FINANCIAL REPORT 30 JUNE 2020 SNCF GROUP
SNCF.COM
SNCF G ROUP B OARD O F D IRECTORS M EETING O F 3 0 J ULY 2 020
S
SNCF GROUP
01 – S NCF G ROUP H ALF-YEAR A CTIVITY R EPORT PAGE 1
02 – S NCF G ROUP C ONDENSED H ALF-YEAR PAGE 2 1 CONSOLIDATED F INANCIAL S TATEMENTS
03 – S TATUTORY A UDITORS’ R EPORT O N T HE C ONDENSED PAGE 5 5 HALF-YEAR C ONSOLIDATED F INANCIAL S TATEMENTS
DECLARATION BY THE PERSONS RESPONSIBLE FOR THE HALF-YEAR FINANCIAL REPORT
LA PLAINE SAINT-DENIS, 30 JULY 2020,
We declare that, to the best of our knowledge, the condensed half-year consolidated financial statements for the six months ended 30 June 2020 have been prepared in accordance with the applicable accounting standards and give a true and fair view of the assets and liabilities, financial position and results of the issuer and of the group of companies included in the consolidation as of and for the period ended 30 June 2020, and that the half-year activity report fairly presents trends in the operations, results and financial position of the issuer and of the group of companies included in the consolidation as well as a description of the principal risks and uncertainties that we face.
JEAN-PIERRE F ARANDOU LAURENT T RÉVISANI CHAIRMAN A ND C HIEF E XECUTIVE O FFICER O F T HE S NCF DEPUTY C EO GROUP FINANCIAL S TRATEGY
SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT
30 JUNE 2020
01 – SNCF GROUP HALF-YEAR ACTIVITY REPORT
Rappo rt de gestion 01
1 SNCF G ROUP - 2 020 H ALF-YEAR F INANCIAL R EPORT
THE SNCF GROUP IN THE FIRST HALF OF 2020 3 1. SIGNIFICANT EVENTS OF THE FIRST HALF OF 2020 3
2. SNCF GROUP KEY FIGURES 4
3. EVENTS AFTER THE REPORTING PERIOD 4
GROUP RESULTS 5 1. ANALYSIS OF GROUP RESULTS 5
2. SEGMENT RESULTS 8
3. INVESTMENT AND NET DEBT 17
4. ACQUISITIONS OF EQUITY INVESTMENTS 18
5. FINANCIAL RELATIONS WITH THE STATE AND LOCAL AUTHORITIES 18
6. EMPLOYEE MATTERS 19
OUTLOOK AND CHALLENGES 20
2 SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 1 - SIGNIFICANT EVENTS OF THE FIRST HALF OF 2020 03
0 1 –
THE SNCF GROUP IN THE H A L F - Y
FIRST HALF OF 2020 E A R A C T I V I
The New Railway Pact Law (law no 2018-515 of 27 June 2018), as supplemented by Order no 2019-552 of 3 June 2019, T came into force on 1 January 2020. With effect from that date, the SNCF Group has adopted a new organisational Y structure based on eleven operating segments. R E
P
O R
T
1. SIGNIFICANT EVENTS OF THE FIRST Finally, the Group has drawn up a specific action plan aimed at generating additional savings by the end of HALF OF 2020 2020, to mitigate the financial effects of the crisis. In 1.1 COVID-19 PUBLIC HEALTH CRISIS parallel, in mid-March the Group implemented partial lay- off measures (see Note 1.2.1 to the condensed half-year The Covid-19 public health crisis has had a severe impact consolidated financial statements). on the operations of the SNCF Group.
SNCF Voyageurs was particularly hard hit. Operations 1.2 STRIKE ACTION were sharply reduced from 16 March 2020; services The strike action that began on 5 December 2019 in gradually recovered from the first easing of lockdown opposition to proposed pension reforms continued until measures, subject to compliance with governmental February 2020. biosecurity requirements. This resulted in a loss of business which, along with The financial consequences for revenue and for key refunds and other concessions, had an adverse impact on financial indicators by business line and operating revenue in the Group’s 2020 first-half financial statements. segment are described in section 2 of the half-year activity report. 1.3 PARTIAL ASSUMPTION OF DEBT BY THE STATE The new economic landscape was taken into account when testing CGUs and goodwill for impairment, as On 1 January 2020, the State assumed €25bn (at nominal described in Note 4.3 to the condensed half-year value on redemption) of the debt carried by SNCF Réseau, consolidated financial statements. in line with the French 2020 Budget Act. The Group also adapted its treasury management policies The mechanism used is described in the notes to the during this period to ensure that it can meet all its condensed half-year consolidated financial statements. obligations and financial commitments as they fall due. A The impact of this transaction on net finance costs is an specific note describing the measures implemented is amount of net financial income that exactly mirrors the presented in Note 5 to the condensed half-year finance cost effectively borne by SNCF Réseau on the consolidated financial statements. portion of its historical debt assumed by the State.
3 2 - SNCF GROUP KEY FIGURES SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT 03 Rappo rt de gestion
1.4 NEGOTIATION OF THE ÎLE-DE-FRANCE (4) Free cash flow is calculated as follows:
T MOBILITÉS 2020-2023 CONTRACT
R € m illion 3 0/06/2020 30/06/2019
O A new contract for the 2020-2023 period relating to the by aggregating the following line P implementation of passenger transport pricing and service
E items from the cash flow statement: policies in the Île-de-France (Greater Paris) region is
R - Cash from operations after cost of
Y currently being negotiated with Île-de-France Mobilités net debt and taxes -520 1,903 T I (the regional Transport Organising Authority). Pending - Acquisitions of intangible assets V I finalisation of that contract, SNCF Voyageurs is and property, plant and equipment -3,033 -3,587 T
C recognising revenue equal to the aggregate amount of - Investment grants received 764 886 the fixed monthly payments on account paid by Île-de- - Repayments of lease liabilities -502 -479 A
R France Mobilités under article R.1241-25 of the French - Repayment of IFRS 16 lease A Transport Code, which specifies the provisional fixed receivables 1 1 E
Y contribution that Île-de-France Mobilités must pay SNCF - Proceeds from disposals of -
F Voyageurs to ensure continuity of service. intangible assets and property, plant L and equipment 91 139 A 2. SNCF GROUP KEY FIGURES - New concession financial assets -693 -730 H - Cash inflows from concession –
1 € m illion 3 0/06/2020 30/06/2019 financial assets 565 376 0 - Impact of change in working capital Revenue 14,129 17,854 requirement 398 -341 EBITDA 69 2,906 change in working capital Net profit/(loss) attributable to requirement relating to income equity holders of the parent -2,389 20 taxes, included in the cash flow Recurring net profit/(loss) statement line item “Taxes attributable (paid)/collected” 109 138 to equity holders of the parent (1) -2,384 10 accrued interest on IFRS 16 lease Net investment (2) 2,397 3,055 liabilities, included in the cash flow statement line item “Interest paid on Investment all funding sources (3) 3,752 4,299 lease liabilities” 0 14 Free cash flow (4) -2,809 -1,666 dividends received from entities Headcount 271,949 274,234 accounted for by the equity method, included in the cash flow statement line item “Dividends received” 12 13 € m illion 3 0/06/2020 31/12/2019 Total free cash flow -2,809 -1,666 SNCF Group net debt 38,327 60,281 of which SNCF Réseau net debt 28,784 51,852 3. EVENTS AFTER THE REPORTING PERIOD
The principal events after the reporting period are (1) For a definition of “Recurring net profit/(loss)”, see the described below. “Group Results” section of this half-year activity report. 3.1 SIGNATURE OF BUILDING PERMIT FOR THE (2) “Net investment” is calculated as follows: GARE DU NORD MODERNISATION PROJECT € m illion 3 0/06/2020 30/06/2019 The Paris Gare du Nord 2024 project, housed within the by aggregating the following line single-purpose semi-public company Stationord, obtained items from the cash flow statement: consent from the Paris Prefecture when the building - Acquisitions of intangible assets and permit was signed on 6 July 2020. property, plant and equipment 3,033 3,587 - Investment grants received -764 -886 Work on this project, which aims to enhance the - New concession financial assets 693 730 attractiveness of public transport in the Île-de-France - Cash inflows from concession region and hence reduce pollution, is due to start in the financial assets -565 -376 summer of 2020. Total net investments 2,397 3,055
3.2 SUSPENSION OF PAYMENTS FROM ÎLE-DE- (3) “Investment all funding sources” is calculated as follows: FRANCE MOBILITÉS TO SNCF TRANSILIEN € m illion 3 0/06/2020 30/06/2019 Pending signature of the contract for the 2020-2024 period, Île-de-France Mobilités is paying a provisional by aggregating the following line fixed monthly contribution to SNCF Transilien to ensure items from the cash flow statement: - Acquisitions of intangible assets and continuity of service under Article R.1241-25 of the French property, plant and equipment 3,033 3,587 Transport Code. The monthly payments scheduled for the - New concession financial assets 693 730 first half of 2020 were made each month on the dates minus changes in workin g capital specified in the previous contract. requirement relating to investing However, the Board of Directors of Île-de-France Mobilités activities, as presented in Note 4.2 to voted on 8 July 2020 to suspend those payments from July the condensed half-year consolidated onwards, until such time as the State makes good the loss financial statements -26 18 of revenue due to the Covid-19 crisis. Total investment all funding sources 3,752 4,299
Consequently, the operating component of the fixed monthly contribution from Île-de-France Mobilités (€190m) that was expected in July was not received by SNCF Transilien. In the short term, SNCF is drawing on its own liquidity sources to ensure continuity of public transport services in the Île-de-France region.
4 SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT 1 - ANALYSIS OF GROUP RESULTS 03
0 1 – H
GROUP RESULTS A L F - Y E A R A
1. ANALYSIS OF GROUP RESULTS C T
I 1.1 GROUP RESULTS V I T
Y R
Change E P
€ m illion H1 2 020 H1 2 019 2020 v s 2 019 O
Revenue 14,129 17,854 - 3,726 -20.9% R T
Infrastructure fees -373 -448 75 -16.6% Purchases and external charges other than infrastructure fees -5,612 -6,283 671 -10.7% Taxes and duties other than income tax -892 -912 20 -2.2% Employee benefit expense -7,140 -7,358 217 -3.0% Other operating income and expenses -43 52 -94 -182.1% EBITDA 69 2,906 - 2,837 -97.6% Depreciation and amortisation -1,980 -1,884 -95 5.1% Net movement in provisions -55 33 -88 -267.1% Current o perating p rofit/(loss) -1,966 1,054 - 3,021 -286.4% Net proceeds from asset disposals 61 31 29 93.5% Fair value remeasurement of previously-held equity interest - - - n/a Impairment losses -13 -6 -7 115.2% Operating p rofit/(loss) -1,918 1,080 - 2,998 -277.6% Share of net profit/(loss) of companies accounted for by the equity method 9 8 1 9.7% Operating p rofit/(loss) a fter s hare o f n et p rofit/(loss) o f c ompanies accounted f or b y t he e quity m ethod -1,909 1,088 - 2,997 -275.4% Net finance costs of employee benefits -5 28 -34 -119.2% Cost of net debt and other finance costs -547 -912 365 -40.0% Net f inance c osts -552 -884 3 31 -37.5% Net p rofit/(loss) b efore t ax -2,462 205 - 2,666 -1302.7% Income taxes -97 -175 78 -44.4% Net p rofit/(loss) f rom o rdinary a ctivities -2,559 30 - 2,589 -8623.3% Net profit/(loss) from transferred operations - - - n/a Net p rofit/(loss) f or t he p eriod -2,559 30 - 2,589 -8623.3% Net p rofit/(loss) f or t he p eriod a ttributable t o e quity h olders o f t he p arent -2,389 20 - 2,409 -11941.0% Net profit/(loss) for the period attributable to non-controlling interests -170 10 -180 -1827.5% Recurring n et p rofit/(loss) a ttributable t o e quity h olders o f t he p arent -2,384 10 -2,394 -24581.0%
EBITDA/Revenue 0.5% 16.3% Current operating profit or loss/revenue -13.9% 5.9%
(1) For both internal and external financial reporting investees, and recognised within “Share of net profit/(loss) purposes, the SNCF Group uses “Recurring net of companies accounted for by the equity method”; profit/(loss) attributable to equity holders of the parent” as – changes in the fair value of financial instruments a key indicator. It is determined by eliminating the included within “Cost of net debt and other finance costs” following items from “Net profit/(loss) for the period that exceed €50m in absolute value; attributable to equity holders of the parent”:
– non-routine transactions involving financial instruments – impairment losses; (including restructurings and renegotiations) with an – transactions generating an impact on profit or loss that impact of more than €50m in absolute value on “Cost of is individually greater than €50m in absolute value, net debt”; generally included in and/or allocated between “Fair – movements in deferred tax assets recognised for entities value remeasurement of previously-held equity interest” belonging to the SNCF tax group, and recognised within and “Net proceeds from asset disposals”; “Income taxes”; – the share attributable to equity holders of the parent of any such transactions recognised in the books of equity
5 1 - ANALYSIS OF GROUP RESULTS SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT 03 Rappo rt de gestion
– the portion of all the above items attributable to non- This indicator better reflects the net profit or loss for the
T controlling interests, included within “Net profit/(loss) for period attributable to equity holders of the parent relating
R the period attributable to non-controlling interests”. to the Group’s recurring performance. The table below O shows how it was determined for the periods presented: P E € m illion Note ( *) 3 0/06/2020 3 0/06/2019 R
Y Net p rofit/(loss) a ttributable t o e quity h olders o f t he p arent -2,389 20 T I
V Impairment losses 4.3 13 6 I
T Included in “EBITDA” 3 - -30 C Included in “Net movement in provisions” - -33 A
R Included in “Net proceeds from asset disposals” - -1 A
E Included in “Cost of net debt and other finance costs” (non-routine financial instrument Y
- transactions) 5.2 1 47 F
L Included in “Income taxes” -2 1
A Included in “Net profit/(loss) attributable to non-controlling interests” -7 - H Recurring n et p rofit/(loss) a ttributable t o e quity h olders o f t he p arent -2,384 10 –
1 (*) Refers to the notes to the condensed half-year consolidated financial statements. 0 1.2 COMPARABILITY OF THE FINANCIAL STATEMENTS The table below shows the effects of (i) changes in scope of consolidation and (ii) exchange rate fluctuations on the comparability of 2020 first-half results with 2019 first-half results: Effects o n y ear-on-year € m illion change i n r evenue Changes i n s cope o f c onsolidation i n 2 019 (1) Sale of OUIbus -27 Voyages S NCF Sale of Ecolutis (iDVroom) -1 Exchange r ate f luctuations -3 Changes i n s cope o f c onsolidation i n 2 019 (1) Keolis Santé acquisitions 1 CarPostal France acquisition 33 Keolis MyPark acquisition 6 Sale of LeCab - minicab business -5 Exchange r ate f luctuations -11 Change i n s cope o f c onsolidation i n 2 019 (1) Geodis Sale of Geodis Euromatic -37 Exchange r ate f luctuations -20 Change i n s cope o f c onsolidation i n 2 019 (1) TFMM ( rail/multimodal f reight transport) Railtraxx/KCR acquisition 6 Exchange r ate f luctuations -1 Change i n s cope o f c onsolidation i n 2 019 (1) Freight & L ogistics – O ther Raffles Lease acquisition 8 Exchange r ate f luctuations 0 Internal t ransactions 4 Total -46 (1) Transactions completed in 2019 and impacting the year-on-year change in revenue.
1.3 2020 FIRST-HALF RESULTS 1.3.1 Revenue 2020 f irst-half o rganic g rowth a t s egment l evel SNCF Réseau -€645 m -19.5% The SNCF Group generated consolidated revenue of SNCF Gares & Connexions €14,129m in the first half of 2020, a year-on-year decrease -€38 m -5.0% of €3,726m (-20.9%), reflecting: Transilien -€244 m -14.3% TER – negative effects of €12m from changes in the scope of -€442 m -16.7% consolidation; Voyages SNCF -€2,555 m -57.5% Industrial Division – negative effects of €34m from exchange rate -€114 m -13.4% fluctuations; Passengers - Other -€98 m -28.4% Keolis – negative organic growth at Group level of €3,680m -€394 m -12.1% (-20.7%). Organic growth trends by business segment are Geodis +€13 m +0.3% shown in the following table (segment level data): TFMM (train/multi -modal freight transport) -€172 m -19.6% Freight & Logistics - Other -€9 m -3.7% SNCF Immobilier (real estate) +€40 m +14.6% Corporate -€45 m -8.2%
6 SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT 1 - ANALYSIS OF GROUP RESULTS 03
1.3.2 EBITDA 0
1 – At €69m for the first half of 2020, EBIDTA was €2,837m – lower year-on-year, a decrease of 97.6%. The ratio of H
EBITDA to revenue fell from 16.3% to 0.5% over the same A L
period. F - – The loss of EBITDA caused by strike action in 2020 and Y E
by the Covid-19 crisis has been estimated at €237m and A
€3,230m respectively. R A
Change o n a c onstant C
Change structure and e xchange T I € m illion H1 2 020 H1 2 019 2020 v s 2 019 rate b asis V I Revenue 14,129 17,854 -3,726 -20.9% -3,680 -20.6% T Y
Employee benefit expense -7,140 -7,358 217 -3.0% 215 -2.9% R E
Purchases and external charges (other than P infrastructure fees, traction energy and fuel), O and other income and expenses -5,190 -5,602 412 -7.4% 332 -5.9% R T
Infrastructure fees -373 -448 75 -16.6% 74 -16.6% Traction energy and fuel -464 -629 165 -26.2% 166 -26.4% Taxes and duties other than income tax -892 -912 20 -2.2% 21 -2.3% EBITDA 69 2,906 -2,837 -97.6% -2,872 -98.8% Ratio of EBITDA to revenue 0.5% 16.3%
1.3.3 Current operating profit/loss 1.3.5 Net finance costs The current operating loss for the period was €1,966m, The year-on-year improvement of €331m in net finance representing a negative movement of €3,021m compared costs was mainly due to the partial assumption by the with the first half of 2019. State of the debt carried by SNCF Réseau (see note 2.1 to the condensed half-year consolidated financial Consequently, the conversion rate of revenue into current statements). operating profit went from +5.9% in the first half of 2019 to -13.9% in the first half of 2020. 1.3.6 Income taxes The €2,837m deterioration in EBITDA was accentuated by Income tax expense decreased by €78m. Current income an increase of €95m in depreciation and amortisation and taxes fell by €42m, and the tax on rail company profits by a negative shift in the net movement in provisions, with (TREF) by €25m. a net charge of €55m in the first half of 2020 versus a net 1.3.7 Net profit/loss attributable to equity holders of reversal of €33m a year earlier. the parent 1.3.4 Operating profit/loss As a result of all the trends described above, the SNCF The negative movement of €2,998m at operating level was Group reported a net loss attributable to equity holders of in line with the year-on-year change at current operating the parent of €2,389m, compared with a profit of €20m in level. the first half of 2019, after a net loss of €170m attributable to non-controlling interests.
7 2 - SEGMENT RESULTS SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT 03 Rappo rt de gestion
2. SEGMENT RESULTS T
R The contributions to revenue, EBITDA, net investment, and
O investment all funding sources made by each of the Group’s P
E segments are presented below (unless otherwise indicated, the
R segment data presented in the table below and in the following
Y pages represent the segment’s contribution to the Group): T I V I T C SNCF A
R SNCF Gares & Voyages Industrial Passengers
A € m illion Réseau Connexions Transilien TER SNCF Division - O ther Keolis E Y - a) External revenue 1,214 100 1,311 2,052 1,720 32 32 2,836 F L
A b) Internal revenue 1,443 611 154 154 167 701 216 46 H a+b R evenue 2 ,658 711 1,465 2,206 1,887 733 248 2,883 – 1
0 c) External EBITDA 222 93 -41 16 -905 -12 32 189 d) Internal EBITDA 52 5 16 18 30 13 4 8 c+d E BITDA 274 98 -25 35 -875 1 35 197
Net investment (1) -1,575 10 -356 112 -237 -46 3 -103 Investment all funding sources (1) -1,989 -261 -522 -268 -350 -37 -17 -115 (1) For a definition refer to Section 2, “SNCF Group key figures”.
Inter- Logistics - SNCF segment € m illion G eodis TFMM Other Immobilier Corporate eliminations Total +
a) External revenue 3,949 664 199 13 7 14,129 +
b) Internal revenue 48 47 36 303 495 -4,423 - + a+b R evenue 3 ,998 711 235 316 502 -4,423 14,129 + c) External EBITDA 283 -44 139 99 -2 - 69 d) Internal EBITDA 3 31 1 0 26 -207 - c+d E BITDA 286 -14 140 99 24 -207 69 +
Net investment (1) -61 -16 -90 -1 -38 -2,397 + Investment all funding sources (1) -52 -14 -97 -4 -25 -3,752 + (1) For a definition refer to Section 2, “SNCF Group key figures”.
Unless otherwise indicated, the analysis of segment results is presented without adjusting for effects of changes in the scope of consolidation or exchange rate fluctuations. Comments on revenue and EBITDA relate to data calculated at the level of each individual operating segment.
8 SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 2 - SEGMENT RESULTS 03
2.1 SNCF RÉSEAU 0
2020 first-half results 1 – – Revenue H SNCF R ÉSEAU Revenue at SNCF Réseau was down 19.5%, or €645m, on A
the first half of 2019. There were negative impacts of L SA R éseau Subsidiaries €709m from Covid-19 and €80m from the January strikes, F
-
relating to the infrastructure fees billed to the Group’s Y Customers& S ervices passenger and freight transport operations. E A Directorate – EBITDA R A EBITDA was down €673m or 71.1% year-on-year. Covid-
Operations & P roduction C 19 had a negative impact of €718m, including a €135m Directorate T
reduction in capitalized labour costs due to a decline in I V
own production capitalized during lockdown. The January I
T Industrial & E ngineering Sferis strikes had a negative impact of €70m. The crisis plan Directorate Altametris Y succeeded in cutting costs by €70m, with a drop in other R
purchases and external charges and in employee benefit E Strategy, P lanning & expense following implementation of the partial layoff P Commissioning scheme (€27m). O
Directorate R
– Net investment T
Ole-de-France The volume of net investment in the period (€1,575m) was
€140m lower year-on-year. That change was due mainly to delays in gross investment versus 2019, with an equivalent
System O perations level of grants received. Upgrade and performance Directorate projects were substantially down on the previous year (mainly track and signalling works), although the effect was
partly offset by higher gross investment in major national SNCF Réseau sells track slots and handles the projects (especially Charles de Gaulle Express). management, maintenance, upgrading and development of the national rail network. Its customers are the 29 rail – Investment all funding sources operators that use the national rail network, plus 12 other The volume of investment from all funding sources in the companies (combined transport operators, ports, etc) that period was down €403m at €1,989m. Investment during reserve track slots which they then assign to the rail the first half of 2020 broke down as follows: operator of their choice. The segment includes the Sferis • Upgrade and performance: €1.0bn, including €0.6bn and Altametris subsidiaries. for track upgrades and new switchgear and €0.3bn for signalling, engineering structures and catenaries. H1 H1 € m illion 2020 2019 Change • Major and regional development projects: €0.9bn, a) External revenue 1,214 1,228 -14 mainly comprising €0.3bn for EOLE, €0.1bn for CDG b) Internal revenue 1,443 2,075 -631 Express, and €0.4bn for State Regional Development Plan contracts. a+b R evenue 2,658 3,303 - 645 • Compliance upgrades: €0.05bn (mainly on safety). c) External EBITDA 222 904 -682 d) Internal EBITDA 52 43 9 • Industrial and other investment: €0.2bn, including information systems, land and buildings, contracting for c+d E BITDA 274 946 - 673 third parties, maintenance plant, and tooling. EBITDA/Revenue 10.3% 28.7% Outlook for the second half of 2020 Net investment 1,575 1,714 -140 Investment all funding – Post-Covid-19 recovery: the works programme is sources 1,989 2,392 -403 expected to pick up faster than anticipated, with lower cost overruns and a continuation of the cost savings
Significant events implemented in the first half to limit the impact of the crisis on the financial statements. Despite the health crisis and the imposition of lockdown on 17 March 2020, operations were never interrupted: – Safety: continued commitment to reducing the accident rate on the rail network, and to ensuring occupational – During lockdown, urgent network maintenance was health and safety. carried out, cuttings and embankments were brought back into service, and a dedicated task force ensured that – Employee relations: work continued on priority projects. • Government order (announced by ministerial – Since lockdown began, works essential for network communiqué) on the grade and pay scale review, continuity have been resumed: locking in the reference framework.
• Intensification of infrastructure monitoring and • Launch of initiatives in career progression, skills maintenance, to ensure optimal traffic performance and development and training. The aim is to produce a safety. reference framework for employee relations within two years. • Technical inspections of all level crossings. – Referral to the Transport Regulatory Authority (ART) of • Use of the IRIS 320 track inspection train to ensure safe pricing scales for the national rail network for 2021-2023. resumption of traffic on high speed lines
9 2 - SEGMENT RESULTS SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 03 Rappo rt de gestion
residual increase of €61m mainly reflected the inclusion in
– Finalisation of the performance contract with the State 2020 of platform access fees (previously included in SNCF
T for the 2020-2029 period.
R Réseau) in SNCF Gares & Connexions (€58m) and the – “Mobilities Orientation Law” (LOM) - local rail services:
O positive impact of the crisis plan (€12m). decree being prepared on the terms for transferring some P E lines to regional authorities once regulated service – Net investment
R arrangements have been agreed. Net investment for the period was negative €10m, a year- Y on-year increase of €149m. SNCF Gares & Connexions T
I 2.2 SNCF GARES & CONNEXIONS delivered a higher volume of projects in the period V I (+€102m), largely because a number of platform-related T projects were transferred in from SNCF Réseau (impact C SNCF G ARES & C ONNEXIONS €140m to end June). SNCF Réseau is still carrying out the A related works, generating an increase in trade payables R owed by G&C to SNCF Réseau: this had a very favourable A Gares & C onnexions S A Subsidiaries E effect on the investment working capital requirement of Y
- Management a nd AREP G roup G&C but was neutral at Group level. F development o f F rench Retail & L – Investment all funding sources rail s tations Connexions G roup A The volume of investment from all funding sources was H €261m, representing an increase of €103m year-on-year. – Outlook for the second half of 2020 1
0 SNCF Gares & Connexions is responsible for developing – Publication of 2021 rail station reference document for and operating all rail stations, and for ensuring equal regulatory approval. access to all operators. It includes Gares & Connexions – Issuance of building permit for the Gare du Nord 2024 SA, and its subsidiaries Arep Group and Retail & project. Connexions. – Continuation of the operating and capital expenditure cost savings plans to limit the impacts of the health crisis. H1 H1 – Uncertainties about the pace of recovery of station retail € m illion 2020 2019 Change outlets. a) External revenue 100 142 -42 b) Internal revenue 611 607 4 2.3 TRANSILIEN a+b R evenue 711 749 -38 c) External EBITDA 93 100 -6 TRANSILIEN d) Internal EBITDA 5 4 1 c+d E BITDA 98 104 -5 SA V oyageurs EBITDA/Revenue 13.8% 13.9%
Net investment -10 140 -149 Transilien Investment all funding sources 261 159 103
Significant events Transilien provides local rail transport services in the Île- – Favourable opinion issued by the ART on 28 February de-France (Greater Paris) region. 2020 on pricing scales and fees for regulated services H1 H1 provided in passenger stations by SNCF Réseau and € m illion 2020 2019 Change SNCF Gares & Connexions for the 2020 timetable, except a) External revenue 1,311 1,508 -198 for prices for access to boarding gates in a few sectors. b) Internal revenue 154 201 -46
– Health crisis: major impact on station retail outlets, which a+b R evenue 1,465 1,709 - 244 were closed during lockdown and have seen only a very c) External EBITDA -41 67 -108 slow recovery in trade, leading to a significant drop in concession revenue for SNCF Gares & Connexions. d) Internal EBITDA 16 5 11 c+d E BITDA -25 72 - 97 – Implementation of cost-saving measures to limit the EBITDA/Revenue -1.7% 4.2% impact of the health crisis. Net investment 356 336 20 2020 first-half results Investment all funding – Revenue sources 522 524 -2
SNCF Gares & Connexions revenue for the first half of 2020 was €38m (5.0%) lower than in the first half of 2019. Significant events Covid-19 had a negative impact of €82m. After stripping – Delivery on investment programmes: out the impact of Covid-19, the residual increase of €44m – Gradual rollout of new rolling stock funded by the (5.9%) reflected the inclusion in SNCF Gares & Connexions Transport Organising Authority as part of the accelerated revenue of platform access fees (previously included in rolling stock master plan: 10 Regio2N trainsets (6 on line SNCF Réseau) from 2020. D, 4 on line N) and 9 NAT trainsets on lines L and J.
– EBITDA EBIDTA was €5m lower year-on-year. Covid-19 had a negative impact of €66m. After stripping that out, the
10 SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 2 - SEGMENT RESULTS 03
2020 first-half results – A crisis plan covering procurement, investment and 0
– Revenue headcount has been implemented at TER, and the first 1 results have already flowed through into the June 2020 – 2020 first-half revenue at Transilien was down €244m financial statements. H (-14.3%) year-on-year, with negative impacts of €253m from Covid-19 and €33m from the January strikes. After – To encourage French people to travel, and to promote A L stripping those impacts out, the residual €42m (2.5%) France as a tourist destination this summer, all the French F
regional authorities (under the auspices of Régions de - increase was due to favourable revenue adjustments from Y
2019 booked in 2020 (€58m). Revenue from traffic was France) linked up with SNCF Voyageurs to launch the E down 36%. “TER De France” campaign. To date, 15,000 young A person’s railcards have already been sold. R – EBITDA A 2020 first-half results Transilien’s EBITDA was down €97m year-on-year, with C negative impacts of €163m from Covid-19 and €11m from – Revenue T I strike action, partly offset by (i) favourable revenue Revenue at TER was down €442m, or -16.7%, on the first V I adjustments from 2019 booked in 2020 (+€58m); (ii) the half of 2019. This reflects the adverse impacts of Covid-19 T counter-effect in 2020 of the ending of the Cézembre Y and the January strikes, which led to a 46% loss of direct R operation (+€21m); and the benefits of the cost savings revenue and a 27% drop in revenue from recharged E
plan (+€14m). infrastructure fees, partly offset by the transfer of the P – Net investment and investment all funding sources Normandy Intercités lines to TER in 2020. Traffic was down O 47%, and traffic revenue down 45%. R There was no material change in either net investment or T investment all funding sources during the period. – EBITDA Outlook for the second half of 2020 EBITDA at TER was €169m (-83.0%) lower year-on-year, despite the substantial €442m loss of revenue, thanks to – Continuation and finalisation of negotiations on the the implementation of an operating cost-cutting plan and 2020-2023 contract, against a backdrop of financial tight control over production costs. difficulties highlighted by Île-de-France Mobilités. – Net investment
2.4 TER The sharp fall in net investment at TER (€198m) was due to the receipt of a much greater volume of grants in the first half of 2020 for new rolling stock orders (Régiolis and TER Regio2N). – Investment all funding sources SA V oyageurs Subsidiaries Investment all funding sources was stable year-on-year.
TER Ritmx Outlook for the second half of 2020 – Rollout of a recovery plan in September, focused on adapting our services and digital tools to new customer
TER provides regulated regional passenger transport behaviour (especially tele-working); on developing new services (rail and road, including urban and suburban), and multi-modal offers for occasional travellers using bicycles; associated services (via the Ritmx subsidiary). and continuing use of load factor monitoring so each traveller can choose the train that suits them best. H1 H1 – Preparation and review of the TER Auvergne-Rhône- € m illion 2020 2019 Change Alpes, Grand Est and Pays de Loire agreements, and a) External revenue 2,052 2,409 -357 extension of the TER Centre Val de Loire agreement. b) Internal revenue 154 238 -85 – Issuance on 8 June of the call for tenders by the SUD a+b R evenue 2,206 2,647 -442 Provence-Alpes-Côte d’Azur Transport Organising c) External EBITDA 16 199 -182 Authority, with submission of tenders by 31 August ahead d) Internal EBITDA 18 5 14 of the competitive dialogue process that will run from c+d E BITDA 35 203 -169 September to December 2020. EBITDA/Revenue 1.6% 7.7% Net investment -112 86 -198 Investment all funding sources 268 267 2
Significant events – Transfer of the Intercités lines in Normandy to TER Normandie on 1 January. – During the health crisis, the collective efforts of all enabled TER to run a core service at around 15% of capacity, helping front line health workers and law enforcement officers get to work every day. The same commitment went into preparing for the resumption of services on 11 May, since when TER has operated a good quality service while complying strictly with public health rules for the benefit of passengers and employees alike.
11 2 - SEGMENT RESULTS SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 03 Rappo rt de gestion
• Serious difficulties reaching commercial targets due to
2.5 VOYAGES SNCF the strikes early in the year and Covid-19. T
R 2020 first-half results O P VOYAGES S NCF – Revenue E Revenue at Voyages SNCF fell by €2,585m or -57.8% year- R SA V oyageurs Subsidiaries on-year. This takes account of: Y
T I – an unfavourable effect of €28m from changes in
V TGV F rance
I structure (see section 1.2, “Comparability of the financial INOUI a nd T Eurostar Thalys statements”); OUIGO C Westbahn Alleo
– unfavourable exchange rate effects of €3m.
s Lyria A r TGV E urope
o R Elipsos
t On a constant structure and exchange rate basis, revenue a r A TGV I talia at Voyages SNCF fell by €2,555m (-57.5%), due to adverse e E p impacts from Covid-19 (€2,395m) and the January strikes Y o - n Intercités i (€143m). Revenue from traffic was down 60%. F a r L T Voyages ( excluding I ntercités) saw revenue decline by A €2,343m (-57%), with adverse impacts of €2,308m from
H Luxembourg-Basle Covid-19 and €130m from strike action:
– Special t rains – Voyages revenue excluding subsidiaries was €1,864m 1
0 (-57%) lower, with adverse impacts of €1,748m from OUI.sncf Covid-19 and €121m from strike action. Traffic decreased CRM S ervices by 53% and revenue from traffic by 59%, as the health
s
e Rail E urope l crisis stalled progress on the recovery plan launched in a Avancial S February after the January strikes. Despite the ending of Rail S olutions social distancing restrictions and of the ban on travelling more than 100 kilometres, trainsets are restricted to 90%
of capacity in order to reduce health risks. The gradual Voyages SNCF offers its customers: resumption of normal timetables means that 70% of InOui – door-to-door passenger transport in France and across services and 85% of OuiGo services were running by the Europe via Voyageurs SA (TGV, OUIgo, Intercités) and its end of June. subsidiaries (Eurostar, Thalys, Lyria, Rielsfera, etc); – Eurostar revenue was down €340m (-61%), with adverse – sales of travel-related products (including via the impacts of €399m from Covid-19 and €6m from strikes. subsidiary Oui.sncf). After stripping this out, there was a year-on-year rise of €65m (11%), due to the non-recurrence of the 2019 French H1 H1 customs officers’ work-to-rule (+€39m) and the opening of € m illion 2020 2019 Change the new Amsterdam-London route. Traffic was down 62%. a) External revenue 1,720 4,221 -2,501 – Thalys revenue was down €159m (-57%), with adverse b) Internal revenue 167 251 -84 impacts of €156m from Covid-19 and €4m from strikes. a+b R evenue 1,887 4,472 -2,585 Traffic was down 55%. c) External EBITDA -905 643 -1,548 – Revenue from other subsidiaries fell by €100m, affected d) Internal EBITDA 30 14 16 by a reduction in intra-group sales commission due to c+d E BITDA -875 657 -1,532 Covid19. EBITDA/Revenue -46.4% 14.7% Intercités revenue decreased by €232m (-58%) due to the Net investment 237 326 -88 adverse impacts of Covid-19, the January strikes and the Investment all funding transfer of the Normandy lines to TER. Traffic was down sources 350 585 -235 71%, and traffic revenue was 77% lower.
– EBITDA Significant events EBITDA declined by €1,532m. On a constant structure and – Voyages SNCF excluding Intercités exchange rate basis, EBITDA was down €1,554m, with the • The action plans implemented in the midst of the adverse effects of Covid-19 (€1,579m) and strikes (€104m) health crisis on the production side, especially to partly offset by €127m of cost savings under the crisis safeguard rolling stock, delivered satisfactory results: plan. H00 punctuality 86.9% (cumulative to June) and 90.9% Voyages ( excluding I ntercités) saw EBITDA fall by for June (+1.4 points versus 2019), passenger €1,498m, with adverse impacts of €1,536m from Covid-19 information 89% (cumulative to June), 4 points over the and €98m from strikes. target. – Voyages excluding subsidiaries was down €1,166m, with • Despite the crisis, ongoing impairment testing the adverse effects of Covid-19 (€1,137m) and strikes indicated there was no risk of asset write-downs. (€90m) partly offset by €68m of cost savings - mainly on IT – Intercités projects, overheads, and survey and marketing costs.
• Confirmation of the tendering process for future – Eurostar EBITDA was down €207m with adverse impacts medium/long-distance multiple unit trainsets, with the of €261m from Covid-19 and €5m from strikes, partly offset signature of a funding agreement with the State worth by the achievement of €36m of cost savings and €39m nearly €800m. from the non-recurrence of the 2019 French customs officers’ work-to-rule.
12 SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 2 - SEGMENT RESULTS 03
– EBITDA at Thalys was down €86m, with adverse impacts
H1 H1 0 of €93m from Covid-19 and €3m from strikes partly offset € m illion 2020 2019 Change 1 – by cost savings of €10m. a) External revenue 32 32 -1 H – Other subsidiaries saw EBITDA decrease by €39m. The b) Internal revenue 701 814 -113 A adverse effect of reduced intra-group sales commission a+b R evenue 733 847 - 114 L
due to Covid-19 (€46m) was partly offset by cost savings of F c) External EBITDA -12 41 -52 €13m. - d) Internal EBITDA 13 9 4 Y Intercités posted a fall of €49m in EBITDA, due mainly to E
c+d E BITDA 1 50 - 48 A Covid-19 and strike action. EBITDA/Revenue 0.2% 5.8% R – Net investment A Net investment 46 42 3 Net investment reached €237m in the first half of 2020, Investment all funding C sources 37 34 4 T
versus €326m in the first half of 2019. At Voyages SNCF, I acquisitions of new TGV trainsets and fleet upgrades were V
I at low levels due to production delays linked to the Covid- Significant events T Y
19 crisis. R – Technical input and support by Engineering and
– Investment all funding sources Maintenance teams during lockdown. E P
Investment from all funding sources was €350m in the first – Start of the test phase of the first RER NG test trainset O half of 2020, versus €585m a year earlier. (Alstom/Bombardier) on the test track at the Bar-Le-Duc R Outlook for the second half of 2020 Rail Testing Centre. T
– Voyages SNCF excluding Intercités – Shutdown of production at Industrial Technicentres from • Ambitious commercial plan to encourage the return of mid-March to mid-May. There was serious disruption of business travellers. work programmes being conducted for other business lines: Transilien (Waouh upgrade programme), TER (video- • Continued high level of vigilance around health surveillance, programmed 18-year overhauls, etc.), measures in anticipation of a potential second wave. Intercités (on-board WiFi). Operations started to resume • Launch of the OUIGO offering on the Paris-Lyon route gradually in June. at the start of July, ahead of it being opened up to – Ongoing restructuring of the ISM Matériel maintenance competition. business.
• Ongoing work on the FALBALA project in preparation for the launch of a low-cost offering on the Spanish – Launch of “ATOUT CONDUITE” to promote train- domestic market in March 2021. driving as a key performance driver and source of corporate pride.
• Restructuring of the Eurostar and Thalys subsidiaries in anticipation of Green Speed, and of subsidiaries offering – Implementation of traction safety upgrades (including international services, to make our European business train dispatching) programmed in connection with the models more resilient. December 2019 timetable changes.
– Intercités – Continuation of the H00 and FIRST programmes (including PULSIV). • Continuation and finalisation of regulated service agreement: new one-year extension. 2020 first-half results • Negotiations with the Transport Organising Authority – Revenue (TAO) on additional financial support for the impact of Industrial Division revenue for the first half of 2020 was Covid-19. down €114m (-13.4%) year-on-year. There were adverse • Ongoing efforts to adapt resources to the new impacts from Covid-19 (€169m) and strikes (€13m). Intercités scope. – EBITDA • Commercial relaunch plan, supported by a specific Industrial Division EBITDA for the first half of 2020 was action plan on costs. down €48m year-on-year, with negative impacts of €89m from Covid-19 and €6m from strikes. After stripping those 2.6 INDUSTRIAL DIVISION impacts out, the residual increase reflects a pricing uplift for Equipment services (in line ART recommendations) and savings generated by the crisis plan. INDUSTRIAL D IVISION – Net investment and investment all funding sources
SA V oyageurs Subsidiaries There was no material change in either net investment or investment all funding sources during the period. Equipment Masteris
Traction
The Industrial Division coordinates all of the SNCF Group’s other operations and business lines. It comprises Equipment, Traction, Rail Production, and their subsidiary Masteris.
13 2 - SEGMENT RESULTS SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 03 Rappo rt de gestion
Outlook for the second half of 2020 • The integration of CarPostal France is proceeding well
(excluding the Covid-19 impact). T – Implementation of a major cost savings plan covering R research/design, overheads and investment. • At Effia, the integration of MyPark is also going well O (excluding the Covid-19 impact). P – A drive to reduce spare parts inventory has begun, to E run down the surplus inventory built up during the health – Contract start-ups and extensions, and new contracts
R crisis. won, in France and abroad: Y T – Gradual resumption of industrial operations to almost • United States: Keolis obtained a 4-year extension to its I
V normal levels on wagon and locomotive maintenance, and operating and maintenance contract for the Boston I commuter rail network, and a 5-year extension to its rail T to around 75% on industrial refurbishment and upgrade
C works. contract in Virginia.
A – Tests on Spanish high speed lines of the first TGV • Denmark: 4-year extension to the electric bus contract R trainset to be adapted for operating in Spain. in Odense. A E – Continuation of the ISM Matériel masterplan, with site • Hyderabad: Inauguration of the final section of the Y automated metro system, transporting more than - restructurings to come.
F 400,000 passengers a day.
L – Implementation of action plans from the ATOUT A CONDUITE roadmap. – Action plans
H • Action plans are under way to mitigate the economic – INFO FIRST: Launch of a pilot service disruption
– effects of the Covid-19 crisis. simulator, and a national master agreement to train staff in 1 0 speaking to the public. • Negotiations with the Transport Organising Authorities are ongoing. – H00: Continuation of initiatives with operating units,
towards more robust punctuality performances. • Agreement reached with the banking syndicate on a waiver to end June, and a covenant holiday until end 2.7 KEOLIS December 2020. 2020 first-half results KEOLIS – Revenue Keolis revenue for the first half of 2020 was down €370m (11.4%) on the first half of 2019. This takes into account:
Keolis I nternational Keolis F rance – a favourable effect of €34m from changes in structure United Kingdom Major networks (see section 1.2, “Comparability of the financial Continental Europe Mass transit statements”); Australia Regions – unfavourable exchange rate effects of €11m. North America Île-de-France On a constant structure and exchange rate basis, Keolis New territories revenue fell by €394m (-12.1%). The adverse impact of Covid-19 was €353m. After stripping that out, the residual decrease of €41m was due largely to the loss of some New M obilities Effia contracts in France (including Angers and Brest) at the end Navya Parking of 2019. Kisio Cykleo – EBITDA Keolis Santé EBITDA at Keolis was down €116m year-on-year. On a
constant structure and exchange rate basis, EBITDA fell by Keolis is a mass transport operator with a presence in 16 €123m, mainly due to the Covid-19 effect. countries. Keolis has expertise in all forms of transport
(train, bus, coach, metro, tram, ferry, bicycle), and in – Net investment managing transport hubs (railway stations, airports) and Net investment at Keolis was sharply down (by €42m) parking. versus the first half of 2019, mainly at international level H1 H1 (€31m drop, relating to postponed or cancelled projects € m illion 2020 2019 Change including postponed IT projects in Australia and real estate projects not carried out in Wales & Borders). a) External revenue 2,836 3,195 -359 b) Internal revenue 46 58 -12 – Investment all funding sources a+b R evenue 2,883 3,253 -370 The amount of investment from all funding sources was c) External EBITDA 189 307 -118 stable year-on-year. d) Internal EBITDA 8 6 2 Outlook for the second half of 2020 c+d E BITDA 197 314 -116 – Numerous tenders bids are expected for the Optile bus EBITDA/Revenue 6.8% 9.6% network in the Île-de-France region as it is opened up to Net investment 103 145 -42 competition. Investment all funding – Cost savings plans with a gross value of more than sources 115 117 -2 €330m (before rebates to the Transport Organising
Authorities) have been implemented to mitigate the Significant events economic impacts of the Covid-19 crisis. – Acquisitions, divestments and equity investments in – Several areas for negotiation have been identified and France and abroad: are being explored with a view to TOAs compensating Keolis for some of the impacts of the crisis.
14 SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 2 - SEGMENT RESULTS 03
– Weekly monitoring of the Group cash position, in liaison 2020 first-half results 0 with the subsidiaries and with the SNCF Financing and – Revenue 1 Treasury Department. – Revenue at Geodis for the first half of 2020 was €44m, H – Ongoing discussions with the banking syndicate on 1.1% lower than in the first half of 2019. This takes account financing issues. of: A L
– an unfavourable effect of €37m from changes in F 2.8 GEODIS - structure (see section 1.2, “Comparability of the financial Y statements”); E A
GEODIS – unfavourable exchange rate effects of €20m. R A On a constant structure and exchange rate basis, revenue C
rose by 0.3% or €13m. The resilience of Geodis revenue, T
despite an adverse effect from Covid-19 estimated at I Distribution & E xpress Contract L ogistics V
€324m, was driven by strong momentum in US Contract I T
Logistics (especially in e-commerce) and revenue growth Y
in Freight Forwarding (which was boosted by the use of R
Freight F orwarding Road T ransport charters to meet demand for urgent freight services at a E time of reduced air freight capacity). P
O
R – EBITDA EBIDTA was down €67m. T Supply C hain US C ontract L ogistics Optimization Covid-19 had an adverse effect of €133m. After stripping this out, the residual increase reflects savings generated
Geodis is a European operator with global reach, offering by the crisis plan (€50m, including €12m from the partial management solutions across all or part of the logistics lay-off scheme). chain (Supply Chain Optimization, Air & Sea Freight – Net investment and investment all funding sources Forwarding, Contract Logistics, Distribution & Express, There was no material change in either net investment or Road Transport, US Contract Logistics). investment all funding sources during the period. H1 H1 Outlook for the second half of 2020 € m illion 2020 2019 Change – There is still a high level of uncertainty as to the length a) External revenue 3,949 3,983 -34 and intensity of the ongoing crisis. One of the key issues b) Internal revenue 48 58 -10 for Geodis will be the pace of the recovery in market a+b R evenue 3,998 4,042 -44 volumes in the second half, and in particular the intensity c) External EBITDA 283 348 -65 of the peak season in Freight Forwarding and Contract d) Internal EBITDA 3 6 -2 Logistics. c+d E BITDA 286 353 -67 2.9 TFMM (RAIL/MULTI-MODAL FREIGHT EBITDA/Revenue 7.2% 8.7% TRANSPORT) Net investment 61 59 1 Investment all funding sources 52 50 2 RAIL/MULTI-MODAL FREIGHT T RANSPORT
Significant events Fret S NCF S AS Subsidiaries – From mid-February, Geodis operations were affected by the repercussions of the Covid-19 in China, with the Fret S NCF S AS Naviland C argo effects spreading to other regions of the world from Captrain F rance March onwards. Operations in France were particularly Captrain E urope hard hit from mid-March. VIIA S NCF – All Geodis business lines implemented action plans to Forwardis limit the impact of the crisis:
• adapting operations; TFMM is a rail/multi-modal freight specialist, including rail • introducing cost savings plans; and combined freight operators and freight forwarders
• tightening controls over credit risk and debt recovery. operating through various companies (Fret SNCF SAS, – Geodis also acted rapidly to set up charters to meet Captrain France, Naviland Cargo, Captrain Europe, demand for urgent freight services at a time of reduced air Forwardis and VIIA SNCF). freight capacity. Those steps limited the impact of the crisis on the financial results of Geodis. – US Contract Logistics operations reported growth in the first half, driven by strong volumes in the e-commerce market and with major customers. – As a result of all these actions, Geodis was able to remain in profit in the first half, and keep debt under control.
15 2 - SEGMENT RESULTS SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 03 Rappo rt de gestion
Outlook for the second half of 2020
H1 H1
T € m illion 2020 2019 Change – Fret SNCF R a) External revenue 664 818 -154 • Steel industry significantly impacted beyond the O
P b) Internal revenue 47 59 -12 immediate crisis, with major customers like ArcelorMittal
E a+b R evenue 711 877 -166 affected through to August (shutdown of blast furnaces,
R c) External EBITDA -44 13 -57 and closure of the Florange coking plant brought Y forward). T d) Internal EBITDA 31 32 -1 I V c+d E BITDA -14 45 -58 • Auto industry also expected to take a big hit in 2020, I with only a 50% recovery predicted. However there are T EBITDA/Revenue -1.9% 5.1%
C signs of recovery in other major sectors including Net investment 16 21 -5 chemicals, petroleum products and LPG. A Investment all funding R sources 14 15 -1 • Little visibility for combined operators on freight traffic, A with risks of a drop in consumption and tough
E
Y competition from road post-Covid-19.
- Significant events
F • Uncertain prospects for Minerals, Quarrying and
L – Fret SNCF Cement operators, who are working with a construction A • Activity levels sharply reduced as a result of the strike industry still on standby.
H action in January and the Covid-19 health crisis, and of • Implementation of a €10m post-Covid savings plan,
– tough conditions across all segments of the steel
1 including €5m of investment cuts. industry. 0 • Launch of a project to streamline how the business – Rail Freight operates by rethinking processes and support/transverse • Gradual resumption of the Freight Plan, but persistent functions. The aims include making the business more difficulties in some sectors (especially steel and auto). efficient and bring overheads into line with market • For CTI, rebates on track slot fees (anti-Covid law) to standards; delivering higher quality service via more help mitigate the economic losses inflicted by the effective and flexible structures; and regaining market Covid-19 crisis. share through higher-powered customer offerings. • Potential commercial successes: ETEA (CTI), K-LOG – Rail Freight (CTE) and Eurovia Nord (VFLI/Railtraxx). • Acquisition of the “Aggregates” business by VFLI. – Multi-Modal Freight • Marked economic slowdown in Europe, especially in • Proposed resumption of service on the Orbassana and Germany with the steel and auto industries. Barcelona lines in the fourth quarter of 2020 with gradual • Shipping of face masks and hand gel by Forwardis ramp-up of load factors, but no rapid return to full over a 12,000 route from Nanchang in China to Valenton performance levels for the rolling highway business. in France, in coordination with subsidiaries including Captrain Polska, Captrain Deutschland and Naviland. 2.10 SNCF IMMOBILIER – Multi-Modal Freight • Marked slowdown for rolling highways: SNCF I MMOBILIER
Satisfactory service frequency and load factors only on SNCF S A Subsidiaries the Bettembourg-Le Boulou line. Real E s tate D i vision S2FIT
The Bettembourg-Perpignan-Barcelona and Calais- Land m anagement Orbassano lines were temporarily suspended. 2020 first-half results Rail a ssets – Revenue
Revenue at TFMM for the first half of 2020 was down €166m (-18.9%) on the first half of 2019. This takes account of: ICF h abitat ( NOVEDIS)
– a favourable effect of €6m from changes in structure (see
section 1.2, “Comparability of the financial statements”);
– unfavourable exchange rate effects of €1m. SNCF Immobilier acts as agent or service-provider for the On a constant structure and exchange rate basis, revenue other SNCF business lines in four main areas: fell by 19.6% or €172m. There were negative impacts of €118m from Covid-19 and €36m from the January strike, – managing real estate used in operations (including on top of which came the loss of some contracts at Fret master plans to optimise real estate assets, the SNCF. construction and refurbishment of buildings, and managing leased properties); – EBITDA – monetising assets not required for railway operations; EBITDA fell by €58m. – managing the working environment in key office This includes adverse impacts of €67m from Covid-19 and premises; €22m from strikes.
– managing residential properties through the ICF Habitat – Net investment and investment all funding sources group, a subsidiary of SNCF SA. There was no material change in either net investment or investment all funding sources during the period.
16 SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 3 - INVESTMENT AND NET DEBT 03
– Real estate management: negotiations with tenants
H1 H1 0
€ m illion 2020 2019 Change facing the severest financial difficulties. 1 – a) External revenue 13 27 -14 – Implementation of “Immo 2021” project, reorganising H b) Internal revenue 303 249 54 the business to offer more integrated solutions, thereby A a+b R evenue 316 276 40 improving customer satisfaction and unlocking synergies L
(subject to the opinion of the Social and Economic F c) External EBITDA 99 87 12 Committee). - d) Internal EBITDA 0 2 -1 Y – Further progress towards the objective of reducing the E
c+d E BITDA 99 89 10 A built area by 2% (160,000 m²), helping to reduce the EBITDA/Revenue 31.4% 32.2% R energy footprint. A Net investment 1 9 -8 Investment all funding 3. INVESTMENT AND NET DEBT C sources 4 -2 6 T I 3.1 INVESTMENT V
I Significant events T Y
– Management/Optimisation € m illion H1 2 020 H1 2 019 Change R Investment all E
• Implementation of the office space master plan aimed P
at a €20m reduction in rental expense by 2026 relative to funding sources -3,752 -4,299 547 -13% O
2019 levels: preparation for relocation to the Rimbaud Disposals 91 139 -48 -35% R Campus in St Denis from two existing office buildings: Investment n et o f T
Equinoxe (18,000 m² in the 13th arrondissement of Paris, disposals -3,662 -4,160 595 -14%
occupied by SNCF Réseau) and Innovia (16,000 m² in Clichy, occupied mainly by the Information Systems Investments all funding sources was €547m lower year-on- department). year at -€3,752m for the first half of 2020. • Inauguration of the Technicentre at Hellemes Disposals were €48m lower than in the first half of 2019, (28,000 m²), specialising in mid-life servicing of TGV and and mainly comprised real estate assets. Transmanche rolling stock, fitting-out (WiFi installation), and component repairs. This “factory of the future” 3.2 GROUP NET DEBT includes 6,000 m² of roof-mounted solar panels. – Urban regeneration: € m illion 3 0/06/2020 31/12/2019 Change • Sale of the Gares des Mines site to Paris City Council Non-current debt 77,369 68,155 9,214 for over €40m within the agreed timeframe. Non-current receivable -34,967 -6,380 -28,587 • Signature of a memorandum of understanding with Non-current n et d ebt Nantes City Council with a view to the sale of a 15- used i n t he n et d ebt hectare site to construct the new Nantes University calculation 42,402 61,775 -19,373 Hospital. Reciprocal commitment from the City Council Current debt 9,918 9,132 787 to contribute over €100m to upgrades of network and Current receivable -13,994 -10,576 -3,418 freight installations at Nantes Blottereau. Current n et d ebt u sed i n • Signature of a memorandum of understanding on a the n et d ebt c alculation -4,076 -1,444 -2,631 partnership with Strasbourg City Council, opening up approximately 30 hectares for monetisation. Net d ebt 38,327 60,281 -21,954 • SNEF: signature of a promise to sell Lot I at La Net debt / EBITDA 13.6 10.7 Chapelle International to Legendre Immobilier for €12m Gearing (net debt / equity) 2.9 -7.0
(March 2020). Net debt amounted to €38,327m as at 30 June 2020, 2020 first-half results giving gearing (net debt / equity) of 2.9 (compared – Revenue with -7.0 as at 31 December 2019). The ratio of net debt to Revenue at SNCF Immobilier for the first half of 2020 was EBITDA (on a twelve months rolling basis) increased from up €40m (14.6%) year-on-year. 10.7 as at 31 December 2019 to 13.6 as at 30 June 2020. – EBITDA EBITDA for the first half of 2020 was €99m, versus €89m a year earlier, a rise of 11.7%. – Net investment and investment all funding sources There was no material change in either net investment or investment all funding sources during the period. Outlook for the second half of 2020 – Monetisation of land banks: reopening of discussions with local councils and with the cities of Paris, Lyon, Strasbourg, Marseille and Rennes. – Resumption of onsite works post-Covid-19: selection of projects to be prioritised for completion (cost savings plan).
17 4 - ACQUISITIONS OF EQUITY INVESTMENTS SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 03 Rappo rt de gestion
Movements in net debt during the first half of 2020 are 3.4 EXPOSURE OF THE GROUP TO MARKET shown below: T RISKS AND RECOURSE TO FINANCIAL R Net d ebt a t s tart o f p eriod 6 0,281 INSTRUMENTS O
P Cash from operations 520 Market risks are managed within an overall framework E Net investment 2,397 approved by the SNCF Group Board of Directors. R For details of the strategy adopted, refer to note “Capital
Y Disposals -91
T and Funding” of the annual consolidated financial
I Dividends received from companies accounted
V for by the equity method -12 statements. I T Repayments of lease liabilities and associated 4. ACQUISITIONS OF EQUITY C interest 501 INVESTMENTS A Changes in scope of consolidation 1 R Change in operating working capital No material equity investments were acquired in the first A requirement -398 half of 2020. E
Y Dividends paid 8 - 5. FINANCIAL RELATIONS WITH THE STATE
F Changes in fair value/amortised cost, currency L translation differences 221 AND LOCAL AUTHORITIES
A SNCF receives: Change in tax working capital requirement -109
H Assumption of SNCF Réseau debt by the State -25,000 – network investment grants; – 1 Other 8 – public service orders (as is the case with any public 0 Net d ebt a t e nd o f p eriod 3 8,327 service operator or supplier to the French state or local authorities), in the legal and regulatory context of SNCF’s 3.3 FUNDING SOURCES AND DEBT status as a monopoly operator; MANAGEMENT – operating and investment grants received mainly for Non-current debt and current debt increased by €9,214m Transilien, TER and Intercités operations. and €787m respectively during the period. 5.1 PUBLIC SERVICE ORDERS The main reasons for those movements were: The table below shows revenue generated by SNCF – a new financial grant of €6,132m, linked to the Voyageurs SA and SNCF Réseau SA with the French assumption by the State of €25,000m of the debt carried regional authorities, Île-de-France Mobilités and the State: by SNCF Réseau (see Note 2.1 to the condensed half-year consolidated financial statements); € m illion H 1 2 020 H1 2 019 Change – an increase in bond issues (net of issue premium) of Regional fare subsidies 11 11 0 €3,916m ; Services for Transport – new bank borrowings contracted (net of issue premium) Organising Authorities of €887m; (French regions and Île-de-France – redemptions of bond issues amounting to €557m; Mobilités) 2,656 2,740 -84 – repayments of bank borrowings of €241m. Defence 37 78 -41 The non-current and current receivable increased by Public-interest inter- €28,587m and €3,418m respectively. city train services (TET) 74 109 -35 The main reasons for those movements were: TER and TET access fees 953 931 22 – a new receivable of €31,132m from the Public Debt Fund Total 3,731 3,868 -137 (CDP), linked to the assumption by the State of €25,000m
of the debt carried by SNCF Réseau (see Note 2.1 to the condensed half-year consolidated financial statements); 5.2 GRANTS AND PUBLIC SUPPORT RECEIVED – movements in cash and cash equivalents of €732m. FROM THE FRENCH STATE AND OTHER PUBLIC The SNCF Group’s long-term debt is rated as follows by BODIES the main credit ratings agencies: The table below summarises support received by the SNCF Group from the State and other public bodies: Long-term Date o f rating O utlook report Standard & Poor's AA- Negative 7 July 2020 Moody's Aa3 Stable 12 June 2020 Fitch Ratings A+ Negative 22 May 2020
On 7 July 2020, Standard & Poor’s Global Ratings downgraded the outlook for its AA- rating from Stable to Watch Negative, reflecting the consequences of the Covid-19 crisis for the Group.
18 SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 6 - EMPLOYEE MATTERS 03
SNCF Voyageurs and Keolis receive investment grants in the form of third-party funding, primarily from regional 0 € m illion H 1 2 020 H1 2 019 Change 1
authorities, particularly for rolling stock. – Operating grants 176 69 107 In accordance with IFRIC 12, grants received under H Cash inflows from concession financial concession arrangements are presented in the statement A of financial position as a deduction from intangible assets L assets 565 376 189 F
or as a financial asset, depending on which accounting -
Investment grants on Y model is applicable based on an analysis of each property, plant and E equipment and concession agreement. In the case of concession financial A intangible assets (1) 764 886 -122 assets, grants received are treated as a means of R reimbursing the asset. A Pricing support for C freight operations 38 40 -2 Investment grants received are deducted from intangible T
assets and property, plant and equipment in the I
Public-interest inter- V
city train services (TET) 74 109 -35 statement of financial position. In the income statement, I they are recognised in operating profit or loss (as a T Total 1,618 1,480 137 Y
deduction from depreciation and amortisation) over the R (1) See Note 4.1 to the condensed half-year consolidated financial statements. estimated economic life of the corresponding asset. E Pricing support for freight operations is intended to cover P O
the marginal cost of freight traffic over and above fees To support investment in the network, SNCF Réseau R receives co-financing from partners in the public and paid by freight companies. T private sectors. For the public sector, a differentiated approach is taken depending on the partner: AFITF (the French infrastructure funding agency), or other public bodies.
6. EMPLOYEE MATTERS 6.1 HEADCOUNT
Change Change o n c onstant 30/06/2020 30/06/2019 vs H 1 2 019 structure b asis SNCF Réseau 57,607 58,017 -0.7% -410 -0.7% -410 SNCF Gares & Connexions 4,885 4,044 +20.8% 841 +20.8% 841 Transilien 14,467 14,689 -1.5% -222 -1.5% -222 TER 28,516 28,689 -0.6% -173 -0.6% -173 Voyages SNCF 23,760 25,227 -5.8% -1,467 -5.7% -1,450 Industrial Division 10,988 11,013 -0.2% -25 -0.2% -25 Passengers - Other 507 61 +727.7% 445 +727.7% 445 Keolis 68,908 68,519 +0.6% 389 -0.8% -543 Geodis 40,904 41,017 -0.3% -113 +1.1% 453 TFMM (train/multi-modal freight transport) 9,535 10,194 -6.5% -659 -6.5% -659 Freight & Logistics - Other 755 760 -0.6% -5 -0.6% -5 SNCF Immobilier (real estate) 1,576 1,100 +43.3% 477 +43.3% 477 Corporate 9,542 10,906 -12.5% -1,364 -12.5% -1,364 TOTAL 271,949 274,234 -0.8% -2,285 -1.0% -2,634
6.2 PRINCIPAL AGREEMENTS SIGNED IN 2020 No collective agreements were signed at SNCF Group level in the first half of 2020.
19 OUTLOOK AND CHALLENGES SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT 03 Rappo rt de gestion
T R O
P OUTLOOK AND E R Y T I V I
T CHALLENGES C A R A E Y - F
L SNCF remains highly vigilant on measures to protect the depend on the Group’s ability to ride the rebound, in A health of passengers, working alongside the State and the particular through the continuation of exceptional
H Transport Organising Authorities. measures to support the recovery in economic activity in –
1 Exceptional pricing concessions, including the sale of cut- France and around the world. 0 price tickets for both TGV and TER services, should Against this backdrop, the SNCF Group is now in talks generate a further significant increase in train load factors with the State to define the financial support measures this summer. needed to secure the resilience of the national rail Since July, OUIGO services have been running from Paris network and to achieve the target level of rail service to Lyon city centre, ahead of the route being opened up delivery. The objective is to provide a sound financial to competition. position, without incurring further debt in the longer term. In September, a recovery plan will be launched, focused An outcome from those discussions is expected by the on adapting price bands and digital tools to new end of the year. customer behaviour patterns. New multi-modal offerings In a ny e vent, t he G roup e njoys p articularly s ound for occasional travellers will be unveiled, and an ambitious liquidity a s o f n ow, a nd i s a ble t o m eet i ts o bligations. sales strategy launched to tempt back business travellers. Investor confidence has not wavered, as shown by the It is still difficult to judge the long-term financial impact of successful rounds of bond issues carried out in April, May, the Covid-19 crisis with any degree of precision, given the June and July. In m id-July, t he G roup h ad l iquid high level of uncertainty about how and when the crisis resources o f € 6.8bn, p lus a n a vailable c redit f acility o f will end, and what the economic fallout will be. It will also €3.5bn.
20 SNCF G ROUP – 2 020 H ALF-YEAR F INANCIAL R EPORT
30 June 2020
02 –
SNCF GROUP
Comptes Consolidés Annuels 03 CONDENSED
HALF -YEAR
CONSOLIDATED
FINANCIAL STATEMENTS
21 SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT 03 03État s fi nanci ers co nsolid és
S T N E M E T A T 3.1 SEGMENT INFORMATION 33 S CONSOLIDATED INCOME STATEMENT 23 L 3.2 REVENUE 37 A I STATEMENT OF PROFIT OR LOSS AND C 3.3 TRANSACTIONS WITH TRANSPORT ORGANISING
N GAINS/LOSSES RECOGNISED DIRECTLY IN AUTHORITIES 37 A EQUITY 24 N
I 3.4 OTHER ITEMS 38
F CONSOLIDATED STATEMENT OF FINANCIAL D POSITION 25 4. OPERATING ASSETS AND LIABILITIES 38 E
T 4.1 GOODWILL 38 A CONSOLIDATED STATEMENT OF CHANGES IN
D 4.2 PROPERTY, PLANT AND EQUIPMENT AND RIGHT OF I EQUITY 26 L USE ASSETS 39 O
S CONSOLIDATED CASH FLOW STATEMENT 27 4.3 IMPAIRMENT TESTING OF NON-CURRENT ASSETS 42 N
O 4.4 PROVISIONS FOR RISKS AND LITIGATION 47 NOTES TO THE CONDENSED HALF-YEAR C CONSOLIDATED FINANCIAL STATEMENTS 29 R 5. CAPITAL AND FUNDING 48 A
E 1. ACCOUNTING STANDARDS 29 5.1 LIQUIDITY MANAGEMENT DURING THE HEALTH Y
- CRISIS 48
F 1.1 APPLICATION OF IFRS 29 L 5.2 COST OF NET DEBT 49 A 1.2 VALUATION METHODS SPECIFIC TO INTERIM
H REPORTING PERIODS 31 5.3 CALCULATION OF NET DEBT 50 D
E 1.3 CHANGES MADE TO THE CURRENT PERIOD AND 5.4 RECONCILIATION TO “CASH GENERATED BY/(USED S COMPARATIVE PERIODS 31 IN) FINANCING ACTIVITIES” 52 N E 5.5 SHAREHOLDERS’ EQUITY 54 D 2. SIGNIFICANT EVENTS 32 N 2.1 SIGNIFICANT EVENTS OF THE FIRST HALF OF 2020 32 O 6. OFF BALANCE SHEET COMMITMENTS 54
C 2.2 EVENTS AFTER THE REPORTING PERIOD 33
– 7. SCOPE OF CONSOLIDATION 54 2
0 3. PERFORMANCE FOR THE PERIOD 33
22 SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT CONSOLIDATED INCOME STATEMENT 03
0 2 CONSOLIDATED INCOME – C O N D
STATEMENT E N S E D H A L F -
€ million Note 30/06/2020 30/06/2019 Y
Revenue 3 14,129 17,854 E A
Purchases and external charges 3 -5,985 -6,731 R C Employee benefit expense -7,140 -7,358 O Taxes and duties other than income tax -892 -912 N
Other operating income and expenses -43 52 S O EBITDA 69 2,906 L I
Depreciation and amortisation 4.2 -1,980 -1,884 D
Net movement in provisions 4.4 -55 33 A T
Current o perating p rofit/(loss) -1,966 1,054 E D Net proceeds from asset disposals 4.2 61 31 F
Fair value remeasurement of previously-held equity interest - - I N
Impairment losses 4.3 -13 -6 A Operating p rofit/(loss) -1,918 1,080 N C
Share of net profit/(loss) of companies accounted for by the equity method 9 8 I A
Operating p rofit/(loss) a fter s hare o f n et p rofit/(loss) o f c ompanies a ccounted f or b y L S the e quity m ethod -1,909 1,088 T
Net finance costs of employee benefits -5 28 A T
Cost of net debt and other finance costs 5 -547 -912 E Net f inance c osts -552 -884 M E
Net p rofit/(loss) b efore t ax f rom o rdinary a ctivities -2,462 205 N
Income taxes -97 -175 T S
Net p rofit/(loss) f rom o rdinary a ctivities -2,559 30 Net profit/(loss) from discontinued operations - - Net p rofit/(loss) f or t he p eriod -2,559 30 Net p rofit/(loss) f or t he p eriod a ttributable t o e quity h olders o f t he p arent -2,389 20 Net profit/(loss) for the period attributable to non-controlling interests -170 10
Notes 1 to 7 are an integral part of the half-year consolidated financial statements.
23 STATEMENT OF PROFIT OR LOSS AND GAINS/LOSSES SNCF G ROUP - 2 020 H ALF-YEAR F INANCIAL R EPORT RECOGNISED DIRECTLY IN EQUITY 03 03Co nsolid ated Fi nancial Statements
S
T STATEMENT OF PROFIT N E M E T
A OR LOSS AND T S L A I C
N GAINS/LOSSES A N I F D
E RECOGNISED DIRECTLY IN T A D I L O
S EQUITY N O C R A E Y -
F € million 30/06/2020 30/06/2019 L
A Net p rofit/(loss) f or t he p eriod -2,559 30
0 H Change in foreign currency translation differences -97 8 D
E Tax on change in foreign currency translation differences 4 0 S 0
N -93 8 E Change in fair value of cash flow hedges -204 -633 D
N Tax on change in fair value of cash flow hedges 4 0
0 O -200 -633
C Change in fair value of hedging costs -44 20 –
2 Tax on change in fair value of hedging costs 0 0 0 0 -44 20 Share of reclassifiable other comprehensive income of companies accounted for by the equity method -3 1 Total i tems s ubsequently r eclassifiable t o p rofit o r l oss -340 -604
0 Actuarial gains/(losses) on employee defined-benefit plans 59 -221 Tax on actuarial gains/losses on employee defined-benefit plans 0 3 0 59 -217
0 Change in value of equity instruments at fair value through equity 0 0 0 0 0 Share of non -reclassifiable other comprehensive income of companies accounted for by the equity method -4 0 Total i tems n ot s ubsequently r eclassifiable t o p rofit o r l oss 55 -218
Total g ains/(losses) r ecognised d irectly i n e quity -286 -822
Profit/(loss) a nd t otal g ains/(losses) r ecognised d irectly i n e quity f or t he p eriod -2,844 -792 Attributable to equity holders of the parent -2,627 -782 Attributable to non-controlling interests -217 -10
0
Notes 1 to 7 are an integral part of the half-year consolidated financial statements.
24 SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT CONSOLIDATED STATEMENT OF FINANCIAL POSITION 03
0 2 CONSOLIDATED – C O N D
STATEMENT OF E N S E D H
FINANCIAL POSITION A L F - Y E A R C O
CONSOLIDATED ASSETS N S
€ million Note 30/06/2020 31/12/2019 O
4.1 L
Goodwill 2,386 2,513 I D
Intangible assets 2,413 2,368 A
Rights of use of leased assets 4.2 3,778 3,948 T E
Property, plant and equipment 4.2 51,701 51,674 D Non-current financial assets 5 36,201 7,562 F I Investments accounted for by the equity method 1,015 1,026 N A
Deferred tax assets 4,471 4,473 N
Non-current a ssets 101,964 73,565 C I Inventories and work-in-progress 1,480 1,361 A L
Operating receivables 9,878 10,496 S Operating a ssets 11,359 11,857 T A
Current financial assets 5 5,750 2,876 T E
Cash and cash equivalents 5 8,490 7,754 M
Current a ssets 25,599 22,488 E N
Assets classified as held for sale - 0 T
Total a ssets 127,562 96,052 S
CONSOLIDATED EQUITY AND LIABILITIES € million Note 30/06/2020 31/12/2019 Share capital 1,000 13,736 Consolidated reserves 14,571 -21,681 Net profit/(loss) for the period attributable to equity holders of the parent -2,389 -801 Equity a ttributable t o e quity h olders o f t he p arent 13,183 -8,746 Non-controlling interests 55 118 Total e quity 13,237 -8,628 Non-current employee benefit liabilities 2,708 2,767 Non-current provisions 4.4 1,396 1,260 Liabilities related to non-current concession assets outside the scope of IFRIC 12 2,434 2,549 Non-current financial liabilities 5 78,733 69,994 Non-current lease liabilities 3,027 3,137 Deferred tax liabilities 164 157 Non-current l iabilities 88,461 79,864 Current employee benefit liabilities 176 179 Current provisions 4.4 126 164 Operating payables 14,790 14,429 Operating l iabilities 15,092 14,771 Current financial liabilities 5 9,920 9,132 Current lease liabilities 852 913 Current l iabilities 25,864 24,816 Liabilities associated with assets classified as held for sale - 0 Total e quity a nd l iabilities 127,562 96,052
Notes 1 to 7 are an integral part of the half-year consolidated financial statements.
25 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 03 03Co nsolid ated Fi nancial Statements
S
T CONSOLIDATED N E M E T
A STATEMENT OF CHANGES T S L A I C
N IN EQUITY A N I F D E T
A After- Actuarial Equity tax D I gains/ instru- Debt reser- Equity L (losses) o n ments instru- ves o f Retained attribu-
O Reserve employee at f air ments a t trans- earnings/ table t o
S related defined value Group Cash fair v alue ferred (accumu- equity Non-
N Share to s hare benefit through translation flow Hedging through opera- lated holders o f controlling Total € million capital capital plans equity reserves hedges costs equity tions losses) the p arent interests equity O Published e quity a s C 13,736 - - 387 - 66 - 246 - 1,013 - 135 0 - - 18,519 - 6,629 1 39 - 6,491
R at 0 1/01/2019
A Net profit/(loss) for
E ------20 20 10 30 the period Y
- Gains/(losses) F recognised directly in - - -200 - 9 -632 20 0 - 1 -802 -20 -822 L equity A Profit/(loss) a nd t otal H gains/(losses)
D - - - 200 - 9 - 632 2 0 0 - 2 1 - 782 - 10 - 792 recognised d irectly E in e quity S
N Dividends paid - - 0 - - 0 - - - -537 -537 - -537
E Dividends of ------55 -55 D subsidiaries
N Changes in scope of
O consolidation, non- controlling interests C and commitments to - - 0 - 0 0 - - - -202 -202 52 -149 – buy out non- 2
0 controlling interests (*) Other changes - - 1 0 - -2 5 - - 10 13 1 13 Equity a s a t 13,736 - - 586 - 66 - 237 - 1,646 - 111 0 - - 19,226 - 8,136 1 27 - 8,010 30/06/2019 Published e quity a s 13,736 - - 607 - 66 - 181 - 1,465 - 47 0 - - 20,117 - 8,746 1 18 - 8,628 at 3 1/12/2019 Net profit/(loss) for ------2,389 -2,389 -170 -2,559 the period Gains/(losses) recognised directly in - - 64 - -65 -192 -44 - - -2 -239 -47 -285 equity Profit/(loss) a nd t otal gains/(losses) - - 6 4 - - 65 - 192 - 44 - - - 2,391 - 2,627 - 217 - 2,844 recognised d irectly in e quity Dividends paid ------762 -762 - -762 Dividends of ------16 -16 subsidiaries Transactions involv ing ------4 4 share capital Changes in scope of consolidation, non- controlling interests and commitments to 1,000 29 2 ------713 317 165 482 buy out non- controlling interests (*) Other changes (**) -13,736 - 0 - - 100 - - - 38,636 25,001 - 25,001 Published e quity a s 1,000 2 9 - 541 - 65 - 246 - 1,557 - 91 0 - 1 4,653 1 3,183 5 5 1 3,237 at 3 0/06/2020 (*) Includes €1bn for the constitution of the share capital of SNCF SA after its transformation into a société anonyme on 1 January 2020 (see Note 2.1.2), and changes in commitments to buy out non-controlling interests in Eurostar and THI Factory. (**) Includes transfer of €13,736m from share capital as at 31 December 2019 to consolidated reserves (see Note 2.1.2), and assumption by the State of €25bn of SNCF Réseau debt (see Note 2.1.3).
Notes 1 to 7 are an integral part of the half-year consolidated financial statements.
26 SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT CONSOLIDATED CASH FLOW STATEMENT 03
0
CONSOLIDATED CASH 2 – C O N
FLOW STATEMENT D E N S E
D H A L F - Y E A R
€ million Note 30/06/2020 30/06/2019 C
Net p rofit/(loss) f or t he p eriod IS(1) -2,559 30 O N Eliminations: S share of net (profit)/loss of companies accounted for by the equity method IS (1) -9 -8 O L deferred tax expense/(gain) -24 -10 I D
depreciation, amortisation, impairment losses and provisions 2,127 1,839 A T
gains and losses on fair value remeasurements 11 88 E net proceeds from disposals and gains and losses on dilution -66 -36 D F Cash f rom o perations a fter c ost o f n et d ebt a nd t axes -520 1,903 I N
Eliminations: A current income tax expense/(gain) 121 184 N cost of net debt 535 823 C I A
dividend income -2 -3 L Cash f rom o perations b efore c ost o f n et d ebt a nd t axes 134 2,908 S T
Impact of change in working capital requirement 398 -341 A T
Taxes paid/(collected) -12 -46 E Dividends received 14 15 M E
Cash g enerated b y/(used i n) o perating a ctivities 534 2,536 N
Acquisitions of subsidiaries, net of cash acquired 30 -46 T S
Disposals of subsidiaries, net of cash transferred -5 -16 Acquisitions of intangible assets and property, plant and equipment 4.2.3 -3,033 -3,587 Disposals of intangible assets and property, plant and equipment 91 139 New concession financial assets -693 -730 Cash inflows from concession financial assets 3.3 565 376 Cash inflows from lease receivables 1 1 Acquisitions of financial assets 0 -85 Disposals of financial assets 0 0 Changes in loans and advances -215 -212 Changes in cash assets -473 -400 Investment grants received 764 886 Cash g enerated b y/(used i n) i nvesting a ctivities -2,969 -3,674
(1) Consolidated income statement
27 CONSOLIDATED CASH FLOW STATEMENT SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 03 03Co nsolid ated Fi nancial Statements
S T N E M E T A T S L € million Note 30/06/2020 30/06/2019 A I
C Cash inflows from equity transactions 4 -4
N New borrowings 4,969 3,726 A Repayments of borrowings net of Public Debt Fund (PDF) loan receivables -325 -618 N I Cash inflows from PPP receivables 138 137 F
D Cash outflows on PPP payables -141 -141 E
T Net interest paid -866 -837
A Repayments of lease liabilities -502 -479 D I Interest paid on lease liabilities -73 -56 L (2)
O Dividends paid to Group shareholders (*) SCE 0 0 S Dividends paid to non-controlling interests -8 -41 N
O Increase/(decrease) in cash borrowings 157 110
C Cash g enerated b y/(used i n) f inancing a ctivities 5 3,354 1,796 R Impact of exchange rate fluctuations -25 -1 A
E Impact of changes in accounting policies 1 0 Y -
F Impact of changes in fair value 1 -2 L Increase/(decrease) i n c ash a nd c ash e quivalents 896 656 A
H Opening cash and cash equivalents 7,273 7,728
D Closing cash and cash equivalents 8,169 8,384
E
S (*) The dividend was paid in July 2020.
N (2) Consolidated statement of changes in equity.
E
D
N Notes 1 to 7 are an integral part of the half-year consolidated financial statements. O C – 2 0
28 SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 1 - ACCOUNTING STANDARDS 03
0 2 – C
NOTES TO THE O N D E N
CONDENSED HALF-YEAR S E D H A L CONSOLIDATED F - Y E A R C
FINANCIAL STATEMENTS O N S O L I D A T E D F I N A
N C
Notes 1 to 7 are an integral part of the half-year I 1.1 APPLICATION OF IFRS A consolidated financial statements. L
The accounting policies used for the preparation of the S All amounts are in millions of euros (€ million), unless SNCF Group consolidated financial statements for the T stated otherwise. As the Group has elected not to half-year ended 30 June 2020 are the same as those A eliminate rounding errors, some minimal discrepancies T adopted for the year ended 31 December 2019, adapted E may appear. to reflect new standards and interpretations endorsed by M E 1. ACCOUNTING STANDARDS the European Commission. N
Pursuant to European Regulation 1606/2002 of 19 July The consolidated financial statements for the half-year T S
2002, the SNCF Group prepares its consolidated financial ended 30 June 2020 were prepared in accordance with statements in accordance with IFRS (International Financial IAS 34, “Interim Financial Reporting”. Consequently, they Reporting Standards), as adopted in the European Union do not include all the disclosures and notes required by and available to view on the European Commission IFRS for the preparation of annual consolidated financial website. statements, but only selected notes explaining significant SNCF already applied IFRS, pursuant to Article L.2012-10 events for the period. These half-year consolidated of the French Transport Code as amended with effect financial statements should therefore be read in from 1 January 2015 by the Rail Reform Law (law no. 2014- conjunction with the 2019 full-year consolidated financial 872 of 4 August 2014), in preparing the consolidated statements. financial statements of the group formed by the Groupe The basis of preparation of the half-year consolidated Public Ferroviaire (Public Rail Group – PRG) and the financial statements, as described in the following notes, subsidiaries of the group’s entities. derives from: Consequently, the entry into force on 1 January 2020 of – standards and interpretations mandatorily applicable for the New Railway Pact Law (law no 2018-515 of 27 June financial periods commencing on or before 1 January 2018), as supplemented by Order no 2019-552 of 3 June 2020; 2019, has not affected the presentation of the consolidated financial statements for the half-year ended – elective accounting options and exemptions applied in 30 June 2020. preparing the financial statements for the half-year ended 30 June 2020 (those options and exemptions are The comparative figures for the six months ended 30 June described in Note 1.1.3, and valuation methods specific to 2019 were not published during the 2019 financial year. interim reporting periods are described in Note 1.2). The consolidated financial statements for the half-year ended 30 June 2020 were closed off by the Board of Directors of the SNCF Group on 30 July 2020.
29 1 - ACCOUNTING STANDARDS SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 03
1.1.1 Standards and interpretations applicable to half-
S year consolidated financial statements for financial T periods beginning on or after 1 January 2020 N
E A summary is provided below of (i) amendments to M standards and interpretations and (ii) newly-issued E
T standards that are applicable as of 1 January 2020 and are A
T of specific relevance to the Group’s half-year consolidated
S financial statements: L
A I
C Standard or Summary Impacts N interpretation A N
I Amendments to IFRS 3, Issued by the IASB: 22 October 2018. The SNCF Group has
F “Definition of a Business” Endorsed by the EU: Regulation (EU) 2020/551 of 21 April 2020, applied this amendment with
D effect from 1 January 2020.
E published in the Official Journal on 22 April 2020.
T No material impacts were These amendments help stakeholders determine whether an A identified as of 30 June 2020.
D acquisition is of a business or a group of assets when IFRS 3 is I
L applied. O
S The amended definition emphasises that the output of a business
N is to provide goods and services to customers, whereas the
O previous definition focused on returns in the form of dividends,
C lower costs or other economic benefits to investors and other R third parties. A
E Amendments to IFRS 9, Issued by the IASB: 26 September 2019 There has been no Y -
F IAS 39 and IFRS 7, “Interest Endorsed by the EU: Regulation (EU) 2020/34 of 15 January 2020, discontinuation of hedge L Rate Benchmark Reform” accounting as a result of
A published in the Official Journal on 16 January 2020. benchmark reform.
H D
E These amendments are intended to enable entities to provide
S useful financial information during the period of uncertainty N
E relating to interest rate benchmark reform. They amend some
D hedge accounting requirements, so as to prevent the
N discontinuation of hedge accounting for hedging relationships
O documented in accordance with IFRS 9, notwithstanding the
C uncertainties arising from ongoing benchmark reform. The –
2 amendments also require entities to provide investors with
0 additional disclosures about hedging relationships that are directly affected by such uncertainties. Amendments to IASB: 01/01/2020, with option to early adopt as of 01/01/2019 The SNCF Group has IAS 1, “Presentation of EU: 01/01/2020 applied these amendments with effect from 1 January Financial Statements” and Group: 01/01/2020 2020. No material impacts IAS 8, “Accounting These amendments clarify the definition of “material” used in IAS were identified as of 30 June policies, changes in 1 2020. accounting estimates and and IAS 8. errors”
1.1.2 Standards and interpretations early adopted in preparing the 2020 half-year consolidated financial statements
Standard or Summary interpretation Amendment to IFRS 16, On 28 May 2020, the IASB issued the final version of an amendment to IFRS 16, dealing “Covid-19-Related Rent with rent concessions related to Covid-19. Concessions” The amendment permits lessees, as a practical expedient, not to assess whether particular rent concessions relating to the Covid-19 pandemic are lease modifications and instead to account for those rent concessions as if they are not lease modifications and recognise their impact in profit or loss for the period.
The Group has not elected early adoption of the other regardless of whether they have been endorsed by the standards and interpretations mandatorily applicable to European Commission. financial periods commencing on or after 30 June 2020,
30 SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 1 - ACCOUNTING STANDARDS 03
1.1.3 Description of accounting policies applied The actuarial gain arising from changes in the discount The accounting principles applied by the Group are and inflation rates was €38m. Of this, €9m related to the described in the relevant notes to the 2019 full-year finance cost of long-term employee benefits and was 0 consolidated financial statements. They apply to the recognised in “Finance costs”, and €29m related to post- 2 consolidated financial statements for the half-year ended employment benefits and was recognised in non- – C 30 June 2020 with the exception of the tax on rail reclassifiable reserves. O
company profits (TREF) and income tax, which are subject Experience adjustments generated actuarial gains of N
to valuation methods specific to interim reporting periods €27m, including €31m for post-employment benefits D as described in Note 1.2. recognised in non-reclassifiable reserves. E N 1.2.2 Income taxes S
1.2 VALUATION METHODS SPECIFIC TO E
INTERIM REPORTING PERIODS Income taxes for the half-year are calculated by applying D to the pre-tax profit or loss of consolidated companies the H 1.2.1 Employee benefits best known estimate for the effective tax rate of the A Use of the partial lay-off scheme in response to the Covid- L period for each tax entity. F
19 crisis has been made easier by the latest government - Profit forecasts as of 30 June 2020, which form part of the Y job protection measures. Order no. 2020-346 of 27 March E
assessment of the recoverability of deferred tax assets, A 2020 extended the scheme to “non-State employees of have not been updated given that the new financial R enterprises included in the national register of C trajectory was still under discussion with the State on the undertakings under majority State control, as mentioned O date the half-year financial statements were closed off. in paragraph 3 of Article L.5424-1 of the French Labour N Code”, thereby bringing all SNCF Group companies S 1.3 CHANGES MADE TO THE CURRENT PERIOD O within the scheme. AND COMPARATIVE PERIODS L I As a result, the SNCF Group companies were able to use With effect from 1 January 2020, the SNCF Group has D the scheme from mid-March onwards. The Group has A decided to report EBITDA as a performance indicator in T recognised a net €94m of lay-off allowances (excluding the the consolidated income statement, in place of gross E portion self-insured under the UNEDIC unemployment D profit. F insurance scheme), which are being offset against the I
The definition adopted by the SNCF Group for EBITDA is N expected cost of short-term employee benefits. It was not the same as that previously used for gross profit, except A possible to recognise the expected gain due to N that it (i) excludes changes in provisions for employee exemption from social security charges in respect of C
benefits, which are not dependent on operating activities I partial lay-off allowances and supplementary allowances, A
and have no direct cash impact and (ii) includes changes in L because not all the conditions had been met as at 30 provisions for current assets, which are directly related to S
June. T
operating activities. Provisions for employee benefits A
The net provision for employee benefits is updated based mainly comprise retirement benefits; annuities paid as T on the most recent actuarial valuations available on the E
compensation for work-related accidents and illnesses; M closing date of the previous period. Actuarial assumptions
social welfare; the provident plan; the phased retirement E relating to companies within the SNCF Unified Public and time savings account schemes; and long service N Group (UPG), the main contributors within the Group, awards. T S
were reviewed in full as at 30 June 2020. The impact of the change in performance indicator on the The Group’s employee benefit liabilities reduced by €60m income statement for the half-year ended 30 June 2019 is in the first half of 2020. This decrease mainly reflected (i) an improvement of €5m in “Employee benefit expense” an increase in the discount rate from 0.60% as at 31 and of €12m in “Other operating income and expenses”, December 2019 to 0.69% as at 30 June 2020, and (ii) a and a deterioration of €17m in “Net movement in decrease in the inflation rate from 1.90% to 1.80% over the provisions”. same period. A reconciliation of restated and recalculated figures for the comparative period is presented below:
30/06/2020 30/06/2019 30/06/2019 Reclassification € million published restated recalculated ( *)
Revenue 14,129 17,854 17,854 Purchases and external charges -5,985 -6,731 -6,731 Employee benefit expense -7,140 -7,358 -7,363 -5 Taxes and duties other than income tax -892 -912 -912 Other operating income and expenses -43 52 40 -12
Gross p rofit 2 ,889 -17 EBITDA 69 2,906 Depreciation and amortisation -1,980 -1,884 -1,884 Net movement in provisions -55 33 50 17
Current o perating p rofit/(loss) - 1,966 1,054 1,054 0
(*) The SNCF Group is presenting a recalculated gross profit figure for the half-year ended 30 June 2019 because it did not publish a half-year financial report in 2019.
31 2 - SIGNIFICANT EVENTS SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT 03
2. SIGNIFICANT EVENTS – The recognition of the loan receivable and the mirror
S loan payable at market value, including a €6.1bn fair value T 2.1 SIGNIFICANT EVENTS OF THE FIRST HALF remeasurement uplift on the assets and liabilities sides of N
E OF 2020 the balance sheet relative to the €25bn nominal value.
M 2.1.1 Covid-19 public health crisis – Simultaneously, the SNCF Group recognised the State’s E
T The Covid-19 public health crisis has had a severe impact debt waiver by (i) incorporating into reserves the €25bn A nominal value of the assumed debt and (ii) recognising a
T on the operations of the SNCF Group. financial grant on the liabilities side of the balance sheet S The Passengers business line was particularly hard hit. L corresponding to the differential between the average
A Operations were sharply reduced from 17 March 2020; I rate on the Réseau debt and the current market rate.
C services gradually recovered from the first easing of
N lockdown measures, subject to compliance with With effect from 1 January 2020, the PDF loan receivable A governmental biosecurity requirements. is accounted for as a financial asset at amortised cost. In N
I parallel, the financial grant is being written back to profit The new economic landscape was taken into account F or loss on an actuarial basis, as and when the fair value when testing CGUs and goodwill for impairment, as D remeasurement associated with the receivable is E described in Note 4.3 to the condensed half-year
T reclassified to profit or loss via the amortised cost consolidated financial statements. A calculation. D
I The Group also adapted its treasury management policies
L Consequently, the impact of this transaction on net during this period to ensure that it can meet all its O finance costs is an amount of net financial income that
S obligations and financial commitments as they fall due. A exactly mirrors the finance cost effectively borne by SNCF N specific note describing the measures implemented is Réseau on the portion of its historical debt assumed by O presented in Note 5 to the condensed half-year the State. C consolidated financial statements. R 2.1.4 Strike action A Finally, the Group has drawn up a specific action plan E aimed at generating additional savings by the end of The strike action that began on 5 December 2019 in Y - opposition to proposed pension reforms continued until
F 2020, to mitigate the financial effects of the crisis. In
L parallel, the Group implemented partial lay-off measures February 2020. A from mid-March onwards (see Note 1.2.1 to the This resulted in a loss of business which, along with H condensed half-year consolidated financial statements). refunds and other concessions, had an adverse impact on D
E 2.1.2 Implementation of rail industry reform revenue in the Group’s 2020 first-half financial statements. S
N The reform of the French rail industry resulting from the 2.1.5 Impairment S
E New Railway Pact Law (law no 2018-515 of 27 June 2018), Background D as supplemented by Order no 2019-552 of 3 June 2019, In 2017, the State began work on developing a “New N took effect on 1 January 2020.
O Railway Pact”, to be based on: The changes to the Group’s organisational structure, C – the New Railway Pact Law (no. 2018-515), which became
– governance and missions – as described in the 2019 law on 27 June 2018, and various Orders and Decrees 2 Annual Financial Report – are now operational. 0 specifying the arrangements for its implementation; All the accounting entries required for asset and capital a strategic business plan, prepared by the PRG at the transfers to the Group’s new legal entities have been – made. They have no impact on the consolidated financial request of the State, aimed at improving performance; statements, as the legal implementation of the reform – a new collective agreement for the rail industry by 2020. qualifies under IFRS as a legal reorganisation of – This work formed the basis of a financial trajectory for businesses under common control. the Group for the 2019-2028 period. To reflect the new organisational structure, the SNCF – As of the date the 2020 half-year financial statements Group has adapted its segment information, and now were closed off, that financial trajectory had not yet been reports eleven operating segments (see Note 3.1 to the amended or updated. The collective agreement has not condensed half-year consolidated financial statements). been finalised, and discussions have been provisionally 2.1.3 Partial assumption of debt by the State suspended. On 1 January 2020, the State assumed €25bn (at nominal – The latest versions of the Group’s strategic business value on redemption) of the debt carried by SNCF Réseau, plan and financial trajectory are currently being updated. in line with the French 2020 Budget Act. Those updates will take account of the changes in the The mechanism used is described below: economic landscape due to the effects of the Covid-19 public health crisis. Work is ongoing on these matters, as – SNCF Réseau and the Caisse de la Dette Publique are discussions with the State. The business plan and (Public Debt Fund – PDF) put in place, simultaneously, financial trajectory are expected to be finalised by the end mirror loans with identical characteristics that perfectly of 2020. reflect the characteristics (maturity, repayment profile, average interest rate, etc) of SNCF Réseau’s gross debt, Indications of impairment identified in the period and including hedging instruments. tests performed – The State substituted itself for SNCF Réseau in the The Group’s business units and entities have checked for repayment of its debt to the PDF and waived its own debt, potential indications of changes in the fair value of CGUs such that SNCF Réseau retained only its loan receivable and goodwill (primarily Geodis, Keolis, Eurostar and from the PDF. Thalys), in particular relating to the potential effects of the In accounting terms, this transaction resulted in: Covid-19 public health crisis. To better evaluate those effects, the business units and entities applied various scenarios using different
32 SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT 3 - PERFORMANCE FOR THE PERIOD 03
assumptions about how soon and at what level operations that was expected in July was not received by SNCF 0
would recover over time; those scenarios were then Transilien. In the short term, SNCF is drawing on its own 2 applied to the cash flows from the most recent financial liquidity sources to ensure continuity of public transport – trajectory. services in the Île-de-France region. C O
Impairment tests were carried out for entities showing 3. PERFORMANCE FOR THE PERIOD N
potential indications of impairment. In parallel, all D weighted average cost of capital (WACC) assumptions for 3.1 SEGMENT INFORMATION E the business units affected were updated to reflect N 3.1.1 Determination of reported segments S changes in market parameters. The effects of the crisis on E the rates used was also assessed by reference to the The operations of the SNCF Group are organised into five D H impact on discounted cash flows. business lines and eleven segments: A On completion of those analyses, some business units – The Infrastructure M anagement business line, L comprising two segments: F performed further testing. However, those tests did not - Y require any adjustment to the values of the assets • SNCF Réseau, whose mission is to commercialise, E involved. For a detailed presentation of the analyses and manage, maintain, upgrade and develop the French A R
impairment tests carried out, see Note 4.3 to the national rail network. Its customers are the 29 rail C
condensed half-year consolidated financial statements. operators that use the national rail network, plus 12 O
2.1.6 Negotiation of the Île-de-France Mobilités 2020- other companies (combined transport operators, ports, N etc) that reserve track slots which they then assign to the S
2023 contract O rail operator of their choice. This segment includes the A new contract for the 2020-2023 period relating to the L I
following SNCF Réseau subsidiaries: Sferis and D implementation of passenger transport pricing and service Altametris. A
policies for passengers in the Île-de-France (Greater Paris) T
E region is currently being negotiated with Île-de-France • SNCF Gares & Connexions handles the operation and development of France’s 3,030 railway stations, ensuring D
Mobilités (the regional Transport Organising Authority). F that all operators have fair and equal access. It includes Pending finalisation of that contract, SNCF Voyageurs is I Gares & Connexions SA, and its subsidiaries Arep Group N
recognising revenue equal to the aggregate amount of A the fixed monthly payments on account paid by Île-de- and Retail & Connexions. N France Mobilités under article R.1241-25 of the French – The Passengers business line comprises four segments: C I Transport Code, which specifies the provisional fixed A
• Transilien: local rail transport services in the Île-de- L contribution that Île-de-France Mobilités must pay SNCF France (Greater Paris) region. S
Voyageurs to ensure continuity of service. T
• TER: regulated regional passenger transport services A 2.2 EVENTS AFTER THE REPORTING PERIOD (rail and road, including urban and suburban), and T E
The principal events after the reporting period are associated services (Ritmx). M • Voyages SNCF: door-to-door passenger transport in E described below. N
2.2.1 Credit rating France and across Europe via SNCF Voyageurs SA (TGV, T OUIgo, Intercités) and its subsidiaries (Eurostar, Thalys, S
On 7 July 2020, Standard & Poor’s Global Ratings Lyria, Rielsfera, etc), and sale of travel-related products downgraded the outlook for its AA- rating from Stable to (including via the subsidiary Oui.sncf). Watch Negative, reflecting the consequences of the Covid-19 crisis for the Group. • Industrial Division: comprising Equipment, Traction, Rail Production, and the subsidiary Masteris, this
2.2.2 Signature of building permit for the Gare du segment co-ordinates all of the Group’s industrial Nord modernisation project operations. The Paris Gare du Nord 2024 project, housed within the – Keolis handles mass transit systems in 16 countries single-purpose semi-public company Stationord, obtained around the world. Keolis has expertise in all forms of consent from the Paris Prefecture when the building transport (train, bus, coach, metro, tram, ferry, bicycle), permit was signed on 6 July 2020. and in managing transport hubs (railway stations, airports) Work on this project, which aims to enhance the and parking. attractiveness of public transport in the Île-de-France – The Freight & L ogistics business line, comprising two region and hence reduce pollution, is due to start in the segments: summer of 2020. • Geodis: a European operator with global reach, 2.2.3 Suspension of payments from Ile de France offering management solutions across all or part of the Mobilités to SNCF Transilien logistics chain (Supply Chain Optimization, Air & Sea Pending signature of the contract for the 2020-2024 Freight Forwarding, Contract Logistics, Distribution & period, Ile-de-France Mobilités is paying a provisional Express, Road Transport, US Contract Logistics). fixed monthly contribution to SNCF Transilien to ensure • TFMM: a rail/multi-modal freight specialist, including continuity of service under Article R.1241-25 of the French rail and combined freight operators and freight Transport Code. The monthly payments scheduled for the forwarders: Fret SNCF SAS, Captrain France (formerly first half of 2020 were made each month, on the dates VFLI), Captrain Europe (formerly Captrain), Naviland specified in the previous contract. Cargo, Forwardis and VIIA SNCF. However, the Board of Directors of Ile-de-France Mobilités – SNCF I mmobilier acts as agent or service-provider for voted on 8 July 2020 to suspend those payments from July the other SNCF Group companies in four main areas: onwards, until such time as the State makes good the loss managing real estate assets used in operations (master of revenue due to the Covid-19 crisis. plans to optimise real estate assets, the construction and Consequently, the operating component of the fixed refurbishment of buildings, and managing leased monthly contribution from Ile-de-France Mobilités (€190m) properties); monetising assets not required for railway
33 3 - PERFORMANCE FOR THE PERIO D SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT 03
operations; managing the working environment in key
S office premises; and managing residential properties
T through SNCF SA subsidiary ICF Habitat Group. N
E All of these segments are served by corporate support
M functions and other service-providers from within the E
T SNCF Group: Shared Service Centres, holding company
A activities within SNCF Participations, and SUGE (rail T safety). Along with certain operational subsidiaries, these S
L constitute the “Other” segment. A I 3.1.2 Indicators reported C
N The key indicators reported for each segment are: A External r evenue, which excludes transactions with N – I other Group segments. F
D – Internal r evenue, which consists of transactions with E
T other Group segments. A – EBITDA, which consists of revenue and other income D I
L minus expenses directly attributable to operating
O activities. Those expenses mainly comprise purchases; S sub-contracting and other external services; employee N benefit expenses; taxes and duties other than income tax; O disposals of operating assets (property, plant and C
R equipment – mainly transport equipment – used in the
A operating cycle and disposed of in connection with E
Y upgrades to production facilities); and movements in -
F provisions for current assets. EBITDA does not include L changes in provisions for employee benefits, which are A presented within the line item “Net movement in H
D provisions”, a component of “Current operating profit”.
E Nor does it include reversals of utilised provisions, which S are also presented within “Net movement in provisions”; N
S this is because EBITDA is only affected when the loss is E effectively realised. D
N – Net i nvestment, which comprises cash outflows on O gross acquisitions of property, plant and equipment and C intangible assets (including own production capitalised –
2 and finance costs), net of (i) investment grants received 0 and (ii) new concession financial assets net of cash inflows, i.e. after the impact of changes in working capital requirements relating to investing activities. – Gross i nvestment a ll f unding s ources, which comprises gross acquisitions of property, plant and equipment and intangible assets as recognised for accounting purposes (including own production capitalised and finance costs), plus new gross concession financial assets. – Net d ebt, which is the sum total of current and non- current financial liabilities minus current and non-current financial assets derived from transactions that in substance relate solely to exchanges of cash flows (outflow or inflow of cash, in exchange for an expected repayment or disbursement of cash). The accounting policies used to prepare financial data for each segment are the same as those used in the preparation of the consolidated financial statements. Internal revenue is eliminated on a separate “Inter- segment eliminations” line to allow for a reconciliation to the consolidated financial statements.
34 SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT 3 - PERFORMANCE FOR THE PERIOD 03
3.1.3 Segment information 0
30/06/2020 2 –
Investment a ll C External Internal External Net funding O € million revenue revenue Revenue EBITDA investment sources Net d ebt N
SNCF Réseau 1,214 1,443 2,658 222 -1,575 -1,989 28,784 D
SNCF Gares & Connexions 100 611 711 93 10 -261 1,150 E N
Intra-business line S -223 -223 eliminations E D
Infrastructure M anagement 1,314 1,831 3,145 315 -1,565 -2,250 29,934 H
Transilien 1,311 154 1,465 -41 -356 -522 1,064 A L
TER 2,052 154 2,206 16 112 -268 -1,353 F -
Voyages SNCF 1,720 167 1,887 -905 -237 -350 4,001 Y E
Industrial Division 32 701 733 -12 -46 -37 902 A R
Other 32 216 248 32 3 -17 -1,330 C
Intra -business line O -1,038 -1,038
eliminations N
Passengers 5,147 354 5,501 -910 -523 -1,195 3,284 S O
Keolis 2,836 46 2,883 189 -103 -115 994 L I Geodis 3,949 48 3,998 283 -61 -52 899 D A
TFMM 664 47 711 -44 -16 -14 14 T E
Other 199 36 235 139 -90 -97 1,076 D
Intra-business line F -43 -43 I
eliminations N
Freight & L ogistics 4,812 88 4,901 378 -166 -163 1,989 A N
SNCF I mmobilier 13 303 316 99 -1 -4 -290 C I
Corporate 7 495 502 -2 -38 -25 2,415 A L
S
Inter-segment eliminations -4,423 -4,423 T A T
Total 14,129 0 14,129 69 -2,397 -3,752 38,327 E
M
E N T S
35 3 - PERFORMANCE FOR THE PERIOD SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT 03
30/06/2019 31/12/2019
S
T Investment a ll
N External Internal External Net funding
E € million revenue revenue Revenue EBITDA investment sources Net d ebt M SNCF Réseau 1,228 2,075 3,303 904 -1,714 -2,392 51,852 E
T SNCF Gares & Connexions 142 607 749 100 -140 -159 748 A
T Intra-business line -115 -115
S eliminations L Infrastructure M anagement 1,370 2,566 3,936 1,003 -1,854 -2,551 52,600 A I
C Transilien 1,508 201 1,709 67 -336 -524 746
N TER 2,409 238 2,647 199 -86 -267 -887 A
N Voyages SNCF 4,221 251 4,472 643 -326 -585 2,923 I
F Industrial Division 32 814 847 41 -42 -34 923
D Other 80 267 346 22 -26 -24 -1,862 E
T Intra -business line
A -1,294 -1,294 eliminations D I Passengers 8,251 477 8,728 971 -816 -1,433 1,844 L
O Keolis 3,195 58 3,253 307 -145 -117 1,121 S
N Geodis 3,983 58 4,042 348 -59 -50 726
O TFMM 818 59 877 13 -21 -15 5,408
C Other 196 39 235 126 -104 -111 883 R
A Intra-business line
E -49 -49 eliminations Y - Freight & L ogistics 4,998 107 5,105 487 -185 -164 7,017 F L SNCF I mmobilier 27 249 276 87 -9 2 -236 A
H Corporate 14 532 546 51 -47 -36 -2,064
D E
S Inter-segment eliminations -5,448 -5,448
N E
D Total 17,854 0 17,854 2,906 -3,055 -4,299 60,281
N O C – 2 0
36 SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT 3 - PERFORMANCE FOR THE PERIOD 03
3.2 REVENUE 0 2
–
C The SNCF Group derives revenue from providing services at a point in time, or continuously over a period of time, to O N
private individuals and to public and private sector D customers. The key revenue-generating service lines are: E N
€ million 30/06/2020 30/06/2019 Change Segment S E
Passenger transport revenue 1,480 3,661 -2,181 Voyages SNCF D H
Freight transport revenue 3,404 3,580 -176 Freight & Logistics business line A L F -
Voyages SNCF, Freight & Logistics Y Other services ancillary to transport 1,207 1,275 -67 business line E A
Fees from Transport Organising Authorities (TOA) for R 6,069 7,235 -1,166 Transilien, TER, Keolis regulated operations C O
Rail network management fees 1,123 1,110 12 SNCF Réseau N S O Station management revenue 101 144 -43 SNCF Gares & Connexions L I D
Real estate rental revenue (excluding rent generated Freight & Logistics business line, A 50 69 -19 by stations) Voyages SNCF, Corporate T E
Freight & Logistics business line, D Transport equipment leasing revenue 179 168 10 Transilien, TER, Keolis F I N Upkeep and maintenance services 103 135 -32 All segments A N
Other revenue 413 478 -65 All segments C I A
Revenue g enerated b y k ey s ervice l ine 14,129 17,854 -3,726 L S
Public sector (governmental bodies) 7,128 8,412 -1,285 T A
Private individuals 1,555 3,662 -2,107 T E
Private sector companies 5,446 5,780 -334 M E
Revenue b y c ustomer t ype 14,129 17,854 -3,726 N T
Services provided immediately or within one day 2,770 5,242 -2,472 S
Services provided continuously over no more than 10,829 12,298 -1,469 one year (logistics, freight transport, and TOA fees)
Services provided continuously over more than one year (real estate, some station management 530 315 215 operations, etc) Revenue b y p attern o f r ecognition 14,129 17,854 -3,726
3.3 TRANSACTIONS WITH TRANSPORT ORGANISING AUTHORITIES
Transactions with Transport Organising Authorities (TOAs) have the following effects on the SNCF Group’s consolidated financial statements:
37 4 - OPERATING ASSETS AND LIABILITIES SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT 03
€ million 30/06/2020 30/06/2019 Change 3.4 OTHER ITEMS
S Services provided to TOAs 5,199 5,640 -441 Purchases, sub-contracting and other external charges: T Revenue from passenger N € million 30/06/2020 30/06/2019 Change
E ticket sales 761 1,469 -708 Services to the State as TOA
M Sub-contracting -2,932 -2,988 56 of public-interest inter-city E Eurotunnel and other
T train services (TET) 72 105 -34 infrastructure fees -373 -448 75 A Interest income from Other purchases and external T concession financial assets 38 21 16 charges -2,422 -2,961 540 S
L Traction energy -259 -334 75
A Effects o n r evenue ( *) 6,069 7,235 -1,166 I Purchases a nd e xternal
C New concession financial charges -5,985 -6,731 746
N assets -693 -730 36
A Cash inflows from concession N
I financial assets 565 376 189 Investment grants on F property, plant and D
E equipment and intangible
T assets (1) 764 886 -122 A
D Effect o n c ash g enerated b y/ I
L (used i n) i nvesting a ctivities 636 532 104 O
S (*) of which Keolis revenue 2,579 3,004 -426 N of which SNCF Voyageurs O revenue 3,490 4,231 -740 C
R € million 30/06/2020 30/06/2019 Change A
E Intangible concession assets 119 112 8 Y - Non-current concession F
L financial assets 1,019 966 53 A
H Effect o n n on-current a ssets 1,138 1,078 61
D (1) Includes €538m in 2020 (€696m in 2019) of grants for SNCF Réseau rail E
S network infrastructure.
N E
D 4. OPERATING ASSETS AND LIABILITIES The main goodwill balances at the end of the reporting
N period are:
O 4.1 GOODWILL
€ m illion 30/06/2020 31/12/2019 Change
C
The table below shows movements in goodwill during the –
2 period: Keolis 630 729 -98 0 SNCF Voyageurs (*) 404 418 -14 Gross Carrying € m illion value Impairment amount Freight & Logistics 1,351 1,354 -3 1 J anuary 2 019 2,731 -402 2,330 of which Geodis CGU 1,122 1,125 -3 Acquisitions 174 0 174 of which Fleet Management CGU 197 197 0 Impairment losses 0 -1 -1 Disposals -14 2 -12 of which Other rail Currency translation 34 -1 32 operations 32 32 0 SNCF Corporate (**) 0 11 -11 Other movements -10 0 -10
31 D ecember 2 019 2,914 -402 2,513 Total 2,386 2,513 -127 (*) Includes €348m for Eurostar (€373m in 2019). 1 J anuary 2 020 2,914 -402 2,513 (**) Includes Ouicar (€11m in 2019), transferred from Corporate to SNCF Voyageurs on 1 January 2020. Acquisitions -98 0 -98
Impairment losses 0 0 0 Disposals 0 0 0 The Group has elected to use the partial goodwill method in accounting for business combinations made during the Currency translation -30 1 -29 period. This means that the Group has recognised in the Other movements 0 0 0 balance sheet only the portion of goodwill attributable to 30 J une 2 020 2,787 -401 2,386 equity holders of the parent, excluding goodwill Movements in 2020 related to the allocation of goodwill attributable to non-controlling interests. on Effia to contractual rights (negative movement of €98m). For 2019, acquisitions mainly comprised STEMI (€82m), Parking Cathédrale SA (€63m) and Parking de l’Esplanade SA (€12m), all acquired by Keolis; and Railtraxx (€12m), acquired by TFMM. Disposals relate to Euromatic. The “Other movements” line was impacted by a reallocation of goodwill to intangible assets (concession, patents and other rights) at Keolis Santé.
38 SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT 4 - OPERATING ASSETS AND LIABILITIES 03
0
2
4.2 PROPERTY, PLANT AND EQUIPMENT AND RIGHT OF USE ASSETS –
4.2.1 Property, plant and equipment C Property, plant and equipment breaks down as follows by category: O N
30/06/2020 31/12/2019 D E
Gross Depreciation a nd Carrying Gross Depreciation a nd Carrying N € million value impairment amount value impairment amount S E
Investment property 305 -21 284 312 -24 288 D Land and buildings 25,526 -11,361 14,165 24,537 -10,957 13,581 H A
Tracks, earthworks, engineering structures, and L F
level crossings 56,784 -23,464 33,320 55,702 -23,043 32,659 - Y E
Technical, electrical, telecoms and signalling A
equipment, plant and tooling, and other assets 29,965 -14,598 15,367 29,497 -14,071 15,426 R Transport equipment(*) 34,908 -22,741 12,168 34,758 -22,462 12,296 C Property, plant and equipment under O construction 14,641 -16 14,625 14,877 -21 14,857 N S
TOTAL E XCLUDING G RANTS 162,129 -72,201 89,928 159,684 -70,578 89,107 O
Investment grants 51,905 -13,678 38,228 50,471 -13,038 37,433 L I TOTAL 110,224 -58,523 51,701 109,213 -57,539 51,674 D A
(*) Includes €1,125m for transport equipment under construction (2019: €965m). T E
The table below gives an analysis of movements in property, plant and equipment after investment grants: D F I N
Tracks, A
earthworks, Technical, N
engineerin electrical, t elecoms Property, C
g and s ignalling plant a nd I structures, equipment, p lant Transport equipment Total a fter A L
Investment Land a nd and l evel and t ooling, a nd equipment under Investment investment S € m illion property buildings crossings other a ssets (*) construction grants grants T
Carrying a mount a t A
298 13,203 31,222 15,545 12,265 12,678 -34,809 50,401 T 01/01/2019 E
Acquisitions 0 34 0 176 1,220 6,627 -3,133 4,924 M E
Disposals -9 -47 0 -7 -40 -1 2 -101 N
Net depreciation T -1 -599 -1,075 -1,092 -1,280 0 1,302 -2,744 S
expense Impairment losses 0 -43 0 -7 -18 14 0 -55 Changes in scope of 0 36 0 6 199 -6 26 261 consolidation Currency translation 0 3 0 4 52 0 1 60 differences Other movements 0 995 2,512 801 -101 -4,456 -823 -1,072
Carrying a mount a t 31/12/2019 2 88 13,581 32,659 15,426 12,296 14,857 -37,433 51,674 of which assets held under finance leases 0 52 0 4 658 0 0 714 Acquisitions 0 7 0 67 415 2,415 -1,800 1,105 Disposals -5 -3 0 -1 -4 0 0 -13 Net depreciation expense 1 -327 -545 -555 -536 0 663 -1,300 Impairment losses 0 14 0 0 3 3 0 20 Changes in scope of consolidation 0 521 -534 6 0 1 0 -6 Currency translation differences 0 -4 0 -7 -71 0 2 -79 Other movements 0 376 1,739 431 65 -2,651 340 300
Carrying a mount a t 30/06/2020 284 14,165 33,320 15,367 12,168 14,625 -38,228 51,701 (*) Includes transport equipment under construction.
39 4 - OPERATING ASSETS AND LIABILITIES SNCF G ROUP - 2 020 H ALF-YEAR F INANCIAL R EPORT2020 03
For details of the principal acquisitions and of equipment under construction that were completed and
S depreciation charges during the period, refer to Notes brought into use during the period.
T 4.2.3 and 4.2.4; for details of the impact of impairment N losses on the income statement, refer to Note 4.3. Details of grant received during the period are provided in E
M Other movements during the period mainly comprise Note 4.2.3. Other movements in grants during the period E relate to grants invoice in advance by SNCF Réseau
T items previously recorded as property, plant and
A during the period. T 4.2.2 Leases S
L
A Right-of-use assets break down by category as follows: I C
N 30/06/2020 31/12/2019 A Depreciation Carrying Depreciation Carrying N I € million Gross v alue and i mpairment amount Gross v alue and i mpairment amount F Land and buildings 3,092 -916 2,176 2,969 -717 2,252 D
E Transport equipment 2,281 -813 1,468 2,226 -667 1,559 T
A Other 221 -87 134 219 -81 138 D
I TOTAL 5,593 -1,816 3,778 5,413 -1,465 3,948
L
O
S – Leases in the “Land and Buildings” category relate – Leased assets in the “Other” category mainly comprise N mainly to buildings such as warehousing, retail stores, technical equipment used in the operating cycle with O offices, etc. Leases in the “Transport equipment” category significant financial implications. C
R include leases of rail and road transport equipment A (including buses, trainsets, locomotives, cars, etc). E Y
- F
L Movements in this line item are shown in the table below: A
H Land and Transport
D € million buildings equipment Other Total E
S Carrying a mount a t 0 1/01/2019 2,436 1,605 127 4,169 N
E New leases contracted 366 338 66 769
D Impact of expired or terminated leases -17 -1 0 -18 N Depreciation -495 -419 -51 -966 O Changes in scope of consolidation -12 30 -5 12 C
– Other movements (lease modifications, changes in assumptions, -26 6 1 -19 2 etc) 0 Carrying a mount a t 3 1/12/2019 2,252 1,559 138 3,948 New leases contracted 232 136 24 392 Impact of expired or terminated leases -25 -1 -1 -26 Depreciation -268 -211 -28 -507 Impairment losses 0 Changes in scope of consolidation 12 -21 -1 -10 Other movements (lease modifications, changes in assumptions, -27 5 2 -19 etc) Carrying a mount a t 3 0/06/2020 2,176 1,468 134 3,778
For details of depreciation charged to profit or loss, see Note 4.2.4.
40 SNCF G ROUP - 2020 H ALF-YEAR F INANCIAL R EPORT 4 - OPERATING ASSETS AND LIABILITIES 03
4.2.3 Investment 0
€ m illion 30/06/2020 30/06/2019 Change 2
Net cash outflows from investing activities relating to – acquisitions of property, plant and equipment and Disposals of intangible assets -1 -3 2 C
intangible assets break down as follows: Disposals of property, plant O
and equipment 58 43 15 N € m illion 30/06/2020 30/06/2019
Disposals of right -of -use D
Intangible assets -154 -171 assets 3 0 3 E N Property, plant and equipment -2,905 -3,398 Disposals of financial assets 1 -9 10 S
Total a cquisitions -3,059 -3,569 Net p roceeds f rom a sset E disposals 61 31 29 D Change in investing working capital H requirement 26 -18 A
Net c ash o utflow o n a cquisitions o f Net proceeds from asset disposals in the first half of 2020 L
intangible a ssets a nd p roperty, related mainly to sales of real estate assets by SNCF F -
plant a nd e quipment -3,033 -3,587 Y Réseau (€41m), including the sale of the Gare des Mines E site in the 18th arrondissement of Paris, and by ICF- A Investments in property, plant and equipment in the NOVEDIS (€4m). R period relate mainly to: C O
– rail infrastructure investment by SNCF Réseau, N comprising: S O
• €1,867m of direct production; L I • €24m of major overhauls; D A
• €14m of direct acquisitions; T E
• €44m of capitalised interest on borrowings. D F
– acquisitions and fixtures/fittings carried out in rail I stations and other buildings, amounting to €391m N A
(including works on the Tangentielle Ouest tramway, N extending and adapting maintenance workshops to C I accommodate Régiolis and Régio2N trainsets, and A L
construction of a new industrial facility at the Hellemmes S
Technicentre); T A – acquisitions and upgrades of rail and road transport T equipment amounting to €397m (including acquisitions of E M “NAT” multiple units for Transilien; Océane trainsets; the E
“TGV of the future”; TGC UFC trainsets; Eurostar N trainsets; wagons; transcontainers and containers; TGV T S upgrades; and electric multiple units). Investment grants recognized in the period to fund property, plant and equipment amounted to €1,800m, comprising €80m for rail equipment and €1,720m for fixed installations and rail infrastructure projects (expansions/upgrades). The difference between that amount and the amount of grants received is mainly due to the change in working capital requirement during the period relating to investment grant receivables. 4.2.4 Depreciation and amortisation
Depreciation and amortisation breaks down as follows:
€ m illion 30/06/2020 30/06/2019 Change Amortisation of intangible assets -209 -182 -27 Depreciation of property, plant and equipment -1,952 -1,967 15 Depreciation of right-of-use assets -507 -466 -41 Grants released to profit or loss 663 651 12 Reversal of liabilities related to non-current concession assets outside the scope of IFRIC 12 25 79 -55 Depreciation a nd amortisation -1,980 -1,884 -95
4.2.5 Net proceeds from asset disposals
Asset disposals had the following impacts on profit or loss:
41 4 - OPERATING ASSETS AND LIABILITIES SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT2020 03
4.3 IMPAIRMENT TESTING OF NON-CURRENT ASSETS S
T
N Impacts on the income statement were as follows: The main assumptions used to determine the E recoverable amount are: M E
T € m illion 30/06/2020 30/06/2019 Change 2020 2019 A
T Property, plant & Freight &
S equipment and intangible Segment Logistics SNCF Logistics L assets -13 -5 -8 A CGU Geodis Geodis I Goodwill 0 -1 1 C Assets tested €1,562m €1,555m N Provisions for risks and A charges 0 0 0 Base used for N
I recoverable amount Value in use Value in use Impairment l osses -13 -6 -7
F 5-year plan 5-year plan D
E + normative + normative
T 4.3.1 Background year discounted year discounted A The Covid-19 crisis in the first half of 2020 triggered a
D Source used to infinity to infinity I major downgrade of SNCF’s operating projections, L Discount rate (min -
O leading to a review of the financial trajectory for the
S Group’s core business lines, taking account of various max) 7.2% - 8.5% 6.8% - 7.8% N effects including: Long-term growth O rate 1.80% 1.90%
C – lower activity levels, with an adverse effect on revenue
R relative to the projected trajectory; The test performed as at 30 June 2020 substantiates the A carrying amount of the CGU’s assets. Sensitivity analyses E – spending (operating and capex) on safety and Y performed on the discount rate (± 50 bp), the long-term - compliance measures for spaces used by customers and F growth rate (± 10 bp) and the operating margin rate L employees;
A (± 50 bp) support the results of the test. – an increase in the amount of past due receivables. H 4.3.2.2 Keolis CGU
D – All those factors led to impairment tests being
E Of the total amount of goodwill, €630m (€729m as at 31
S conducted on the assets of most of the Group’s CGUs in December 2019) is allocated to the Keolis cash generating
N accordance with IAS 36, which requires such tests to be
E unit, which houses all operations in the multi-modal performed: D passenger transport solutions business of the Keolis
N – at least once a year for goodwill and indefinite-lived segment. Indefinite-lived intangible assets allocated to
O intangible assets; this CGU amount to €83m (€53m as at 31 December 2019), C – whenever there is an indication of potential impairment, and mainly comprise brands and licences. The CGU is –
2 in the case of other non-current assets. tested for impairment at least annually. The main 0 assumptions used to determine the recoverable amount
– The estimates and assumptions used in these tests are are: subject to the uncertainties and difficulties of judgment inherent in the situation, in terms of the duration and 2020 2019 consequences of the crisis, and its impacts on competition Segment Keolis Keolis and on demand from the Group’s main customers. The values for assets tested as presented in the tables CGU Keolis Keolis below are shown net of impairment losses charged or Assets tested €1,654m €1,813m reversed during prior periods, and exclude any acquisition or loss of control during the period. Base used for recoverable amount Value in use Value in use 4.3.2 CGUs carrying high levels of goodwill relative to total goodwill 5-year plan Those CGUs that carry high levels of goodwill are + normative 5-year plan described below. year + normative year 4.3.2.1 Geodis CGU discounted to discounted to Source used infinity infinity Of the total amount of goodwill (net of impairment), €1,122m (€1,125m as at 31 December 2019) is allocated to Discount rate (min - the Geodis cash generating unit, which houses the max) 5.9% - 6.9% 5.5% - 6.5% logistics and freight transport operations of the Freight Long-term growth and Logistics business line. The CGU is tested for rate 1.80% 1.90% impairment at least annually. No impairment loss was recognised as of 30 June. Sensitivity analyses performed on the discount rate (± 50 bp) and the long-term growth rate (± 50 bp) show a variation of ± €332m in the recoverable amount (± €437m
in 2019). The sensitivity analysis performed on the operating margin rate (± 50 bp) shows a variation of ± €430m in the recoverable amount (± €402m in 2019).
42 SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 4 - OPERATIN G ASSETS AND LIABILITIES 03
4.3.2.3 Fleet Management CGU 2020 2019 0
Of the total amount of goodwill, €197m (€197m as at 31 2 December 2019) is allocated to the Fleet Management Segment Passengers Voyages SNCF – C cash generating unit. CGU Eurostar Eurostar O
The test performed, based on value in use, gives a N
Assets tested €1,811m €2,031m D recoverable amount greater than the carrying amount. E
The main assumptions used to determine the recoverable Base used for N amount are: recoverable S E
amount Value in use Value in use D 2020 2019 H Freight & 10-year plan 10-year plan A
Segment Logistics SNCF Logistics + normative year + normative year L F
discounted to discounted to - Fleet Fleet Y
Source used infinity infinity E
CGU Management Management A
Discount rate R Assets tested €1,831m €1,812m C (min-max) 7.0% - 8.1% 6.2% - 7.1% O Base used for Long- term growth N recoverable S
rate 1.80% 1.90% O amount Value in use Value in use L I 5-year plan 5-year plan D
The cash flow projections used to assess the recoverable A
+ normative year + normative year amount of the assets are derived from an Information T discounted to discounted to E Memorandum related to the Grand Slam funding project D
Source used infinity infinity approved by the Board of Directors on 19 June 2020, and F I Discount rate (min- based on core assumptions including: N max) 3.6% - 4.1% 3.9% - 4.5% – Trends in traffic revenue that build in a catch-up effect A N
after the Covid-19-related slowdown (U-shaped recovery). C Long-term growth I
A rate 2.00% 2.00% – Amounts for expenses (employee benefits, purchases, L
etc) which will in some cases be subject to performance S No impairment loss has been recognised, as the plans. T recoverable amount exceeds the carrying amount. A
Sensitivity analyses performed on the discount rate – Infrastructure fee projections. T E
(± 50 bp), the long-term growth rate (± 50 bp) and the – Positioning of the arrival of rail competition. M operating margin rate (± 50 bp) support the results of the E – The level of investment required to upgrade the fleet, N test. taking account of performance plans relating to trainset T 4.3.2.4 Eurostar CGU S use optimisation and to the arrival of new rolling stock and Of the total amount of goodwill, €348m (€373m as at of competitors. 31 December 2019) is allocated to the Eurostar cash The terminal value is calculated by extrapolating the generating unit, which houses all the cross-channel target operating margin rate (relative to revenue) derived passenger operations of the Voyages SNCF segment. from the new trajectory prepared in June 2020, and builds Indefinite-lived intangible assets allocated to this CGU in the assumption about the positioning of the arrival of amount to €255m (€273m as at 31 December 2019), and rail competition. mainly comprise brands. The CGU is tested for Those estimates and assumptions were made in the impairment at least annually. context of difficulties in assessing the impact of (i) the The main assumptions used to determine the recoverable Covid-19 crisis; (ii) issues around multi-modal competition, amount are: especially low-cost airlines; (iii) the arrival of rail competition; and (iv) Brexit (the withdrawal of the United Kingdom from the European Union), which took place on 31 January 2020 and is being followed by an 11-month transition period. No impairment loss has been recognised, as the recoverable amount exceeds the carrying amount. In addition, sensitivity tests supported the value of the economic asset as at 30 June 2020. – A movement of ± 100 bp in the normative year operating margin rate would have an effect of ± €89m on the recoverable amount (± €130m in 2019). – A movement of ± £10m in normative year investment would have an effect of ± €85m on the recoverable amount (± €132m in 2019). – A delay of 1 year in the date of arrival of competition would lead to a variation of approximately ± €215m in the recoverable amount (± €151m in 2019).
43 4 - OPERATING ASSETS AND LIABILITIES SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 03
– A movement of ± 25 bp in the discount rate would have – Operating and capital expenditure productivity plan that
S an effect of ± €80m on the recoverable amount (± €122m builds in the consequences of the Covid-19 crisis. T in 2019).
N – Arrival of rail competition from mid-June 2021 (versus
E – A movement of ± 10 bp in the normative year growth 2024 in the 2018 version 2 strategic plan), and more
M rate would have an effect of ± €20m on the recoverable intense competition with more new entrants declaring an E
T amount (± €32m in 2019 for a ± 10 bp movement). interest. A
T A further fall in normative year operating margin rate of – Positive effects in relation to air travel in the post Covid-
S approximately 2% would give a value in use equal to the 19 world. L carrying amount. However, additional steps would be A I – taken by management to minimise the impacts of such a C – The other methodological components used to
N fall.
A determine the recoverable amount as at 30 June 2020 are: Conversely, such a fall in operating margin would have a N I favourable effect on the financial liability relating to the 2020 F purchase commitment given by SNCF Mobilités. D Segment Passengers E The financial liability relating to the irrevocable purchase T
A commitments by SNCF to buy out the stakes in Eurostar TGV F rance a nd
D held by the CDPQ/Hermès consortium and SNCB are I Europe ( excluding L valued on the same bases. CGU Eurostar a nd T halys) O
S 4.3.3 CGUs with indications of potential impairment
N losses or reversals in 2020 and/or 2019 Assets tested €5,761m O 4.3.3.1 TGV France and Europe CGU (excluding Base used for recoverable C Value i n u se
R Eurostar and Thalys) amount A
E Against the backdrop of rail reform and the French 10-year p lan Y - government’s announcement of associated financial Source used
F + n ormative y ear measures, including pegging infrastructure fees to the L discounted t o i nfinity
A consumer price index, management updated the strategic
H plan for the TGV business, which was then approved by Discount rate (min-max) 6.6% - 7 .7%
D the Board of Directors on 26 July 2018. E Long-term growth rate 1.80% S The financial trajectory in that plan built in (i) the new N index-linking of infrastructure fees; (ii) scenarios for the E
D opening of services to competition; (iii) additional The test performed as at 30 June 2020 substantiates the
N performance gains; and (iv) new projections for the carrying amount of the CGU’s assets. Sensitivity analyses
O CST/TREF tax take based on expected trends for performed on the discount rate (± 50 bp), the long-term
C Intercités operations. growth rate (± 10 bp) and the operating margin rate –
2 The factors listed above, especially the new index-linking (± 50 bp) support the results of the test. 0 of infrastructure fees, have a strong impact on operating 4.3.3.2 Gares & Connexions CGU margins for TGV operations, and gave an indication of a As at 30 June 2020, following implementation of rail potential reversal of impairment. Consequently, reform and as part of the deployment of the Group’s new management conducted impairment tests at end June strategic plan, the new entity SNCF Gares & Connexions 2018 that led to the determination of a value in use SA reworked its business plan based on a scope of significantly higher than the carrying amount of the assets consolidation that includes the assets transferred from of the TGV France and Europe CGU (excluding Eurostar SNCF Réseau on 1 January 2020. This readjusted business and Thalys). plan builds in: The impairment losses recognised in previous periods, – the effect of changes in scope related to rail reform with a residual balance of €3,193m (€3,160m for the (assets transferred from SNCF Réseau); Voyages SNCF segment, and €33m for corporate support assets), were therefore reversed in full as at 30 June 2018. – the effects of the Covid-19 crisis on the revised 2020 forecasts and on the business plan (investment overruns, During the first half of 2020, new trends emerged that and short/medium-term decrease in concession revenue caused SNCF Voyages to review its financial trajectory: in line with reduced footfall in station retail outlets); – the adverse effects of the strike action that began on certain productivity efforts in operating and capital 5 December 2019 in opposition to proposed pension – expenditure, to limit the financial impacts of the end-2019 reforms and continued in the early months of 2020; and strike and the Covid-19 crisis. – the slump in activity caused by the fallout from the The assumptions used to determine value in use are Covid-19 crisis and the lockdown measures imposed by summarised below: the authorities. The events described above led to a downgrade to the Voyages SNCF financial trajectory, and constitute an indication of potential impairment. Consequently, SNCF tested the assets of the TGV CGU for impairment, using the following key assumptions: – Scenario for post-Covid-19 return to normal activity levels from 2022.
44 SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 4 - OPERATING ASSETS AND LIABILITIES 03
2020 2019 0
Segment Intercités 2 SNCF G ares & – C Segment Connexions CGU Intercités O
Gares & C onnexions N
CGU Assets tested Immaterial D E
Assets tested €3,005m Base used for recoverable amount Value in use N S
Value i n u se E Base used for recoverable amount 2016-2020 D Source used agreement H 10-year p lan A
+ n ormative y ear Discount rate (min-max) 5.2% - 6.0% L F
discounted t o - Y
Source used infinity Long-term growth rate Not applicable E A
Discount rate (min-max) 4.9% - 5 .7% R C
Long-term growth rate 1.80% NB: The operations of the “Unpowered Rolling Stock” unit O of the SNCF Voyages Passenger Charter division were N
S
taken over by Intercités on 1 January 2018, resulting in the O This amended financial trajectory confirms that there is no transfer of rolling stock with a carrying amount of €8.5m. A L I
indication of impairment, and supports the carrying D new (unregulated) Passenger Charter CGU was identified amounts of the assets of the Gares & Connexions CGU as A to house these assets and test them for impairment. Given at 30 June 2020. T that this CGU generates negative operating margin, E This position will have to be confirmed by further financial Intercités recognised an €8.5m impairment loss as at 30 D F information expected during the second half of 2020 in June 2018. I time for the annual accounting close. N 4.3.3.4 Infrastructure CGU A
4.3.3.3 Intercités CGU and Passenger Charter CGU N The following indications of potential impairment were The operating agreement signed on 27 February 2017 and C identified as at 30 June 2020: I covering the 2016-2020 period expires on 31 December A – impacts of the Covid-19 crisis on revenue, investment L 2020. S
and the working capital requirement; and T
Negotiations on a new agreement for 2021 and beyond A have not yet reached a conclusion, and at this stage a – risk of downgrade to the support fund trajectory. T E
one-year extension appears to be under consideration. The impairment test performed - against this backdrop of M
Consequently, at this stage the assets are being tested for uncertainty - did not result in the value of the E impairment based on the 2016-2020 agreement and on Infrastructure CGU assets being written down as at 30 N T the associated financial trajectory, which in the event that June 2020. S the agreement ends: The test was based on cash flows derived from the financial trajectory in the new SNCF Group strategic plan, – lays down the principle that the State will underwrite and which builds in the effects of: compensate all investments made in rolling stock from 2011 onwards; – the Covid-19 crisis; – does not include a clause underwriting and – the opening of passenger traffic to competition; compensating investments made in rolling stock prior to – the impact of cost savings plans initiated by the SNCF 2011; Group;
– does not specify any compensation for asbestos-related – the additional investment needed to restore the issues; resilience of the network;
– does not specify what happens to other assets (e.g. fixed – revisions to the trajectory for upgrade grants collected non-ISM installations). through the support fund. As at 31 December 2019, the carrying amount of assets Strategic plan scenarios were presented to the Board of not underwritten by a guarantee of compensation in the Directors for information on 24 June 2020. event the agreement ends (see above) was written down Those scenarios represented the best estimate of the to zero. financial trajectory of SNCF Réseau as of now, and will be As at 30 June 2020, the deterioration in activity levels updated in the coming months. caused by the Covid-19 crisis, the lack of visibility on the post-2020 trajectory, and the rise in discount rates all lead Work is ongoing between SNCF and the State to define to the conclusion that the carrying amount of assets not support funding measures that will strengthen the covered by the agreement at the reporting date should resilience of the national rail network and deliver the cash continue to be written down in full. flows necessary to protect the value of the assets carried in the SNCF Réseau balance sheet. That work is expected The carrying amount of the assets tested, and the to be completed by the end of the year. assumptions used to determine the recoverable amount, are as follows: The other methodological components used to determine the recoverable amount as at 30 June 2020, and the key assumptions applied, are:
45 4 - OPERATING ASSETS AND LIABILITIES SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 03
2020 2019 – Additional upgrade investment relative to the end-2019
S test, scheduled from 2020 onwards and worth in the T Segment SNCF R éseau SNCF R éseau region of €2bn over the period tested. That investment N
E will safeguard the quality of the upgraded network in CGU Infrastructure Infrastructure
M 2030.
E Assets tested €31.4bn €31.6bn T – Gradual ramping-up of funding for safety and
A accessibility expenditure (excluding the Île-de-France
T Base used for region), reaching 100% funding from 2024. S recoverable Value i n u se Value i n u se L amount
A – Further productivity efforts over and above the I performance contract, amounting to a recurring €300m in C Performance Performance
N 2026, to be achieved in addition to the recurring €1.2bn contract contract A extended t o productivity gains already written into the performance N extended t o I contract. 2030 + 2030 + F normative y ear – Payment of investment grants from the State to SNCF D normative y ear
E discounted t o discounted t o Réseau allocated to the funding of upgrades (amounts T infinity revised downward relative to the end-2019 test), in the A Source used infinity
D region of €1.1bn. Those grants come from the State I
L Discount rate 5.0% - 5 .9% 5.05% - 5 .15% earmarking some or all of the dividends received from O (min-max) SNCF out of the profits of its subsidiaries, topped up as S
N Long- term growth necessary by passing on a share of the tax gain generated 1.80% 1.70% O rate by the group tax election of the Unified Public Group
C (UPG). The timing of investment and upgrade grants used
R in the model is based on the SNCF Group’s economic and A E – The methodology used is that same as that applied in financial trajectory. Y
- the previous impairment test carried out in 2019: The 10-year traffic projections for passenger and freight F
L – Discounted cash flow projections are calculated for the operations were prepared at the level of the SNCF Group A years covered by the economic trajectory derived from the so as to ensure reciprocity with the relevant entities. H 2020-2029 performance contract with the State, updated It should be borne in mind that on 6 February 2020, the D
E for newly available information and extended to 2030, ART issued a dissenting opinion on the index-linking of S which continues to be the normative year as it is the pricing scales (published on 13 December 2019) for N
E considered that the network will by then have stabilised at regulated operations in respect of 2021-2023 service
D a sufficient performance/upgrade level to optimise the timetables. SNCF Réseau published new draft track slot N amount of maintenance. pricing scales on 5 June 2020. The ART is expected to O – As regards the Sud Europe Atlantique (SEA) concession, issue an opinion on these new pricing scales in August C the cash flow projections assume that operation of the line 2020. –
2 will be taken back from 2061, when the concession held by Measures relating to the new pension regime, and more 0 the current operator expires. broadly to the new labour relations framework derived – The terminal value is obtained by projecting the values from rail industry collective agreements, were still under for the normative year (2030) to infinity at a rate of 1.8%, negotiation at the reporting date and hence could not be and represents 87% of the value in use. modelled. – The projected cash flows are after tax, adopting a Consequently, the carrying amount of Infrastructure CGU theoretical tax charge calculated using a known rate at assets as at 30 June 2020 was €31.4bn, versus €31.6bn as each date that is then applied to projected current at 31 December 2019. Those assets cover lines currently in operating profit. service, plus upgrade works in progress. Other property, plant and equipment under construction (€2.1bn as at 30
– Future cash flows were discounted at 5.3% (versus 5.15% June 2020, versus €1.9bn as at 31 December 2019) relate as at 31 December 2019). to capacity investments under development, the value of – The key assumptions used in the test relate to the level which is analysed separately in a specific review. of infrastructure fees, the level of investment, productivity The results of the sensitivity analyses carried out as part of level, and public support funding. the test are: Those assumptions take account of agreements entered – A movement of +/- 10 bp in the discount rate represents into between SNCF and the State, as derived from the a movement of -/+ €1bn in the recoverable amount. latest economic and financial trajectory presented to the A movement of +/- 10 bp in the perpetual growth rate Board of Directors and relating to: – represents a movement of +€0.8bn.
– Trends in index-linking of infrastructure fees: TGV and freight infrastructure fees pegged to the CPI (1.75%) – A movement of +/- €100m in annual net upgrade instead of the index-linking specified in the most recent expenditure represents a movement of +/- €2bn in the performance contract, and index-linking maintained for recoverable amount. That value is provided for indicative regulated infrastructure fees (i.e. TER and TET access purposes only because above a certain threshold, the fees), in accordance with the current performance contract impact of changes in upgrade expenditure on the and the applicable regulations. recoverable amount of the assets ceases to be linear, and the resulting impacts on maintenance costs and traffic
– Freight pricing scales: retention of the State (and hence on infrastructure fees) can be substantial. compensation scheme, the amount of which is uplifted to reflect changes in index-linking and the switch to a new – A movement of +/- €100m in annual infrastructure fees marginal cost model starting with 2019 pricing scales. or State support fund payments represents a movement of +/- €1.8bn in the recoverable amount.
46 SNCF G ROUP - 2020 H ALF-YEAR F INANCIAL R EPORT 4 - OPERATING ASSETS AND LIABILITIES 03
4.4 PROVISIONS FOR RISKS AND LITIGATION 0
2
–
The table below shows movements in provisions for risks and charges: C O N D
Reversals i n Reversals i n of w hich E
Charges i n the p eriod the p eriod Other of w hich non- N
€ m illion 01/01/2020 the p eriod (used) (unused) movements 30/06/2020 current current S E
D
Litigation and contractual H risks 230 82 -15 -17 3 282 42 240 A L
Tax, employee-related and F - customs risks 151 13 -1 0 0 162 26 136 Y E
Environmental risks 781 52 -14 -5 41 855 0 855 A R
Restructuring costs 10 1 -3 0 0 8 4 4 C
Other 252 22 -30 -26 -3 215 54 161 O N
S
Total p rovisions 1,423 170 -63 -48 41 1,522 126 1,396 O
L I D A T E D F I N A N C I A L S T A T E M E N T S
47 5 - CAPITAL AND FUNDING SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 03
4.4.1 Provisions for environmental risks 5.1.1 Funding and liquidity management
S The main environmental risks covered by provisions at the Faced with this liquidity crisis, and potentially with a credit T risk at some of its subsidiaries and partners, SNCF has
N end of the year are:
E implemented a range of measures. – asbestos-related costs: €689m (€622m in 2019). M Changes to forecasting and liquidity management E – creosoted railway sleeper processing costs: €93m (€92m T tools
A in 2019). T To obtain a best estimate of the impact of the Covid-19 S – site decontamination costs: €59m (€54m in 2019). crisis, SNCF’s Financing and Treasury Department L
A The increase in the provision for asbestos-related costs prepared several scenarios and built them into its liquidity I relates mainly (€62m) to a reassessment of the costs of C forecasting tools. The assumptions used took account of
N dismantling asbestos-contaminated rolling stock. Of that the potential losses arising from flat economic activity, and
A amount, €40m is shown in the “Other movements” the impact of strong volatility in the financial markets on N I column, with the corresponding debit recorded in the weekly margin calls (posting of collateral). F “Dismantling of capitalised rail equipment” component; The Financing and Treasury Department also introduced a D the remaining €22m was debited to the line item “Net E new detailed daily review of changes in its liquidity T movement in provisions” within current operating profit. position. A
D This increase was due mainly to an increase in the
I The resulting data on the amount, accessibility, and L projected cost of processing. autonomy (from the financial markets) of the Group’s O
S 4.4.2 Provisions for litigation and contractual risks sources of liquidity are calculated and monitored very
N The provision for litigation and contractual risks primarily frequently. O covers risks associated with legal disputes and contract The amount of liquidity that can be accessed and C completions, plus other contractual risks. mobilised day-to-day, which stood at €5.46bn as at 30 R
A 4.4.2.1 Litigation June 2020 in the books of SNCF SA, is regarded by E management as highly satisfactory. Y
- Ongoing litigation
F Reorganisation of liquidity flows L There were no material movements in provisions for A litigation occurred during the first half of 2020. The Financing and Treasury Department has taken steps H to reorganise and monitor liquidity flows by:
D 4.4.2.2 Provisions for onerous contracts
E – accelerating the transfer of cash from subsidiaries S An additional €45m was charged to the provision for through various measures including automated cash N onerous contracts as at 30 June 2020. That extra charge
E remittances within some subsidiaries and the inclusion of reflects a remeasurement by Keolis of losses on some of D cash-positive subsidiaries in the cash pool;
N its contracts in Germany that are experiencing persistent – optimising working capital requirements within the O operational difficulties. subsidiaries, at both operating and financing levels, C 4.4.3 Provisions for tax, employee-related and
– through the monetisation or securitisation of receivables.
2 customs risks For example, securitising CICE tax credits receivable by 0 Provisions for tax risks primarily cover risks relating to SNCF as the lead company in a tax group improved the taxes and duties other than income taxes; uncertain tax cash position by €306m. All the risks and rewards treatments relating to income taxes are recognised as associated with this receivable were transferred to the operating payables in accordance with IAS 12, “Income bank that acted as counterparty in the securitisation; taxes”. – detailed tracking of the liquidity position of subsidiaries Provisions for employee-related risks mainly relate to an outside the cash pool, and support for subsidiaries in URSSAF social security audit of SNCF, SNCF Mobilités managing their credit risk. and SNCF Réseau covering the years ended 31 December 2016, 2017 and 2018, which was already provided for as at – 31 December 2019. The amount of the provision was Expanding the Group’s sources of funding adjusted as at 30 June 2020. The Group operates the following funding programmes: 5. CAPITAL AND FUNDING – a Euro Commercial Paper (ECP) programme capped at €5bn; 5.1 LIQUIDITY MANAGEMENT DURING THE
HEALTH CRISIS – a Negotiable European Commercial Paper (NEU CP) programme capped at €3bn; The SNCF Group, like all businesses in the transport and tourism sectors, has been very severely affected by the – a Euro Medium Term Note (EMTN) programme capped consequences of the Covid-19 health crisis and by the at €12bn. lockdown measures imposed by the authorities in the The Group also has a Revolving Credit Facility (RCF) of various countries where the Group operates, especially €3.5bn, all of which is accessible, contracted with 20 France. partner banks. No drawdowns have been made under that By initially shutting down economic activity, and then facility. allowing only a gradual resumption, the measures taken to To date, a total of €4.3bn has been raised by SNCF SA contain the coronavirus have had a very significant impact through nine long-term funding issues, representing on both corporate cash flows and the financial markets. 61.2% of the 2020 issuance programme and with an Companies have seen their cash needs rise substantially average maturity of 10.95 years. Those issues comprise just when there has been intense pressure in financial eight bond issues with a nominal value of €4bn, and the markets, including several days when the markets were securitisation of a CICE tax credit receivable of €306m. closed.
48 SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT 5 - CAPITAL AND FUNDING 03
5.1.2 Review of cash flow hedges and bank loan agreements. Based on that analysis, there was no risk of 0
covenants any breach of covenants as at 30 June 2020. 2 5.1.3 Credit risk management –
To protect against the risk of fluctuations in the price of C petroleum products and other commodities purchased for The SNCF Group is exposed to credit risk through its O operations, the SNCF Group customarily uses derivative dealings with banks and credit institutions, and with its N financial instruments, including forward contracts and customers. D options. E Bank credit risk arises from deposits placed with banks, N
Because the uncertainties surrounding the Covid-19 crisis and derivative financial instruments contracted with banks. S could question the highly probable nature of the hedged E No increase in the level of risk has been identified. D transactions, the Group has analysed those transactions to However, to limit the potential risk, the Financing and H assess whether they remain highly probable. Treasury Department has decided (over and above the A L
That analysis did not identify any cases where the hedging internal control procedures already in place) to amend the F - relationship was in doubt. master agreements governing collateral arrangements Y with counterparties to switch from monthly to weekly E The SNCF Group regards the risk relating to future cash A flows arising from borrowings covered by cash flow margin calls. R hedges as very low because the Group’s funding is Under IFRS 9, the measurement of expected losses on C primarily arranged through the parent company SNCF SA, receivables must take account of forward-looking O information, including forecasts of future economic N which obtains refinancing on the international capital S markets, mostly in the form of public or private bond conditions. Consequently, the Group has reviewed the O issues. An analysis of entities funded partially through impact of potential late payments related to the Covid-19 L I bank loans did not identify any renegotiations of crisis. That review did not identify any material increase in D A
contractual cash flows that could result in the credit risk. No major default had been recorded as of the T discontinuation of hedging relationships. date on which the 2020 half-year financial statements were E D
At the same time, the Group checked whether the impacts closed off. F I of the Covid-19 crisis had led to potential breaches of N commitments or covenants contained in bank loan A N
5.2 COST OF NET DEBT C I “Cost of net debt” breaks down as follows: A L S T
€ m illion 30/06/2020 30/06/2019 Change A T
Net g ain/(loss) o n f air v alue a nd h edge a ccounting -4 -95 91 E M Gains and losses on derivative instruments -259 -143 -116 E
Gains and losses on fair value hedged items 230 2 228 N T
Gains and losses on equity instruments at fair value through profit or loss 7 -1 8 S
Gains and losses on debt instrument assets at fair value through profit or loss 0 2 -2 Gains and losses on financial liabilities at fair value through profit or loss 2 0 2 Other fair value gains and losses 18 43 -25 Cost o f n et d ebt -457 -745 288 Of which interest income/(expense) on financial assets at amortised cost 420 43 378 Of which interest income/(expense) on financial liabilities at amortised cost -906 -828 -78 Other f inancial i ncome/(expenses) -86 -72 -14 Of which interest expense on lease liabilities -73 -71 -2 Cost o f n et d ebt a nd o ther f inance c osts -547 -912 365
€ m illion 30/06/2020 30/06/2019 Change Financial expenses -1,311 -1,137 -174 Financial income 764 225 539 Cost o f n et d ebt a nd o ther f inance c osts -547 -912 365
49 5 - CAPITAL AND FUNDING SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT 03
5.3 CALCULATION OF NET DEBT
S 30/06/2020 Financial i nstruments T otal F air v alue T At fair N
E Line i tem a nd f inancial At fair value instrument c ategory value At through Derivatives Carrying Fair M
E Non- Net through amortised profit or qualifying amount of value of
T € m illion current Current debt equity cost loss as hedges category category Level 1 Level 2 Level 3
A Public-private partnership
T 2,180 268 2,448 - 2,448 - - 2,448 2,448 - 2,448 - (PPP) receivables S Public Debt Fund (PDF) L 29,376 2,751 32,127 - 32,127 - - 32,127 33,238 - 33,238 - receivable A I Cash collateral assets - 1,994 1,994 - 1,994 - - 1,994 1,994 - 1,994 - C
N Other loans and receivables 1,222 82 1,304 - 1,303 0 - 1,303 1,440 0 1,440 0 A Concession financial assets 1,019 245 - - 1,264 - - 1,264 1,183 - 1,183 - N I
F Lease receivables 9 1 - - 9 - - 9 - - - - D
E Debt instruments 162 - 162 - - 162 - 162 162 - 78 85 T Sub-total: d ebt A 33,967 5,341 38,035 - 39,145 162 - 39,307 40,466 0 40,380 85 instruments D I
L Pension plan assets 13 ------
O Investments in equity S 194 0 - 173 - 21 - 194 194 3 0 191 instruments N Held -for -trading
O - 107 107 - - 107 - 107 107 7 100 - instruments
C Positive fair value of 1,415 243 1,658 - - - 1,658 1,658 1,658 - 1,658 - R hedging derivatives A Positive fair value of trading E 613 58 671 - - 671 - 671 671 - 671 -
Y derivatives -
F Cash and cash equivalents - 8,490 8,490 - - 8,490 - 8,490 8,491 7,156 1,334 0 L A Total c urrent a nd n on- H 36,201 14,240 48,961 173 39,145 9,452 1,658 50,427 51,586 7,167 44,143 276 current f inancial a ssets D E
S Bond issues 60,869 6,586 67,455 - 67,306 149 - 67,455 81,506 - 81,506 -
N Bank borrowings 4,248 166 4,413 - 4,413 - - 4,413 4,506 0 4,506 - E D Asset finance liabilities 120 99 219 - 219 - - 219 219 - 219 - N
O Sub-total: b orrowings 65,236 6,851 72,087 - 71,939 149 - 72,087 86,231 0 86,231 - C of which: ------–
2 - unhedged 47,910 4,628 52,538 - 52,538 - - 52,538 66,319 0 66,319 - 0
- cash flow hedge 13,395 1,841 15,236 - 15,236 - - 15,236 15,533 - 15,533 - accounted
- fair value hedge 3,789 376 4,165 - 4,165 - - 4,165 4,230 - 4,230 - accounted
- designated at fair value(*) 143 5 149 - - 149 - 149 149 - 149 -
Negative fair value of 3,556 59 3,615 - - - 3,615 3,615 3,615 - 3,615 - hedging derivatives Negative fair value of 544 79 623 - - 623 - 623 623 - 623 - trading derivatives Borrowings a nd f inancial 69,337 6,989 76,326 - 71,939 772 3,615 76,326 90,469 0 90,469 - liabilities Cash borrowings and - 2,650 2,650 - 2,650 - - 2,650 2,649 321 2,328 - overdrafts Liabilities for commitments to buy out non-controlling 1,356 - - 1,356 - - - 1,356 1,356 - - 1,356 interests Lease liabilities 3,027 852 - - 3,879 - - 3,879 - - - - Public-private partnership 2,232 279 2,511 - 2,511 - - 2,511 2,511 - 2,511 - (PPP) payables
Financial grant 5,801 - 5,801 - 5,801 - - 5,801 5,801 - 5,801 - Concession financial 8 1 - - 9 - - 9 9 - 9 - liabilities Total c urrent a nd n on- current f inancial l iabilities 81,760 10,772 87,288 1,356 86,789 772 3,615 92,532 102,795 321 101,117 1,356 (**)
Group n et d ebt ( ***) 42,402 -4,076 38,327 - 45,029 -8,659 1,958 38,328 51,220 -6,843 58,148 -85
The Group does not designate financial assets at fair value through profit or loss. (*) The nominal value of liabilities designated at fair value is €124m. Those liabilities were designated at fair value on initial recognition. (**) Includes lease liabilities, presented as a separate line item in the consolidated statement of financial position. (***) The State has assumed €25bn (at nominal value on redemption) of SNCF Réseau debt (see Note 2.1.3).
50 SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT 5 - CAPITAL AND FUNDING 03
0
31/12/2019 Financial i nstruments T otal F air v alue 2 –
At fair C Line i tem a nd f inancial At fair value O instrument c ategory value At through Derivatives Carrying Fair Non- Net through amortised profit or qualif ying amount of value of N € m illion current Current debt equity cost loss as hedges category category Level 1 Level 2 Level 3 D Public-private partnership E 2,250 268 2,518 - 2,518 - - 2,518 2,518 - 2,518 - N (PPP) receivables S
Public Debt Fund (PDF) loan E 965 542 1,507 - 1,507 - - 1,507 1,756 - 1,756 - receivable D Cash collateral assets - 1,623 1,623 - 1,623 - - 1,623 1,623 1,142 480 - H Other loans and receivables 1,029 84 1,112 - 1,112 0 - 1,112 1,123 1 1,121 2 A L
Concession financial assets 966 53 - - 1,019 - - 1,019 1,038 - 1,038 - F - Lease receivables 9 1 - - 11 - - 11 - - - - Y E
Debt instruments 161 - 161 - - 161 - 161 161 - 77 84 A R
Sub-total: l oans a nd C 5,380 2,571 6,921 - 7,789 161 - 7,950 8,219 1,143 6,989 87 receivables O Pension plan assets 13 ------N
Investments in equity S 194 0 - 173 - 20 - 194 194 4 22 168 instruments O
Held -for -trading L
- 6 6 - - 6 - 6 6 6 - - I
instruments D
Positive fair value of A 1,349 148 1,498 - - - 1,498 1,498 1,498 - 1,498 - hedging derivatives T Positive fair value of trading E 626 152 778 - - 778 - 778 778 - 778 - D derivatives F
Cash and cash equivalents - 7,754 7,754 - - 7,754 - 7,754 7,754 6,749 1,005 0 I N A
Total c urrent a nd n on- N 7,562 10,630 16,956 173 7,789 8,719 1,498 18,179 18,448 7,902 10,291 255
current f inancial a ssets C I A
Bond issues 58,826 5,633 64,459 - 64,312 147 - 64,459 75,673 - 75,673 - L S
Bank borrowings 3,461 250 3,711 - 3,711 - - 3,711 3,771 0 3,771 - T A
Asset finance liabilities 117 105 223 - 223 - - 223 223 - 223 - T E
Sub-total: b orrowings 6 2,404 5,989 68,393 - 68,246 147 - 68,393 79,667 0 79,667 - M
of which: ------E N
- unhedged 46,787 4,181 50,968 - 50,968 - - 50,968 61,913 0 61,912 - T S
- cash flow hedge 11,337 1,771 13,108 - 13,108 - - 13,108 13,370 - 13,370 - accounted
- fair value hedge 4,136 34 4,170 - 4,170 - - 4,170 4,236 - 4,236 - accounted
- designated at fair value (*) 145 2 147 - - 147 - 147 147 0 147 - Negative fair value of 2,860 66 2,925 - - - 2,925 2,925 2,925 - 2,925 - hedging derivatives Negative fair value of 539 125 663 - - 663 - 663 663 - 663 - trading derivatives Borrowings a nd f inancial 65,803 6,180 71,982 - 68,246 810 2,925 71,982 83,255 0 83,256 - liabilities Cash borrowings and - 2,673 2,673 - 2,673 - - 2,673 2,673 481 2,192 - overdrafts Liabilities for commitments to buy out non-controlling 1,839 - - 1,839 - - - 1,839 1,839 - - 1,839 interests Lease liabilities 3,137 913 - - 4,050 - - 4,050 - - - - Public-private partnership 2,353 279 2,582 - 2,631 - - 2,631 2,631 - 2,631 - (PPP) payables Total c urrent a nd n on- current f inancial l iabilities 73,131 10,045 77,237 1,839 77,601 810 2,925 83,176 90,398 481 88,079 1,839 (**)
Group n et d ebt ( ***) 61,726 -1,444 60,281 - 66,732 -7,888 1,428 60,271 71,293 -7,417 78,797 -87
The Group does not designate financial assets at fair value through profit or loss. (*) The nominal value of liabilities designated at fair value is €124m. Those liabilities were designated at fair value on initial recognition. (**) Includes lease liabilities, presented as a separate line item in the consolidated statement of financial position.
51 5 - CAPITAL AND FUNDING SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT 03
5.4 RECONCILIATION TO “CASH GENERATED BY/(USED IN) FINANCING ACTIVITIES” S
T The table below reconciles movements in components of net debt presented in the statement of financial position with cash
N generated by/used in financing activities: E
M
E Cash g enerated b y/(used i n) f inancing a ctivities T 31/12/19 Non-cash m ovements 3 0/06/20 A
T Cash S inflows/ L (outflows A I Repay- ) on PPP Interest Increase/ Changes Non- C ments receiv- Net Repay- paid on (decrease Chang Exchange in scope cash N New of ables inte- ments of lease ) in cash es in rate of lease A borrow- borrow and rest lease liabilitie borrow- fair fluctu- consoli- move- N
I € m illion T otal ings -ings payables paid liabilities s ings value ations dation ments Other Total
F Liabilities ( A) 82,697 4,969 -820 -141 -525 -502 0 157 27 -90 -65 392 -27 86,403 D E
T Bond issues 64,459 3,978 -557 0 -123 0 0 0 -302 0 0 0 0 67,455 A D
I Bank borrowings 3,711 992 -256 0 7 0 0 0 17 -54 10 0 -13 4,414 L O
S Asset finance
N liabilities 223 0 -7 0 0 0 0 0 0 0 0 0 3 219 O
C Cash borrowings
R (excluding
A overdrafts) 2,192 0 0 0 0 0 0 157 -18 0 -1 0 0 2,329 E Y - Lease liabilities 4,050 0 0 0 0 -502 0 0 26 -32 -74 392 18 3,880 F L
A Liabilities for
H commitments to
D buy out non- E controlling S interests 1,840 0 0 0 0 0 0 0 -483 0 0 0 0 1,356 N E
D Public-private
N partnership (PPP)
O payables 2,631 0 0 -141 0 0 0 0 71 0 0 0 -50 2,511 Negative fair C value of hedging –
2 and trading
0 derivatives 3,589 0 0 0 -78 0 0 0 717 -4 0 0 16 4,239
Financial grant 0 0 0 0 -332 0 0 0 0 0 0 0 6,132 5,801
Assets ( B) 6,337 0 -495 -138 -122 0 0 0 226 -1 0 0 31,139 36,946 Public Debt Fund (PDF) loan receivable 1,507 0 -500 0 -4 0 0 0 -7 0 0 0 31,132 32,127
Public-private partnership (PPP) receivables 2,518 0 0 -138 0 0 0 0 68 0 0 0 0 2,448
Other loans and receivables - Accrued interest 3 0 0 0 1 0 0 0 0 0 0 0 0 4 Deposits and caution money 34 0 6 0 0 0 0 0 0 -1 0 0 0 39 Positive fair value of hedging and trading derivatives 2,276 0 0 0 -119 0 0 0 164 0 0 0 7 2,328
Financial i ncome and e xpenses ( C) 0 0 0 -463 0 -73 0 0 0 0 0 0 Expenses 0 0 0 -1,020 0 -73 0 0 0 0 0 0 Income 0 0 0 557 0 0 0 0 0 0 0 0 Financing c ash flows p er t he cash f low statement - (A + B + C ) 76,359 4,969 -325 -3 -866 -502 -73 157 -198 -89 -65 392 31,166 49,457
52 SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT 5 - CAPITAL AND FUNDING 03
3 1/12/18 Cash g enerated b y/(used i n) f inancing a ctivities Non-cash m ovements 3 0/06/19 0 2 –
Cash C inflows/ Chang Repay- (outflows) Increase/ es in O ments on PPP Net Repay- Interest (decrease) Chang Exchange scope Non-cash N New of receiv- inte- ments of paid on in cash es in rate of lease D borrow- borrow- ables and rest lease lease borrow- fair fluctu- consoli- move- E € m illion T otal ings ings payables paid liabilities liabilities ings value ations dation ments Other Total N S
Liabilities ( A) 75,183 3,726 -629 -141 19 -479 14 110 903 0 145 259 3,834 82,944 E D
Bond issues H 60,239 3,482 -512 0 -54 0 0 0 19 0 0 0 7 63,181 A L F - Y
Bank borrowings 2,830 244 -83 0 1 0 0 0 0 0 161 0 -14 3,138 E A R
Asset finance C
liabilities 493 0 -35 0 0 0 0 0 0 2 0 0 -152 308 O N
Cash borrowings S (excluding O overdrafts) 3,912 0 0 0 0 0 0 110 -73 0 0 0 2 3,951 L I D
Lease liabilities 0 0 0 0 0 -479 14 0 -1 -1 -16 259 4,121 3,897 A T E
Liabilities for D commitments to F I buy out non- N
controlling A
interests 1,558 0 0 0 0 0 0 0 145 0 0 0 0 1,703 N C I
Public-private A partnership (PPP) L payables 2,717 0 0 -141 0 0 0 0 74 0 0 0 23 2,672 S T A
Negative fair T value of hedging E and trading M derivatives 3,433 0 0 0 72 0 0 0 740 0 0 0 -151 4,093 E N
Assets ( B) 6 ,586 0 -11 -137 103 0 0 0 11 0 0 0 -145 6,408 T S
Public Debt Fund (PDF) loan receivable 1,520 0 0 0 31 0 0 0 -7 0 0 0 0 1,545
Public-private partnership (PPP) receivables 2,650 0 0 -137 0 0 0 0 72 0 0 0 0 2,584 Other loans and receivables - Accrued interest 5 0 0 0 0 0 0 0 0 0 0 0 0 5 Deposits and caution money 43 0 -11 0 0 0 0 0 0 0 0 0 0 32
Positive fair value of hedging and trading derivatives 2,369 0 0 0 71 0 0 0 -54 0 0 0 -145 2,242 Financial i ncome and e xpenses ( C) 0 0 0 -752 0 -71 0 0 0 0 0 0 0
Expenses 0 0 0 -898 0 -71 0 0 0 0 0 0 0
Income 0 0 0 145 0 0 0 0 0 0 0 0 0 Financing c ash flows p er t he cash f low statement (A + B + C ) 6 8,596 3,726 -618 -4 -837 0 -56 110 892 0 145 259 3,979 76,536
53 6 - OFF BALANCE SHEET COMMITMENTS SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT 03
– Investment funding commitments for the operation of
5.5 SHAREHOLDERS’ EQUITY
S rail equipment decreased by €430m as a result of calls for As at 1 January 2020 the share capital of the parent T funds during the period; this related mainly to NAT, company SNCF SA – wholly owned by the State in N Regio2N and RER NG rail equipment for Transilien, E accordance with Article L. 2101-1 of the French Transport Omnéo Normandie equipment for Intercités, and Régiolis M Code – was €1bn, divided into 10 million shares with a par equipment for TER; the effect was partly offset by a €554m E value of €100.
T increase in investment grants receivable on new
A An amount of €13,736m was reclassified from “Share acquisitions of Regio2N trainsets at TER. T capital” to “Consolidated reserves” on 1 January 2020. – Investment funding commitments receivable for the S
L At the same time, the consolidated reserves of the SNCF operation of property, plant and equipment other than rail
A Group increased by €25bn following the assumption by
I equipment increased by €5,982m. the State of SNCF Réseau debt (see Note 2.1). C – During the first half of 2020, the SNCF Réseau group N A dividend of €762m was approved by the Board of reviewed its policies for reporting off balance sheet A Directors of SNCF SA on 24 June 2020, and paid in July. commitments to align them on the policies used by the N I In 2019, a dividend of €537m was approved and paid to Group. This resulted in an increase of €5,640m in this item
F the shareholder in July of that year. (€4,230m at SNCF Réseau, and €1,410m at SNCF Gares & D Connexions in respect of projects transferred from SNCF E 6. OFF BALANCE SHEET COMMITMENTS
T Réseau as of 1 January 2020). Commitments received by The main changes in commitments given since 31
A the SNCF Réseau group in respect of future grants December 2019 are as follows: D comprise funding receivable via signed funding I
L – Investment commitments for the operation of rail agreements, minus earned grants recognised in the
O equipment decreased by €305m in line notably with financial statements to date. S deliveries of NAT, Regio2N and RER NG trainsets for
N – In addition, new investment programmes at SNCF Gares Transilien; Omnéo Normandie trainsets for Intercités;
O & Connexions, both in the Île-de-France region (mainly Régiolis trainsets for TER; and TGV trainsets for Voyages soundproofing of railway stations, replacement and C SNCF. Investment commitments at Transilien, which relate
R installation of screens, signage, and park-and-ride to fleet and equipment maintenance, were also lower A schemes) and in the rest of France (such as the multi-
E year-on-year. However, the decrease was partly offset by modal transport hub at Toulouse railway station), Y new notifications of Regio2N rolling stock acquisitions of - contributed to a €317m increase in these commitments .
F €606m at TER.
L – Operational and financial guarantees increased by A – Purchase and funding commitments relating to property, €361m, mainly comprising €194m of financial guarantees plant and equipment other than rail equipment increased H received by SNCF Gares & Connexions for the Gare du by €7,146m. D Nord 2024 project; €72m of financial guarantees received E – During the first half of 2020, the SNCF Réseau group
S by TER in connection with orders for Régiolis equipment; reviewed its policies for reporting off balance sheet N and a €42m guarantee received by SNCF Gares &
E commitments to align them on the policies used by the Connexions from ALTA Austerlitz in connection with the
D Group. This resulted in an increase of €7,661m in this item Paris-Austerlitz station upgrade project.
N (€5,433m at SNCF Réseau, and €2,228m at SNCF Gares & – Commitments relating to equipment and real estate O Connexions in respect of projects transferred from SNCF operating leases rose by €587m, mainly due to the new
C Réseau as of 1 January 2020). Commitments given by the rental agreement between SNCF Gares & Connexions and
– SNCF Réseau group comprise those entered into via ALTA Montparnasse relating to retail space at Paris- 2 signed funding agreements minus costs incurred to date, 0 Montparnasse station. and (where no funding agreement is in place, which applies mainly to regeneration projects) on the amount of SNCF uses a revolving trade receivables factoring facility firm orders and contracts with works contractors. Where a in the Geodis segment. Factoring transactions cover the funding agreement links a commitment to build with a entire amount of the receivables assigned, and can be commitment to operate, the entire commitment is carried out on a monthly basis. Counterparty and late presented as works to be completed. payment risks are transferred to the factor, as are the benefits associated with the receivables. As the – In addition, new investment programmes at SNCF Gares receivables are denominated and assigned in euros, there & Connexions, both in the Île-de-France region (mainly is no foreign exchange risk. Consequently, the Group is soundproofing of railway stations, replacement and deemed to have transferred substantially all the risks and installation of screens, signage, and elevator/escalator rewards relating to the receivables. Because these are replacement and maintenance) and in the rest of France operating receivables, the cash inflows from assigning (such as the multi-modal transport hub at Toulouse railway them are presented as cash flows from operating activities station), contributed to a €656m increase in these in the cash flow statement. Factoring transactions in the commitments. Conversely, commitments incurred by period to 30 June 2020 generated a net cash inflow of Transilien decreased by €1,197m, pending approval of the €171m (€168m for the period to 30 June 2019) being funding package by Île-de-France Mobilités. collected upfront from the factor, in advance of the usual – Operational and financial guarantees increased by debt collection period. €67m, due mainly to new operational guarantees entered 7. SCOPE OF CONSOLIDATION into by Keolis in the UK and for the CDG Express project. There were no material changes in the scope of – The main changes in commitments received since 31 consolidation during the period.. December 2019 are as follows: – Undrawn confirmed credit facilities increased by €948m. This is related to a new revolving credit facility contracted by the Group with 20 partner banks.
54 SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT
03 –
STATUTORY
AUDITORS’
Comptes Consolidés Annuels 03 REPORT ON THE
CONDENSED HALF-
YEAR
CONSOLIDATED
FINANCIAL STATEMENTS
55 Société Nationale SNCF
Statutory Auditors’ review report on the 2020 interim financial information
(For the six months ended 30 June 2020)
PricewaterhouseCoopers Audit Ernst & Young Audit 63, rue de Villiers Tour First TSA 14444 92208 Neuilly-sur-Seine, France 92037 Paris-La Défense Cedex, France S.A.S. à capital variable 344 366 315 R.C.S. Nanterre
Commissaire aux Comptes Commissaire aux Comptes Membre de la compagnie Membre de la compagnie régionale de Versailles régionale de Versailles
Statutory Auditors’ review report on the 2020 interim financial information
(For the six months ended 30 June 2020)
Société Nationale SNCF
This is a free translation into English of the Statutory Auditors’ review report 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.
To the Shareholder,
In compliance with the engagement entrusted to us by the French Minister for the Economy, Industry and Digital Affairs and in accordance with the requirements of Article L. 451 ‑1‑2 III of the French Monetary and Financial Code ( Code monétaire et financier ), we hereby report to you on:
- the review of the accompanying condensed interim consolidated financial statements of Société Nationale SNCF, for the six months ended 30 June 2020; - the verification of the information contained in the interim management report.
These condensed interim consolidated financial statements were prepared under the responsibility of the Board of Directors on 30 July 2020 based on information available at that date and in the evolving context of the Covid-19 crisis and the difficulties in assessing its impacts and the future prospects of the Company. Our role is to express a conclusion on these financial statements based on our review.
I – Conclusion on the financial statements
We conducted our review in accordance with professional standards applicable in France, with the exception of the items described in the following paragraphs. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with professional standards applicable in France and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
SNCF SA Statutory Auditors’ review report on the 2020 interim financial information – Page 2
As stated in Note 4.3 to the condensed interim consolidated financial statements concerning impairment testing of the assets of the Infrastructure Cash-Generating Unit (the “Infrastructure CGU”), the health crisis that began in March 2020 had an impact on the Infrastructure CGU’s revenue, investing flows as well as and working capital requirements.
Accordingly, the Company carried out another impairment test at 30 June 2020 based on a similar methodology to that used for the previous impairment test in 2019.
This test did not result in a change in the Infrastructure CGU’s carrying amount, as the balance in the negotiations between the French State and SNCF Réseau underlying the financial trajectory used in the test was not challenged. This balance in the negotiations remains based on the assumption that (i) the Company will achieve its productivity goals and (ii) the French State will effectively implement all means and make all commitments necessary to support the recoverable amounts of the Infrastructure CGU’s assets in the context of the current health crisis, although the French State did not confirm these undertakings before the 30 June 2020 closing.
The cash flow projections used for the test comprised (i) cash inflows (infrastructure fees, access charges and investment subsidies) mainly arising from commitments received from the French State, and (ii) expenses (installation work and maintenance), capital investment in renovations, and productivity gains.
The assumptions underlying these projections are subject to a number of risks and uncertainties:
• The projections used for the impairment test carried out on the Infrastructure CGU at 30 June 2020 are based on a strategic plan for which scenarios were presented for information purposes to Société Nationale SNCF’s Board of Directors on 24 June 2020. This strategic plan should be finalised in the coming months. Consequently, some of the assumptions used, particularly those which rely on a decision by the French State, may change. • Work is currently underway between Société Nationale SNCF and the French State to define the terms and conditions of the support provided by the French State to Société Nationale SNCF in the context of the current health crisis. The work is expected to be completed by the end of the year. The assumption used in the impairment test is that the French State will provide financial support to ensure that Société Nationale SNCF has the necessary cash flows to maintain the value of the Infrastructure CGU’s assets. • The new performance agreement between SNCF Réseau and the French State for the 2020-2029 period is currently under discussion and its impacts cannot be measured at present. Key decisions are pending, in particular concerning network consistency and local transport services. • The investment subsidies allocated to renovation work – which are financed by the dividends received by the French State from Société Nationale SNCF and redistributed to SNCF Réseau – are based on a financial trajectory resulting from a new strategic plan that is currently being finalised (see above). • The indexation trajectory for contractual infrastructure fees has been left unchanged from the previous reporting date, at a higher level than for TGV and Rail Freight operations despite the non-compliance opinions issued by the French transport authority (ART, formerly the French road and rail office [ARAFER]) regarding the rates indexation for contractual activities for the 2020 and 2021-2023 service timetables.
SNCF SA Statutory Auditors’ review report on the 2020 interim financial information – Page 3
• 2030 was maintained by the Company as the standard final year for the railway network currently in service, considering that 2030 will correspond to the year in which the network will be stabilised at expected performance levels, although these levels have never previously been attained. Terminal value therefore represents the essential factor in measuring the recoverable amount. • The measures concerning the new pension scheme and, more broadly, the new social framework resulting from the rail industry agreements were still under negotiation at the reporting date and consequently could not be modelled in the impairment test.
These major risks and uncertainties weigh on the discounted future cash flow projections used to measure the Infrastructure CGU’s property, plant and equipment and intangible assets as presented in the Company’s statement of financial position at 30 June 2020. Consequently, the amount of the related impairment loss could increase significantly. These projections are also used to estimate the likelihood of recovering deferred tax assets and therefore to determine their amount in the statement of financial position. However, the projections used to measure deferred tax assets were not updated at 30 June 2020. Consequently, the amount of deferred tax assets in the statement of financial position may be overestimated.
As a result, we are unable to assess the pertinence of the projections used and are therefore unable to form a conclusion on the carrying amount of the assets concerned which, at 30 June 2020, amounted to €33.5 billion (including work-in-progress) for property, plant and equipment and intangible assets and €4.5 billion for deferred tax assets.
Based on our review and subject to the above qualifications, nothing has come to our attention that causes us to believe that the accompanying condensed interim consolidated financial statements have not been prepared, in all other material respects, in accordance with IAS 34 “Interim Financial Reporting”, as adopted by the European Union.
II – Specific verification
We have also verified the information given in the interim management report prepared on 30 July 2020 on the condensed interim consolidated financial statements subject to our review.
With the exception of the possible impact of the matters set out above, we have no matters to report as to its fair presentation and its consistency with the condensed interim consolidated financial statements.
Neuilly-sur-Seine and Paris-La Défense, 30 July 2020
The Statutory Auditors
PricewaterhouseCoopers Audit Ernst & Young Audit
François Guillon Philippe Vogt Nicolas Pfeuty Valérie Descleves
Rapport des CAC
Rappo rt des Comm issaires aux Comptes sur les Com ptes Consolidés 04
SA S NCF Direction de la Communication 2, place aux Etoiles – 93633 La Plaine St Denis Cedex English translation by Stephen Reynolds ACA and Jane Lambert