Annual Report of the ČD Group 2017
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Annual Report of the České dráhy Group 2017 Table of Contents 1 Foreword of the Chairman of the Board of Directors page 05 2 Introduction of the čd Group page 06 3 Overview of the Investment Shares Held by the Group page 24 4 Corporate Governance page 26 Report on the Activities of the Supervisory Board of the 5 Company české dráhy, a.s., for 2017 page 30 6 Social Responsibility page 31 Report of the Board of Directors on the Company’s 7 Business Activities and Assets page 34 8 Independent Auditor’s Report to the Shareholder of české dráhy, a.s. page 49 9 Consolidated Financial Statements for the Year Ended 31 December 2017 page 57 10 Separate Financial Statements for the Year Ended 31 December 2017 page 133 11 Providing Information Pursuant to Act No. 106/1999 Coll., on Free Access to Information for 2017 page 191 12 Information about Persons Responsible for the čd Group Annual Report page 192 13 Report on Relations page 193 14 List of Used Abbreviations page 201 15 Identification and Contact Information page 203 Pavel Krtek, M.Sc. Chairman of the Board of Directors České dráhy, a.s. 1 Foreword of the Chairman of the Board of Directors Dear Ladies and Gentlemen, the condition of the České dráhy Group continued to improve in year continued its expansion into foreign markets by cooperation with its 2017 and the total consolidated profit according to International Finan- subsidiaries abroad. For example, transport in Poland has intensified, and cial Reporting Standards (IFRS) amounted to CZK 984 million. Year over the new product trains to Romania and Hungary have the potential to year improvement is driven by revenue growth recorded in both major attract more customers. segments, in the passenger and the freight transport. However, the foreign exchange gains had also positive impact. Thanks to the stable České dráhy continues its preparations for the liberalization of the development during the last year, České dráhy justified the international European railway passenger transport market, which will be based on investment rating of Moody's agency at the Baa2 level. the EU's 4th railway package. Thanks to our participation in the Com- munity of European Railways (CER), we are actively involved in its proper The passenger transport segment’s performance improved year over interpretation and application of individual measures. Liberalization of year and resulted in a modest profit. In 2017, number of passengers and the European railway passenger transport market raises the main task transport performance continued to grow. Our services were used by of České dráhy Management for the near future – developing of the busi- almost 175 million people. The greatest interest was in traveling by long- ness model in passenger transport after year 2019, when most of the distance and suburban connections. The offer of attractive products and long-term contracts with the regions and the Ministry of Transport end. their targeted promotion has helped to increase revenue from the sale of We also await to justify the international rating, repay the Czech crowns train tickets. Significant growth in revenues is evident, for example, on denominated bonds in summer 2018 and to refinance the euro denomi- the international routes Prague - Vienna - Graz and Prague - Berlin - Ham- nated bonds in 2019. burg, where we operate on a long-term basis in cooperation with foreign partners, but also within intranational trains included into integrated Our priority is that České dráhy is able to meet its obligations to credi- transport systems. In addition, the share of revenues from purely com- tors, shareholder and employees and to preserve the maximum of its mercial transport increases dynamically. current performance in both long-distance and regional transport. All the subsidiaries were also doing well. Traditionally, the biggest impact on the final result of the ČD Group had the freight transport segment represented by joint-stock company ČD Cargo. The positive information is the year over year increase in revenues. The carrier has invested in the purchase of new locomotives and freight wagons. It has successfully Pavel Krtek, M.Sc. Chairman of the Board of Directors České dráhy, a.s. 5 2 Introduction of the čd Group Our Vision Being the leading employer and the first-choice network carrier in Being a profitable company governed by international principles of a fully liberalized market for public transport and supporting services. corporate governance, which will stand in the long run against the Maintaining social peace and being a demanding and stable employer in competition the labour market, who maintains and creates attractive working conditi- Our goal is to create a profitable company and to ensure the going concern ons on the labour market, is our goal in the area of employment. Our goal principle in the liberalized environment of the public passenger transport is also to create quality employment opportunities to effectively address market – to create the company that is transparent, homogeneous and the quality and safety system of employees' work, especially with respect understandable to shareholder and financial institutions / investors. to their training, licensing and certification, and to ensure the career deve- lopment of our employees. Being a company that respects the principle of environmental sustainability. Continuing to fulfil the role of the national railway transport operator, The goal is to create and deliver services and products under the principle which provides nationwide transport services and network connectivity to of balanced economic and environmental sustainability. We prefer soluti- the public passenger transport system, even after beginning of compe- ons, which are less burden to the environment. tition, is our goal in the area of transport. Furthermore, we want to be a leader in the quality of service and satisfaction of customers (passengers) with a much wider range of services than just passenger and goods trans- port, and to ensure a high level of service for passengers, their rights, in particular the right to information and the high-standard services. Last but not least, we also want to ensure the quality of transport for the elderly, passengers with reduced mobility and orientation and to guarantee a high level of transport and railway vehicles safety. 6 Our Values Our Strategy Customer Orientation Our basic goal is to hold market position on the liberalised market of rail- We provide our services to existing and potential customers in order to way transport. maximize their needs while respecting technical, economic and environ- mental opportunities, utilizing the professional experience and capabilities Economic strategic goal is to maintain international credit rating of the of all employees. group at the same level as in the year 2015. We respect all the specific needs of both external and internal customers and seek through open communication ways to satisfy these needs. High Quality of Provided Services We provide services to our customers based on established standards, and we continually verify these in relation to competition and strive to increase them. All services are provided with maximum professionalism through open communication. Continuous Improvement in All Areas of Business While pursuing all our activities, we are looking for innovative solutions that enable us to better understand the needs of our customers in order to meet their needs faster, efficiently, in a more comprehensive way and in a higher quality. Errors, deficiencies, complaints and criticism are a challenge for us to look for solutions and to implement them quickly and efficiently. 7 Board of Directors of the Company Pavel Krtek, M.Sc. Pavel Krtek studied at the French state technical university Ecole Centrale Paris. He began his career working for multinational company Lafarge Cement, the world's second biggest cement-producing company. He then worked for the petrochemical oil refinery group Unipetrol for nine years, of which he was a member of the company's board of directors for six years. He spent three years working at the company's headquarters as the head of financial controlling, then two years in the position of financial director of the railway transport department of Unipetrol Doprava in Litvínov, followed by two years at the company's headquarters in Prague and two years as the financial director of the Paramo refinery in Pardubice. He then worked in the field of investment funds. In February 2014, he became a member of the Board of Directors of Česke dráhy, a.s. and on 1 March 2014 he became Deputy CEO of ČD for economy and technology. ▶ Chairman of the Board of Directors (since 10 November 2014) ▶ responsible for the section of the Board of Directors and the management of the Company, 47 years old Ludvík Urban Ludvík Urban graduated from the University of Transport and Communications in Žilina. From 1991 to the present, he has worked for České dráhy in several positions: stationmaster Members in Zlín, director of the Regional Centre of Passenger Transport for the Zlín region, deputy managing direc- tor for regional integration. He is a municipal represen- of the Board tative in Holešov. of Directors ▶ Vice-Chairman of the Board of Directors (since 10 November 2014) ▶ responsible for the department of investment and cooperation with 5 regions, since 1 March 2017 responsible for the cooperation with the regions, 48 years old Miroslav Kupec After graduating from the Faculty of Mechanical Enginee- ring in Prague, he joined Poldi Kladno in 1983, where after two years of practice, he started working as an operati- ons manager. In 1990, he won a tender for the position of CEO of ČKD Slaný, later he worked for F. X. Meiler where since 1994 he became the managing director and the executive director. Since 2001, he held the position of Chairman of the Board and CEO of the Company Škoda Machine Tool in Pilsen and Škoda Vagónka in Ostrava.