KEOLIS S.A. FINANCIAL REPORT 2017 CONTENTS 1. MANAGEMENT REPORT ...................................................... 3 Management Report of the Board of Directors at the Annual General Meeting on 3 May 2018...................................................................4 Appendix 1 .........................................................................9 Appendix 2 ...................................................................... 11 Appendix 3 ...................................................................... 33 2. CONSOLIDATED FINANCIAL STATEMENTS .............. 34 Key figures for the Group ............................................ 35 Consolidated financial statements ........................... 36 Notes to the consolidated financial statements ....................................................................... 41 Statutory auditors’ report on the consolidated financial statements ............................ 93 3. UNAUDITED MANAGEMENT FINANCIAL STATEMENTS ...................................................96 Key figures ....................................................................... 97 Income statement ......................................................... 98 Statement of financial position .................................. 99 Statement of cash flows ............................................100 4. ANNUAL FINANCIAL STATEMENTS .......................... 101 Financial statements at 31 December 2017 ........103 Notes to the Annual Financial Statements ...........106 Information on subsidiaries and non-consolidated investments ........................119 Statutory auditors’ report on the financial statements ......................................133 1. MANAGEMENT REPORT | KEOLIS S.A. 2017 1. MANAGEMENT REPORT CONTENTS A MANAGEMENT REPORT OF THE BOARD 3 n CONDITION 2: ENGAGEMENT WITH OUR OF DIRECTORS AT THE ANNUAL GENERAL MEETING CUSTOMERS AND OTHER STAKEHOLDERS . 16 ON 3 MAY 2018 . 4 3.1. Stakeholders . 16 n HIGHLIGHTS OF THE FINANCIAL YEAR . 4 3.2. Partnerships . 17 n n CONSOLIDATED FINANCIAL STATEMENTS . 6 4 COMMITMENT TO OUR CUSTOMERS: SAFETY AND ACCESSIBILITY . 18 n ANNUAL FINANCIAL STATEMENTS . 6 4.1. Customer Experience . .. 18 n SUBSIDIARIES AND HOLDINGS . 6 4.2. Accessibility . 19 n NOTIFICATION OF MAJOR HOLDINGS 1 n COMMITMENT TO OUR EMPLOYEES: AND ACQUISITIONS OF CONTROL . 6 SAFETY, DIVERSITY AND INCLUSION . 20 n RESEARCH AND DEVELOPMENT ACTIVITY . 6 5.1 Health and safety in the workplace . 20 . n FORESEEABLE TRENDS AND FUTURE OUTLOOK . 6 5.2. Diversity and Inclusion 21 5.3. Gender equality . 22 n SIGNIFICANT EVENTS SINCE 5.4. Employing people with a disability . 23 THE END OF THE YEAR . 7 5.5. Combating discrimination . 23 n NON-FINANCIAL INFORMATION . 7 5.6. Other employment data . 24 n INFORMATION ON SUPPLIER 5.7. Organisation of work . 25 PAYMENT DEADLINES . 7 5.8. Organisation of social dialogue . 25 5.9. Training . 25 n ALLOCATION OF PROFIT . 8 6 n COMMITMENT TO THE ENVIRONMENT: n SHAREHOLDINGS . 8 ENERGY, WASTE AND WATER . 27 n EMPLOYEE SHARES IN COMPANY CAPITAL . 8 6.1. Energy efficiency . 27 n AGREEMENTS COVERED BY ARTICLE 6.2. Reducing impact on the climate . 29 L. 225-38 OF THE COMMERCIAL CODE . 8 6.3. Waste management . 30 n DIRECTORS AND CONTROL OF THE COMPANY . 8 6.4. Water consumption . .. 30 7 n COMMITMENT TO REGIONS: SOLIDARITY, B APPENDIX 1 EDUCATION AND CULTURE. 31 REPORT ON COMPANY GOVERNANCE . 9 7.1. Solidarity . 31 7.2. Education . 31 APPENDIX 2 C 8 n CONCLUSION AND OUTLOOK . .. 32 NON-FINANCIAL DATA . 11 1 n METHODOLOGY . 11 1.1. Background . 11 D APPENDIX 3 1.2. Scope and reference period . 11 TABLE OF EARNINGS FOR THE PAST 1.3. List of information and definitions . 12 FIVE FINANCIAL YEARS . .. 33 2 n CONDITION 1: COMPLIANCE WITH THE GROUP GENERAL RULES AND POLICIES . 13 2.1. The Konformité programme . 13 2.2. The Safety Policy . 14 2.3. The Group Environment Policy . .. 14 2.4. The Diversity and Inclusion Policy . 14 2.5. The Purchasing Policy . 15 3 1. MANAGEMENT REPORT | KEOLIS S.A. 2017 MANAGEMENT REPORT OF THE BOARD OF DIRECTORS A AT THE ANNUAL GENERAL MEETING ON 3 MAY 2018 Ladies and Gentlemen, (Qatar) and the Pudong metro (China). The Group lost the London Midland rail franchise in the United Kingdom. We have convened this Ordinary Annual General Meeting, in n The year was also marked by the turnaround of the Boston accordance with legal, regulatory and statutory requirements to and Las Vegas contracts, while in Continental Europe, report to you on the activities of our Company during the year results failed to improve. ended 31 December 2017 and submit for your approval the annual and consolidated accounts of that year. Acquisitions and investments In addition, your Auditors will also read their reports to you. In France, the Group acquired the companies Les Coccinelles and Les Kangourous 2 (Greater Paris) which provide transport For our part, we are at your disposal to provide any clarification services to people with reduced mobility (PRM). and further information that you might find desirable. Outside France, the Group acquired Compagnie des Autobus We will review below, successively, the various items of informa- Liégeois in Belgium and the company Goolwa (school buses) in tion as required by applicable regulations. Australia. The company’s financial position n HIGHLIGHTS OF THE FINANCIAL YEAR At 31 December 2017, the Group had net financial debt of €246 million, chiefly comprising a borrowing facility arranged with its Keolis S.A. carried out a share capital increase of €65,981,400 shareholder GROUPE KEOLIS S.A.S. for €93 million, and exter- which was fully subscribed to and paid for by its shareholder nal borrowings contracted in France and other countries which GROUPE KEOLIS S.A.S., through the issuance of 5,498,450 mature between now and 2025. new shares. To manage its liquidity risk, the Group uses bank overdrafts, Business activity and development short term financing facilities and daily liquid investments. France The Group manages its counterparty risk by only borrowing from n The group recorded solid commercial results, with the full- banks falling within the “Authorised” bank category. This cate- year revenue of contracts won amounting to €761 million. gory is defined according the banks’ ratings and their participa- In the Major Networks division, the Lille and Rennes tion towards the financing of the Group. contracts were renewed with profitable conditions. Among its Large City networks, the Group had its contract renewed As a result of its operational, financial and investment activities, in Caen and Amiens, and also won a new contract in the Group is exposed to the following financial market risks: Besançon. Keolis however lost the Lorient and Montbéliard n Interest rate risk; networks. In the French Regions and Greater Paris, contract n Foreign exchange risk; renewal was generally satisfactory. n Commodities risk. n Measured by value, the offensive bids won by the Group compensated for the defensive contracts that were lost. To manage this exposure, the Group uses standard, liquid and n Passenger revenue on city contracts held up well, with market-available derivative financial instruments: 4.6% growth across Keolis’ 14 largest city transport n forward and futures sales and purchases; networks compared to their 2016 figure. n swaps; n call options; International n put options used in combination with call options to provide n Outside France, the Group’s business grew significantly, symmetric or asymmetric collars. with the launch of a number of new operations: tram networks in Manchester (United Kingdom) and Aarhus The Group’s interest rate risk exposure results from its financial (Denmark), the TWN rail network (Germany), train and bus debt, part of which is subject to variable interest rates. It is the- networks in Zwenzwoka and Almere (Netherlands), the refore exposed to rate rises. The objective of risk management Foothill bus network (United States), the multimodal network is to protect the Group’s financial income/expense from an in Newcastle (Australia), the extension of the Gold Coast increase in interest rates, while taking advantage of any decrease tram network (Australia), the launch of the Hyderabad metro in rates to the greatest possible extent. (India) and the wins of the Doha metro and tram network 4 1. MANAGEMENT REPORT | KEOLIS S.A. 2017 The Group also makes investments in foreign entities. To cover The portfolio impact of contracts won and lost stands at +€101.2 the foreign exchange risks engendered by these investments, million, comprising €(29.7) million in France (losses of the Tadao the Group uses derivative financial instruments to maintain a contract in Lens/Béthune, Keolis Alençon and the Caen PRM reference exchange rate defined for the year. transport service, which were partly compensated by the T11 Transkeo tram-train with Transilien and the wins of Côte Basque- The Group is exposed to the risk of fluctuation in the price of Adour and PAM 94), and +€130.9 million abroad (in particular, diesel. This risk is partially hedged in the concession contracts the wins of Manchester in the United Kingdom, Utrecht in the signed with public transport authorities. For the remaining expo- Netherlands, Newcastle in Australia and Foothill in the USA.). sure, the Group implements a hedging policy using derivative Organic growth within existing contracts stands at +€190.3 or financial instruments whose objective is to minimise the volatility +3.9%, comprising +€63.8 million in France (Major networks of Group profits.