1,089 20,019 31,824 Net fl eet fi nancing expenses 11 (65,974) (5,129) (1,805) (72,908) Adjusted corporate EBITDA of the segments 151,368 27,956 33,484 212,807 Total assets 1,491,165 125,547 2,329,732 3,946,444 Total liabilities 1,568,712 121,550 2,098,047 3,788,309
(i) Information about revenue and services
Revenue and services can be analyzed as follows:
December 31, 2015
Eliminations Rest of & Holding Segment In thousands of euros Europe w orld companies total
Vehicle rental income 1,859,598 132,297 - 1,991,895 Other revenue associated with car rental 100,106 3,595 (6,327) 97,374 Franchising business 32,451 20,203 - 52,654
SEGMENT REVENUE 1,992,155 156,195 (6,327) 2,141,923
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December 31, 2014
Eliminations Rest of & Holding Segment In thousands of euros Europe w orld companies total
Vehicle rental income 1,695,994 126,772 - 1,822,766 Other revenue associated with car rental 106,126 3,935 (7,287) 102,774 Franchising business 34,041 19,289 - 53,330
SEGMENT REVENUE 1,836,161 149,996 (7,287) 1,978,870
(ii) Disclosure by country and customer segment
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Vehicle rental income 1,991,895 1,822,766 Breakdown of customers by segment Leisure 55.6% 55.3% Business 44.4% 44.7%
(iii) Segment information by geographical Revenue and non-current assets include items directly areas attributable to a geographical area as well as those that can be allocated on a reasonable basis. Unallocated items include income and non-current assets related to holding The Group operates in four main markets: France, Germany, companies and eliminations. Car rental customers comprise the United Kingdom, as well as other European countries. both individuals and corporate customers. Revenue has been identifi ed based on where the rental service is provided. Non-current assets are allocated based on their physical location.
Other United- European Rest of Unallocated In thousands of euros France Kingdom Germany countries w orld (2) items Total
December 31, 2015
Revenue from external customers 360,781 465,227 544,470 621,677 156,095 (6,327) 2,141,923 Non current assets (1) 98,307 116,148 207,205 128,280 36,329 806,741 1,393,011 Of which Goodwill 88,345 96,270 180,384 38,374 26,899 26,800 457,072
Other United European Rest of Unallocated In thousands of euros France Kingdom Germany countries w orld (2) items Total
December 31, 2014
Revenue from external customers 325,363 410,385 518,259 582,154 149,996 (7,287) 1,978,870 Non-current assets (1) 97,886 110,253 208,865 118,397 39,041 788,435 1,362,977 Of which Goodwill 88,024 88,865 180,384 38,374 26,942 26,800 449,389
(1) Non-current assets reported under “Eliminations & Holdings” notably include trademarks. (2) “Rest of World” mainly corresponds to Australia and New Zealand.
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NOTE 3 FLEET HOLDING COSTS
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Costs related to rental fl eet agreements (1) (460,360) (421,709) Purchase and sales related costs (2) (54,536) (47,354) Taxes on vehicles (32,290) (27,201) 03 (547,186) (496,264)
(1) Costs related to rental fl eet agreements mainly consist of (i) vehicle depreciation expenses and (ii) off-balance sheet fl eet operating lease expenses (see Signifi cant Accounting Policies, Section f) “Vehicle fl eet”. During the year ended December 31, 2015 the Group recognized depreciation expense net of volume rebates amounting to €189.0 million (€164.2 million in 2014) under “Costs related to rental fl eet agreements”. This depreciation expense relates to vehicles subject to manufacturer or dealer buy-back agreements and “at-risk” vehicles. “Costs related to rental fl eet agreements” also include operating lease payments amounting to €265.5 million (December 2014: €245 million). The related off-balance sheet rental commitments in respect of rental fl eets operated under operating lease arrangements are disclosed in Note 32.1 (i), “Operating leases”. (2) Fleet acquisition and disposal costs include the costs related to vehicle accessories and conditioning new vehicles and to the disposal of used cars.
NOTE 4 FLEET OPERATING, RENTAL AND REVENUE RELATED COSTS
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Fleet operating costs (1) (233,279) (229,577) Revenue-related commissions and fees (2) (270,968) (247,547) Of which, trade receivables allowances and write-offs (6,954) (9,899) Rental related costs (3) (222,743) (209,155)
(726,990) (686,279)
(1) Fleet operating costs mainly consist of insurance, repairs and maintenance costs as well as costs incurred for damaged and stolen cars and for the reconditioning of vehicles before they are repurchased by the car manufacturers or dealers. (2) Revenue-related costs include agent’s fees, travel agency commissions and airport and railway concession fees. (3) Rental related costs include vehicle transfer costs incurred during the holding period, vehicle washing costs and fuel costs.
NOTE 5 PERSONNEL COSTS
PERSONNEL COSTS
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Wages and salaries (1) (266,480) (242,757) Social security contributions (2) (68,452) (59,875) Post-employment benefi ts (6,847) (6,833) Other items (5,609) (8,688)
(347,388) (318,153)
(1) Includes bonuses and profi t-sharing expenses, as well as the IFRS expense related to plans for free shares implemented in the course of 2015 (€2.6 million). (2) Includes employer contributions (€2.6 million) related to free shares allocated to residents of France.
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HEADCOUNT
As at As at In average number of equivalent-to-full-time employees (FTE) Dec. 31, 2015 Dec. 31, 2014
TOTAL HEADCOUNT 6, 324 (1) 6,284 (1)
(1) Excluding EuropHall in 2014. In 2015, Europhall has 128 full-time employees.
Data shown in the table above correspond to average annual transit and cleaning during peak periods, and in accordance data. The Group also uses a certain number of temporary with the applicable legislation in each of the countries in which workers as well as external service providers, mainly for vehicle the Group operates.
NOTE 6 SHARE-BASED PAYMENTS
The extraordinary General Meeting of the Company’s a for the year ended December 31, 2017: performance shareholders held on June 8, 2015 authorized the Company’s conditions related to (i) Adjusted Corporate EBITDA and (ii) Management Board to award free shares in the Company. movements in the Company’s stock price as compared with The Management Board at its meeting held on June 25, 2015 movements in the SBF 120. pursuant to said delegation of authority fi nalized these Scheme The second free share grant plan, “AGA 100”, benefi ts the rules and the principle of two plans to award free shares. The Group’s top 100 executives. The shares would vest following a fi rst plan, “AGA 13 T1” and “AGA13 T2”, benefi ts members of two-year vesting period, subject to the benefi ciary’s continued the Group’s Executive Committee. employment with the Company and subject to the achievement Vesting of these free shares, following vesting periods of two of performance conditions relating to (i) Adjusted Corporate to three years, and on condition that the person continue to EBITDA and (ii) movements in the Company’s stock price as be with the Company for two years after the periods, would be compared with movements in the SBF 120. conditioned on the achievement of: a with respect to the years ended December 31, 2015 and 2016: performance conditions related to Adjusted Corporate EBITDA; and
Movements relating to the acquisition of free shares in 2015, to which IFRS 2 standard “Share-based payments” applies, are as follows:
Number of free shares
Currently vesting as at January 1, 2015 Allocated 1,991,844 Vested Canceled (128,511) Currently vesting as at December 31, 2015 1,863,333
The weighted average fair value of the allocated shares was a €6.53 for the AGA 13 T1 plan; determined on the allocation date by applying a Monte Carlo- a €5.91 for the AGA 100 plan. type simulation model. The employer’s contribution of 30% was calculated on a base Since the dividend rate was 2.20% (only for 2017) and the corresponding to the fair unit value of shares estimated on the borrowing rate was equal to a risk-free rate +1%, the fair values awarding date. on the allocation date less the dividends discounted during the vesting period and the discounted cost of non-transferability The total expense for these two plans was €10.2 million with during the lock-up period are equal to €2.6 million recorded as personnel costs for 2015 (see Note 5). a €11.73 for the AGA 13 T1 plan;
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NOTE 7 NETWORK AND HEAD OFFICE OVERHEAD COSTS
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Network costs (1) (81,878) (77,948) IT costs (33,983) (30,482) Telecom costs (7,761) (6,348) Head offi ce costs (2) (57,424) (50,185) 03 Sales and marketing costs (37,429) (34,376)
(218,475) (199,339)
(1) Network costs consist of rental expenses for premises and network overheads. (2) Head offi ce costs consist of rental and traveling expenses and auditing and consulting fees incurred at Group level.
NOTE 8 AMORTIZATION, DEPRECIATION AND IMPAIRMENT EXPENSE
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Amortization of intangible assets (17,450) (18,243) Depreciation of property, plant and equipment (14,888) (13,550) Impairment expense (443) (31)
(32,781) (31,824)
NOTE 9 OTHER INCOME AND EXPENSES
This category includes net income related to certain commercial agreements, the release of provisions and other items.
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Contractual income 2,204 2,514 Release of surplus provisions 188 1,410 Foreign exchange gains/(losses) on operating activities 705 307 Gains (losses) on the disposal of property, plant and equipment 394 1,312 Other items, net (1) 10,725 1,336
14,216 6,879
(1) Of which: a €1.3 million in 2014 for gains on the disposal of plants in Manchester, Birmingham and Plymouth owned by P1 UK Ops; a i n 2015, income from the previous fi scal year was reported for a debt established in 2009 that lapsed during 2015.
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NOTE 10 OTHER NON-RECURRING INCOME AND EXPENSES
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Amortization of rights to operate National and Alamo trademarks (5,235) Addition to/release of provisions for impairment of real estate assets in Spain (613) 502 Reorganization charges (2) (24,033) (22,771) O/w: Reorganization – redundancy expenses (18,897) (12,960) Reorganization - professional fees (5,136) (9,811) IPO fees (1) (8,692) - Compensation benefi t 1,025 (23,865) Legal fees (3) 23,001 (59,440) Other (4) ( 52,462) (4,920)
TOTAL OTHER NON-RECURRING INCOME AND EXPENSES (61,774) (115,729)
(1) For the part recognized on the income statement. The total amount of fees incurred is €32.5 million. (2) Reorganization charges, which totaled €24.0 million as at December 31, 2015 compared with €22.8 million as at December 31, 2014 resulted from the measures implemented by several of the Group’s entities or announced before the end of the year to streamline the network and back-offi ce activities. (3) In 2014, this amount included ongoing litigation with Enterprise Holdings Inc both for use of the logo in the UK and for the arbitration proceedings: legal fees, damage assessment and the cost of dismantling the logo in certain rental stations as well as a one-off write-down taken on the residual value of the right to use the National Alamo trademark (see Note 32.4 ). In 2015, taking into account the outcome of the dispute (see Note 32), a portion of the provision was reversed. (4) Of which €45 million provisioned in 2015 for the fi nancial risk measured by the Group as part of the ongoing proceedings with the French anti-trust authorities (see Note 32.4 ) and €2.7 million of exceptional bonuses paid out to the employees of the Group.
NOTE 11 NET FINANCING COSTS
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Net fl eet fi nancing expenses (65,454) (72,908) Net other fi nancing expenses (56,314) (78,516) Gross fi nancing costs (121,768) (151,424) Amortization of charges arising on the trading of derivatives (1,465) (16,258) Amortization of transaction costs (2) (42,340) (30,652) Foreign exchange losses (8,164) (5,963) Cost of discounting social commitments (2,125) (2,977) Early redemption premiums (1) (56,010) (17,100) Other ( 7,676) ( 17,700) Other fi nancial expenses (117,780) (90,650) Foreign exchange gains 11,956 9,393 Other fi nancial income 11,956 9,393
NET FINANCING COSTS (227,592) (232,681)
(1) Of which €56 million redemption price paid to bond holders of €324 and €400 million high yield notes in 2015, and €17.1 million redemption price paid to bond holders €350 million in 2014. (2) Of which €26.9 million transaction costs written-off following the repayment of the corporate bonds €400 and €324 million for the period ended December 31, 2015 and €4 million transaction costs written-off following the repayment of the fl eet bond €350 million for the period ended December 31, 2014.
For the year ended December 31, 2015, the total interest expense on fi nancial liabilities at amortized cost amounted to €123.3 million (vs. €152.5 million in December 2014) and total interest income on fi nancial assets at amortized cost amounted to €1.5 million (vs. €1.0 million in December 2014).
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NOTE 12 INCOME TAX
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Current tax ( 46,794) (29,196) Deferred tax 9,157 18,541 TOTAL INCOME TAX EXPENSE (37,637) (10,655) 03
The theoretical tax expense based on ECG’s statutory tax rate (i.e., the standard corporate income tax rate in France of 33.33% to which is added the corporate income tax social security contribution of 3.3% on the amount of corporate income tax above €763,000) can be reconciled to the tax expense reported in the income statement as follows:
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Profi t/loss before tax (6,047) (94,520) Statutory tax rate 34.43% 34.43% Theoretical tax 2,081 32,543 Impact of differences in tax rates 12,814 (2,229) Permanent differences (1) ( 24,649) (8,397) Capitalization of losses and temporary differences that were formerly not recognized 31,541 Unrecognized deferred tax assets ( 31,000) (28,201) Impact of tax losses (2) ( 18,725) (19,037) Other temporary differences ( 12,275) (9,164) Impact of French business contribution on added value (CVAE) and Italy’s regional tax on productive activities (IRAP) (5,997) (3,625) Other (3) ( 22,427) (747) Income tax benefi t/(expense) (37,637) (10,655) Effective tax rate (11.27)%
(1) The amount was mainly due to the non-deduction of interest for tax purposes in France in 2014 (-€11 million) and 2015 (€16 million). (2) In 2014 and 2015, virtually all unrecognized tax losses were attributable to France (€26 million). (3) The 2014 total included a provision for tax risks in Germany for a negative amount of €3.7 million, offset by €2.7 million in prior-period adjustments (including €1.0 million in Germany and €0.8 million in the United Kingdom) and an €18 million provision for tax risks in France, and €5.7 million of adjustments for previous years.
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NOTE 13 GOODWILL
Carrying In thousands of euros Gross value Impairment loss Value
Balance at January 1, 2014 621,530 (187,178) 434,352 Acquisitions 10,287 - 10,287 Impairment - (31) (31) Disposals --- Effect of movements in foreign exchange rates 7,095 (2,314) 4,781 BALANCE AT DECEMBER 31, 2014 638,912 (189,523) 449,389 Balance at January 1, 2015 638,912 (189,523) 449,389 Acquisitions 4,805 - 4,805 Impairment - (443) (443) Disposals --- Effect of movements in foreign exchange rates 4,864 (1,543) 3,321 BALANCE AT DECEMBER 31, 2015 648,581 (191,509) 457,072
Goodwill arises from past acquisitions of franchisees in the normal course of the Group’s business and from acquisitions of subsidiaries.
13.1 Annual impairment test adopted is conservative with a stable profi tability rate. The Group considers that each country corresponds to a cash- generating unit (CGU). When performing impairment tests, the In accordance with IAS 36 – Impairment of Assets, the Group Group calculates cash fl ows from Adjusted corporate EBITDA performs impairment testing of the carrying value of goodwill. and uses the following assumptions: The Group prepares and internally approves formal three-year business plans for each of its geographical segments. For a adjusted corporate EBITDA according to the three-year plan. impairment testing purposes, the three-year plan is extended a the terminal value of each CGU is based on a perpetuity to fi ve years The 2016 budget and the 2017 & 2018 plans growth rate of 2%. were drawn up in consideration of (i) the economic growth forecasts in the countries where the Group operates, (ii) the a the weighted average cost of capital (WACC) is applied to current macroeconomic data for each country, (iii) the expected the cash fl ows of each CGU based on the average risk-free growth of air traffi c, (iv) changes in the car rental market and rate (average over a fi ve-year period) corresponding to the competitive pressure, and (v) projects and new products under German risk-free rate for ten year bonds adjusted for a risk development. Beyond 2018, the revenue growth assumption premium for each country:
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13.2 Goodwill allocated to corporate segments by underlying geographical cash- generating unit
United- Other In thousands of euros Germany Kingdom France Italy Spain countries Total
Balance at January 1, 2014 180,384 85,121 77,768 - - 91,079 434,352 Acquisition - - 10,287 - - - 10,287 Disposal/price adjustment ------Impairment expense - - (31) - - - (31) 03 Effect of movements in foreign exchange rates - 3,744 - - - 1,037 4,781 BALANCE AT DECEMBER 31, 2014 180,384 88,865 88,024 - - 92,116 449,389 Balance at January 1, 2015 180,384 88,865 88,024 - - 92,116 449,389 Acquisition - 3,960 764 - - 4,724 Disposal/price adjustment - - - 81 81 Impairment expense - - (443) - - - (443) Effect of movements in foreign exchange rates - 3,445 - - - (124) 3,321 BALANCE AT DECEMBER 31, 2015 180,384 96,270 88,345 - - 92,073 457,072
Recently recognized impairment losses include the following: of goodwill allocated to a United Kingdom cash-generating unit for the year ended December 31, 2010, €53.8 million of and €16.7 million of goodwill allocated to an Australian cash- goodwill allocated to an Italian cash-generating unit (full write- generating unit (partial write-downs). down); for the year ended December 31, 2011, €23.7 million
13.3 WACC calculation
United- France Germany Italy Spain Kingdom Belgium Portugal Australia
WACC calculation 7.46% 7.25% 8.95% 9.10% 7.95% 7.29% 10.49% 9.12%
The terminal value is based on normalized cash flows 13.4 Sensitivity analysis discounted over an indefi nite period, with a perpetuity growth rate of 2%. The risk-free rate is based on the German risk-free Goodwill was subject to an impairment test performed by the rate for bonds with a 10-year maturity (average over a fi ve-year Company as described in the “Goodwill” Section of Signifi cant period), adjusted by a risk premium for each country in line with Accounting Policies and in Section (a) above. a credit risk premium based on a BB- credit rating. Europcar did not identify any probable scenarios in any The Group considers that the weighted average cost of countries whereby the CGU’s recoverable amount would fall capital should be determined based on an historical equity risk below its carrying amount. The sensitivity analysis performed premium of 5%, in order to refl ect the long-term assumptions on the assumptions used indicate that no impairment losses factored into the impairment tests. would be recognized in the following scenarios: The gearing used when determining the WACC is based on a a 1 percentage point increase in the discount rate; the annual average debt to equity ratio issued by comparable companies on a quarterly basis. a a 1 percentage point decrease in the growth rate; a a 5% decrease in adjusted corporate EBITDA.
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NOTE 14 INTANGIBLE ASSETS
Software, Intangible operating assets in Leasehold In thousands of euros Trademarks (1) systems progress rights Total
Gross values Balance at January 1, 2014 731,709 232,751 7,113 1,040 972,613 Changes in scope of consolidation - 12 - 263 275 Other acquisitions - 622 10,747 - 11,369 Disposals - (8) - (33) (41) Transfers - 727 (723) - 4 Effect of movements in foreign exchange rates 3,849 815 - 33 4,697 BALANCE AT DECEMBER 31, 2014 735,558 234,919 17,137 1,303 988,917 Balance at January 1, 2015 735,558 234,919 17,137 1,303 988,917 Changes in scope of consolidation - 113 - - 113 Other acquisitions - 478 7,976 75 8,529 Disposals - ( 3,702) (36) ( 3,738) Transfers - 10,970 (10,960) - 10 Effect of movements in foreign exchange rates 3,586 691 - 12 4,289 BALANCE AT DECEMBER 31, 2015 739,144 243,469 14,153 1,354 998,120 Depreciation and impairment losses Balance at January 1, 2014 (39,942) (186,345) - (699) (226,986) Increases/decreases related to changes in scope of consolidation - - - (239) (239) Provision for depreciation (17,909) (1) - Provision for amortization (18,224) - (19) (36,152) Disposals - 7 - - 7 Transfers - 242 - - 242 Effect of movements in foreign exchange rates (3,258) (799) - - (4,057) BALANCE AT DECEMBER 31, 2014 (61,109) (205,119) - (957) (267,185) Balance at January 1, 2015 (61,109) (205,119) - (957) (267,185) Increases/decreases related to changes in scope of consolidation - 5 - - 5 Provision for amortization - (17,438) - (12) (17,450) Disposals - 3,485 - (24) 3,461 Transfers - 462 - - 462 Effect of movements in foreign exchange rates (3,582) (689) - (6) (4,277) BALANCE AT DECEMBER 31, 2015 (64,691) (219,294) - (999) (284,984) Net carrying amounts As at Dec. 31, 2014 674,449 29,800 17,137 346 721,732 As at Dec. 31, 2015 674,453 24,175 14,153 355 713,136
(1) Including the right to use trademarks with a fi nite life (Alamo, Guy Salmon and National), amortized since March 1, 2007: gross value of €54.7 million, cumulative amortization of €37.4 million as at December 31, 2013 and Europcar trademark. In 2014, these trademark usage rights were written down in full following the settlement of the related litigation (see “Signifi cant events of the year”).
182 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION CONSOLIDATED FINANCIAL STATEMENTS AND STATUTORY AUDITORS’ REPORT
14.1 Trademarks The discount rate used in the weighted average cost of capital is applied to the net royalty cash fl ows of each CGU based on a risk-free rate for 10-year German bonds. (i) Annual impairment test In 2015, it was estimated at 9.14% (9.05% in 2014). In accordance with IAS 36 – Impairment of Assets, the Group has performed an annual impairment test of the carrying (iii) Sensitivity analysis amount of the Europcar trademark that has an indefi nite useful A reasonably possible change in the key assumptions on which life (€699 million as at December 31, 2015) based on the relief- management has based its determination of the recoverable from-royalty method. This test is performed on a consolidated amount would not cause signifi cant difference between the basis with no country or segment-based allocation. 03 carrying amount and the recoverable amount. The following The value in use of the trademark has been determined based table shows the results of the impairment tests and the resulting on projections of royalties received within the Europcar network difference between the recoverable amount and the carrying (corporate entities, domestic and international franchisees). amount of brands according to different assumptions of the long-term growth rate and weighted average cost of capital. (ii) Key assumptions
The terminal value is based on a perpetuity growth rate of 2%.
Perpetuity growth rate
In millions of euros 1.0% 2.0% 3.0%
WACC 8.14% 314 440 616 9.14% 189 280 403 10.14% 91 160 249
The tests performed on the Europcar trademark did not result in the recognition of any impairment losses in 2014 or 2015.
14.2 Software and operating systems 14.3 Security
Computer software (the Europcar Greenway and PremierFirst The total amount of intangible assets (except for the Europcar Speedlink systems) has been recognized at fair value in brand) is held as security against the senior asset fi nancing accordance with IFRS 3 – Business Combinations, based on loan, as described in Note 26. an analysis of functional aspects. This methodology is based on the calculation of function points for each segment/software of the Europcar and PremierFirst rental reservation and fl eet management systems. A function point refl ects the functionality of the application which has been used as a basis to calculate its replacement value. The net book value of this internally-developed computer software amounts to €3.1 million as at December 31, 2015 (the equivalent fi gure in 2014 was €19.9 million). Costs amounting to € 7.4 million were capitalized in 2015.
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NOTE 15 PROPERTY, PLANT AND EQUIPMENT
The Group leases buildings and other equipment under different Property, plant and equipment assets are held as security types of fi nance lease agreements. At December 31, 2015, against Group corporate fi nancing, as described in Note 26. the carrying amount of leased buildings and other equipment was €0.1 million and €5.7 million, respectively (in 2014, the respective fi gures were €0.3 million and €4.9 million).
Land and Technical Other Fixed assets in In thousands of euros buildings equipment equipment progress Total
Gross values Balance at January 1, 2014 89,649 8,227 158,973 2,616 259,465 Changes in scope of consolidation - 69 3,209 - 3,278 Other acquisitions 548 171 8,132 3,252 12,103 Disposals (2,449) (6) (959) (285) (3,699) Transfers 11 - 1,873 (1,888) (4) Effect of movements in foreign exchange rates 1,058 13 1,895 - 2,966 BALANCE AT DECEMBER 31, 2014 88,817 8,474 173,123 3,695 274,109 Balance at January 1, 2015 88,817 8,474 173,123 3,695 274,109 Changes in scope of consolidation - - (53) 17 (36) Other acquisitions 366 971 15,923 3, 302 20,562 Disposals (4,506) (477) ( 8,404) ( 1,551) ( 14,938) Transfers - - 1,885 (1,895) (10) Effect of movements in foreign exchange rates 747 (2) 1,693 - 2,438 BALANCE AT DECEMBER 31, 2015 85,424 8,966 184,167 3,568 282,125 Depreciation and impairment losses Balance at January 1, 2014 (36,469) (6,247) (127,347) - (170,063) Increases/decreases related to changes in scope of consolidation - (60) (2,560) - (2,620) Depreciation and impairment charge for the year (1,358) (364) (11,112) - (12,834) Disposals 714 6 801 - 1,521 Transfers - - (242) - (242) Effect of movements in foreign exchange rates (232) (6) (1,429) - (1,667) BALANCE AT DECEMBER 31, 2014 (37,345) (6,671) (141,889) - (185,905) Balance at January 1, 2015 (37,345) (6,671) (141,889) - (185,905) Increases/decreases related to changes in scope of consolidation - - 36 - 36 Depreciation and impairment charge for the year (2,429) (352) ( 12,493) - ( 15,277) Disposals 1,792 413 7,984 - 10,189 Transfers - - (462) - (462) Effect of movements in foreign exchange rates (151) 2 (1,321) - (1,470) BALANCE AT DECEMBER 31, 2015 (38,133) (6,608) (148,148) - (192,889) Carrying amounts As at Dec. 31, 2014 51,472 1,803 31,234 3,695 88,204 As at Dec. 31, 2015 47,291 2,358 36,019 3,568 89,236
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NOTE 16 EQUITY-ACCOUNTED INVESTMENTS
AS AT DEC. 31, 2015
Provisions Net profi t/ taken loss Equity- on equity- attributable accounted accounted Principal place to Europcar shares shares Company name of business % interest % control (in thousands of €) (in €k) (in €k) 03 Car2Go Europe GmbH (A ) Germany 25.00% 25.00% (10,010) 1,776 - Ubeeqo (B ) France 75.71% 75.71% (2,064) 20,259 -
TOTAL (12,074) 22,035 -
AS AT DEC. 31, 2014
Provisions Net profi t/ taken loss Equity- on equity- attributable accounted accounted Principal place to Europcar shares shares Company name of business % interest % control (in thousands of €) (in €k) (in €k)
Car2Go Europe GmbH (A ) Germany 25.00% 25.00% (6,523) - (717) Ubeeqo (B ) France 70.60% 70.60% - 17,323 -
TOTAL (6,523) 17,323 (717)
(A) CAR2GO EUROPE GMBH – ON A FULL-CONSOLIDATION BASIS
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Non-current assets 36,455 50,266 Current assets 17,392 43,596 Non-current liabilities (19) (33) Current liabilities (42,690) (71,532) NET ASSETS 11,138 22,297 Revenue 52,324 53,179 Profi t or loss (40,040) (26,091)
The Europcar Group subscribed to two capital increases in Car2go for an amount of €12.5 million.
(B) UBEEQO SAS – ON A FULL-CONSOLIDATION BASIS
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Non-current assets 4,819 2,057 Current assets 5,806 5,310 Non-current liabilities (85) (1,548) Current liabilities (1,884) (64) Net assets 8,656 5,755 Revenue 2,698 2,613 Profi t or loss (2,919) (843)
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In light of the planned shareholders’ agreement between As at December 16, 2015, Europcar Groupe had injected Europcar Groupe and the founders of Ubeeqo, no shareholder €5 million during a capital increase. The proportionate share of controls the Company within the meaning of IFRS 10 - none its assets is thus 75.7% as from this date (note however, that the of the parties may take a decision without the approval of the loss recorded in the accounts closed as at December 31, 2015 other party (even if one of the parties owns more than 50% takes the former holding rate of 70.76% into account). of the share capital), or exercise joint control. Consequently, The carrying amount of the Ubeeqo securities, a company in Europcar Groupe exercises signifi cant infl uence over Ubeeqo the ramp-up phase, is justifi ed by its value in use. and accounts for it using the equity method.
NOTE 17 FINANCIAL ASSETS
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Other non-current financial assets Available-for-sale fi nancial assets 280 670 Held-to-maturity investments (1) 50,838 31,225 Deposits and prepayments 5,928 5,747 Other long-term investments 15 1,292
TOTAL NON-CURRENT FINANCIAL ASSETS 57,061 38,934 Current financial assets Loans 118 118 Other current fi nancial assets (1) 37,405 49,359
TOTAL CURRENT FINANCIAL ASSETS 37,523 49,477
(1) Including €72.0 million to cover liabilities arising from our captive insurance structure (€62.9 million at December 31, 2014), mainly consisting of bonds recognized at amortized cost. Because they mature in the very near future, management has concluded that the fair value of these held-to-maturity investments approximates their respective carrying amounts as at December 31, 2015.
No impairment charge was recognized on investments in non-consolidated entities classifi ed as “available-for-sale fi nancial assets”.
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NOTE 18 DEFERRED TAX ASSETS AND LIABILITIES
18.1 Deferred tax assets and liabilities and temporary differences recognized during the period
Changes Recognized Fair value January 1, in scope of in income adjustment Translation December 31, In thousands of euros 2015 consolidation statement in OCI reserve 2015 03 Property, plant and equipment (1,228) (932) - (94) (2,254) Intangible assets (245,514) 738 - (72) (244,848) Rental fl eet (2,012) (4,207) - 8 (6,211) Investments in subsidiaries 145 (94) - 3 54 Other fi nancial assets (302) (34) - - (336) Receivables and other assets (2,962) (1,566) - 9 (4,519) Prepaid and deferred charges 36 (67) - - (31) Employee benefi ts 18,099 (2,877) (1,087) (4) 14,178 Deferred income 6,152 (3,473) - - 2,679 Provisions 17,436 2,724 (554) (5) 19,601 Derivative liabilities 20 - (20) - - Other debt 10,111 3,656 - 1 13,830 Tax losses carried forward 116,409 15,288 554 313 132,564 DEFERRED TAX ASSETS/(LIABILITIES) (83,610) 9,157 (1,107) 158 ( 75,402) Deferred tax assets 55,730 Deferred tax liabilities (131,132)
Recognized Fair value January 1, in income adjustment Translation December 31, In thousands of euros 2014 Reclassifi cation statement in OCI reserve 2014
Property, plant and equipment (1,434) 313 - (106) (1,228) Intangible assets (253,308) 7,988 - (200) (245,514) Rental fl eet (3,964) 2,082 - (130) (2,012) Investments in subsidiaries 149 - (7) 3 145 Other fi nancial assets - (302) (302) Receivables and other assets (1,199) (1,782) 20 (2,962) Prepaid and deferred charges 2,276 (2,239) (3) 36 Employee benefi ts 12,615 (533) 5,985 32 18,099 Deferred income 3,670 2,482 - - 6,152 Provisions 11,787 5,686 (11) (26) 17,436 Derivative liabilities 4,733 - (4,713) 20 Other debt 6,218 3,865 - 28 10,111 Tax losses carried forward 115,030 980 - 381 116,409 DEFERRED TAX ASSETS/(LIABILITIES) (103,427) 18,541 1,628 (81) (83,610) Deferred tax assets 47,395 Deferred tax liabilities (131,005)
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Aside from the French tax group, on which a portion of tax trademark, the other deferred tax assets recognized must be losses have been recognized as deferred tax assets in the used within fi ve years. amount of the deferred tax liabilities related to the Europcar
18.2 Unrecognized deferred tax assets
Deferred tax assets are recognized up to the amount of available deferred tax liabilities and recoverability projections derived from business plans.
in millions of euros 2015 2014
Relating to temporary differences 45,691 33,415 Relating to tax losses carried forward (1) 127,942 129,290
173,643 162,705
(1) The amount mainly relates to Spain (€28.9 million), Italy (€6.7 million) and France (€84.9 million). All tax losses, including Spain since 2015, may be carried forward indefi nitely. Certain tax jurisdictions may cap the use of tax losses.
NOTE 19 INVENTORIES
No material restrictions of title or right of use exist in respect of the inventories listed below:
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Consumables 1,632 2,021 Oil and fuel 11,779 12,363 Vehicles 736 739 Spare parts 291 312 Other items 654 706
TOTAL INVENTORIES 15,092 16,141
Inventories are stated net of provisions, they amounted to €152,000 (end-2014: €140,000). Vehicles reported in inventory are vehicles not yet in operation at the end of the period.
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NOTE 20 RENTAL FLEET RECORDED ON THE BALANCE SHEET
The rental fl eet operated by the Group is acquired and fi nanced in different ways. The table below presents the breakdown between these different methods for the 2014 and 2015 business years:
% of total volume of vehicles purchased
Type of acquisition and related fi nancing 2015 2014
Vehicles purchased with manufacturer or dealer buy-back commitment fi nanced on-balance sheet 46% 43% 03 Vehicles purchased with manufacturer or dealer buy-back commitment and fi nanced through rental agreements qualifying as operating leases 46% 49% Total fl eet purchased with buy-back arrangements 92% 92% Vehicles purchased without manufacturer or dealer buy-back commitment (“at risk” vehicles) 7% 7% Vehicles fi nanced through rental agreements qualifying as fi nance leases 1% 1%
TOTAL PURCHASES OF RENTAL FLEET 100% 100%
In accordance with accounting standards, the fl eet funded by operating leases is not recorded in the balance sheet and liabilities for these contracts are listed in off-balance sheet commitments. The rental fl eet recorded in the statement of fi nancial position is broken down as follows:
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Deferred depreciation expense on vehicles 258,441 158,247 Vehicle buy-back agreement receivables 1,024,072 897,011 Fleet purchased with buy-back contracts fi nanced on-balance sheet 1,282,513 1,055,258 Vehicles purchased without manufacturer or dealer buy-back commitment (“at risk” vehicles) 306,744 289,088 Vehicles acquired through rental agreements qualifying as fi nance leases without buy-back arrangements 75,043 58,314
TOTAL RENTAL FLEET RECOGNIZED IN THE STATEMENT OF FINANCIAL POSITION 1,664,300 1,402,660
The fl eet is presented net of depreciation or impairment expense amounting to €4.7 million (December 2014 : €4,5 million) in respect of damaged or stolen vehicles.
NOTE 21 RECEIVABLES AND PAYABLES RELATED TO THE RENTAL FLEET
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Fleet receivables (1) 501,522 460,038 VAT receivables (2) 73,130 70,060
RENTAL FLEET AND RELATED RECEIVABLES 574,652 530,098
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As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Fleet payables (1) 567,931 491,664 VAT payables 94,791 90,293
TOTAL RENTAL FLEET AND RELATED PAYABLES 662,722 581,957
(1) Includes €245 million (December 2014: €232.5 million) related to a large fl eet operating lease contracted in 2009, whereby the Group acquired vehicles from a manufacturer and resold them immediately to the lessor. The receivable (from the manufacturer) and payable (to the lessor) amounts recorded at inception of the lease are settled when the vehicles are returned to the manufacturer according to the buy-back arrangement. (2) Most of the VAT receivables amount is related to fl eet acquisitions and disposals.
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Fleet receivables (39,257) (77,096) VAT receivables (1,725) (22,595) Payables related to fl eet acquisition 74,475 11,947 VAT payables 1,376 13,719
CHANGES TO THE NEED FOR CASH FLOW LINKED TO THE VEHICLE FLEET 34,869 (74,025)
NOTE 22 TRADE AND OTHER RECEIVABLES
All trade receivables fall due within one year.
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Rental receivables 209,215 181,487 Other trade receivables 77,804 79,501 Other tax receivables 870 543 Insurance claims 21,378 18,515 Prepayments 32,144 31,902 Employee related receivables 803 739 Deposits, other receivables and loans 14,987 13,225
TOTAL TRADE AND OTHER RECEIVABLES 357,200 325,912
Impairment losses taken on rental and other trade receivables are as follows:
As at As at In thousands of euros Dec. 31, 2015 wDec. 31, 2014
Opening balance (35,297) (33,742) Depreciation for bad debts (6,683) (8,783) Receivables written off during the year/period 8,694 6,803 Unused amounts reversed 1,874 568 Foreign currency differences (81) (143) Closing balance (31,493) (35,297)
Additions to/releases of the allowance for bad debts are included in “Fleet operating, rental and revenue related costs” in the consolidated income statement (Note 4).
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The aged receivables profi le is as follows:
As at Dec. 31, 2015
Overdue by Overdue by between 90 Overdue by In thousands of euros Not past due < 90 days and 180 days > 180 days Total
Trade and other receivables - gross amount 255,772 62,035 20,581 49,612 388,000 Impairment of bad debts (8,363) (5,360) (3,488) (24,332) (41,543) Trade and other receivables - net amount 247,409 56,675 17,093 25,280 346,457 03
As at Dec. 31, 2014
Overdue by Overdue by between 90 Overdue by In thousands of euros Not past due < 90 days and 180 days > 180 days Total
Trade and other receivables - gross amount 253,396 50,679 18,133 47,067 369,275 Impairment of bad debts (9,308) (2,335) (2,152) (29,568) (43,363) Trade and other receivables - net amount 244,088 48,344 15,981 17,499 325,912
NOTE 23 CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Cash-in-hand and at bank 145,803 143,721 Accrued interest 272 316 Cash and cash equivalents 146,075 144,037 Restricted cash 97,366 81,795 Cash and cash equivalents and restricted cash 243,441 225,832
Cash-in-hand and at bank includes €77.7 million in cash Cash and cash equivalents in fl eet and captive insurance SPEs (December 2014: €52.5 million) tied up in Securitifleet are reported as restricted cash. For the defi nition of restricted companies, excluding the two SFH Holdings dedicated to fl eet cash, please refer to Signifi cant Accounting Policies, Section fi nancing in France, Germany, Italy and Spain. As such, this “Treasury” (ii). cash is considered as non-restricted.
The following table reconciles cash and cash equivalents in the statement of fi nancial position to cash and cash equivalents in the cash fl ow statement:
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Cash and cash equivalents 146,075 144,037 Restricted cash 97,366 81,795 Bank overdrafts (1) (14,073) (19,515) Cash and cash equivalents reported in the cash fl ow statement 229,368 206,317
(1) Included in current loans and borrowings (see Note 26).
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NOTE 24 CAPITAL AND RESERVES
24.1 Share capital and share premium 142,998,496 common shares, 147,434 category B preference shares, 4,045 category C preference shares and 4,041 category D preference shares. The various corporate actions As at December 31, 2015, the recorded share capital since January 1, 2015 (in particular within the scope of ecg’s of Europcar Groupe was €143,154,016 and comprised ipo on euronext paris) are as follows: 143,154,016 shares with a unit value of one euro each,
Share capital Share premium Number Nominal value Date Operation (in €) (in €) of shares (in €)
12/31/2014 446,383,193.50 452,977,636.00 103,810,045 4,300 2/24/2015 Capital decrease (336,844,642.72) - 103,810,045 1. 055 5/15/2015 Increase in share capital 8,532.21 1,501,568.74 103,818,131 1. 055 6/8/2015 Increase in share capital 98,909,577.00 (98,909,577.00) 103,818,131 2. 008 6/8/2015 Capital decrease (104,638,529.00) - 103,818,131 1. 000 6/26/2015 Increase in share capital 495,845.00 (495,845.00) 495,845 1. 000 6/26/2015 Increase in share capital 38,775,510.00 412,392,604.5 38,775,510 1. 000 11/04/2015 Increase in share capital 8,829.00 (8,829.00) 8,829 1. 000 11/04/2015 Increase in share capital 7,444.00 (7,444.00) 7,444 1. 000 12/15/2015 Increase in share capital 48,257.00 (48,257.00) 48,257 1. 000 12/31/2015 143,154,016.00 767,401,857.24 143,154,016 1. 000
Each Category A common share gives an entitlement to one price – or of the exercise date of the conversion right, based vote. on an average of the Company’s stock market share price. Category B, C and D shares are preferred shares as defi ned Holders of Class B shares could sell part of their shareholding by article L. 228-11 of the French Commercial Code and have on the same terms and conditions as those of Eurazeo during no voting rights. the IPO. The balance of Class B shares was bound by the lock-up obligations to the underwriting banks. Class B preferred shares were issued outside July 2011 for executive offi cers and employees of the Group, some of whom If a Class B shareholder does not exercise their conversion have left the Group, and Eurazeo. rights in the course of the conversion period available, their Class B shares will be automatically converted into the same The terms and conditions of Class B shares set out the terms number of common shares in the Company at the end of the on which holders can convert them into ordinary shares. These period. state that Class B shares can be converted into ordinary shares exclusively by certain managers and ex-managers Class C and D shares were issued by the Company’s of the Europcar Group (together “the managers”) if certain Management Board on May 15, 2015, upon delegation of events occur before publication of Eurazeo’s 2015 results, powers granted it at the Shareholders’ Meeting of February 24, in particular if the Company’s shares are offered for sale in 2015. a regulated market via an Initial Public Offering (IPO). In the Class C preferred shares were subscribed for by certain latter case, holders of Class B shares can exercise their right managers and employees of the Group sitting on the Executive to convert their shares at any time from notifi cation of the IPO Committee (together “the Group managers – C”) while Class D up to the expiration of the 20-day period following publication shares were subscribed for by Eurazeo on the understanding of Eurazeo’s 2015 results, or, if later, the three-month period that they would be sold by Eurazeo to the Group managers – C following expiration of the lock-up period that may be imposed (and accordingly purchased by the latter from the former) in the by the underwriting banks in relation to the IPO. event of the signing of an underwriting agreement for an IPO. The conversion ratio of Class B shares into common stock Class D shares were accordingly sold by Eurazeo to the is calculated on the basis of the exercise period – taking into Group managers – C following the signing of an underwriting account Eurazeo’s return on its investment up to the IPO agreement for the IPO. (including net proceeds of any sale of shares by Eurazeo during the IPO) plus the value of its retained stake based on the IPO
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The total amount paid by all holders of Class C shares was Under the agreement between the Group managers – C and €1.7 million; of this amount, members of the Management Eurazeo in respect of the IPO, neither Class C nor Class D Board paid €925,000 (of which in turn the Chairman of the shares can be sold (except to Eurazeo) and common shares Board paid €550,000) for the subscription for Class C shares created by the conversion of Class C shares cannot be and the purchase of the Class D shares from Eurazeo. transferred during the lock-up period set by the underwriting banks and in any case before a minimum period of one year. In The terms and conditions of Class C and D preferred shares addition, members of the Management Board may not transfer set out how and when holders of Class C and D shares can shares to reduce their holding below the mandatory minimum convert them into common stock. Accordingly, in the event of for their offi ce until the end of their term of offi ce, i.e. the lower of an IPO, Class C shares can be converted into common shares either 10% of the number of shares held before the transfer or at any time until December 31, 2019; Class D shares cannot a number equivalent to three times their annual compensation 03 be converted in the year following the IPO; up to half of Class based on the share price at the transfer date. D shares can be converted during the following year with the remainder eligible for conversion two years from the IPO. The agreement also defines the joint transfer rights and commitments of the Group managers – C as well as their As from the IPO, the conversion ratio of Class C and D shares commitment to transfer their preferred shares to Eurazeo if into common stock is determined on the basis of the exercise they leave the Group under specifi ed circumstances. period taking into account a multiple of the value of the common shares varying in line with their trading price. For the purposes If no conversion event occurs before December 31, 2019, the of this calculation, the value of the common shares is equal Class C and D shares will automatically be converted into the to a weighted average of the share price over a period of 10 same number of common shares in the Company. trading days. Shareholders are entitled to receive dividends as declared on a timely basis. There is no preferential dividend. The Group did not distribute any dividends in 2015.
The following table shows the breakdown of the Company’s shareholders before the Company’s IPO:
Number Number Number Number Percentage of common of Class B of Class C of Class D Total of common Percentage shares and preferred preferred preferred number of shares and of share Shareholders voting rights shares (4) shares (4) shares (4) shares voting rights capital
Eurazeo 89,947,696 (1) 150,810 (2) – 4,041 90,102,547 86.97% 86.79% ECIP Europcar Sarl 13,480,307 – – – 13,480,307 13.03% 12.98% Executives and employees – 231,232 (3) 4,045 – 235,277 - 0.23%
TOTAL 103,428,003 382,042 4,045 4,041 103,818,131 100.00% 100.00%
(1) Including 346,607 shares issued by the Company on October 16, 2007 and later transferred to Eurazeo by Eureka Participations SAS in connection with a complete transfer of assets and liabilities; (2) Of these shares, 41,025 Class B Preferred Shares acquired from Mr. Philippe Guillemot were placed in escrow pursuant to an order dated June 14, 2012 in a legal proceeding relating to the exercise of the promise to purchase and its terms and conditions; (3) Including 122,783 Class B Preferred Shares still held by former employees. (4) The Class B, Class C and Class D Preferred Shares do not have voting rights.
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The following table sets forth the shareholders of Europcar Groupe following the Company’s IPO:
Number Number Number Number Percentage of common of Class B of Class C of Class D Total of common Percentage shares and Preferred Preferred Preferred number of shares and of share Shareholders voting rights Shares Shares Shares shares voting rights capital
Eurazeo 61,859,208 - - 4,041 61,863,249 43.29% 43.23% ECIP Europcar Sarl 9,232,494 - - - 9,232,494 6.46% 6.45% Executives and employees, and fl oating 71,814,775 174,923 4,045 - 71,993,743 50.25% 50.32%
TOTAL 142,906,477 174,923 4,045 4,041 143,089,486 100.00% 100.00%
As at December 31, 2015, the breakdown of shareholders in the share capital was as follows:
Number Number Number Number Percentage of common of Class B of Class C of Class D Total of common Percentage shares and Preferred Preferred Preferred number of shares and of share Shareholders voting rights Shares Shares Shares shares voting rights capital
Eurazeo 60, 544,838 - - - 60,544,838 42. 38% 42.29% ECIP Europcar Sarl 9,036,469 - - - 9,036,469 6.33% 6.31% Executives and employees, and fl oating 73, 417,189 147, 434 4,045 4041 73,572,709 51. 29% 51.39%
TOTAL 142,998,496 147,434 4,045 4,041 143,154,016 100.00% 100.00%
24.2 Treasury shares foreign exchange loss amounting to €51.5 million (the same as at December 31, 2014) arising on an intercompany loan denominated in GBP granted by Europcar Groupe S.A. to its Under the liquidity contract entrusted to Rothschild relating subsidiary Europcar UK Ltd that qualifi es as a quasi-equity loan. to the shares of Europcar Groupe on December 31, 2015 the following resources were listed on the liquidity account: This loan for a nominal amount of €171 million (denominated in GBP) was repaid in full by Europcar UK Ltd to Europcar a no Europcar Groupe shares; Groupe SA in December 2011. As the parent company a €100,000 continues to hold the same percentage of the subsidiary and continues to control the foreign operation, no partial disposal Europcar did not cancel any shares in 2015. was recognized under Sections 48d and 49 of IAS 21. Accordingly, the relevant currency translation adjustment has not been reclassifi ed to the consolidated income statement. As at December 31, 2015, Europcar International S.A.S.U. 24.3 Translation reserve held a loan receivable with its subsidiary located in Australia amounting to AUD 14.6 million. The translation reserve includes The translation reserve comprises all foreign exchange a foreign exchange gain amounting to €1.6 million in relation to differences arising from the translation of the fi nancial statements this loan (unchanged from December 31, 2014). of foreign operations. At December 31, 2015 it includes a
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NOTE 25 LOSS PER SHARE
Basic and diluted loss per share are based on the loss the year (not taking into account the shares that could be issued attributable to common shareholders of €55,6 million as at as these are likely to have an accretive impact), calculated as December 31, 2015 (€112.3 million as at December 31, 2014) follows: and the weighted average number of common shares during
As of As of 03 In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Loss attributable to ordinary shareholders (55,602) (112,273) Average number of shares outstanding 123,722,277 103,428,003 Loss per share in € (0. 449) (1.085) Diluted loss per share in € (0. 449) (1.085)
The number of potential dilutive shares is 2,371,810 (of which 1,863,333 free shares, 500,391 class B preferred shares and 8,086 class C and D preferred shares) as at December 31, 2015 and 1,296,651 as at December 31, 2014.
NOTE 26 LOANS AND BORROWINGS
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Notes issued 825,000 1,074,000 Other bank loans 152 303 Transaction costs/Premiums/Discounts (23,969) (31,234) NON-CURRENT LIABILITIES 801,183 1,043,069 Senior Revolving Credit Facility 81,000 201,000 Senior Asset Facility 658,284 417,600 Other borrowings dedicated to fl eet fi nancing 383,706 420,154 Finance lease liabilities 76,041 55,570 Bank overdrafts 14,073 19,515 Current bank loans and other borrowings 47,314 9,361 Transaction costs/Premium/Discount – current portion (7,906) (16,916) Accrued interest 11,271 21,261 CURRENT LIABILITIES 1,263,783 1,127,545
Total net debt reconciliation: vehicles in question. The estimated debt on operating leases represents the carrying amount of the vehicles concerned and Total net debt includes net corporate debt and total fl eet net is calculated based on the purchase prices and depreciation debt. The latter includes all fi nancing in relation to the fl eet rates of corresponding vehicles ( based on contracts signed whether or not it is recorded in the balance sheet. In particular, with the manufacturers). the estimated outstanding value of the fl eet fi nanced through operating leases corresponds to the net book value of the
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As at As at In thousands of euros Notes Dec. 31, 2015 Dec. 31, 2014
Non-current loans and borrowings 26 801,183 1,043,069 Current loans and borrowings 26 1,263,783 1,127,545 Held-to-maturity investments 17 (50,838) (31,225) Other current fi nancial assets 17 (37,405) (49,359) Cash and cash equivalents and restricted cash 23 (243,441) (225,832) Net debt on the statement of fi nancial position 1,733,282 1,864,198 Estimated outstanding value of the fl eet fi nanced through operating leases 1,323,411 1,284,052
TOTAL NET DEBT 3,056,693 3,148,250
26.1 Loans and borrowings by maturity
As at From 1 year In thousands of euros Dec. 31, 2015 <1 year to 5 years >5 years
Notes issued 825,000 - - 825,000 Other bank loans 152 - 152 Transaction costs/Premiums/Discounts (1) (23,969) - - (23,969) NON-CURRENT LIABILITIES 801,183 - 152 801,031 Senior Revolving Credit Facility 81,000 81,000 - - Senior Credit Facility 658,284 658,284 - - Other borrowings 383,706 383,706 - - Finance lease liabilities 76,041 76,041 - - Bank overdrafts 14,073 14,073 - - Current bank loans and other borrowings 47,314 47,314 - - Transaction costs/premiums/discount - current portion (1) (7,906) (7,906) - - Accrued interest 11,271 11,271 - - CURRENT LIABILITIES 1,263,783 1,263,783 - -
(1) Transaction costs and premiums relate to the €475 million bond for €9.5 million, the €350 million bond for €6.1 million, the SARF for €5.5 million, the RCF for €10.8 million.
As at From 1 year In thousands of euros Dec. 31, 2014 <1 year to 5 years >5 years
Notes issued 1,074,000 - 724,000 350,000 Other bank loans 303 - 303 - Transaction costs (31,234) - (29,492) (1,741) NON-CURRENT LIABILITIES 1,043,069 - 694,811 348,259 Senior Revolving Credit Facility 201,000 201,000 - - Senior Credit Facility 417,600 417,600 - - Other borrowings 420,154 420,154 - - Finance lease liabilities 55,570 55,570 - - Bank overdrafts 19,515 19,515 - - Current bank loans and other borrowings 9,361 9,361 - - Transaction costs/Premiums/Discounts - current portion (16,916) (16,916) - - Accrued interest 21,261 21,261 - - CURRENT LIABILITIES 1,127,545 1,127,545 - -
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26.2 Loans and borrowings by currency of origination
As at December 31, 2015, loans and borrowings by currency of origination can be analyzed as follows:
As at In thousands of euros Dec. 31, 2015 EURO GBP AUD
Notes issued 825,000 825,000 - - Transaction costs (31,875) ( 28,436) (3,439) - Accrued interest 11,271 11,271 - - 03 Senior Revolving Credit Facility 81,000 81,000 - - Senior Credit Facility 658,284 658,284 - - Other borrowings 383,706 26, 824 356, 937 26,769 Finance lease liabilities 76,041 27,039 - 49,002 Bank overdrafts 14,073 14,073 - - Current bank loans and other borrowings 47,314 47,314 - - Other bank loans 152 152 - -
TOTAL LOANS AND BORROWINGS 2,064,966 1,628,819 360,376 75,771
As at In thousands of euros Dec. 31, 2014 EURO GBP AUD
Notes issued 1,074,000 1,074,000 - - Transaction costs (48,150) (44,101) (4,049) - Accrued interest 21,261 21,261 - - Senior Revolving Credit Facility 201,000 201,000 - - Senior Credit Facility 417,600 417,600 - - Other borrowings 420,154 351,018 69,136 Finance lease liabilities 55,570 22,041 - 33,529 Bank overdrafts 19,515 19,176 339 - Current bank loans and other borrowings 9,361 9,361 - - Other bank loans 303 303 - -
TOTAL LOANS AND BORROWINGS 2,170,614 1,720,641 347,308 102,665
26.3 Debt covenants (ii) For the Senior Revolving Credit Facility The ratio of cash fl ow (which shall include, for any given period The following covenants must be complied with: of 12 months ending on a quarter date, cash on the statement of fi nancial position at the beginning of such period) to total debt (i) For United Kingdom fl eet fi nancing facilities service shall at no time be less than 1.10.
Europcar UK shall ensure that: Total debt service is defi ned as the aggregate of the interest and associated fees paid during any given 12 month period a the net assets of Europcar UK Group shall be not less than plus repayment of fi nancial liabilities, the latter being subject GBP 60 million; to certain limitations. a the ratio of earnings before interest, tax, depreciation and amortization to Fixed Charges shall be not less than 1.00; (iii) Loan to Value Covenant a fl eet cover shall be no more than 1.00. The Group is subject to a maximum 95% loan-to-value ratio for all Securitifl eet company debt over the total asset market value of certain Securitifl eet entities. Compliance is tested on a quarterly basis.
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(iv) For Australian Asset Financing a its minimum cumulative net profi t before tax is within 85% of the Company’s budget. Europcar Australia shall ensure that: a no dividends or other payments may be made by a member of a its minimum net worth, i.e., total shareholders’ equity, is Europcar Groupe Australia to another member or shareholder always greater than AUD 58 million; or related party of Europcar Groupe Australia without prior a the fl eet utilization ratio is above 70% on average over the written consent of the bank. year; The Group complied with all these covenants at December 31, 2015.
26.4 Notes issued
Loan notes issued are as follows:
Nominal outstanding amount Carrying Value
As at As at As at As at In thousands of euros Dec. 31 2015 Dec. 31 2014 Dec. 31 2015 Dec. 31 2014
Senior Subordinated Secured 11.50% Notes due in 2017 - 324,000 - 302,807 Senior Subordinated Secured 9.75% Notes due in 2017 - 350,000 - 350,122 Senior Subordinated Secured 5.125% Notes due in 2021 350,000 - 352,098 - Senior Subordinated Secured 5.75% Notes due in 2022 475,000 - 466,673 - Senior Subordinated Unsecured 9.375% Notes due in 2018 - 400,000 - 402,397
825,000 1,074,000 818,771 1,055,326
(i) €350 million senior subordinated notes (ii) €475 million senior subordinated notes
In July 2014, the Group refi nanced its fl eet fi nancing debt in On May 27, 2015, €475 million senior notes due 2022 were France, Italy, Germany and Spain by issuing €350 million worth issued at an issue price of 99.289%. and a coupon of 5.75%. of senior secured 5.125% notes due in 2021. These notes On June 29, 2015 a portion of the HY bond proceed was were issued by EC Finance plc, an SPE, and guaranteed as directly transferred to an escrow account dedicated to the senior debt by ECI, (the “EC Finance Notes”). This issue was redemption of €400 million of Outstanding Subordinated used to redeem the senior secure notes due in 2017 – and Notes Due 2018 and bearing interest at 9.375%. The remaining also guaranteed by EC Finance plc – in two installments: proceed was transferred to Europcar Groupe. €250 million in summer 2010 and €100 million in May 2011. On June 29, 2015 a portion of the IPO proceeds was directly This early redemption therefore generated a redemption transferred to an escrow account dedicated to the redemption premium of €17.1 million. of the €324 million of Outstanding Subordinated Notes Due These call options provided for in the event of early redemption 2017 and bearing interest at 11.50%. The remaining proceed are considered as embedded derivatives that must be was transferred to Europcar Groupe. recognized separately at fair value through profi t and loss and they are not deemed material at December 31, 2015.
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26.5 Senior Revolving Credit Facility Paribas and any other entity which may subscribe to or acquire the FCT Senior Notes as senior subscriber, and (ii) FCT Junior Notes to be subscribed from time to time by ECI. The Senior Revolving Credit Facility consists of a senior secured revolving credit facility providing for loan advances denominated In March 2014, the Group signed an amendment allowing it to in euro, or such other currencies as may be agreed upon with extend maturity through July 2017 and to start repayments in the lenders. The purpose of the facility is to provide funding January 2017. Europcar also adapted the facility to its fi nancing mainly for: requirements and limited its commitment to €1 billion. Standard & Poor’s has confi rmed its A stable outlook rating. a fi nancing advances to be made by a borrower to an SPE to contribute to the fi nancing of fl eet acquisition; SARF was amended (signed on May 12, 2015 and effective as of June 17, 2015) primarily to extend the maturity of the facility 03 a working capital needs and general corporate purposes of to July 2019 thereof and to lower the overall interest cost fi xed the Group; to EURIBOR (+1.70%), increase the amount from €1.0 billion a payment to an SPE pursuant to any operating lease; to €1,1 billion and permit the participation of two new banks, Lloyds Bank and HSBC France. a interest payments due by ECG or any other debtor of the Group pursuant to, inter alia, the Senior Revolving Credit Facility and certain other outstanding liabilities of ECG; (ii) United Kingdom fl eet fi nancing facilities a repayment of inter-company loans. The United Kingdom fleet has a stand-alone arrangement through the Group’s United Kingdom subsidiaries, including The New Senior Revolving Credit Facility was signed on Europcar Group UK Limited, Europcar UK Limited and May 12, 2015 and entered into effect on May 28, 2015. The certain subsidiaries of Europcar UK Limited, comprising a €350 million Senior Revolving Credit Facility matures in 5 years working capital facility and two main leasing facilities (one with and bears interest at a rate of Euribor + 250 bps (or 275 bps Lloyds for GBP 190 million and the other with Lombard for if certain thresholds are achieved). GBP 160 million). In October 2014, all fi nancing lines were renegotiated. As well as obtaining better conditions and expanding the banking pool, the refi nancing arrangements increase the United Kingdom entities’ fl eet fi nancing facilities 26.6 Dedicated asset fi nancing to GBP 455 million, maturing in three years with a two-year extension option. The total guaranteed amount available for leasing facilities is (i) Senior asset Revolving Facility GBP 525 million (2014: GBP 555 million). Vehicles are acquired The SARF 2010 was initially entered into on July 30, 2010, then from the manufacturers, then sold to lessors and operated amended between Credit Agricole Corporate and Investment through lease-back agreements. The amount outstanding for Bank acting as lender, Securitifl eet Holding (as borrower) and these contracts as at December 31, 2015 was GBP 262 million ECI (as borrower agent). Drawings are available to Securitifl eet (GBP 273 million at end-2014). Most of the leasing facilities Holding for the sole purpose of fi nancing fl eet acquisition and will mature on September 30, 2018 after the fi rst one-year maintenance in France, Italy, Germany and Spain through extension option has been exercised. the Securitifl eet companies exclusively. These drawn down amounts are based on the aggregate of all borrowing bases calculated monthly, in substance representing the aggregate of the vehicle fl eet residual value (including vehicles for which 26.7 Australia asset fi nancing registration is pending) and the fl eet working capital, including related VAT positions. National Australia Bank (the “NAB”), Toyota Financial Services, The lender assigned its claims arising under SARF 2010, Volkswagen Financial Services and Alphabet Financial Services together with all security and ancillary rights thereto, to FCT have provided Europcar Australia and New Zealand with senior Sinople. With respect to these claims, FCT Sinople will issue: credit facilities (the “Australian Asset Financing Facilities”) that (i) FCT Senior Notes to be subscribed periodically by Credit include revolving and non-revolving fl eet operating and fi nance Agricole Corporate and Investment Bank, Royal Bank of leases for up to AUD 60 million. These facilities are renewed Scotland plc., Société Générale, Deutsche Bank, Natixis, BNP annually in April of each year.
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NAB Facilities are secured by fi xed and fl oating charges over operating leases. In certain countries, the operating companies Europcar Australia assets, including goodwill and uncalled have entered into comprehensive framework operating lease capital and called but unpaid capital, together with assignment agreements with fi nancial institutions and manufacturers. of the related insurance policy. There are also performance The fi nancing of our operating leases is mostly correlated to guarantees for the facilities. the 6-month Euribor rate, in particular due to contractual terms that match the average length of the holding period of cars. The note on “Financial risk management” provides more information about the Group’s exposure to interest and liquidity 26.8 Major operating lease risks.
The Group fi nances a portion of its fl eet in all countries in which it is present, including Germany, France, Italy and Spain, through
NOTE 27 EMPLOYEE BENEFITS
As at Dec. 31, 2015 As at Dec. 31, 2014
Other LT Other LT employee employee In thousands of € Pensions benefi ts Total Pensions benefi ts Total
Non-current 115,849 3,446 119,295 120,945 3,814 124,759 Current 2,944 - 2,944 2,744 - 2,744
TOTAL 118,793 3,446 122,239 123,689 3,814 127,503
27.1 Net liability recognized in the statement of fi nancial position
The Group has defi ned benefi t pension obligations for some of the Group’s employees in the United Kingdom, France, Germany, Italy and Belgium.
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Present value of funded or partially funded obligations (A) (76,045) (74,155) Fair value of plan assets (B) 71,630 67,425 Surplus/(Defi cit) at period end (1) (4,415) (6,730) Present value of unfunded obligations (C) (114,378) (116,960) Unrecognized prior service costs --
NET LIABILITY FOR DEFINED BENEFIT OBLIGATIONS AT END OF PERIOD (118,793) (123,689) O/w: A statement of fi nancial position liability of 118,793 123,689 A statement of fi nancial position asset of --
(1) Mainly in United Kingdom.
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27.2 Movement in net liability recognized in the statement of fi nancial position
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Net liability for defi ned benefi t obligations at January 1 (123,689) (101,346) Changes in scope of consolidation 156 (912) Settlements (39) - Defi ned benefi t obligations and fair value of plan assets acquired as part of business combinations 03 Contributions paid into plan 2,901 2,269 Benefi ts paid 2,662 3,399 Current service cost, interest expense and expected return on plan assets (5,475) (5,861) Past service cost (7) (12) Actuarial gains/(losses) recognized in equity 4,179 (21,802) Curtailments 596 569 Foreign currency differences (76) 7
NET LIABILITY FOR DEFINED BENEFIT OBLIGATIONS AT END OF PERIOD (118,793) (123,689)
27.3 Movement in defi ned benefi t obligations
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Defi ned benefi t obligations at January 1 (191,115) (156,416) Curtailments 596 569 Settlements (39) (3) Defi ned benefi t obligations acquired as part of a business combination 156 (912) Benefi ts paid 6,603 5,028 Current service cost (3,349) (3,048) Interest on obligations (4,645) (5,199) Actuarial gains/(losses) recognized in equity 5,261 (27,327) Foreign currency differences (3,891) (3,807)
DEFINED BENEFIT OBLIGATIONS AT END OF PERIOD (A)+(C) (190,423) (191,115)
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27.4 Plan assets
2015 2014
In % (average) Eurozone United-Kingdom Eurozone United-Kingdom
Equities 0% 17% 0% 18% Debt 0% 52% 0% 52% Other assets 100% (1) 32% 100% 31%
(1) Unit-linked portfolios for various insurance policies, which themselves consist of a mix of stocks, bonds and cash, were classifi ed as “other instruments“.
27.5 Movement in defi ned benefi t plan assets
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Fair value of plan assets at January 1 67,425 55,080 Curtailments -- Settlements -3 Fair value of plan assets acquired as part of a business combination - - Contributions paid into plan 2,901 2,269 Benefi ts paid (3,941) (1,629) Expected rate of return on plan assets 2,519 2,386 Actuarial gains/(losses) recognized in equity (1,082) 5,527 Foreign currency differences 3,808 3,789
FAIR VALUE OF PLAN ASSETS AT END OF PERIOD (B) 71,630 67,425
27.6 Expense recognized in the income statement for defi ned benefi t plans
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Current service costs 3,107 3,046 Interest on obligations 4,647 5,199 Expected rate of return on plan assets (2,318) (2,386) Past service cost 712 Curtailments/settlements (148) -
5,295 5,872
The expense is recognized in “Personnel costs” as disclosed in (France, Germany and United Kingdom), the estimated charge Note 5, except for interest costs on benefi t plans and expected in the consolidated income statement for 2016, based on the return on plan asset (€2.3 million). In the three main countries assumptions at December 31, 2015 amounts to €4.9 million.
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27.7 Actuarial assumptions
Group obligations are valued by an external independent actuary, based on assumptions at the reporting date that are periodically updated. These assumptions are set out in the table below:
2015 2014
Eurozone Eurozone excl. United- excl. United- Germany (1) Germany Kingdom Germany (1) Germany Kingdom
Discount rate 2.00% 2.00% 3.85% 1.80% 1.80% 3.65% 03 1.00% 1.00% Infl ation rate to 2.00% 1.00% 3.25% to 2.00% 1.00% 3.15% 2.00% 2.00% Expected rate of salary increase to 3.50% 2.00% 3.25% to 3.50% 2.00% 2.75% 0.00% 0.00% Expected rate of pension increase to 3.00% 1.00% 3.10% to 3.00% 1.00% 3.05% 1.75% Expected rate of return on plan assets to 2.00% na 3.85% 1.80% na 3.65%
(1) The eurozone includes plans in Italy, France and Belgium expressed based on a weighted average.
The discount rate is the yield at the reporting date on bonds Assumptions concerning long-term returns on plan assets are with a credit rating of at least AA that have maturities similar to based on the discount rate used to measure defi ned benefi t those of the Group’s obligations. obligations. The impact of the revised IAS 19 is not material for Europcar Groupe. A 0.25% increase in the discount rate would reduce the benefi t obligation by €7.9 million; a 0.25% decrease in the discount Assumptions regarding future mortality rates are based on rate would increase the benefi t obligation by €8.2 million. best practice and published statistics and experience in each country. The estimated return on plan assets has been determined based on long-term bond yields. All of the plan assets are allocated to United Kingdom and Belgian employees.
27.8 Actuarial gains and losses recognized directly in equity (net of deferred tax)
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Cumulative opening balance (41,724) (25,907) Gain/(loss) recognized during the year/period 3,785 (15,817) Cumulative closing balance (37,939) (41,724)
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27.9 Experience adjustments
In thousands of euros 2015 2014 2013 2012 2011 2010 2009
Present value of defi ned benefi t obligations (63,917) (61,369) (50,720) (47,859) (42,325) (38,098) (35,482) Fair value of plan assets 65,992 61,669 49,880 47,155 40,668 36,617 31,286 (surplus)/defi cit (2,075) (300) (840) (705) (1,657) (1,481) (4,196) Experience adjustments to plan liabilities (247) 1,372 313 - 850 - Experience adjustments to plan assets (1,071) 36 1,444 3,174 679 2,434 1,469
27.10 Contributions to defi ned contribution plans
In 2015, the Group paid contributions into defi ned contribution plans amounting to €2.7 million (2014: €2.7 million).
NOTE 28 PROVISIONS
Insurance claim Reconditioning Other In thousands of euros provisions provisions provisions Total
Balance at January 1, 2014 129,769 28,070 40,302 198,141 Provisions recognized during the period 59,816 72,314 65,268 (1) 197,398 Provisions utilized during the period (51,489) (68,738) (22,575) (142,802) Provisions reversed during the period (2,252) (295) (4,476) (7,023) Changes in scope of consolidation - - 644 644 Transfers - - 976 976 Actuarial (gains)/losses ---- Effect of foreign exchange differences 2,339 423 415 3,177 BALANCE AT DECEMBER 31, 2014 138,183 31,774 80,554 250,511 Non-current - - 10,114 10,114 Current 138,183 31,774 70,440 240,397 138,183 31,774 80,554 250,511 Balance at January 1, 2015 138,183 31,774 80,554 250,511 Provisions recognized during the period 73,743 78,904 76,289 (1) 228,936 Provisions utilized during the period (77,938) (76,121) (34,372) (188,431) Provisions reversed during the period - - (20,223) (20,223) Changes in scope of consolidation ---- Transfers - - 1,231 1,231 Actuarial (gains)/losses ---- Effect of foreign exchange differences 2,242 403 586 3,231 BALANCE AT DECEMBER 31, 2015 136,230 34,960 104,065 275,255 Non-current - - 25,168 25,168 Current 136,230 34,960 78,897 250,087
136,230 34,960 104,065 275,255
(1) Including in 2014 a provision relating to the dispute between Europcar and Enterprise Holding Inc. and in 2015 a provision for the ongoing dispute with the French Competition Authority (see Note 32).
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28.1 Insurance claim provisions contract. These contracts usually stipulate that the vehicles must be returned at the end of a certain period (less than 12 months) and in a certain “condition” (mileage, cleanliness, Most of these provisions relate to the insurance risks described etc.). Consequently, the Group has commitments to these in the Section “Financial risk management”. For the portion manufacturers under these contracts and recognizes a of the self-fi nanced automotive liability risk, Europcar annually provision to cover the cost of restoring the fl eet at the balance establishes a cost schedule for the insurance and brokerage sheet date. This cost is determined from statistics compiled costs, taxes and cost of the self-fi nanced portion for each by the Fleet Department over the last 6 to 12 months. There country. The cost is determined by day of rental and is included are no specifi c key assumptions, but only statistical support. in the budget instructions sent to each country at the end of the year. Based on the cost per day of rental, Europcar entities set 03 aside funds to cover costs based on the self-fi nanced portion that will pay claims when benefi ts are actually due to third parties. 28.3 Other provisions
Other provisions relate mainly to reserves for: a risks and liabilities for damages to cars fi nanced through 28.2 Reconditioning provisions operating leases; a restructuring costs (personnel costs and the costs of moving The provision for reconditioning relates to costs incurred for the Group’s head offi ce); the present fl eet at the end of the buy-back agreement period. a litigation costs include litigation with franchisees, employee Europcar acquires a large proportion of its vehicles from car disputes and accident claims. manufacturers with buy-back commitments at the end of the
28.4 Provisions added or reversed in the income statement
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Included in “Fleet operating, rental and revenue related costs” ( 2,699) 10,152 Included in “Personnel costs” ( 6,418 ) (5,841) Included in “Network and head offi ce overhead costs” (1,015) (263) Included in “Other income” (2,779) (86) Included in “Other non-recurring income and expenses” 13,959 29,677 Included in “Net fi nancing costs” 2,311 3,250 Included in “Income tax” 15,687 9,980
TOTAL PROVISIONS ADDED OR REVERSED 19,076 46,867
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NOTE 29 TRADE PAYABLES AND OTHER LIABILITIES
The fair values of trade payables correspond to their nominal value. All trade payables and other liabilities fall due within one year.
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Trade payables 304,911 302,669 Other tax payables 8,989 16,007 Deposits 37,379 42,875 Employee related liabilities (1) 70,403 82,930 Liabilities relating to the acquisition of participating interests 3,292 5,385
TOTAL TRADE PAYABLES AND OTHER LIABILITIES 424,974 449,866
(1) Includes €23.7 million relating to the multi-year compensation program in 2014 which was paid in 2015.
As of As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Trade receivables (17,148) (18,346) Other receivables (9,206) (11,492) Tax receivables (327) 1,249 Inventories 1,294 1,300 Trade payables (4,994) 69,514 Other debt (5,845) 4,304 Employee-related liabilities (13,998) 2,443 Tax debt (7,020) 1,046
CHANGES IN NON-FLEET WORKING CAPITAL (57,243) 50,018
NOTE 30 DERIVATIVE FINANCIAL INSTRUMENTS
Total interest rate derivatives eligible for hedge accounting
Fair value Fair value Impact on as at adjustments income Impact In thousands of euros Nominal Indexation Dec. 31, 2015 during period statement on OCI
1-month Interest rate swaps maturing in 2017 (1) - 0.8059% 1,000,000 Euribor (16,753) 3,192 - 3,192 6-month Interest rate swaps maturing in 2020 (3) - 1.099% 600,000 Euribor (22,728) (803) 900 (1,703) Asset swaps 1,600,000
Forward interest rate swaps maturing in 2019 (4) - 1-month 0.6418% 1,000,000 Euribor (12,609) (12,609) (1,811) (10,798) 1-month Interest rate swaps maturing in 2015 - 0.143% 900,000 Euribor - (58) - 58 1-month Interest rate swaps maturing in 2015 (2) - 2.43% 1,300,000 Euribor - - (554) 554
(52,090) (10,162) (1,465) (8,697)
(1) From 1/19/2015 to 7/17/2017 - following the amendment of the SARF in 2015, the nominal amount was raised from €900 million to €1,000 million. The interest rate was dropped to 0.8059%. (2) Wound up in April 2012 in exchange for a balancing cash payment of €67 million amortized over the initial term of the swap (i.e., through January 2015). (3) Maturity extended until July 2020, change in interest rate at 1.099% and nominal amount raised to €600m. (4) From 7/17/2017 to 7/17/2019.
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Fair value Fair value Impact a s at adjustments on income Impact In thousands of euros Nominal Indexation Dec. 31, 2014 during period statement on OCI
Forward interest rate swaps maturing in 2017 (1) 1-month - 0.865% 900,000 Euribor (19,945) (19,945) - (19,945) 6-month Interest rate swaps maturing in 2018 (3) - 1.489% 500,000 Euribor (21,925) (12,460) - (12,460) Asset swaps 1,400,000 1-month Interest rate swaps maturing in 2015 - 0.143% 900,000 Euribor (58) 4,225 (2,000) 4,225 03 1-month Interest rate swaps maturing in 2015 (2) - 2.43% 1,300,000 Euribor - - (14,258) 14,258
(41,928) (28,180) (16,258) (13,922)
(1) From 1/19/2015 to 7/17/2017. (2) Wound up in April 2012 in exchange for a balancing cash payment of €67 million amortized over the initial term of the swap (i.e., through January 2015). (3) Change in rate to 1.65% in exchange for a balancing cash payment of €2 million, then to 1.4890%, and maturity extended through July 2018.
The fair value of a hedging derivative is recorded as a non- fair value is recognized in equity. In 2015, a fi nancial expense current asset or liability if the remaining maturity of the hedged of €1.8 million was recorded for the ineffi ciencies generated by item is more than 12 months, and as a current asset or liability the Eur 1-month forward swap. if the maturity of the hedged item is less than 12 months. The consideration of credit risk in the valuation of derivatives The forward swap agreements qualify for cash fl ow hedge had no material impact on fair value as of December 31, 2015. accounting and therefore the effective portion ofchanges in
NOTE 31 OTHER DISCLOSURES RELATING TO FINANCIAL ASSETS AND LIABILITIES
This note presents the Group’s fi nancial instrument fair value remaining fi nancial instruments. The fair value of interest rate measurement methodology. The “Financial risk management” swaps is calculated using the discounted cash fl ow method: Section in the Signifi cant Accounting Policies provides more Level 2 in the fair value measurement hierarchy. information about the Group’s fi nancial risk management policy. The carrying amount less impairment provision for trade The fair value of fi nancial instruments traded in active markets receivables and payables is assumed to approximate their fair (such as trading and available-for-sale securities) is based on value. quoted market prices at the reporting date. The quoted market Given the maturity of the fi nancing facilities and other debts price used for fi nancial assets held by the Group is the current and their respective interest rates, management has concluded bid price: Level 1 in the fair value measurement hierarchy. that the fair value of the fi nancial liabilities approximates their The fair value of fi nancial instruments that are not traded in respective carrying amounts, except for Loan Notes maturing an active market (for example, over-the-counter derivatives) in 2017, 2018 and 2021 whose fair values were determined is determined by using valuation techniques. The Group uses using quoted prices on the Euro MTF market at December 31, a variety of methods and makes assumptions that are based 2015, December 31, 2014 and December 31, 2013. on market conditions existing at each reporting date. Quoted The fair values of the other financial assets and liabilities market prices or dealer quotes for similar instruments are (investments, other assets, trade receivables and payables) are used for long-term debt. Other techniques, such as estimated close to their carrying amounts in view of their short maturities. discounted cash fl ows, are used to determine fair value for the
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The fair values of fi nancial assets and liabilities, together with their carrying amount in the statement of fi nancial position, are as follows:
Fair value Financial through Fair value instruments Carrying the income through at amortized In thousands of euros Notes Value Fair value statement equity cost
Fair value as at December 31, 2015 Trade receivables 22 287,018 287,018 - - 287,018 Deposits and current loans 17 6,046 6,046 - - 6,046 Vehicle buy-back agreement receivables 20 1,024,072 1, 024,072 - - 1,024,072 Fleet receivables 21 501,522 501,522 - - 501,522 Deposits, other receivables and loans 22 14,987 14,987 - - 14,987 TOTAL OF LOANS AND RECEIVABLES 1,833,645 1,833,645 --1,833,645 Investments in non-consolidated entities 17 280 280 - 280 - Other fi nancial assets 17 88,236 88,236 - - 88,236 Restricted cash 23 97,366 97,366 97,366 - - Cash and cash equivalents 23 146,075 146,075 146,075 - - Derivative assets 30 -----
TOTAL FINANCIAL ASSETS (1) 2,165,602 2,165,602 243,441 280 1,921,881 Notes and borrowings 26 801,183 839,109 - - 839,109 Trade payables 29 468,453 468,453 - - 468,453 Fleet payables 20 567,931 567,931 - - 567,931 Bank overdrafts and portion of loans due in less than one year 26 1,263,783 1,263,783 - - 1,263,783 Derivative liabilities 30 52,090 52,090 - 52,090
TOTAL FINANCIAL LIABILITIES (1) 3,153,440 3,153,440 - 52,090 3,101,350
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Fair value Financial through Fair value instruments Carrying the income through at amortized In thousands of euros Notes Value Fair value statement equity cost
Fair value as at December 31, 2014 Trade receivables 22 260,629 260,629 - - 260,629 Deposits and current loans 17 7,164 7,164 - - 7,164 Vehicle buy-back agreement receivables 20 897,011 897,011 - - 897,011 03 Fleet receivables 21 460,038 460,038 - - 460,038 Deposits, other receivables and loans 22 13,225 13,225 - - 13,225 TOTAL OF LOANS AND RECEIVABLES 1,638,067 1,638,067 --1,638,067 Investments in non-consolidated entities 17 670 670 - 670 - Other fi nancial assets 17 99,179 99,179 - - 99,179 Restricted cash 23 81,795 81,795 81,795 - - Cash and cash equivalents 23 144,037 144,037 144,037 - - Derivative assets 30 - - -
TOTAL FINANCIAL ASSETS (1) 1,963,748 1,963,748 225,832 670 1,737,246 Notes and borrowings 26 1,043,069 1,120,820 - - 1,120,820 Trade payables 29 368,913 368,913 - - 368,913 Fleet payables 21 491,664 491,664 - - 491,664 Bank overdrafts and portion of loans due in less than one year 26 1,127,545 1,127,545 - - 1,127,545 Derivative liabilities 30 41,928 41,928 - 41,928
TOTAL FINANCIAL LIABILITIES (1) 3,073,119 3,150,870 - 41,928 3,108,942
(1) Financial assets and liabilities are not offset as they were not contracted with the same counterparties.
The level in the fair value hierarchy at which fair value measurements are categorized, for assets and liabilities measured in the statement of fi nancial position, is as follows:
As at In thousands of euros Dec. 31, 2015 Level 1 Level 2 Level 3
Assets measured at fair value Other fi nancial assets 280 280 - - Cash and cash equivalents 243,820 243,820 - -
TOTAL 244,100 244,100 - -
As at In thousands of euros Dec. 31, 2015 Level 1 Level 2 Level 3
Liabilities measured at fair value Derivative liabilities 52,090 - 52,090 -
TOTAL 52,090 - 52,090 -
Time-frame for recycling items from OCI to profi t and loss:
As at In thousands of euros Dec. 31, 2015 2016 2017 2018 2019 2020
Recycling of completed operations 1,465 ----- Recycling of operations in progress 52,090 17,415 16,719 11,953 5,233 768
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NOTE 32 OFF-BALANCE SHEET COMMITMENTS
32.1 Fleet operating leases
As at December 31, 2014 and 2015, the Group’s minimum future payments for non-cancellable operating lease commitments are as follows:
As at Dec. 31 2015 As at Dec. 31 2014
Including amounts Including amounts In thousands of euros related to rental fl eet related to rental fl eet
Payable: Within 1 year 233,581 185,230 314,276 267,735 From 1 to 5 years 115,339 8,002 115,527 23,607 More than 5 years 37,558 - 33,179 -
386,478 193,232 462,982 291,342
The Group leases vehicles in Germany, Belgium, Portugal, 32.3 Asset purchase commitments France, Spain, Australia and New Zealand. The Group also leases facilities and other assets. Facilities and other asset During the year ended December 31, 2015, the Group entered leases run for a period of three to nine years in most instances, into contracts to purchase tangible and intangible assets. As usually with an option to renew the lease after that date. of December 31, 2015, purchase agreements amounted to During 2015, €265.5 million was recognized as an expense in €700,000 versus €200,000 as of December 31, 2014. the income statement in respect of operating leases related to the rental fl eet (2014: €245.0 million). For assets other than the rental fl eet leased under operating leases (mainly rental station facilities), expenses recorded in the 2015 consolidated income 32.4 Contingencies and guarantees statement were €67.1 million (€64.7 million in 2014).
1. The main disputes and proceedings currently in progress or that have evolved during the period are as follows: 32.2 Capital commitments for vehicle Procedure of the French anti-trust authorities purchases The French Competition Authority (Autorité de la concurrence – ADLC) has initiated a procedure in the vehicle rental sector. During 2015 the Group entered into contracts to purchase On February 17, 2015, the ADLC addressed a statement vehicles. As at December 31, 2015, capital commitments to of objections to Europcar France, as well as to other purchase vehicles amounted to €1,037.5 million (€496.1 million stakeholders, relating to certain practices that are alleged as at December 2014). not to be compliant with French anti-trust regulations. In 2015, the increase in commitments related to the fl eet was Europcar France lodged its statement of defense brief due to a larger volume of purchases located mainly in Germany on May 20, 2015. The Company strongly contests the and the UK. complaints and the underlying arguments. Further to which the case-handler is expected to submit a report to the ADLC College during the fi rst quarter of 2016. Europcar France will then have two months to respond to this report. The ADLC’s decision would then be expected to be issued several months later, following a closed hearing before its College.
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Any decision imposing a fi ne may be appealed. This would or pre-litigation and in agreement with Volkswagen on the not in principle suspend the obligation to pay the penalty, fi nal amount of such compensations. unless there is an exceptional procedure to suspend the 4. The Group has granted pledges on some of its assets, in payment pending appeal. An unfavorable decision could be particular subsidiaries’ shares, receivables, bank accounts followed by damages claims brought by third parties. and business assets. The assets of the Securitifl eet group The Group recorded a provision for €45 million of non- as well as those related to Securitifl eet group operations are recurring expenses (see Note 10) in its 2015 consolidated pledged in favor of EC Finance Notes holders and the lenders fi nancial statements, refl ecting the Company’s best estimate of the SARF 2010. Other assets have been pledged in favor of the fi nancial risks at this stage of the procedure in the event of the lenders of the Senior Revolving Credit Facility, except that the ADLC were to impose a fi ne, notwithstanding the for certain United Kingdom based assets and Australia/New 03 Group’s arguments in defense of its position. Zealand based assets which are pledged in favor of the local lenders for those respective territories. There is no guarantee that the amount of any fi ne would not be signifi cantly higher than the provision recognized or that 5. Securitifl eet SAS and Securitifl eet SL respectively own a damage claims would not be brought at a later date. substantial part of the fl eet leased by, respectively, Europcar France S.A.S and Europcar IB S.A. to their respective clients 2. The Group has provided various guarantees (mostly joint and have been granted a pledge over their vehicles, with and several guarantees) to certain third parties (mainly respect to Securitifleet S.A.S, in favor of Crédit Agricole for fl eet leasing transactions) within the normal course of Corporate and Investment Bank and its successors and business, as well as some specifi c purpose guarantees, assignees and, more particularly, in favor of the French including a €38 million guarantee to Chartis (formerly securitization mutual fund, FCT Sinople, in accordance with AIG) for the performance of certain obligations of its self- the provisions of articles 2333 et seq. of the French Civil insurance program (Loss Retention Agreement), which could Code (Code civil), and with respect to Securitifleet S.L., be exercised in the highly unlikely event that Europcar were in favor of its creditors and its successors and assignees unable to meet its commitments under such Loss Retention pursuant to a contract known as the “Spanish Securitifl eet Agreement. Financing Agreement” and in accordance with the As at December 31, 2015, ECG had given guarantees worth provisions of article 1863 of the Spanish Civil Code. For the €26.7 million to suppliers, including Chartis (€43.4 million in requirements of these pledges, Europcar France SAS and December 2014). At that date, contingent assets amounted Europcar IB SA were respectively appointed as third party to €5.1 million (€3.6 million at end-2014). holders (tiers convenu and tercero poseedor de conformidad) in accordance with the provisions of Article 2337 of the 3. ECG received a vendor warranty granted by the Volkswagen French Civil Code and Article 1863 of the Spanish Civil Code, group at the time of the acquisition of Europcar Groupe in respectively. Consequently, any vehicle returns by clients of 2006. This guarantee has expired and cannot now be called Europcar France SAS or Europcar IB S.A. will either have upon except in relation to certain very specific matters. to be made to Europcar France SAS or Europcar IB SA in However, relating to previous implementations or such their capacity as third party holder (tiers convenu and tercero specifi c implementations, the Company may still receive poseedor de conformidad) or to any other entity representing compensation subject to the completion of ongoing litigation them in such capacity and in no event to Securitifl eet France SAS or Securitifl eet SL.
NOTE 33 RELATED PARTIES
Under IAS 24, related parties include parties with the ability to 33.1 Transactions with related parties control or exercise signifi cant infl uence over the reporting entity. controlled by Eurazeo SA All business transactions with non-consolidated subsidiaries are conducted at arm’s length. Several members of the The Group has negotiated a management services agreement Group’s management and Supervisory Board are members of with Eurazeo. These services are provided by Eurazeo and the management bodies of companies with which Europcar billed directly to Europcar Groupe S.A. . Groupe S.A. has relations in the normal course of its business activities. All transactions with these parties are conducted at The services provided by Eurazeo as at December 31, 2015 arm’s length. are presented in the table below.
In thousands of euros
Services to Eurazeo 1,695 Services from Eurazeo 1,894
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33.2 Transactions with entities over Management Board has the authority and responsibility to plan, which Europcar Groupe exercises direct and control the activities of the Group. For this reason, signifi cant infl uence the compensation of its members is detailed below. In 2014, in accordance with the governance structure in force The Group has subscribed to the capital increase of Car2Go at the time, the compensation of the members of the Group’s Europe in line with its 25% stake for the following amounts: Executive Committee was detailed by category. These fi gures €5.7 million in 2012, €5.0 million in 2013, €5.7 million in 2014 are repeated here for the record. and 12.5 million in 2015. In addition to their salaries, the Group provides non-cash The Group also subscribed to the capital increase of its benefits to executive officers and contributes to a post- subsidiary Ubeeqo for €4 million during its acquisition in 2014 employment defi ned benefi t plan on their behalf. There were and for €5 million in 2015. no signifi cant transactions with any companies related directly or indirectly to key management members disclosed in the management report of the Europcar subsidiaries. The remuneration of the Group’s executives amounted to 33.3 Compensation of key management €6.4 million in 2015. members The senior executives of the Group were remunerated as follows throughout the year. Salaries and short-term employee In 2015, on the occasion of the Company’s IPO, a new benefi ts include wages, salaries and social security costs. governance structure was put in place. Henceforth the
As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Salaries and short-term employee benefi ts 6,973 7,421 (1) Post-employment benefi ts 41 15 Termination indemnities - 313
7,014 7,749
(1) Including the Executive Committee members’ portion of the LTIP, of which €24 million was classifi ed in “Other non-recurring expenses” (Note 10).
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NOTE 34 GROUP ENTITIES
Consolidation Local HQ method (1) % % Company name (city) Country (FC/EM) interest control
PARENT COMPANY Europcar Groupe S.A. Voisins-le- Bretonneux France FC 03 1. Information on consolidated companies Europcar International S.A.S.U. Voisins-le- Bretonneux France FC 100.0% 100.0% EC1 Voisins-le- Bretonneux France FC 100.0% 100.0% Europcar Holding S.A.S. Voisins-le- Bretonneux France FC 100.0% 100.0% Europcar Lab S.A.S.U. Voisins-le- Bretonneux France FC 100.0% 100.0% Europcar Lab UK Ltd Leicester United-Kingdom FC 100.0% 100.0% E-Car Club Holding Ltd Leicester United-Kingdom FC 60.8% 60.8% E-Car Club Ltd London United-Kingdom FC 60.8% 60.8% EC 2 S.A.S.U. Voisins-le- Bretonneux France FC 100.0% 100% PremierFirst Vehicle Rental German Holdings GmbH Weisbaden Germany FC 100.0% 100% Ubeeqo S.A.S. Boulogne-Billancourt France EM 75.7% 75.7% Ubeeqo France S.A.S. Boulogne-Billancourt France EM 75.7% 75.7% Ubeeqo Luxembourg Sarl Luxembourg Luxembourg EM 75.7% 75.7% Ubeeqo SPRL Ixelles Belgium EM 75.7% 75.7% Ubeeqo GmbH Düsseldorf Germany EM 75.7% 75.7% Ubeeqo Limited London United-Kingdom EM 75.7% 75.7% Securitifl eet Holding S. A Paris France FC 100.0% 8.26% Securitifl eet Holding Bis S.A.S.U. Paris France FC 100.0% 0.0% EC Finance Plc London United-Kingdom FC 0.0% 0.0% FCT Sinople Paris France FC 0.0% 0.0% Europcar France S.A.S. Voisins-le- Bretonneux France FC 100.0% 100.0% Securitifl eet S.A.S.U. Paris France FC 100.0% 8.26% Securitifl eet France Location S.A.S.U. Rouen France FC 100.0% 8.26% Parcoto Services S.A.S Rouen France FC 100.0% 100.0% Europ-Hall S.A.U. Besançon France FC 100.0% 100.0% Monaco Auto Location SAM Monaco Monaco FC 100.0% 100.0% Europcar International S.A.S.U. und Co OHG Hamburg Germany FC 100.0% 100.0% Europcar Autovermietung GmbH Hamburg Germany FC 100.0% 100.0% Securitifl eet GmbH Hamburg Germany FC 100.0% 5.41% InterRent Immobilien GmbH Hamburg Germany FC 100.0% 100.0% Car2Go Europe GmbH Esslingen Germany EM 25.0% 25.0% Car2Go Deutschland GmbH Esslingen Germany EM 25.0% 25.0% Car2Go Österreich GmbH Vienna Austria EM 25.0% 25.0% Car2Go Italia S.r.l. Milan Italy EM 25.0% 25.0% Car2Go UK Ltd Birmingham United-Kingdom EM 25.0% 25.0% Ogotrac France S.A.S. Paris France EM 25.0% 25.0% Car2Go Denmark Copenhagen Denmark EM 25.0% 25.0% Car2Go Sweden Stockholm Sweden EM 25.0% 25.0% Car2Go Hamburg GmbH Hamburg Germany EM 75.0% 50.0% Europcar S.A. Zaventem Belgium FC 100.0% 100.0%
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Consolidation Local HQ method (1) % % Company name (city) Country (FC/EM) interest control
Europcar IB S.A. Madrid Spain FC 100.0% 100.0% Securitifl eet S.L. Madrid Spain FC 100.0% 0.41% Ultramar Cars S.L. Palma de Mallorca Spain FC 100.0% 100.0% Europcar Italia S.p.A. Bolzano Italy FC 100.0% 100.0% Securitifl eet S.p.A. Bolzano Italy FC 99.32% 13.76% Europcar Internacional Aluguer de Automoveis S.A. Lisbon Portugal FC 100.00% 100.0% Europcar Services Unipessoal, LDA. Lisbon Portugal FC 100.0% 100.0% Europcar United Kingdom Limited Watford United-Kingdom FC 100.0% 100.0% PremierFirst Vehicle Rental EMEA Holdings Ltd Leicester United-Kingdom FC 100.0% 100.0% PremierFirst Vehicle Rental Holdings Ltd Leicester United-Kingdom FC 100.0% 100.0% Provincial Assessors Ltd Leicester United-Kingdom FC 100.0% 100.0% PremierFirst Vehicle Rental Pension Scheme Trustees Ltd Leicester United-Kingdom FC 100.0% 100.0% Europcar Group UK Ltd Leicester United-Kingdom FC 100.0% 100.0% PremierFirst Vehicle Rental Franchising Ltd Leicester United-Kingdom FC 100.0% 100.0% Euroguard Gibraltar Gibraltar FC 100.0% 100.0% Europcar Holding Property Ltd Melbourne Australia FC 100.0% 100.0% Europcar Australia Pty Ltd Victoria Australia FC 100.0% 100.0% G1 Holdings Pty Ltd Victoria Australia FC 100.0% 100.0% CLA Holdings Pty Ltd Victoria Australia FC 100.0% 100.0% CLA Trading Pty Ltd Victoria Australia FC 100.0% 100.0% Eurofl eet Pty Ltd Victoria Australia FC 100.0% 100.0% Delta Cars & Trucks Rentals Pty Ltd Victoria Australia FC 100.0% 100.0% Eurofl eet Sales Pty Ltd Victoria Australia FC 100.0% 100.0% E Rent a car Pty Ltd Victoria Australia FC 100.0% 100.0% MVS Holdings (Australia) Pty Ltd Victoria Australia FC 100.0% 100.0% MVS Trading Pty Ltd Victoria Australia FC 100.0% 100.0% JSV Trading Pty Ltd Victoria Australia FC 100.0% 100.0% SMJV Ltd Christchurch New Zealand FC 100.0% 100.0% BVJV Ltd Christchurch New Zealand FC 100.0% 100.0% Wilmington, Europcar Inc. New Castle, Delaware USA FC 100.0% 100.0% 2. Information on non-consolidated companies Vehitel 2000 France S.A.S. Suresnes France NC 20.0% 20.0% Vehitel 2000 S.N.C. Suresnes France NC 33.33% 33.33% PremierFirst Marketing Enterprises Middle East Ltd Dubai United Arab Emirates NC 25.0% 25.0% EIR Autonoleggio SRL Rome Italy NC 100.0% 100.0% EC 3 S.A.S.U. Voisins-le-Bretonneux France NC 100.0% 100.0%
(1) FC: full consolidation; EM: equity method; NC: not consolidated.
Consolidated special purpose entities (SPEs) those countries and are either 100% owned or controlled (over 90%-controlled) by one of the following SPEs: “Securitifl eet As part of the securitization program for part of the fleet Holding SA” or “Securitifleet Holding Bis SAS”, both fi nancing for Germany, France, Italy and Spain, SPEs have incorporated in France. The Group consolidates all Securitifl eet been incorporated under the name Securitifleet in each of entities, i.e., the four local Securitifl eet companies as well as
214 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION CONSOLIDATED FINANCIAL STATEMENTS AND STATUTORY AUDITORS’ REPORT
the two Securitifl eet holding companies, since they have been PremierFirst Vehicle Rental Holdings Limited owns 100% of created for specifi c objectives defi ned by Europcar Groupe. PremierFirst Vehicle Rental Insurances Guernsey Limited, a captive company based in Guernsey in the Channel Islands. The Group’s operating subsidiaries located in France, Spain, the This captive company has two types of business: roadside United Kingdom, Portugal, Belgium, Italy (from January 1, 2008) assistance (RAC) and Personal Accident Insurance (PAI). and Germany (from April 1, 2008) buy local automobile liability The profi ts from the RAC and PAI businesses can mostly be insurance policies with Chartis (formerly AIG) entities, which distributed by the captive company under strict rules. 90% of reinsure part of such risks with a reinsurance structure hosted the profi ts must be distributed within 18 months of the year end. by Euroguard, a protected cell reinsurance company. The Group owns a reinsurance cell (9) within Euroguard, which Since January 2008, PremierFirst Vehicle Rental Limited has has been consolidated since January 2006. However, the local participated in the Group insurance scheme described in the 03 Europcar entities fund a signifi cant portion of the risk through a fi rst paragraph above. Deductible Funding mechanism which is managed via another cell (0) located within Euroguard that acts as a fund manager. The funds hosted in this cell are also consolidated.
NOTE 35 STATUTORY AUDITORS’ FEES
PricewaterhouseCoopers Audit Mazars Total
In thousands of euros 2013 2014 2015 2013 2014 2015 2013 2014 2015
Audit Statutory audit, certifi cation, review of individual and consolidated accounts 795 767 798 476 682 666 1,271 1,449 1,464 of which Europcar Groupe 111 193 163 104 193 198 215 386 361 of which fully consolidated subsidiaries 684 574 634 372 489 468 1,056 1,063 1,102 Other diligence and services directly related to the Statutory Auditors’ role 34 209 601 34 171 533 68 380 1,134 of which Europcar Groupe 159 475 112 463 271 938 of which subsidiaries 34 50 126 34 59 70 68 109 196 SUB-TOTAL 829 976 1,398 510 853 1,199 1,339 1,829 2,597 Other services provided by the networks to fully consolidated subsidiaries Legal, tax, labor 145 124 108 ---145 124 108 Other 21 --- 21 SUB-TOTAL 145 145 108 ---145 145 108
TOTAL 974 1,121 1,506 510 853 1,199 1,484 1,974 2,705 of which Europcar Groupe 111 352 638 104 305 661 215 657 1,299 of which subsidiaries 863 769 868 406 548 538 1,269 1,317 1,406
NOTE 36 SUBSEQUENT EVENTS
To management’s knowledge, no events liable to have a material impact on the earnings, assets, business or overall fi nancial position of the Group occurred between January 1 and February 25, 2016.
EUROPCAR REGISTRATION DOCUMENT 2015 215 03 ACCOUNTING AND FINANCIAL INFORMATION STATUTORY AUDITORS’ REPORT
STATUTORY AUDITORS’ REPORT
Statutory Auditors’ report on the consolidated fi nancial statements
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 specifi cally required by French law in such reports, whether modifi ed or not. This information is presented below the opinion on the consolidated fi nancial statements and includes an explanatory paragraph discussing the auditors’ assessments of certain signifi cant accounting and auditing matters. These assessments were considered for the purpose of issuing an audit opinion on the consolidated fi nancial statements taken as a whole and not to provide separate assurance on individual account captions or on information taken outside of the consolidated fi nancial statements. This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.
(For the year ended 31 December 2015) In compliance with the assignment entrusted to us by your Annual General Meeting, we hereby report to you, for the year ended 31 December 2015, on: a the audit of the accompanying consolidated fi nancial statements of Europcar Groupe; a the justifi cation of our assessments; a the specifi c verifi cation required by law. These consolidated fi nancial statements have been approved by the Management Board. Our role is to express an opinion on these consolidated fi nancial statements based on our audit.
I - Opinion on the consolidated fi nancial statements
We conducted our audit in accordance with professional standards applicable in France; those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated fi nancial statements are free of material misstatement. An audit involves performing procedures, using sampling techniques or other methods of selection, to obtain audit evidence about the amounts and disclosures in the consolidated fi nancial statements. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made, as well as the overall presentation of the consolidated fi nancial statements. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion. In our opinion, the consolidated fi nancial statements give a true and fair view of the assets and liabilities and of the fi nancial position of the Group as at 31 December 2015 and of the results of its operations for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union.
II - Justifi cation of our assessments In accordance with the requirements of article L.823-9 of the French Commercial Code (Code de commerce) relating to the justifi cation of our assessments, we bring to your attention the following matters:
Measurement of tangible and intangible assets The Group tests goodwill and intangible assets with an indefi nite useful life for impairment and assesses whether long term assets present an indication of impairment, in accordance with the methods set out in note 13 - “Goodwill” and note 14 - “Intangible assets” to the consolidated fi nancial statements. We have reviewed the methods used for the aforementioned test, the methodology applied as well as the estimated future cash fl ows and underlying assumptions and verifi ed that the information provided in these notes is appropriate.
216 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION STATUTORY AUDITORS’ REPORT
Provisions As specifi ed in the note “Signifi cant accounting policies – Provisions” to the consolidated fi nancial statements, the Group records provisions to cover risks. The nature of the provisions recorded in the fi nancial statements under Provisions is described in the note “Financial risk management – Insurance risks” and in the notes 27, 28 and 32 to the consolidated fi nancial statements. Based on the information available at the time of our audit, we ensured that the methods and data used to determine provisions, notably relating to insurance claims, as well as the disclosures regarding the provisions provided in the notes to the consolidated fi nancial statements, are appropriate. These assessments were made as part of our audit of the consolidated fi nancial statements taken as a whole, and therefore contributed to the opinion we formed which is expressed in the fi rst part of this report. 03
III - Specifi c verifi cation As required by law, we have also verifi ed in accordance with professional standards applicable in France the information related to the Group given in the management report. We have no matters to report regarding the fair presentation and consistency of this information with the consolidated fi nancial statements.
Neuilly-sur-Seine and Courbevoie, 25 February 2016 The S tatutory Auditors
PricewaterhouseCoopers Audit Mazars François Jaumain Isabelle Massa
EUROPCAR REGISTRATION DOCUMENT 2015 217 03 ACCOUNTING AND FINANCIAL INFORMATION ANALYSIS OF THE RESULTS OF EUROPCAR GROUPE S.A
3.5 ANALYSIS OF THE RESULTS OF EUROPCAR GROUPE S.A.
Please read the following information on the Company’s profi ts and losses and fi nancial position in conjunction with the Company’s fi nancial statements for the year ended on December 31, 2015, as shown in Section 3.6 “ Company fi nancial statements and Statutory Auditors’ report” of this Registration Document.
3.5.1 Revenue of the Company
Europcar Groupe reported revenue of €4,543 thousand in 2015, compared with €4,042 thousand in 2014, an increase of 12.4%, breaking down as follows:
Revenue in thousand of euros Dec. 31, 2014 Dec. 31, 2015
a Management fees in respect of services to subsidiaries (ECI) 2,960 3,197 a Royalty fees on long-term trademark 1,082 1,346
TOTAL 4,042 4,543
3.5.2 Results of operations of the Company
The Company reported an operating loss of €9,772 thousand in URSS AF (social security) charge levied on free shares granted 2015, compared with a loss of €4,379 thousand in 2014. The to management, an increase in wages and salaries, and higher deterioration in the results of operations was due primarily to a consulting fees.
3.5.3 Financial income/(expense) of the Company
The Company reported net financial expense of €135,172 chiefly to the payment of early redemption premiums on thousand in 2015, compared with an expense of €79,258 two convertible bonds and the accelerated amortization of thousand in 2014, a variation of €55,914 thousand attributable transaction costs.
218 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION ANALYSIS OF THE RESULTS OF EUROPCAR GROUPE S.A
3.5.4 Other information relating to the Company’s separate fi nancial statements for 2015
The profi t/(loss) before tax of the Company in the year ended On the basis of the above items, the result of the Company for December 31, 2015 was a loss of €114,944 thousand, the year ended December 31, 2015 was a loss of €119,633 compared with a loss of €83,637 thousand in the previous thousand, compared with a loss of €104,639 thousand in the year, a deterioration of €31,307 thousand. year ended December 31, 2014. The exceptional income/(expense) of the Company was income At December 31, 2015, the total assets of the Company 03 of €9,002 thousand in the year ended December 31 2015, amounted to €1, 463,336 thousand, compared with €1,481,643 compared with a loss of €32,411 thousand in the previous year. thousand at December 31 2014. Income tax was a gain of €16,310 thousand in the year ended The Company had 12 salaried employees at December 31, 2015. December 31, 2015 (for the most part attributable to income from tax consolidation), compared with a gain of €11,409 thousand in the year ended December 31, 2014.
3.5.5 Proposed appropriation of profi t
The Combined General Meeting of May 10, 2016 will be asked from the share, merger and contribution premium, reducing to clear the loss for the year ended December 31, 2015, in the its balance from €767,402 thousand to €647,769 thousand. amount of €119,633 thousand, by deducting the full amount
3.5.6 Dividends paid in respect of the last three years
Pursuant to Article 243 bis of the French General Tax Code, you are reminded that no dividend was paid in respect of the last three years.
EUROPCAR REGISTRATION DOCUMENT 2015 219 03 ACCOUNTING AND FINANCIAL INFORMATION ANALYSIS OF THE RESULTS OF EUROPCAR GROUPE S.A
3.5.7 Table of results for the last fi ve years (Article R.225-102 of the French Commercial Code)
Year ended Year ended Year ended Year ended Year ended In euros Dec. 31, 2011 Dec. 31, 2012 Dec. 31, 2013 Dec. 31, 2014 Dec. 31, 2015
Duration of fi nancial period 12 12 12 12 12 Capital at year end ----- Share capital (at year end) 782,286,490 782,286,490 446,383,194 446,383,194 143,154,016 Number of ordinary shares 78,228,649 78,228,649 103,810,045 103,810,045 143,154,016 Operations and profi t/(loss) ----- Revenue excluding taxes 6,020,004 6,446,965 4,975,918 4,041,733 4,542,518 Profi t/(loss) before tax, investment, depreciation and amortization, and provisions (103,269) (67,220,136) (77,942,907) (92,990,176) (127,161,398) Income tax 4,595,901 18,455,888 17,533,484 11,409,147 16,310,028 Net profi t/(loss) for the period (45,335) (50,706,748) (60,018,663) (104,638,5) (119,632,847) Distributed earnings (losses) 00000 Earnings per share ----- Profi t/(loss) after tax, investment, depreciation and amortization, and provisions (1,26) (0,62) (0,58) (0,79) (0,77) Net profi t/(loss) for the period (0,58) (0,65) (0,58) (1,01) (0,84) Dividend paid 00000 Personnel ----- Average headcount 22 21 12 10 9 Payroll 6,132,410 5,623,262 4,529,371 3,740,470 10,114,172 Amounts paid for employee benefi ts (social security, social services, etc.) 2,205,405 2,580,591 1,751,808 1,418,461 3,180,188
220 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION COMPANY FINANCIAL STATEMENTS
3.6 COMPANY FINANCIAL STATEMENTS AND STATUTORY AUDITORS’ REPORT
COMPANY FINANCIAL STATEMENTS
Balance sheet 03
ASSETS
Year ended Year ended Dec. 31, 2015 Dec. 31, 2014
Gross Depreciation carrying and In thousands of euros Notes amount amortization Net Net
Trademarks 25,000 - 25,000 25,000 Intangible assets 25,000 - 25,000 25,000 Investment securities 1,241,195 - 1,241,195 1,258,517 Receivables from investments - - - - Loans 146,378 - 146,378 146,286 Other fi nancial assets 105 - 105 8 Financial assets 1,387,678 - 1,387,678 1,404,811 NON-CURRENT ASSETS 11 1,412,678 - 1,412,678 1,429,811 Advance payments on orders 87 - 87 112 Trade and other receivables 12 18,858 - 18,858 6,463 Other receivables 12 20,533 - 20,533 12,449 Marketable securities - - - - Cash-in-hand and at bank - - - 5 Prepaid and deferred charges 15---11 Deferred expenses 15 8,064 - 8,064 32,791 Premiums on early redemption of bonds 3,116 - 3,116 - CURRENT ASSETS 50,658 - 50,658 51,832 Foreign exchange differences – assets - - - -
TOTAL ASSETS 1,463,336 - 1,463,336 1,481,643
EUROPCAR REGISTRATION DOCUMENT 2015 221 03 ACCOUNTING AND FINANCIAL INFORMATION COMPANY FINANCIAL STATEMENTS
LIABILITIES AND EQUITY
Year ended Year ended In thousands of euros Notes Dec. 31, 2015 Dec. 31, 2014
Share capital 143,154 446,383 Share, merger, contribution premiums 767,402 452,978 Legal reserve -- Retained earnings - (336,845) Net profi t/(loss) for the period (119,633) (104,639) Regulated provisions 23,793 23,793 Equity 18 814,716 481,671 Provisions for risks 19 - 25,000 Provisions for expenses -- Provisions - 25,000 Other non-convertible bonds 13 476,138 736,725 Borrowings from credit institutions 430 Financial liabilities 476,142 736,755 Trade and other payables 13 12,042 9,809 Tax and social security liabilities 12,256 10,436 Other debt 13 148,148 217,972 Deferred income 32 - Operating liabilities 172,478 238,217 LIABILITIES 648,620 974,972 Foreign exchange differences – liabilities --
TOTAL LIABILITIES AND EQUITY 1,463,336 1,481,643
222 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION COMPANY FINANCIAL STATEMENTS
Income statement
Year ended Year ended In thousands of euros Notes Dec. 31, 2015 Dec. 31, 2014
Sales of services 3 4,543 4,042 Reversals of provisions, amortization and transfers of expenses - - Other income 4 12,607 2,334 03 TOTAL OPERATING INCOME 17,150 6,376 Other purchases and external expenses 5 (17,282) (5,715) Taxes, levies and similar payments (202) 119 Wages and salaries (5,321) (4,169) Social security contributions (3,800) (990) Other expenses (317) (0) TOTAL OPERATING EXPENSES (26,922) (10,755) OPERATING INCOME (9,772) (4,379) Other interest and similar income 16,878 16,804 Foreign exchange gains 42 Financial income 7 16,882 16,806 Interest and similar expense (118,153) (81,410) Depreciation, amortization, impairment and provisions (33,781) (14,599) Foreign exchange losses (119) (54) Financial expense 7 (152,054) (96,063) NET FINANCIAL INCOME/(EXPENSES) (135,172) (79,258) RECURRING PROFIT/(LOSS) BEFORE TAX (144,944) (83,637) Exceptional income from management transactions 4,400 7,102 Exceptional income from capital transactions 17,323 - Reversals of provisions, impairment and transfers of expenses 25,000 1,943 Exceptional income 8 46,723 9,045 Exceptional expenses on management transactions (20,398) (16,456) Exceptional expenses on capital transactions (17,323) - Depreciation, amortization, impairment and provisions - (25,000) Exceptional expenses 8 (37,721) (41,456) EXCEPTIONAL INCOME/(EXPENSES) 9,002 (32,411) Income taxes 9 16,310 11,409
NET PROFIT/(LOSS) (119,633) (104,639)
EUROPCAR REGISTRATION DOCUMENT 2015 223 03 ACCOUNTING AND FINANCIAL INFORMATION COMPANY FINANCIAL STATEMENTS
Consolidated statement of cash fl ows
Year ended Year ended In thousands of euros Notes Dec. 31, 2015 Dec. 31, 2014
PROFIT/(LOSS) BEFORE TAX (135,943) (116,056) Change in provisions 18 (25,000) 25,000 Expenses related to the IPO 8,692 - Financing costs 79,046 80,414 Redemption premium 56,010 - OPERATING INCOME BEFORE CHANGES IN WORKING CAPITAL (17,195) (10,642) Change in trade receivables (12,395) (2,826) Change in other receivables (15,966) (7,340) Change in trade payables (1,959) 13,414 Change in other liabilities 14,307 (765) Cash generated from operations (16,013) 2,483 Income taxes received/(paid) 8 5,783 22,168 Net interest paid (56,971) (65,712) NET CASH GENERATED FROM/(USED BY) OPERATIONS (84,396) (51,703) Acquisition of intangible assets and property, plant and equipment - - Proceeds from disposal of intangible assets and property, plant and equipment - - Change in other investments and borrowings (1) 17,323 (17,323) Dividends received from associates -- NET CASH USED BY INVESTING ACTIVITIES 17,323 (17,323) Capital increase (3) 448,203 - Issuance of bonds (4) 471,623 - Redemption of bonds (2) (780,010) - Change in other borrowings (63,888) 69,074 Payment of refi nancing costs (8,832) NET CASH GENERATED FROM/(USED BY) FINANCING ACTIVITIES 67,096 69,074 Cash and cash equivalents at end of period (4) (27) Cash and cash equivalent at beginning of period (27) (75) INCREASE/(DECREASE) IN NET CASH 23 48
(1) Transfer of Ubeeqo securities, acquired by ECG on November 30, 2014 for €17.3 million, to Europcar Lab SASU. (2) Early redemption of the €324 million and €400 million high-yield notes, and payment of their early redemption premiums (€56 million). (3) Capital increases dated May 15 and June 26, 2015, in a total amount of €476.5 million (see Note 18) net of fees paid (€8.7 million recognized in other non-recurring expenses and €19.6 million of the €23.6 million allocated to the issue premium). (4) €475 million in high-yield notes issued at 99.289% of par.
224 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION COMPANY FINANCIAL STATEMENTS
Notes to the separate fi nancial statements
CONTENTS 03
NOTE 1 SIGNIFICANT EVENTS 226 NOTE 2 SIGNIFICANT ACCOUNTING POLICIES 227 NOTE 3 BREAKDOWN OF REVENUE 229 NOTE 4 OTHER INCOME 229 NOTE 5 OTHER PURCHASES AND EXTERNAL EXPENSES 229 NOTE 6 EXECUTIVE COMPENSATION 229 NOTE 7 NET FINANCING COSTS 230 NOTE 8 EXCEPTIONAL INCOME/(LOSS) 231 NOTE 9 INCOME TAX: BREAKDOWN AND TAX LIABILITIES 231 NOTE 10 TAX GROUP 232 NOTE 11 STATEMENT OF FIXED ASSETS 233 NOTE 12 AMOUNTS AND MATURITIES OF RECEIVABLES 233 NOTE 13 AMOUNTS AND MATURITIES OF PAYABLES 234 NOTE 14 INFORMATION ON RELATED COMPANIES 235 NOTE 15 DEFERRED EXPENSES AND PREMIUMS ON EARLY REDEMPTION OF BONDS 235 NOTE 16 ACCRUED EXPENSES 236 NOTE 17 ACCRUED INCOME 236 NOTE 18 SHAREHOLDERS’ EQUITY 237 NOTE 19 STATEMENT OF PROVISIONS 240 NOTE 20 OFF-BALANCE SHEET COMMITMENTS 241 NOTE 21 WORKFORCE 242 NOTE 22 FREE SHARE GRANTS 242 NOTE 23 SUBSIDIARIES AND AFFILIATES 243
EUROPCAR REGISTRATION DOCUMENT 2015 225 03 ACCOUNTING AND FINANCIAL INFORMATION COMPANY FINANCIAL STATEMENTS
General principles
NOTE 1 SIGNIFICANT EVENTS
1.1. Overview and description The main purpose of the Global Offering and the listing of the of the activity performed Company’s shares on Euronext Paris was to enable the Group by the Company to reduce its indebtedness, strengthen its fi nancial structure and increase its fi nancial fl exibility in order to accelerate its development and continue the deployment of its “Fast Lane” Europcar Groupe S.A. (“ECG”) was incorporated on March 9, program. 2006 with an initial share capital of €235,000 and was converted into a French société anonyme (joint-stock corporation) on The net proceeds from the issuance of new shares, in the April 25, 2006. ECG’s registered offi ces are located at 2 rue amount of approximately €441 million, takes into account René Caudron, 78960 Voisins le Bretonneux, France. expenses incurred as part of the transaction. These expenses break down either as: The Europcar Groupe leverages all of its experience in the car a rental sector to offer diverse and varied mobility solutions to its expenses related to the issuance of new shares in the amount customers through the provision of leisure and utility vehicles of €23.8 million, charged directly against shareholders’ equity; for short- and medium-term rentals. Under its Europcar and a IPO fees in the amount of €8.7 million, recorded among InterRent trademarks, the Group covers a wide range of exceptional items. markets and customers, both private and business, with low- cost or luxury rentals. The net proceeds from the issuance of new shares was allocated to the full redemption of the €324 million owed by Europcar Groupe is the European leader in short-term vehicle the Company on subordinated bonds maturing in 2017 and rentals. the payment of an early redemption premium of €37 million. At December 31, 2015, 42.3% of Europcar Groupe’s share On May 27, 2015, €475 million of senior notes due 2022 were capital was held by Eurazeo, and 57.7% by private and public issued at an issue price of 99.289% of par through the entity investors following its initial public offering on the regulated Europcar Notes Limited. The proceeds were only available after market of Euronext Paris in June 2015. the listing of the Group’s shares. Consequently, on June 29, 2015, the net proceeds, kept in an escrow account until then, were released and partially used to redeem subordinated bonds maturing in 2018 with a principal 1.2. Signifi cant events during the year amount of €400 million and to pay an early redemption premium of €19 million.
a) Initial public offering The balance of the net proceeds from the issuance of new shares and new bonds after these refi nancing transactions (i.e. The Company was listed on the regulated market of Euronext approximately €112 million) was allocated to general corporate Paris on June 26, 2015 (Compartment A; ISIN code: purposes. FR0012789949; ticker: EUCAR). Trading in Europcar Groupe shares on the regulated market of Euronext Paris began on b) Governance June 26, 2015 in the form of share promises (“Europcar Prom“). Settlement and delivery of the shares took place on June 29, During the first half of 2015, and ahead of the Company’s 2015 and the fi rst shares were exchanged on the market on IPO, Europcar Groupe strengthened its governance through June 30, 2015. The offering price was set at €12.25 per share. the establishment of a Supervisory Board and a Management Board. The Management Board comprises Philippe Germond, The IPO involved: Chairman, Caroline Parot, Chief Financial Offi cer of Europcar a the issuance of new shares as part of a cash capital Groupe, Ken McCall, Chief Operating Officer, and Fabrizio increase in the gross amount of approximately €475 million, Ruggiero, Head of Mobility. corresponding to net proceeds of approximately €441 million; and a the sale of approximately €404 million (gross) of existing common shares by the Selling shareholders.
226 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION COMPANY FINANCIAL STATEMENTS
c) Treasury shares held under the liquidity SAS for a total of €17,323 thousand, corresponding to the net contract carrying amount.
As of July 24, 2015, for a period of one year renewable by f) Disputes and litigation proceedings tacit agreement, the Company has appointed Rothschild & Cie Banque to implement a liquidity contract on the Europcar share, At December 31, 2014, various entities of the Group, in compliance with the charter of Ethics established by AMAFI including ECG, were party to a number of legal disputes and approved by decision of the AMF on March 21, 2011. and an arbitration proceeding with Enterprise Holdings Inc. For the implementation of this contract, resources of up to (“Enterprise”). On April 30, 2015, the Group and Enterprise €4 million may be allocated to the liquidity account. signed a settlement agreement putting an end to these proceedings, in consideration of the payment of €12.5 million 03 by ECG and the phased discontinuation of use of the e-moving d) Free share grants logo by Europcar (see Note 8). The extraordinary General Meeting of the Company’s The French Competition Authority (Autorité de la concurrence shareholders held on June 8, 2015 authorized the Company’s – ADLC) has initiated a procedure in the vehicle rental sector. Management Board to award free shares in the Company. On February 17, 2015, the Competition Authority addressed The Management Board, at its meeting of June 25, 2015, a statement of objections to Europcar France, as well as to pursuant to the said delegation, accordingly granted free shares other stakeholders, citing certain practices that are allegedly to members of the Executive Committee and to 100 of the not compliant with French antitrust regulations (see Note 19). Group’s managers (see Note 23). e) Transfer of Ubeeqo securities
In order to house its investments in mobility solutions within the 1.3. Subsequent events same holding company, Europcar Groupe sold, on June 30, 2015, its 70.6% stake in French start-up Ubeeqo, a company Not applicable specializing in shared in-company mobility, to Europcar Lab
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES
The annual accounts of Europcar Groupe are prepared in 2.2. Measurement of non-amortized accordance with French generally accepted accounting non-current assets principles for separate fi nancial statements, pursuant to the French General Accounting Plan (ANC regulation 2014-03 of At each balance sheet date, Europcar Groupe conducts June 5, 2014 relating to the General Accounting Plan). impairment testing to ensure that the fair value of the trademark The accounting policies used in the preparation of the fi nancial at this date is higher than its carrying amount. statements for the year ended December 31, 2015 are identical Impairment is recognized when the carrying amount exceeds to those used for the year ended December 31, 2014. the greater of its fair value amount or its value in use. They were prepared in accordance with the historical cost convention. The fi gures in the Notes are in thousands of euros, unless otherwise stated. 2.3. Financial assets
Investment securities and related advances Investment securities are recorded at their purchase price, 2.1. Intangible assets including costs directly attributable to their acquisition. Impairment testing on securities is carried out on the basis This item is comprised exclusively of the Europcar trademark of the value of the securities. Value in use is determined for the “long-term” car rental activity (over one year). using discounted future cash fl ows based on business plans
EUROPCAR REGISTRATION DOCUMENT 2015 227 03 ACCOUNTING AND FINANCIAL INFORMATION COMPANY FINANCIAL STATEMENTS
established by the management of each investment and 2.6. Provisions approved by Europcar’s management. For impairment testing purposes, the three-year plan is A provision is recognized in the balance sheet when the Group extended to fi ve years. The 2016 budget and the 2017 and has a present legal or constructive obligation as a result of a 2018 business plans were prepared taking into account past event, it is probable that an outfl ow of resources with no economic growth forecasts in the countries where the Group counterparty will be required to settle the obligation, and the operates, current macroeconomic data for each country, air amount can be reliably estimated. traffi c growth forecasts, trends in the vehicle rental market and If the effect is material, provisions are discounted using a pre- competitive pressure, as well as new projects and products tax rate that refl ects current market assessments of the time in the development phase. Beyond 2018, revenue growth value of money and the risks specifi c to the liability. assumptions are conservative, and the projected profi t margin is stable. If this value in use is lower than the carrying amount, impairment is recognized. 2.7. Borrowings and bond issuance Investment securities have an acquisition value of €1,234,724 costs thousand, and are exclusively comprised of Europcar International SASU securities, as well as incidental acquisition Borrowings are recorded at their nominal repayment amount. costs in the amount of €23,793 thousand. These were the They are not discounted. subject of straight-line amortization over fi ve years, and were fully amortized as of December 31, 2015. For bonds issued above par and redeemable at par, the difference is an issue premium. For bonds issued below par and redeemable at a higher amount, the difference is a redemption premium. 2.4. Receivables and payables The redemption premium is recorded in the balance sheet as “deferred expenses,” and is amortized over the term of the loan. Receivables and payables are stated at their nominal value. Impairment is recognized when a risk of non-recovery exists. Unrealized foreign exchange gains are recognized in translation gains, whereas unrealized foreign exchange losses are 2.8. Retirement and post-employment recognized in translation losses and are subject to a provision benefi ts for risks and charges.
Foreign exchange gains and losses corresponding to current Europcar gives Company employees retirement bonuses and accounts are recognized directly in profi t or loss, and are not pensions provided through defi ned-contribution or defi ned- subject to translation adjustments. benefi t plans. Europcar Groupe has opted not to recognize its pension obligations. The Company’s obligations are valued by independent actuaries, and are subject to disclosures (see 2.5. Marketable securities: Note 20). treasury shares
Marketable securities are exclusively comprised of Europcar Groupe shares purchased under the terms of the liquidity 2.9. Capital increase expenses contract entered into with an investment service provider in accordance with Article L. 225-209 of the French Commercial Europcar Groupe has opted to charge the expenses related to Code, as amended by Article 15 of Law No. 2012-387 of the capital increase against the issue premium. March 22, 2012 (see Note 14). These shares are measured at acquisition cost. If their probable market value at the balance sheet date is below their acquisition cost, impairment is recognized.
228 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION COMPANY FINANCIAL STATEMENTS
Notes to the income statement
NOTE 3 BREAKDOWN OF REVENUE
Europcar Groupe’s revenue excludes amounts derived from the rebilling of subsidiaries (see Note 4), and breaks down as follows:
Amounts as of Amounts as of Dec. 31, 2015 Dec. 31, 2014 03
Excluding France France Total Total
Provision of services to subsidiaries 3,197 - 3,197 2,960 Franchise revenue 1,346 - 1,346 1,082
TOTAL 4,543 - 4,543 4,042
NOTE 4 OTHER INCOME
Other revenue consists primarily of:
Amounts as of Amounts as of Dec. 31, 2015 Dec. 31, 2014
Rebilling of fees (1) 12,260 1,987 Rebilling of insurance 347 313 Miscellaneous -34
TOTAL 12,607 2,334
(1) See Note 5.
NOTE 5 OTHER PURCHASES AND EXTERNAL EXPENSES
Other purchases and external expenses increased signifi cantly refi nancing of senior credit facilities (Senior asset Revolving (by €11.6 million) in the year ended December 31, 2015. Facility or SARF and Revolving Credit Facility or RCF) made in the context of the Company’s IPO. These costs were billed to This is due to the payment of approximately €12 million the various countries (see Note 4). to various financial intermediaries in connection with the
NOTE 6 EXECUTIVE COMPENSATION
A new governance structure was established at the time of the Note that in 2014, and in accordance with the governance Company’s IPO in 2015. The Management Board is now the in place during that period, it was the compensation of the body that has authority and responsibility for planning, directing members of the Group’s Executive Committee that was and controlling the Group’s activities. It is in this capacity that disclosed by category. The relevant figures are given as a the compensation of its members is set out below. reminder.
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As at As at In thousands of euros Dec. 31, 2015 Dec. 31, 2014
Salaries and short-term employee benefi ts 8,129 (1) 7,667 Post-employment benefi ts 41 15 Termination indemnities - 313
TOTAL 8,170 7,995
(1) Of which the portion relating to Management Board members in respect of compensation under the multi-year plan paid in 2015.
Europcar Groupe did not make any payments to members of In addition, exceptional compensation of €30,000 was paid to the Supervisory Board in respect of directors’ fees in the year a member of the Supervisory Board for a special assignment ended December 31, 2015 (as opposed to payments totaling involving the provision of assistance in the implementation and €246,380 in the previous year). monitoring of the Company’s transformation plan.
NOTE 7 NET FINANCING COSTS
Financial income/(loss) was €(135,172) thousand, consisting of:
Amounts as of Amounts as of Dec. 31, 2015 Dec. 31, 2014
Other interest and similar income 16,878 16,804 Other 42 Financial income 16,882 16,806 Interest on bonds (53,593) (60,312) Interest on the revolving credit facility (1,765) (14,735) Interest on intercompany debt (6,785) (6,363) Amortization of transaction costs (6,881) (14,599) Accelerated amortization of transaction costs (1) (26,900) - Early redemption premiums (1) (56,010) - Other (119) (54) Financial expense (152,054) (96,063)
NET FINANCING COSTS (135,172) (79,258)
(1) Relative to the €324 million and €400 million bonds redeemed early.
230 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION COMPANY FINANCIAL STATEMENTS
NOTE 8 EXCEPTIONAL INCOME/(LOSS)
Exceptional income/(loss) is primarily composed of:
Amounts as of Amounts as of Dec. 31, 2015 Dec. 31, 2014
Transfer of Ubeeqo securities (1 ) 17,323 - Reversal of provisions (2 ) 25,000 1,943 03 Repayment of VW liability guarantees - 7,102 Other non-recurring income (3 ) 4,400 - Other -- Exceptional income 46,723 9,045 Transfer of Ubeeqo securities (1 ) (17,323) - Charges to provisions (2 ) - (25,000) Compensation paid following the “Memorandum of Understanding” (2 ) (12,500) - IPO fees and related exceptional payments (4 ) (7,896) (5,508) Other exceptional expenses (3 ) (2) (10,948) Exceptional expenses (37,721) (41,456)
EXCEPTIONAL INCOME/(EXPENSES) 9,002 (32,411)
(1 ) Europcar Groupe transferred Ubeeqo shares at their acquisition price (€17.3 million) to Europcar Lab SASU, another member of the Europcar consolidated group (see Note 10). (2 ) These amounts correspond to the reversal of a provision of €25.0 million related to the dispute between Europcar Groupe and Enterprise Holdings Inc. over the use of the e-logo in the United Kingdom and in respect of the ensuing arbitration proceedings. In 2015, given the outcome of the case, part of the provision recorded was reversed as no longer required (€12.5 million). (3 ) Including, in 2014, €7 million accrued in respect of lawyers’ fees, particularly in the context of the dispute with Enterprise, and, in 2015, €4.4 million of fees written off once the agreement had been reached. (4 ) Fees related to the IPO and related exceptional compensation in an amount of €32.5 millions, of which €23.8 million charged to the issue premium and €8.7 million recorded in exceptional expenses. In 2014, the exceptional expense corresponded primarily to the multi-year compensation payable to executives.
NOTE 9 INCOME TAX: BREAKDOWN AND TAX LIABILITIES
Profi t before tax Net profi t for Net profi t for in the year ended the year ended the year ended Breakdown Dec. 31, 2015 Current tax Dec. 31, 2015 Dec. 31, 2014
Recurring profi t/(loss) (144,944) 16,310 (128,634) (72,228) Exceptional income/(expenses) 9,002 - 9,002 (32,411)
TOTAL (135,943) 16,310 (119,633) (104,639)
Income tax Detail Base effect
At a rate of 33.33% Organic 30 (10) Net reduction of the future tax liability 30 (10)
As ECG had tax losses in the amount of €813 million as of December 31, 2015, there would have been no tax to recognize if the Company had been taxed separately.
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NOTE 10 TAX GROUP
Europcar Groupe is the parent company of the French tax Europcar Groupe, as parent company, recognizes the gain group, which includes Europcar International, Europcar Lab, resulting from the effects of tax consolidation in its fi nancial Europcar Holding, Europcar France, Parcoto and EuropHall. statements. Europcar Groupe accordingly recognized tax Europcar Groupe is the only entity liable for tax for the entire consolidation income of €16,310 thousand in 2015. tax group. Tax loss carryforwards in respect of the scope of the tax group Each consolidated company is placed in the position it would amounted to €562 million as of December 31, 2015. have been in as regards tax if it had been taxed separately. Tax income and expense on consolidated companies are recognized in the fi nancial statements of Europcar Groupe.
232 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION COMPANY FINANCIAL STATEMENTS
Notes to the balance sheet
NOTE 11 STATEMENT OF FIXED ASSETS
Additions Reductions Amounts as of during during Amounts as of Dec. 31, 2014 the period the period Dec. 31, 2015 03
Trademarks (2) 25,000 - - 25,000
TOTAL INTANGIBLE ASSETS 25,000 - - 25,000 Investment securities (1) 1,258,517 - 17,323 1,241,195 Loans and other fi nancial assets 146,293 190 - 146,483
TOTAL FINANCIAL ASSETS 1,404,811 190 17,323 1,387,678
(1) Investment securities correspond to the subsidiary Europcar International SASU, wholly-owned by Europcar Groupe and include incidental acquisition expenses (€23,793 thousand). They were the subject of straight-line amortization over fi ve years, and had been fully amortized as of December 31, 2015. The securities of Ubeeqo, held in the proportion of 70.6%, were sold for their net carrying amount of €17,323 thousand to Europcar Lab SASU under the terms of a transfer agreement signed on June 30, 2015. (2) Intangible assets are comprised exclusively of the Europcar trademark for the “long-term” car rental activity (over one year).
Since these assets have an indefi nite life, they are not amortized. No impairment was recorded on non-current assets.
NOTE 12 AMOUNTS AND MATURITIES OF RECEIVABLES
Amounts Gross as of From 1 to Receivables Dec. 31, 2015 ≤ 1 year 5 years > 5 years
Receivables from investments 146,378 146,378 - - Loans 105 105 - - Trade and other receivables 18,945 18,945 - - Tax and social security receivables 5,191 5,191 - - Associates 16,436 16,436 - - Deferred expenses 11,180 1,428 9,752 -
TOTAL 198,235 188,483 9,752 -
Amounts as of Amounts as of Aged analysis of receivables Dec. 31, 2015 Dec. 31, 2014
Not past due 13,435 46 Overdue by < 30 days - 1,678 Overdue by > 30 days and < 6 months 19 - Overdue by > 6 months and < 1 year 81 27 Overdue by > 1 year --
TOTAL 13,535 1,751
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NOTE 13 AMOUNTS AND MATURITIES OF PAYABLES
OPERATING LIABILITIES
Amounts Gross as of Liabilities Dec. 31, 2015 ≤ 1 year > 1 year
Trade and other payables 12,042 12,042 - Tax and social security liabilities 13,382 13,382 - Associates 147,595 147,595 Other debt 553 553 - Deferred income ---
TOTAL 173,572 173,572 -
Due
Aged analysis of payables ≥ 46 days and as of Dec. 31, 2015 Not past due Due < 45 days ≤ 60 days > 60 days Total.
Suppliers within the Group 6,464 53 - 6 47 6,517 Suppliers outside the Group 187 85 - 4 81 272
TOTAL 6,651 138 - 10 128 6,789
Due
Aged analysis of payables ≥ 46 days and as of Dec. 31, 2014 Not past due Due < 45 days ≤ 60 days > 60 days Total.
Suppliers within the Group 18 84 - - 84 102 Suppliers outside the Group 226 2,916 1,013 605 1,298 3,142
TOTAL 244 3,000 1,013 605 1,316 3,244
FINANCIAL LIABILITIES
Gross amounts as of Aged analysis of fi nancial liabilities Dec. 31, 2015 ≤ 1 year > 1 year
Other non-convertible bonds 475,000 - 475,000 Accrued interest 1,138 1,138 - Borrowings from credit institutions 4 4 -
TOTAL 476,142 1,142 475,000
Gross amounts as of Aged analysis of fi nancial liabilities Dec. 31, 2014 ≤ 1 year > 1 year
Other non-convertible bonds 724,000 - 724,000 Accrued interest 12,725 12,725 - Borrowings from credit institutions 30 30 -
TOTAL 736,755 12,755 724,000
234 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION COMPANY FINANCIAL STATEMENTS
NOTE 14 INFORMATION ON RELATED COMPANIES
Amounts as of Amounts as of Gross value Dec. 31, 2015 Dec. 31, 2014
ASSETS Ownership 1,241,295 1,258,517 Loans 146,383 146,286 Trade and other receivables 5,322 6,463 03 Other receivables 29,979 12,449 LIABILITIES Trade and other payables 6,517 102 Other debt 11,419 217,972 Income statement Financial expense 6,785 6,363 Financial income 16,850 16,804
The information on related companies corresponds to transactions with subsidiaries included in the scope of consolidation as of December 31, 2015, of which Europcar Groupe is the parent company. Eurazeo SA also subscribed to the €475 million high-yield bond in the amount of €15 million.
DEFERRED EXPENSES AND PREMIUMS ON EARLY REDEMPTION NOTE 15 OF BONDS
As of December 31, 2015, “Deferred expenses” and “Premiums In the year ended December 31, 2014, the balance of bond on early redemption of bonds”, in a total amount of €11,180 redemption fees and redemption premiums related to: thousand, included: a issuance costs incurred on the issuance on a refi nancing costs incurred on the issuance of high-yield notes November 18, 2010 of high-yield notes maturing in 2018 maturing in 2022 in the amount of €475 million conducted in in the amount of €400 million, in a net amount of €5,624 May 2015 in a net amount of €5.6 million; thousand as of 12/31/2014; a the resulting issue premium in a net amount of €3.1 million, a issuance costs incurred on the issuance in June 2012 of high- and; yield notes maturing in 2017 in the amount of €324 million, in a net amount of €25,850 thousand as of 12/31/2014; a costs related to the renegotiation of the €350 million Revolving Credit Facility maturing in fi ve years commencing a the renegotiation of the Revolving Credit Facility in May 2012 in May 2015 in the amount of €2.5 million. in the amount of €1,317 thousand as of 12/31/2014. These expenses are amortized over the term of the loans. These items were fully amortized following their repayment in 2015.
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NOTE 16 ACCRUED EXPENSES
Amounts as of Amounts as of Dec. 31, 2015 Dec. 31, 2014
ASSETS Interest accrued on bonds and other borrowings 1,138 12,678 LOANS AND BORROWINGS 1,138 12,678 LIABILITIES Supplier creditors excluding FNP fl eet 2,331 6,414 Group – Other liabilities – FNP Corporate 2,922 151 TRADE AND OTHER PAYABLES 5,253 6,565 Provisions for wages 6,878 2,289 Provisions – Other personnel expenses 917 Provisions on accrued social security charges 1,182 690 Withholding tax on wages (159) (50) Other accrued expenses 465 - TAX AND SOCIAL SECURITY LIABILITIES 8,375 2,946
TOTAL ACCRUED LIABILITIES 14,766 22,190
NOTE 17 ACCRUED INCOME
Amounts as of Amounts as of Dec. 31, 2015 Dec. 31, 2014
Accrued interest – Loans 2,256 2,164 OTHER FINANCIAL ASSETS 2,256 2,164 Interco – Corporate – FAE 4,955 4,072 Miscellaneous income receivable 368 368 Other receivables – FAE 1288 TRADE AND OTHER RECEIVABLES 5,324 4,728
TOTAL ACCRUED INCOME 7,580 6,892
236 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION COMPANY FINANCIAL STATEMENTS
NOTE 18 SHAREHOLDERS’ EQUITY
18.1 Consolidated statement of changes in equity
Net profi t/ (loss) as at Share Retained Dec. 31, Unappropriated In thousands of euros Share capital premium earnings 2014 earnings Equity 03 Balance at January 1, 2015 446,383 452,978 (336,845) (104,639) - 457,877 Net profi t/(loss) for the year ended 12/31/2015 ----(119,633)(119,633) Net profi t/(loss) for the year ended 12/31/2014 - - (104,639) 104,639 - - Capital increase preferred shares 73 1,437 - - - 1,510 Capital increase by incorporation of premium 99,405 (99,405) - - - - Capital decrease (441,483) - 441,483 - - - Capital increase IPO 38,776 436,224 - - - 475,000 IPO fees - (23,832) - - - (23,832) BALANCE AS AT DECEMBER 31, 2015 143,154 767,402 - - (119,633) 790,922
18.2 Share capital and share premium with a unit value of one euro each, 142,998,496 common shares, 147,434 category B preferred shares, 4,045 category C preferred shares and 4,041 category D preferred shares. The As at December 31, 2015, the recorded share capital of Europcar various corporate actions since January 1, 2015 (in particular Groupe was €143,154,016 and comprised 143,154,016 shares within the scope of ECG’s IPO on euronext Paris) are as follows:
Share capital Issue premium Number Nominal value Date Operation (in €) (in €) of shares (in €)
12/31/2014 446,383,193.50 452,977,636.00 103,810,045 4. 300 2/24/2015 Capital decrease (336,844,642.72) - 103,810,045 1. 055 5/15/2015 Increase in share capital 8,532.21 1,501,568.74 103,818,131 1. 055 6/8/2015 Increase in share capital 98,909,577.00 (98,909,577.00) 103,818,131 2. 008 6/8/2015 Capital decrease (104,638,529.00) - 103,818,131 1. 000 6/26/2015 Increase in share capital 495,845.00 (495,845.00) 495,845 1. 000 6/26/2015 Increase in share capital 38,775,510.00 412,392,604.50 38,775,510 1. 000 11/04/2015 Increase in share capital 8,829.00 (8,829.00) 8,829 1. 000 11/04/2015 Increase in share capital 7,444.00 (7,444.00) 7,444 1. 000 12/15/2015 Increase in share capital 48,257.00 (48,257.00) 48,257 1. 000 12/31/2015 143,154,016.00 767,401,857.24 143,154,016 1. 000
Each Category A common share gives an entitlement to one The terms and conditions of the B Shares lay down the vote. conditions under which their holders may convert them into common shares. As such, pursuant to their terms, the B Shares Class B, C and D shares are preferred shares within the could be converted into common shares upon the occurrence meaning of Article L. 228-11 of the French Commercial Code, of certain events before the date of publication of the 2015 and are devoid of voting rights. results of Eurazeo, notably in the event of the admission to Class B preferred shares (the “B Shares”) were issued in trading of the shares of the Company on a regulated market July 2011 for executives and employees of the Group, some (an “initial public offering”). In such cases, holders of B Shares of whom have since left it, and for Eurazeo. were able to exercise their conversion rights at any time from
EUROPCAR REGISTRATION DOCUMENT 2015 237 03 ACCOUNTING AND FINANCIAL INFORMATION COMPANY FINANCIAL STATEMENTS
the notifi cation of the proposed IPO until the end of a period of The terms and conditions of the C and D preferred shares lay 20 trading days following the date of publication of the 2015 down the conditions under which holders of C and D Shares results of Eurazeo (or, if later, until the end of a period of three may convert them into common shares. Thus, in accordance months following the expiry of lock-up obligations imposed by with their terms, in the event of an IPO, the C Shares may be the underwriters for the IPO). converted into common shares at any time until December 31, 2019; the D Shares may only be converted for a period of one The conversion ratio of B Shares into common shares is year following the IPO, then in an amount capped at half the determined, depending on the exercise period, by taking into outstanding D Shares in the following year, and then in full at account the return on investment of Eurazeo until the IPO the end of a period of two years after the IPO. (including the net proceeds from the sale of any shares by Eurazeo as part of the IPO) plus the value of the stake kept by As from the IPO, the conversion ratio of the C and D Shares Eurazeo on the basis of the IPO price or, depending on the date into common shares is determined, depending on the exercise of exercise of the conversion right, on the basis of an average period, by taking into account a multiple of the value of the market price of the Company’s shares. common shares, which varies in line with changes in the value of the common shares. For the purposes of this calculation, the Holders of B Shares were able to sell part of their shares under value of the common shares is equal to the weighted average the same conditions as those of Eurazeo at the time of the share price over a period of 10 trading days. IPO. The balance of the B Shares was subject to lock-up commitments in respect of the underwriters. Under the agreement between the Group C managers and Eurazeo drawn up in conjunction with this transaction, neither In the absence of the exercise of conversion rights by a C Shares nor D Shares may be transferred (sale to Eurazeo holder of B Shares during the conversion period, the holder’s excepted), and common shares resulting from the conversion B Shares will be converted automatically at the end of the of the C Shares may not be sold during the term of the lock-up conversion period into the same number of common shares commitment imposed by the underwriters, and in any case not of the Company. within a minimum period of one year. Neither may they be sold The C and D Shares were issued by the Management Board of in the amount of the number of shares held by the members the Company on May 15, 2015, on the basis of an authorization of the Management Board and locked up until the end of their granted by the Shareholders’ Meeting of February 24, 2015. term (i.e. the lesser of 10% of shares held before transfer and an amount equal to three times the annual remuneration of the The Class C preferred shares (the “C Shares”) were subscribed common shares on the date in question). by certain of the Group’s executives and employees belonging to the Executive Committee (the “Group C managers”), and the The agreement also lays down the joint rights and duties of the Class D preferred shares (the “D Shares”) were subscribed by Group C managers and the commitment of such managers to Eurazeo, it being stipulated that the D Shares were subject to sell their preferred shares to Eurazeo in certain situations should a promise by Eurazeo to sell them to the Group C managers they leave the Group. and a commitment by the Group C managers to purchase them In the absence of conversion before December 31, 2019, the from Eurazeo upon the signature of a guarantee agreement C and D Shares shall be converted automatically into the same relating to the IPO. The D Shares were transferred by Eurazeo number of common shares of the Company. to the Group C managers following the signing of a guarantee agreement as part of the IPO. Shareholders are entitled to receive dividends as declared periodically. There is no preferential dividend. The Group did The total amount of the investment of the Management Board not distribute any dividends in 2015. members for the subscription of the C Shares and the purchase of the D Shares from Eurazeo was €925,000 (€550,000 for the Chairman of the Management Board), and approximately €1.7 million for all C Share holders.
238 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION COMPANY FINANCIAL STATEMENTS
The following table shows the breakdown of shareholdings before the Company’s IPO:
Number Number Number Number Percentage of common of Class B of Class C of Class D Total of common Percentage shares and preferred preferred preferred number shares and of share Shareholders voting rights shares (4) shares (4) shares (4) of shares voting rights capital
Eurazeo 89,947,696 (1) 150,810 (2) - 4,041 90,102,547 86.97% 86.79% ECIP Europcar Sarl 13,480,307 - - - 13,480,307 13.03% 12.98% Executives and employees - 231,232 (3) 4,045 - 235,277 - 0.23% 03 TOTAL. 103,428,003 382,042 4,045 4,041 103,818,131 100.00% 100.00%
(1) Including 346,607 shares issued by the Company on October 16, 2007 and later transferred to Eurazeo by Eureka Participations SAS in connection with a complete transfer of assets and liabilities. (2) Including 41,025 Class B preferred shares acquired from Philippe Guillemot, held in escrow (order of June 14, 2012 in legal proceedings). (3) Including 122,783 Class B Preferred Shares still held by former employees. (4) The Class B, Class C and Class D Preferred Shares do not have voting rights.
The following table shows the breakdown of Europcar Groupe shareholdings following the Company’s IPO:
Number Number Number Number Percentage of common of Class B of Class C of Class D Total of common Percentage shares and preferred preferred preferred number shares and of share Shareholders voting rights shares shares shares of shares voting rights capital
Eurazeo 61,859,208 - - 4,041 61,863,249 43.29% 43.23% ECIP Europcar Sarl 9,232,494 - - - 9,232,494 6.46% 6.45% Executives and employees, and free fl oat 71,814,775 174,923 4,045 - 71,993,743 50.25% 50,32%
TOTAL. 142,906,477 174,923 4,045 4,041 143,089,486 100.00% 100.00%
As at December 31, 2015, the breakdown of shareholders in the share capital was as follows:
Number Number Number Number Percentage of common of Class B of Class C of Class D Total of common Percentage shares and voting preferred preferred preferred number shares and of share Shareholders rights shares shares shares of shares voting rights capital
Eurazeo 60,544,838 - – – 60,544,838 42.38% 42.29% ECIP Europcar Sarl 9,036,469 - – – 9,036,469 6.33% 6.31% Executives and employees, and fl oating 73,417,189 147,434 4,045 4,041 73,572,709 51.29% 51.39%
TOTAL 142,998,496 147,434 4,045 4,041 143,154,016 100.00% 100.00%
Europcar did not cancel any shares in 2015.
18.3 Treasury shares following resources were listed on the liquidity account: a no Europcar Groupe share Under the liquidity contract entrusted to Rothschild relating to a the shares of the Europcar Groupe on December 31, 2015 the €100,000
In number of shares 6/29/2015 Increase Reduction Dec. 31, 2015
Treasury shares - 437,227 (437,227) -
TOTAL - 437,227 (437,227) -
EUROPCAR REGISTRATION DOCUMENT 2015 239 03 ACCOUNTING AND FINANCIAL INFORMATION COMPANY FINANCIAL STATEMENTS
18.4 Regulated provisions
Provisions reversed during Provisions the period Additions reversed reversed during Amounts as of during during the the period Amounts as of Dec. 31, 2014 the period period (used) (unused) Dec. 31, 2015
Accelerated depreciation (see Note 2.3) 23,793 - - - 23,793
TOTAL REGULATED PROVISIONS 23,793 - - - 23,793
NOTE 19 STATEMENT OF PROVISIONS
Provisions Provisions Additions reversed reversed during Amounts as of during the during the the period Amounts as of Dec. 31, 2014 period period (used) (unused) Dec. 31, 2015
Provisions for litigation 25,000 - (12,500) (12,500) -
PROVISIONS FOR RISKS 25,000 - (12,500) (12,500) -
19.1 Dispute with Enterprise Holdings damages that the Group may be required to pay as a result Inc. of the adverse fi ndings in such decision cannot be reasonably estimated at this stage of the proceeding (the fi nal award of which is not expected to be issued before the second quarter In 2007 the Group acquired from Vanguard the operations of 2016) and, accordingly, no provision in respect of such of National and Alamo in the EMEA region. Vanguard was other potential damages was recorded in the Group’s fi nancial then acquired by Enterprise and the Group and Enterprise statements for the year ended December 31, 2014. entered into a period of commercial cooperation that lasted until August 2013 during which Europcar Groupe continued On April 29, 2015, the Group and Enterprise signed a to operate the National and Alamo brands in EMEA under a settlement agreement which put an end to these proceedings, license agreement with Enterprise. Following disputes between in consideration of the payment of €12.5 million by the Group the parties over the interpretation of certain provisions of the (paid on May 4, 2015) as well as the phased discontinuation license agreement, such agreement and the commercial of use of the e-moving logo by Europcar. alliance agreement were the subject of an arbitration proceeding that resulted in a decision on December 9, 2014 which, after a transitional period agreed by the parties terminated these agreements as of March 2015. 19.2 Procedure of the French anti-trust Furthermore, in January 2015, the High Court of Justice of authorities England issued a judgment ordering Europcar Groupe to cease using the “e-moving” logo (an accessory element to the global Europcar France lodged its statement of defense brief on Europcar brand) in the United Kingdom on the grounds that May 20, 2015. The Company strongly contests the complaints such logo was confusing and infringed upon prior trademarks and the underlying arguments, further to which the ADLC’s of Enterprise Holdings Inc. Europcar Groupe has sought leave case-handler is expected to submit a report to the Competition to appeal this judgment before the English courts. Authority College during the fi rst half of 2016. Europcar France In its financial statements as of and for the year ended will then have two months to respond to this report. The ADLC’s December 31, 2014, Europcar Groupe recorded a provision of decision would then be expected to be issued several months €25 million in relation to the two aforementioned proceedings, later, following a closed hearing before its College. an amount equal to the risk of certain of the damages that it Any decision imposing a fi ne may be appealed. This would not was able reasonably to estimate as of the closing date. in principle suspend the obligation to pay the penalty, unless During a second phase of the arbitration proceeding, the there is an exceptional procedure to suspend the payment arbitrators will determine the compensation for damages pending appeal. An unfavorable decision could be followed by incurred by Enterprise as a result of the facts referred to in the damages claims brought by third parties. arbitration decision of December 9, 2014. The amount of other
240 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION COMPANY FINANCIAL STATEMENTS
Off-balance sheet items
NOTE 20 OFF-BALANCE SHEET COMMITMENTS
20.1 Guarantees The Group has commitments with respect to defined benefit retirement plans. This commitment is assessed by an independent actuary using the projected unit credit Pursuant to Article 4 of regulation 2010-02 of September 2, 2010 03 method. This method requires the use of the specifi c actuarial of the French Accounting Standards Authority, repealed and assumptions set out below. These actuarial valuations are subsequently included in ANC regulation 2014-03, relating to performed at the period end for each plan by estimating the related party transactions and transactions not recorded in the present value of the amount of future benefi ts that employees balance sheet, the fi nancial commitments of the Company, have earned in return for their service in the current and prior given and received, as of December 31, 2015 are as follows: periods and factoring in the effects of future salary increases. Guarantees and sureties given The assumptions are: a As surety for the Senior Revolving Facility Agreement dated discount rate: 1.80%; May 31, 2006 as amended, and the relevant coverage a anticipated long-term infl ation rate: 1.75%; documents (ISDA Master Agreement), the Company has made a the following pledges to its banks: expected return on the fund: 2.00%; a a secured and irrevocable deposit of borrowers; expected rate of wage increases: 3.50%. a pledge of Europcar International SASU shares held by the The 2015 service cost was €15 thousand, and the fi nancial Company; cost €2 thousand. a pledge of the bank accounts of consolidated companies.
Guarantees and sureties received 20.3 Other commitments The Company is the benefi ciary of a vendor warranty granted by the Volkswagen group at the time of its disposal of Europcar Groupe in 2006. This warranty is expired and can no longer be Individual training rights implemented. However, relating to previous implementations, As of December 31, 2015, the number of hours of training the Company may still receive compensation subject to accumulated corresponding to rights acquired under the French the completion of ongoing litigation or pre-litigation and Individual Training Rights scheme (replaced by the Professional in agreement with Volkswagen on the fi nal amount of such Training Account on January 1, 2015) was 594 hours. compensations. Employees used a total of 121 hours in 2015.
20.2 Retirement commitments
Legal and contractual retirement allowances amounted to €167 thousand (€132 thousand in 2014) based on the valuation method prescribed by ANC recommendation no. 2013-02.
EUROPCAR REGISTRATION DOCUMENT 2015 241 03 ACCOUNTING AND FINANCIAL INFORMATION COMPANY FINANCIAL STATEMENTS
Further information
NOTE 21 WORKFORCE
Items as of Dec. 31, 2015
Salaried Personnel seconded personnel to the Company
Managers and similar 12 -
TOTAL 12 -
NOTE 22 FREE SHARE GRANTS
The extraordinary General Meeting of the Company’s a for the year ended December 31, 2017: performance shareholders held on June 8, 2015 authorized the Company’s conditions related to (i) adjusted corporate EBITDA and (ii) Management Board to award free shares in the Company. movements in the Company’s stock price as compared with The Management Board at its meeting held on June 25, 2015 movements in the SBF 120 index. pursuant to said delegation of authority approved the decision The second free share grant plan, “AGA 100“, benefi ts the and the principle of two grants of free shares. Group’s top 100 executives. The shares will vest following a The fi rst plan, “AGA 13 T1“ and “AGA 13 T2“ benefi ts members two-year vesting period, subject to the benefi ciary’s continued of the Group’s Executive Committee. employment with the Company on the date of allocation and subject to the achievement of performance conditions relating The granting of these free shares, following vesting periods of to (i) adjusted corporate EBITDA and (ii) movements in the two to three years, and subject to the benefi ciary’s continued Company’s stock price as compared with movements in the employment with the Company at the end of this period, would SBF 120 index. be conditioned on the achievement of: a with respect to the years ended December 31, 2015 and 2016: performance conditions related to adjusted corporate EBITDA; and
Changes in respect of free shares during 2015 are as follows:
Number of free shares
Currently vesting as at January 1, 2015 Allocated 1,991,844 Vested - Canceled (128,511) Currently vesting as at December 31, 2015 1,863,333
The weighted average fair value of the allocated shares was a €6.53 for the AGA 13 T2 plan; determined on the allocation date by applying the Monte Carlo a €5.91 for the AGA 100 plan. simulation model. The employer contribution at the rate of 30% was calculated Since the dividend rate was 2.20% (only for 2017) and the on a base corresponding to the unit fair value of the shares as borrowing rate was equal to a risk-free rate +1%, the fair values estimated at the grant date. on the allocation date less the dividends discounted during the vesting period and the discounted cost of non-transferability The plans are expected to be satisfi ed by new shares. during the lock-up period are equal to: a €11.73 for the AGA 13 T1 plan;
242 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION STATUTORY AUDITORS’ REPORT
NOTE 23 SUBSIDIARIES AND AFFILIATES
Percentage Gross value Loans, Share capital held of securities advances Revenue
Dividends Net value Net income/ Corporate name Equity received of securities Guarantees (loss) Subsidiaries (over 50%) 03 Europcar International SASU (FRANCE) 110,000 100% 1,217,402 - 98,772 52,638 - 1,217,402 - 78,248 Investments (between 10% and 50%) ------
STATUTORY AUDITORS’ REPORT
Statutory A uditor’s report on the fi nancial statements
This is a free translation into English of the statutory auditors’ report on the fi nancial statements issued in French and it is provided solely for the convenience of English speaking users. The statutory auditors’ report includes information specifi cally required by French law in such reports, whether modifi ed or not. This information is presented below the audit opinion on the fi nancial statements and includes an explanatory paragraph discussing the auditors’ assessments of certain signifi cant accounting and auditing matters. These assessments were considered for the purpose of issuing an audit opinion on the fi nancial statements taken as a whole and not to provide separate assurance on individual account balances, transactions, or disclosures. This report also includes information relating to the specifi c verifi cation of information given in the management report and in the documents addressed to shareholders. This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France. For the year ended 31 December 2015 To the Shareholders, In compliance with the assignment entrusted to us by your Annual General Meeting, we hereby report to you, for the year ended 31 December 2015, on: a the audit of the accompanying consolidated fi nancial statements of Europcar Groupe S.A.; a the justifi cation of our assessments; a the specifi c verifi cations required by law. These fi nancial statements have been approved by the Management Board. Our role is to express an opinion on these fi nancial statements based on our audit.
I - Opinion on the fi nancial statements We conducted our audit in accordance with professional standards applicable in France; those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit involves performing procedures, using sample techniques or other methods of selection, to obtain audit evidence about the amounts and disclosures in the fi nancial statements. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made, as well as the overall presentation of the fi nancial statements. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
EUROPCAR REGISTRATION DOCUMENT 2015 243 03 ACCOUNTING AND FINANCIAL INFORMATION STATUTORY AUDITORS’ REPORT
In our opinion, the fi nancial statements give a true and fair view of the assets and liabilities and of the fi nancial position of the Group as at 31 December 2015 and of the results of its operations for the year then ended in accordance with French accounting principles.
II - Justifi cation of our assessments In accordance with the requirements of article L.823-9 of the French Commercial Code (Code de Commerce) relating to the justifi cation of our assessments, we bring to your attention the following matters: a m easurement of investments in subsidiaries: the Company assesses annually the recoverable value of its investments in subsidiaries in accordance with the methods set out in section 2.3 – “Financial assets” note 2 – “Signifi cant accounting policies” to the fi nancial statements. We have reviewed the methods used for the aforementioned assessment and, based on the information available at the time of our audit, we ensured the estimates made by the Company at 31 December 2015 are appropriate. a pr ovisions: as specifi ed in note 2 - “Signifi cant accounting policies” section 2.6 - “Provisions” to the fi nancial statements, the Group records provisions to cover risks. The nature of the provisions recorded in the fi nancial statements under Provisions is described in the note 19 - “Statement of provisions” to the fi nancial statements. Based on the information available at the time of our audit, we ensured that the information given in the notes to the fi nancial statements is appropriate; These assessments were made as part of our audit of the fi nancial statements, taken as a whole, and therefore contributed to the opinion we formed which is expressed in the fi rst part of this report.
III - Specifi c verifi cations We have also performed, in accordance with professional standards applicable in France, the specifi c verifi cations required by French law. We have no matters to report as to the fair presentation and the consistency with the fi nancial statements of the information given in the management report of the Management Board, and in the documents addressed to the shareholders with respect to the fi nancial position and the fi nancial statements. Concerning the information given in accordance with the requirements of article L.225-102-1 of the French Commercial Code (code de commerce) relating to remunerations and benefi ts received by the directors and any other commitments made in their favour, we have verifi ed its consistency with the fi nancial statements, or with the underlying information used to prepare these fi nancial statements and, where applicable, with the information obtained by your company from companies controlling your company or controlled by it. Based on this work, we attest the accuracy and fair presentation of this information. In accordance with French law, we have verifi ed that the required information concerning the identity of shareholders and holders of the voting rights has been properly disclosed in the management report.
Courbevoie and Neuilly-sur-Seine, on 25 February 2016 The S tatutory Auditors
PricewaterhouseCoopers Audit Mazars François Jaumain Isabelle Massa
244 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION OUTLOOK FOR FINANCIAL YEAR 2016
3.7 OUTLOOK FOR FINANCIAL YEAR 2016
3.7.1 Group forecasts for the year ending December 31, 2016
Forecasts in terms of revenue and Adjusted Corporate EBITDA In line with its commitments made at the time of the initial as well as distributions presented below are founded on data, public offering, the Group foresees, for the year ended on 03 assumptions, and estimates considered as reasonable by December 31, 2016, that it will continue to generate profi table Group Management. They are likely to change or be modifi ed growth, due to its Fast Lane transformation plan: due to uncertainties linked, for example, to the economic, a consolidated revenues increasing between 3% and 5% at fi nancial, competitive and/or regulatory environment, and due constant scope and exchange rates (organic growth) (1), to other factors that are unforeseeable as well as by certain compared to revenues of €2,141.9 million in 2015; transactions, if any. In addition, the materialization of certain risks described in Chapter 2 “Risk factors” of this Registration a adjusted Corporate EBITDA greater than €275 million, Document could have an impact on the Group’s activities and compared to €251 million in 2015. its ability to achieve these forecasts. No assurance can be given The Company also has an objective to distribute, subject to that the Group’s actual results will be in line with the forecasts shareholder approval, annual dividends starting in 2017 in an below. Finally, the Group considers that Adjusted Corporate amount equal to at least 30% of its net profi t of the prior fi scal EBITDA, although a non-GAAP measure, is a relevant indicator year. of the Group’s operating and fi nancial performance. The Company’s dividend payment policy (see Section 6.7.1 The Group’s forecasts are based on its consolidated fi nancial “Dividend Policy”) will take into account, among other factors, statements as of and for the year ended December 31, 2015. its results of operations, fi nancial position and the achievement These forecasts are based on the following main assumptions: of its objectives as set out in this Chapter, as well as restrictions a no material changes in the accounting principles or scope on dividend payments applicable under the terms of its debt of consolidation as compared to the Group’s consolidated instruments. financial statements as of and for the year ended December 31, 2015; a an estimated annual average GBP/Euro exchange rate of 1.43 and Australian dollar/Euro exchange rate of 0.68.
(1) Taking into account the current price of gas.
EUROPCAR REGISTRATION DOCUMENT 2015 245 03 ACCOUNTING AND FINANCIAL INFORMATION OUTLOOK FOR FINANCIAL YEAR 2016
3.7 .2 Statutory auditors’ report on the profi t forecast for the year ending December 31, 2016
PricewaterhouseCoopers Audit MAZARS 63 rue de Villiers 61 rue Henri Regnault 92208 Neuilly sur Seine 92400 Courbevoie – La Défense
To the Chairman of the Management Board EUROPCAR GROUPE 2 rue René Caudron Bâtiment Op 78960 Voisins le Bretonneux France
Sir, In our capacity as statutory auditors of your company and in accordance with Commission Regulation (EC) no809/2004, we hereby report to you on the profi t forecast (“Adjusted Corporate EBITDA”) of Europcar Groupe S.A. set out in section 3.7 - chapter 3 of the 2015 Registration Document (Document de référence 2015). It is your responsibility to compile the profi t forecast, together with the material assumptions upon which it is based, in accordance with the requirements of Commission Regulation (EC) n°809/2004 and ESMA’s recommendations on profi t forecasts. It is our responsibility to express an opinion, based on our work, in accordance with Annex I, item 13.2 of Commission Regulation (EC) n°809/2004, as to the proper compilation of this forecast. We performed the work that we deemed necessary according to the professional guidance issued by the French institute of statutory auditors (Compagnie nationale des commissaires aux comptes –CNCC) for this type of engagements. Our work included an assessment of the procedures undertaken by management to compile the profi t forecast as well as the implementation of procedures to ensure that the accounting policies used are consistent with the policies applied by Europcar Groupe S.A. for the preparation of the historical fi nancial information. Our work also included gathering information and explanations that we deemed necessary in order to obtain reasonable assurance that the profi t forecast has been properly compiled on the basis stated. Since profi t forecasts, by nature, are uncertain and may differ signifi cantly from actual results, we do not express an opinion as to whether the actual results reported will correspond to those shown in the profi t forecast. In our opinion: a the profi t forecast has been properly compiled on the basis stated; and a the basis of accounting used for the profi t forecasts is consistent with the accounting policies of Europcar Groupe S.A. applied in 2015. This report has been issued solely for the purpose of registering the Registration Document (Document de référence) with the French fi nancial markets authority (Autorité des marches financiers – AMF).
Courbevoie and Neuilly-sur-Seine, April 8, 2016 The S tatutory A uditors
Mazars PricewaterhouseCoopers Audit Isabelle Massa François Jaumain
246 EUROPCAR REGISTRATION DOCUMENT 2015 ACCOUNTING AND FINANCIAL INFORMATION INFORMATION ON MID-TERM TRENDS AND OBJECTIVES
3.8 INFORMATION ON MID-TERM TRENDS AND OBJECTIVES
3.8.1 Recent events
A detailed description of the Group’s results for the year ended December 31, 2015 is provided in Section 3.1 “Analysis of Group 03 results ” of this Registration Document.
3.8.2 Objectives for the year ending December 31, 2017
The objectives of the Group described below are not forecasts Corporate EBITDA margin of 11.7% in 2015 (see the Section or estimates of Group profi t, but refl ect the Group’s strategic “Key fi gures and signifi cant events of the year” on page 7 of orientations and action plan, as described in Section 1.5 this Registration Document.) “Strategy”. Lastly, the Group aims to maintain its corporate leverage ratio The Group’s management believes the data, assumptions (defi ned as Corporate Net Debt to Adjusted Corporate EBITDA, and estimates upon which the Group has based these see the Section “Key fi gures and signifi cant events of the year” objectives to be reasonable. They are based, in particular, on on page 7 of this Registration Document) at a level of less the Group’s expectations regarding the economic climate, than 1x by the end of fi scal year 2017 (at constant scope of market developments and the anticipated impact of its current consolidation compared to December 31, 2015). This objective “Fast Lane” program. They are likely to evolve or change due is based on the following assumptions: to uncertainties related notably to the economic, fi nancial, a improvement in the below-mentioned profi tability; competitive, and/or regulatory environment, other factors of which the Group is not aware, or due to the occurrence of a objective to distribute, subject to shareholder approval, certain operations. Moreover, the occurrence of certain risks annual dividends starting in 2017 in an amount equal to at described in Chapter 2 “Risk Factors” of this Registration least 30% of its net profi t of the prior fi scal year; Document could affect the business of the Group and its a increase in annual capital expenditure (excluding fleet ability to implement the objectives described below. The Group and acquisition of subsidiaries) at a level of approximately provides no assurance that the objectives described in this €40 million in 2017, relating mainly to information technology; Section will be met and does not undertake to publish updates to this information. Finally, the Group considers that Adjusted a up to €80 million in financial investments (acquisitions, Corporate EBITDA, and the associated margin, non-GAAP partnerships) by the end of 2017 for strategic initiatives, measures, are relevant indicators of the Group’s operating and including up to €25 million for Lab-related activities; fi nancial performance. a the possible payment of the amount set aside in the 2015 The Group confirms the 2017 objectives as announced at financial statements to cover the proceedings initiated the time of the Company’s initial public offering. The Group by the French Competition Authority (see Note 32 to the thus plans to continue implementation of the Fast Lane consolidated financial statements for the year ended transformation program. December 31, 2015 and Section 2.5 “Administrative, Legal and Arbitration Proceedings”). The Group targets organic revenue growth (at constant exchange rates and scope) of between 3% and 5% in 2017. The Group believes that reducing its leverage ratio (at current scope) could also enable it to benefi t from organic growth The Group aims to achieve an Adjusted Corporate EBITDA opportunities that would create value. margin in excess of 13% by 2017, compared with an Adjusted
EUROPCAR REGISTRATION DOCUMENT 2015 247 03 ACCOUNTING AND FINANCIAL INFORMATION SIGNIFICANT CHANGE IN THE FINANCIAL OR BUSINESS POSITION
3.9 SIGNIFICANT CHANGE IN THE FINANCIAL OR BUSINESS POSITION
To the Company’s knowledge, there has been no signifi cant change in the Group’s or Company’s fi nancial or business position since December 31, 2015 other than as described in this document.
3.10 COMMENTS FROM THE SUPERVISORY BOARD REGARDING THE MANAGEMENT BOARD’S REPORT AND THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2015
Europcar Groupe A public limited company with Management Board and Supervisory Board with share capital of €143,154,016 Registered offi ce: 2 rue René Caudron - Bâtiment OP 78960 Voisins-le-Bretonneux Versailles Trade and Companies Register no. 489 099 903 Comments of the Supervisory Board presented to the Combined General Meeting of May 10, 2016 Dear Shareholders, In consideration of Article L. 225-68 of the French Commercial Code, the Supervisory Board has no comment to make concerning the report of the Management Board or the fi nancial statements for the year ended December 31, 2015 and asks the General Meeting to approve all of the resolutions that are proposed by the Management Board.
248 EUROPCAR REGISTRATION DOCUMENT 2015 04 SOCIETAL, SOCIAL AND ENVIRONMENTAL INFORMATION
4.1 CSR ORGANIZATIONAL OVERVIEW 250 4.4 CONCORDANCE TABLES 265 4.1.1 CSR history and current developments 250 4.1.2 CSR Reporting Organization and Governance 251 4.5 METHODOLOGY NOTE 267
4.2 EUROPCAR, PROMOTING 4.6 ILO REPORT 270 SUSTAINABLE, SHARED MOBILITY 251 1. Attestation regarding the completeness 4.2.1 Mobility for all our customers and employees 251 of CSR Information 270 4.2.2 Our fl eet, driving sustainable, shared mobility 253 2. Conclusion on the fairness of CSR Information 271
4.3 EUROPCAR, RENTING CARS RESPONSIBLY 255 4.3.1 A business generating local jobs 255 4.3.2 An environmental footprint distributed through the value chain 261 4.3.3 Local suppliers and sub-contractors 263
EUROPCAR REGISTRATION DOCUMENT 2015 249 04 SOCIETAL, SOCIAL AND ENVIRONMENTAL INFORMATION CSR ORGANIZATIONAL OVERVIEW
4.1 CSR ORGANIZATIONAL OVERVIEW
4.1.1 CSR history and current developments
Europcar’s CSR initiative was strengthened in 2005, when the non-fi nancial information publication obligations of its historical Group adhered to the principles of the United Nations Global reference shareholder, Eurazeo. Compact. From 2005 through 2012, the Group participated Following the Company’s IPO, in 2015 this organization was in the Learner Platform, before achieving the Global Compact reviewed with the appointment of a Group CSR Director tasked Active Level in 2013. This means that the Group is required to with defi ning and overseeing the Group’s CSR strategy. This comply with the United Nations Global Compact’s disclosure appointment enables the Group to meet its obligation to collect and monitoring requirements, including a statement by the and publish social and environmental information in accordance Company’s CEO expressing the renewal of its support for the with Article 225 of the Act No. 2010-788, of July 12, 2010, the Global Compact, a description of the practical steps taken so-called “Grenelle 2 Law” (CSR Reporting). by the business and a measurement of the results achieved. 2015 was thus marked by an effort to consolidate the Group’s The Group also launched measures to increase environmental CSR governance, the establishment of a new reference awareness at all of its entities and to establish a dedicated framework for CSR Reporting to ensure both compliance and environmental management team. This voluntary internal operational supervision, and the launch of actions in tune with initiative led to the drafting of an environmental charter, certifi ed the Group’s renewed commitment to CSR. in June 2008 by Bureau Veritas, an independent external organization. The charter has been updated several times since In 2015, Europcar carried out work to integrate a CSR and is audited by Bureau Veritas each year. The environmental dimension into its purchasing policy. The new policy, which charter sets forth the Group’s objectives in eight areas: is being deployed in the Corporate Countries in the fi rst half water, energy, air pollution, biodiversity, waste management, of 2016, is based on the results of a comprehensive CSR environmental awareness and responsibility, risk prevention questionnaire evaluating suppliers on their level of maturity and and management, and the principles and rules applicable to their CSR risks, and provides for the addition of CSR clauses environmental matters. to calls for tender and supplier contracts. In compliance with one of the charter’s requirement, in 2009, The Group also bolstered its identifi cation and fraud prevention all of the Group’s European operating subsidiaries obtained processes across all its activities. The fi rst stage of the Fraud ISO 14001 (environmental management) certification. The Prevention Plan, covering station fraud, was implemented in certifi cation is audited by Bureau Veritas each year and must the fi rst half of 2015 (1) . be renewed every three years. The Group’s CSR initiative has In 2016, the Group plans to establish a more detailed CSR been built on the foundations laid in 2009, in particular with the strategy with action plans for the coming years. appointment of persons tasked with managing and monitoring environmental questions for each of the Group’s operating subsidiaries and at the Europcar International level. In 2012, the Group published its fi rst social and environmental report based on the ISO 26000 recommendations, and put into a place an internal organization to ensure it could meet the
(1) See the paragraph “Suppliers and local sub-contractors” at the end of this section.
250 EUROPCAR REGISTRATION DOCUMENT 2015 SOCIETAL, SOCIAL AND ENVIRONMENTAL INFORMATION EUROPCAR, PROMOTING SUSTAINABLE, SHARED MOBILITY
4.1.2 CSR Reporting Organization and Governance
To meet the requirements of the Grenelle 2 Law and to speed a implementation of an internal control process to ensure up the defi nition of a value-generating CSR strategy, in 2015 the consistency in CSR Reporting; Group consolidated its CSR governance structure as follows: a appointment of an Independent Third Party Organization to a appointment of a Group CSR Director in charge of CSR verify the existence and accuracy of CSR Reporting data in Reporting and of defi ning and implementing the Group’s accordance with Decree No. 2012-557 of April 24, 2012. CSR strategy; Dedicated software (SI-RSE) was used to collect non-fi nancial a appointment of CSR representatives in the Holdings and information, with specifi c settings to incorporate data from Corporate Countries, responsible for forwarding non-fi nancial across the Group. The CSR Reporting scope covers the information and implementation of the Group CSR strategy; Holdings (Europcar International, Europcar Groupe and the Shared Service Center) and Corporate Countries. a identification of around one hundred CSR Reporting 04 contributors across the Group’s subsidiaries and For more information on the scope and structure of non- departments; fi nancial information collection and consolidation, please refer to the methodology note at the end of this Chapter. a drafting of a CSR Reporting protocol detailing all the relevant procedures and methodologies, distributed to all CSR Reporting contributors;
4.2 EUROPCAR, PROMOTING SUSTAINABLE, SHARED MOBILITY
4.2.1 Mobility for all our customers and employees
Innovation that supports shared, sustainable dialog, transparency and security systems concerning its mobility stakeholders, i.e. its “customers”, placing them at the heart of its action. Europcar wishes to contribute to society by playing a role in developing tomorrow’s mobility for all. With over 65 years of experience on the vehicle rental market, the Group is 4.2.1.1 Quality and accessible offering continuously driving innovation to provide its customers with With a view to continuously improving the quality of its services, an increasingly extensive shared mobility offering. the Group tracks customer satisfaction levels based on its In particular, with Europcar Lab the Group develops new Promoter Score program in place since 2011. The program mobility offers and solutions which (1), focusing on usage rather gathers feedback from customers as to whether they would than possession, make it possible to reduce the environmental recommend Europcar to friends and family. The Group’s footprint of society as a whole. continued efforts to improve the customer experience were refl ected by a net increase in the Group’s Promoter Score from In addition to the mobility offering per se and its availability to 2011 to 2014: the widest clientele possible, the Group has also established
2011 2012 2013 2014
Promoter Score 58% 66% 72% 79%
(1) See Europcar Lab / Mobility solutions and Europcar® Service Offerings in Section 1.6.2 “Europcar Lab/Mobility solutions ”.
EUROPCAR REGISTRATION DOCUMENT 2015 251 04 SOCIETAL, SOCIAL AND ENVIRONMENTAL INFORMATION EUROPCAR, PROMOTING SUSTAINABLE, SHARED MOBILITY
Since 2015, Europcar has changed its measurement of Online assessment and feedback services to improve customer satisfaction with the adoption of a more potent transparency, customer interaction and satisfaction levels have performance indicator, the “Net Promoter Score” (NPS), i.e. the also been available since 2014. difference between the brand’s “promoters” and “detractors.” Finally, the Group has a process monitoring tool to manage Detailed analysis of the NPS has identifi ed ways to improve the customer requests and complaints and ensure they are score and monitor the performance of actions undertaken. The dealt with in the best possible way. This system centralizes method used to gather customer reviews has been harmonized, all requests, classified by type (duplicate invoice, invoice and the Group’s NPS score was 44.9 in 2015. explanation, payment means and so on), and monitors the Part of station employees’ variable compensation (as well as time required to process and solve customer requests. that of all Group employees) is linked to their Net Promoter In addition to offering a wide range of quality services, the Score. Station scores are reviewed weekly and action plans Group also aims to ensure its offers are accessible to the widest implemented based on such reviews. possible customer base, by providing modern mobility solutions to all users, including those with a specifi c budget or other requirements.
Affected customers Details of offering
In France the Student Box offer gives students discounted rates for both utility and leisure vehicle rentals, Students to facilitate their frequent relocations, in spite of the young drivers’ surcharge. In Italy, the “Family” offering was expanded with the addition of a customized package (insurance, child car seat, Families additional driver, GPS, etc.). In Spain, a dedicated package has been developed for female customers that includes the guaranteed availability Women of the reserved model and comprehensive protection, as well as the gift of an accessory. Bicycle/motorbike riders The Group now rents motorbikes and bicycles at many of its stations. In Germany and in the United Kingdom, vehicles fi tted with hand controls are available for people with reduced People with reduced mobility mobility. Since 2013, the Group offers low-cost rental in most European countries under its attractively priced InterRent Cost-sensitive customers brand. This offer allows customers on a low budget to fi nd suitable mobility solutions.
The Group also pursues sustainable mobility solutions internally, In practical terms, one of the key measures implemented in particular with the launch of its subsidiary Ubeeqo’s services involved amending the general rental terms and conditions at its head offi ce. This initiative, known as Bettercar Sharing, to ensure greater transparency and understanding by the provides employees without a company vehicle with courtesy customers. cars they can use for personal and work-related trips at the The insurance protection offering, a vital part of Europcar’s Europcar International and Europcar France head offi ces. customer safety policy, has also been reviewed, and made Europcar International and Europcar France has also clearer and more transparent, as well as more consistent implemented a solution in partnership with Wayz-Up, allowing between countries where the Group is active. It is now based their employees at the Voisins-le-Bretonneux sites near Paris on three simple packs (basic, medium and premium), offering to car pool for their commute. increasing protection levels and decreasing damage waiver amounts. 4.2.1.2 Transparent offering Lastly, of particular relevance among these transparency boosting measures is an email sent to customers summarizing In 2015, the Group committed to a set of 18 measures the key elements of their rental, as well as the applicable terms promoting the transparency of offers made to customers in and conditions after the booking is completed (which are also the European Union. The Group wishes to promote these available at the stations and on the website) or the inclusion of measures, as it believes they can contribute to improving its the young driver surcharge at the start of the booking process, customer relations, from the booking stage to when the vehicle where applicable. is returned by the customer to the station and including the sale of insurance protection.
252 EUROPCAR REGISTRATION DOCUMENT 2015 SOCIETAL, SOCIAL AND ENVIRONMENTAL INFORMATION EUROPCAR, PROMOTING SUSTAINABLE, SHARED MOBILITY
4.2.1.3 Customer safety and protection The insurance offering, revamped in 2015 to provide greater clarity, covers all the risks customers may be exposed to and Customer safety and protection are a Group priority: from offers protection up to full liability waivers. All damage types vehicle inspection and maintenance in accordance with written can be covered: from liability insurance, which is included and procedures displayed at the preparation sites, the availability mandatory with every rental, to theft, and from vehicle damage of customized insurance protection to meet a range of diverse (including glass breakage or punctured tires) to the loss of customer needs, to customer support as part of roadside personal effects in the event of an accident. assistance. All vehicles rented by Europcar are covered by MTPL (Motor In addition to the main guarantee of safety, namely the average Third Party Liability) policies issued by recognized insurance age of fl eet vehicles (8.9 months across the entire fl eet of the companies in their markets. Group), Europcar arranges for each vehicle to be inspected and cleaned at the end of every rental and to be maintained Twenty-four hour roadside assistance is available to all according to the manufacturer’s recommendations. Mandatory customers in the event of any issues during the rental period checks before each departure include dashboard lights (battery, (accidents, technical faults, lost keys, etc.). The best solution to temperature, brake pads, etc.), levels (gasoline, tire pressure, ensure the customer’s mobility will be identifi ed based on the 04 oil, wiper fl uid, etc.), rearview mirrors, lights, tires, windshield issue. In general, response time, included in the service level and body. guaranteed by the assistance providers, is around one hour. Europcar must follow the maintenance specifi cations of the Lastly, the Group offers its customers the option to access a respective manufacturers in order to maintain the warranty and complete range of equipment that provides a greater level of repurchase commitment on the vehicle. Europcar operates safety: winter tires or chains, driver assistance systems (parking vehicle maintenance centers at certain rental stations in the assist, cruise control, etc.). Corporate Countries, providing routine maintenance and light repair facilities for its fl eet. Major repairs, in particular if related to collision damage, are generally performed by independent contractors.
4.2.2 Our fl eet, driving sustainable, shared mobility
Fleet description and utilization sourcing. In 2015, approximately 30% of its fl eet was acquired from Volkswagen, 14% from General Motors, 13% from Fiat, The functionality economy, which prioritizes the sale of an 11% from Renault, 9% from Peugeot Citroen, 7% from Daimler, integrated product-service solution (usage) rather than an 6% from Hyundai, 3% from Ford and the remaining 7% from individual product or service, is at the core of Europcar’s model. other manufacturers. Thanks to the fl eet made available by the Group, customers can focus on using rather than owning a vehicle. This approach is Across all cars resold in 2015, the Group sold approximately increasingly in line with the expectations of society. This shared 7 billion mobility kilometers to its customers, of which mobility model is benefi cial to the environment, in particular approximately 60% on Mini, Economy or Compact models. because it leads to far higher utilization rates compared with the use of individual cars. Fleet delivery The benefi ts of the Group’s vehicle purchasing model are even greater, given the average holding period of 8.9 months across To meet customer demand and ensure there are always the Group at December 31, 2015, which translates into a very vehicles available at the right time and in the right place, the young fl eet and consequently the Group’s ability to offer its Group must manage its fl eet across the different rental stations. customers vehicles that meet the most recent standards in Whenever possible, the Group chooses pooled delivery means terms of average consumption, greenhouse gas emissions (trucks, trains or even ships) and also relies on drivers who and safety. move the cars from one station to the other or to the customer’s home, where this service is available. The Group optimizes During the year ended December 31, 2015, the Group took these trips in both fi nancial and distance traveled terms, thereby delivery of approximately 278,500 vehicles and operated an minimizing their environmental footprint. In 2015, the distance average rental fleet of 205,353 leisure and utility vehicles. traveled for vehicle delivery was just 2% of the distance traveled To meet its customers’ needs, the Group has diversifi ed its by rented vehicles.
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Lastly, in certain countries, the Group offers a “€1 return” option while customers can travel paying only for fuel. In 2015, either enabling customers to bring back one-way rentals to the point directly or through external partners in charge of distributing of origin. This enables vehicle retrieval free of charge and avoids offers, over 1.6 million kilometers were travelled under the “€1
the CO2 emissions associated with alternative vehicle recovery, return” option across the Group.
CAR DELIVERY ASSISTED BY BICYCLE In 2015, in eight locations across the country, Germany pilot-tested delivery or collection of reserved vehicles to the home by an employee using a bicycle. The concept is very simple: It enables a reserved vehicle to be delivered or picked up using only one employee, who drives the reserved vehicle on delivery or return, and travels in the opposite direction using a folding bicycle stored in the vehicle’s trunk. The environmental gain is signifi cant since it saves one round trip by car for each delivery or collection (i.e. the accompanying car driven by a second driver in order to bring or take back the employee driving the delivered car). This is an example of value-creating environmental innovation since it also enables the Group to benefi t from the related fi nancial savings.
Overview of greenhouse gas emissions offi ces and stations within the CSR Reporting scope (electricity and gas). Over and above the internal consumption of fuel, The table below shows the Group’s greenhouse gas emissions the Group’s internal energy consumption is thus relatively for scopes 1 and 2, corresponding to direct (scope 1) and low, mostly originating in the remaining part of the value chain indirect (scope 2) emissions from energy consumption. (scope 3): outsourcing of car washing and repairs, upstream The table shows the emissions from internal fuel consumption carbon associated with car manufacturing, customers’ across the Group as well as energy consumption of head combustion of oil and fuel, fl eet delivery, etc.
In t CO2 eq. 2015 Coverage rate
Scope 1 20,105 ✔ 95 – 99% Scope 2 6,359 ✔ 95% Total scope 1 & 2 26,464 ✔ 95 – 99%
Thanks to its purchasing policy, based on a short holding vehicles for their use, all other things being equal, the mobility period, the Group can always rely on the best possible fl eet, services it provides translate into a way to reduce emissions. as it purchases its vehicles new. Consequently, the average Given that the average age of vehicles in France is 8/9 years, ✔ (1) emissions in grams of CO2 per kilometer (manufacturers’ according to the CCFA survey , we can estimate that the fi gures) of the Group’s fl eet have been decreasing year after average emissions of current vehicles is in line with those of
year: new cars sold in 2007, i.e. approximately 150g CO2/km.
160 In view of the number of kilometers traveled on the Group’s 151 European fl eet (excluding commercial vehicles), we estimate
146 the emissions avoided on this scope at roughly 176,000 tCO2e. 140 140 This means that emissions avoided on this scope represent 134 roughly 20% of the emissions generated by customers on all 127 7 billion kilometers of mobility provided by the Group. 124 120 119 118 In addition to the intrinsic benefi ts of the Group’s model (young fl eet and high utilization rates), Europcar spares no effort to 100 reduce its own and its customers’ carbon footprint: Nov-08 Sept-09 Aug-10 Dec-11 Dec-12 Nov-13 Dec-14 Jan-16 a a website (2 ) dedicated to environmental awareness has been developed and shows customers the processes put This chart shows the emissions of the European scope in place by the Group to reduce its footprint, as well as its excluding commercial vehicles. “green” vehicle offering (hybrid or electric), accessible to all Although it is true that Europcar carries a part of the customers, and lastly offers nine “green tips” for reducing environmental footprint of its customers by holding a fl eet of fuel consumption on the road;
(1) Committee of French Automotive Manufacturers: The French Automotive Industry, Analysis and Statistics 2015. (2 ) http://microsite.europcar.com/green/
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a every year the Group increases the proportion of hybrid and from the fi rst screen and are also included in the customer’s electric vehicles in its fl eet, based on customer demand and invoice; market maturity in terms of both offering and infrastructure. a to help its Corporate customers prepare their carbon In 2015, Europcar hybrid and electric vehicles traveled over emissions statements, the Group has been providing the 11 million kilometers; “Carbon Emissions Report” since 2011. At the customer’s a to raise awareness and to help customers choose, the CO2 request, Europcar provides information for calculating and emissions of each vehicle (manufacturers’ fi gures) are posted documenting the carbon emissions generated by vehicles on the Group’s website during the booking process starting rented by their employees.
WEFOREST Since 2013, the Group has also taken measures to limit the effects of climate change and increase biodiversity through its collaboration with WeForest. 04
Through this program, the Group gives its customers the chance to offset a portion of their CO2 emissions when they rent Europcar vehicles. WeForest is an international non-profi t organization working against climate change. The funds collected are used to fi nance reforestation and sustainable energy projects. The inclusion of such a carbon-offset program when reserving a vehicle promotes the involvement and awareness of Europcar’s customers in climate change issues. But Europcar also works alongside its customers, since on each reservation, the customer is asked to give 50 euro cents, which are then matched by the Group, enabling 2 trees to be planted in the Burkina Faso desert.
4.3 EUROPCAR, RENTING CARS RESPONSIBLY
4.3.1 A business generating local jobs
4.3.1.1 Group operations Within the Subsidiaries in other countries, with 1034 rental stations owned by the Group and approximately 900 stations Europcar offers vehicles to its Leisure and Corporate customers operated by agents and franchisees that had revenue in 2015, from stations located at airports, railway terminals, hotels, the Group has operations in a diverse range of geographical resorts, office buildings, and other urban and suburban locations. The Group provides a signifi cant contribution to locations. local dynamics wherever it is present, be it in tourist areas Outside airports, the car rental market is very fragmented, with and resorts through its Leisure and Vacation customers, or in numerous smaller vehicle rental businesses, each with limited business and industrial areas through its Business customers. market share and geographical distribution.
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In particular, with two-thirds of the staff working in the station networks and just one-third in the head offi ces, the Group is an important local employer:
HEAD OFFICE/RENTAL STATION WORKFORCE DISTRIBUTION** (1)
Workforce at 12/31 2015
Headcount Head offi ces 2,466 38% Headcount Stations 4,094 62%
The staff of the Holdings and the Shared Services Center have 4.3.1.2 A dynamic approach to workforce been included in the Head offi ces headcount. management
The business is, by nature, very seasonal, with strong fl uctuations during the year but also during the week. Consequently, the Group must manage its workforce dynamically to meet the needs of its Leisure and Corporate customers.
The geographical breakdown of the workforce is a refl ection of the Group’s international operations and its business levels within each country.
WORKFORCE DISTRIBUTION BY COUNTRY**
Workforce at 12/31 2015
TOTAL 6,560 ✔ 100% Europcar International and Europcar Group 316 5% Shared Services Center 280 4% Germany 1,562 24% France 1,227 19% United Kingdom 1,156 17% Spain 642 10% Australia 473 7% Italy 438 7% Portugal 292 4% Belgium 116 2% New Zealand 58 1%
WORKFORCE DISTRIBUTION BY AGE*
Workforce at 12/31 2015
Under 25 282 5% From 25 year to 35 years 1,915 33% From 36 year to 45 years 1,931 33% From 46 year to 55 years 1,258 21% More than 55 years 497 8%
Among permanent employees, approximately two-thirds of the workforce are aged between 25 and 45 years, 60% have more than 5 years’ service and over 40% more than 10 years’ service.
(1) Throughout this section, an asterisk (*) signifi es that the data relate to permanent headcount only; two asterisks (**) signify that the data relate to permanent and fi xed-term headcount 256 EUROPCAR REGISTRATION DOCUMENT 2015 SOCIETAL, SOCIAL AND ENVIRONMENTAL INFORMATION EUROPCAR, RENTING CARS RESPONSIBLY
WORKFORCE DISTRIBUTION MANAGERS/NON-MANAGERS*
Workforce at 12/31 2015
Managers 1,512 26% Non-managers 4,371 74%
Managers, defi ned as having responsibility for a team, a budget or a function, account for approximately one-quarter of the Group’s workforce, and are divided between headquarters in Corporate Countries and stations.
HIRINGS AND DEPARTURES OVER THE YEAR**
2015
Hirings 2,048 ✔ Number of voluntary departures 893 ✔ 41% Number of departures initiated by employer 498 ✔ 23% 04 Number of departures for other reasons (contract ended, retirement) 784 ✔ 36%
WORKING TIME ORGANIZATION even daily peaks, the Group uses different types of contracts depending on the country and in compliance with local To meet the mobility needs of its customer base, the Company regulations, from close-ended contracts of a few weeks or requires a dynamic approach to its workforce, with the ability months (for fi xed-term staff) to weekly or hourly based contracts to adjust its Human Resources to the level of business. Due (including seasonal staff). to the seasonal nature of the business, with yearly, weekly and
The Group thus adjusts its staff to the business, as shown by the graphs below: DIFFERENCE FROM THE ANNUAL AVERAGE OF THE FLEET DIFFERENCE FROM THE ANNUAL AVERAGE FIXED-TERM AND SEASONAL HEADCOUNT
60,000 292
40,000 37,114 250 114 20,000 4,546 50 0
-20,000 -8,995 -150 -96
-40,000 -32,666
Q1 Q2 Q3 Q4 -350 -309 Q1 Q2 Q3 Q4
There is a signifi cant correlation between the fl uctuation in ORGANIZATION OF WORKING TIME temporary and seasonal staff and the changes in the average 2015 fleet over the year. Mostly located in the United Kingdom, Germany and Spain, seasonal staff accounted for approximately Proportion of permanent part-time employees* 10.3% 2,000 full-time equivalent employees over the year. Overtime (all types of contracts) (in hours) 301,218 Hours of atypical work (all types of contracts) 242,446 Absenteeism** 4.6%
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To meet its customers’ demands, Europcar stations need to be multiple and complex national labor laws. With the exception of open outside normal business hours, principally in the evening, very few individual proceedings, the Group has not received any Sundays, and holidays, depending on the country. In all the type of sanction for failure to comply with the labor regulations countries, the Group complies with the applicable regulations of the countries in which it operates. As regulations in the under collective bargaining agreements and employees working countries where the Group operates are in line with and often outside standard hours are paid a premium. stricter than ILO (International Labor Organization) directives, the Group is compliant with said directives. 4.3.1.3 Labor policy The Group promotes a labor policy built on social dialog, diversity and gender equality, and on training and health/safety With operations in seven European countries as well as in policies leading to low absenteeism and accident rates, as well Australia and New Zealand, the Group needs to comply with as a balanced gender ratio at Group level.
YOU MAKE THE DIFFERENCE As part of the “You make the difference” program, whose objective is strengthen the corporate culture within the Group, in June 2015 the Company launched a fi rst fl agship initiative around its values: the Europcar 2015 Trophies, organized in all the subsidiaries. These trophies reward the attitudes and behaviors the Group wishes to promote. Each quarter, different attitudes related to Group values are highlighted. For 2015, Europcar chose to concentrate on three of its values: commitment, fl exibility and trust, and to promote the following attitudes: cooperation, open-mindedness and passion, pro-activeness, infl uence, simplicity and leadership, etc.,
LABOR RELATIONS, COLLECTIVE BARGAINING In Australia and New Zealand, the Group has been proactive in AGREEMENTS, CORPORATE CLIMATE establishing constructive labor relations through team meetings and monthly telephone conferences, yearly roadshows, ORGANIZATION OF LABOR RELATIONS regular bulletins and emails sent to the employees, and a The Group abides by local regulations in all countries with dedicated email address enabling employees to contact senior regulated labor relations. Accordingly, in France, Germany, management directly. Spain, Italy and Belgium, labor relations are built around works OVERVIEW OF THE COLLECTIVE BARGAINING AGREEMENTS councils which discuss any topics as required, in relation to employment, equal opportunities and equality, the Company’s Within the Group, 52 collective bargaining agreements are fi nancial position and so on, depending on the country. active as of December 31, 2015, including 8 signed during the year. These collective bargaining agreements cover different subjects such as working time organization, pensions or compensation.
SOCIAL CLIMATE AND EMPLOYEE SATISFACTION The Group has implemented and deployed in all of its Corporate Countries and holding companies an internal tool to assess the social climate. Employees are asked to express their level of satisfaction on a scale from 1 to 10 as part of a quarterly survey. The results are then consolidated for each country and analyzed by the Human Resources teams, including regional teams, before being passed on to the General Manager of each subsidiary. Depending on the detailed results and the associated comments that employees are also free to give, action plans are implemented if needed. The satisfaction rate averages 7 out of 10.
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HEALTH/SAFETY The activities of Group employees do not cause any occupational illness in any of the Corporate Countries or Holding Within the Group, four collective agreements relating to health Companies. In particular, employees of Europcar France are or safety were in force at December 31, 2015, one of which not exposed to levels exceeding the limits set by legislation was signed during the year. for any of the factors deemed by legislation to be particularly In the majority of the countries where the Group is located, harsh (cold, noise, posture etc.) However, Europcar France has signing health and safety agreements with staff representation nonetheless recognized that certain employees, in particular bodies is not mandatory. The Group has, however, implemented the vehicle preparation agents or customer service agents, various measures to reduce the frequency and severity of could be engaged in tasks deemed “harsh” and a collective workplace accidents, which are thus low. bargaining agreement covering this has been agreed with the social partners (unions and management) to mitigate its effects. In its French subsidiaries, regulation largely covers these measures, but in addition to the CHSCT meetings and keeping records of the Risk Assessment Documents, in 2015 for COMPENSATION POLICY AND SOCIAL SECURITY example, Europcar France introduced an internal report that Over 2015, all benefits and salaries together amount to 04 managers must complete after each accident and on which they approximately €266 million. can note any preventative measures to be implemented so that the accident does not occur again. In the stations, employees The compensation policy is, depending on the country, based are required to wear Individual Protection Equipment. on pay scales in accordance with the collective bargaining agreements, either internal pay scales set by the Company or In certain countries like Germany and Portugal, site safety on local labor market conditions. management is operated in partnership with independent certifi cation bodies, enabling the Group to ensure risks are Europcar complies with local regulations which, in certain identifi ed and procedures implemented to minimize them. countries, regulate compensation for working hours outside of the traditional work week (evenings, weekends and holidays) In other countries such as Spain and the United Kingdom, the by offering higher pay to those employees affected. Group relies on benchmarks and standards such as OHSAS 18001 (1) or COSHH (2) in order to comply with regulations and Many employees benefit from a variable component of defi ne its Health and Safety policy. Italy renewed its OHSAS compensation linked to monthly or annual performance 18001 certifi cation in 2015. objectives depending on the type of position. At the Group level, more than 20% of the total payroll is variable and based In Australia and New Zealand, various policies and procedures on performance objectives. are developed to identify station risks. In addition to the monthly inspection of sites with car washing equipment, and Benefi ts ** 2015 an inspection every hour months for other sites, all employees Number of employees covered by optional health are trained in health and safety practices when they join the insurance 2,542 Company and annually thereafter. All job descriptions defi ne Number of employees covered by optional death the health and safety responsibilities related to it. and disability insurance 5,064 In Belgium, a Hygiene, Health and Safety and Working Number of employees covered by optional retirement Conditions Committee meets every month to review potential insurance 3,215 risk areas and identify improvements to be made. A large number of employees receive company benefits In the Holding Companies, evacuation drills and staff fi rst aid (health, provident or retirement) providing higher benefi t levels training are carried out regularly. than the legal minimums. The granting of this complementary Workplace accidents 2015 coverage depends on criteria specifi c to each country, chief among which are age, seniority within the Company, the type Number of workplace accidents 160 of contract (permanent, fi xed-term and status as a manager Number of days lost time due to workplace accidents 3,771 or member of the Executive Committee). In certain countries, Number of fatal workplace accidents in the year 0 these corporate employee benefi ts enable the Company to build employee loyalty by offering more favorable terms than Workplace accident frequency rate 12.9 those in the local market. Workplace accident severity rate 0.3 In all other cases, Europcar complies with its obligations from internal agreements or collective bargaining agreements.
(1) OHSAS is an international standard for managing workplace health and safety. (2) COSHH is a set of UK regulations requiring employers to control substances that are hazardous to health. EUROPCAR REGISTRATION DOCUMENT 2015 259 04 SOCIETAL, SOCIAL AND ENVIRONMENTAL INFORMATION EUROPCAR, RENTING CARS RESPONSIBLY
TRAINING AND ANNUAL REVIEWS maximizes opportunities and minimizes ineffi ciency. Training plans are defi ned on the basis of achieving a balance between Staff training is a key factor in the Group’s success. Whether it the economic and performance requirements of the Group, be at the rental agency counter, where the training of teams in individual aspirations and local regulations. service quality and sales has a direct impact on the brand image and Group profi ts, or behind the scenes, where the safety of Training plans are also defi ned based on individual interviews employees and the quality and speed of vehicle preparation is held with the majority of employees, whether or not they are a direct result of training policies, the Group provides training managers, and working in agencies or in head offi ces. The plans in all countries training tailored to each type of job or procedures for annual reviews are formalized and based on employee. performance criteria and objectives, as well as on the areas of commitment and personal development. Employees in head offices also benefit from training plans tailored to their activities. In the area of youth employment and training, in some countries the Group takes on apprentices, some of whom are then In 2015, 86,530 hours of training were provided. recruited permanently. There were approximately 164 full time The training objectives are to improve the value of each team, equivalent employees taken on as apprentices across the of each team member and to create an environment that Group in 2015, representing almost 3% of headcount.
OUR NEIGHBORHOODS HAVE TALENT Europcar International signed a partnership agreement with the “Nos quartiers ont des talents” (Our neighborhoods have talent) organization in July 2015. This organization puts together companies and young graduates with four or fi ve years of post-high school education, who come from disadvantaged backgrounds and cannot fi nd employment. The organization looks for male and female sponsors within these companies who will be able to help these young people to better understand the working world by coaching them (reviewing CVs, interview practice, following their progress, etc.). Europcar International signed up to this community initiative and as of December 31, 2015 had 16 sponsorships with young people in the Ile-de-France region.
ANTI-DISCRIMINATION with one disabled person recruited in 2015 and 21 in the headcount as of December 31, 2015, which represents By drawing on its geographic presence in very different regions, approximately 5% of the permanent and fi xed-term headcount. the Group is a signifi cant local employer relying on the diversity of the regions in which it operates in order to recruit. In France, despite efforts undertaken to adapt jobs and work with ESAT whenever possible, the Company has not reached The Group furthermore complies in a proactive way with the minimum regulatory requirement of 6% of its headcount different local regulations designed to fi ght discrimination. The being people with a disability. Group communicates internally pursuant to legal requirements and trains employees in compliance with non-discrimination principles, both in the recruitment process, where the Human MALE/FEMALE EQUALITY** Resources departments are trained in non-discrimination, and The anti-discrimination policy extends to parity between the in the corporate environment. The majority of countries have sexes and the Group is exemplary in this regard. All anti- formal and internally communicated anti-discrimination policies. discrimination policies of Group subsidiaries state that gender In particular, concerning the employment of people with cannot be a selection or remuneration criterion and that is disabilities, no discrimination is practiced in hiring, and in certain refl ected in the fi gures showing a balance between male and countries where it is allowed, positive discrimination is even female headcount across the Group. practiced where possible. The Group also ensures that both genders are represented In Italy, regulations require recruitment of a minimum percentage within its management and governance, with a female presence of people with disabilities. The Group complies with this law, in its Management Board and Supervisory Board of 25% and 30% respectively at year-end 2015.
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2015
Men/Women Breakdown Headcount at 12/31 %
Men 3,297 ✔ 50.3% Women 3,263 ✔ 49.7% Men on the Management Board 3 ✔ 75% Women on the Management Board 1 ✔ 25% Men on the Supervisory Board 7 ✔ 70% Women on the Supervisory Board 3 ✔ 30%
WOMEN AT EUROPCAR 04 Europcar puts parity and fairness at the heart of its corporate culture. With the development of the “Europcar Women” community and forums, the Group hopes to support the contribution of women internally at all levels and give them the resources to succeed: training, career development, succession planning, and personnel development. In this context, the Group actively supports the PWN (Professional Women’s Network), which is a network of European women whose mission is to support women in their promotion to strategic positions.
4.3.2 An environmental footprint distributed through the value chain
As a provider of mobility, the Group holds and maintains on water, energy, air discharges, biodiversity, waste management, behalf of its customers a substantial fleet of vehicles. The environmental responsibility and risk management. Group’s model is virtuous from the environmental point of view, Furthermore, the European Corporate Countries have all since it enables Group customers to travel with new and well- been ISO 14001 certified since 2009. This environmental maintained vehicles, thus minimizing consumption, emissions management system has enabled the Group to identify and accident risks. environmental risk areas and implement tailored procedures The environmental footprint of the business is thus shared and training. between the customer as user (usage of the vehicle and fuel The amount of provisions and guarantees for environmental consumption), the Group (administration and delivery of the risks as of December 31, 2015 is thus insignifi cant (around fl eet) and its sub-contractors (vehicle washing, preparation and €50,000) and no environmental penalties were imposed on repair). the Group in 2015. As the Group does not carry out any industrial activities, the The Group’s “green” initiatives resulted in its winning the World risks of environmental pollution are thus limited and essentially Travel Awards trophy for World’s Leading Green Transport only concern the washing areas and the fuel storage tanks. Solution Company 2015, its sixth consecutive win.
Organization of the Group and training related Environmental footprint to the environment Although the Group carries and shares a part of the Since 2007, Europcar has had a pro-active environmental environmental footprint of its customers by holding a fleet charter, approved by Bureau Veritas, deployed across the of vehicles for their use, it also externalizes a signifi cant part Group and addressing the management of the following issues: of its environmental footprint, essentially comprised of the maintenance, washing and delivery of its vehicle fl eet.
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The footprint shown below thus only shows the Group’s internal consumption:
2015
Consumption Coverage rate
Water (cu.m.) 326,512 86% Electricity (MWh) 17,227 ✔ 95% Renewable energy (MWh) 5,375 ✔ 92% Natural gas (MWh) 6,384 ✔ 95% Total energy excluding fuel (MWh) 28,986 ✔ 86-95% Fuel consumed internally (liters) 7,462,453 ✔ 99%
The costs related to water and energy consumption are, for a (head offi ces and networks) to reduce paper and offi ce waste number of stations, included in the premises’ rental charges, as much as possible and increase their recycling. In addition and it is difficult to obtain more detailed information. This to sorting, collecting and recycling this type of waste, the explains the fact that coverage rate of (1) these fi gures is not Group’s main initiative in this area is to go paperless in the 100%. billing and contract signing procedures. In 2015, more than 1,220,000 invoices were neither printed nor sent by mail to Beyond the issues of car washing discussed in the following Group customers, representing a paperless rate of 12.5% paragraph, the Group has implemented best practices as across the whole Group (Leisure and Corporate customers), quickly as possible for reducing water and energy consumption and 25% on Leisure customers alone. in its head offi ces and networks: timed self-closing faucets, low fl ush toilets, lighting operated by motion detectors, replacement The classifi cation of waste as hazardous waste depends on of existing lighting by LED lighting, air conditioning automatically local regulations. The Group mainly produces the following shut off after 8 pm, etc. hazardous waste: computer waste and toners for the head offi ces, and neon lights, batteries and sludge from hydrocarbon The Group’s non-hazardous waste is mainly from office separators in the stations. The Group complies with local uses and paper. The Group considers these impacts to be regulations for waste treatment and implements treatment and non-material in relation to its activity and has therefore not recycling procedures guided by its ISO 14001 environmental implemented any strategy to collect this information. Various management system. steps have nevertheless been carried out across the Group
2015
Consolidated Group Tons data Coverage rate
Quantity produced 318 87% Quantity recycled 119 93%
In terms of its ground footprint, the Group has areas used ISO 14001 to reduce leakage risks. Accordingly, the tanks permanently for head offi ces and the network and parking are regularly monitored and a signifi cant number of them are lots actively managed according to the activity. The orders equipped with leak detectors, alarms and double bottoms. No of magnitude and the types of area occupied by the Group leaks were detected in 2015. (basement or on an upper level) are not such as to make ground usage a signifi cant issue for the Group in terms of environmental impact. Car washing The Group has 267 ✔ tanks used mainly to stock oil and In addition to the environmental and carbon footprint related fuel. The Group complies with local regulations covering the to the typical lifecycle of cars (manufacture, transport, usage, ownership and operation of reservoirs to stock oil and fuel maintenance, end of life), the Group’s main environmental and also uses procedures implemented in compliance with impact relates to the cleaning of cars, which is the source of water, energy and chemical product consumption.
(1) For more information on the coverage rate, please refer to the methodology note.
262 EUROPCAR REGISTRATION DOCUMENT 2015 SOCIETAL, SOCIAL AND ENVIRONMENTAL INFORMATION EUROPCAR, RENTING CARS RESPONSIBLY
In certain countries, such as Germany, the washing of cars in a washing gantry, but cleaned by hand as necessary and is almost entirely sub-contracted (outside of the station) to without water, thus saving substantial amounts of water, the extent that the Group does not have its own washing energy and chemical products on a Group scale, even if equipment. In other countries, the Group has washing facilities the number of vehicles prepared this way remains marginal; operated either by Group employees or by sub-contractors. a many stations, including the biggest in all countries, are In 2015, the Group started work to analyze the consumption equipped with a fi ltration system (hydrocarbon separators, related to both internal and sub-contracted car washing. decanters, active charcoal fi lters) and used water recycling The purpose of this work is to understand and reduce the system operating in an almost closed circuit. Thanks to these impact of car washing in terms of its consumption of resources systems, between 70% and 80% of the water required for (energy, water and chemical products) and discharges into the each wash comes from the recycling circuit, depending on environment. the type of equipment, and only the remaining water required is taken from the water supply network. Nevertheless, many steps are already in use within the Group, sometimes enabling a very substantial reduction in the impacts Including hot countries and areas of water stress, there were from car washing, in terms of both water and energy resource no restrictions on water usage in 2015, and the Group did not 04 consumption, and pollution risks: incur any penalties in this regard. a when the vehicle (in general a very short-term rental) returns in an almost immaculate state on the exterior, it is not washed
4.3.3 Local suppliers and sub-contractors
Breakdown between suppliers Corporate social responsibility (CSR) policy and sub-contractors in the value chain
Present in Europe, Australia and New Zealand, the Group As well as being a signifi cant provider of local employment, makes 99% of its purchases in these geographic regions and the Group is also a purchaser, with relationships with a large has contracts with only approximately 30 suppliers in Asia number of local suppliers, often small companies. or South America, representing approximately 0.2% of the The Group measures and monitors the risk level of its suppliers Group’s purchasing volumes. depending, on the one hand, on the potential social risks (which NUMBER OF DIRECT SUPPLIERS are limited given the geographic areas in which the Group operates) and on the other hand, on the supplier’s revenue from Europcar (dependency risk). 20,000 18,075 18,000 To further understand and manage its supply chain, and to 16,000 follow an improvement process with its suppliers, in 2015, the 14,000 12,000 Group undertook major work to formalize the way it takes into 10,000 account CSR progress and risk criteria in its purchasing policy. 8,000 From the inclusion of CSR clauses in tenders and contracts, to 6,000 a complete CSR questionnaire sent to all its existing or potential 4,000 suppliers, this new policy will be deployed in all Subsidiaries 2,000 1,459 in 2016. 32 19 11 0 0
Europe The Pacific North Asia South Africa America America
With more than 19,500 suppliers, the Group has essentially two supplier types: Group suppliers (fl eet, insurance, bank, IT, etc.) and a very large number of local suppliers enabling each station to operate locally (repairers, transporters, recruitment agencies, etc.).
EUROPCAR REGISTRATION DOCUMENT 2015 263 04 SOCIETAL, SOCIAL AND ENVIRONMENTAL INFORMATION EUROPCAR, RENTING CARS RESPONSIBLY
Fraud prevention and fi ght against corruption non-compliance situations and risks, as well as to present and money-laundering any corrective measures taken; (ii) ensure that all employees have received training related to the Group’s values charter, The Group’s Internal Audit Department oversees identifi cation confl icts of interest, personal data protection and competition and fraud prevention processes for all of its activities. This law over the course of the fi scal year; and (iii) certify, in particular, process was strengthened in 2015 by a Fraud Prevention Plan, the absence of any confl icts of interest and compliance with the fi rst part of which, covering station fraud was implemented anti-corruption rules, personal data protection, labor laws and in the fi rst half-year. human rights. The Group has implemented a signed reporting policy. Moreover, in the context of its compliance program (including Under this policy, the managers of the Group’s different anti-corruption, compliance with economic sanctions, anti- subsidiaries sign an annual compliance letter. The purpose of fraud), the Group has recently adopted a data-processing tool the compliance letter is in particular to (i) notice and analyze allowing for the identifi cation of at-risk commercial partners.
AUSTRALIA/NEW ZEALAND Group employees are trained in anti-corruption rules every two years as part of training related to the “Competition and Customers” act. A code of conduct governing the relationship with suppliers and specifying the required standards of integrity and conduct must be signed by all employees authorized to send purchase orders. Finally, employees must sign an annual confl ict of interests or potential confl ict of interests declaration.
264 EUROPCAR REGISTRATION DOCUMENT 2015 SOCIETAL, SOCIAL AND ENVIRONMENTAL INFORMATION CONCORDANCE TABLES
4.4 CONCORDANCE TABLES
Section
SOCIAL INFORMATION
Employment Total headcount and breakdown of employees 4.3.1.2 4.3.1.3 Hirings and dismissals 4.3.1.2 Compensation and its change 4.3.1.3 Working time organization 04 Working time organization 4.3.1.2 Absenteeism 4.3.1.2 Employee Relations Organization of labor relations 4.3.1.3 Overview of the collective bargaining agreements 4.3.1.3 Health and safety Health and safety conditions at work 4.3.1.3 Summary of the agreements signed relating to health and safety at work 4.3.1.3 Workplace accidents and occupational illnesses 4.3.1.3 Training Training policies 4.3.1.3 Total number of training hours 4.3.1.3 Equal treatment Measures taken to promote equality between men and women 4.3.1.3 Measures taken to promote employment and inclusion of disabled persons 4.3.1.3 Anti-discrimination policy 4.3.1.3 Promotion and respect for the provisions of the ILO’s fundamental conventions Respect for the freedom of association and right to collective bargaining 4.3.1.3 Elimination of discrimination in matters of employment and occupation 4.3.1.3 Elimination of forced or compulsory labor n/a, see note on methodology Effective abolition of child labor n/a, see note on methodology ENVIRONMENTAL INFORMATION
General Environmental Policy Company organization to take environmental questions into account 4.1.1 4.1.2 4.3.2 Training and information regarding environmental protection 4.3.2 Resources dedicated to environmental risk and pollution prevention 4.3.2 Amount of environmental risk provisions and guarantees 4.3.2
EUROPCAR REGISTRATION DOCUMENT 2015 265 04 SOCIETAL, SOCIAL AND ENVIRONMENTAL INFORMATION CONCORDANCE TABLES
Section
Pollution and Waste Management Prevention, reduction or remediation measures for air, water, and soil discharges severely affecting 4.2.2 the environment 4.3.2 Measures to prevent recycle and eliminate waste 4.3.2 Taking noise pollution and any other form of pollution specifi c to an activity into account n/a, see note on methodology Sustainable Use of Resources Water consumption and water supply depending on local constraints 4.3.2 Consumption of raw materials and measures taken to improve the effi ciency of their use n/a, see note on methodology Energy consumption, the measures taken to improve energy effi ciency and use of renewable energy 4.3.2 Ground use 4.3.2 Climate change Greenhouse gas emissions 4.2.2 Adapting to the consequences of climate change n/a, see note on methodology Protection of Biodiversity Measures taken to protect and increase biodiversity n/a, see note on methodology SOCIAL INFORMATION
Territorial, economic and social impacts of the Company’s activity Regarding employment and regional development 4.3.1.1 On neighboring or local populations 4.3.1.1 Relationships maintained with persons or organizations interested in the Company’s activity. Conditions for dialogue with these persons or organizations 4.2.1 Partnership or sponsorship initiatives 4.2.2 Sub-contractors and suppliers Taking account social and environmental issues in the purchasing policy 4.3.3 Importance of sub-contracting and taking into account suppliers’ and sub-contractors’ social and environmental responsibility 4.3.3 Fair trade practices Action taken to prevent corruption; 4.3.3 Measures taken to promote consumer health and safety 4.2.1.2 4.2.1.3 Other actions taken to promote human rights n/a, see note on methodology
266 EUROPCAR REGISTRATION DOCUMENT 2015 SOCIETAL, SOCIAL AND ENVIRONMENTAL INFORMATION METHODOLOGY NOTE
4.5 METHODOLOGY NOTE
As a listed company and in accordance with Article 225 of Law No. 2010-788, July 12, 2010, the so-called “Grenelle 2” Law, Europcar is required to publish consolidated non-fi nancial data in its Registration Document.
Period and Scope of CSR Reporting
The CSR Reporting period is the calendar year from January 1, It does not include data from stations purchased from 04 2015 to December 31, 2015. EuropHall , or data from agency or franchised stations, except for fl eet information for vehicles used by agents. The scope of CSR Reporting covers the Holding Companies (ECI, ECG and the Shared Services Center) and the Corporate The published data are consolidated at Group level, apart from Countries (France, Germany, United Kingdom, Italy, Spain, the data on workforce distribution by country. Portugal, Belgium, Australia and New Zealand), including InterRent stations.
CSR Reporting Organization
The organization used for CSR Reporting is set out in a Audit and consolidation of the data protocol showing all the procedures and methodologies of CSR Reporting. This protocol has been circulated to each CSR INTERNALLY Reporting contributor prior to the start of reporting. Data are audited at the level of each entity by the teams responsible for reporting the information and by internal audit Data collection teams. Automatic consistency checks are carried out in the CSR Reporting is organized and coordinated by the Europcar collection software, then by people in the teams in charge CSR Director, Pierre Beguerie, in collaboration with the of the analysis and consolidation of the data at Group level: CSR coordinators in the Holding Companies and Corporate comparison of the data between countries, comparison to Countries. At the level of each subsidiary, data collection is historic data, the ratio of localized checks (e.g. on the price managed by the responsible teams, and mainly concerns of resources.) Finally, a part of the data from the Corporate Human Resources, Operations, Fleet and Management Audit Countries comes from the Shared Services Center, which teams. ensures consistency of data between countries.
VERIFICATION OF THE DATA BY AN INDEPENDENT Collection tool THIRD PARTY ORGANIZATION To collect and consolidate the data, and ensure the traceability PricewaterhouseCoopers, Audit (PwC), one of the Company’s of the data and processes, Europcar used the online non- Statutory Auditors, has been appointed by Europcar as the fi nancial information collection software, Reporting 21. This Independent Third Party Organization to verify the presence software has been deployed in all the entities covered by CSR and accuracy of the non-fi nancial information presented in the Reporting and has helped around 100 contributors to input the Registration Document, pursuant to the Grenelle 2 legislation information from the CSR Reporting. (see the report and the opinion on fairness in Section 4.6 “ILO report”). Europcar also voluntarily asked PwC to review certain indicators in the context of a reasonable assurance audit. The data reviewed in this context are fl agged by the sign: ✔.
EUROPCAR REGISTRATION DOCUMENT 2015 267 04 SOCIETAL, SOCIAL AND ENVIRONMENTAL INFORMATION METHODOLOGY NOTE
Choice of indicators
To produce its CSR Reporting, Europcar defined a list of a the Group’s activities do not generate noise pollution or other indicators consistent with the themes identifi ed in Article 225 specifi c forms of pollution other than the issues discussed of Law No. 2010-788 of July 12, 2010, the so-called Grenelle 2 in this chapter (mainly the use and maintenance of cars); Law. a the Group does not, strictly speaking, consume raw materials, This list contains quantitative and qualitative indicators, and the issues related to reducing oil and fuel consumption broken down into fi ve major categories: Environment, Fleet, are discussed in this chapter; Social, Societal and Supply Chain. This enables not only the a The Group has not to be impacted to date by the Group’s material issues in terms of compliance and dialog with consequences of climate change in its host countries; stakeholders to be covered, but also the baseline information to be collected in order to defi ne and steer an actionable and a the Group’s activities do not directly impact biodiversity; long-term CSR strategy. a the Group is not located in countries at risk of human rights Given the Group’s business (non-industrial), its geographic violations and complies with all local human rights legislation location (European countries, Australia and New Zealand), in the countries where it is located (elimination of forced or certain themes from the decree applying Article 225 of the compulsory labor and the effective abolition of child labor). Grenelle Law have been deemed irrelevant in relation to the Group’s activity and are not covered by the CSR Reporting indicators: a no framework has been implemented to measure and collect the amounts of non-hazardous waste (mainly paper and offi ce items) produced;
Coverage rate
Given the decentralized structure of the Group (more than 9,000 The coverage rate is calculated for all the indicators in the stations in 9 countries), data collection and standardization is social, environment and supply chain categories, starting from a complex exercise. the reference indicators: To consolidate the data and communicate unbiased a permanent and fi xed-term headcount as of December 31, information, the Group has introduced the concept of coverage 2015 for the social indicator; rate in its CSR Reporting. This concept enables data to be a revenue for the environment indicator; consolidated solely across the scope where they are available, indicator by indicator, and allows entities (mainly stations) to be For each indicator in these categories, the contributors provided excluded from an indicator where the data is not available or the scope actually covered by the indicator’s value, and the not homogenous with the rest of the Group. value consolidated at Group level is therefore shown with the exact consolidated coverage rate for each indicator. For the chapter as a whole, coverage in respect of social information is 100%.
268 EUROPCAR REGISTRATION DOCUMENT 2015 SOCIETAL, SOCIAL AND ENVIRONMENTAL INFORMATION METHODOLOGY NOTE
Notes on methodology and main limiting factors
The entities included in the CSR Reporting scope are spread a The energy and water indicators do not include consumption across nine countries with substantially different laws and for vehicle washing by external service providers. practices. The choice of indicators and their defi nitions are discussed Notes on the greenhouse gas emissions upstream with the different contributors from the various entities footprint to achieve indicators that are as closely tailored as possible to circumstances on the ground. For CO2 emissions, the Group’s internal consumption of energy was considered (mainly electricity and gas) and fuel (diesel and gasoline). Carbon emission factors specifi c to each country for Notes on the defi nitions of certain indicators electricity consumption were then considered, and the same for the other items. The emission factors used come from the 2014 04 a Unlike the productivity data monitored by the Group, the IEA (International Energy Agency) report on carbon emission workforce under the CSR reporting scope includes long- factors. term leave. a Absenteeism excludes maternity and paternity leave.
EUROPCAR REGISTRATION DOCUMENT 2015 269 04 SOCIETAL, SOCIAL AND ENVIRONMENTAL INFORMATION ILO REPORT
4.6 ILO REPORT
Report by one of the Statutory Auditors, appointed as an independent third party, on the consolidated environmental, labour and social information presented in the management report For the year ended December 31, 2015
To the Shareholders, In our capacity as Statutory Auditor of Europcar Groupe, appointed as an independent third party and certifi ed by COFRAC under number 3-1060 (1), we hereby report to you our report on the consolidated human resources, environmental and social information for the year ended December 31, 2015, included in the management report (hereinafter named «CSR Information»), pursuant to article L.225-102-1 of the French Commercial Code (Code de commerce).
COMPANY’S RESPONSIBILITY The Chairman of the Management Board is responsible for preparing a company’s management report including the CSR Information required by article R.225-105-1 of the French Commercial Code in accordance with the CSR reporting protocol used by the Company (hereinafter the «Guidelines»), summarised in the management report under section 4.5 “Methodology Note” and available on request from the company’s head offi ce.
INDEPENDENCE AND QUALITY CONTROL Our independence is defi ned by regulatory texts, the French Code of ethics (Code de déontologie) of our profession and the requirements of article L.822-11 of the French Commercial Code. In addition, we have implemented a system of quality control including documented policies and procedures regarding compliance with the ethical requirements, French professional standards and applicable legal and regulatory requirements.
STATUTORY AUDITOR’S RESPONSIBILITY On the basis of our work, our responsibility is to: a attest that the required CSR Information is included in the management report or, in the event of non-disclosure of a part or all of the CSR Information, that an explanation is provided in accordance with the third paragraph of article R.225-105 of the French Commercial Code (Attestation regarding the completeness of CSR Information); a express a limited assurance conclusion that the CSR Information taken as a whole is, in all material respects, fairly presented in accordance with the Guidelines (Conclusion on the fairness of CSR Information). Our work involved 5 persons and was conducted between October 2015 and February 2016 during a 4 week period. We were assisted in our work by our CSR experts. We performed our work in accordance with the French professional standards and with the order dated 13 May 2013 defi ning the conditions under which the independent third party performs its engagement and with ISAE 3000 (2) concerning our conclusion on the fairness of CSR Information.
1. Attestation regarding the completeness of CSR Information
Nature and scope of our work
On the basis of interviews with the individuals in charge of the relevant departments, we obtained an understanding of the Company’s sustainability strategy regarding human resources and environmental impacts of its activities and its social commitments and, where applicable, any actions or programmes arising from them. We compared the CSR Information presented in the management report with the list provided in article R.225-105-1 of the French Commercial Code. For any consolidated information that is not disclosed, we verifi ed that explanations were provided in accordance with article R.225- 105, paragraph 3 of the French Commercial Code.
(1) W hose scope is available at www.cofrac.fr. (2) ISAE 3000 – Assurance engagements other than audits or reviews of historical fi nancial information.
270 EUROPCAR REGISTRATION DOCUMENT 2015 SOCIETAL, SOCIAL AND ENVIRONMENTAL INFORMATION ILO REPORT
We verifi ed that the CSR Information covers the scope of consolidation, i.e., the Company, its subsidiaries as defi ned by article L.233-1 and the controlled entities as defi ned by article L.233-3 of the French Commercial Code within the limitations set out in the methodological note, presented in section 4.5 “Methodology Note” of the management report.
Conclusion Based on the work performed and given the limitations mentioned above, we attest that the required CSR Information has been disclosed in the management report.
2. Conclusion on the fairness of CSR Information
Nature and scope of our work
We conducted about 10 interviews with the persons responsible for preparing the CSR Information in the departments in charge of collecting the information and, where appropriate, responsible for internal control and risk management procedures, in order to: 04 a assess the suitability of the Guidelines in terms of their relevance, completeness, reliability, neutrality and understandability, and taking into account industry best practices where appropriate; a verify the implementation of data-collection, compilation, processing and control process to reach completeness and consistency of the CSR Information and obtain an understanding of the internal control and risk management procedures used to prepare the CSR Information. We determined the nature and scope of our tests and procedures based on the nature and importance of the CSR Information with respect to the characteristics of the Company, the human resources and environmental challenges of its activities, its sustainability strategy and industry best practices. Regarding the CSR Information that we considered to be the most important (3): a at the parent entity level, we referred to documentary sources and conducted interviews to corroborate the qualitative information (organisation, policies, actions), performed analytical procedures on the quantitative information and verifi ed, using sampling techniques, the calculations and the consolidation of the data. We also verifi ed that the information was consistent and in agreement with the other information in the management report; a at the level of a representative sample of entities selected by us (4) on the basis of their activity, their contribution to the consolidated indicators, their location and a risk analysis, we conducted interviews to verify that procedures are properly applied and to identify potential undisclosed data, and we performed tests of details, using sampling techniques, in order to verify the calculations and reconcile the data with the supporting documents. The selected sample represents on average 60% of headcount and 59% of quantitative environmental data disclosed. For the remaining consolidated CSR Information, we assessed its consistency based on our understanding of the company. We also assessed the relevance of explanations provided for any information that was not disclosed, either in whole or in part. We believe that the sampling methods and sample sizes we have used, based on our professional judgement, are suffi cient to provide a basis for our limited assurance conclusion; a higher level of assurance would have required us to carry out more extensive procedures. Due to the use of sampling techniques and other limitations inherent to information and internal control systems, the risk of not detecting a material misstatement in the CSR information cannot be totally eliminated.
Conclusion
Based on the work performed, no material misstatement has come to our attention that causes us to believe that the CSR Information, taken as a whole, is not presented fairly in accordance with the Guidelines.
Neuilly-sur-Seine, February 25, 2016 One of the Statutory Auditors, appointed as an independent third party
PricewaterhouseCoopers Audit François Jaumain Sylvain Lambert Partner Partner in charge of the Sustainable Business department
(3) The list of the CSR Information considered to be the most important is available in Appendix to this report (4) Europcar France, Europcar Group UK Ltd (United Kingdom), Europcar Autovermietung GmbH (Germany) EUROPCAR REGISTRATION DOCUMENT 2015 271 04 SOCIETAL, SOCIAL AND ENVIRONMENTAL INFORMATION APPENDIX: LIST OF INFORMATION THAT WE CONSIDERED THE MOST IMPORTANT
APPENDIX: LIST OF INFORMATION THAT WE CONSIDERED THE MOST IMPORTANT
Quantitative Human Resources Information
a Headcount as of December 31, 2015 per country, age, a Working time organization (Proportion of permanent part-time employment status and gender. employees, overtime hours, hours of atypical work). a Employment and departures (Number of hirings, number of a Absenteeism rate. total departures and allocation by motive). a Frequency and severity rate of workplace accidents. a Number of training hours.
Qualitative Human Resources Information
a Compensation policy and social security. a Training policy. a Health and safety working conditions.
Quantitative Environmental Information
a a Consumption by energy source (electricity, renewable energy, Average CO2 emission of the rental fl eet. natural gas). a Water consumption. a Fuel consumption. a Number of oil and fuel tanks. a Greenhouse gas emissions – Scope 1 and 2.
Qualitative Environmental Information
a Waste management and recycling policies. a Overview of greenhouse gas emissions.
Qualitative S ocietal Information
a Customer safety and protection measures. a Involvement of sub-contractors and consideraton of the suppliers’ and sub-contractors’ Corporate social responsability (CSR).
272 EUROPCAR REGISTRATION DOCUMENT 2015 05
CORPORATE GOVERNANCE
5.1 MANAGEMENT AND SUPERVISORY 5.3 COMPENSATION AND OTHER BODIES 274 BENEFITS IN KIND RECEIVED 5.1.1 Management Board 274 BY CORPORATE OFFICERS 310 5.1.2 Supervisory Board 279 5.3.1 Compensation principles of the corporate offi cers 310 5.1.3 Declarations relating to corporate governance 292 5.3.2 Summary of the compensation and benefi ts of corporate offi cers 312 5.2 ROLE AND ACTIVITIES 5.3.3 Other information 318 OF THE SUPERVISORY BOARD 293 5.2.1 Internal rules of the Supervisory Board 293 5.4 SUMMARY STATEMENT OF 5.2.2 Supervisory Board Committees 294 TRANSACTIONS IN COMPANY SECURITIES BY CORPORATE 5.2.3 Internal control 298 OFFICERS 319 5.2.4 Report by the Chairman of the Supervisory Board 300 5.2.5 Statutory Auditors’ report, prepared in accordance with article L.225-235 of the French Commercial Code on the report prepared by the Chairman of the Supervisory Board of Europcar Groupe S.A. 309
EUROPCAR REGISTRATION DOCUMENT 2015 273 05 CORPORATE GOVERNANCE MANAGEMENT AND SUPERVISORY BODIES
5.1 MANAGEMENT AND SUPERVISORY BODIES
The Company is a public limited company (société anonyme) Company’s bylaws, in particular those relating to its functioning with a Supervisory Board and a Management Board since and powers, as well as a summary description of the main March 9, 2015. This latter is composed of Philippe Germond, provisions of the Internal Regulations of the Supervisory Board Chairman of the Management Board, Caroline Parot, CEO and the special committees of the Supervisory Board, are Finance, Kenneth McCall, Deputy Chief Operating Officer included in Section 5.2 “Functioning of the Supervisory Board” and Fabrizio Ruggiero, Head of Mobility. Prior to this date, the and in Section 6.2 “Memorandum of Association and Bylaws” Company was a public limited company (société anonyme) with of this Registration Document. a Board of Directors. A description of the main provisions of the
5.1.1 Management Board
The table below shows the composition of the Management Management Board outside the Company (whether inside or Board as of the date of this Registration Document and the outside the Group) during the last fi ve years. principal positions and offi ces held by the members of the
274 EUROPCAR REGISTRATION DOCUMENT 2015 CORPORATE GOVERNANCE MANAGEMENT AND SUPERVISORY BODIES
PHILIPPE GERMOND CHAIRMAN OF THE MANAGEMENT BOARD OF EUROPCAR GROUPE
POSITIONS AND OFFICES HELD Positions and offices currently held at companies controlled (1) by Europcar Groupe ❚ None
Positions and offices currently held at companies not controlled (1) by Europcar Groupe ❚ Chairman of the Supervisory Board of Qosmos ❚ Member of the Board of Directors of the École Centrale de Paris ❚ Manager of Philippe Germond Conseil Business address: ❚ Member of the Board of Directors of Unisys Corporation (2) C/o Europcar Groupe S.A. 2 rue René Caudron, Other positions and offices held over the last five years Bâtiment OP ❚ Chairman and CEO of PMU 78960 Voisins-le- Bretonneux MANAGEMENT EXPERIENCE
Age and nationality: ❚ Philippe Germond joined the Group in October 2014 as CEO of the Company, a post he held until the change in the 59 Company’s corporate governance structure to a public limited company with a Management Board and a Supervisory French Board. ❚ Before joining the Group, he had served since 2009 as Chairman and CEO of PMU. 05 Date first appointed: ❚ Before 2009, he had been Chairman of Atos Origin (2007-2008), member of the Management Board of Atos Worldline 03/09/2015 (2006-2008), Chairman of Alcatel (2003-2005), Chairman and CEO of SFR – Cegetel (1995-2002) and member of the Management Board of Hewlett-Packard, where he began his career. Date term of office ❚ Mr. Germond is a graduate of the École Centrale Paris - ECP Paris (1979) and holds an MS in Management from ends: Stanford University (1980). 03/08/2019 Number of Company shares held: 1,292 Class C shares 1,292 Class D shares
(1) Articles L. 225-21 par. 2, L. 225-77 par. 2 and L. 225-94 par. 1 of the French Commercial Code. (2) Company listed outside France.
EUROPCAR REGISTRATION DOCUMENT 2015 275 05 CORPORATE GOVERNANCE MANAGEMENT AND SUPERVISORY BODIES
CAROLINE PAROT CEO FINANCE - MEMBER OF THE MANAGEMENT BOARD OF EUROPCAR GROUPE
POSITIONS AND OFFICES HELD Positions and offices currently held at companies controlled (1) by Europcar Groupe ❚ Chairwoman of EUROPCAR INTERNATIONAL SAS ❚ Chairwoman of Europcar Holding SAS ❚ Chairwoman of Europcar Services, Unipessoal, Lda ❚ Permanent representative of Europcar International SAS in her capacity as Chairwoman of Europcar France SAS ❚ Member of the Supervisory Board of Europcar Autovermietung GmbH ❚ Member of the Board of Directors of Europcar Australia PTY Ltd Business address: ❚ Member of the Board of Directors of car2go Europe GmbH C/o Europcar Groupe S.A. ❚ Member of the Board of Directors of PremierFirst Vehicle Rental EMEA Holdings Limited 2 rue René Caudron, ❚ Member of the Board of Directors of BVJV Limited Bâtiment OP ❚ Member of the Board of Directors of CLA Trading Pty Ltd 78960 Voisins-le- ❚ Member of the Oversight and Development Committee of Ubeeqo SAS Bretonneux Positions and offices currently held at companies not controlled (1) by Europcar Groupe Age and nationality: ❚ None 44 French Other positions and offices held over the last five years Date first appointed: ❚ Member of the Executive Committee of Technicolor 03/09/2015 Date term of office MANAGEMENT EXPERIENCE ends: ❚ Caroline Parot joined the Group in 2011 and has been its CFO since March 2012. 03/08/2019 ❚ Previously, she had occupied the positions of group management controller (2009-2011) and member of the Executive Committee (2010-2011) with the Technicolor group, and in particular was in charge of restructuring Thomson- Number of Company Technicolor’s debt. shares held: ❚ She also served as Technicolor’s Chief Financial Officer for the Technology sector (2008-2009) and as controller in the 528 Class C shares Department of Intellectual Property and License Management (2005-2008). 528 Class D shares ❚ Until 2005, she was an auditor with Ernst & Young, where she began her career in 1995. ❚ Ms. Parot holds a DEA in Mathematical Economics from the Panthéon-Sorbonne University and a Masters in Finance from the École Supérieure de Commerce de Paris. She also holds a DESCF (an accounting and financial diploma).
(1) Articles L. 225-21 par. 2, L. 225-77 par. 2 and L. 225-94 par. 1 of the French Commercial Code.
276 EUROPCAR REGISTRATION DOCUMENT 2015 CORPORATE GOVERNANCE MANAGEMENT AND SUPERVISORY BODIES
KENNETH MCCALL DEPUTY CEO - MEMBER OF THE MANAGEMENT BOARD OF EUROPCAR GROUPE
POSITIONS AND OFFICES HELD Positions and offices currently held at companies controlled (1) by Europcar Groupe ❚ Managing Director of Europcar Group UK Limited ❚ Managing Director of Europcar UK Limited ❚ Managing Director of PremierFirst Vehicle Rental EMEA Holdings Limited ❚ Managing Director of PremierFirst Vehicle Rental Holdings Limited ❚ Managing Director of Provincial Assessors Limited
Business address: Positions and offices currently held at companies not controlled (1) by Europcar Groupe C/o Europcar Group UK Ltd ❚ None 77-85 Aldenhal Road Bushey, Hertfordshire WD23 Other positions and offices held over the last five years 2QQ ❚ Member of the Executive Committee of Technicolor United Kingdom Age and nationality: MANAGEMENT EXPERIENCE 58 ❚ Kenneth McCall joined Europcar Groupe in November 2010 as Managing Director of Europcar Group UK. British ❚ He is also a non-executive member of the Board of Directors of SuperGroup, a fashion brands distribution company 05 operating a multichannel network of Internet sites, franchisees and licensees in 54 countries throughout the world. Date first appointed: ❚ Previously, he had served as Chief Executive of DHL Express UK & Ireland from 2008 to 2010, after having served as 03/09/2015 Managing Director in charge of network and operations at the European level for DHL Express from 2007 to 2008. Date term of office ❚ Among his earlier positions, he served as Managing Director of The International Consulting Company (March-October ends: 2007) and as Chief Executive Officer of TNT China (2004-2006), after having held the same positions at TNT Asia/ Middle East/Africa/Indian Subcontinent from 1996-2004. He had been with TNT since 1979. 03/08/2019 ❚ Mr. McCall completed all of his higher education in Scotland. Number of Company shares held: 3,818 common shares 118 Class C shares 116 Class D shares
(1) Articles L. 225-21 par. 2, L. 225-77 par. 2 and L. 225-94 par. 1 of the French Commercial Code.
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FABRIZIO RUGGIERO MEMBER OF THE MANAGEMENT BOARD OF EUROPCAR GROUPE POSITIONS AND OFFICES HELD Positions and offices currently held at companies controlled (1) by Europcar Groupe ❚ CEO of Europcar Italia SpA ❚ Co-Chairman of the Oversight and Development Committee of Ubeeqo SAS ❚ Member of the Board of Directors of car2go Europe GmbH ❚ Sole Director of Europcar Lab Italy Srl
Positions and offices currently held at companies not controlled (1) by Europcar Groupe Business address: ❚ Member of the Board of Directors of car2go Europe GmbH Via Cesare Giulio Viola 48 00148 Rome Other positions and offices held over the last five years Italy ❚ General Manager of Leasys ❚ Member of the Executive Committee of Fiat Group Automobiles Age and nationality: 46 MANAGEMENT EXPERIENCE Italian ❚ Fabrizio Ruggiero joined the Europcar Groupe in May 2011 and has served as Managing Director of Europcar Italy and Date first appointed: as Head of Mobility Solutions for Europcar Groupe. 03/09/2015 ❚ From 2004 to 2011 he was General Manager of the Italian company Leasys, a company controlled by Fiat Group Date term of office Automobiles and Crédit Agricole and a leader in “long-term commercial” rentals in Italy. ends: ❚ Also at Leasys, he served as Director of Sales and Marketing from 2005 to 2007 and as Director of Operations from 2004 to 2005. Mr. Ruggiero had previously been a manager of Bain & Company Italy (Rome office) from 2000 to 2004 03/08/2019 and a consultant with Accenture (Rome office) from 1997 to 2000. Number of Company ❚ He holds a Masters in business management from the MIP Politecnico di Milano (1999) and a management diploma shares held: from the Università degli Studi di Roma (1995). 234 Class C shares 234 Class D shares
(1) Articles L. 225-21 par. 2, L. 225-77 par. 2 and L. 225-94 par. 1 of the French Commercial Code.
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5.1.2 Supervisory Board
5.1.2.1 Composition of the Supervisory Board the main positions and offi ces held by the members of the Supervisory Board outside the Company (both inside and The table below shows the composition of the Supervisory outside the Group) during the last fi ve years. Board as of the date of this Registration Document and
JEAN- PAUL BAILLY CHAIRMAN OF THE SUPERVISORY BOARD OF EUROPCAR GROUPE - INDEPENDENT MEMBER
POSITIONS AND OFFICES HELD Positions and offices currently held at companies not controlled (1) by Europcar Groupe ❚ Member of the Board of Directors of Accor SA (2) ❚ Member of the Board of Directors of Edenred (2)
Other positions and offices held over the last five years 05 ❚ Chairman and CEO of La Poste SA ❚ Member and Chairman of the Supervisory Board of La Banque Postale Business address: ❚ Chairman of the Board of Directors of Post-Immo 38 rue Gay-Lussac ❚ Permanent representative of La Poste on the Board of Directors of Sofipost, Geopost and Post Immo 75005 Paris ❚ Member of the Boards of Directors of Sopasurre and CNP Assurances (2) ❚ Member of the Supervisory Board of La Banque Postale Asset Management. Age and nationality: ❚ Member, representing the French State, of the Board of Directors of GDF Suez (2) 69 French MANAGEMENT EXPERIENCE Date first appointed: ❚ Jean-Paul Bailly has devoted all of his career to public service, by participating in the management and running of 06/08/2015 two major public companies, the RATP and then La Poste. Date term of office ❚ He started his career in 1970 at the Régie Autonome des Transports Parisiens (RATP). In 1978, he ran the Direction ends: de la Coopération Française in Mexico. Shareholders’ Meeting ❚ He joined RATP again in 1982, where he was notably Director of Bus Rolling Equipment, Director of the Metro and called to approve the RER and Director of Human Resources. In 1990, he was named Deputy CEO and then CEO from 1994 to 2002. ❚ financial statements for He was CEO of La Poste from 2002 to 2013 and has served as its Honorary Chairman since October 2013. ❚ the fiscal year ending He is also President of Entreprise et Personnel as well as of IMS-Entreprendre pour la Cité, Vice-President of Confrontations Europe and a member of the Board of Directors of Accor, Edenred, the Envol, the ANVIE, the December 31, 2018 Fondation Jean-Jacques Laffont-TSE, the Fondation de la 2ème chance and of Sciences-Po Aix. He is also a Number of Company member of the Conseil Économique, Social et Environnemental since 1995. shares held: ❚ Jean-Paul Bailly is a graduate of École polytechnique and MIT. He is an Officer of the French Legion of Honor and a Commander of the French National Order of Merit. 500 common shares
(1) Articles L. 225-21 par. 2, L. 225-77 par. 2 and L. 225-94 par. 1 of the French Commercial Code. (2) French listed company.
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JEAN-CHARLES PAUZE VICE-CHAIRMAN OF THE SUPERVISORY BOARD OF EUROPCAR GROUPE - INDEPENDENT MEMBER
POSITIONS AND OFFICES HELD Positions and offices currently held at companies not controlled (1) by Europcar Groupe ❚ Chairman of the Supervisory Board of CFAO (2) ❚ Independent member of the Board of Directors of Bunzl Plc (3) ❚ Chairman of the Supervisory Board of IMCD NV (3)
Other positions and offices held over the last five years ❚ Member of the Board of Directors of Redcats Business address: ❚ Chairman of the Management Board of Rexel (2) C/o Europcar Groupe S.A. ❚ Board member of Rexel France 2 rue René Caudron, ❚ President of Rexel North America, Inc. Bâtiment OP ❚ Director (Geschäftsführer) of Rexel GmbH 78960 Voisins-le- ❚ Member of the Board of Directors and Chairman of Rexel Holdings USA Corp. Bretonneux ❚ Board member of Rexel Senate Limited ❚ Chairman of the Supervisory Board of Hagemeyer Age and nationality: ❚ Manager of Rexel Deutschland Elektrofach grosshandel GmbH 68 ❚ Manager of Galatea Einhundertvierzigste Vermögensverwaltungs GmbH French ❚ Manager of Rexel Central Europe Holding GmbH Date first appointed: ❚ Board member of Rexel, Inc. 02/24/2015 ❚ Board member of General Supply & Services, Inc. ❚ Board member of Rexel Belgium. Date term of office ❚ President of Rexdir ends: ❚ Chairman and CEO of Rexel Distribution Shareholders’ Meeting ❚ Board member of Discodis and CFP called to approve the financial statements for the fiscal year ending MANAGEMENT EXPERIENCE December 31, 2015 ❚ Jean-Charles Pauze was Chairman of the Company’s Board of Directors from February 2012 until the change in the Company’s corporate governance structure to a public limited company with a Management Board and a Supervisory Number of Company Board. shares held: ❚ He had previously been CEO of Alfa Laval Industrie (1981-1984), Chairman and CEO of Bran & Luebbe, a German 1,000 common shares subsidiary of Alfa Laval (1984-1986), Chairman and CEO of Clestra-Hausermann (1986-1991), Chairman and CEO of Steelcase Strafor (1991-1998), Chairman of the Management Board of Guilbert (1998-2002), and Chairman of the Management Board of Rexel (2002-2012). ❚ Jean-Charles Pauze holds an engineering degree from the IDN-EC of Lille and an MBA from the INSEAD.
1) Articles L. 225-21 par. 2, L. 225-77 par. 2 and L. 225-94 par. 1 of the French Commercial Code. (2) French listed company. (3) Company listed outside France.
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PATRICK SAYER MEMBER OF THE SUPERVISORY BOARD OF EUROPCAR GROUPE
POSITIONS AND OFFICES HELD Positions and offices currently held at companies not controlled(1) by Europcar Groupe ❚ Chairman of the Management Board of Eurazeo(2) ❚ Member of the Supervisory Board of ANF Immobilier(2) ❚ Member of the Board of Directors of Accor(2) ❚ Member of the Board of Directors of I-Pulse (USA) ❚ Managing Director of Legendre Holding 19 ❚ Manager of Investco 3d Bingen (non-trading company) Business address: ❚ Chairman of Legendre Holding 25, Legendre Holding 26, CarryCo Capital 1, CarryCo Croissance 2 C/o Eurazeo and CarryCo Croissance 1, rue Georges Berger ❚ Member of the Board of Directors of Tech Data Corporation (USA)(3) 75017 Paris ❚ Member of the Advisory Board of Kitara Capital International Limited (Dubai) ❚ Member of the Board of Directors of Colyzeo Investment Advisors (United Kingdom) Age and nationality: 58 Other positions and offices held over the last five years French ❚ Vice-Chairman of the Supervisory Board and later member of the Board of Directors of Rexel(2) Date first appointed: ❚ Chairman and Vice-Chairman of the Supervisory Board of ANF Immobilier(2) 02/24/2015 ❚ Manager of Eurazeo Srl ❚ Chairman and member of the Board of Directors of Europcar Groupe 05 Date term of office ❚ Chairman and member of the Board of Directors of Holdélis ends: ❚ Member of the board of directors of Moncler Srl Shareholders’ Meeting ❚ Member of the board of directors of Sportswear Industries Srl called to approve ❚ Member of the board of directors of Edenred the financial statements ❚ Member of the board of directors of Gruppo Banca Leonardo for the fiscal year ending ❚ Managing Director of Immobilière Bingen December 31, 2018 ❚ Managing Director of Legendre Holding 8 Number of Company ❚ President of Eurazeo Capital Investissement shares held ❚ Member of the Supervisory Board of Paris-Saint-Germain Football SASP ❚ 500 common shares Member of the Advisory Board of APCOA Parking Holdings GmbH
MANAGEMENT EXPERIENCE
❚ Patrick Sayer was a director of the Company from 2006 until the change in the Company’s corporate governance structure to a public limited company with a Management Board and a Supervisory Board. ❚ Since May 2002, he has been Chairman of the Management Board of Eurazeo. ❚ He was previously a managing partner of Lazard Frères et Cie in Paris and a managing director of Lazard Frères & Co. in New York. ❚ He is a former Chairman of the Association Française des Investisseurs pour la Croissance (French Association of Investors for Growth) (AFIC), a director of the Musée des Arts Décoratifs de Paris and a member of the Club des Juristes. ❚ He is also a commercial court judge with the Commercial Court of Paris. ❚ Mr. Sayer is a graduate of the Ecole Polytechnique and of the Ecole des Mines de Paris.
(1) Articles L. 225-21 par. 2, L. 225-77 par. 2 and L. 225-94 par. 1 of the French Commercial Code. (2) French listed company. (3) Company listed outside France .
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PHILIPPE AUDOUIN MEMBER OF THE SUPERVISORY BOARD OF EUROPCAR GROUPE
POSITIONS AND OFFICES HELD Positions and offices currently held at companies not controlled (1) by Europcar Groupe ❚ Member of the Management Board and Chief Administrative and Financial Officer of Eurazeo(2) ❚ Member of the Supervisory Board of ANF Immobilier(2) ❚ Member of the Supervisory Board of Elis(2) ❚ Member of the Supervisory Board of Eurazeo PME ❚ Chairman of LH APCOA, Legendre Holding 19, Legendre Holding 21, Legendre Holding 27, Legendre Holding 29, Legendre Holding 30 Business address: ❚ Legendre Holding 34, Legendre Holding 35, Legendre Holding 36, Legendre Holding 42, Eurazeo Patrimoine C/o Eurazeo ❚ and Eurazeo Patrimoine Aubervilliers 1, rue Georges Berger ❚ CEO of Legendre Holding 23, Legendre Holding 25, CarryCo Capital 1 and and CarryCo Croissance 75017 Paris ❚ Chairman of the Supervisory Board of Legendre Holding 28 ❚ Chief Executive of Eurazeo Services Lux Date first appointed: ❚ Permanent representative of Eurazeo on the board of directors of SFGI 02/24/2015 ❚ Managing Director of Perpetuum MEP Verwaltung GmbH Age and nationality: Other positions and offices held over the last five years 59 French ❚ Vice-Chairman of the Supervisory Board of the B&B Hotels Group ❚ Managing Director of Legendre Holding 33, Eurazeo Capital Investissement and Eureka Participations Date term of office ❚ Chairman of Legendre Holding 8, Legendre Holding 22, Legendre Holding 28, Legendre Holding 25, Legendre Holding 23 ends: ❚ Legendre Holding 26, Legendre Holding 31 and Legendre Holding 32 Shareholders’ Meeting ❚ Chairman of Immobilière Bingen called to approve the ❚ Chairman of Rue Impériale Immobilier financial statements for the ❚ Manager of Eurazeo Italia fiscal year ending ❚ Vice-Chairman of the Supervisory Board of APCOA Parking AG December 31, 2016 ❚ Member of the advisory board of Apcoa Parking Holdings GmbH Number of Company ❚ Member of the board of directors of Holdélis shares held: ❚ Member of the board of directors of Europcar Groupe 1,000 common shares MANAGEMENT EXPERIENCE
❚ Philippe Audouin was a director of the Company from 2006 until the change in the Company’s corporate governance structure to a public limited company with a Management Board and a Supervisory Board. ❚ He spent the first 10 years of his career creating and developing his own business. After selling that business, he served as CFO and legal representative (“Prokurist”) of the first joint venture between France Telecom and Deutsche Telekom in Germany from 1992 to 1996. ❚ From 1996 to 2000, he served as Financial, Human Resources and Administrative Director of France Telecom’s Multimedia division. He was also a member of the Supervisory Board of Pages Jaunes. From April 2000 to February 2002, he worked for the Arnault Group as CFO of Europ@Web. ❚ He joined Eurazeo in 2002 as Administrative and Financial Director and was appointed to its Management Board in March 2006 ❚ He is a member of the Supervisory Boards and Audit Committees of ANF Immobilier, Elis and Eurazeo PME and is Chairman of the Audit Committees of ANF Immobilier and Eurazeo PME. He is also a member of the Consultative Commission of the Autorité des Normes Comptables (French Accounting Standards Authority), a member of the AMF’s Issuers Committee and Chairman of the Association Nationale des Dirigeants Finance-Gestion (National Association of Finance and Management Executives) (DFCG). ❚ Mr. Audouin is a graduate of the Ecole des Hautes Etudes Commerciales.
(1) Articles L. 225-21 par. 2, L. 225-77 par. 2 and L. 225-94 par. 1 of the French Commercial Code. (2) French listed company.
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ARMANCE BORDES MEMBER OF THE SUPERVISORY BOARD OF EUROPCAR GROUPE
POSITIONS AND OFFICES HELD Positions and offices currently held at companies not controlled (1) by Europcar Groupe ❚ Corporate and Securities Law Manager of Eurazeo (2)
Other positions and offices held over the last five years ❚ Manager of Euraleo ❚ Member of the Board of Directors of Lauro 2007 Srl ❚ Member of the Board of Directors of Broletto 2 Srl Business address: ❚ Member of the Board of Directors of Broletto 1 Srl C/o Eurazeo 1, rue Georges Berger MANAGEMENT EXPERIENCE 75017 Paris ❚ Armance Bordes joined Eurazeo in 2007. She is Legal Director in charge of corporate law and corporate governance Age and nationality: and is secretary of Eurazeo’s Supervisory Board. 37 ❚ She is in charge of monitoring listed equity investments and has participated in several acquisitions and sales of listed French companies, as well as in initial public offerings. ❚ She began her career in the mergers and acquisitions department at the Paris office of Gibson Dunn & Crutcher LLP. Date first appointed: She then practiced law at Linklaters LLP in Paris. 05 02/24/2015 ❚ Ms. Bordes is an attorney with a degree from Oxford University and a DEA in English and North American Business Law from the Panthéon-Sorbonne University. Date term of of the appointment: Shareholders’ Meeting called to approve the financial statements for the fiscal year ending December 31, 2015 Number of Company shares held: 500 common shares (3)
(1) Articles L. 225-21 par. 2, L. 225-77 par. 2 and L. 225-94 par. 1 of the French Commercial Code. (2) French listed company. (3) Share loan granted by Eurazeo.
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ÉRIC SCHAEFER MEMBER OF THE SUPERVISORY BOARD OF EUROPCAR GROUPE
POSITIONS AND OFFICES HELD Positions and offices currently held at companies not controlled(1) by Europcar Groupe ❚ Director of Eurazeo Capital (2) ❚ Member of the Supervisory Board of Elis (2) ❚ Member of the Supervisory Board of Legendre Holding 33
Other positions and offices held over the last five years ❚ Member of the Board of Directors of Holdélis Business address: C/o Eurazeo MANAGEMENT EXPERIENCE 1, rue Georges Berger ❚ 75017 Paris Eric Schaefer represented Eurazeo on the Company’s Board of Directors until the change in the Company’s corporate governance structure to a public limited company with a Management Board and a Supervisory Board. Age and nationality: ❚ He serves as Director of Eurazeo Capital, which he joined in 2004. 34 ❚ He participated in the analysis of several investment opportunities and monitored equity investments in various French industrial and service sectors. ❚ At Eurazeo, he participated actively in the carrying out and monitoring investments in Eutelsat, B&B Hotels, Europcar, Date first appointed: Elis and Asmodée. 02/24/2015 ❚ Mr. Schaefer is a graduate of the Ecole Polytechnique and of the Ecole des Hautes Etudes Commerciales. Date term of office ends: Shareholders’ Meeting called to approve the financial statements for the fiscal year ending December 31, 2017 Number of Company shares held: 500 common shares(3)
(1) Articles L. 225-21 par. 2, L. 225-77 par. 2 and L. 225-94 par. 1 of the French Commercial Code. (2) French listed company. (3) Share loan granted by Eurazeo.
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ANGÉLIQUE GÉRARD MEMBER OF THE SUPERVISORY BOARD OF EUROPCAR GROUPE - INDEPENDENT MEMBER
POSITIONS AND OFFICES HELD Positions and offices currently held at companies not controlled(1) by Europcar Groupe ❚ Independent member of the Board of Directors of Association Française de la relation Client ❚ Director of Customer Relations at the French Iliad Group ❚ Chairwoman of nine subsidiaries of the Iliad Group
Other positions and offices held over the last five years ❚ None. Business address: C/o Iliad MANAGEMENT EXPERIENCE 16, rue de la Ville l’Evêque ❚ 75008 Paris Angélique Gérard joined the Iliad Group at the end of 1999 after four years with France Telecom. She is currently Director of Customer Relations for the Iliad Group (Free & Free Mobile) and a member of Iliad’s Executive Committee. Age and nationality: ❚ She was manager of Memdis from 2003 to 2006, and is Chairwoman of nine subsidiaries of the French 40 telecommunications group Iliad. French ❚ Angélique Gérard is a graduate of INSEAD, of the Ecole des Hautes Etudes Commerciales and of the Multimedia Institute. Date first appointed: 05 02/24/2015 Date term of office ends: Shareholders’ Meeting called to approve the financial statements for the fiscal year ending December 31, 2017 Number of Company shares held: 500 common shares
(1) Articles L. 225-21 par. 2, L. 225-77 par. 2 and L. 225-94 par. 1 of the French Commercial Code .
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VIRGINIE FAUVEL MEMBER OF THE SUPERVISORY BOARD OF EUROPCAR GROUPE - INDEPENDENT MEMBER
POSITIONS AND OFFICES HELD Positions and offices currently held at companies not controlled (1) by Europcar Groupe ❚ Member of the Executive Committee of Allianz France ❚ Member of the Conseil National du Numérique (French Digital Council) ❚ Member of the Board of Directors of Allianz Vie ❚ Member of the Board of Directors of Allianz Iard
Other positions and offices held over the last five years Business address: ❚ Member of the Board of Directors of Cortal Consorts c/o Allianz 87, rue Richelieu MANAGEMENT EXPERIENCE 75113 Paris Cedex 02 ❚ Virginie Fauvel began her career in 1997 at Cetelem as the head of risk scoring and then as Director of CRM, before Age and nationality: becoming Director of world Internet strategy in 2004 and then Director of the e-business France unit in 2006. 41 ❚ She next joined BNP Paribas’s retail bank in 2009, where she directed and developed the online bank before French becoming Director of European online banks in 2012. In that capacity, in mid-2013 she launched HelloBank!, the first 100% mobile European bank. Date first appointed: ❚ She joined Allianz France in July 2013 as a member of the Executive Committee in charge of Digital and Market 02/24/2015 Management. ❚ In January 2013 she was named a member of the Conseil National du Numérique (French Digital Council). Date term of office ❚ ends: Ms. Fauvel is a graduate of the École des Mines de Nancy. Shareholders’ Meeting called to approve the financial statements for the fiscal year ending December 31, 2016 Number of Company shares held: 500 common shares
(1) Articles L. 225-21 par. 2, L. 225-77 par. 2 and L. 225-94 par. 1 of the French Commercial Code.
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SANFORD MILLER MEMBER OF THE SUPERVISORY BOARD OF EUROPCAR GROUPE - INDEPENDENT MEMBER
POSITIONS AND OFFICES HELD Positions and offices currently held at companies not controlled (1) by Europcar Groupe ❚ Vice-Chairman of the board and founding director of Gateway Financial Holdings of Florida Inc. ❚ Managing Partner of Basin Street Partners LLC
Other positions and offices held over the last five years ❚ Co-Chairman and co-CEO of Franchise Services of North America, Inc. ❚ Member of the Board of Directors of Stonewood Holdings LLC Business address: 444 Seabreeze Blvd Ste. MANAGEMENT EXPERIENCE 1002 Daytona Beach, ❚ FL 32118 Sandy Miller has experience in the transportation and tourism industries and strong knowledge of the vehicle rental market. United States of America ❚ He started his career in 1979 at the vehicle rental company Budget Group, Inc. that he joined as North East Field Age and nationality: Operation Manager, before becoming a franchisee of Budget Rent-a-Car from 1980 to 1987. 63 ❚ Appointed as Chief Executive Officer of Team Rental Group in 1987, he notably supervised the acquisitions of Cruise American America, VPSI, Premier Car Rental and Budget Rent-a-Car; he then served as President, Chief Executive Officer and Chairman of Budget Group from 1997 to 2003, where he supervised the acquisition of Ryder TRS as well as the 05 Date first appointed: acquisition of Budget Group by Cendant Corporation. 06/08/2015 ❚ From 2003 to 2012, he served as Co-Chairman and Co-Chief Executive Officer of Franchise Services of North America, Inc., where he managed the acquisition of Advantage-Rent-a-Car, the merger with Rent a Wreck Capital and Date term of office U-Save. ends: ❚ He also served as member of the Board of Directors of the restaurant chain Stoonewood Holdings and of the State Shareholders’ Meeting University of New York at Oswego Foundation and as President of the American Car Rental Association. called to approve the ❚ Sandy Miller is currently Managing Partner of the private investment firm Basin Street Partners that he founded in 2001 financial statements for and since 2006 has been Vice-Chairman of the Board & Founding Director of the bank Gateway Financial Holdings of the fiscal year ending Florida, Inc. He is also a management consultant at Gerson Lehrman Group since 2003. ❚ December 31, 2018 Sandy Miller holds a Bachelor of Science, Business from the State University of New York, Oswego, NY. Number of Company shares held: 500 common shares
(1) Articles L. 225-21 par. 2, L. 225-77 par. 2 and L. 225-94 par. 1 of the French Commercial Code.
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PASCAL BAZIN MEMBER OF THE SUPERVISORY BOARD OF EUROPCAR GROUPE - INDEPENDENT MEMBER
POSITIONS AND OFFICES HELD Positions and offices currently held at companies not controlled (1) by Europcar Groupe ❚ Director of Darty plc ❚ Director of Belron ❚ Director of Camaïeu ❚ Manager of PB Consulting
Other positions and offices held over the last five years Business address: ❚ Chairman and Chief Executive Officer of Avis plc 49 Bis route de Montesson ❚ Director of Belvédère (2) 78110 Le Vesinet Age and nationality: MANAGEMENT EXPERIENCE 59 ❚ Pascal Bazin was, from June 2014 until the transformation of the Company’s corporate structure to a structure with French a Management Board and a Supervisory Board, a representative of PB Consulting on the Board of Directors of the Company. Date first appointed: ❚ He started his career in 1980 in the management consulting firm Peat Marwick Mitchell. Pascal Bazin was founder 06/08/2015 and Chairman of PB Consulting, a consulting firm specialized in professional and strategic coaching and director (administrateur) of Darty Plc, Belron SA and Camaïeu. Date term of office ❚ ends: Pascal Bazin was Managing Director (Directeur Général) of Avis Europe Plc from January 2008 to December 2011, where he successfully managed the company’s recovery and led the development of the group towards new markets Shareholders’ Meeting such as China and towards new mobility solutions such as car-sharing. He left his position at the end of 2011, called to approve the following the transfer of his activity to Avis Budget Group, Inc. financial statements for ❚ He had joined Avis Europe in 2005 after leaving Redcats, the third largest direct selling group in the world, where he the fiscal year ending was Managing Director (Directeur Général) of the specialized brands division (division des marques spécialisées) and December 31, 2017 Vice-President of Development/Strategy. ❚ Among his previous positions, he was Managing Director (Directeur Général) of many divisions of the cosmetic group Number of Company Yves Rocher in Southern Europe and North America. shares held: ❚ Pascal Bazin graduated from France’s École polytechnique. 500 common shares
(1) Articles L. 225-21 par. 2, L. 225-77 par. 2 and L. 225-94 par. 1 of the French Commercial Code. (2) French listed company.
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KRISTIN NEUMANN MEMBER PROPOSED FOR APPOINTMENT AT THE GENERAL MEETING OF MAY 10, 2016 INDEPENDENT MEMBER
POSITIONS AND OFFICES HELD Positions and offices currently held at companies not controlled(1) by Europcar Groupe ❚ Administrative and Financial Director of LSG Lufthansa Service Holding AG ❚ Member of the Supervisory Board of Germanwings GmbH
Other positions and offices held over the last five years ❚ Member of the Board of Directors of Thomas Cook AG
Business address: MANAGEMENT EXPERIENCE LSG Lufthansa Service ❚ Holding AG Kristin Neumann began her career in 2000 at Thomas Cook AG as a Specialist and later Head of the IT Department’s Planning and Coordination Unit, then Head of Sales Control in the German market (2003), Administrative and Financial FRA Z/VF Director for continental Europe (2006, and from November 1, Deputy CEO), Administrative and Financial Director for Dornhofstrasse 38 central Europe (2008), Member of the Thomas Cook AG Board of Directors (2010), Administrative and Financial Director Allemagne for the United Kingdom and continental Europe (2012-2014), in particular in charge of restructuring the English market. ❚ Age and nationality: In 2014, she joined LSG Lufthansa Service Holding AG as Administrative and Financial Director and Chief Officer Human Resources. 44 years 05 ❚ Kristin Neumann holds a degree in micro-economics and business management from the Georg-August-Universität German Göttingen (Diplom-Kauffrau, 1997) and a doctorate in business administration from the same university (1999), where she Date first appointed: also worked as a graduate-level lecturer and scientific director (1997-2000). May 10, 2016 Date term of office ends: Shareholders’ Meeting called to approve the financial statements for the fiscal year ending December 31, 2019 Number of Company shares held: No shares held
(1) Articles L. 225-21 par. 2, L. 225-77 par. 2 and L. 225-94 par. 1 of the French Commercial Code .
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5.1.2.2 Balance in the composition All of the criteria recommended by the AFEP/MEDEF Code of the Supervisory Board were used to evaluate the independence of the members of the Supervisory Board. At December 31, 2015, the Supervisory Board of the Europcar Group had ten members, of which six were independent. The application of all of these criteria led the Supervisory Board to keep the following as independent members: The Nominations and Compensation Committee and the a Supervisory Board, at their meetings of February 4, 2015 and Jean- Paul Bailly; February 4, 2015 respectively, evaluated the independence of a Jean-Charles Pauze; Jean-Charles Pauze pursuant to the criteria adopted by the a Company (see Section 6.2.2.2 “Supervisory Board” of this Virginie Fauvel; Registration Document). The Supervisory Board noted that, a Angélique Gérard; although he had been Chairman of the Board of Directors a between 2012 and 2015, Jean-Charles Pauze had never been Pascal Bazin; CEO nor held an executive position at the Group. In particular, a Sanford Miller; he did not hold the position of interim CEO, a position held a by Mrs. Caroline Parot for a few months in 2014. Therefore, Kristin Neumann. the Board of Directors considered that his past mandate as This is a total of 7 out of 11 members, representing 64% of Chairman of the board of the directors of the Company did not the headcount of the Supervisory Board, at the end of the impact his independence, which was also considered in light Shareholders’ Meeting of May 10, 2015. of other independence-related criteria which were all satisfi ed.
INDEPENDENCE CRITERIA
Not be an employee Not be a Not have been Not hold or current a director more than corporate No cross- No business No family or a past for more than 10% of the offi cer directorships relationships ties auditor 12 years stock Independent
Jean-Paul Bailly ✔ ✔ ✔✔✔ ✔ ✔ ✔ Jean-Charles Pauze ✔ ✔ ✔✔✔ ✔ ✔ ✔ Patrick Sayer ✔✔✔✔✔ Philippe Audouin ✔ ✔✔✔ ✔ ✔ Virginie Fauvel ✔ ✔ ✔✔✔ ✔ ✔ ✔ Angélique Gérard ✔ ✔ ✔✔✔ ✔ ✔ ✔ Pascal Bazin ✔ ✔ ✔✔✔ ✔ ✔ ✔ Sandy Miller ✔ ✔ ✔✔✔ ✔ ✔ ✔ Armance Bordes ✔ ✔✔✔ ✔ ✔ Eric Schaefer ✔ ✔✔✔ ✔ ✔ Kristin Neumann ✔ ✔ ✔✔✔ ✔ ✔ ✔
On the criterion of business relationships, the AFEP-MEDEF Since Europcar’s initial public offering on June 26, 2015 and Code in its revised version states that “the appreciation of the the appointments of Virginie Fauvel and Angélique Gérard to signifi cance or not of the relationship with the Company or its Supervisory Board, the latter includes three women, or 30% its group should be discussed by the board and the criteria of its members, thus exceeding the 20% threshold of women resulting in the assessment explained in the Registration stipulated by Act 2011-103 of January 27, 2011 relating to Document.” The review by the Nominations and Compensation the balanced representation of women and men on boards of Committee of the situation of each member in respect of directors and Supervisory Boards. Subject to the approval by this criterion found there to be no business relationships as the Shareholders’ Meeting of May 10, 2016 of the resolution regards the independent members. It therefore made no on the appointment of Kristin Neumann and the renewed pronouncement on the materiality assessment. mandates of Jean-Charles Pauze and Armance Bordes to the Company’s Supervisory Board, the latter will comprise eleven members of which four, or about 36%, will be women.
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5.1.2.3 Terms of offi ce of the members Information about the four members of the Executive of the Supervisory Board Committee who are also members of the Management Board is provided in Section 5.1.1.1 “Management Board” of this The terms in offi ce of the members of the Supervisory Board Registration Document. Information about the other members expire on a staggered basis in order to allow for the rolling of the Executive Committee is set out below: renewal of the Supervisory Board’s membership, in accordance with the recommendations of the AFEP-MEDEF Code. Marcus Bernhardt has been the Commercial Director since February 2013. He was previously the head of operations and responsible for conformity at international hotel groups and 5.1.2.4 Other management bodies chief of security at Gulf Air Bahrain. The Group has appointed one Chief Operating Offi cer and Jacques Brun has been Transformation and Human set up an Executive Committee, as well as two committees Resources Director since December 2012. He previously to assist the Management Board at operating level with the held various functions in the Finance, Logistics and Human preparation and implementation of decisions and strategies Resource Departments of several companies, in particular decided by the Management Board, namely the Fast Lane within Avis EMENA. Committee and the Investment Committee. Didier Fenix has been responsible for Fleet and Innovation at a) Chief Operating Offi cer the Group since 2013. He also holds the position of Managing Director of Europcar France and Europcar Belgium. He joined Kenneth McCall is the Chief Operating Offi cer. the Group in 1992 and held various management positions at 05 b) Executive Committee Europcar Belgium. The Group has established an Executive Committee, the Benoît Garel has been Group Controller since 2012. He joined principal mission of which is to coordinate the operating the Group in 2008. management of the Group. The Executive Committee Jan Löning has been Group Head of Customer Experience meets monthly to review the Group’s operating and fi nancial since 2015. He previously held general management positions performance, discuss strategic projects and business within Fnac.com, Redcats, Yves Rocher and Mobile Planet. He operations and to propose action plans to achieve the Group’s also has extensive knowledge of our business and the mobility short- and mid-term objectives. market, acquired at Avis Budget Group, where he held the post The Executive Committee, chaired by Philippe Germond, is of Managing Director France. composed of the heads of each country and the members of José-Maria Gonzalez has been General Manager of Spain the Management Board, as well as operating managers: at the Group since February 2010. He previously was director a Mr. Philippe Germond, Chairman of the Management Board; of operations for Spain since June 1995. a Mrs. Caroline Parot, CEO Finance (Directeur Général Paulo Moura has been General Manager of Portugal at the Finances), Chief Financial Offi cer; Group since 2005. He was previously Manager of Europcar Fleet Services. a Mr. Kenneth McCall, Deputy CEO, General Manager of Europcar UK; Reinhardt Quante has been General Manager of Germany at the Group since January 2013. He previously was fi nancial a Mr. Fabrizio Ruggiero, Director of Innovation and Mobility and director of Central Europe and Eastern Europe within Ferrero. General Manager of Europcar Italy; Ron Santiago has been General Manager of Australia and a Mr. Marcus Bernhardt, Group Commercial Director; New Zealand since 2008. He has 22 years of experience in a Mr. Jacques Brun, Transformation Director and Director of the automotive industry. Group Human Resources; c) Fast Lane Transformation Committee a Mr. Didier Fenix, General Manager of Europcar France and The Group formed a Fast Lane Transformation Committee, Belgium, Head of Group Fleet; headed by Jacques Brun, whose main function is to monitor a Mr. Benoît Garel, Group Controller; the operational implementation of the Fast Lane transformation program throughout the Group’s various business and regional a Mr. Jan Löning, Customer Experience Director; units. a Mr. José Maria Gonzalez, General Manager of Europcar This committee will be supported by the PMO (Project Spain, in charge of InterRent; Management Officer) team and representatives from the a Mr. Paulo Moura, General Manager of Europcar Portugal; principal operating functions of the Group. a Mr. Reinhard Quante, General Manager of Europcar Meetings are held based on the advancement of roll-out Germany; and projects within each relevant country or unit. a Mr. Ron Santiago, General Manager of Europcar Australia / New Zealand.
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d) Investment Committee including customers and partners) other than those monitored by the Fast Lane Committee. The Group also formed an Investment Committee, whose main task is to analyze, structure and validate the economic The Investment Committee meets whenever necessary. and fi nancial balance of contracts with principal partners and This Committee, presided by Caroline Parot, relies on the major Group investment projects (key commercial stakeholders, project management function, the group controlling the operating functions of the Group.
5.1.3 Declarations relating to corporate governance
The Company complies with all of the recommendations of (iv) no Board member has been disqualifi ed by a court from the AFEP-MEDEF Code of Corporate Governance for Listed acting as a member of the administrative, management or Companies (1). supervisory body of any company or from being involved in the management or performance of business of any company. As the Company’s shares were publicly traded on a regulated market as of the fi ling date of this Registration Document, and in accordance with article L. 225-68 of the French Commercial 5.1.3.2 Confl icts of interest Code, the Chairman of the Supervisory Board is required to draw up a report on the Board’s composition and gender balance, To the Company’s knowledge, and subject to the relationships the conditions in which the Board prepares and organizes its described in Section 7.2 “Related Party Transactions”, as of work, and the internal control and risk management procedures the date of this Registration Document there were no potential the Company has put in place. This report was prepared for confl icts of interest between the duties of the members of the the fi rst time in respect of the fi scal year ended December 31, Supervisory and Management Boards to the Company and 2015; the said report appears in Section 5.2.4 “Report by their private interests. The Supervisory Board has given a the Chairman of the Supervisory Board” of this Registration special assignment to Pascal Bazin to support the Fast Lane Document. project. This assignment is in the best interests of the Company. Outside of this mission and to the Company’s knowledge, there are no service contracts linking members of the Supervisory 5.1.3.1 Biographical information about Board with the Company or one of its subsidiaries and granting the members of the Supervisory benefi ts. and Management Boards To the Company’s knowledge, as of the date of this Registration As of the date of this Registration Document, to the Company’s Document, there were no agreements or undertakings of knowledge, there were no family ties between any members of any kind with shareholders, customers, suppliers or others the Company’s Supervisory and Management Boards. pursuant to which any member of the Company’s Supervisory or Management Boards was appointed to such position. To the Company’s knowledge, in the last fi ve years, (i) no Board member has been convicted of fraud, (ii) no Board member As of the date of this Registration Document, the members has been associated with any bankruptcy, receivership or of the Supervisory and Management Boards have not agreed liquidation, (iii) no Board member has been the subject of any to any restrictions on the sale of their shares in the Company accusations or offi cial public sanctions by statutory or regulatory apart from rules on the prevention of insider trading and the authorities (including designated professional bodies), and recommendations of the AFEP-MEDEF Code on the retention of shares.
(1) http://www.afep.com/uploads/medias/documents/Code_de_gouvernement_entreprise_revise_novembre_2015.pdf
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5.2 ROLE AND ACTIVITIES OF THE SUPERVISORY BOARD
5.2.1 Internal rules of the Supervisory Board
The internal rules set out in Article 19 of the Company’s bylaws or other means of telecommunication is prohibited for votes on follow best practices to ensure compliance with the basic the following decisions: principles of corporate governance, in particular those laid a appointing or replacing a Chairperson or Vice-Chairperson; down in the AFEP-MEDEF Code of Corporate Governance for Listed Companies (henceforth the “AFEP-MEDEF Code”) a appointment or removal of members of the Management revised in November 2015. Board; and The internal rules were approved by the Supervisory Board at a closing the annual Company and consolidated financial its meeting of April 1, 2015 and complement the Company’s statements and reviewing the Company and Group bylaws as well as the laws and regulations in force by specifying management reports. the duties, composition and workings of the Supervisory Board, the Audit Committee and the Nominations and Compensation 05 Committee and their interactions. The Audit Committee has had 5.2.1.2 Matters reserved for the Supervisory its own charter since 2010, which is currently being updated. Board The internal rules of the Supervisory Board can be modifi ed at Article 20.IV of the Company’s bylaws sets limits to the powers any time by a deliberation of the Supervisory Board. of the Management Board. First, in accordance with applicable laws and regulations, the following acts are subject to the prior authorization of the Supervisory Board: 5.2.1.1 Participation in Supervisory Board a meetings by video conference or the sale of real property; other means of communication a the total or partial sale of equity investments; and Pursuant to applicable laws and regulations, the use of video a the granting of sureties, bonds, endorsements or guarantees. conference or other means of telecommunication is authorized The bylaws also stipulate that the following transactions relating for any Supervisory Board meeting. The means used must to the Company require prior authorization: enable real-time and continuous transmission of speech and, if applicable, video images of the members, who must be visible a a proposal to the Shareholders’ Meeting to modify the to everyone. These means must also permit each member to bylaws; be identifi ed and ensure their active participation in meetings. a any draft resolution to the Shareholders’ Meeting relating Directors participating in a meeting by means of video to the issuance of share or other securities giving access, conference or other means of telecommunication as described immediately or in the future, to the Company’s share capital, above are deemed present for purposes of calculating quorum and any use of such delegations granted by the general and majority. The attendance sheet includes the names of Shareholders’ Meeting; members participating in the Supervisory Board meeting in a any transaction in the Company’s shares that could lead, such manner. The meeting’s minutes must indicate the names immediately or in the future, to a capital decrease (not of those Supervisory Board members deemed present in this occasioned by losses) through a decrease in the par value manner. The minutes must also mention the occurrence of any or a cancellation of shares; technical diffi culties that may have interfered with the meeting. a any proposal to the Shareholders’ Meeting to implement a In accordance with Article L. 225-82 of the French Commercial share buy-back program; Code and Article 19-III of the Company’s bylaws, participation in Supervisory Board meetings by means of video conference a any proposal to the Shareholders’ Meeting to allocate the Company’s results and to distribute dividends, as well as any distribution of an interim dividend;
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a decisions to change the Company’s business or to diversify a the acquisition, expansion or sale of equity investments by the Group’s activities in a manner involving investments of the Company or by one of its subsidiaries in any companies more than €15 million; and created or to be created in an amount greater than €15 million; a adopting the Company’s annual budget and strategic plan. a the entry into or substantial modification of agreements The amounts referred to above may be revised upward by the relating to the exclusive use by a third party of any mark Supervisory Board’s internal rules. owned by the Company or one of its subsidiaries (other than The bylaws also provide that the following transactions relating in connection with a franchise agreement or in the ordinary to the Company or to the subsidiaries it controls, within the course of business); meaning of Article L. 233-3 of the French Commercial Code, a any other planned transaction (except for fl eet purchase require prior authorization: investments) not referred to in the list above, the investment a implementing an option plan or allocating stock subscription amount of which is greater than €10 million, to the extent or purchase options; that such investments are not included in the budget; and a implementing a free share grant plan or granting shares; a any decision to carry out a merger, spin-off, partial asset contribution or similar transaction involving the Company, a any new debt or fi nancing agreement where the transaction and any vote within the Company’s subsidiaries relating or agreement amount exceeds (i) €100 million in the case of to a merger, spin-off, partial asset contribution or similar asset-backed debt without any guarantee, with the exception transaction, with the exception of intra-Group reorganizations. of leasing agreements, and (ii) €25 million in all other cases; The amounts referred to above may be revised upward by the a dispute settlement agreements in an amount exceeding Supervisory Board’s internal rules. €10 million; Any related-party agreement subject to Article L. 225-86 of a decisions to expand into new countries, whether directly, the French Commercial Code also requires prior authorization. through the formation of a direct or indirect subsidiary, through equity investments or entry into joint-venture agreements Activity of the Supervisory Board in 2015 or signifi cant collaborations that is to say, collaborations in In 2015, the Supervisory Board met 10 times, with an which the assets contributed by any Group entity (including in attendance rate of 83% (1). cash) exceed a threshold of €15 million, as well as decisions to withdraw from any presence in a given country, except in the event of an emergency;
5.2.2 Supervisory Board Committees
Pursuant to Article 20.VI of the Company’s bylaws and Article 10 After receiving a favorable opinion from the Nominations and of the Supervisory Board’s internal rules, the Supervisory Board Compensation Committee, the Supervisory Board decided on may form committees charged with examining questions the following composition for the Board’s committees: submitted to them by the Board or its Chairman. Prior to the 1) The Audit Committee comprises the following members change in the Company’s corporate governance structure, the for terms that will coincide with their respective terms as Board of Directors had two committees: an Audit Committee members of the Supervisory Board: and a nominations-compensation committee. a Philippe Audouin (Chairman); The Supervisory Board created an Audit Committee and a a Nominations and Compensation Committee whose Pascal Bazin (independent member); composition, duties and workings are described below. a Virginie Fauvel (independent member). The composition of these committees complies with the The three members of the Audit Committee have the necessary recommendations of the AFEP-MEDEF Code. fi nancial and accounting skills in view of their experience, as described in Section 5.1.2.1 “Composition of the Supervisory Board” of this Registration Document.
(1) With the change in the Company’s mode of governance, the Board of Directors met three times, with a 93% attendance rate of its members.
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2) The Nominations and Compensation Committee comprises The Statutory Auditors must in particular be heard at the time the following members for terms that will coincide with their of the Committee meetings dealing with the preparation and respective terms as members of the Supervisory Board: control of the fi nancial statements in order to report on the execution of their mission and the conclusions of their work. a Jean-Charles Pauze (Chairman, independent member); a Angélique Gérard (independent member); This allows the Committee to be informed of the main areas a Eric Schaefer. of risk or uncertainty regarding the accounts identifi ed by the Statutory Auditors, their audit approach and any diffi culties encountered during their mission. 5.2.2.1 Audit Committee (II) OVERSEEING THE EFFECTIVENESS OF THE INTERNAL DUTIES (ARTICLE 1 OF THE RULES CONTROL, INTERNAL AUDIT AND RISK MANAGEMENT OF PROCEDURE OF THE AUDIT COMMITTEE) SYSTEMS CONCERNING ACCOUNTING AND FINANCIAL INFORMATION. The duties of the Audit Committee are to oversee the preparation and audit of accounting and fi nancial information and to ensure The Audit Committee must ensure the relevance, reliability the effectiveness of risk monitoring and internal operating and implementation of internal control procedures and the control mechanisms in order to facilitate the Supervisory identifi cation, hedging and management of the Company’s Board’s oversight of control and verification mechanisms. risks in relation to its activities and its accounting and fi nancial Within this framework, the Audit Committee carries out the information. 05 following main duties: The Committee must also examine the signifi cant risks and off-balance sheet commitments of the Company and its (I) OVERSEEING THE PREPARATION OF ACCOUNTING subsidiaries. The Committee must in particular interview the AND FINANCIAL INFORMATION persons in charge of the internal audit and regularly examine Prior to their presentation to the Supervisory Board, the the business risk map. In addition, the Committee must give Audit Committee must examine the parent company and its opinion on the organization of the Audit Department and be consolidated fi nancial statements, annual or half-yearly, and informed of its audit program. It should receive the internal audit ensure the relevance and constancy of the accounting methods reports or a periodic summary of these reports. used to establish these statements. The Committee will review, if needed, all major transactions that may have entailed confl icts (III) OVERSEEING THE LEGAL AUDIT OF THE PARENT COMPANY of interest. The Committee must express an opinion on any AND CONSOLIDATED FINANCIAL STATEMENTS BY THE signifi cant changes to the accounting principles applied by the COMPANY’S STATUTORY AUDITORS Company when preparing its consolidated fi nancial statements In particular, the Audit Committee must gather and monitor (annual or half-yearly) with the exception of changes caused information from the Company’s Statutory Auditors (also by modifi ed IAS/IFRS. without the presence of members of the Management Board) The Committee must examine the scope of consolidated on their general work schedule, on any diffi culties encountered companies and, if need be, the reasons why companies are during the exercise of their mission, on changes they consider excluded from the scope. necessary to the Company’s accounts or other records, on any accounting irregularities, anomalies or inaccuracies they may The Audit Committee must in particular examine provisions have identifi ed, on uncertainties or signifi cant risks concerning and their adjustments and any situation that may generate a the drawing up and processing of accounting and fi nancial signifi cant risk for the Group as well as all fi nancial information data, on the conclusions drawn from their observations and and all annual, half-yearly or quarterly reports drawn up in the corrections concerning the period’s results compared to those regular course of business or for a specifi c transaction (for of the previous period, and on any signifi cant internal control example a contribution, a merger or a market transaction). weaknesses they may have discovered. This examination must take place insofar as possible two (2) (IV) OVERSEEING THE INDEPENDENCE OF THE STATUTORY days prior to the review by the Supervisory Board. AUDITORS The examination of the financial statements must be The Committee must steer the procedure for selecting and accompanied by a presentation from the Statutory Auditors renewing the Statutory Auditors and submit the results of indicating the key points of the legal audit and of the accounting this selection to the Supervisory Board. It must also issue a options used as well as a presentation by the Chief Financial recommendation on the Statutory Auditors put forward for Offi cer describing the Company’s risk exposure and signifi cant appointment by the Shareholders’ Meeting. Upon expiry of off-balance sheet commitments. the Statutory Auditors’ mandate, their selection or renewal may be preceded, upon a proposal by the Committee and decision by the Supervisory Board, by a call for tenders supervised by the Audit Committee.
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In order for the Audit Committee to monitor the Statutory In accordance with applicable legal rules, the members of the Auditors’ compliance with the rules pertaining to their committee must have specialized knowledge in fi nance and/ independence and objectivity throughout the duration of their or accounting. Upon their appointment, all members of the mandate, the Committee must obtain every year: Audit Committee must receive information pertaining to the Company’s accounting, fi nancial and operating specifi cities. a the Statutory Auditors’ declaration of independence; The Audit Committee members’ terms expire at the same a the amount of the fees paid to the Statutory Auditor networks time as their terms on the Supervisory Board, except that the by the entities controlled by the Company and its controlling Supervisory Board may at any time change the composition of entity for services that are not directly related to the Statutory the Committee and thus end the term of a Committee member. Auditors’ mission; and The Chairman of the Audit Committee is appointed by the a information on the services supplied in respect of the tasks Supervisory Board from among the Committee’s members for directly related to the Statutory Auditors’ mission. his entire term as a member of the Committee. In addition, the Committee must examine with the Statutory Auditors the risks pertaining to their independence and the OPERATION (ARTICLE 2 OF THE RULES safeguard measures taken to reduce these risks. It must in OF PROCEDURE OF THE AUDIT COMMITTEE) particular ensure that the amount of the fees paid by the Company and the Group, or the share it represents of the The Audit Committee may conduct meetings in person or via revenue of the Statutory Auditor fi rms or networks, is not of a video or telephone conference pursuant to the same rules as nature to endanger the independence of the Statutory Auditors. the Supervisory Board, when convened by its Chairman or secretary, so long as at least half of its members participate. The mission of Statutory Auditor must be exclusive of any Committee members may not give proxies to other members other task not related to this mission in accordance with to represent them. the professional code of ethics and professional standards governing Statutory Auditors. The selected Statutory Auditors The Audit Committee’s recommendations are adopted by a must renounce, for themselves and for the network to which simple majority of members present. In the event of a tie, the they belong, all consultancy work (e.g. legal, tax, information vote of the Committee’s Chairman prevails. technology) carried out directly or indirectly on behalf of the The notice of meeting must include an agenda and may be Company that has chosen them or of the companies that transmitted orally or by any other means. it controls. Nevertheless, upon prior approval by the Audit Committee, work ancillary or directly complementary to the The Audit Committee meets as often as necessary and, in audit of the fi nancial statements may be carried out, such as any event, at least twice a year in connection with the Group’s acquisition or post-acquisition audits but excluding evaluation preparation of the annual and interim fi nancial statements. and consultancy work. The Audit Committee’s meetings are held prior to the meeting of the Supervisory Board and, to the extent possible, at least COMPOSITION (ARTICLE 10 OF THE SUPERVISORY two days prior when the Audit Committee’s agenda includes BOARD’S INTERNAL RULES) examination of interim or annual fi nancial statements prior to their review by the Supervisory Board. In accordance with Article 10 of the Supervisory Board’s internal rules, the Audit Committee must comprise between Minutes are prepared for each meeting, in the absence three and fi ve members chosen from among the members of of other provisions, by the meeting’s secretary appointed the Supervisory Board. by the Committee’s Chairman, under the authority of the Committee’s Chairman. The minutes are sent to all members As of the date of this Registration Document, the Audit of the Committee. The Chairman of the Committee decides Committee was made up of three members chosen from conditions pursuant to which it reports on its work to the among the members of the Supervisory Board, two of whom Supervisory Board. were appointed from among the independent members of the Supervisory Board. As the proportion of independent members The Committee presents its work at the next Supervisory Board within the Audit Committee is two thirds, the composition of this meeting. committee complies with the recommendations of the AFEP- Activity of the Audit Committee in 2015 MEDEF Code. In 2015, the Audit Committee met fi ve times, with an attendance rate of 100%.
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5.2.2.2 Nominations and Compensation a annual evaluation of all positions held by members of the Committee Supervisory Board Each year prior to the publication of the Company’s Annual DUTIES (ARTICLE 1 OF THE RULES Report, the Nominations and Compensation Committee OF PROCEDURE OF THE NOMINATIONS examines the status of each member of the Supervisory AND COMPENSATION COMMITTEE) Board with regard to the rules on the holding of multiple offices and submits its findings to the Board so that the In accordance with Article 10 of the Supervisory Board’s internal Board may examine the status of members as appropriate rules, the Nominations and Compensation Committee must under these standards. comprise between three and fi ve members chosen from among the members of the Supervisory Board. a e xamination and proposal to the Supervisory Board of all components and terms of compensation of the members As of the date of this Registration Document, the Nominations of the Management Board and Compensation Committee had three members chosen from among the members of the Supervisory Board, two of whom The Nominations and Compensation Committee makes were appointed from among the independent members of the proposals that include fi xed and variable compensation, Supervisory Board. As the proportion of independent members as well as, if applicable, share subscription or purchase within the Nominations and Compensation Committee is a options, performance share allocations, retirement and majority, the composition of this committee complies with the pension plans, severance packages, benefi ts in kind and recommendations of the AFEP-MEDEF Code. individual benefi ts and all other possible direct or indirect 05 compensation (including long-term) that may be included in The Nominations and Compensation Committee is a specialized the compensation of members of the Management Board. committee of the Supervisory Board whose main duty is to assist the Supervisory Board in constituting the Company’s The Committee is informed of the compensation policy for management bodies and determine and regularly evaluate the principal executives who are not corporate offi cers, as the compensation and benefi ts received by the members of well as of the hiring and compensation of the members of the Management Board, including deferred benefi ts and/or the Executive Committee. severance pay for voluntary or forced departure from the Group. a e valuation and proposal to the Supervisory Board concerning In that context, the Nominations and Compensation Committee allocation of attendance fees carries out the following duties: The Committee submits a proposal to the Supervisory Board a p roposing candidates for appointment to the Supervisory with respect to the allocation of attendance fees and individual Board, to the Management Board and to Board Committees amounts of payments to the members of the Supervisory and evaluating the candidacies of non-independent members Board, taking into account their actual participation on the of the Supervisory Board Board and on the committees of which they are members, the responsibilities undertaken and the time which they must The Nominations and Compensation Committee makes dedicate to their duties. proposals for the appointment of members of the Supervisory Board (either by the Shareholders’ Meeting or by co-option) The Committee also submits a proposal on the compensation and of the Management Board and for the appointment of allocated to the Chairman and Vice-Chairman of the members and chairmen of each of the Supervisory Board’s Company’s Supervisory Board. committees. a e xceptional duties With respect to nominating independent members of the The Committee is consulted by the Supervisory Board to Supervisory Board, the Committee takes the following criteria make recommendations on all exceptional compensation into account: (i) the desired balance in the composition of related to exceptional duties which may be given by the the Supervisory Board with regard to the composition and Supervisory Board to certain of its members. the evolution of the Company’s ownership, (ii) the proportion of men and women required by the regulations in effect, (iii) the advisability of renewing terms, and (iv) the integrity, COMPOSITION (ARTICLE 10 OF THE SUPERVISORY knowledge, experience and independence of each candidate. BOARD’S INTERNAL RULES) The Nominations and Compensation Committee must also As of the date of this Registration Document, the Nominations establish a procedure to select future independent members and Compensation Committee had three members chosen and make its own evaluations of potential candidates before from among the members of the Supervisory Board, two of any candidates are approached. whom were appointed from among the independent members of the Supervisory Board.
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Committee members are appointed by the Supervisory Board WORKINGS (ARTICLE 2 OF THE RULES from among its own members, taking into consideration OF PROCEDURE OF THE NOMINATIONS independence as well as experience in the selection and AND COMPENSATION COMMITTEE) compensation of listed company executive officers. The The Nominations and Compensation Committee may conduct Nominations and Compensation Committee may not include meetings in person or via video or telephone conference any senior executive or corporate offi cer of the Company. pursuant to the same rules as the Supervisory Board, when The Nominations and Compensation Committee members’ convened by its Chairman or secretary, so long as at least half terms expire at the same time as their terms on the Supervisory of its members participate. Committee members may not give Board, except that the Supervisory Board may at any time proxies to other members to represent them. change the composition of the Committee and thus end the The Committee’s recommendations with respect to term of a Committee member. compensation and nominations are adopted by a simple The composition of the Committee may be modifi ed by the majority of members present. In the event of a tie, the vote of Supervisory Board, acting at the request of its Chairman, and, the Committee’s Chairman prevails. in any event, must be modifi ed in the event of a change in the The notice of meeting must include an agenda and may be general composition of the Supervisory Board. transmitted orally or by any other means. The Chairman of the Nominations and Compensation The Nominations and Compensation Committee meets as Committee is appointed from among the independent members often as necessary and, in any event, prior to any meeting by the Supervisory Board, upon the proposal of the Chairman at which the Supervisory Board votes on the compensation of the Supervisory Board. of members of the Management Board or the allocation of The Committee’s secretary is any person designated by the attendance fees. Chairman of the committee or with the Chairman’s agreement. The Committee presents its work at the next Supervisory Board meeting. Activity of the Nominations and Compensation Committee in 2015. In 2015, the Nominations and Compensation Committee met four times, with an attendance rate of 100%.
5.2.3 Internal control
The Group’s internal control system is intended to ensure: The internal control system encompasses the following: a application of the instructions and guidelines set by the Group’s senior management; Organization/control environment, including: a the proper functioning of the Company’s internal processes, in particular those involved in protecting its assets; and AN INTERNAL AUDIT DEPARTMENT a the reliability of fi nancial information. The Group Internal Audit Department is composed of a Director It relies on the principles of the Committee of Sponsoring of Group Internal Audit, a manager and three internal auditors. Organizations of the Treadway Commission (COCO) as well Previously, the Director of Internal Audit has reported to the as on international standards, as defi ned by the Institute of CEO, the Chairman of the Company’s Board of Directors and Internal Auditors (IIA), in particular. the Audit Committee, which was appointed by the Board of Directors. When the Company’s new corporate governance
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structure is instituted, the Director of Internal Audit will report The report prepared by the Chairman of the Supervisory to the Chairman of the Supervisory Board and to the Audit Board on the composition of the Supervisory Board and the Committee appointed by the Supervisory Board. This link application of the principle of balanced representation of men between internal audit and the Company’s management is and women on the Board, and setting out the conditions under supplemented by continuous access to and cooperation with which the Supervisory Board prepares and organizes its work the other members of the Company’s Management Board. and the internal control and risk management procedures the Group has been put in place, as provided for in article L. 225-68 In addition, there will be an operating link between the Group of the French Commercial Code, is presented in Section 5.2.4 Internal Audit Department and the local audit units of the “Report by the Chairman of the Supervisory Board” of this operating subsidiaries, primarily dedicated to point of sale Registration Document. audits and operating site audits, including of local stations and franchisees. AN INTERNAL CONTROL QUESTIONNAIRE This organization arises out a shared audit charter that has been in place between the Company and the Corporate The Group has used an Internal Control Questionnaire (ICQ) Countries since 2010, the update of which is expected to be for the past four years. It covers fi nancial reporting procedures, completed in early 2016. operating oversight (such as contract management, franchises, agents and affiliates), functional oversight (such as legal, The Group Internal Audit Department provides Group purchase, Human Resources, IT) and oversight of Group management teams with reasonable assurances as to governance. The internal control questionnaire will be reworked transactional oversight, gives them advice on improvements and in 2016. 05 contributes to creating added value. It assists the Management Board and the Corporate Countries in achieving their objectives AN ANNUAL STATEMENT SIGNED BY by using a systematic and methodical approach to evaluating THE MANAGEMENT OF THE GROUP ENTITES. management risks, control risks and corporate governance, and making proposals to strengthen their effectiveness. It also Each year, the executive offi cers of the Group’s companies sign promotes a strong internal control environment in order to a compliance letter that lists and analyzes situations of non- increase oversight of risks and operations. compliance or risk of non-compliance and then explains the corrective measures implemented during the fi scal year. The The Group Internal Audit Department carries out and regularly compliance letter also certifi es that, to the knowledge of the updates risk mapping at the Group and subsidiary levels on a signing offi cer, all staff employed by the entity during the fi scal rotating basis. The risk mapping is presented once a year to year received training on the Group’s ethics charter, confl icts the Group’s Management Board, which reviews it and examines of interest, the protection of personal data and competition actions and specific monitoring of certain risks. The main law (see Section 2.7.2 “Risk Management” of this Registration identifi ed risks are then addressed or monitored specifi cally. Document). The Group Internal Audit Department defi nes and executes, either on its own initiative or on the initiative of Group AN INTRANET SITE management, an annual audit plan that includes the international franchise network, internal control audits and any The Group also maintains an intranet site that includes all other advice or assurance assignment. In addition, the Group internal procedures applicable to the Group entities and is Internal Audit Department consolidates the audits performed in accessible to all such entities. the various Corporate Countries and in particular those relating to transactions carried out by the different stations making up An internal control evaluation and monitoring the Group’s network. It works in close collaboration with the system local audit teams for that purpose. For the last two years, the Group Internal Audit Department has Supervision of the internal control procedures includes an asked Ernst & Young to conduct an annual audit of stations analysis of the results of controls carried out (identifi cation held by franchisees in order to ensure their compliance with and processing of incidents) and the evaluation of controls the Group’s rules. to ensure their relevance and adequacy for ensuring the control objectives. This supervision combines self-evaluations Finally, in close collaboration with the external auditors, the and audits (see Section 2.7.2 “Risk Management” of this Group Internal Audit Department oversees the implementation Registration Document). of the audit recommendations and of high-priority action plans.
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5.2.4 Report by the Chairman of the Supervisory Board
Report by the Chairman of the Supervisory Board under and benefi ts of all kinds granted to corporate offi cers. Lastly, article L. 225-68 of the French Commercial Code it mentions the publication of the information provided for in article L. 225-100-3 of the French Commercial Code. In accordance with article L. 225-68 of the French Commercial Code, the report by the Chairman of the Supervisory Board The Company’s 2015 Registration Document comprises all for the year ended December 31, 2015 comprises information the items of the report by the Chairman of the Company’s on the composition of the Board and its gender balance, the Supervisory Board referred to in article L. 225-68 of the French conditions in which the Board prepares and organizes its work, Commercial Code. References to sections of the Registration and the internal control and risk management procedures the Document corresponding to the various parts of the report by Company has put in place, in particular those concerning the Chairman of the Supervisory Board, as approved by the the drawing up and processing of accounting and fi nancial Supervisory Board at its meeting of February 24, 2016, can data. This report also specifi es that the Company voluntarily be found below. applies a code of corporate governance, indicates the specifi c The report and the procedures underlying it were examined procedures relating to the participation of shareholders in by the Audit Committee of February 22, 2016, and were Shareholders’ Meetings, and presents the principles and rules approved in whole by the Supervisory Board during its meeting laid down by the Supervisory Board to set the compensation of February 24, 2016.
Registration Document Chapter/Section
Composition and gender balance of the Supervisory Board and conditions 5.1.2.1 in which it prepares and organizes its work 5.1.2.2 5.2.1 5.2.2 6.2.2.2 Limitation of the powers of the Management Board 5.1.1 6.2.2 5.2.1.2 Reference to the Corporate Governance Code and deviations from the Code 5.1.3 Specifi c procedures relating to the participation of shareholders in Shareholders’ Meetings 6.2.5 Principles and rules laid down by the Supervisory Board to set the compensation 5.3 and benefi ts of all kinds granted to the corporate offi cers Information provided for in article L. 225-100-3 of the French Commercial Code 6.6
Internal control and risk management the Group’s scope of consolidation. The information contained procedures in this report is divided in the following manner: a The description of internal control and risk management w ork underlying the preparation of the description of internal procedures was drawn up under the responsibility of the control and risk management procedures; Chairman of the Supervisory Board and is an integral part of a i nternal control standard chosen by the Group; the Chairman’s report provided for in article L. 225-68 of the a French Commercial Code. The report was prepared with the i nternal control scope of the Group; support of the Group Internal Audit Department and the Group a general organization of internal control and risk management; Financial Department as well as the Group Legal Department, a under the supervision of the Management Board. i nternal control procedures concerning the elaboration and processing of accounting and fi nancial information. This report covers the parent company of Groupe Europcar S.A. (the Company) as well as all controlled companies included in
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5.2.4.1. Work underlying the preparation achieved. Among its inherent limitations, the internal control of the description of internal control cannot avoid erroneous judgments, bad decisions or external and risk management procedures events that may hinder the achievement of the operating objectives. The description of internal control and risk management procedures was drawn up using contributions from several departments, in particular the fi nancial, legal and information 5.2.4.3. Internal control scope of the Group systems departments. Various countries also contributed The principles and operating methods of the internal control actively to the report’s description of internal control system system are defi ned at the Group and operating entity levels. as needed. Furthermore, the internal control system applies to the entire Group (parent company and subsidiaries) irrespective of 5.2.4.2. Internal control standard chosen whether management has decided to carry out operating by the group activities directly or via external service providers. The description of internal control and risk management procedures is based on the fi ve components of the internal 5.2.4.4. General organization of internal control model established and distributed by the Committee control and risk management of Sponsoring Organizations of the Treadway Commission (COSO): This report covers the main control procedures implemented 05 or being implemented for each internal control component set 1. c ontrol environment; out in the COSO control framework. 2. r isk assessment; 3. c ontrol activities; CONTROL ENVIRONMENT OF THE GROUP
4. i nformation and communication; GOVERNANCE BODIES AND CONTROL ENVIRONMENT 5. m onitoring. The Group’s control environment is based on a set of measures relying both on the commitment of senior management and This model, which is internationally recognized, constitutes the on an internal control culture at all levels of responsibility, in reference standard for the Group’s control efforts. particular at station chief level. It also relies on documents and In accordance with the “COSO Report”, internal control is rules that structure critical processes and are mandatory for a process implemented by the Supervisory Board and the all members of staff: management and staff of an entity aiming to provide reasonable a the Group’s values, setting out its commitments towards assurance regarding the achievement of objectives in terms of customers, staff and shareholders and outlining the principles operations, reporting and compliance. These objectives cover on which the actions of senior management are based; the main aspects of internal control and are defi ned as follows: a the rules common to all Group entities laid down by the 1. Operating objectives ensure the effectiveness and effi ciency Supervisory Board and the Management Board. These rules of operating and financial performance and of asset lay down the measures applicable in the following instances: protection; a delegations of authority to executives and corporate 2. Reporting objectives ensure the reliability, punctuality and offi cers, transparency of internal, external, fi nancial and non-fi nancial a reporting; means of executive compensation, a investments and commitments given (such as bonds, 3. Compliance objectives ensure the respect of the laws and endorsements and guarantees); regulations applicable to the entity. a the harmonization of fi nancial processes currently underway This internal control framework is itself consistent with the through the setting up of a Shared Services Center and a framework proposed by the AMF in 2007, supplemented by unifi ed IT system used by most entities; its application guide, updated in July 2010, and with AMF a an Internal Control Questionnaire (ICQ) covering all functions Recommendation 2013-17. and processes and adapted to the operating risks in the As with any control system, internal control provides reasonable, stations. not absolute, assurance that the entity’s objectives have been
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Several networks of managers and correspondents relay the This code is based on several international guidelines to which control procedures defi ned by the Group in the various countries Europcar adheres (in particular the United Nations Universal and subsidiaries, such as the network of decentralized internal Declaration of Human Rights, the European Convention on auditors. Human Rights, various conventions of the International Labour Organization, and the OECD Guidelines for Multinational BREAKDOWN OF INTERNAL CONTROL DUTIES AND Enterprises). RESPONSIBILITIES Via this Ethics Code, Europcar undertakes to respect a certain The primary actors of the internal control process are as follows: number of commitments on the basis of specifi c objectives: a the Audit Committee, in accordance with its duties defi ned 1. toward its customers and consumers: in the French Commercial Code, ensures the relevance, reliability and implementation of internal control procedures a offer services that meet or anticipate the expectations and the identification, hedging and management of the of customers and consumers in order to fully merit their Company’s risks in relation to its activities and the generation confi dence, of accounting and fi nancial information. In particular, the a guarantee the security and confi dentiality of data; Committee interviews the Group Director of Internal Audit and 2. toward its employees: examines the risk map. It is regularly informed of the results a safeguard the health and safety of employees, of the internal control self-evaluation process. In addition, a the Committee gives its opinion on the organization and promote equal opportunities within the Company, resources of the Group Internal Audit Department and is a enable its employees to feel a sense of work informed of its audit program. It receives a periodic summary accomplishment, of the internal audit reports; a encourage positive work relations and freedom of expression of employees, a the Management Board is ultimately responsible for risk a prevent insider trading and unjustifi ed use of confi dential management and internal control and relies in particular on: or privileged information; a the fi nancial departments of operating entities on the one 3. toward its industrial and commercial partners: hand, and a select industrial and commercial partners that can, in their a the operating and functional departments on the other respective countries, guarantee compliance with basic hand; labor rights, in particular those defi ned by the International a the Internal Audit Department reports to the Chairman of Labour Organization, the Management Board and has direct access to the Audit a ensure mutual respect of the principles of loyalty in all Committee. It relies on a central team and a decentralized industrial and commercial relations, network of internal auditors in order to: a prevent all forms of active and passive corruption; a design, execute and monitor the annual internal audit plan, 4. toward the stock market: a assess risks by carrying out an annual Group risk mapping a and the ensuing action plans, Europcar attaches great importance to the quality of information and ensures reliable and transparent a contribute to compliance with the Group’s rules, in communication with fi nancial markets; particular in the stations, and recommend improvements to internal control. 5. toward the environment: a ETHICS AND PROFESSIONAL RULES OF CONDUCT minimize the environmental footprint of its activity while ensuring respect of environmental regulations by reducing The Group is currently implementing a complete Ethics program the pollution caused by its services and infrastructures and (Compliance program) comprising a range of ethical principles, by limiting its consumption of energy and raw materials. a structure covering the entire Group, and a multi-annual action Overall, Europcar is proposing 12 objectives, expressed plan. through 47 concrete commitments Ethics code The Code must be communicated to all Europcar employees Europcar is developing a concrete and detailed set of ethical and put up on the Company’s intranet; it will also, if necessary, principles defi ning the professional behavior expected of the be made available to various Europcar counterparts. Group’s representatives and employees. These principles are Senior managers of the Company will be trained on how to now included in the Ethics Code, which will be examined by the apply the Code and will be responsible for making their teams Group’s representation bodies. When this process is complete, aware of it. the Code will be implemented. Europcar’s Management Board will carry out annual reviews of the proper application of the Code and its wide distribution.
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Assistance and advice will be available from the Group A regional Compliance Offi cer will be appointed in each country Compliance Committee. Its goal, amongst others, is to help in which Europcar subsidiaries are present. They will be tasked all employees who want to properly apply the Code’s principles in particular with implementing the Compliance program when and commitments in complete confidentiality and with the the Group Compliance Offi cer requires assistance at the local assurance that queries will be answered within a reasonable level. time. Multi-annual compliance program The Compliance Committee must deliver a report to Europcar’s The multi-annual Compliance program is designed to be Executive Committee with proposals for initiatives and actions deployed over 3 years (2016-2018) around the following main deemed useful or necessary to safeguard the lasting nature of actions: the promises contained in the Ethics Code and of Europcar’s commitments. a validating the Ethics code and elaborating appropriate procedures and documentation; Compliance structure a putting in place a professional alerts procedure in which Europcar compliance is based on a three-level pyramid each country will establish a dedicated telephone line (in the structure: local language) allowing all staff members to report any issue a the Management Board, which is responsible for overseeing pertaining to the application of the ethics and compliance the Group’s ethics program; policies; a the Compliance Committee, which is responsible for a developing and/or proposing training programs to the 05 monitoring the ethics program and its control at Group level; management of each department concerned by the components of the Compliance program; a the Group Compliance Offi cer (currently being appointed) and the regional Compliance Offi cers. a assessing the performance of offi cers, heads and managers on the distribution and respect of the Europcar Compliance The Compliance Committee program; The Compliance Committee must meet once a year and must comprise the following managers: a establishing a Purchasing Code and updating General Terms and Conditions and Terms and Conditions of Purchase. a Group Legal Director; Any signifi cant deviation from the Group’s rules will trigger a Group Internal Audit Director; an investigation to determine its cause. If it is found that a Group Corporate Social Responsibility Director; the deviation was caused by irregular procedures or poor understanding of the rules, Europcar will take swift action to a Group Human Resources Director; rectify the problem. a Great Britain Legal Director; In the case of reported or apparent suspected non-compliance, a Spain Legal Director; the Group Compliance Offi cer and the Group Internal Audit Department will rapidly take measures to investigate the a Germany Legal Director. behavior in question in order to determine whether or not a The chief roles and responsibilities of the Compliance signifi cant breach of the applicable law or the requirements of Committee will consist of issuing advisory opinions to the the Compliance program has occurred. Management Board to enable it to make decisions with regard In such a case, the Group Compliance Offi cer will determine to ethics and fraud prevention, periodically revising the program the measures to be taken to rectify the problem and will present in accordance with Europcar’s development, defining the their report to the Group Compliance Committee and the actions to be implemented at all levels in the multi-annual plans, Supervisory Board for approval. analyzing the annual Compliance reports to be presented to the Supervisory Board, and verifying and handling alert situations reported by local Compliance Committees. RISK MANAGEMENT PROCEDURES
The Group Compliance Offi cer and the regional A presentation of the general risk management framework Compliance Offi cers and a description of each risk are provided in Section 2, “Risk Factors”, in this Registration Document. The Group Compliance Officer, with the assistance of the regional Compliance Offi cers, ensures the proper execution RISK MANAGEMENT STRUCTURE and implementation of all decisions taken at Group level in terms of ethics and fraud prevention. Risk management relates to measures implemented by the Group to identify and analyze the risks to which it is exposed The Group Compliance Officer will be designated by the in the ordinary course of business. Risk management is Chairman of the Group Compliance Committee in agreement considered a priority by the Group’s management and is closely with the Management Board. The Group Compliance Offi cer followed by the Group Internal Audit Department and the Risk will report directly to the Group Compliance Committee and Management team (for insurable risks). The Group’s internal must issue their activity report at least once a year.
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control and risk management procedures are based on a set with the estimated degree of control of each of the identifi ed of measures, policies, procedures, behaviors and customized risks and to identify those that must be dealt with in priority, actions aiming to ensure that the necessary measures are taken as well as to ensure that internal control is adequate to to: prevent and detect them; a ensure the effi ciency of operations and the effi cient use of a reviewing and validating the risk map by the Management resources; and Board and presenting it to the Audit Committee. a identify, analyze and control risks that could have a In 2015, the Group risk map identifi ed 17 “highly critical” risks material effect on the Group’s assets, results, operations or and 26 “moderately critical” internal or external risks to the achievement of its objectives, whether they are operating, Group. Moreover, risk mapping is carried out on a rolling basis commercial, legal or fi nancial or related to compliance with in two countries at a time in order to take local specifi cs into laws and regulations. account in the Group’s risk portfolio and to more widely share the vision of the Group’s risks at country level. The Group’s risk management and internal control process is monitored by the Supervisory Board through the Audit For financial risks, the Group’s risk management program Committee. The Audit Committee ensures the relevance, integrates the unpredictable nature of fi nancial markets, and reliability and implementation of internal control procedures and seeks to minimize their potentially negative effects on the identifi cation, hedging and management of the Group’s risks Group’s financial performance by using derivative financial in relation to its activities as well as accounting and fi nancial instruments to hedge certain exposures, notably those information. related to interest rate fluctuations. The Group’s Treasury Department is tasked with managing financial risks under Controlling risk exposure in each country in which the Group’s the control of the Group Chief Financial Offi cer. The Group companies operate depends on local management teams, who Treasury Department identifi es, evaluates and hedges fi nancial are as close as possible to the risks related to the activities they risks in close collaboration with the Group’s operating units. exercise or supervise. All of these hedging operations are either coordinated and MAIN RISK MANAGEMENT PROCEDURES validated centrally or directly executed by the Group Treasury Department. Group risk map Risk monitoring and action plans The Group Internal Audit Department regularly updates the risk map at the Group and subsidiary levels on a rolling basis. Depending on the principal risks identified, the concerned The risk map is presented to the Audit Committee and to the departments draw up action plans to be carried out by the Management Board which studies it and examines the actions local managers of the departments in question. The Group and specifi c monitoring of certain risks. Internal Audit Department is working on implementing tools and processes for better and more formal monitoring of the The risk identifi cation process relies on a 3-step methodology: action plans. a identifying the main risks through interviews with high-ranking The risk map also helps to update the audit plan, in particular Group executives and other key staff within the Group and on topics that are identifi ed as requiring increased supervision. countries in order to identify the risks to which their scope is exposed. These interviews are carried out by the Group CONTROL ACTIVITIES Internal Audit Department; a identifying and quantifying risks based on the estimated GENERAL ARCHITECTURE AND STRUCTURE impact of each risk and the likelihood of its occurrence. Risks The objectives of the control activities implemented by the identifi ed as having severe impacts and a strong probability Group are to: of occurring are mapped as “highly critical”. Conversely, risks a identifi ed as having little impact and a weak probability of ensure that the Group’s activities in all countries and the occurring are mapped as “moderately critical”. The resulting actions of all its employees adhere to the framework defi ned map obtained for a given year provides a comparative tool by applicable laws and regulations, the policies laid down with the previous year’s map and helps in understanding by the Management Board, and the Group’s commitments the development of risks to which the Group is exposed. and internal rules; The resulting map obtained for a given year provides a a prevent and control risks encountered by the Group, not comparative tool with the previous year’s map, and helps in only in terms of fi nance and accounting, but also as regards understanding the development of risks to which the Group operations, in order to protect and preserve its activities and is exposed. The map allows the Group to set up a dashboard more generally its assets;
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a produce timely accounting, financial and management and confi rm compliance with anti-corruption rules, personal information to ensure, on the one hand, the reliability and data protection, labor laws and human rights. relevance, in line with applicable standards and regulations, This assessment work is part of a continuous improvement of fi nancial information communicated to shareholders, and process applying to internal control procedures. to enable, on the other hand, appropriate steering of the Group. INTERNAL CONTROL PROCEDURES RELATING TO INFORMATION The architecture of the internal control process, is based on a SYSTEMS three-level structure: The Group IT Department defi nes, implements and updates 1. the fi rst control level applies to each staff member and the security policy roadmap. It initiates and coordinates risk their superiors according to their explicit responsibilities, reduction projects in its domain. The Group IT Systems Security the procedures applicable to their actions and their Manager heads up IT security via a network of correspondents communicated instructions; within the Group IT Department and the various countries. 2. the second control level applies to managers independently In March 2015, a new Group IT Systems Security Manager of the actions controlled. It may also apply to staff employed arrived to implement the Group’s security governance. in an operating, support or control capacity; Security correspondents were also appointed to the Group IT Department and in each country. Beginning in 2016, this 3. the third control level applies to the Group Internal Audit network of 10 specialists runs and monitors the IT security of Department which constantly monitors the effective the entire Group. 05 application of the fi rst two control levels. In 2015, the Group’s risk mapping and a report by an INTERNAL CONTROL SELF-EVALUATION PROCESS independent expert added elements to the security roadmap. The roadmap provides the Group with an overall The internal control self-evaluation process is based on two and consolidated vision of the action plans to be carried out complementary tools: according to fi ve themes, namely, governance, access and a an internal control questionnaire; identity management, security oversight, infrastructure security, and compliance. a an annual compliance statement. The Group’s business continuity plan was defi ned and relies An internal control questionnaire on a fully operational IT backup site. A complete business The Group has used an Internal Control Questionnaire (ICQ) recovery exercise was carried out at the end of 2014 and partial for the past four years. It covers fi nancial reporting procedures, exercises on each functional environment were carried out in operating oversight (such as contract management, franchises, the course of 2015. The next complete exercise is scheduled agents and affiliates), functional oversight (such as legal, for March 2016. purchase, Human Resources, IT) and oversight of Group The applications exposed to the Internet are regularly subjected governance. to intrusion tests. The latest tests were carried out in the course The ICQ will be reworked in 2016 in order to update the of the summer of 2015 and the next ones will take place in design of the controls and make them even more relevant to 2016. station operations, and to take into consideration the entire The security roadmap will be updated in 2016 by taking into Compliance roadmap and the IT systems security and fi nancial account the missions carried out by the Group Internal Audit processes roadmaps. Department, the recommendations of the Statutory Auditors An annual statement of compliance signed by the management and the results of the IT controls self-evaluations. of Group entities INTERNAL CONTROL ARRANGEMENTS RELATING TO THE The Group has implemented a signed reporting policy. Under STATIONS this policy, the managers of the Group’s subsidiaries sign an annual compliance letter. The purpose of the compliance letter Station control activities are of particular importance to the is to (i) notice and analyze non-compliance situations and risks Group as any dysfunction may alter the customer experience and present any corrective measures taken, (ii) ensure that all and operating profi ts. In order to maintain a very high standard employees have participated in awareness campaigns related of internal control, Europcar has drawn up a complete, detailed to the Group’s values charter, confl icts of interest, personal data and regularly internally audited reference system. This reference protection and competition law over the course of the fi scal system is structured into four parts entitled: year, and (iii) confi rm the absence of any confl icts of interest a Cash;
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a Fuel; GROUP STEERING OF INTERNAL CONTROL a Fleet; The Group Internal Audit Department steers internal control in close collaboration with the Audit Committee, the Management a Rental. Board and the Corporate Country Directors. For each part, the expected controls are detailed in terms of Its structure and duties are defi ned by the Internal Audit Charter objective, operating method, person responsible, frequency, which is currently being updated. documentation and reference to the procedures/tools to be used. The fundamental control objectives taken into account DUTIES OF THE GROUP INTERNAL AUDIT DEPARTMENT are as follows: The Group Internal Audit Department provides management a Cash: ensure that the handling of cash is reduced to a teams with reasonable assurances as to transactional minimum and that cash register statements are reconciled oversight, gives advice on improvements and contributes to daily. Optimize the safety of stations by making bank deposits creating added value. It assists the Management Board and as soon as a maximum threshold of cash on hand has been the Corporate Countries in achieving their objectives by using a reached; systematic and methodical approach to evaluate management a Fuel: reconcile fi llings-up with vehicle movements, match risks, control risks and corporate governance, and make fuel consumption to customer invoices using the Greenway proposals to strengthen their effectiveness. It also promotes operating management software tool at stations, and analyze a strong internal control environment in order to increase and monitor non-movement revenue; oversight of risks and operations. a Fleet: carry out a physical inventory of the vehicle fl eet at least The Group Internal Audit Department is also in charge of once a week and rectify any deviations, enter all changes steering the fraud identification and prevention process in vehicle status into Greenway in real time, in particular throughout the Group. when vehicles leave and return, and investigate all mileage Finally, the Group Internal Audit Department oversees the deviations between two vehicle movements (missing mileage implementation of audit recommendations and high-priority control); action plans. a Rental: strictly observe station procedure when signing STRUCTURE AND RESOURCES a contract with a client (e.g. ID check, safety deposit), thoroughly check manual contracts (drawn up only if The Internal Audit Director reports to the Chairman of the Greenway is faulty), and scrupulously enter and monitor Management Board and to the Audit Committee appointed data in real time. by the Supervisory Board. This link between internal audit and senior management is supplemented by continuous access The Internal Audit uses a detailed analysis grid to assess the to and cooperation with the other members of the Company’s performance of stations in relation to the expected controls Management Board. and to list non-compliant items and areas for improvement. In addition, there is an operating link between the Group Internal FRAUD PREVENTION AND FIGHT AGAINST CORRUPTION AND Audit Department and the local audit units of the operating MONEY-LAUNDERING subsidiaries largely pertaining to point-of-sale audits and The Group Internal Audit Department oversees identifi cation operating site audits, including local stations and franchisees. and fraud prevention processes for all Group activities. This The Group Internal Audit Department is composed of an process was strengthened in 2015 by a Fraud Prevention Plan, Internal Audit Director, a manager and three internal auditors the fi rst part of which, covering station fraud, was implemented and relies on a network of 20 country correspondents. in the fi rst half-year. Each mission is the subject of a written report intended for the Moreover, in the context of its compliance program (including audited persons, their superiors and the Management Board. anti-corruption, compliance with economic sanctions, anti- Audit reports include an evaluation of the identifi ed risks and fraud), the Group has recently adopted a data-processing tool recommended measures to reduce these risks. allowing for the identifi cation of at-risk commercial partners. CONSTRUCTION OF THE INTERNAL AUDIT AND REPORTING PLAN Risks related to operations of the Group’s international franchisee network are subcontracted to an external audit fi rm. The Group Internal Audit Department defi nes and executes, At times, external auditors are called upon to cover certain either on its own initiative or on the initiative of senior business sectors with respect to technical issues that cannot management, an annual audit plan that includes the international be covered internally. franchise network, internal control audits and any other advice
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or assurance assignment. It reviews the recurring internal a the Cash, Risk Management and Insurance Division; control self-evaluation campaigns. In addition, the Group a the Shared Services Center, covering many of the accounting Internal Audit Department consolidates the audits performed in processes and the Group’s various Corporate Countries; the various Corporate Countries, and in particular those relating to transactions carried out by the different stations making up a the Financial Communication Department. the Group’s network. It works in close collaboration with the local audit teams for that purpose. CONTROL ENVIRONMENT RELATED This annual plan is approved by the Chairman of the TO THE RELIABILITY OF ACCOUNTING Management Board; the Audit Committee expresses an opinion AND FINANCIAL INFORMATION on this annual audit program. The reliability of accounting and fi nancial information relies on Lastly, the Group Internal Audit Director reports to the Chairman the following steering elements: of the Management Board and to the Audit Committee on the a a three-year strategic plan, spearheaded by the Management realization of the annual audit plan and on the state of progress Board in coordination with operating departments, of the recommendations issued by the internal audit. determines the Group’s main strategic lines annually and the related annual budgetary targets. It is validated annually ACTIVITY IN THE COURSE OF THE YEAR ENDED DECEMBER 31, by the Supervisory Board; 2015 a the annual budgetary process, spearheaded by the During the year, in addition to the fraud prevention plan and Risk Management Board and handled by senior management 05 Map, the Group Internal Audit Department carried out some control teams with the support of all operating departments, twenty missions in the following areas: focuses on operating financial aggregates. The financial a franchisee audits: for the past two years, the Group Internal elements of the budget are consolidated month by month Audit Department has asked Ernst & Young to conduct an using the same tool as that used for consolidating actual annual audit of stations held by franchisees in order to ensure results with a comparable degree of detail. This enables their compliance with the Group’s rules; immediate comparison of the monthly performance of the operating fi nancial aggregates with the budgeted targets; a standard missions completed in stations, in particular in France; a three results projections per year focus on the same fi nancial aggregates as the annual budget and therefore use the same a missions dealing with an operating process or a specifi c risk; consolidation methods in CEGID FCRS with the same degree a monitoring missions carried out by the internal audit, if need of detail. These forecasts are normally made in March, June be on critical subjects. and September and rely on the actual monthly results already closed. Their objective is to estimate the remaining months until the end of the year in question in order to compare the 5.2.4.5 Internal control procedures re-estimated year and the annual budgetary targets. These concerning the drawing up forecasts are reviewed by the Management Board; and processing of accounting a and fi nancial information complete monthly closings (full balance sheet, consolidated income statement, net profi t and cash fl ow) are recorded and consolidated in the same manner as annual and half-yearly ORGANIZATION AND RESPONSIBILITIES IN THE closings in CEGID FCRS; and GENERATION OF ACCOUNTING AND FINANCIAL a INFORMATION monthly performance review meetings, led by the Chairman of the Management Board, bring together the CEO Finance, The chief generators or auditors of accounting and fi nancial the Group Financial Controller and senior executives, and information fall under the Group Finance Department and are are carried out with all the countries. The senior executives as follows: in question are themselves subject to review by the a the Group Accounting Department; Management Board. Performance and margin analyses are reviewed in order to understand the principal performance a the Group Management Control Department; levers of the month and to defi ne, in particular, the action a the Legal Department; plans for the coming months. a the Tax Department;
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PROCEDURES FOR THE DRAWING UP OF standardizes and optimizes practices, and offers better ACCOUNTING AND FINANCIAL INFORMATION control; Accounting and fi nancial information is obtained through a a a reporting and consolidation software package and rigorous process relying on: a chart of accounts under ORACLE aligned with the reporting chart of accounts: the transfer and consolidation a a common standard and documentation of the Group’s of fi nancial information are handled by the ORACLE/CEGID principal accounting rules: the fi nancial statements are FCRS tool for all fi nancial reporting (budget, forecasts, actual established in accordance with IFRS which are communicated monthly, quarterly, half-yearly and yearly). The use of a single to the Group’s subsidiaries via the Group Accounting Manual tool ensures consistency between internal steering and along with specific instructions. Moreover, the above- external communication; mentioned ICQ internal control reference measure integrates the different processes affecting the generation of fi nancial a consistency checks and analyses carried out on information (e.g. closing, cash, payroll, purchasing, sales, fi nancial information: automatic checks in the reporting assets, IT and consolidation); tool, detailed activity reviews by the Group’s Management Control teams, and specifi c analyses (e.g. scope changes, a a unifi ed IT system: Europcar uses just one accounting exchange rate effects or non-recurring transactions) by the tool (ORACLE), one operating tool (GREENWAY) and one Accounting Department ensure the proper control of fi nancial reporting tool (CEGID FCRS). The operating and fi nancial information generated. fl ows of most subsidiaries are managed via ORACLE. The use of a single fi nancial model within ORACLE promotes a A formalized process for the transfer, analysis and consistency between data sources for the Accounting control of other information published in the Group’s Department and the Management Control Department, annual documents (e.g. Registration Document).
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5.2.5 Statutory Auditors’ report, prepared in accordance with article L.225-235 of the French Commercial Code on the report prepared by the Chairman of the Supervisory Board of Europcar Groupe S.A.
This is a free translation into English of the Statutory Auditors’ report issued in the French language and is provided solely for the convenience of English speaking readers. This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France. (For the year ended 31 December 2015) To the Shareholders Europcar Groupe S.A. 2 rue René Caudron Bâtiment Op 78960 Voisins le Bretonneux - France In our capacity as Statutory Auditors of Europcar Groupe S.A., and in accordance with article L.225 235 of the French Commercial Code (Code de commerce), we hereby report to you on the report prepared by the Chairman of your company in accordance 05 with article L.225-68 of the French Commercial Code for the year ended 31 December 2015. It is the Chairman’s responsibility to prepare, and submit to the Supervisory Board for approval, a report describing the internal control and risk management procedures implemented by the company and providing the other information required by article L.225-68 of the French Commercial Code in particular relating to corporate governance. It is our responsibility: a to report to you on the information set out in the Chairman’s report on internal control and risk management procedures relating to the preparation and processing of fi nancial and accounting information; and a to attest that the report sets out the other information required by article L.225-68 of the French Commercial Code, it being specifi ed that it is not our responsibility to assess the fairness of this information. We conducted our work in accordance with professional standards applicable in France.
Information concerning the internal control and risk management procedures relating to the preparation and processing of fi nancial and accounting information
The professional standards require that we perform procedures to assess the fairness of the information on internal control and risk management procedures relating to the preparation and processing of fi nancial and accounting information set out in the Chairman’s report. These procedures mainly consisted of: a obtaining an understanding of the internal control and risk management procedures relating to the preparation and processing of fi nancial and accounting information on which the information presented in the Chairman’s report is based, and of the existing documentation; a obtaining an understanding of the work performed to support the information given in the report and of the existing documentation; a determining if any material weaknesses in the internal control procedures relating to the preparation and processing of fi nancial and accounting information that we may have identifi ed in the course of our work are properly described in the Chairman’s report. On the basis of our work, we have no matters to report on the information given on internal control and risk management procedures relating to the preparation and processing of fi nancial and accounting information, set out in the Chairman of the Supervisory Board report, prepared in accordance with article L.225-68 of the French Commercial Code.
Other information
We attest that the Chairman’s report sets out the other information required by article L.225-68 of the French Commercial Code.
Neuilly-sur-Seine and Courbevoie, on 25 February 2016 The statutory auditors PricewaterhouseCoopers Audit Mazars François Jaumain Isabelle Massa
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5 .3 COMPENSATION AND OTHER BENEFITS IN KIND RECEIVED BY CORPORATE OFFICERS
The Company applies the AFEP-MEDEF Code in this regard (see Section 5.1.3 “Declarations relating to corporate governance” of this Registration Document).
5.3.1 Compensation principles of the corporate offi cers
The compensation policy for the executives of Europcar SA is 150% of fi xed pay for the Chairman of the Management aligned with the recommendations of the AFEP-MEDEF Code. Board (before applying the net promoter score multiplier and up to 172.5% after applying the multiplier) and 100-120% of fi xed pay for the other members of the Management Board 5.3.1.1 Compensation of members (before applying the net promoter score multiplier and up to of the Management Board 138% after applying the multiplier):
The compensation policy for the members of the Management a the following quantitative criteria were applied: Board is decided by the Supervisory Board upon proposal – (i) Group EBITDA (representing 40% of fi xed pay if the by the Nominations and Compensation Committee. It takes base objective was achieved and up to 67%), (ii) Cash into account the principles of comprehensiveness, balance, (representing 15% of fixed pay if the base objective coherence, intelligibility and measure. All components of the was achieved and up to 25%), and (iii) Transformation compensation of each member of the Management Board are (representing 20% of fi xed pay if the base objective was reviewed every year in order to make an overall assessment achieved and up to 33%) for Philippe Germond; of individual compensation (including fixed pay, bonuses, – (i) Group EBITDA (representing 40% of fi xed pay if the performance shares, excess benefi t plans and company cars). base objective was achieved and up to 60%), (ii) Cash The compensation of the members of the Management Board (representing 20% of fi xed pay if the base objective was is based on the following main principles: achieved), and (iii) Transformation (representing 20% of fi xed pay if the base objective was achieved) for Caroline a annual fixed pay over a period of 12 months, an annual Parot; bonus, free shares and benefi ts in kind related to their duties; – (i) Group EBITDA (representing 20% of fi xed pay if the a the fi xed pay due for 2015 was set by the Supervisory Board base objective was achieved and up to 30%), (ii) Country at its meeting of March 9, 2015, upon a proposal by the EBITDA (representing 20% of fi xed pay if the base objective Nominations and Compensation Committee at its meeting was achieved and up to 30%), (iii) Cash (representing 20% of February 16, 2015; of fi xed pay if the base objective was achieved), and (iv) Transformation (representing 20% of fi xed pay if the base a the bonuses due for 2015 were set by the Supervisory Board objective was achieved) for Kenneth McCall and Fabrizio at its meeting of February 24, 2016, upon a proposal by the Ruggiero; Nominations and Compensation Committee at its meeting a individual qualitative criteria (if met) could represent up to of February 18, 2016. 25% of fi xed pay for the Chairman of the Management Bonuses for 2015 – the variable base portion and the qualitative Board and up to 20% for the other members of the and quantitative criteria applicable for 2015 having been Management Board; approved by the Supervisory Board at its meeting of March 9, 2015 upon a proposal by the Nominations and Compensation Committee at its meeting of February 16, 2015 – were determined as follows: a a variable base portion was set for each member of the Management Board in line with their duties representing 100-
310 EUROPCAR REGISTRATION DOCUMENT 2015 CORPORATE GOVERNANCE COMPENSATION AND OTHER BENEFITS IN KINDRECEIVED BY CORPORATE OFFICERS
a if the Group exceeded its objectives by a net promoter grant free shares to members of the Executive Committee. score of over 10 points, a multiplier of 1.15x would have Vesting of these free shares, following a waiting period of 2 been applied to bonuses up to 172.5% of fi xed base pay years, is conditioned on the achievement of: for the Chairman of the Management Board and 138% of a with respect to the years ended December 31, 2015 and fi xed base pay for the other members of the Management 2016, performance conditions related to Adjusted Corporate Board. This multiplying coeffi cient varies based on the net EBITDA; and promoter score obtained up to 0.85x (at the lowest) in the event of performance that is 10 points lower than the a with respect to the year ended December 31, 2017, Group’s objective. performance conditions related to (i) Adjusted Corporate The Chairman of the Management Board has a company car EBITDA and (ii) movements in the Company’s stock price with a chauffeur and the other members of the Management as compared with movements in the SBF 120. Board all have a company car. Pursuant to Article L. 225-197-1 II of the French Commercial Code: 5.3.1.2 Compensation of members (i) the Chairman of the Management Board shall retain a of the Supervisory Board number of bonus shares equal to the lesser of (i) one-third of the Granted Shares and (ii) a number of bonus shares The annual compensation of members of the Supervisory awarded (x) under this regulation or (y) any another share Board comprises: plan representing an amount equivalent to three (3) times 05 a fi xed annual pay of €165,000 and the use of a company the amount of his annual salary, bearing in mind that the car to Jean-Paul Bailly for his duties as Chairman of the Chairman of the Management Board shall in all cases retain Supervisory Board starting from his appointment to said a minimum of one Granted Share until he leaves offi ce; position on June 25, 2015; (ii) the Chief Financial Offi cer and Chief Operating Offi cer of a attendance fees allocated to all directors for attending the Company shall retain a number of bonus shares equal Supervisory Board meetings. to the lesser of (i) one-third of the Granted Shares and (ii) a number of bonus shares awarded (x) under this regulation On February 24, 2015, the Company’s Ordinary and or (y) any another share plan representing an amount Extraordinary Shareholders’ Meeting voted, subject to the equivalent to two (2) times the amount of his annual salary, condition precedent of the listing of the Company’s shares bearing in mind that the Chief Financial Offi cer and Chief on Euronext Paris, to allocate a total of €500,000 per year in Operating Offi cer of the Company shall in all cases retain a attendance fees to the members of the Supervisory Board until minimum of one Granted Share until they leave offi ce; and such time as the Meeting decides otherwise. The Supervisory Board meeting of March 9, 2015 decided to allocate attendance (iii) the other members of the Management Board of the fees as follows: Company shall retain a number of bonus shares equal to the lesser of (i) one-third of the Granted Shares and (ii) a a fixed portion: €15,000 per member (+100% for the number of bonus shares awarded (x) under this regulation Chairman); and or (y) any another share plan representing an amount a variable portion: equivalent to one (1) time the amount of his annual salary, bearing in mind that they shall in all cases retain a minimum a €4,000 for attending a Supervisory Board Board meeting, of one Granted Share until the end of their respective terms. a €2,500 for attending an Audit Committee meeting (+50% for the Chairman), The Company has also implemented a free share allocation plan a €2,500 for attending a Nominations and Compensation for the Group’s top 100 executives. Vesting of these free shares Committee meeting (+50% for the Chairman), following a two-year vesting period subject to the benefi ciary’s continued employment with the Company is subject to the all up to the overall limit of €500,000 set by the Shareholders’ achievement of performance conditions relating to: Meeting. (i) adjusted Corporate EBITDA; and In 2015, the total amount of attendance fees paid to members of the Supervisory Board amounted to €216,750. (ii) movements in the Company’s stock price compared with movements in the SBF 120. 5.3.1.3 Free shares granted to employees Following the listing of the Company’s shares on the regulated Euronext Paris market, the Company implemented a plan to
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5.3.2 Summary of the compensation and benefi ts of corporate offi cers
The tables below summarize the compensation and benefi ts in control the Company and (iv) companies that control the kind due/paid to members of the Management Board and the Company, all within the meaning of Article L. 233-16 of the Supervisory Board by (i) the Company, (ii) companies controlled French Commercial Code. by the Company, (iii) companies controlled by companies that
TABLE 1 - SUMMARY OF THE COMPENSATION, OPTIONS ALLOCATED AND FREE SHARES GRANTED TO EACH EXECUTIVE CORPORATE OFFICER
(in euros) 2015 2014
PHILIPPE GERMOND – Chairman of the Management Board
Compensation due for the year (detailed in table 2) 3,177,998 305,083 Value of multi-year bonuses paid during the year -- Value of stock options allocated during the year (detailed in table 4) - - Value of free shares granted (detailed in table 6) 2,776,276 -
TOTAL 5,954,274 305,083
(in euros) 2015 2014
CAROLINE PAROT – CEO Finance – Member of the Management Board
Compensation due for the year (detailed in table 2) 1,654,294 1,956,728 Value of multi-year bonuses paid during the year -- Value of stock options allocated during the year (detailed in table 4) - - Value of free shares granted (detailed in table 6) 1,616,571 -
TOTAL 3,270,865 1,956,728
(in euros)* 2015 2014
KENNETH MCCALL – Member of the Management Board
Compensation due for the year (detailed in table 2) 1,232,297 2,393,962 Value of multi-year bonuses paid during the year -- Value of stock options allocated during the year (detailed in table 4) - - Value of free shares granted (detailed in table 6) 878,564 -
TOTAL 2,110,861 2,393,962
* Except for the amounts owing for 2015 bonuses, the amounts were converted from pounds sterling to euros at the average exchange rate of 1.377 on December 31, 2015.
(in euros) 2015 2014
FABRIZIO RUGGIERO – Member of the Management Board
Compensation due for the year (detailed in table 2) 827,251 1,007,099 Value of multi-year bonuses paid during the year -- Value of stock options allocated during the year (detailed in table 4) - - Value of free shares granted (detailed in table 6) 878,564 -
TOTAL 1,705,815 1,007,099
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TABLE 2 - SUMMARY OF THE COMPENSATION OF EACH EXECUTIVE CORPORATE OFFICER
Amounts in respect Amounts in respect (in euros) of year 2015 of year 2014
PHILIPPE GERMOND – Chairman of the Management Board Amounts due (2) Paid (3) Amounts due (2) Paid (3)
Fixed pay (1) 600,000 600,000 150,000 (4) 150,000 Annual bonus (1) 557,400 150,000 (5) 150,000 (6 ) - Value of stock options allocated during the year (detailed in table 4) ---- Multi-year bonus (1) ---- Exceptional compensation (1) 2,000,000 (7 ) 1,100,000 - - Attendance fees ---- Benefi ts in Kind (8 ) 20,598 20,598 5,083 5,083
TOTAL 3,177,998 1,870,598 305,083 155,083
(1) Gross before taxes. (2) Compensation granted for the year, irrespective of the payment date. (3) Compensation paid for duties through the year. (4) Because Mr. Philippe Germond took over his duties at the beginning of the fi rst quarter of 2014, this amount is prorated. 05 (5) Variable compensation paid in 2015 is that due in respect of 2014. (6 ) Because Mr. Philippe Germond took over his duties at the beginning of the fi rst quarter of 2014, his bonus was set at a lump sum amount of €150,000. (7 ) Compensation corresponding to the bonus related to the Company’s IPO, approved by the Supervisory Board on June 25, 2015, including €1.1 million paid out in 2015; the balance, €900,000, is to be paid on the date of the fi rst anniversary of the IPO. (8 ) This amount corresponds to a company car made available to Mr. Philippe Germond, as well as mandatory unemployment insurance taken out in his name.
Amounts in respect Amounts in respect (in euros) of year 2015 of year 2014
CAROLINE PAROT – CEO Finance Amounts due (2) Paid (3) Amounts due (2) Paid (3)
Fixed pay (1) 337,500 337,506 321,252 321,252 Annual bonus (1) 313,538 317,236 (4 ) 317,236 302,617 Value of stock options allocated during the year (detailed in table 4) ---- Multi-year bonus (1) - 1,180,000 (5 ) - Exceptional compensation (1) 1,000,000(6 ) 1,180,000 135,000 (7 ) 40,000 Attendance fees - 500,000 - - Benefi ts in Kind (8 ) 3,526 3,526 3,240 3,240
TOTAL 1,654,294 2,337,998 1,956,728 667,109
(1) Gross before taxes. (2) Compensation granted for the year, irrespective of the payment date. (3) Compensation paid for duties through the year. (4) Variable compensation paid in 2015 is that due in respect of 2014. (5 ) Amounts owing under the multi-year bonus program implemented in 2013, described in Section […] of this document, corresponding to 2 times the amount of the annual fi xed compensation and bonus due for 2013. (6 ) Compensation corresponding to the bonus related to the Company’s IPO, approved by the Supervisory Board on June 25, 2015, including 500,000 paid out in 2015; the balance, €500,000, is to be paid on the date of the fi rst anniversary of the IPO. (7 ) This amount corresponds to additional compensation for fulfi lling the position of interim Managing Director of the Company between July and September 2014. This amount will be paid out in 2016. (8 ) This amount corresponds to a company car made available to Mrs. Caroline Parot.
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Amounts in respect Amounts in respect (in euros)* of year 2015 of year 2014
KENNETH MCCALL – Chief Operating Offi cer Amounts due (2) Paid (3) Amounts due (2) Paid (3)
Fixed pay (1) 457,105 457,105 429,492 429,492 Annual bonus (1) 351,064 427,373 (4) 388,521 435,921 Value of stock options allocated during the year (detailed in table 4) ---- Multi-year bonus(1) - 1,554,082 (5) -- Exceptional compensation(1) 400,000(5) 197,964 1,554,082 (5) - Attendance fees ---- Benefi ts in Kind 24,128(7 ) 24,128 21,867 21,867
TOTAL 1,232,297 2,660,652 2,393,962 887,280
* Except for the amounts owing for 2015 bonuses, the amounts were converted from pounds sterling to euros at the average exchange rate of 1.377 on December 31, 2015. (1) Gross before taxes. (2) Compensation granted for the year, irrespective of the payment date. (3) Compensation paid for duties through the year. (4) Variable compensation paid in 2015 is that due in respect of 2014. (5 ) Amounts owing under the multi-year bonus program implemented in 2013, described in Section […] of this document, corresponding to 2 times the amount of the annual fi xed compensation and bonus due for 2013. (6 ) Compensation corresponding to the bonus related to the Company’s IPO, approved by the Supervisory Board on June 25, 2015, including 200,000 paid out in 2015; the balance, €200,000, is to be paid on the date of the fi rst anniversary of the IPO. (7 ) This amount corresponds to a company car made available to Mr. Kenneth McCall, as well as additional health insurance taken out in his name.
Amounts in respect Amounts in respect (in euros) of year 2015 of year 2014
FABRIZIO RUGGIERO – Member of the Management Board Amounts due (2) Paid (3) Amounts due (2) Paid (3)
Fixed pay (1) 214,615 214,615 179,231 179,231 Annual bonus (1) 201,953 194,689 (4) 179,231 178,800 Value of stock options allocated during the year (detailed in table 4) ---- Multi-year bonus (1) 640,000 640,000(5 ) - Exceptional compensation (1) 400,000(5) 200,000 - - Attendance fees ---- Benefi ts in Kind 10,683(7 ) 10,683 8,637 8,637
TOTAL 827,251 1,259,987 1,007,099 366,669
(1) Gross before taxes. (2) Compensation granted for the year, irrespective of the payment date. (3) Compensation paid for duties through the year. (4) Variable compensation paid in 2015 is that due in respect of 2014. (5 ) Amounts owing under the multi-year bonus program implemented in 2013, described in Section […] of this document, corresponding to 2 times the amount of the annual fi xed compensation and bonus due for 2013. (6 ) Compensation corresponding to the bonus related to the Company’s IPO, approved by the Supervisory Board on June 25, 2015, including €200,000 paid out in 2015; the balance, €200,000, is to be paid on the date of the fi rst anniversary of the IPO. (7 ) This amount corresponds to a company car made available to Mr. Fabrizio Ruggiero, as well as additional accident and health insurance taken out in his name.
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TABLE 3 – ATTENDANCE FEES AND OTHER COMPENSATION RECEIVED BY NON-EXECUTIVE CORPORATE OFFICERS
Amounts in euros Amounts in euros Members of the Supervisory Board paid in 2015 paid in 2014
Attendance fees - - Jean Paul Bailly Other compensation 41,250 (1) - Attendance fees - - Jean Charles Pauze Other compensation 47,013 (2) 246,380 (3) Attendance fees - - Patrick Sayer Other compensation - - Attendance fees - - Pascal Bazin Other compensation 30,000 (4) - Attendance fees - - Sandford Miller Other compensation - - Attendance fees - - Virginie Fauvel Other compensation - - Attendance fees - - 05 Angélique Gérard Other compensation - - Attendance fees - - Philippe Audouin Other compensation - - Attendance fees - - Armance Bordes Other compensation - - Attendance fees - - Eric Schaefer Other compensation - -
(1) Compensation received by Mr. Jean-Paul Bailly in his capacity as the President of the Supervisory Board beginning from June 25, 2015 . The total amount owing for 2015 amounts to €82,500. (2) Compensation received in 2015 by Mr. Jean-Charles Pauze in his capacity as the Chairman of the Board of Directors until the governance of the Company changed on March 9, 2015. (3) Compensation received in 2014 by Mr. Jean-Charles Pauze in his capacity as the Chairman of the Board of Directors. (4) Compensation granted to Mr. Pascal Bazin by the Supervisory Board on May 20, 2015 for a special task, providing assistance for the implementation and monitoring of the transformation plan of the Company.
TABLE 4 – STOCK OPTIONS ALLOCATED DURING THE YEAR TO EACH EXECUTIVE CORPORATE OFFICER
Value of options according Number Type of option to the method chosen of options (purchase or for the consolidated allocated Exercise Exercise Plan subscription) fi nancial statements during the year price period
None
TABLE 5 – STOCK OPTIONS EXERCISED DURING THE YEAR BY EACH EXECUTIVE CORPORATE OFFICER
Type of option Number of (purchase or options exercised Name of corporate offi cer Plan subscription) during the year Exercise price
None
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TABLE 6 – FREE SHARES GRANTED DURING THE YEAR TO EACH CORPORATE OFFICER
Value of shares according Number to the method of shares chosen for the Free shares granted granted consolidated during the year to each during fi nancial Acquisition Availability Performance corporate offi cer Plan no. & date the year statements date date conditions
Philippe Germond 06/25/2015 AGA 2015 Top 13 (Tranche 1) 128,979 €1,512,924 06/25/2017 06/25/2019 yes 06/25/2015 AGA 2015 Top 13 (Tranche 2) 193,469 €1,263,353 2018(1) 2020(2) yes Caroline Parot 06/25/2015 AGA 2015 Top 13 (Tranche 1) 75,102 €880,946 06/25/2017 06/25/2019 yes 06/25/2015 AGA 2015 Top 13 (Tranche 2) 112,653 €735,624 2018(1) 2020(2) yes Kenneth McCall 06/25/2015 AGA 2015 Top 13 (Tranche 1) 40,816 €478,772 06/25/2017 06/25/2019 yes 06/25/2015 AGA 2015 Top 13 61,224 €399,793 2018(1) 2020(2) yes Fabrizio Ruggiero 06/25/2015 AGA 2015 Top 13 40,816 €478,772 06/25/2017 06/25/2019 yes 06/25/2015 AGA 2015 Top 13 61,224 €399,793 2018(1) 2020(2) yes
(1) On the 15th day after the decision by the Management Board approving the fi nancial statements of the Company for the year ending December 31, 2017. (2) On the 15th day after the decision by the Management Board approving the fi nancial statements of the Company for the year ending December 31, 2019.
TABLE 7 – FREE SHARES AVAILABLE TO EACH CORPORATE OFFICER
Plan no. Number of shares available Acquisition Free shares available to each corporate offi cer & date during the year conditions
None
TABLE 8 – HISTORY OF STOCK OPTION ALLOCATIONS
Plan
Date of Management Board meeting None
TABLE 9 – OPTIONS ALLOCATED TO AND EXERCISED BY THE TOP TEN NON-EXECUTIVE OFFICERS
Total number of options granted/ Average shares subscribed weighted or purchased price Plan
Options granted during the fi scal year by the issuer and any company of the Group whose employees were eligible for option grants to the ten employees of the issuer and any such company who received the highest number of such options (global information) --- Options on the issuer and the companies previously mentioned exercised during the year by the ten employees of the issuer and such companies who purchased or subscribed for the greatest number of options (overall fi gure) - - -
316 EUROPCAR REGISTRATION DOCUMENT 2015 CORPORATE GOVERNANCE COMPENSATION AND OTHER BENEFITS IN KINDRECEIVED BY CORPORATE OFFICERS
TABLE 10 – HISTORY OF FREE SHARE GRANTS
AGA Plan AGA Plan 2015 Top 13 2015 Top 13 (Tranche 1) (Tranche 2)
Date of Management Board meeting 06/25/2015 06/25/2015 Total number of free shares granted 653,057 979,586 of which granted to: Philippe Germond 128,979 193,469 Caroline Parot 75,102 112,653 Kenneth McCall 40,816 61,224 Fabrizio Ruggiero 40,816 61,224 Date shares acquired 06/25/2017 2018(1) Retention period end date 06/25/2019 2020(2) Number of shares subscribed at March 31, 2016 (most recent date) 0 0 Cumulative number of shares canceled or lapsed 40,816 61,224 Free shares granted remaining at the end of the year 653,057 979,586 05
(1) On the 15th day after the decision by the Management Board approving the fi nancial statements of the Company for the year ending December 31, 2017. (2) On the 15th day after the decision by the Management Board approving the fi nancial statements of the Company for the year ending December 31, 2019.
TABLE 11 – SUMMARY OF SOME OF THE INFORMATION REQUIRED WITHIN THE FRAMEWORK OF THE AFEP-MEDEF RECOMMENDATIONS
Severance or other benefi ts due or likely to become due Compensation Employment Supplemental as a result of termination under a non- agreement Pension Plan or change of offi ce compete clause
Members of the Management Board Yes No Yes No Yes No Yes No
Philippe Germond – Chairman of the Management Board Beginning of term: March 9, 2015 End of term: March 8, 2019 ✔✔✔✔ Caroline Parot – Member of the Management Board Deputy CEO, Finance (Directeur Général Finances) Beginning of term: March 9, 2015 End of term: March 8, 2019 ✔✔✔✔ Kenneth McCall – Chief Operating Offi cer Board Beginning of term: March 9, 2015 End of term: March 8, 2019 ✔ ✔ ✔✔ Fabrizio Ruggiero – Member of the Management Board Beginning of term: March 9, 2015 End of term: March 8, 2019 ✔✔✔✔
EUROPCAR REGISTRATION DOCUMENT 2015 317 05 CORPORATE GOVERNANCE COMPENSATION AND OTHER BENEFITS IN KINDRECEIVED BY CORPORATE OFFICERS
5.3.3 Other information
5.3.3.1 Employment agreement terminated, he will have the right to an annual payment in that regard in an amount equal to three months of gross Mr. Germond does not have an employment agreement with compensation (based on his average compensation over the the Company. course of the 12 months preceding the termination). Mrs. Caroline Parot holds an employment contract with the If he also receives severance pay (as described above), the Company for her role as Chief Financial Offi cer of the Group combined non-compete payment and severance pay may not and does not receive any separate compensation for her role exceed the fi xed and variable compensation paid to him during as member of the Company’s Management Board. the two years preceding his departure. Mr. Kenneth McCall holds an employment contract with Each of the other members of the Management Board may Europcar Group UK for his role as Managing Director and does be bound by non-compete clauses in the event that their not receive any separate compensation for his role as member employment agreements with the Group are terminated. In of the Company’s Management Board. that event, such member would receive an annual payment of Mr. Fabrizio Ruggiero holds an employment contract with 50% of his or her last year’s fi xed compensation. Europcar Italia SpA for his role as Direttore Generale and does not receive any separate compensation for his role as member 5.3.3.4 Supplemental Pension Plan of the Company’s Management Board. No member of the Management Board benefi ts from an excess benefi t plan . 5.3.3.2 Indemnities in the event of forced termination of offi ce 5.3.3.5 Corporate offi cer unemployment As from the listing of the Company’s shares on Euronext Paris, insurance if Mr. Germond’s position is terminated he will receive severance pay in an amount to be determined based on the achievement The Company holds corporate offi cer unemployment insurance of performance criteria and equal to a maximum of 18 months for Mr. Germond. of salary. He will receive no severance pay if he is terminated for cause. 5.3.3.6 Exceptional bonus Mr. Germond will also receive no severance pay if he leaves his position with the Company in order to take a new position within An exceptional bonus will be paid to certain employees the Group or if he will be soon eligible for his retirement benefi ts. and corporate offi cers for the listing the Company’s shares on Euronext Paris, including, for a maximum total amount No other member of the Management Board will be eligible for of €3.8 million, to members of the Management Board, in severance or other benefi ts a result of termination or change accordance with the following conditions: 50% of these of offi cer. amounts will vest upon the listing of the Company’s shares on Euronext Paris and will then be paid; the remaining 50% will 5.3.3.3 Compensation under a non-compete be paid upon the fi rst anniversary of the listing, subject to the clause person remaining within the Group at such date.
In the event that Mr. Germond is bound by a non-compete obligation at the time his position with the Company is
318 EUROPCAR REGISTRATION DOCUMENT 2015 CORPORATE GOVERNANCE SUMMARY STATEMENT OF TRANSACTIONS IN COMPANY SECURITIES BY CORPORATE OFFICERS
5.4 SUMMARY STATEMENT OF TRANSACTIONS IN COMPANY SECURITIES BY CORPORATE OFFICERS
Description of Type of Number Name and position the fi nancial instrument transaction of shares
Philippe Germond, Chairman of the Management Board Class D preferred shares Acquisition 1,292 Caroline Parot, CEO Finance - Member of the Management Board Class D preferred shares Acquisition 528 Kenneth McCall, Deputy CEO - Member of the Management Board Class D preferred shares Acquisition 116 Fabrizio Ruggiero, Member of the Management Board Class D preferred shares Acquisition 234 05 Jean-Paul Bailly, Chairman of the Supervisory Board Common shares Acquisition 500 Jean-Charles Pauze, Vice-Chairman of the Supervisory Board Common shares Acquisition 1,000 Patrick Sayer, Member of the Supervisory Board Common shares Acquisition 500 Pascal Bazin, Member of the Supervisory Board Common shares Acquisition 500 Philippe Audouin, Member of the Supervisory Board Common shares Acquisition 1,000 Virginie Fauvel, Member of the Supervisory Board Common shares Acquisition 500 Angélique Gérard, Member of the Supervisory Board Common shares Acquisition 500 Sandy Miller, Member of the Supervisory Board Common shares Acquisition 500
EUROPCAR REGISTRATION DOCUMENT 2015 319 320 EUROPCAR REGISTRATION DOCUMENT 2015 06 INFORMATION ON THE COMPANY AND ITS SHARE CAPITAL
6.1 INFORMATION ON THE COMPANY 322 6.5 PROFIT-SHARING AGREEMENTS AND INCENTIVE PLANS – 6.2 CONSTITUTION AND BYLAWS 322 EMPLOYEE SHAREHOLDERS 344
6.3 SHARE CAPITAL 334 6.6 DISCLOSURES PURSUANT TO ARTICLE L. 225-100-3 OF THE FRENCH COMMERCIAL CODE 345 6.4 MAIN SHAREHOLDERS OF THE COMPANY 340 6.7 DIVIDEND DISTRIBUTION POLICY 345
EUROPCAR REGISTRATION DOCUMENT 2015 321 06 INFORMATION ON THE COMPANY AND ITS SHARE CAPITAL INFORMATION ON THE COMPANY
6.1 INFORMATION ON THE COMPANY
6.1.1 Company name
The name of the Company is “Europcar Groupe”.
6.1.2 Place and number of registration
The Company is registered with the Versailles Company Register under number 489 099 903.
6.1.3 Date of incorporation and duration
The Company was created on March 16, 2006 for the purpose The Company has a legal life of 99 years as from its registration of Eurazeo’s acquisition of the Europcar Group. with the Versailles Company Register, subject to early dissolution or extension.
6.1.4 Registered offi ce, legal form and applicable law
The Company’s headquarters are at: Since March 9, 2015, Europcar Groupe is a public limited company (société anonyme) with a Management Board and 2 rue René Caudron, Bâtiment OP, a Supervisory Board under French law governed in particular 78960 Voisins-le-Bretonneux by the provisions of Book II of the French Commercial Code. (Tel.: +33 (0)1 30 44 90 00). Before March 9, 2015, the Company was a limited liability company (société anonyme) with a Board of Directors. The Company’s fi scal year begins on January 1 and ends on December 31 of each year.
6.2 CONSTITUTION AND BYLAWS
The Company’s bylaws were prepared in accordance with points described below are taken from the Company’s bylaws French law and regulations on public limited companies with approved at the Ordinary and Extraordinary Shareholders’ a Management Board and a Supervisory Board. The key Meeting of February 24, 2015.
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6.2.1 Corporate purpose
Article 3 of the bylaws states that the Company’s corporate a own, by way of acquisition or otherwise, and manage, in purpose, directly or indirectly, in France or abroad, is to: particular by way of leasing, any buildings, real property and property rights; a acquire investments by way of asset transfers, purchases, subscriptions or otherwise in any companies regardless of a take direct or indirect part in any transaction that might their form and purpose; directly or indirectly be connected with the corporate purpose through the creation of new companies, asset transfers, a provide all types of management services to other fi rms, in subscriptions or purchases of securities or company rights, particular strategic, organizational, accounting, fi nancial, IT mergers, alliances, joint ventures and by any other means and commercial services; and in any forms used in France and abroad; a manage a portfolio of trademarks and patents, in particular and, more generally, to engage in all commercial, fi nancial by way of licensing rights; (including any loan, advance, security or any cash transaction a lease any machinery and equipment of any kind whatever; within the Group), industrial and real or personal property transactions that might directly or indirectly be connected with the corporate purpose and with any purposes that are similar or connected or capable of promoting the achievement thereof.
06 6.2.2 Management and supervisory bodies
6.2.2.1 Management Board Dismissal (Article 12 of the bylaws) Any member of the Management Board may be dismissed Appointments (Article 12 of the bylaws) either by the Supervisory Board or by the Shareholders’ Meeting. If a dismissal decision is made without just cause, it The Company is managed by a Management Board comprising can give rise to damages. two to fi ve members appointed by the Supervisory Board. It performs its duties under the oversight of the Supervisory Board The dismissal of a member of the Management Board does in accordance with the law and the bylaws. not result in the termination of their contract of employment. The members of the Management Board may be chosen from among non-shareholders. They must be natural persons. They Chairman of the Management Board and CEOs may always be re-elected. No member of the Supervisory (Article 13 of the bylaws) Board may be a member of the Management Board. The Supervisory Board appoints one of the members of the The age limit for being a member of the Management Board Management Board as the Chairman of the Management is sixty-eight (68) years. Members of the Management Board Board. The Chairman of the Management Board performs are automatically deemed to have resigned at the end of the their duties throughout their term of offi ce as a member of Shareholders’ Meeting convened to approve the financial the Management Board. They represent the Company in its statements for the fi scal year in which they reach the age of relations with third parties. sixty-eight (68) years. The Supervisory Board may attribute the same representative Members of the Management Board may be bound to the powers to one or more members of the Management Board Company by a contract of employment which remains in force who then have the title of CEO. throughout their term of offi ce and after its expiry. The offi ce of Chairman and, if applicable, of CEO attributed to All members of the Management Board are subject to the members of the Management Board may be withdrawn by the applicable laws and regulations regarding the total number of Supervisory Board at any time. offi ces held. As regards third parties, any actions binding on the Company The members of the Management Board are appointed for a may be validly taken by the Chairman of the Management term of four (4) years. In the event of a seat becoming vacant, Board or by any member appointed by the Supervisory Board the Supervisory Board appoints a replacement for the remainder as CEO. of the predecessor’s term of offi ce in accordance with the law.
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Deliberations of the Management Board one or more specifi c purposes with or without the power to (Article 14 of the bylaws) sub-delegate. The Management Board meets as often as the interests of The Management Board prepares and presents to the the Company require, on a notice of meeting issued by its Supervisory Board the reports required by the regulations in Chairman or at least half of its members, either at the registered force as well as annual, half-yearly and, when appropriate, offi ce or in any other place indicated in the notice of meeting. quarterly fi nancial statements. The agenda can be completed at the time of the meeting. The Management Board convenes all shareholders’ meetings, Notices of meetings may be issued by any means, even orally. sets their agenda and performs their decisions. A member of the Management Board may arrange to Members of the Management Board are liable to the Company be represented at a meeting by another member of the or to third parties, both individually or jointly and severally, Management Board who may not hold more than one proxy. as the case may be, whether for infringements of the legal The Chairman of the Management Board chairs its meetings. In provisions governing public limited companies, or for breaches the event that the Chairman is absent, the Management Board of the bylaws, or for negligence in their management, under appoints one of its members to act as Chairman of the meeting. the conditions set and subject to the penalties provided for by The deliberations of the Management Board are only valid if at the legislation in force. least half of its members are present or represented. Decisions are taken by a majority of the votes of members present or Compensation of members of the Management Board represented. In the event of a tied vote, the chairman of the (Article 16 of the bylaws) meeting has a casting vote. The Supervisory Board sets the mode and amount of Members of the Management Board may take part in its compensation of each member of the Management Board. meetings by means of videoconferencing or other means of telecommunication under the conditions authorized by the regulations applicable to meetings of the Supervisory Board. 6.2.2.2 Supervisory Board They are then deemed to be present for the purposes of calculating the quorum and majority. Internal rules of the Supervisory Board The deliberations are recorded in minutes drawn up in a The Supervisory Board has internal rules which determine its special register kept at the registered offi ce and signed by workings. the Chairman and by the secretary or another member of the Management Board. Copies or extracts of these minutes can Composition and terms of offi ce be validly certifi ed by the Chairman, by the secretary or by a (Article 17 of the bylaws and Articles 1 and 2 member of the Management Board. of the Supervisory Board’s internal rules)
Powers and obligations of the Management Board The Supervisory Board comprises three (3) to eighteen (18) (Article 15 of the bylaws) members (subject to special dispensations provided for by law) appointed by the Shareholders’ Meeting. The Management Board is invested with the broadest powers to act in any circumstances in the name of the Company Members of the Supervisory Board are appointed by the within the limitations of the corporate purpose and subject Shareholders’ Meeting, save that the Board has the power, in to the powers expressly attributed by law and the bylaws to the event of a vacancy for one or more positions, to appoint shareholders’ meetings and to the Supervisory Board. replacements by way of co-option for the remainder of the predecessors’ terms of offi ce and subject to ratifi cation by the No restriction on its powers is enforceable against third next Shareholders’ Meeting. parties; these can take action against the Company to enforce obligations contracted in its name by the Chairman of the The number of members of the Supervisory Board aged over Management Board or by a CEO provided their appointments seventy (70) years may not exceed one third of members in were duly published. offi ce. Should this proportion be exceeded, the term of offi ce of the oldest member of the Supervisory Board, other than the Members of the Management Board may divide management Chairman, expires at the end of the next Shareholders’ Meeting. tasks among themselves with the authority of the Supervisory Board. Under no circumstances, however, does this division The term of offi ce of members of the Supervisory Board is of tasks exempt the Management Board from meeting and four (4) years. The Shareholders’ Meeting may, upon the deliberating on the most important matters regarding the appointment of certain members of the Supervisory Board, running of the Company, nor does it exempt the Management reduce their term of offi ce to less than four (4) years in order to Board and all of its members from their joint and several stagger the renewal of the terms of offi ce of members of the responsibility. Supervisory Board. Members may be re-elected. The duties of a member of the Supervisory Board cease at the end of The Management Board may nominate one or more of its the Shareholders’ Meeting convened to approve the fi nancial members or any person chosen elsewhere to carry out such statements for the previous fi scal year held in the year in which special, permanent or temporary assignments as it determines their term of offi ce expires. and delegate to them the powers it considers necessary for
324 EUROPCAR REGISTRATION DOCUMENT 2015 INFORMATION ON THE COMPANY AND ITS SHARE CAPITAL CONSTITUTION AND BYLAWS
Members of the Supervisory Board must own at least 500 shares owned by employees exercising their voting right shares in the Company throughout their term of offi ce, at all on an individual basis. times no later than 6 months after being appointed. The Company can form an ad hoc election committee to ensure No member of the Supervisory Board may be a member of the process is regular. the Management Board. Should a member of the Supervisory The minutes drawn up by the Supervisory Board(s) of the Board be appointed to the Management Board, their term of Company mutual funds or by ad hoc election committees offi ce on the Supervisory Board expires as soon as they take presenting the applications must be sent to the Supervisory up that offi ce. Board no later than eight (8) days before the date of its meeting Should the report presented by the Management Board to the convened to settle the resolutions of the Shareholders’ Meeting Shareholders’ Meeting pursuant to Article L. 225-102 of the relating to the appointment of the member of the Supervisory French Commercial Code state that the shares owned by the Board representing employee shareholders. Company’s employees and by companies associated with the In order to be admissible, each application must present a Company under Article L. 225-180 of said Code represent principal and deputy candidate. The deputy candidate, who more than three per cent (3%) of the share capital, a member must satisfy the same conditions of eligibility as the principal, of the Supervisory Board representing employee shareholders may be co-opted by the Supervisory Board to succeed the is appointed by the Shareholders’ Meeting in accordance with representative appointed by the Shareholders’ Meeting in the terms and conditions laid down by the laws and regulations the event that they cannot complete their term of offi ce. The in force and the bylaws, provided the Supervisory Board does co-option of the deputy by the Supervisory Board is subject to not already have among its members one or more member(s) ratifi cation by the next Shareholders’ Meeting. appointed from among the members of the Supervisory Boards of the Company mutual funds representing employees, or one In order to ensure the continuity of employee shareholder or more employees elected pursuant to Article L. 225-79 of representation and in the event that the deputy also cannot the French Commercial Code if the bylaws make use of that complete their term of offi ce, the Chairman of the Supervisory 06 provision. Board refers to the body that originally nominated the candidate (the Supervisory Board of a company mutual fund or a group Prior to the Shareholders’ Meeting called to appoint of employee shareholders) for it to nominate a new candidate the Supervisory Board member representing employee whose appointment will be submitted to the Shareholders’ shareholders, the Chairman of the Supervisory Board refers Meeting. to the Supervisory Boards of the Company mutual funds created under the employee savings plan of the Company The terms and conditions of nomination of candidates not and the entities it controls under Article L. 233-3 of the defi ned by the laws and regulations in force or the bylaws are French Commercial Code (together the “Group”) and invested set by the Chairman of the Supervisory Board, in particular principally in the Company’s shares and consults employee with regard to the timetable for the nomination of candidates. shareholders as stipulated in the bylaws. Each procedure mentioned in a) and b) above is recorded in Candidates for appointment are nominated under the following minutes comprising the number of votes received for each of conditions: the candidates. A list of all the candidates validly designated is established. a. when the voting right attached to shares owned by employees is exercised by members of the Supervisory The Shareholders’ Meeting rules, under the conditions Board of a company mutual fund, that board may appoint applicable to any appointment of a member of the Supervisory one candidate chosen from among its regular members Board, on all the candidates validly designated; the candidate representing employees. When there are several such obtaining the highest number of votes held by the shareholders company mutual funds, the Supervisory Boards of those present or represented during this Shareholders’ Meeting will funds can agree in identical resolutions to present two be appointed member representing employee shareholders. joint candidates chosen from among the sum total of their Members representing employee shareholders are not taken regular members representing employees; into account when determining the minimum and maximum numbers of members of the Supervisory Board set by the b. when the voting right attached to shares owned by bylaws (Article 17). employees is directly exercised by those employees, one candidate may be nominated at the time of the consultations The term of offi ce of the member of the Supervisory Board organized by the Company. These consultations, preceded representing employee shareholders is four (4) years. Their by a call for applications, are organized by the Company term of offi ce ceases at the end of the Shareholders’ Meeting by any technical means that make it possible to ensure the convened to approve the fi nancial statements for the previous reliability of the vote, including electronic or postal voting. fi scal year held in the year in which their term of offi ce expires. In order to be admissible, applications must be presented However, their term of offi ce ceases automatically and they by a group of shareholders representing at least 5% of the are deemed to have automatically resigned in the event that
EUROPCAR REGISTRATION DOCUMENT 2015 325 06 INFORMATION ON THE COMPANY AND ITS SHARE CAPITAL CONSTITUTION AND BYLAWS
they cease to be an employee of the Company (or of an entity To qualify as independent, members of the Supervisory Board or economic interest grouping associated with the Company must: under Article L. 225-180 of the French Commercial Code). (i) not be an employee or executive corporate officer of In the event that the position of member of the Supervisory the Company, or an employee or member of the Board Board representing employee shareholders becomes vacant of Directors or Supervisory Board of any parent or for any reason whatsoever, the replacement will be arranged consolidated entity, and not have been such in the past under the conditions set out above, at the latest prior to the fi ve years; next Shareholders’ Meeting or, if this meeting occurs less than (ii) not be an executive corporate offi cer of an entity on whose four (4) months after the position becomes vacant, prior to the Board of Directors or Supervisory Board the Company subsequent Shareholders’ Meeting. The new member of the sits directly or indirectly or of an entity on whose Board Supervisory Board is appointed by the Shareholders’ Meeting of Directors or Supervisory Board a designated or actual for the remainder of their predecessor’s term of offi ce. executive corporate offi cer (current or less than fi ve years The Supervisory Board may validly meet and deliberate until the ago) of the Company sits; date of replacement of the member(s) representing employee (iii) not be a customer, supplier, investment banker or major shareholders. creditor of the Company or its Group or of an entity for The above provisions shall cease to apply when, at the close of which the Company or Group represent a signifi cant share a fi scal year, the percentage of the capital owned by employees of business (nor may they be related directly or indirectly of the Company and entities associated with the Company to any such entity); under Article L. 225-180 of the French Commercial Code, in the (iv) not have any close family ties with a corporate offi cer of context set out by Article L. 225-102 of said Code, represents the Company; less than three per cent (3%) of the capital on the understanding that the term of offi ce of any member appointed will expire on (v) not have been an auditor to the Company within the last its expiry date. fi ve years; Provisions relating to the number of shares that must be owned (vi) not have been a member of the Company’s Supervisory by a member of the Supervisory Board are not applicable to Board within the last twelve years preceding the start of members representing employee shareholders. Nevertheless, their term of offi ce. members of the Supervisory Board representing employee Regarding Board members who hold ten percent or more shareholders must, either individually or through a company of the Company’s equity or voting rights or who represent mutual fund created under the Group’s employee savings a legal entity with an equivalent stake, the Board, on report plan, own at least one share or a number of units of said fund of the Nominations and Compensation Committee, rules on equivalent to at least one share. their independence taking special note of the composition of The Supervisory Board ensures that wherever possible, at least the Company’s share ownership and any potential confl ict of a third of its members are independent; independence implies interest. no value judgment as to the quality and skills that members The Supervisory Board may consider that a Board member bring to the Board. who meets the above criteria may nevertheless not be deemed On every appointment or reappointment of a Board member, independent in view of their particular circumstances or those of and at least annually before publication of the Company’s the Company in light of its shareholder structure or for any other Annual Report, the Board carries out an assessment of reason. Conversely, the Board may consider that a member the independence of each member (or candidate). During of the Board who does not meet all the above criteria may this assessment the Board, having heard the opinion of the nonetheless be deemed independent. Nominations and Compensation Committee, assesses each Members deemed independent must inform the Chairman of member (or candidate) in light of the criteria set out below, any change in their personal circumstances affecting these any special circumstances and the person’s relationship to the criteria as soon as they become aware of such a change. Company. The conclusions of this assessment are brought to the attention of shareholders in the Annual Report and, where applicable, of the Shareholders’ Meeting during the election of Dismissal (Article 17 of the bylaws) the members of the Supervisory Board. Members of the Supervisory Board may be dismissed at any time by the Shareholders’ Meeting.
326 EUROPCAR REGISTRATION DOCUMENT 2015 INFORMATION ON THE COMPANY AND ITS SHARE CAPITAL CONSTITUTION AND BYLAWS
Offi cials of the Supervisory Board The following transactions are subject to the prior authorization (Article 18 of the bylaws and Article 1.4 of the Supervisory Board: of the Supervisory Board internal rules) a. according to the laws and regulations in force: The Supervisory Board elects a Chairman and can elect a Vice- a the sale of real property, Chairman from among its members for the duration of their a the total or partial sale of equity investments, term of offi ce and in accordance with its internal rules. a the granting of sureties, bonds, endorsements or It determines their fi xed or variable compensation. guarantees; The Chairman is responsible for convening the Board, at least b. according to the bylaws, for the completion of the following four times a year, for setting the agenda of meetings and for transactions relating to the Company: chairing discussions. a a proposal to the Shareholders’ Meeting to modify the The Vice-Chairman performs the same functions and has bylaws, the same prerogatives if the Chairman is absent or when the a any draft resolution to the Shareholders’ Meeting relating Chairman has delegated his powers temporarily. to the issuance of share or other securities giving access, immediately or in the future, to the Company’s share The Supervisory Board may appoint a secretary selected or capital, and any use of such delegations granted by the not from among its members. Shareholders’ Meeting, a any transaction in the Company’s shares that could lead, Powers and obligations of the Supervisory Board immediately or in the future, to a capital decrease (not (Article 20 of the bylaws and Articles 1.5, 2.8, 2.9 occasioned by losses) through a decrease in the par value and 3 of the Supervisory Board’s internal rules) or a cancellation of shares, The Supervisory Board exercises permanent control over the a any proposal to the Shareholders’ Meeting to implement 06 Management Board’s running of the Company. a share buy-back program, a At any time of the year, it carries out such checks and inspections any proposal to the Shareholders’ Meeting to allocate the as it deems necessary and can obtain any documents from the Company’s results and to distribute dividends, as well as Management Board that it considers necessary for it to carry any distribution of an interim dividend, out its task. a decisions to change the Company’s business or to diversify the Group’s activities in a manner involving investments of The Management Board, at least once every quarter, presents more than €15 million, and the Supervisory Board with a report summarizing the main a adopting the Company’s annual budget and strategic plan. management actions or decisions of the Company and The amounts referred to above may be revised upward by the containing all items for the Supervisory Board to be fully Supervisory Board’s internal rules; informed of the Company’s business development as well as the half-yearly fi nancial statements and quarterly accounting c. according to the bylaws, for the completion of the information. following transactions relating to the Company or its controlled subsidiaries under Article L. 233-3 of the French Once a year the Management Board presents the budgets and Commercial Code (together, the “Group”): investment plans to the Supervisory Board. a implementing an option plan or allocating stock After the close of each fi scal year, and within the regulatory subscription or purchase options, period, the Management Board presents the annual fi nancial a statements, consolidated fi nancial statements and its report implementing a free share grant plan or granting shares, to the Shareholders’ Meeting to the Supervisory Board a any new debt or fi nancing agreement where the transaction for verification and audit. The Supervisory Board presents or agreement amount exceeds (i) €100 million in the case its observations on the Management Board’s report and of asset-backed debt without any guarantee, with the the individual, parent company and consolidated financial exception of leasing agreements, and (ii) €25 million in all statements to the Shareholders’ Meeting. other cases, a dispute settlement agreements in an amount exceeding Under no circumstances can this supervision give rise to the €10 million, taking of management action by the Supervisory Board or by a decisions to expand into new countries, whether directly, its members, whether directly or indirectly. through the formation of a direct or indirect subsidiary, The Supervisory Board appoints and may dismiss members through equity investments or entry into joint-venture of the Management Board according to the law and Article 12 agreements or signifi cant collaborations (that is to say, of the bylaws. collaborations in which the assets contributed by any Group entity (including in cash) exceed a threshold of The Supervisory Board sets the draft resolution proposing the €15 million), as well as decisions to withdraw from any appointment of the Statutory Auditors to the Shareholders’ Meeting according to the law.
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presence in a given country, except in the event of an performance of the Chairman or members of the Management emergency, Board or, if applicable, the CEO(s). a the acquisition, expansion or sale of equity investments The Management Board reports regularly to the Supervisory by the Company or by one of its subsidiaries in any Board on the Company’s and Group’s business, results, cash companies created or to be created in an amount greater position and commitments in accordance with the law, the than €15 million, bylaws, the internal rules and the rules of procedure of the a the entry into or substantial modifi cation of agreements Supervisory Board’s Committees. relating to the exclusive use by a third party of any mark owned by the Company or one of its subsidiaries (other In particular, the Management Board reports the following than in connection with a franchise agreement or in the information to the Supervisory Board: ordinary course of business), (i) in general, any document or information relating to the a any other planned transaction (except for fl eet purchase Company or Group that the Management Board is obliged investments) not referred to in the list above, the investment to compile or publish by law or in the interests of open amount of which is greater than €10 million, to the extent information, before publication; that such investments are not included in the budget, and (ii) within ninety (90) days of the closing date, the Company’s a any decision to carry out a merger, spin-off, partial asset audited consolidated fi nancial statements including the contribution or similar transaction involving the Company, balance sheet, income statement, cash fl ow statement and any vote within the Company’s subsidiaries relating and notes to the consolidated fi nancial statements; the to a merger, spin-off, partial asset contribution or audited parent company fi nancial statements including the similar transaction, with the exception of intra-Group balance sheet, income statement, cash fl ow statement and reorganizations. notes to the parent company fi nancial statements; and the The amounts referred to above may be revised upward by the Statutory Auditors’ reports; Supervisory Board’s internal rules. (iii) bi-annually, a table summarizing the Company’s d. Any agreement subject to Article L. 225-86 of the French shareholder structure; Commercial Code. (iv) quarterly, all other information, including financial and Within the limits of the amounts it determines, and under the accounting information, provided by the Company to conditions and for the period it sets, the Supervisory Board its bank lenders under credit agreements made by the may give advance authorization to the Management Board to Company as soon as the information is sent to the banks; complete one or more of the transactions referred to in items a. and b. immediately above. (v) monthly, a summary of the key fi nancial and operating items of the Company and Group with a breakdown by The Supervisory Board may form committees responsible for country (including key income statement aggregates, looking into matters that it or its Chairman submit for their corporate EBITDA, consolidated fi nancial debt and cash); examination and opinion. It determines the composition and remit of these committees which carry out their duties under (vi) at least quarterly, and whenever the Supervisory Board so its supervision. requests or deems appropriate, a progress report on the business of the Company and Group; Reporting to the Supervisory Board (vii) within three months of the half-yearly closing dates, the (Article 4 of the Supervisory Board internal rules) parent company and consolidated fi nancial statements Each Board member may receive, upon his or her appointment, along with the associated management report (presented additional training on the specifi cs of the Company and the fi rst to the Audit Committee and then to the Supervisory companies it controls, their business and their industry. Board for verifi cation and audit); The Chairman, or where appropriate the Vice-Chairman, (viii) within eight (8) days of being drawn up, the future provides Board members, in suffi cient time, the information or projections of fi nancial statements and accompanying documents in his possession allowing them to perform their analysis reports required by Articles L. 232-2 and L. 232- duties effectively. Any Board member who is not in possession 3 of the French Commercial Code (presented fi rst to the of the information needed to cast an informed vote has the Audit Committee and then to the Supervisory Board); duty to report this to the board and to demand the information (ix) the Company’s and Group’s annual budget and medium- relevant for the performance of his or her duties. or long-term investment and fi nancial plan for approval The Supervisory Board may hear from members of the (the Supervisory Board may request that the Management Management Board who may be asked to attend its meetings Board provide quarterly monitoring reports on how these except for meetings or deliberations called to assess the are being met);
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(x) as required by the Audit Committee’s rules of procedure, the documents and information provided by the Management and at least once a year, the Management Board’s policy Board, and whenever the interests of the Company so require. for managing and monitoring risks of all types affecting Meetings must be suffi ciently frequent and long to allow in- the Company and Group as well as the programs and depth review and discussion of the matters falling under the measures implemented and the monitoring report on the Supervisory Board’s responsibility. effectiveness of Group internal control, internal audit and Meetings are held and decisions made under the quorum and risk management; majority conditions provided by law. In the event of a tied vote, (xi) as required by the Nominations and Compensation only the Chairman of the Supervisory Board has a casting vote. Committee’s rules of procedure, and at least once a year, all Pursuant to applicable laws and regulations, the use of video information and policies relating to the fi xed pay, bonuses conference or other means of telecommunication is authorized and benefi ts, deferred or conditional, of Management Board for any Supervisory Board meeting. The means used must members (the Management Board reports this information enable real-time and continuous transmission of speech to the Nominations and Compensation Committee which in and, if applicable, video images of the members, who must turn reports it to the Supervisory Board and, if applicable, be visible to everyone. These means must also permit each seeks its prior approval); likewise, the Management Board member to be identifi ed and ensure their active participation keeps the Nominations and Compensation Committee in meetings. Directors participating in a meeting by means regularly informed about succession plans for its members of video conference or other means of telecommunication and members of the Executive Committee; as described above are deemed present for purposes of (xii) any other information and documents relating to the calculating quorum and majority. The attendance sheet includes Company or Group deemed to assist the Supervisory the names of members participating in the Supervisory Board Board in fulfi lling its duties. meeting in such manner. Any member of the Supervisory Board can meet members of The meeting’s minutes must indicate the names of those 06 the Executive Committee without Management Board members Supervisory Board members deemed present in this manner. being present provided they inform a Management Board The minutes must also mention the occurrence of any technical member beforehand. Such meetings are purely informative diffi culties that may have interfered with the meeting. and must not impair any hierarchical reporting lines to which In accordance with Article L. 225-82 of the French Commercial the executives concerned are subject. Code and Article 19-III of the Company’s bylaws, participation in Supervisory Board meetings by means of video conference Deliberations of the Supervisory Board or telecommunication is prohibited for votes on the following (Article 19 of the bylaws and Articles 5 and 6 decisions: of the Supervisory Board’s internal rules) a appointing or replacing a Chairperson or Vice-Chairperson; Members of the Supervisory Board are called to its meetings a by its Chairman or, in the case of impediment, by the appointing or removing a member of the Management Board; Vice- Chairman, by any means, including orally. The Chairman a closing the annual Company and consolidated financial must convene the Supervisory Board when at least one statements and reviewing the Company and Group member of the Management Board or at least one third of management reports. members of the Supervisory Board submit a written motivated request to this effect within fi fteen (15) days of its receipt. If The minutes of meetings of the Supervisory Board are prepared the demand is not acted upon, its authors may themselves and copies or extracts thereof are delivered and certifi ed in convene the meeting and set the agenda. accordance with the law. Meetings take place at the Company’s registered office or Compensation of members of the Supervisory any other place specifi ed in the notice of meeting. They are Board (Article 21 of the bylaws and Article 7 chaired by the Chairman of the Supervisory Board, and in the of the Supervisory Board internal rules) event of their absence, by the Vice-Chairman. The Supervisory Board meets every three (3) months, notably to review the The Shareholders’ Meeting may allocate an annual fi xed sum quarterly report presented by the Management Board with, if as attendance fees to the members of the Supervisory Board necessary, a report of the Audit Committee, to verify and audit by way of compensation for their duties.
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On recommendation of the Nominations and Compensation 6.2.2.3 College of censors (Article 22 Committee, the Supervisory Board: of the bylaws and Article 9 of a freely divides up among its members the attendance fees the Supervisory Board internal rules) allocated to the Board by the Shareholders’ Meeting. The Shareholders’ Meeting may appoint censors (non-voting Committee members receive a share, set by the Supervisory directors) for the purpose of assisting the Supervisory Board. Board and deducted from the total attendance fees allocated, Censors may or may not be shareholders and can number up according to their attendance at c ommittee meetings; to four. They are appointed for a maximum term of two years. a determines the compensation of the Chairperson and The Shareholders’ Meeting may revoke their appointment at Vice-Chairperson; any time. The Supervisory Board sets their attributions and determines their compensation. a allocates, if it sees fi t, exceptional compensation to certain of its members for tasks or duties entrusted to them. The age limit of a censor is eighty (80) years. Any censor reaching that age will be deemed to have automatically Fixed payments are adjusted on a proportional basis when resigned. terms of offi ce begin or end in the fi scal year. Censors are convened to all meetings of the Supervisory Attendance fees are paid annually in arrears. Board under the same terms and conditions as members of The rules for dividing up attendance fees and determining their the Supervisory Board and take part in its deliberations in a individual amounts must be disclosed in the Annual Report, it solely consultative capacity. Censors express their observations being understood that the total amount paid to members of during the Supervisory Board’s meetings. They cannot replace the Supervisory Board, including for their work in committees members of the Supervisory Board and only issue their but excluding receipted expenses, cannot exceed the amount opinions. The Supervisory Board may also entrust specifi c authorized by the Shareholders’ Meeting. assignments to censors.
6.2.3 Rights and obligations attached to shares (Articles 6, 7, 9 and 10 of the bylaws)
6.2.3.1 General principles The shares are indivisible as regards the Company so that joint owners of undivided shares must arrange to be represented to Fully paid up common shares are held in either registered or the Company either by one of them or by a single representative bearer form at the shareholder’s discretion. Class B, C and D appointed by the courts in the event of disagreement. preferred shares can only be held in registered form. They are registered in the accounts of their owners according to the laws Each common share grants the right to vote and to be and regulations in force. represented at any Shareholders’ Meeting in accordance with legal and statutory requirements. Ownership of a share automatically implies acceptance of the bylaws and the decisions made at shareholders’ meetings. Double voting rights are granted to all fully paid up ordinary shares that have been held in registered form by the same Each share carries a right to ownership of the Company’s holder for a continuous period of at least two (2) years. The assets and liquidation surpluses equal to the fraction of the length of time that shares were held prior to the listing date of share capital that it represents. the Company’s ordinary shares on Euronext Paris will not be Whenever it is necessary to own several old shares in order counted towards the two-year holding period. The Company to exercise any right, or in the event of a securities swap or has thus not exercised the option to waive the attribution of allocation conferring a right to a new security in exchange double voting rights set out in Article L. 225-123 paragraph 3 for the delivery of several old shares, individual securities or of the French Commercial Code. numbers of securities lower than that required will not give their In accordance with Article L. 225-123 paragraph 2 of the holders any rights against the Company, and shareholders must French Commercial Code, in the event of a capital increase make their own arrangements to group together and potentially by incorporation of reserves, profi ts or share premium, double purchase or sell the necessary number of securities. voting rights will be granted upon issuance to new ordinary
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shares allocated free of charge to a shareholder in respect of a since the initial public offering, the conversion ratio is existing shares already carrying such rights. determined on the basis of an average of market prices of shares of the Company. Double voting rights may be exercised at any Shareholders’ Meeting. If a Class B shareholder does not exercise their conversion rights during the conversion period (i.e. until the expiry of a period of Any ordinary share that is transferred or converted into bearer 20 trading days following the date on which Eurazeo’s 2015 form loses its double voting right. Nevertheless, a transfer of results are published), their Class B shares will automatically ownership through inheritance, liquidation of marital property be converted into the same number of common shares in the or inter vivos donation to a spouse or relative entitled to inherit Company. Upon expiration of the said conversion time, all of does not result in the loss of an acquired double voting right the B shares shall be automatically converted into the same and does not interrupt the two-year holding period above. number of ordinary shares of the Company.
6.2.3.2 Specifi c characteristics of preferred b) Class C and D shares (Appendix B of the by laws) shares Class C and D shares are preferred shares under Article L. 228- 11 of the French Commercial Code whose issue was agreed a) Class B shares (Appendix A of the by laws) by the Company’s Management Board on May 15, 2015 exercising powers granted it at the Shareholders’ Meeting of Class B shares (B shares) are preferred shares under Article February 24, 2015. L. 228-11 of the French Commercial Code issued in July 2011 to the Group’s managers and employees, some of whom have Class C preferred shares ( C Shares) were subscribed by left the Group, and to Eurazeo (see Section 6.4.5 “Shareholders’ certain of the Group’s offi cers and employees belonging to agreements” of this Registration Document). the Executive Committee (the “Group C Managers”), and Class D preferred shares (the “D Shares”) were subscribed by These B shares have the same characteristics as ordinary 06 Eurazeo, it being stipulated that the D Shares were subject to shares except that they confer no voting rights. a promise by Eurazeo to sell them to the Group C Managers The terms and conditions of the B shares set out the terms and a commitment by the Group C managers to purchase them on which the holders of Class B preferred shares can convert from Eurazeo upon the signature of a guarantee agreement them into ordinary shares. relating to the IPO. These state that B shares may be converted into common The terms and conditions of Class C and D preferred shares shares if certain events occur before publication of Eurazeo’s set out how and when holders of Class C and D shares can 2015 results, in particular if the shares are offered for sale in convert them into common stock. Accordingly, in the event of a regulated market via an Initial Public Offering (IPO). In this an IPO, Class C shares can be converted into common shares case, holders of Class B shares can exercise their right to at any time until December 31, 2019; Class D shares cannot convert their shares at any time from notifi cation of the IPO be converted in the year following the IPO; up to half of Class up to the expiration of the 20-day period following publication D shares can be converted during the following year with the of Eurazeo’s 2015 results, or, if later, the three-month period remainder eligible for conversion two years from the IPO. following expiration of the lock-up period that may be imposed As from the IPO, the conversion ratio of Class C and D shares by the underwriting banks in relation to the IPO. The description into common stock is determined on the basis of the exercise of the conversion of B shares into common shares during fi scal period taking into account a multiple of the value of the common year 2015 is described in Section 6.3.3 “Three-year change in shares varying in line with their trading price. For the purposes share capital” of this Registration Document. of this calculation, the value of the common shares is equal The conversion ratio of Class B shares into ordinary shares either to their initial listing price or to a weighted average of the is determined, depending on the exercise period, as follows: share price over a period of ten trading days. a until the IPO, the conversion ration was based on Eurazeo’s Under the agreement between the C Managers and Eurazeo in return on its investment (including net proceeds of any sale respect of the IPO, neither Class C nor Class D shares can be of shares by Eurazeo as part of the IPO) plus the value of the sold (except to Eurazeo) and common shares created by the stake retained by Eurazeo based on the IPO price; conversion of Class C shares cannot be transferred during the
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lock-up period set by the underwriting banks and in any case The agreement also defines the joint transfer rights and before a minimum period of one year. In addition, members commitments of the C Managers as well as their commitment of the Management Board may not transfer shares to reduce to transfer their preferred shares to Eurazeo if they leave the their holding below the mandatory minimum for their offi ce until Group under specifi ed circumstances. the end of their term of offi ce, i.e. the lower of either 10% of If no conversion occurs before December 31, 2019, the Class the number of shares held before the transfer or a number C and D shares will automatically be converted into the same equivalent to three times their annual compensation based on number of common shares in the Company. the share price at the transfer date.
6.2.4 Changes to shareholders’ rights
The rights of shareholders may be changed under the law and regulations in force. There is no specifi c stipulation that restricts changes to shareholders’ rights beyond the requirements of the law.
6.2.5 Shareholders’ M eetings (Articles 9, 10, 24 and 25 of the bylaws)
Shareholders’ meetings are convened and conducted in Each common share grants the right to vote and to be accordance with the law. represented at any Shareholders’ Meeting in accordance with legal and statutory requirements. Meetings take place either at the registered offi ce or in any other place specifi ed in the notice of meeting. Class B, C and D preferred shares are non-voting. Shareholders may attend shareholders’ meetings in accordance When common shares are held in usufruct, their right to vote at with the law. ordinary and extraordinary Shareholders’ meetings belongs to the usufruct-holders, However, shareholders may agree among Any shareholder may attend meetings in person or by proxy themselves any other allocation of the exercise of voting rights (without voting rights in the case of holders of Class B, C or at Shareholders’ Meetings. In this case, they must notify their D shares). They may also attend any shareholders’ meeting agreement to the Company by registered mail sent to the by postal vote according to the laws and regulations in force. registered offi ce and the Company will be obliged to respect The Management Board is empowered to authorize transfer this agreement at any Shareholders’ meeting held more than by telecommunications (including by electronic media) to the one (1) month after the date the registered letter was sent, as Company of the postal proxy and voting forms in accordance attested by the postmark. with applicable law and regulations. Double voting rights are granted to all fully paid up common When e-signatures are used they can take any form complying shares that have been held in registered form by the same with the conditions set out in the fi rst sentence of paragraph 2 holder for a continuous period of at least two (2) years. The of Article 1316-4 of the French Civil Code. length of time that shares were held prior to the listing date of the Company’s ordinary shares on Euronext Paris will not be If the Management Board announces in the notice of meeting counted towards the two-year holding period. The Company that such means of telecommunication may be used, has thus not exercised the option to waive attribution of double all shareholders attending by video conference or other voting rights set out in Article L. 225-123 paragraph 3 of the telecommunication permitting their identifi cation as required French Commercial Code. by applicable regulations are deemed present for purposes of calculating quorum and majority. In accordance with Article L. 225-123 paragraph 2 of the French Commercial Code, in the event of a capital increase by Meetings are chaired by the Chairman of the Supervisory Board incorporation of reserves, earnings or share premiums, double or, in their absence, by the Vice-Chairman. Failing this, the voting rights will be granted upon issuance to new common meeting elects its own C hairman. shares allocated free of charge to a shareholder in respect of Minutes are taken of shareholders’ meetings and copies or existing shares already carrying such rights. extracts provided and certifi ed in accordance with law.
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Double voting rights may be exercised at any Shareholders’ Any shareholder may vote by mail under the terms and Meeting. conditions and using the procedures prescribed in accordance with applicable law and regulations. Shareholders may, in Any ordinary share that is transferred or converted into bearer accordance with applicable law and regulations, send their form loses its double voting right. However, a transfer of proxy or voting forms by mail in either paper format or, if the ownership through inheritance, liquidation of marital property Management Board so decides and announces in the notice of or inter vivos donation to a spouse or relative entitled to inherit meeting, by telecommunications (including electronic media); does not result in the loss of an acquired double voting right the Company may, to this end, use an identifi cation procedure and does not interrupt the two-year holding period above. that complies with the conditions in the first sentence of paragraph 2 of article 1316-4 of the French Civil Code.
6.2.6 Bylaws likely to have an effect in the event of a change of control
None.
6.2.7 Breach of thresholds and identifi cation of shareholders 06
6.2.7.1 Breach of thresholds 6.2.7.2 Identifi cation of shareholders (Article 8 of the bylaws) (Article 7 of the bylaws)
Aside from applicable legal and regulatory thresholds, any The Company is entitled, under the law and regulations in natural person or legal entity, acting alone or in concert, who force, and against payment of a fee at its own cost, to ask the comes or ceases to hold, directly or indirectly, one (1) percent central depository of fi nancial instruments to be informed, as or more of the Company’s share capital or voting rights, or any the case may be, of the name or corporate name, nationality, multiple of this percentage, including above the declaration date of birth or year of formation, and mail address, and, thresholds set by law and regulations, must inform the when appropriate, electronic address, of the holders of bearer Company of the total number of shares and voting rights owned securities conferring the right to vote at its shareholders’ and of any securities giving access to the capital or voting rights meetings, whether immediately or in the future, together potentially attached by registered post with recorded delivery to with the quantity of securities owned by each of them and, the registered offi ce (general address) by the close of trading on if applicable, the restrictions to which the securities may be the fourth trading day following the date the breach occurred. subject. In view of the list provided by the aforementioned organization, the Company has the power to ask the persons For the purpose of determining the thresholds described appearing thereon, whom the Company deems potentially above, account is also taken of the shares or voting rights held registered on behalf of third parties, for the above information indirectly and shares or voting rights associated with shares or concerning the owners of the securities. voting rights held as defi ned in Articles L. 233-7 et seq. of the French Commercial Code. If a person asked for information has failed to provide said information within the periods provided by the laws and In the event of a failure to comply with the above requirements, regulations in force, or has provided incomplete or incorrect the penalties prescribed by law for any shareholder in breach information relating either to their status or the owners of the of their obligation to declare the breach of a legal threshold securities, the shares or securities giving immediate or future shall only be applied to the thresholds prescribed in the bylaws access to the Company’s equity in respect of which that person on the demand, recorded in the minutes of the Shareholders’ was registered in an account will be stripped of their voting Meeting, of one or more shareholders holding at least one (1) rights for any Shareholders’ Meeting held until the identifi cation percent of the Company’s share capital or voting rights. process is regularized, and payment of the corresponding The Company reserves the right to announce to the public and dividend will be deferred until that date. to shareholders either the information notifi ed to it or any failure to comply with the above obligation by the person concerned.
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6.2.8 Changes to the share capital
Unless stated otherwise in the bylaws, the share capital may be increased, reduced or canceled by any method and in any manner permitted by law.
6.2.9 Distribution of profi ts (Article 27 of the bylaws)
The profi t or loss of each fi scal year is determined according The Shareholders’ Meeting has the power to grant shareholders to the laws and regulations in force. the option to receive payment of all or part of their dividend or interim dividend in cash or in shares under the conditions laid In the event of a profi t for the fi scal year after deductions to down by the regulations in force. In addition, the Shareholders’ establish or increase legal reserves, the Shareholders’ Meeting, Meeting may decide that payment of all or part of dividends, on a proposal from the Management Board, may deduct any interim dividends, distributed reserves or premiums, or any sums that it considers appropriate to be either retained and reduction in capital, will be conducted in kind using the carried forward to the next fiscal year or allocated to one Company’s portfolio securities or assets. or more general or special reserve funds or distributed to shareholders. All shareholders share in profi ts and contribute to losses in proportion to their stake in the share capital.
6.3 SHARE CAPITAL
6.3.1 Number of shares
At December 31, 2015, share capital amounted to 143,154,016 expiration of a time of 20 marketing days following the date euros divided into 142,998,496 common shares, 147,434 B of publication of the Eurazeo 2015 earnings, all of the class B class preferred shares, 4,045 C class preferred shares and preferred shares will be automatically converted into the same 4,041 D class preferred shares. number of ordinary shares of the Company (see Section 6.2.3.2 “Specifi c characteristics of preferred shares” of this Registration It is specifi ed that if the bearers of class B preferred shares Document). do not exercise their conversion right at the latest upon
6.3.2 Securities giving access to capital
There were no outstanding securities giving access to capital 12, 15 and 18) in respect of the issuance of securities giving and voting rights at December 31, 2015. access to capital, as described in Section 6.3.4 “Summary of current authorizations to increase the capital and their use in The Combined General Meeting of June 8, 2015 gave various 2015.” authorizations to the Management Board (resolutions 10, 11,
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6.3.3 Three-year change in share capital
Number Number Face Share Share of shares Face value of shares value after capital after premium before before after transaction transaction Year Date Type of transaction (in euros) transaction transaction transaction (in euros) (in euros)
2013 01/09/2013 Capital decrease - 78,228,649 10 78,228,649 4.30 336,383,190.70 2013 02/01/2013 Increase in share capital - 78,228,649 4.3 103,810,045 4.30 446,383,193.50 2015 02/24/2015 Capital decrease to cover losses by reducing the par value of the shares - 103,810,045 4.3 103,810,045 1.055 109,538,550.78 2015 05/15/2015 Capital increase through the issuance of Class C and Class D preferred shares 1,501,568.74 103,810,045 1.055 103,818,131 1.055 109,547,082.99 2015 06/08/2015 Capital increase by incorporation of premiums - 103,818,131 1.055 103,818,131 2.008 208,456,660 2015 06/08/2015 Capital decrease to cover losses by reducing the par value of the shares - 103,818,131 2.008 103,818,131 1.00 103,818,131 2015 06/29/2015 Capital increase by the issuance of Class B preferred shares - 103,818,131 1 104,313,976 1.00 104,313,976 06 2015 06/29/2015 Capital increase by public offering without subscription right 436,224,487.50 104,313,976 1 143,089,486 1.00 143,089,486 2015 08/07/2015 Capital increase by the creation of new shares following conversion of Class B preferred shares - 143,089,486 1 143,098,315 1.00 143,098,315 2015 10/15/2015 Capital increase by the creation of new shares following conversion of Class B preferred shares - 143,098,315 1 143,105,759 1.00 143,105,759 2015 12/15/2015 Capital increase by the creation of new shares following conversion of Class B preferred shares - 143,105,759 1 143,154,016 1.00 143,154,016
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6.3.4 Summary of current delegations of authorization to increase capital and their use in 2015
Amount authorized Use in the Shareholders’ (in nominal amount Term 2015 Meeting Resolution Type of authorization or % of capital) and expiry fi scal year
02/24/2015 5 Delegation of authorization to the Board of Directors €9,913.84 18 months €4,268.21 to increase share capital by issuing Class C preferred (12/07/2016) (4,045 Class C Company shares without subscription rights to a select preferred group of persons comprising employees and managers shares issued) of the Groupe Europcar 02/24/2015 6 Delegation of authorization to the Board of Directors to €9,913.84 18 months €4,263.99 increase share capital by issuing Class D preferred Company (12/07/2016) (4,041 Class D shares without subscription rights to Eurazeo only preferred shares issued) 06/08/2015 9 Delegation of authorization to the Management Board €500,000,000 26 months - to increase share capital by capitalizing reserves, profi ts, (08/07/2017) share premiums, acquisition premiums or goodwill on consolidation 06/08/2015 10 Delegation of authorization to the Management €70,000,000 (1) (2) 26 months - Board to issue shares and/or equity instruments (08/07/2017) with subscription rights giving access to other equity instruments and/or securities entitling holders to receive debt and/or other securities giving access to future shares 06/08/2015 11 Delegation of authorization to the Management Board €20,000,000 (1) (2) 26 months - to issue shares and/or equity instruments without (08/07/2017) subscription rights giving access to other equity instruments and/or securities entitling holders to receive debt and/or other securities giving access to future shares through a public offering or as part of a takeover bid involving the exchange of shares 06/08/2015 12 Delegation of authorization to the Management Board €750,000,000 (1) 26 months - to issue shares and/or equity instruments without (08/07/2017) subscription rights giving access to other equity instruments and/or securities entitling holders to receive debt and/or other securities giving access to future shares through a private placement under Article L. 411-2 II of the French Monetary and Financial Code 06/08/2015 13 Authorization to the Management Board, in the event 10% of the share 26 months - of an issue of shares and/or equity instruments without capital in each (08/07/2017) subscription rights giving access to other equity 12 month period (1) instruments and/or securities entitling holders to receive future shares, to set the issue price at no more than 10% of the share capital 06/08/2015 14 Authorization granted to the Management Board Limit set by 26 months - to increase the number of shares or securities issuable applicable regulation (08/07/2017) in the event of capital increase with or without preferential at the issue date (1) subscription rights 06/08/2015 15 Authorization granted to the Management Board to issue, 10% of share capital (1) 26 months - without preferential subscription rights, shares and/or (07/08/2017) equity securities giving access to other capital securities and/or entitlement to the award of debt securities and/or securities granting access to capital securities issuable in consideration of contributions in kind made to the Company (excluding tender offers)
336 EUROPCAR REGISTRATION DOCUMENT 2015 INFORMATION ON THE COMPANY AND ITS SHARE CAPITAL SHARE CAPITAL
Amount authorized Use in the Shareholders’ (in nominal amount Term 2015 Meeting Resolution Type of authorization or % of capital) and expiry fi scal year
08/06/2015 17 Delegation of authorization to the Management Board to 3% of share capital (2) 26 months - increase the share capital by issuing shares and/or equity (08/07/2017) instruments without subscription rights giving access to other equity instruments and/or entitling holders to receive debt and/or other securities giving access to future shares to members of an employee savings plan only 06/08/2015 18 Authorization to the Management Board to grant free 10% of share capital 38 months 1,991,844 shares shares without subscription rights to corporate offi cers (08/07/2018) granted and employees 06/08/2015 19 Delegation of authorization to the Management Board €50,000,000 (1) 9 months €38,775,510 to issue and offer shares without subscription rights (03/07/2016) to the public in the course of the Company’s IPO 06/08/2015 4 Authorization to trade in the Company’s shares €50,000,000 (3) 18 months (12/07/2016) 06/08/2015 20 Delegation of authorization to the Management Board 10% of share capital 26 months - to reduce the share capital by canceling treasury shares per 24-month period (08/07/2017)
(1) The total maximum nominal amount of capital increases that can be held under this authority counts toward the overall ceiling of €100 million . (2) This amount may be increased by the nominal amount of common shares in the Company to be issued in future, if applicable, in order to safeguard the rights of holders of securities giving access to the capital in accordance with law and regulations and any applicable contractual terms. (3) Up to a maximum number of shares representing 10% of the share capital, it being understood that the maximum number of shares held after purchases cannot be more than 10% of the share capital. 06
6.3.5 Non-equity securities
As of the date of this Registration Document, the Company has issued no non-equity securities.
6.3.6 Share buyback program
6.3.6.1 Details of the share buyback program price per share was set at a price equal to €24.50 (200% of the adopted in 2015 price of the share on its admission to trading on the regulated market of Euronext Paris). Purchases of such shares may be The Combined General Meeting of June 8, 2015 (resolution 4) made at any time within the limits authorized by the statutory or authorized the Management Board to implement a buyback regulatory provisions, notably during a tender offer or exchange program bearing on shares of the Company pursuant to Article offer initiated by the Company or for the shares of the Company, L. 225-209 of the French Commercial Code and the AMF notably for the following purposes: General Regulation (the “Buyback Program”). a canceling treasury shares by virtue of an authorization to The Buyback Program, adopted for a period of 18 months the Management Board conferred by the Extraordinary from the date of the General Meeting of June 8, 2015, i.e. until Shareholders’ Meeting; or December 7, 2016, authorizes the Management Board to trade a in the shares of the Company within the limit of a number of market making on the secondary market or promoting trading shares representing 10% of the share capital of the Company of the Company’s shares under a liquidity contract with an as of the date of such purchases. The maximum purchase
EUROPCAR REGISTRATION DOCUMENT 2015 337 06 INFORMATION ON THE COMPANY AND ITS SHARE CAPITAL SHARE CAPITAL
independent investment services provider in accordance with (c ) Cancellation of shares by Europcar Groupe a code of practice approved by the AMF; or Europcar Groupe did not cancel any shares in 2015. a allocating shares to employees and corporate offi cers of Under prevailing legislation, Europcar Groupe can cancel up to the Company or entities that are or will be related to it in 10% of its capital until August 7, 2017. accordance with applicable laws by implementing any stock option or similar plan, granting free shares or allocating or selling shares to employees as part of an employee (d ) Reallocations profi t- sharing scheme, or setting up a Company or Group Europcar Groupe did not reallocate any shares in 2015. employee savings plan (or similar scheme); or a delivering or exchanging shares in exercise of rights attached (e ) Amount of trading fees to securities entitling the holder, in any manner, to receive The amount of trading fees with respect to share buybacks shares in the Company; or totaled €25,000 before VAT in 2015. a conserving or delivering (in exchange, payment or otherwise) in the course of any acquisition, merger, split or contribution in kind. 6.3.6.2 Description of the share buyback program proposed to the General The program is also intended to permit any practice that may Meeting of May 10, 2016 in future be permitted or recognized by law or the AMF or any other purpose in accordance with applicable regulations. In Pursuant to Articles 241-2 et seq. of the AMF General these circumstances, the Company will inform its shareholders Regulation and L. 451-3 of the French Monetary and Financial by press release. Code, and in accordance with European regulations on market abuse, this description focuses on the objectives and terms The Combined General Meeting of June 8, 2015 also (resolution of the of the Company’s program to buy back its own shares, 20) authorized the Management Board to reduce on one or subject to the authorization of the Combined General Meeting more occasions, within the limit of 10% of capital per 24-month of May 10, 2016. period, the share capital of the Company by way of the cancellation of all or part of the shares held by the Company The Combined General Meeting of May 10, 2016 will be asked under the terms of a share buyback program by the Company to adopt in its eleventh resolution a share buyback program in of its own shares. accordance with Article L. 225-209 of the French Commercial Code. (a) Share buybacks and disposals carried out in 2015 Europcar Groupe had no treasury stock at December 31, 2015. In 2015, the Management Board implemented the Buyback The various objectives of the share buyback program, are, in Program to make a market for the Company’s shares under accordance with the prevailing regulations and market practices a liquidity contract with Rothschild & Cie Banque. The latter accepted by the AMF: purchased, on behalf of Europcar Groupe, 437,227 shares at a an average price of €11.77, i.e. a total cost of €5,146,161.79, cancellation under a cancellation authorization granted to the and sold, on behalf of Europcar Groupe, 437,227 shares at Management Board by the Extraordinary General Meeting; an average price of €11.83, i.e. a total cost of €5,172,395.41. a supply of the secondary market or liquidity of the Company Europcar Groupe did not use derivatives to make its purchases shares under a liquidity contract with an independent during this period. investment services provider, in accordance with an ethics No shares were held under this liquidity agreement at charter recognized by the AMF; December 31, 2015. a allocation of shares to employees and corporate offi cers of the Company and/or companies that are or will be related to (b) Share buybacks and disposals carried out in early it under the conditions defi ned by the applicable law, notably 2016 under the implementation of any stock option or similar plan, the allocation of free shares or the award or sale of shares to Since the start of 2016, Rothschild & Cie Banque bought on employees to allow them to benefi t from the growth of the March 31, 2016, on behalf of Europcar Groupe, 617,130 shares business or the implementation of any company or group at an average price of €9.83, i.e. a total cost of €6,066,387.90, savings plan (or similar plan); and sold on March 31, 2016, on behalf of Europcar Groupe, 604,630 shares at an average price of €9.91, i.e. a total cost a delivery or exchange of shares on the exercise of rights of €5,991,883.30. Europcar Groupe did not use derivatives to attached to securities giving rights in any way to the allocation make its purchases during this period. of shares of the Company; 12,500 shares were held under this liquidity agreement at a retention or surrender (as exchange, payment or otherwise) March 31, 2016. in connection with possible acquisitions, mergers, spin-offs or contributions;
338 EUROPCAR REGISTRATION DOCUMENT 2015 INFORMATION ON THE COMPANY AND ITS SHARE CAPITAL SHARE CAPITAL
a any other practice allowed or recognized by law or by the subject to the limits provided by applicable law. The maximum AMF, or any other objective that complies with the prevailing amount of funds available for the repurchase of shares may not regulations. exceed “€50 million, this condition being cumulative with that of the limit of 10% of the Company’s share capital” . These objectives are identical to the objectives of the previous share buyback program approved under resolution 4 of the The program will have a period of 18 months from the date of Combined General Meeting of June 8, 2015. the Combined General Meeting of May 18, 2016 called on to adopt it, i.e. until December 8, 2017. The Company may repurchase its own shares within the limit of 10% of share capital as of the date of such purchases. The purchase price of the shares is capped at €20 per share and
6.3.7 Conditions governing all rights of acquisition and/or all obligations attached to subscribed but not paid up capital
Not applicable.
6.3.8 Share capital of all Group entities subject to an option or an agreement 06 to issue options on it
In November 2014 the Company acquired a majority stake in E-car Club Ubeeqo, a car-sharing company, and subscribed to its capital increase in 2015. In July 2015, the Company acquired majority holding in the company E-car, a company specializing in electric car sharing The Group holds 75.70% of Ubeeqo’s capital with the remaining in the United Kingdom and subscribed for the capital increase 24.30% held in equal amounts by the two founders. Pursuant it enacted. to agreements dated November 26, 2014 the Company undertook to repurchase the shares held by the founders E-Car is 60.8% held by Europcar Lab, and the remainder of the starting from January 1, 2017. The founders may in principle capital is held by the two founders and the investor Centrica exercise their put options until November 26, 2024, except Ignite. the Company is committed to buying back the shares in periods when the Company may exercise the call options held by the Founders and Centrica Ignite in two blocks from granted it by the founders on the same shares. The Company now to September 30, 2017. may in principle exercise its call options in a six-month period starting July 1, 2020 and in a six month period starting July 1, 2021.
EUROPCAR REGISTRATION DOCUMENT 2015 339 06 INFORMATION ON THE COMPANY AND ITS SHARE CAPITAL MAIN SHAREHOLDERS OF THE COMPANY
6.4 MAIN SHAREHOLDERS OF THE COMPANY
6.4.1 Distribution of share capital and voting rights
The table below gives information about the Company’s by shareholders of their percentage stake in share capital shareholding structure at December 31, 2015. In accordance and voting rights for the purpose of regulatory reporting with AMF recommendation No. 2009-16, it makes mention (including threshold crossing notices), bearing in mind that, at of theoretical or “gross” voting rights, taking into account December 31, 2015, voting rights exercisable in Shareholders’ voting rights attached to shares with suspended voting Meetings, i.e. “net” voting rights, not taking into account the rights, in accordance with Article 223-11 of the AMF General shares with suspended voting rights, are identical to theoretical Regulation, and serving as the denominator for the calculation voting rights.
% of Total theoretical Ordinary Class B Class C Class D number of % of Theoretical voting shares shares (1) shares (1) shares (1) shares equity voting rights rights
Registered shares 69,636,772 147,434 4,045 4,041 69,792,292 48.64% 69,636,772 48.64% Bearer shares 73,361,724 0 0 0 73,361,724 51.30% 73,361,724 51.30% Eurazao SA 60,544,838 0 0 0 60,544,838 42.29% 60,544,838 42.34% ECIP Europcar Sarl 9,036,469 0 0 0 9,036,469 6.31% 9,036,469 6.32% Morgan Stanley 7,228,551 0 0 0 7,228,551 5.05% 7,228,551 5.05% Management and employees, fl oating 66,188,638 147,434 4,045 4,041 66,344,158 46.34% 66,188,638 46.29%
TOTAL 142,998,496 147,434 4,045 4,041 143,154,016 100% 142,998,496 100%
(1) Class B, C and D preferred shares do not have voting rights.
To the best of the Company’s knowledge, no other shareholder, directly or indirectly, alone or in concert, holds more than 5% of share capital or voting rights.
340 EUROPCAR REGISTRATION DOCUMENT 2015 INFORMATION ON THE COMPANY AND ITS SHARE CAPITAL MAIN SHAREHOLDERS OF THE COMPANY
6.4.2 Notices of threshold crossings
Shareholder Notice date AMF notice No. Threshold crossing
Amundi Group (1) July 2, 2015 215C0970 Threshold crossing upward, on July 1, 2015, of the threshold of 5% of the capital and the voting rights of the Company resulting from an acquisition of Company shares on the market and holding of 8,102,056 shares representing 5.67% of the capital and voting rights of the Company. Amundi Group (2) November 10, 2015 215C1646 Threshold crossing downward, on November 6, 2015, of the threshold of 5% of the capital and the voting rights of the Company resulting from an acquisition of Company shares on the market and the holding of 6,979,426 shares representing 4.88% of the capital and voting rights of the Company. Morgan Stanley Plc November 12, 2015 215C1666 Threshold crossing upward, on November 6, 2015, indirectly, by intermediary of its subsidiaries, of the threshold of 5% of the capital and the voting rights of the Company resulting from an acquisition of Company shares on the market and the holding of 7,228,551 shares representing 5.06% of the capital and voting rights of the Company. Morgan Stanley Plc March 2, 2016 216C0595 Threshold crossing downward, on February 25, 2016, indirectly, by intermediary of its subsidiaries, of the threshold of 5% of the capital and the voting rights of the Company and the holding of no share of Europcar Group in the meaning of the provisions of Articles L. 233-7 IV, 3° of the French Commercial Code and 223-13 I, 2° of the General Regulations of the French Financial Markets Authority (AMF) (3). Morgan Stanley Plc March 3, 2016 216C0603 Threshold crossing upward, on February 26, 2016, indirectly, by intermediary 06 of its subsidiary Morgan Stanley & Co. International Plc, of the threshold of 5% of the capital and the voting rights of the Company resulting from an increase in the number of Europcar Group equity cash-settled swaps held by the declarer and the holding of 7,246,226 shares representing 5.06% of the capital and voting rights of the Company. Morgan Stanley Plc March 9, 2016 216C0652 Threshold crossing downward, on March 4, 2016, indirectly, through its subsidiaries, of the threshold of 5% of the capital and voting rights of the Company and the holding of 19,438 shares representing 0.01% of the capital and voting rights of the Company within the meaning of the provisions of Articles L. 233-7 IV, 3° of the French Commercial Code and 223-13 I, 2° of the General Regulations of the French Financial Markets Authority (AMF)(4). Morgan Stanley Plc March 15, 2016 216C0679 Threshold crossing upward, on March 9, 2016, indirectly, through its subsidiaries, of the threshold of 5% of the capital and voting rights of the Company resulting from an increase in the number of Europcar Groupe equity cash-settled swaps held by the declarer and the holding of 7,206,042 shares representing 5.03% of the capital and voting rights of the Company. Morgan Stanley Plc March 16, 2016 216C0684 Threshold crossing downward, on March 10, 2016, indirectly, through its subsidiaries Morgan Stanley Capital Services LLC & Morgan Stanley & Co, of the threshold of 5% of the capital and voting rights of the Company and the indirect holding, by the intermediary of Morgan Stanley Capital Services LLC, of 19,018 shares representing 0.01% of the capital and voting rights of the Company within the meaning of the provisions of Articles L. 233-7 IV, 3° of the French Commercial Code and 223-13 I, 2° of the General Regulations of the French Financial Markets Authority (AMF)(5). Morgan Stanley Plc March 18, 2016 216C0701 Threshold crossing upward, on March 14, 2016, indirectly, through its subsidiaries, of the threshold of 5% of the capital and voting rights of the Company resulting from an acquisition of Company shares off the market and the indirect holding of 7,183,016 shares representing 5.01% of the capital and 5.02% of the voting rights of the Company.
(1) Acting on behalf of the funds that it manages. (2) Acting on behalf of the funds that it manages. (3) This threshold crossing results from a decrease in the number of EUROPCAR GROUPE shares held as collateral, consequently resulting in the benefi t of the exemption specifi ed in Articles L. 233-7 IV, 3° of the French Commercial Code and 223-13 I, 2° of the General Regulations, which allows the declarer to not take into account the shares that it continues to hold in its trading portfolio when the shares represent less than 5% of the capital and the voting rights of Europcar Groupe . (4) This threshold crossing is the result of a reduction in the number of Europcar Groupe shares held by Morgan Stanley & Co International Plc and included in a securities lending agreement with recall facility, leading to use of the exemption provided for in Articles L. 233-7 IV, 3° of the French Commercial Code and 223-13 I, 2° of the General Regulations of the French Financial Markets Authority (AMF), which allows the declarer to not take into account shares that it continues to hold in its trading portfolio when they represent less than 5% of the share capital and voting rights of the Europcar Groupe. (5) This threshold crossing is the result of a reduction in the number of Europcar Groupe shares held by Morgan Stanley & Co International Plc and included in a securities lending agreement with recall facility, leading to use of the exemption provided for in Articles L. 233-7 IV, 3° of the French Commercial Code and 223-13 I, 2° of the General Regulations of the French Financial Markets Authority (AMF), which allows the declarer to not take into account shares that it continues to hold in its trading portfolio when they represent less than 5% of the share capital and voting rights of the Europcar Groupe.
EUROPCAR REGISTRATION DOCUMENT 2015 341 06 INFORMATION ON THE COMPANY AND ITS SHARE CAPITAL MAIN SHAREHOLDERS OF THE COMPANY
6.4.3 Shareholders’ voting rights
Each ordinary share of the Company has the right to one vote. In accordance with Article L. 225-123 paragraph 2 of the French Commercial Code, in the event of a capital increase Class B, C and D shares do not have voting rights. by incorporation of reserves, profi ts or share premium, double The Company’s bylaws do not make use of the ability to voting rights will be granted upon issuance to new ordinary waive double voting rights provided for in Article L. 225-123 shares allocated free of charge to a shareholder in respect of paragraph 3 of the French Commercial Code. Thus, the bylaws existing shares already carrying such rights. hold that double voting rights granted to other common shares Double voting rights may be exercised at any Shareholders’ be granted to all fully paid up shares that have been held in Meeting. registered form by the same holder for a continuous period of at least two years. The length of time that the Company’s Any ordinary share that is transferred or converted into bearer shares were held prior to the listing date of the Company’s form loses its double voting right. However, a transfer of shares on Euronext Paris are not counted toward the two-year ownership through inheritance, liquidation of marital property holding period. or inter vivos donation to a spouse or relative entitled to inherit does not result in the loss of an acquired double voting right and does not interrupt the two-year holding period.
6.4.4 Control of the Company
Following the listing of the Company’s shares on Euronext Paris, Nominations and Compensation Committee is chaired by an Eurazeo is the Company’s main shareholder. The Company independent member of the Supervisory Board. believes there is no risk that control will be exercised in an As of December 31, 2015, Europcar Groupe S.A. is 42.3% abusive manner. In this regard, at least half of the Supervisory controlled by Eurazeo. The remainder of the share capital is Board is composed of independent members and at least two held by ECIP Europcar Sarl for 6.3%, Morgan Stanley for 5.05% thirds of each of the two specialized committees, namely the and by current and former employees and offi cers of the Group Audit Committee and the Nominations and Compensation and fl oating shareholders, who collectively hold 46.29%. Committee, is made up of independent members, while the
6.4.5 Shareholders’ agreements
6.4.5.1 Agreements concerning Europcar a transfer of shares: the shareholders’ agreement provides shares declared to the AMF that in case of sale of all or part of the interest held by Eurazeo and ECIP Europcar in the capital of the Company, Eurazeo Pursuant to Article L. 233-11 of the Commercial Code, the and ECIP Europcar will sell their respective interests in the AMF has made public the shareholders’ agreement signed on Company concurrently on the same legal and fi nancial terms. July 31, 2015 between Eurazeo and ECIP Europcar (Decision In case of partial sale, the number of shares of the Company and Information No. 215C1243). This agreement bears on the sold respectively by Eurazeo and ECIP Europcar will be possible sale of their respective shareholdings in the Company. determined in proportion to their respective shareholdings The main provisions of the agreement are as follows: in the Company before the partial sale in question; a a absence of action in concert: the parties have declared term of the agreement: the shareholders’ agreement that they do not intend to act in concert with each other provides that it will last as long as each party holds shares with regard to the Company within the meaning of Article of the Company. Either party may terminate the shareholders’ L. 233- 10 of the French Commercial Code; agreement by written notifi cation to the other party at least three months before the effective date of termination.
342 EUROPCAR REGISTRATION DOCUMENT 2015 INFORMATION ON THE COMPANY AND ITS SHARE CAPITAL MAIN SHAREHOLDERS OF THE COMPANY
6.4.5.2 Agreements entered For a description of Class B shares, see Section 6.2.3.2 into by shareholders “Specific characteristics of preferred shares” in this Registration Document. Management Agreement Investment Agreement A shareholders’ agreement dated July 29, 2011 was agreed between Eurazeo and certain managers and current and former In conjunction with the issuance by the Company of C Class employees of the Company holding Class B shares (“the B preferred shares (the “C Shares”) and D Class preferred shares Managers”) (“the Management Agreement”). This agreement, (“D Shares”), Eurazeo has concluded an agreement with some concluded for a0 duration of 15 years, legally ended with the managers and employees belonging to the Group’s Executive listing of the Company’s shares on Euronext Paris on June 26, Committee (the “C Managers”) relating to the subscription by 2015 (the Initial Public Offering or IPO). the C Managers of C Shares, and by Eurazeo of D Shares (the “investment agreement”). Other than clauses relating to the governance of the Company requiring the prior authorization of the Supervisory Board The D Shares were subject to a promise by Eurazeo to sell for certain decisions of the managers, the Management them in favor of C Managers and an obligation imposed on Agreement contained an inalienability clause for the securities C Managers to purchase them from Eurazeo in the event of of the Company held by the B Managers until the date of the signing of a security agreement relating to the IPO. The D publication by Eurazeo of its fi nancial results for the year ended Shares were sold by Eurazeo to the C Managers following the December 31, 2015 except in certain circumstances including signing of a security agreement as part of the IPO. an IPO. The main provisions of this agreement, as they will remain in In conjunction with the IPO, B Managers were able to (i) exercise effect following the IPO, are summarized below. their conversion rights at any time from the notifi cation of the In accordance with this agreement, the Class C preferred 06 proposed IPO until the expiry of a period of 20 trading days shares and Class D preferred shares held by the C Managers following the date of publication of the 2015 results of Eurazeo may not be sold, subject to certain exceptions, such as, in (or, if later, until after a period of three months following the particular, the sale to Eurazeo in the event of certain departures expiry of lock-up obligations imposed by underwriters as part by C Managers in the two years following the effective date of the IPO). At the time of the IPO, the B Managers could (i) of the agreement. The provisions with respect to the sale of convert all or part of their Class B shares into common shares shares to Eurazeo will terminate once Eurazeo no longer holds (“Conversion Right”) and (ii) sell the common shares resulting any shares of the Company. from the conversion of their Class B shares pari passu to Eurazeo (“Pari Passu Right to Sell”). The Pari Passu Right to The parties have undertaken to ensure that decisions subject Sell enabled the B Managers, if they so wished, to sell part of to the prior authorization of the Board under the bylaws are not their common shares to Eurazeo under the same terms and adopted without the prior authorization of the Board. conditions as those sold by Eurazeo as part of the IPO, The Investment Agreement has a term of ten years and will A lock-up period of 180 days following the IPO, which expired terminate (i) in the event of a successful public offering for all on December 26, 2015, was imposed on the B Managers of the Company’s share capital following a transfer by Eurazeo who could not then sell their common shares resulting from of its ordinary shares to a third party and (ii) in the event that the conversion of their Class B shares except through the Pari Eurazeo tenders its ordinary shares of the Company to a public Passu Right to Sell. offering. In the absence of the exercise of conversion rights by a B In accordance with applicable law, prior to the Shareholders’ Manager during the conversion period, the holder’s B Shares Meeting of February 24, 2015 that authorized the issuance will be converted automatically at the end of the conversion of the Class C preferred shares and the Class D preferred period into the same number of common shares of the shares, special Statutory Auditors’ reports and a report by a Company. contribution auditor (commissaire aux apports) in charge of assessing special benefi ts were prepared.
6.4.6 Agreements likely to lead to a change of control
As of the date of this Registration Document, to the Company’s knowledge, there are no agreements whose enforcement could lead to a change of control at a later date.
EUROPCAR REGISTRATION DOCUMENT 2015 343 06 INFORMATION ON THE COMPANY AND ITS SHARE CAPITAL PROFIT-SHARING AGREEMENTS AND INCENTIVE PLANS – EMPLOYEE SHAREHOLDERS
6.5 PROFIT-SHARING AGREEMENTS AND INCENTIVE PLANS – EMPLOYEE SHAREHOLDERS
For more information on profi t-sharing and on stock options As of December 31, 2015, employees of the Company and its held by members of the Management Board and Supervisory related entities held a total of 3,499 ordinary shares, 71.649 Board and by certain Group employees, see Section 5.3 Class B preferred shares, 4,045 Class C preferred shares, and “Compensation and Benefits of Senior Executives” and 4,041 Class D preferred shares, representing 0.06% of the Section 6.3 “Share Capital” in this Registration Document. share capital.
6.5.1 Profi t-sharing agreements
Pursuant to Article L. 3322-2 of the French Labor Code, agreements. Each agreement covers all employees having profi t-sharing agreements are mandatory in companies with been with either company for more than three months. 50 or more employees and having taxable profi ts of greater The equation set forth in the French Labor Code is used to than a 5% return on equity. calculate the special profi t-sharing reserve for each agreement. Europcar International and Europcar France, which have more than 50 employees each, have their own profi t-sharing
6.5.2 Company savings plans and similar plans
Pursuant to Articles L. 3323-2 and L. 3323-3 of the French The Company is part of a group savings plan with Europcar Labor Code, companies with profi t-sharing agreements are International while Europcar France has its own company also required to maintain a company savings plan. A company savings plan. or group savings plan is a collective savings scheme offering In accordance with Article 3332-25 of the French Labor Code, employees of the member companies the ability, with the help investors have the right to liquidate the assets available in the of their employer, to build an investment portfolio. In particular, plan in order to exercise options on shares granted pursuant it can receive amounts from a profit-sharing agreement or to Articles L. 225-177 or L. 225-179 of the French Commercial incentive plan as well as voluntary contributions. Amounts Code. The shares thus subscribed for or purchased by the invested in a company savings plan cannot be withdrawn for investor are then paid into the savings plan and only become fi ve years except in the early withdrawal cases provided for available fi ve years after this payment. by law.
6.5.3 Incentive plans
The incentive plan is an optional scheme whose purpose is to defi ned by means of an equation contingent on the Company’s enable a company to give employees a collective interest in the results or performance. Company’s results or performance through immediately payable As such, the Group has incentive plans with the majority of its bonuses pursuant to Article 3312-1 of the French Labor Code French entities.
344 EUROPCAR REGISTRATION DOCUMENT 2015 INFORMATION ON THE COMPANY AND ITS SHARE CAPITAL DIVIDEND DISTRIBUTION POLICY
6.6 DISCLOSURES PURSUANT TO ARTICLE L. 225-100-3 OF THE FRENCH COMMERCIAL CODE
The disclosures required pursuant to Article L. 225-100-3 of the delegations of authorization to increase capital and their use French Commercial Code are contained in Sections 6.3 “Share in 2015” and 6.3.6 “Share buyback program” (concerning the capital” (concerning the capital structure), 6.4.5.1 “Agreements purchase by Europcar Groupe S.A. of its own shares), 6.4.5.2 concerning Europcar shares declared to the AMF” (on clauses in “Agreements concluded by the shareholders” (concerning agreements notifi ed to the Company pursuant to Article 233-11 agreements ending in the event of a change of control) of the French Commercial Code), 6.4.2 “Notices of threshold and 5.3.3.2 “Summary of the compensation and benefits crossings” (relating to investments reported under Article 233-7 of corporate offi cers” (concerning the severance pay of the the French Commercial Code), 6.4.5.2 “Agreements entered Chairman of the Management Board) of the 2015 Registration into by shareholders” (concerning shareholder agreements Document. resulting in restrictions on the transfer of shares), 6.2.2.1 This Registration Document is available on the AMF website “Management Board” and 6.2.2.2 “Supervisory Board” (on the (www.amf-france.org) and on the Europcar website (http:// rules governing the appointment and replacement of Executive fi nance.europcar-group.com). Board and Supervisory Board members and amendments to the bylaws of Europcar Groupe), 6.3.4 “Summary of current
06 6.7 DIVIDEND DISTRIBUTION POLICY
6.7.1 Dividend distribution policy
In accordance with the law and the Company’s Articles an undertaking by the Company. Future dividends will depend of Association, the Company’s shareholders may at their in particular on the Group’s overall fi nancial condition as well Shareholder’s Meeting, upon the recommendation of the as any other factor considered relevant by the Management Management Board and the prior approval of the Supervisory and Supervisory Boards. Board, authorize the distribution of dividends. The Company’s dividend distribution policy will take into account The Company did not distribute any dividends for the year the Company’s results, its fi nancial position, the achievement of ended December 31, 2015, December 31, 2014, and its objectives set forth in Section 3.8 “Information on mid-term December 31, 2013. trends and objectives” of this Registration Document, and the restrictions applicable to the distribution of dividends under the The Company has an objective to distribute, subject to Group’s various debt instruments summarized below. shareholder approval, annual dividends starting in 2017 in an amount equal to at least 30% of its net profi t of the prior fi scal Certain of the Group’s debt instruments restrict the payment year, subject to applicable legal limitations and to restrictions of dividends by the Company and/or restricted subsidiaries. under its debt instruments. This objective does not constitute
EUROPCAR REGISTRATION DOCUMENT 2015 345 06 INFORMATION ON THE COMPANY AND ITS SHARE CAPITAL DIVIDEND DISTRIBUTION POLICY
6.7.2 Restrictions on dividend payments
The restrictions on dividends under the Company’s principal (b) 5% of the market capitalization of the Company (on debt instruments are set out below. For more information on the basis of the arithmetic average of the closing price the Group’s debt instruments, see Section 3.2.3 “Description of the Company’s shares in the 30 consecutive trading of the financing as of December 31, 2015” of this Registration days preceding the dividend declaration date) provided Document. that, after having given effect to the dividend payment on a pro forma basis, the consolidated corporate fi nancial leverage ratio of the Company (as defi ned in the terms Senior notes and conditions of the Notes) is less than 3.0:1.0; or (b) With the exception of payment of dividends between restricted 3% of the market capitalization of the Company provided subsidiaries, the documentation applicable to the Notes that, after having given effect to the dividend payment on restricts the payment of dividends by the Company and its a pro forma basis the, consolidated corporate fi nancial restricted subsidiaries. Payment of dividends is authorized as leverage ratio of the Company (as defi ned in the terms and summarized below. conditions of the Notes) is greater than or equal to 3.0:1.0 but less than 3.5:1.0. The documentation for the Notes permits the payment of dividends by the Company and restricted subsidiaries so long as no default or default event has occurred or might occur Senior Revolving Credit Facility as a result of such payment and so long as the Company The RCF also restricts the payment of dividends by the is able to incur at least €1.00 of additional indebtedness in Company. Following the Company’s initial public offering, under compliance with the limitation on additional indebtedness the RCF, the Company is permitted to distribute dividends, so (according to which new indebtedness may be incurred if, long as no default or default event has occurred or is occurring, after giving effect thereto on a pro forma basis, the corporate in an amount up to 50% of consolidated net income and 100% consolidated fi xed charge coverage ratio as defi ned in the terms of the net cash proceeds from the sale of the Company’s of the Notes is greater than 2.0) and the aggregate amount of shares; or in an amount up to the higher of: the proposed dividend (together with other restricted payments) paid subsequent to the issue date of such notes does not (a) 6% of the proceeds received from the initial public offering exceed the following aggregate amount (without duplication): of the Company; and (a) 50% of consolidated net income for the period (treated as (b) (a) 5% of the market capitalization of the Company (on one accounting period) from April 1, 2015 to the end of the the basis of the arithmetic average of the closing price most recent fi scal quarter ending prior to the date of such of the Company’s shares in the 30 consecutive trading payment for which fi nancial statements are available (or, days preceding the dividend declaration date) provided in case such consolidated net income is a defi cit, minus that, after having given effect to the dividend payment on 100% of such defi cit); plus a pro forma basis, the consolidated fi nancial leverage ratio of the Company (as defi ned in the terms and conditions (b) 100% of the aggregate net cash proceeds and the of the RCF) is less than 4.5:1.0; or (b) 3% of the market fair market value of property or assets received by the capitalization of the Company provided that, after having Company from the issue or sale of its qualifi ed capital stock given effect to the dividend payment on a pro forma basis, or other capital contributions, after the completion d ate the consolidated fi nancial leverage ratio of the Company is (other than certain exceptions); plus greater than or equal to 4.5:1.0 but less than 5.0:1.0. (c) certain other amounts relating to the conversion of certain debt into stock and other amounts. EC Finance Notes In addition, following the listing of the Company’s shares on Euronext Paris, the documentation for the Notes permits the With the exception of payment of dividends between restricted payment of dividends by the Company, so long as no default subsidiaries, the documentation applicable to the EC Finance or default event has occurred, is occurring or might occur as a Notes restricts the payment of dividends by ECI and its result, in an annual amount up to the higher of: restricted subsidiaries. Payment of dividends is authorized as summarized below. (a) 6% of the aggregate gross cash proceeds received by the Company in or from such public offering; and The documentation for the EC Finance Notes authorizes the payment of dividends by ECI and its restricted subsidiaries so long as no default or default event has occurred or might occur
346 EUROPCAR REGISTRATION DOCUMENT 2015 INFORMATION ON THE COMPANY AND ITS SHARE CAPITAL DIVIDEND DISTRIBUTION POLICY
as a result of such payment and so long as ECI is able to incur In addition, following an initial public offering of the Company’s at least €1.00 of additional indebtedness in compliance with the shares or ECI’s shares, the documentation for the EC Finance limitation on additional indebtedness (according to which ECI Notes will permit the payment of dividends by ECI, so long as may incur additional indebtedness when, on a pro forma basis, no default or event of default has occurred and is continuing the consolidated fi xed charge coverage ratio of the Company or would be caused thereby, in an amount per annum not to as defined in the terms and conditions of the EC Finance exceed the greater of: Notes is greater than 2.0:1.0) and the aggregate amount of (a) 6% of the share of the issuance proceeds used to capitalize the proposed dividend (together with other restricted payments) ECI or to repurchase or reimburse the Outstanding paid subsequent to the issue date of these notes does not Subordinated Notes; and exceed the following aggregate amount (without duplication): (b) 5% of the Company’s market capitalization (based on the (a) 50% of the Company’s consolidated net income for the arithmetic mean of the closing prices of the Company’s period (treated as one accounting period) from July 1, 2014 share in the 30 consecutive trading days preceding the to the end of the most recent fi scal quarter ending prior to declaration of the dividend) provided that, after having the date of such payment for which fi nancial statements given effect to the dividend payment on a pro forma are available (or, in case such consolidated net income is basis, the Company’s consolidated financial leverage a defi cit, minus 100% of such defi cit); plus ratio (as defi ned in the terms of the EC Finance Notes) (b) 100% of the aggregate net cash proceeds received by is less than 4.5:1.0; or (b) 3% of the Company’s market ECI from the issue or sale of its qualifi ed capital stock or capitalization provided that, after having given effect to the other capital contributions, after the issue date (other than dividend payment on a pro forma basis, the Company’s certain exceptions); plus consolidated leverage ratio is greater than or equal to 4.5:1.0 but less than 5.0:1.0. (c) certain other amounts relating to the conversion of certain debt into stock and other amounts. 06
EUROPCAR REGISTRATION DOCUMENT 2015 347 348 EUROPCAR REGISTRATION DOCUMENT 2015 07
ADDITIONAL INFORMATION
7.1 PERSONS RESPONSIBLE FOR 7.3 SIGNIFICANT CONTRACTS 353 THE REGISTRATION DOCUMENT 350 7.1.1 Name and position of the person responsible 7.4 STATUTORY AUDITORS’ SPECIAL for the Registration Document 350 REPORT ON RELATED PARTY 7.1.2 Statement by the person responsible AGREEMENTS AND REGULATED for the Registration Document 350 COMMITMENTS 354 7.1.3 Name and position of the person responsible for the Financial Information 350 7.5 STATUTORY AUDITORS’ FEES 357 7.1.4 Persons responsible for auditing the Financial Statements 351 7.6 PUBLICLY AVAILABLE DOCUMENTS 357 7.2 RELATED PARTY TRANSACTIONS 351 7.2.1 Guarantee 351 7.7 CONCORDANCE TABLES 358 7.2.2 Cash Pooling Agreement 352 7.2.3 Loan Agreement 352 7.8 GLOSSARY 364 7.2.4 Tax Agreements 352 7.2.5 General Services Agreement signed by the Company 352 7.2.6 Agreements signed by ECI 353
EUROPCAR REGISTRATION DOCUMENT 2015 349 07 ADDITIONAL INFORMATION PERSONS RESPONSIBLE FOR THE REGISTRATION DOCUMENT
7.1 PERSONS RESPONSIBLE FOR THE REGISTRATION DOCUMENT
7.1.1 Name and position of the person responsible for the Registration Document
Mr. Philippe Germond, Chairman of the Management Board.
7.1.2 Statement by the person responsible for the Registration Document
I hereby certify, having taken all reasonable measures to this in Section 20.1.1 on page 293, in turn makes reference to effect, that the information contained in this Registration Annex II of the Registration Document fi led with the AMF on Document is, to the best of my knowledge, in accordance May 20, 2015 under number I.15-041, which was the subject of with the facts and contains no omission liable to affect its a report by the Statutory Auditors, contained in Section 20.1.2 import. I certify that, to the best of my knowledge, the fi nancial on pages 293-294 of the aforementioned document, and which statements were prepared in accordance with applicable contains the following observations: accounting standards and that they give a fair view of the “Without qualifying our opinion, we draw your attention to the assets, financial position and results of the Company and matters set out: of all companies included in the consolidation, and that the Management Report contained in this Registration Document, a in the Note “I – Basis of preparation to the Consolidated as mentioned in the cross-reference table in Chapter 7.7 of financial statements” which describes the contexts of the the Registration Document, provides a faithful picture of the preparation as well as the methods used to prepare these development of the business, results and fi nancial position of Financial Statements; the Company and all companies included in the consolidation, a in the Section “General context and basis of preparation of the as well as a description of the principal risks and uncertainties consolidated financial statements”, as well as in the Note 31 they face. “Off-balance sheet commitments - (iii) Contingencies and I have obtained from the Statutory Auditors a work completion guarantees” to the consolidated financial statements related letter stating that they have verifi ed the information concerning to the potential consequences of (i) the ongoing litigation with the fi nancial position and the fi nancial statements contained in the Enterprise group and (ii) the ongoing investigations by the this Registration Document, and that they have read the entire competition authority in France.” Registration Document. The consolidated fi nancial statements of the Group for the Philippe Germond, Chairman of the Management Board years ended December 31, 2012, 2013 and 2014, contained
7.1.3 Name and position of the person responsible for the Financial Information
Mrs. Caroline Parot Deputy CEO, Finance (Directeur Général Finances) 2 rue René Caudron, Bâtiment OP, 78960 Voisins-le-Bretonneux, France E-mail: [email protected] Tel: +33 1 30 44 98 98 http://fi nance.europcar-group.com
350 EUROPCAR REGISTRATION DOCUMENT 2015 ADDITIONAL INFORMATION RELATED PARTY TRANSACTIONS
7.1.4 Persons responsible for auditing the Financial Statements
7.1.4.1 The Statutory Auditors
Start date Renewal date Expiry of of 1st term for latest term current term
PricewaterhouseCoopers Audit (Member of the Compagnie March 9, 2006 June 8, 2012 At the end of the Shareholders’ Régionale des Commissaires aux Comptes de Versailles) Meeting called to approve the Represented by François Jaumain fi nancial statements for the year ended December 31, 2017. 63 rue de Villiers, 92200 Neuilly-sur-Seine Mazars (Member of the Compagnie Régionale May 16, 2013 N/A At the end of the Shareholders’ des Commissaires aux Comptes de Versailles) Meeting called to approve the Represented by Isabelle Massa fi nancial statements for the year ended December 31, 2018. 61 rue Henri Regnault, 92400 Courbevoie
7.1.4.2 Alternate Statutory Auditors
Start date Renewal date Expiration date of 1st term for last term of current term
Yves Nicolas (Member of the Compagnie Régionale June 8, 2012 N/A At the end of the Shareholders’ des Commissaires aux Comptes de Versailles) Meeting called to approve the 63 rue de Villiers, 92200 Neuilly-sur-Seine fi nancial statements for the year 07 ended December 31, 2017. Gilles Rainaut (Member of the Compagnie Régionale May 16, 2013 N/A At the end of the Shareholders’ des Commissaires aux Comptes de Versailles) Meeting called to approve the 61 rue Henri Regnault, 92400 Courbevoie fi nancial statements for the year ended December 31, 2018.
7.2 RELATED PARTY TRANSACTIONS
7.2.1 Guarantee
The Company has granted its subsidiaries collateral security for due by Group borrowing entities (the Company, ECI, Europcar the benefi t of a group of lenders (including, in particular, Crédit Holding SAS, Europcar Autovermietung GmbH, Europcar Agricole Corporate and Investment Bank, Deutsche Bank AG International SA und Co oHG, Europcar France SAS, Europcar and Société Générale) as payment guarantee for amounts SA and Europcar IB SA) pursuant to clause 26.1 of the “Senior
EUROPCAR REGISTRATION DOCUMENT 2015 351 07 ADDITIONAL INFORMATION RELATED PARTY TRANSACTIONS
Revolving Facility Agreement” signed on May 28, 2015 between See Section 3.2 “Liquidity and Capital Resources” in this notably the group of lenders, the Group borrowing entities and Registration Document for information on the pledges and the guarantors (the Group borrowing entities plus Europcar UK securities granted by Group entities in connection with the Ltd., Europcar Italia SPA, Europcar Internacional Aluguer de Group’s fi nancing. Automoveis SA) for an amount of €350 million. The amount outstanding as of December 31, 2015 was €81 million.
7.2.2 Cash Pooling Agreement
On April 27, 2011, the Company (as a centralized entity) entered Europcar Internacional Aluguer de Automoveis SA, Europcar IB into a cash pooling agreement with Europcar Holding (as the SA, Europcar UK LLC and Europcar Lab) in order to optimize centralizing entity) and certain Group entities, as centralized the cash requirements and surpluses of the Group’s companies entities (ECI, Europcar Holding, the Company, Europcar France, and to be able to negotiate optimal banking terms. Europcar SA, Europcar Autovermietung GmbH, Europcar Italia,
7.2.3 Loan Agreement
The Company and ECI are parties to a loan of €144,122,000. recapitalization of Europcar Holding in 2014, the Company This loan was initially granted by the Company to Europcar transferred the loan to ECI. Since the loan transfer, ECI owes Holding, a subsidiary of ECI, for the acquisition of operating this amount to the Company. companies in the United Kingdom. In connection with the
7.2.4 Tax Agreements
Since July 1, 2006, the Company and its direct and indirect the Company is the sole taxpayer in its capacity as the parent French subsidiaries of which it holds more than 95% have company. formed a tax consolidation group. The Company created Since 2010, the Group has also maintained a second tax the group by entering into tax consolidation agreements with consolidation group in France, of which the parent company each of the member companies to govern the subsidiaries’ is Securitifl eet Holding. This tax consolidation group includes contribution to the tax consolidation group’s taxes, of which two French companies (Securitifl eet France and Securitifl eet Location).
7.2.5 General Services Agreement signed by the Company
On September 28, 2006, the Company and ECI entered monthly compensation to the Company calculated using into a services agreement pursuant to which the Company the cost-plus method. Under this agreement, management provides ECI with its know-how regarding fl eet organization, fees of €3,079,961 were billed for 2015. This agreement is sales, marketing, communications, Human Resources automatically renewable each year, with a three months’ prior management, accounting, finance, operations and legal notice period before each renewal date. services. In consideration of these services, ECI pays
352 EUROPCAR REGISTRATION DOCUMENT 2015 ADDITIONAL INFORMATION SIGNIFICANT CONTRACTS
7.2.6 Agreements signed by ECI
ECI entered into license agreements for the Europcar and customer service. In consideration of these services, the trademarks with the Group’s operating companies in 2001 and operating entities pay monthly compensation to ECI calculated with the Australian and New Zealand subsidiaries in 2009. In using the cost-plus method (as defi ned in the OECD guidelines). 2013, ECI entered into license agreements for the InterRent Amendments have been entered into to account for changes trademark with the operating entities using that trademark (in since 2011 in the departments and services that make up ECI. the United Kingdom, Spain, Portugal, France and Germany). ECI entered into an information services agreement with the Under these agreements, ECI receives royalties based on a operating entities effective as from November 1, 2014. In percentage of the operating entities’ revenues (2.75% for the consideration of these services, the operating entities pay Europcar trademark and 1% for the InterRent trademark). The monthly compensation to ECI calculated using the cost- operating entities have the right to sub-license the trademarks plus method (as defined in the OECD guidelines). Prior to with ECI’s approval. The agreement relating to the Europcar November 1, 2014, information services were provided trademark has a term of fi ve years, with automatic renewal by the Europcar Information Services European Economic each year. The agreement relating to the InterRent trademark Interest Grouping (“EEIG”). The operating entities contributed has a term of two years, renewable automatically for one-year a percentage of their revenues and in return had access periods. to various services rendered by the EEIG. The EEIG was ECI has also entered into international franchise agreements converted into a general partnership (société en nom collectif) in in more than 150 countries, for which payment consists of November 2014 and then merged into ECI through a complete trademark royalties in varying amounts depending on the transfer of assets and liabilities as of January 2, 2015. franchisee and the services rendered. For a description of transactions with companies over which ECI entered into general service agreements with each of the the Company has signifi cant infl uence, see Note 33 “Related operating entities in 2011. The services rendered relate in Parties” to the Group’s consolidated financial statements particular to senior management, fi nance, Human Resources, included in Section 3.4 “Consolidated Financial Statements legal, sales and marketing, fl eet management, procurement and Statutory Auditors’ reports”. 07
7.3 SIGNIFICANT CONTRACTS
See Section 3.2 “Liquidity and Capital Resources” and Section 7.2 “Related Party Transactions” in this Registration Document.
EUROPCAR REGISTRATION DOCUMENT 2015 353 07 ADDITIONAL INFORMATION STATUTORY AUDITORS’ SPECIAL REPORT ON RELATED PARTY AGREEMENTS AND REGULATED COMMITMENTS
7.4 STATUTORY AUDITORS’ SPECIAL REPORT ON RELATED PARTY AGREEMENTS AND REGULATED COMMITMENTS
This is a free translation into English of the Statutory Auditors’ special report on related-party agreements and commitments issued in French and is provided solely for the convenience of English speaking readers. This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France. EUROPCAR GROUPE SA Shareholders’ meeting to approve the fi nancial statements for the year ended December 31, 2015
PricewaterhouseCoopers Audit R egistered offi ce: 63 rue de Villiers - 92208 Neuilly sur Seine Tel: 33 (0) 1 56 57 58 59 Capital of 2,510,460 Euros – RCS Nanterre 672 006 483 MAZARS R egistered offi ce: 61, rue Henri Regnault - 92075 PARIS LA DÉFENSE CEDEX Te l : +33 (0) 1 49 97 60 00 - Fax : +33 (0) 1 49 97 60 01 Public limited accounting and auditing company Capital of 8,320,000 Euros - RCS Nanterre 784 824 153 - R egistered offi ce: 61, rue Henri Regnault - 92400 Courbevoie EUROPCAR GROUPE SA Public Limited Company with capital of 143,154,016 Euros Registered offi ce: 2 rue René Caudron, 78960 Voisins le Bretonneux RCS: Versailles B 489 099 903
To the Shareholders, In our capacity as Statutory Auditors of your Company, we hereby report on related party agreements and commitments. We are required to inform you, based on the information we have been given, of the terms and conditions of those agreements and commitments indicated to us, or that we may have discovered during our assignment. We are not required to comment on whether they are benefi cial or appropriate nor to ascertain if any other agreements and commitments exist. It is your responsibility, in accordance with the terms of Article R. 225-58 of the French Commercial Code, to evaluate the benefi ts resulting from these agreements and commitments prior to their approval. In addition, we are required, where applicable, to inform you, in accordance with article R. 225-58 of the French Commercial Code, of any agreements and commitments previously approved by the Shareholders’ meeting which were executed during the year. We have performed the procedures that we deemed necessary to comply with professional standards applicable in France to such engagements. These procedures consisted in verifying that the information we were given was consistent with the underlying documentation.
A greements and commitments submitted for approval by the shareholders’ meeting
Agreements and commitments authorised during the year In accordance with Article L. 225-88 of the French Commercial Code, we were advised of the following agreements and commitments which were previously approved by your Supervisory Board: a Service Agreement dated June 16, 2015 concluded with Eurazeo S.A.:
a contracting entity: Eurazeo S.A., a p erson concerned: s hareholder holding more than 10% of the voting rights, a n ature and purpose: service agreement dated June 16, 2015 relating to assistance provided for the Company by Eurazeo with regards to its initial public offering,
354 EUROPCAR REGISTRATION DOCUMENT 2015 ADDITIONAL INFORMATION STATUTORY AUDITORS’ SPECIAL REPORT ON RELATED PARTY AGREEMENTS AND REGULATED COMMITMENTS
a conditions: u nder this agreement, Eurazeo was paid a total amount of 1,750,000 Euros excluding tax on the basis of successfully completing the refi nancing and initial public offering, a b enefi t for the Company: this agreement was authorised by the Supervisory Board at its meeting on June 12, 2015, where it confi rmed that «Eurazeo’s assistance and its team’s fi nancial expertise and experience were a factor in contributing to the success of the refi nancing and the initial public offering”; a Underwriting Agreement dated June 25, 2015 concluded with Eurazeo S.A. and ECIP Europcar:
a c ontracting entities: Eurazeo S.A.and ECIP Europcar Sàrl, a p erson concerned: s hareholders holding more than 10% of the voting rights, a n ature and purpose: Underwriting Agreement, under which, with regards to the Company’s initial public offering, the Underwriters undertake to have the Shares purchased, paid for, subscribed for and released or where applicable to purchase, pay for, subscribe for and release the Shares themselves at the offer price on the payment/delivery date. The possibility to exercise an over-allotment option was also granted by the Selling Shareholders to Goldman Sachs International in the name of and on behalf of the Underwriters, a c onditions: no payment was made by the Company to Eurazeo or ECIP Europcar during the year in respect to this contract. In accordance with this contract, Europcar issued 38,775,510 shares, Eurazeo and ECIP Europcar sold 28,773,577 and 4,226,423 shares respectively, followed by 1,327,795 and 195,034 shares respectively after Goldman Sachs International exercised the over-allotment option, a b enefi t for the Company: this agreement was authorised by the Supervisory Board at its meeting on June 25, 2015, where it noted that the “Underwriting Agreement forms part of the Company’s initial public offering, of which it constitutes an inseparable component, in accordance with market practice” and felt that it was in the interest of the Company”; a remuneration for the Chairman of the Management Board, including the severance and non-compete compensations:
a E xecutive Offi cer concerned: Mr Philippe Germond, Chairman of the Management Board, a nature and purpose: severance and non-compete compensations allocated to Mr Philippe Germond in his capacity as Chairman of the Management Board, a c onditions: severance payments depend on meeting performance standards and could be as high as a maximum of 18 months of total gross compensation (fi xed and variable) subject to performance targets being met. Non-compete payments are equal 07 to 3 months of total gross compensation. No amount was paid to Mr Philippe Germond with regards to severance and non- compete compensations during the year, a benefi t for the Company: at its meeting on March 9, 2015 the Supervisory Board confi rmed that, in accordance with the provisions of Article L. 225-86 of the French Commercial Code and as proposed by the Remuneration and Appointments Committee, severance and non-compete payments fall under the Company’s general remuneration policy and are in its interest, particularly with regard to Mr Philippe Germond’s role as Chairman of the Management Board”; a c hanges to Mrs Caroline Parot’s employment contract :
a E xecutive Offi cer concerned: Mrs Caroline Parot, CEO and Member of the Management Board, a n ature and purpose: changes to Mrs Caroline Parot’s employment contract with the Company, particularly with regards to the remuneration due to her in her new role as CEO, a c onditions: Mrs Caroline Parot’s remuneration is composed of a fi xed portion and a variable annual portion dependent on meeting quantitative and qualitative targets. a The amount paid to Mrs Caroline Parot under her employment contract during 2015 was 657,999 Euros, a benefi t for the Company: at its meeting on March 9, 2015 the Supervisory Board confi rmed that, in accordance with the provisions of Article L. 225-86 of the French Commercial Code and as proposed by the Remuneration and Appointments Committee, Mrs Caroline Parot’s remuneration falls under the Company’s general remuneration policy and is in its interest, particularly with regards to her role as Member of the Management Board”; a e xceptional annual remuneration of 120,000 Euros allocated to Mr Pascal Bazin:
a E xecutive Offi cer concerned: Mr Pascal Bazin, Member of the Supervisory Board, a nature and purpose: e xceptional remuneration allocated by the Supervisory Board to Mr Pascal Bazin, member of the Supervisory Board, in the context of a special mission to assist in implementing and monitoring the Company’s transformation plan, a c onditions: gross annual remuneration of 120,000 Euros. The total amount paid during 2015 was 30,000 Euros, a b enefi t for the Company: the Supervisory Board confi rmed, at its meeting on May 20, 2015, that “this special mission to assist on the Fastlane project which was entrusted to Mr Pascal Bazin is in the interest of the company and the scheduled remuneration of 120,000 Euros per year corresponds to standard market remuneration for this type of mission”.
Agreements and commitments authorised since year end No new agreements and commitments have been authorised by the Supervisory Board since year end.
EUROPCAR REGISTRATION DOCUMENT 2015 355 07 ADDITIONAL INFORMATION STATUTORY AUDITORS’ SPECIAL REPORT ON RELATED PARTY AGREEMENTS AND REGULATED COMMITMENTS
Agreements and commitments previously approved by the shareholders’ meeting
a) which were executed during the year In accordance with Article R.225-57 of the French Commercial Code, we were informed that the following agreements and commitments, previously approved by the Shareholders’ meeting in previous years, were executed during the year. a Tax consolidation agreement between Europcar Groupe S.A. and its French subsidiaries a Contracting entities: the French subsidiaries of Europcar Groupe S.A., namely Europcar International S.A.S.U., Europcar Holding S.A.S., Europcar Lab S.A.S.U., EC 2 S.A.S.U., Europcar France S.A.S., Parcoto Services S.A.S. a Person concerned: direct and indirect wholly owned subsidiaries of the Company. a Nature and purpose: t ax consolidation agreement. a Conditions: the total amount collected by the Company in 2015 under said agreement was €10,867,034, corresponding to contributions from Europcar International SASU and Parcoto Services SASU in respect of corporation tax.
a Separation Agreement dated July 11, 2014 with Roland Keppler, CEO a Executive Offi cer concerned: Roland Keppler, in the capacity of CEO of Europcar Groupe S.A. a Person concerned: CEO (until July 31, 2014). a Nature and purpose: CEO separation Agreement concluded between the Company and Mr. Roland Keppler on July 11, 2014, authorised by the Board of Directors at its meeting on July 10, 2014, relating to the conditions for terminating Mr Keppler’s term of offi ce as CEO, and the amount of remuneration payable to Mr Keppler. a Conditions: the total amount paid in 2015 to Mr. Roland Keppler under said agreement was 321,656 Euros, corresponding to the variable compensation which was due to Mr. Roland Keppler.
b) which were not executed during the year In addition, we were advised of the following agreements and commitments previously approved by the Shareholders’ meeting in previous years, which were not executed during the year. a Consulting Agreement dated May 31, 2006 with Eurazeo S.A.
a Contracting entities: Eurazeo S.A. a Person concerned: shareholder holding more than 10% of the voting rights. a Nature: Consulting Agreement concluded between the Company and Eurazeo S.A. dated May 31, 2006. a Conditions: this agreement was not executed during the year.
Neuilly-sur-Seine and Courbevoie, April 8 , 2016, The Statutory Auditors
MAZARS PRICEWATERHOUSECOOPERS AUDIT Isabelle MASSA François JAUMAIN
356 EUROPCAR REGISTRATION DOCUMENT 2015 ADDITIONAL INFORMATION PUBLICLY AVAILABLE DOCUMENTS
7.5 STATUTORY AUDITORS’ FEES
The fees of the Statutory Auditors are presented in Note 35 fi nancial statements and Statutory Auditors’ report” of this “Statutory Auditors’ fees” of the consolidated financial Registration Document. statements that are shown in Section 3.4 “Consolidated
7.6 PUBLICLY AVAILABLE DOCUMENTS
The bylaws, minutes of Shareholders’ Meetings as well as regulations in force may be consulted at the head offi ce of other corporate documents of the Company, the reports of Europcar Groupe S.A. , 2 rue René Caudron, Bât. OP -78960 the Shareholders’ Meetings as well as fi nancial information and Voisins le Bretonneux - France. any expert valuation or statement requested by Europcar and Some of these documents are also available on the Europcar to be made available to shareholders in accordance with the Groupe website (http://fi nance.europcar-group.com).
07
EUROPCAR REGISTRATION DOCUMENT 2015 357 07 ADDITIONAL INFORMATION CONCORDANCE TABLES
7.7 CONCORDANCE TABLES (EUROPEAN REGULATION NO. 809/2004, ANNUAL FINANCIAL REPORT, MANAGEMENT BOARD REPORT, CONCORDANCE TABLES OF SOCIAL, SOCIETAL AND ENVIRONMENTAL DATA)
Concordance Table with the Annual Financial Report
The concordance table below enables the identifi cation in this Registration Document of information contained in the annual fi nancial report referred to in Article L. 451-1-2 of the French Monetary and Financial Code and in Article 222-3 of the General Regulations of the French Financial Markets Authority (AMF).
Subject Chapter Page
1 Statement of the natural persons who assume responsibility for the annual fi nancial report 7.1.2 350 2 Management report 7.7 359 3 Financial statements and reports 3.1 Parent company fi nancial statements 3.6 221 3.2 Statutory Auditors’ report on the parent company fi nancial statements 3.6 221 3.3 Consolidated fi nancial statements 3.4 147 3.4 Statutory Auditors’ report on the consolidated fi nancial statements 3.4 147 4 Other information 4.1 Declaration of the Statutory Auditors’ fees 7.5 357 4.2 Report by the Chairman of the Supervisory Board on corporate governance and internal control 5.2.4 300 Report by the Statutory Auditors on the report by the Chairman of the Supervisory Board 4.3 on corporate governance and internal control 5.2.5 309 4.4 Comments from the Supervisory Board regarding the Management Board’s report and the fi nancial statements 3.10 248 4.5 Description of the share buyback program 6.3.6 337
358 EUROPCAR REGISTRATION DOCUMENT 2015 ADDITIONAL INFORMATION CONCORDANCE TABLES
Concordance table with the management report
The concordance table below enables the identifi cation in this Europcar Groupe as defi ned in Articles L. 225-100 et seq. of Registration Document of information contained in the annual the French Commercial Code. management report produced by the Management Board of
Subject Chapter Page
1 Information on the Company’s business 1.1 Business overview (in particular the progress made and the diffi culties encountered) 1.6 29 to 58 and the results for the Company, each subsidiary and the Group 1.7 58 3.1 to 3.5 100 to 220 1.2 Analysis of changes in the business, results, the fi nancial position and in particular, the indebtedness of the Company and the Group 3.1 to 3.5 100 to 220 1.3 Foreseeable Company and/or Group trends 3.7 245 1.4 Key fi nancial and non-fi nancial indicators of the Company and/or the Group 3.1.2.1 109 1.5 Post-closing events of the Company and the Group 3.9 248 1.6 Guidance on the use of fi nancial instruments including the fi nancial risks and the price, credit, liquidity and cash risks of the Company and the Group 2.6 94 1.7 Principal risks and uncertainties of the Company and the Group 2 65 to 98 1.8 Research and development information of the Company and the Group 1.8 62 and 63 2 Legal, fi nancial and tax information of the Company 2.1 Choice made between the two methods of exercising general management responsibilities in the event of a change 5.1 274 07 2.2 Breakdown and change in shareholders 6.4.1 340 2.3 Name of the controlled companies holding Treasury shares of the Company and share of the equity capital they hold N/A 2.4 Signifi cant stakes acquired during the fi nancial year in companies with registered offi ces in France N/A 2.5 Notice of a greater than 10% stake in the share capital of another joint stock company (société par actions); disposition of cross-shareholdings N/A 2.6 Purchases and sales by the Company of its own shares (share buyback) 6.3.6 337 2.7 Statement of employee shareholdings 6.5 344 2.8 Overview of items likely to have an impact in the event of a public takeover bid 6.6 345 2.9 Table summarizing the current delegations of powers granted by Shareholders’ Meetings to increase the share capital 6.3.4 336 2.10 Notice of potential adjustments: a for securities giving access to the share capital and stock options in the case of share buybacks a for securities giving access to the share capital in the event of fi nancial transactions N/A 2.11 Dividends paid out in the three preceding fi nancial years 3.5.6 219 2.12 Non-tax deductible expenses and charges N/A 2.13 Terms of payment and breakdown of balance of trade payables and trade receivables by due date Notes 12 and 13 of parent company fi nancial statements 233 and 234 2.14 Injunctions or fi nes for anti-competitive practices N/A 2.15 Agreements between proxies or a shareholder holding more than 10% of the voting rights and a subsidiary (excluding ordinary agreements) 7.2 and 7.4 351 and 354 3 Information on corporate offi cers 3.1 List of all the terms of offi ce and positions held in each company by each of the corporate offi cers during the year 5.1 274 3.2 Compensation and benefi ts of all kinds paid during the year to each corporate offi cer by the Company, the companies controlled by the Company and the company that controls the Company 5.3 310 3.3 Commitments linked to taking up, termination or change of offi ce 5.3.3.2 318
EUROPCAR REGISTRATION DOCUMENT 2015 359 07 ADDITIONAL INFORMATION CONCORDANCE TABLES
Subject Chapter Page
3.4 In the case of stock option grants, presentation of the information used by the Management Board to decide: a either that executives are prohibited from exercising their options before the end of their employment; a or that they are required to hold in registered form all or part of the shares arising from options already exercised (by specifying the portion thus fi xed) until the end of their employment N/A 3.5 Summary statement of the transactions in Company securities by executives and related parties 5.4 319 3.6 In the case of bonus share grants, presentation of the information used by the Management Board to decide: a either that executives are prohibited from selling the bonus shares granted to them before the end of their employment; a or to fi x the quantity of these shares that they must hold in registered form until the end of their employment (by specifying the portion thus fi xed) 5.3.1.3 311 4 The Company’s CSR information 4.1 Acknowledging the social and environmental consequences of the business and the Company’s social commitments to sustainable development, the circular economy and to anti-discrimination and promoting diversity 4 249 5 Other information 5.1 The amount of loans of at least a two year maturity granted by the Company, and ancillary to its main business, to micro-businesses, SMEs or to medium-sized businesses with which it has economic ties justifying the loan (1) N/A 5.2 Information on payments made to authorities in each of the States or territories in which the Company operates the following activities: exploration, prospecting, discovery, exploitation or extraction of hydrocarbons, coal and lignite, metal ores, stone, sand and clay, chemical minerals and fertilizers, peat, salt or other mineral resources or in exploiting primary forests (2) N/A 5.3 Table showing the last fi ve years 3.5.7 220 5.4 Report by the Chairman of the Supervisory Board on corporate governance and internal control 5.2.4 300
(1) Article L. 511-6 of the French Monetary and Financial Code as amended by Law no. 2015-992 of August 17, 2015. (2) Article L. 225-102-3 of the French Commercial Code as amended by Ordinance no. 2015-1576 of December 3, 2015.
360 EUROPCAR REGISTRATION DOCUMENT 2015 ADDITIONAL INFORMATION CONCORDANCE TABLES
Concordance tables with the sections in annex 1 of European regulation 809/2004
The concordance table below enables identifi cation in this Registration Document of the information discussed in the various sections of Annex 1 of EC regulation no. 809/2004 (European Commission) dated April 29, 2004.
Information Chapter Page
1 Persons responsible 1.1 Persons responsible for the information 7.1.1 350 1.2 Statement by the person responsible 7.1.2 350 2 Statutory Auditors 2.1 Information related to the Statutory Auditors 7.1.4 351 3 Selected fi nancial information 3.1 Presentation of historical fi nancial information Key fi gures and signifi cant 6 events of the year 3.2 Presentation of interim fi nancial information N/A 4 Risk factors 2 65 5 Information concerning the issuer 5.1 History and development of the Company 1.1 12 5.1.1 Legal name and trading name of the Company 6.1.1 322 5.1.2 Place and number of the Company’s registration 6.1.2 322 07 5.1.3 The Company’s date of incorporation and duration 6.1.3 322 5.1.4 Registered offi ce, legal form and regulations applying to the Company 6.1.4 322 5.1.5 Signifi cant events in the development of the Company’s business Signifi cant events 6 during the year 1.3.2 17 1.3.3 19 1.4 20 5.2 Investments 5.2.1 Description of the principal investments made by the Company 3.3.1 145 5.2.2 Description of the ongoing investments of the Company and their geographic location 3.3.2 146 5.2.3 Information related to investments the Company expects to complete 3.3.3 146 6 Overview of businesses 6.1 Principal businesses 1.6 29 1.7 58 6.1.1 Description of the transactions carried out by the issuer and its principal businesses 1.5 26
1.6 29 6.1.2 Presentation of the new products/services brought to market 1.6 29 6.2 Principal markets in which the issuer operates 1.3 16 6.3 Exceptional events N/A 6.4 The issuer’s degree of dependence on patents or licenses, industrial, commercial or 1.8 62 fi nancial contracts or on new manufacturing procedures 6.5 Items forming the basis of the issuer’s statement on its competitive position 1.4 20 7 Organizational chart 7.1 Description of the Group 1.7.1 59 7.2 List of signifi cant subsidiaries 1.7.2 59
EUROPCAR REGISTRATION DOCUMENT 2015 361 07 ADDITIONAL INFORMATION CONCORDANCE TABLES
Information Chapter Page
8 Property, plant and equipment 8.1 Signifi cant property, plant and equipment 1.9 63 8.2 Environmental questions infl uencing the issuer’s use of its property, plant and equipment N/A 9 Review of the fi nancial position and results 9.1 Financial position 3.1 to 3.5 100 to 220 9.2 Results of operations 3.1.2.2 and 3.5.2 110 et seq. and 218 9.2.1 Events which impacted the issuer’s operating income 3.1 to 3.5 100 to 220 9.2.2 Explanations supporting a signifi cant change in net revenue and/or net income 3.1 to 3.5 100 to 220 9.2.3 Presentation of the economic, governmental, budgetary, monetary or political factors 2.1 66 and strategies affecting or able to affect the issuer’s business 2.2 69 10 Cash and capital 10.1 Information about the capital resources of the Company 3.2 120 10.2 Source and amount of the issuer’s cash fl ows and cash fl ow description 3.2.2 122 10.3 Information about the loan terms and conditions and the issuer’s capital structure 3.2.3 127 10.4 Information relating to potential restrictions affecting the use of capital resources N/A N/A and able to impact upon the issuer 10.5 Expected fi nancing sources deemed necessary for the Company to comply 3.2 120 with its commitments 11 Research and development, patents and licenses 1.8 62 12 Trend information 12.1 Principal trends affecting production, sales and inventory, costs and sales prices 1.3 16 since the end of the latest fi nancial year 1.4 20 3.8 247 12.2 Known trends, uncertainties or requests or commitments or events reasonably likely 3.8 247 to signifi cantly affect the issuer’s prospects, at least for the current fi nancial year 13 Profi t forecasts or estimates 3.7 245
14 Administrative, management and supervisory bodies and senior management 14.1 Information on the members of the administrative or management bodies of the Company 5.1 and 5.2 274 et seq. and 293 et seq. 14.2 Confl icts of interest at the level of the administrative, management 5.1.3 292 and supervisory bodies and senior management 15 Compensation and benefi ts 15.1 Amount of compensation paid and benefi ts in kind 5.3 310 15.2 Total amount of the provisions made or recorded by the issuer or by its subsidiaries N/A for the payment of pensions, retirement plans or other benefi ts 16 Functioning of administrative and management bodies 16.1 Expiration date of current terms of offi ce 5.1 274 et seq. 16.2 Service contracts binding members of the administrative and management bodies 5.1.3.2 292 16.3 Information on the Audit Committee and the Nominations and Compensation Committee 5.2.2 294 16.4 Statement of compliance with the corporate governance framework 5.1.3 292
362 EUROPCAR REGISTRATION DOCUMENT 2015 ADDITIONAL INFORMATION CONCORDANCE TABLES
Information Chapter Page
17 Employees 17.1 Number of employees 4.3 255 17.2 Shareholdings and stock options 5.3.1.3 311 17.3 Agreements providing for employee shareholdings in the share capital of the issuer 6.5 344 18 Principal shareholders 18.1 Shareholders holding more than 5% of the share capital 6.4 340 6.4.2 341 18.2 Existence of different voting rights 6.4.3 342 18.3 Shareholdings or controlling interests in the issuer 6.4.4 342 18.4 Agreement whose implementation could lead to a change in control 6.4.6 343 19 Related party transactions 7.2 and 7.4 351 and 354 20 Financial information concerning the issuer’s assets, fi nancial position and results of operations 20.1 Historical fi nancial information General comments 1 20.2 Pro forma fi nancial information N/A 20.3 Financial statements 3.4 147 3.6 221 20.4 Verifi cation of the annual historical fi nancial information 3.6 221 3.1 100 20.5 Closing date of the latest fi nancial year 3.6 221 20.6 Interim fi nancial and other information N/A 20.7 Dividend Distribution Policy 6.7 345 07 20.8 Legal and arbitration proceedings 2.5 92 20.9 Signifi cant change in the fi nancial or business condition 3.9 248 21 Additional information 21.1 Share capital 6.2.3 330 21.2 Constitution and bylaws 6.2 322 22 Important contracts 7.3 353 23 Information from third parties, expert statements and declarations of interest 1.3 16 24 Publicly available documents 7.6 357 25 Information on shareholdings 1.7 58
EUROPCAR REGISTRATION DOCUMENT 2015 363 07 ADDITIONAL INFORMATION GLOSSARY
7.8 GLOSSARY
Station Broker
Locations where the Group offers its rental services. These may Intermediaries acting on the leisure segment and selling vehicle take the form of station counters at certain locations such as rentals services to end customers on behalf of the Group. airports. E-commerce Car-sharing The sale or purchase of goods or services effected by means of Car sharing services restricted to subscribing members. The a remote communications network. marketplace matches available cars to potential drivers. The car-sharing market can be divided into three segments: (i) car-sharing operators that provide virtual ownership of cars to Buy back commitments urban users, (ii) players offering corporate fl eet optimization and Undertakings from car manufacturers or auto dealers to management services, and (iii) P2P car-sharing platforms that repurchase vehicles at a pre-determined fi xed price subject to connect individuals for purposes of sharing cars. certain terms and conditions.
Revenue Per Transaction Day (RPD) Europrogram
Consolidated rental revenue divided by the n umber of rental A corporate insurance program allowing each subsidiary d ays for the period. operating in each country participating in the program to benefi t from motor vehicle liability insurance from its local AIG Europcar Business customers Ltd branch, established in the country in which the subsidiary operates. Refers principally to “Major Accounts”, small and medium-sized businesses and organizations that rent replacement vehicles. Corporate Countries Leisure customers Countries where Europcar owns and operates its own network, where directly-operated stations and agent-operated stations Refers principally to individual travelers renting vacation car are located (Germany, United Kingdom, France, Italy, Spain, rentals, as well as people renting vehicles to meet other personal Portugal, Belgium, Australia and New Zealand). needs, directly or indirectly through travel agents, tour operators or brokers. Fleet Auto dealer All vehicles operated by the car rental company, whether or not available for rent. Business that sells new or used vehicles at the retail level, based on a dealership contract with car manufacturers or their sales subsidiaries. Franchise/Franchising Arrangement where the franchiser grants the franchisee the right Concessionary arrangement to use its trademark or trade-name as well as certain know-how in order to produce and market goods or services according to Arrangement whereby a local authority, corporation or other legal certain specifi cations. In return, the franchisee usually pays the entity grants Europcar the right to use land or property. franchiser an entry fee and, each year, a percentage of sales revenues as royalty.
364 EUROPCAR REGISTRATION DOCUMENT 2015 ADDITIONAL INFORMATION GLOSSARY
Customer Relationship Management (CRM) Securitifl eet Companies
System for managing the Group’s interactions with current and Companies that are set up in the context of the Group’s future customers. securitization program to purchase and own vehicles and to lease them to local Group operating companies in France, Germany, Italy and Spain. Holding period The period for which a vehicle is owned or leased by the Group Fleet fi nancial utilization rate (i.e., from the date of acquisition or start date of a lease of a vehicle by the Group to its sale or return date). Number of actual rental days of the vehicles of the fl eet as a percentage of the theoretical total potential n umber of r ental d ays of the vehicles of the fl eet. The theoretical total potential Replacement vehicle number is equal to the number of vehicles held over the period, Business offered by the Group to insurance companies, vehicle multiplied by the total number of days over the period. leasing companies, vehicle dealers and other entities offering vehicle replacement services to their own customers. “At risk” vehicle
Vehicles purchased by the Group from car manufacturers or car General sales (agent) dealers not benefi ting from a buyback option or commitment General sales representative that promotes and sells the services offered by Europcar in a specifi c country or region in Operating lease vehicle consideration of a commission. Agreement by which a vehicle is leased to a car rental company on a short-term basis, which pays rent periodically to a fi nancial Europcar Network institution or the fi nance division of a car manufacturer; at the All of the Group’s rental stations worldwide held directly or end of the operating lease, ownership does not pass to the car through its franchisees or agents. rental company. 07 For instance, in the context of the implementation of the
® securitization program of the Group, the Securitifl eet Companies, GreenWay system whose purpose is to purchase and own vehicles, lease them Software application, owned by Europcar, offering a to the operating companies of the Group pursuant to master comprehensive business solution mainly in the areas of fl eet operating lease agreements. management, e-commerce, reservations and global distribution systems and rental operations. Finance lease vehicle
Agreement by which a vehicle, held by a credit institution, is Global Distribution System (GDS) leased for a long period of time to a car rental company which Computerized reservation systems operated by third parties and in turn pays for the lease on a periodic basis and has the option used by intermediaries such as travel agents and travel/tour to acquire ownership of such vehicle during or at the end of the operators to make reservations with the Europcar Network. rental period. During the term of the lease, the fi nance company remains the RentWay® system legal owner of the vehicle; however the rental company retains the benefi ts and risks of (economic) ownership. Global fleet and vehicle rental management system for the InterRent brand.
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366 EUROPCAR REGISTRATION DOCUMENT 2015 NOTES
EUROPCAR REGISTRATION DOCUMENT 2015 367 NOTES
368 EUROPCAR REGISTRATION DOCUMENT 2015 This document is printed in France by an Imprim’Vert certifi ed printer on PEFC certifi ed paper produced from sustainably managed forest. Registered Offi ce
Parc d’Affaires Le Val Saint-Quentin 2 rue René Caudron, Bâtiment OP 78960 Voisins-le-Bretonneux (France) — EUROPCAR GROUPE S.A. Simplifi ed stock company (société par actions simplifi ée), Versailles Trade and Companies Register no. 489 099 903 with capital of €143,154,016 — Shareholder relations +33 1 30 44 84 40 — www.europcar-group.com