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Share Name | Share Symbol | Market | Type |
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Gaylord Entertainment Company | NYSE:GET | NYSE | Ordinary Share |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 39.53 | 0.00 | 01:00:00 |
Regulatory News:
Jacques Gounon, Chairman and Chief Executive Officer of Groupe Eurotunnel SE (Paris:GET) , stated: “Over the past 10 years, the Group has focused its business model on value creation through the quality of service provided. The success of the partial refinancing of the debt shows the confidence of the markets in the strength of this model. The economic outlook for the next two years remains good and enables us to confirm our objectives.”
All comparisons with the results for the first half of 2016 are made at the average exchange rate for the first half of 2017 of £1=€1.161 and after retreatment of 2016 for the application of IFRS 5 in relation to the sale of GB Railfreight Ltd in November 2016.1 Net profit from continuing operations, presented in accordance with IFRS 5.
Key events in the half year
Continued growth in operating profit
Consolidated revenues for the Group during the first half of 2017 reached €497 million, an increase of €14 million, or +3%, compared to the first half of 2016.
The consolidated figures for the first half show an increase of €17 million in EBITDA to €242 million
Operating costs for the Group have reduced by €3 million for the first half year. For the Fixed Link, operating costs have been reduced by 1% to €198 million
For the Fixed Link, this is the 8th consecutive year of first-half EBITDA growth.
It should be noted that revenues and trading profit are characterised by significant seasonal variation across the year and should therefore not be extrapolated to the whole financial year.
Net financial charges have increased by €9 million for the first six months of 2017, due to the impact of the increase in UK and French inflation rates on the cost of the indexed tranches of the debt.
The partial refinancing of the debt, completed in June 2017 has enabled a reduction in the average annual interest rate excluding indexation on the Term Loan to below 4% being a saving on interest payments of approximately €60 million per year proforma, for at least the next five years. Its effect will begin in the second half of the year.
For the first half of 2017, the Group recorded a net consolidated profit of €35 million.
The free cash flow for the first half of 2017 increased strongly (+€49 million) to €111 million compared to €62 million (recalculated) for the first half of 2016.
Outlook
According to the Bank of England and the European Central Bank, the outlook for the UK and European economies for 2017, 2018 and 2019 is positive.
In this context, the Group remains confident in its capacity to generate sustainable growth and continues to anticipate growth in its EBITDA. The Group therefore re-confirms its objectives for EBITDA and dividends.
EUROTUNNEL GROUP REVENUES
First half-year (January to June)
€ million1st half-year2017*
1st half-year2016**
Change1st half-year2016***
Exchange rate €/£ 1.161 1.161 1.273 Shuttle Services 284.7 277.2 3% 288.7 Railway Network 145.9 140.6 4% 147.0 Other revenues 7.2 6.4 13% 6.7 Sub-total Fixed Link 437.8 424.2 3% 442.4 Europorte 59.2 58.3 2% 58.3 Revenues 497.0 482.5 3% 500.7* Average exchange rate for the first half-year 2017: 1£ = €1.161.** Recalculated at the exchange average rate of the first half of 2017 and restated in application of IFRS after the sale of GB Railfreight.*** Restated in application of IFRS 5.
Second quarter (April to June)
€ million 2nd quarter2017 2nd quarter2016 Change 2nd quarter2016 Shuttle Services 153.9 146.1 5% 153.2 Railway Network 77.0 74.4 4% 78.2 Other revenues 4.0 3.5 18% 3.7 Sub-total Fixed Link 234.9 224.0 5% 235.1 Europorte 30.3 29.2 4% 29.2 Revenues 265.2 253.2 5% 264.3First quarter (January to March)
€ millions 1st quarter2017* 1st quarter2016** Change 1st quarter2016*** Exchange rate €/£ 1.168 1.168 1.263 Shuttle Services 130.8 131.1 0% 135.5 Railway Network 68.9 66.2 4% 68.8 Other revenues 3.2 2.9 8% 3.0 Sub-total Fixed Link 202.9 200.2 1% 207.3 Europorte 28.9 29.1 -1% 29.1 Revenues 231.8 229.3 1% 236.4* Average exchange rate for the first quarter 2017: 1£ = €1.168.** Recalculated at the exchange average rate of the first half of 2017 and restated in application of IFRS after the sale of GB Railfreight.*** Average exchange rate for the first quarter 2016 (£1= €1.263) and restated in application of IFRS 5.
FIXED LINK TRAFFIC
First half-year (January to June)
1st half-year2017 1st half-year2016 Change Truck Shuttles 823,147 829,606 -1% Passenger Shuttles Cars* 1,138,087 1,162,740 -2% Coaches 27,714 28,036 -1% High-speed passenger trains (Eurostar)** Passengers 5,040,425 4,971,080 1% Rail Freight*** Tonnes 601,237 512,895 17% Trains 1,043 869 20%Second quarter (April to June)
2nd quarter2017 2nd quarter2016 Change Truck Shuttles 413,291 418,877 -1% Passenger Shuttles Cars* 671,525 660,869 2% Coaches 16,548 17,060 -3% High-speed passenger trains (Eurostar)** Passengers 2,769,754 2,741,862 1% Rail Freight*** Tonnes 292,512 247,854 18% Trains 500 427 17%First quarter (January to March)
1st quarter2017 1st quarter2016 Variation Truck Shuttles 409,856 410,729 0% Passenger Shuttles Cars* 466,562 501,871 -7% Coaches 11,166 10,976 2% High-speed passenger trains (Eurostar)** Passengers 2,270,671 2,229,218 2% Rail Freight*** Tonnes 308,725 265,041 16% Trains 543 442 23%* Including motorcycles, vehicles with trailers, caravans and motor homes.** Only passengers using Eurostar to cross the Channel are included in this table, thus excluding journeys between Paris-Calais and Brussels-Lille.*** Rails freight services by train operators (DB Schenker on behalf of BRB, SNCF and its subsidiaries, Europorte and GB Railfreight) using the Tunnel.
www.eurotunnelgroup.com
GROUPE EUROTUNNEL SEHALF-YEAR FINANCIAL REPORT*FOR THE SIX MONTHS TO 30 JUNE 2017
* English translation of GET SE’s 2017 “rapport financier semestriel” for information purposes only.
Contents
HALF-YEAR ACTIVITY REPORT AT 30 JUNE 2017
1 Analysis of consolidated income statement 1 Analysis of statement of financial position 6 Analysis of cash flows 7 Other financial indicators 9 Outlook 10SUMMARY CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS AT 30 JUNE 2017
11 Consolidated income statement 11 Consolidated statement of other comprehensive income 12 Consolidated statement of financial position 13 Consolidated statement of changes in equity 14 Consolidated statement of cash flows 15 Notes to the summary financial statements 16 A. Important events 16 B. Basis of preparation and significant accounting policies 17 C. Scope of consolidation 19 D. Operating data 21 E. Employee benefit expense 24 F. Property, plant and equipment 25 G. Financing and financial instruments 26 H. Share capital and earnings per share 31 I. Income tax expense 33 J. Events after the reporting period 33DECLARATION BY THE PERSON RESPONSIBLE FOR THE HALF-YEAR FINANCIAL REPORT AT 30 JUNE 2017
34STATUTORY AUDITORS’ REVIEW REPORT ON THE 2017 HALF-YEAR FINANCIAL INFORMATION
35HALF-YEAR ACTIVITY REPORT AT 30 JUNE 2017
To enable a better comparison between the two periods, Groupe Eurotunnel SE’s consolidated income statement for the first half of 2016 presented in this half-year activity report has been recalculated at the exchange rate used for the 2017 half-year income statement of £1=€1.161.
During the first half of 2016, the Eurotunnel Group’s 49% share in ElecLink Limited’s result (a loss of €1 million) was accounted for in the consolidated income statement under “Share of result of equity-accounted companies”. Since the purchase by the Group of Star Capital’s 51% holding in ElecLink Limited on 23 August 2016, ElecLink Limited has been fully consolidated in the Group’s accounts.
The Eurotunnel Group has applied IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations” to its maritime segment since the cessation of MyFerryLink’s operations in the second half of 2015 and to GB Railfreight’s activity since its sale in November 2016. Accordingly, the net results of these activities for the current and previous financial half-years are presented as a single line in the income statement called “Net result from discontinued operations”.
ANALYSIS OF CONSOLIDATED INCOME STATEMENT
The Group’s consolidated revenues for the first half of 2017 amounted to €497 million, an increase of €14 million or 3% compared to the first half of 2016 and operating costs decreased by €3 million to €255 million. EBITDA improved by €17 million (8%) to €242 million, and the operating profit improved by €12 million to €160 million. Net finance costs increased by €9 million as a result of the impact of the increase in UK and French inflation rates on the cost of the index-linked tranche of the debt.
After a tax charge of €6 million, including €4 million tax on the dividend payment, the Group’s consolidated result from continuing operations was a profit of €30 million compared to a net profit of €25 million restated for the first half of 2016. The Group’s net consolidated profit amounted to €35 million for the first half of 2017.
€ million First half 2017 First half 2016 Change First half 2016 Improvement/(deterioration) of result *,** recalculated and restated ** restated Exchange rate €/£ 1.161 1.161 €M % 1.273 Fixed Link 438 425 13 +3% 443 Europorte 59 58 1 +2% 58 Revenue 497 483 14 +3% 501 Fixed Link (198) (199) 1 +1% (205) Europorte (56) (59) 3 +5% (59) ElecLink (1) – (1) – Operating costs (255) (258) 3 +1% (264) Operating margin (EBITDA) 242 225 17 +8% 237 Depreciation (76) (72) (4) -5% (72) Trading profit 166 153 13 +9% 165 Net other operating charges (6) (5) (1) -32% (4) Operating profit (EBIT) 160 148 12 +8% 161 Share of result of equity-accounted companies – (1) 1 (1) Net finance cost (134) (124) (10) -7% (130) Other net financial income 10 9 1 +7% 9 Pre-tax profit from continuing operations 36 32 4 +14% 39 Income tax for continuing operations (6) (7) 1 +16% (7) Net profit from continuing operations 30 25 5 +23% 32 Net profit from discontinued operations 5 27 (22) 28 Net consolidated profit 35 52 (17) -32% 60* Recalculated at the rate of exchange used for the 2017 half-year income statement (£1=€1.161).** Restated in application of IFRS 5 following the sale of GB Railfreight Limited in November 2016.
The evolution of the pre-tax result from continuing operations by segment compared to the first half of 2016 is presented below:
€ millionImprovement/(deterioration) of result Fixed Link Europorte ElecLink Consolidation adjustment Total Pre-tax result from continuing operations for the first half of 2016 restated * 40 (6) (2) – 32 Improvement/(deterioration) of result: Revenue +13 +1 – – +14 Operating expenses +1 +3 -1 – +3 EBITDA +14 +4 -1 – +17 Depreciation -4 – – – -4 Trading result +10 +4 -1 – +13 Net other operating income/charges -3 +1 +1 – -1 Operating result (EBIT) +7 +5 – – +12 Net finance cost and other items -11 +1 – +2 -8 Net improvement of result -4 +6 – +2 +4 Pre-tax result from continuing operations for the first half of 2017 36 – (2) 2 36* Restated at the rate of exchange used for the 2017 half-year income statement and in application of IFRS 5 following the sale of GB Railfreight Limited in November 2016.
1. Fixed Link Concession segment
The Group’s core business is the Channel Tunnel Fixed Link Concession which operates and directly markets its integrated vehicle transport service (Shuttles) and also manages the circulation of the Train Operators’ services through its Railway Network in return for the payment of a toll. This segment also includes the Group’s corporate services.
€ million First half * First half Change 2017 2016 €M % Shuttle Services 285 277 8 3% Railway Network 146 141 5 4% Other revenue 7 7 – 13% Revenue 438 425 13 3% External operating costs (108) (113) 5 4% Employee benefits expense (90) (86) (4) -5% Operating costs (198) (199) 1 1% Operating margin (EBITDA) 240 226 14 6% EBITDA / revenue 55.0% 53.4% 1.6* Restated at the exchange rate used for the 2017 half-year income statement and in application of IFRS 5 following the sale of GB Railfreight Limited in November 2016.
1.1. Fixed Link Concession revenues
Revenue generated by this segment, which represents 88% of the Group’s total revenue, increased by 3% compared to the first half of 2016, to €438 million.
a) Shuttle Services
Traffic 1st quarter (January to March) 2nd quarter (April to June) 1st half (January to June) (number of vehicles) 2017 2016 % change 2017 2016 % change 2017 2016 % change Truck Shuttle: Trucks 409,856 410,729 0% 413,291 418,877 -1% 823,147 829,606 -0.8% Passenger Shuttle: Cars * 466,562 501,871 -7% 671,525 660,869 +2% 1,138,087 1,162,740 -2.1% Coaches 11,166 10,976 +2% 16,548 17,060 -3% 27,714 28,036 -1.1%* Including motorcycles, vehicles with trailers, caravans and motor homes.
At €285 million for the first half of 2017, Shuttle Services revenues increased by 3% compared to the first half of 2016 mainly due to the increase in yields which benefited from the Group's strategy of optimising the profitability of its Shuttle business through its dynamic pricing policy for both truck and passenger traffic.
Truck Shuttles
The Short Straits cross-Channel market for trucks grew by an estimated 0.5% in the first half of 2017 compared to the first half of 2016. During the first half of 2017, the number of trucks transported by Shuttles decreased by 0.8% and the Truck Shuttle market share reduced slightly compared to the first half of 2016, to 39.2%. At the beginning of 2017, Truck Shuttle traffic and market share were affected by the decrease in fresh fruit and vegetable traffic to the UK due to the exceptionally bad weather conditions in southern Europe.
Passenger Shuttles
Despite a contraction in the Short Straits cross-Channel car market estimated at 3% for the first half of 2017, the Group’s share of the market for its car activity increased by about one point compared to the first half of 2016, to 57.9%. The number of cars transported by the Passenger Shuttles was 2% below 2016. Traffic on the Short Straits market in the first half of 2017 compared to 2016 was affected by the impact of non-recurring events (the Euro football tournament in 2016 and elections in France and the UK in 2017).
The cross-Channel coach market contracted by an estimated 5% in the first half of 2017 and Shuttle coach market share increased by more than one point compared to the first half of 2016, to 39.9%
b) Railway network
Traffic 1stquarter (January to March) 2ndquarter (April to June) 1sthalf (January to June) 2017 2016 % change 2017 2016 % change 2017 2016 % change High-Speed Passenger Trains Eurostar: Passengers * 2,270,671 2,229,218 +2% 2,769,754 2,741,862 +1% 5,040,425 4,971,080 +1% Train Operators’ Rail Freight Services **: Tonnes 308,725 265,041 +16% 292,512 247,854 +18% 601,237 512,895 +17% Trains 543 442 +23% 500 427 +17% 1,043 869 +20%* Only passengers using Eurostar to cross the Channel are included in this table, thus excluding journeys between Paris-Calais and Brussels-Lille.** Rail freight services by trains operators (DB Cargo on behalf of BRB, SNCF and its subsidiaries, GB Railfreight and Europorte) using the Tunnel.
For the first half of 2017, revenues generated from the use of the Tunnel’s railway network by Eurostar high-speed trains and by rail freight trains amounted to €146 million, an increase of 4% compared to 2016.
For the first half of 2017, the number of Eurostar passengers travelling through the Tunnel increased by 1.4% compared to the same period in 2016 despite being penalised by the same factors as the Passenger Shuttle activity as well as by the terrorist incidents in the UK during the period.
During the first half of 2017, cross-Channel rail freight continued the trend seen at the end of 2016, with strong growth of 20% compared to the previous year as a result of additional traffic generated by the excellent quality of service delivered since the beginning of 2016 and by the work carried out by the Group and other parties concerned to re-launch this traffic. This activity was the worst affected by the migrant crisis of 2015 having lost half of its customers and traffic during the autumn of that year, which diverted to other commercial routes.
1.2. Fixed Link Concession operating costs
At €198 million, the Fixed Link’s operating costs for the first half of 2017 decreased by €1 million compared to the previous year reflecting the Group’s efforts to control its costs.
2. Europorte Segment
The Europorte segment covers the entire rail freight transport logistics chain in France and includes Europorte France and Socorail. The British subsidiary GB Railfreight Limited was sold in November 2016.
€ million First half *First half Change 2017 2016 €M % Revenue 59 58 +1 2% External operating costs (33) (33) – 2% Employee benefits expense (23) (26) +3 9% Operating costs (56) (59) +3 5% Operating margin (EBITDA) 3 (1) +4* Restated in application of IFRS 5 following the sale of GB Railfreight Limited in November 2016.
In the first half of 2017, Europorte’s revenue increased by 2% compared to 2016. Operating costs decreased by 5% and EBITDA grew by a substantial €4 million as a result of the impact of the plan launched by the Group in 2016 to generate sustainable improvements in the profitability of this segment.
3. ElecLink segment
ElecLink’s activity is the construction and operation of a 1,000 MW electricity interconnector between the UK and France. Construction works began in the second half of 2016 and the interconnector is expected to be in commercial operation at the beginning of 2020.
Costs directly attributable to the project are capitalised. Capital expenditure on the project during the first half of 2017 amounted to €140 million.
Operating costs for the first half of 2017 amounted to €1 million.
4. Operating margin (EBITDA)
Compared to the first half of 2016, EBITDA by business segment evolved as follows:
€ million Fixed Link Europorte ElecLink Total EBITDA first half of 2016* 226 -1 – 225 Change in revenue +13 +1 – +14 Change in operating costs +1 +3 -1 +3 Net improvement +14 +4 -1 +17 EBITDA first half of 2017 240 3 (1) 242* Restated at the exchange rate used for the 2017 half-year income statement and in application of IFRS 5 following the sale of GB Railfreight Limited in November 2016.
At €242 million, the Group’s consolidated operating margin improved by €17 million (8%) compared to the first half of 2016.
5. Operating profit (EBIT)
Depreciation charges increased by €4 million to €76 million for the first half of 2017 following the completion of capital investment projects in 2016 and the first half of 2017 including the Terminal 2015 and GSM-R projects.
The operating profit for the first half of 2017 was €160 million, an improvement of €12 million (8%) compared to the first half of 2016.
6. Net finance costs
At €134 million for the first half of 2017, net finance costs increased by €10 million compared to the first half of 2016, at a constant exchange rate, as a result of the impact of the increase in inflation rates in the UK and France on the index-linked tranches of the debt. The partial refinancing of the debt in June 2017 did not impact net finance costs in the first half of 2017.
“Other net financial income” in the first half of 2017 of €10 million included net exchange gains of €8 million, interest received on the floating rate notes held by the Group of €3 million, as well as a net charge of €1 million arising from the partial refinancing of the Group’s debt concluded in June 2017 (see notes A.1 and G.1 to the half-year financial statements to 30 June 2017):
7. Net result from continuing operations
The Eurotunnel Group’s pre-tax result from continuing operations for the first half of 2017 was a profit of €36 million compared to €32 million for the first half of 2016.
“Income tax” for the first half of 2017 included a charge of €4 million for the dividend tax (2016: €4 million), an income tax charge of €0.5 million (2016: €0.1 million) and a net deferred tax charge of €1.3 million (2016: €3.4 million).
The Eurotunnel Group’s net consolidated result for continuing operations for the first half of 2017 was a profit of €30 million compared to €25 million for the first half of 2016.
8. Net result from discontinued operations
€ million First half *First half 2017 2016 Maritime segment MyFerryLink 2 22 GB Railfreight Limited 3 5 Net profit from discontinued operations 5 27* Restated at the exchange rate used for the 2017 half-year income statement and in application of IFRS 5 following the sale of GB Railfreight Limited in November 2016.
8.1. MyFerryLink segment
During the first half of 2016, the Group accounted for an income net of tax of €24 million in the income statement at the start of the finance leases on the ferries.
Information on the maritime segment is set out in note C.2i to the half-year financial statements to 30 June 2017.
8.2. GB Railfreight Limited
Information on GB Railfreight is set out in note C.2ii to the half-year financial statements to 30 June 2017.
9. Consolidated net result
The Eurotunnel Group’s consolidated net result for the first half of 2017 was a profit of €35 million compared to a profit of €52 million in 2016 (which included an income of €24 million arising from the inception of the ferries’ finance leases).
ANALYSIS OF STATEMENT OF FINANCIAL POSITION
€ million 30 June 2017 31 December 2016 Exchange rate €/£ 1.137 1.168 Fixed assets 6,455 6,366 Other non-current assets 209 280 Total non-current assets 6,664 6,646 Trade receivables 100 94 Other current assets 85 172 Cash and cash equivalents 550 347 Total current assets 735 613 Total assets 7,399 7,259 Total equity 1,945 1,812 Financial liabilities 4,349 3,786 Interest rate derivatives 686 1,309 Other liabilities 419 352 Total equity and liabilities 7,399 7,259The table above summarises the Group’s consolidated statement of financial position as at 30 June 2017 and 31 December 2016. The main elements and changes between the two dates are as follows:
ANALYSIS OF CASH FLOWS
To enable a better comparison between the two periods, consolidated cash flows for the first half of 2016 presented in this section have been recalculated at the exchange rate used for the statement of financial position at 30 June 2017 of £1=€1.137.
Cash movement
€ million First half 2017 First half 2016* restated Change First half 2016as reported Exchange rate €/£ 1.137 1.137 1.210 Continuing operations: Net cash inflow from trading 261 259 2 262 Other operating cash flows and taxation 1 (9) 10 (9) Net cash inflow from operating activities 262 250 12 253 Net cash outflow from investing activities (168) (29) (139) (30) Net cash outflow from financing activities (269) (292) 23 (295) Net cash inflow from the refinancing operation 265 – 265 – Net cash in/(out)flow from continuing operations 90 (71) 161 (72) Discontinued operations**: Net cash inflow from trading – 8 (8) 8 Other operating cash flows and taxation – (15) 15 (15) Net cash outflow from operating activities – (7) 7 (7) Net cash outflow from investing activities (2) (17) 15 (18) Net cash inflow from financing activities 120 20 100 21 Net cash in/(out)flow from discontinued operations 118 (4) 122 (4) Increase/(decrease) in cash in the period 208 (75) 283 (76)* Restated at the exchange rate used for the statement of financial position at 30 June 2017 (£1=€1.137).** Maritime segment and GB Railfreight Limited, see note C to the summary half-year financial statements at 30 June 2017.
Continuing operations
At €261 million, net cash generated from trading by continuing operations for the first half of 2017 improved by €2 million compared to the first half of 2016 at a constant exchange rate (€259 million restated). The €10 million improvement in “Other operating cash flows and taxation” was due to the receipt in the first half of 2017 of advances on corporation tax paid in the first half of 2016.
Net cash payments from investing activities increased by €139 million in the first half of 2017 to €168 million, comprising mainly:
On 6 June 2017, the Group completed the partial refinancing of its debt. This operation covered the C tranches of the Term Loan, the variable rate tranches that were fully hedged by fixed rate interest swaps (see notes A.1 and G.1 to the half-year financial statements at 30 June 2017 for further details). This operation generated cash totalling €265 million during the first half of 2017:
This operation enables the Group to:
Other net financing payments in the first half of 2017 amounted to €269 million compared to €292 million in the first half of 2016. During the first half of 2017, cash flow from financing comprised:
Discontinued operations
Cash flows relating to discontinued operations during the first half of 2017 included €5.6 million received under the finance leases on the ferries and a receipt of €114 million arising from the sale of the two ferries and a payment of €2 million being the final price adjustment on the sale of GB Railfreight Limited in 2016.
Free cash flow
The free cash flow as defined by the Group in paragraph 2.1.3 of the 2016 Registration Document, is the net cash flow from operating activities less net cash flow from investing activities (excluding the initial investment in new activities and the acquisition of shareholdings in subsidiary undertakings) and net cash flow from financing activities relating to the service of the debt (loans and hedging instruments) plus interest received (on cash and cash equivalents and other financial assets).
For the first six months of 2017, free cash flow totalled €111 million compared to €62 million restated for the same period in 2016.
1st half 2017 1st half 2016 € million restated* reported Exchange rate €/£ 1.137 1.137 1.210 Net cash inflow from operating activities 262 243 246 Net cash outflow from investing activities (28) (46) (47) Debt service costs (interest paid, fees and repayments) (134) (145) (150) Interest received and other receipts 11 10 10 Free Cash Flow 111 62 59 Dividend paid (139) (118) (118) Purchase of treasury shares and net movement on liquidity contract (2) (34) (34) ElecLink project expenditure (140) – – Refinancing operation: Drawdown of new tranches 1 957 – – Repayment of old tranches (1 351) – – Fees and expenses (including the partial termination of the hedging contracts) (504) – – Redemption of the floating rate notes 164 – – Price adjustment on the sale of GB Railfreight Limited (2) – – Sale of ferries 114 – – Cash received from drawdown of borrowings – 15 17 Use of Free Cash Flow 97 (137) (135) Increase/(decrease) in cash in the period 208 (75) (76)* Restated at the exchange rate used for the statement of financial position at 30 June 2017 (£1=€1.137).
OTHER FINANCIAL INDICATORS
Debt service cover ratios
Under the terms of the Term Loan, Groupe Eurotunnel SE is required to meet certain financial covenants as described in paragraph 2.1.3 of the 2016 Registration Document.
At 30 June 2017, the debt service cover ratio (net operating cash flow less capital expenditure for the Fixed Link compared to debt service costs on a rolling 12 month period, as defined in the financing agreements) and the synthetic debt service cover ratio (calculated on the same basis but taking into account a hypothetical amortisation on the Term Loan and the step-up) were 2.06 and 1.85 respectively. The financial covenants for the period were respected.
EBITDA to financing cost ratio
The Group’s ratio of EBITDA to finance cost excluding interest received and indexation as defined in paragraph 2.1.3 of the 2016 Registration Document, was 2.2 at 30 June 2017 (30 June 2016 restated: 1.9).
Net debt to EBITDA ratio
The net debt to EBITDA ratio as defined by the Group in paragraph 2.1.4 of the 2016 Registration Document, is the ratio between consolidated EBITDA and financial liabilities less the value of the floating rate notes and cash and cash equivalents held by the Group. The Group does not consider it appropriate to publish this ratio when calculated on the basis of the activity of a six month period. At 31 December 2016, the ratio was 6.4.
OUTLOOK
On 6 June 2017, the Group completed the partial refinancing of its debt. This operation related to the variable rate tranches of the debt and resulted in a reduction of more than 200bps in the annual cost excluding indexation of the debt, taking it below 4% over the next five years. The surplus cash generated by this operation, amounting to €265 million, and the annual saving in interest payments of at least €50 million per year over the next five years, strengthen the Group’s ability to carry out its development strategy, both for the Fixed Link and ElecLink businesses.
Despite relatively stable traffic, revenue from Shuttle Services increased by 3% for the first half of 2017 compared to the same period in 2016. This improvement is in large part due to the Group’s strategy to optimise the profitability of this business through an active yield management policy.
After growth of 5% in 2016, the cross-Channel truck market in the first half of 2017 was slightly above that of the first half of 2016, having been penalised at the beginning of the year by the impact of the exceptional weather that affected southern Europe. The Group consolidated its truck market share during the period in a context of a strong competitive environment with the return to normal services at the port of Calais, whilst at the same time strengthening and extending its peak-period pricing policy. In a market for which growth forecasts are below last year, the Group favours a strategy focused on optimising its margins and the quality of service provided to its customers.
Despite a contraction in the cross-Channel car market in the first half of the year, the Passenger Shuttle’s car activity grew its market share to reach record levels during the first half of 2017. The current outlook for the Fixed Link’s car traffic during the peak summer season indicates that it will be at a similar level as last year.
In the first half of 2017, passenger traffic on the high-speed trains going through the Tunnel continued the growth trend seen at the end of 2016, despite the difficult geopolitical situation and the unfavourable impact of non-recurring events. In the second half of the year, this traffic should benefit from the entry into service of new trains on the London to Brussels route and, from the end of 2017, from the launch of the new direct service to Amsterdam. Cross-Channel rail freight, which was badly affected by the migrant crisis in 2015, has also continued to recover during the first half of the year, with a 20% growth in traffic. At the end of June, the Group started the construction of a new scanner on the Frethun site, thus demonstrating its willingness to invest in the security, efficiency and growth of this activity.
The Group is continuing with its major capital investment projects aimed at increasing the capacity and the quality of service of its Shuttle activity, with the entry into service of the first of three new Truck Shuttles in February 2017 and the inauguration of the new Flexiplus lounge on the Coquelles terminal in July 2017. This will continue in the second half of the year with the remaining two new Truck Shuttles entering service in the autumn and the opening of the Flexiplus lounge on the Folkestone terminal in the first quarter of 2018.
A year after the UK’s decision to leave the European Union, formal negotiations between the British government and the European Commission on the conditions and mechanisms of the exit began on 19 June 2017. During the first half of the year, the Group did not see any significant impact of this decision on its business, but it continues its active monitoring of the situation and its detailed assessment of potential risks that may arise. The Group remains very confident in the solidity of the Fixed Link’s economic model. The Tunnel is, and will increasingly assert itself as, a major player in the commercial exchanges between the United Kingdom and continental Europe.
As regards the Europorte segment, after the sale of GB Railfreight at the end of 2016, the Group focused its efforts on increasing the profitability of its rail freight business in France. The results of the first half of the year are the fruits of this strategy, which the Group will continue to pursue, showing that it is indeed possible to achieve a healthy development of rail freight in France.
The Group has been the sole shareholder of ElecLink since August 2016, and in the first half of 2017, construction works on the 1,000 MW interconnector between the UK and the Continent started in earnest. At 30 June 2017, the Group has invested more than €250 million in this project, which forms part of its strategy to enhance the value of the Tunnel infrastructure. With work progressing as planned and funding of the project assured, the interconnector is expected to be in service at the beginning of 2020.
In this context and in light of its first-half results, the Group confirms its financial target for 2017 as published in its 2016 annual report of a consolidated EBITDA of €530 million (on the basis of an exchange rate of £1=€1.175 and the current scope of consolidation).
This target is based on data, assumptions and estimations that are considered reasonable.
The main risks and uncertainties which the Eurotunnel Group may face in the remaining six months of the year, other than those described above, are identified in chapter 3 “Risk Factors” of the 2016 Registration Document filed with the Autorité des marchés financiers (the French financial markets authority) on 17 March 2017.
SUMMARY CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS AT 30 JUNE 2017
CONSOLIDATED INCOME STATEMENT
€’000 Note First half2017 * First half2016 Full year2016 Revenue D.1 496,993 500,744 1,023,480 Operating expenses D.2 (141,119) (149,016) (285,578) Employee benefit expense (113,682) (114,469) (224,272) Operating margin (EBITDA) D.1 242,192 237,259 513,630 Depreciation (76,448) (72,544) (149,240) Trading profit D.1 165,744 164,715 364,390 Other operating income D.3 696 260 51,004 Other operating expenses D.3 (6,205) (4,524) (14,557) Operating profit 160,235 160,451 400,837 Share of result of equity-accounted companies C – (1,001) (762) Operating profit after share of result of equity-accounted companies 160,235 159,450 400,075 Finance income 565 1,128 2,048 Finance costs G.3 (134,438) (131,512) (263,927) Net finance costs (133,873) (130,384) (261,879) Other financial income G.4 57,064 46,268 64,436 Other financial charges G.4 (47,291) (36,333) (48,944) Pre-tax profit from continuing operations 36,135 39,001 153,688 Income tax expense of continuing operations I (5,939) (7,099) (17,449) Net profit from continuing operations 30,196 31,902 136,239 Net profit from continuing operations C 5,205 27,860 64,034 Net profit for the period 35,401 59,762 200,273 Net profit attributable to: Group share 35,460 59,858 200,585 Minority interest share (59) (96) (312) Earnings per share (€): H.4 Basic earnings per share: Group share 0.07 0.11 0.37 Diluted earnings per share: Group share 0.07 0.11 0.37 Basic earnings per share from continuing operations 0.06 0.06 0.25 Diluted earnings per share from continuing operations 0.06 0.06 0.25* Restated in application of IFRS 5 following the sale of GB Railfreight Limited as explained in note C.2ii below.
The accompanying notes form part of these financial statements. The exchange rates used for the preparation of these financial statements are set out in note B.3 below.
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
€’000 NoteFirst half2017
First half2016
Full year2016
Items not recyclable to the income statement: Actuarial gains and losses on employee benefits (363) (20,560) (15,595) Related tax 93 725 713 Items recyclable to the income statement: Foreign exchange translation differences 41,960 208,629 266,693 Movement in fair value of hedging contracts G.2 126,913 (425,130) (138,744) Related tax I 65,601 (3,694) 2,272 Net loss recognised directly in other comprehensive income 234,204 (240,030) 115,339 Profit for the period - Group share 35,460 59,858 200,585 Total comprehensive income/(expense) - Group share 269,664 (180,172) 315,924 Total comprehensive expense - minority interest share (59) (96) (308) Total comprehensive income/(expense) 269,605 (180,268) 315,616The accompanying notes form part of these financial statements. The exchange rates used for the preparation of these financial statements are set out in note B.3 below.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
€’000 Note 30 June2017 31 December2016 ASSETS Intangible assets: goodwill F 119 955 119,955 Concession property, plant and equipment F 6,037,553 6,086,544 Other property, plant and equipment F 297,067 159,678 Total property, plant and equipment 6,334,620 6,246,222 Deferred tax asset I.2 201,867 121,698 Other financial assets G.5 7,413 158,361 Total non-current assets 6,663,855 6,646,236 Stock 2,884 3,009 Trade receivables 99,896 94,336 Other receivables 80,020 62,066 Other financial assets G.5 2,256 107,036 Cash and cash equivalents 550,152 346,637 Total current assets 735,208 613,084 Total assets 7,399,063 7,259,320 EQUITY AND LIABILITIES Issued share capital H.1 220,000 220,000 Share premium account 1,711,796 1,711,796 Other reserves H.3 (299,194) (555,788) Profit for the period 35,460 200,585 Cumulative translation reserve 277,742 235,782 Equity – Group share 1,945,804 1,812,375 Minority interest share (709) (650) Total equity 1,945,095 1,811,725 Retirement benefit obligations 98,473 99,887 Financial liabilities G 4,233,499 3,687,213 Other financial liabilities 58,227 61,084 Interest rate derivatives G 685,801 1,308,986 Total non-current liabilities 5,076,000 5,157,170 Provisions D.4 23,566 6,701 Financial liabilities G 52,923 31,265 Other financial liabilities 4,693 6,858 Trade payables 242,350 207,328 Other payables 54,436 38,273 Total current liabilities 377,968 290,425 Total equity and liabilities 7,399,063 7,259,320The accompanying notes form an integral part of these financial statements. The exchange rates used for the preparation of these financial statements are set out in note B.3 below.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
€’000 Issuedsharecapital Sharepremiumaccount Consolidatedreserves Result Cumulative translation reserve Group Share Minority interests Total 1 January 2016 220,000 1,711,796 (337,877) 100,451 (30,911) 1,663,459 (342) 1,663,117 Transfer to consolidated reserves 100,451 (100,451) – – Payment of dividend (118,154) (118,154) (118,154) Share based payments 8,797 8,797 8,797 Acquisition/sale of treasury shares (57,651) (57,651) (57,651) Result for the year 200,585 200,585 (312) 200,273 Minority interests – 4 4 Profit / (loss) recorded directly in other comprehensive income:* Of which €2,362,000 in respect of free shares and €831,000 in respect of preference shares.
The accompanying notes form an integral part of these financial statements. The exchange rates used for the preparation of these financial statements are set out in note B.3 below.
CONSOLIDATED STATEMENT OF CASH FLOWS
€’000 NoteFirst half2017
First half2016Full year2016
Operating margin (EBITDA) from continuing operations 242,192 237,259 513,630 Operating margin (EBITDA) from discontinued operations C (531) 9,122 10,630 Exchange adjustment * (2,216) (7,456) (12,748) Increase in inventories 124 (2,597) (2,126) (Increase)/decrease in trade and other receivables (11,653) 2,011 6,861 Increase in trade and other payables 32,996 31,963 **15,622 Net cash inflow from trading 260,912 270,302 531,869 Other operating cash flows (3,010) (17,241) (22,147) Taxation received/(paid) 4,136 (6,810) (9,454) Net cash inflow from operating activities 262,038 246,251 500,268 Payments to acquire property, plant and equipment (167,691) (46,747) (145,271) Sale of property, plant and equipment 6 32 31 Purchase of shares in a subsidiary – – (74,270) Change in loans and advances – (860) (3,897) Sale of subsidiary C.2ii (2,338) – 129,660 Net cash outflow from investing activities (170,023) (47,575) (93,747) Dividend paid H.3 (139,005) (118,154) (118,154) Exercise of stock options 1,735 270 521 Purchase of treasury shares (3,698) (38,551) (59,053) Net movement on liquidity contract 1,725 4,231 879 Cash received on drawdown of loans G 1,956,708 17,544 16,936 Fees paid on new loans G (19,879) – – Fees paid for partial termination of hedging contracts G (484,297) – – Early repayment of loans G (1,351,030) – – Cash received from redemption of floating rate notes G 163,995 – – Fees paid on loans G (3,435) (14,039) (17,249) Interest paid on loans G (77,639) (83,845) (163,561) Interest paid on hedging instruments G (33,786) (33,034) (66,136) Scheduled repayment of loans G (18,681) (19,082) (38,257) Cash received under finance leases C.2i 119,552 5,399 10,357 Interest received on cash and cash equivalents 563 1,149 2,072 Interest received on other financial assets 2,742 3,120 6,024 Net cash in/(out)flow from financing activities 115,570 (274,992) (425,621) Increase/(decrease) in cash in period 207,585 (76,316) (19,100)* The adjustment relates to the restatement of elements of the income statement at the exchange rate ruling at the period end.** In the 2016 Registration Document as published on the Group's website as well as in the printed version of the document, this table contained an error affecting the amount of the increase in trade and other payables as of 31 December 2016. An erratum was published. This current document has been rectified for this erratum and therefore contains the correct amount.
Movement during the period€’000
First half2017
First half2016Full year2016
Cash and cash equivalents at 1 January 346,637 405,912 405,912 Effect of movement in exchange rate (4,061) (31,448) (40,077) Increase/(decrease) in cash in the period 207,585 (76,316) (19,100) Decrease in interest receivable in the period (9) (60) (98) Cash and cash equivalents at the end of the period 550,152 298,088 346,637The accompanying notes form an integral part of these consolidated financial statements. The exchange rates used for the preparation of these financial statements are set out in note B.3 below.
NOTES TO THE SUMMARY FINANCIAL STATEMENTS
Groupe Eurotunnel SE is the consolidating entity of the Eurotunnel Group, whose registered office is at 3 rue La Boétie, 75008 Paris, France and whose shares are listed on Euronext Paris and on NYSE Euronext London. The term “Groupe Eurotunnel SE” or “GET SE” refers to the holding company which is governed by French law. The term “Group” or “the Eurotunnel Group” refers to Groupe Eurotunnel SE and all its subsidiaries.
The main activities of the Group are the design, financing, construction and operation of the Fixed Link’s infrastructure and transport system in accordance with the terms of the Concession (which will expire in 2086), as well as the rail freight activity.
A. Important events
A.1 Partial refinancing of the debt
On 6 June 2017, the Group completed the partial refinancing of its debt. This operation, which related to the C tranches of the Term Loan (the variable rate tranches that were fully hedged by fixed rate interest swaps) comprised:
At 30 June 2017, this operation is reflected in the Group’s consolidated financial statements as follows:
The operation and its treatment in the half-year consolidated financial statements are presented in detail in note G below.
A.2 Discontinued operation: maritime segment
i. Exercise of the put option
Since the cessation of its maritime activity in the second half of 2015, the Group has applied IFRS 5 “Non-current assets held for sale and discontinued operations” to its maritime segment.
In June 2015, the Eurotunnel Group reached an agreement with the DFDS group in relation to two of the ferries, Berlioz and Rodin (since renamed Côte des Flandres and Côte des Dunes) which provided for their lease with a put option, exercisable by the Eurotunnel Group, for their subsequent sale. At the start of the lease of the two ferries to DFDS in 2016, the Group recorded them as finance leases on the consolidated balance sheet for an amount equivalent to the value of the minimum payments receivable in accordance with IAS 17.
On 12 June 2017, the Eurotunnel Group exercised the put option and on 23 June 2017, completed the sale of the two ferries to DFDS A/S for the price set out in the agreement made in June 2015.
This transaction, from which the Group received €114 million, is treated in the consolidated financial statements at 30 June 2017, in accordance with IAS 17 as indicated above, as a settlement of the lease receivable accounted for under “Other financial assets” and an income of €15 million has been recognised in the result from discontinued operations.
During this transaction, DFDS notified the Eurotunnel Group that it disagrees with the option exercise price. The price paid by DFDS in relation to the exercise of the option corresponds to the terms of the agreement concluded between the parties in June 2015.
On 4 May 2016, the Group concluded an agreement with Vansea Shipping Company Limited for the Nord-Pas-de-Calais (since renamed AL Andalus Express) which provided initially for its lease with an option for its subsequent sale. The option was exercised by the Group on 5 July 2017 and the sale of the ferry was completed on 10 July 2017.
ii. Litigation and disputes
As indicated in its 2016 Registration Document, the Group is the subject of certain claims following the cessation of its maritime activity including claims from the liquidator of the SCOP SeaFrance and the AGS (the French insolvency fund for the management of employee claims). Further claims have been filed during the first half of 2017, including a second claim by the liquidator of the SCOP SeaFrance and the contestation by DFDS of the put option exercise price of the two ferries. In its consolidated accounts at 30 June 2017, the Group has recorded a provision for risk of €12 million in relation to the various ongoing disputes relating to its maritime segment.
Information relating to the maritime segment is presented in note C.2i below.
A.3 Brexit: the United Kingdom’s exit from the European Union
Following the UK’s decision to leave the European Union on 23 June 2016, formal negotiations between the British government and the European Commission began on 19 June 2017.
During the first half of the year, the Group did not note any significant impact of this decision on its business, but continues to pursue its active monitoring of the situation and its ongoing assessment of potential risks that may arise.
The Group has taken account of this situation in the determination of the principal estimates and assumptions used in the preparation of its consolidated financial statements at 30 June 2017 as set out in note B.5 below.
B. Basis of preparation and significant accounting policies
B.1 Statement of compliance
The half-year summary consolidated financial statements have been prepared in accordance with IAS 34 and accordingly do not contain all the information necessary for complete annual financial statements and must be read in conjunction with Groupe Eurotunnel SE’s consolidated financial statements for the year ended 31 December 2016.
The half-year summary consolidated financial statements for 2017 were prepared under the responsibility of the Board of Directors at its meeting held on 24 July 2017.
B.2 Scope of consolidation
The half-year summary consolidated financial statements for Groupe Eurotunnel SE and its subsidiaries are prepared as at 30 June. The basis of consolidation at 30 June 2017 is the same as that used for Groupe Eurotunnel SE’s annual financial statements as at 31 December 2016.
B.3 Basis of preparation and presentation of the consolidated financial statements
The half-year summary consolidated financial statements have been prepared using the principles of currency conversion as defined in the 2016 annual financial statements.
The average and closing exchange rates used in the preparation of the 2017 and 2016 half-year accounts and the 2016 annual accounts are as follows:
€/£ 30 June 2017 30 June 2016 31 December 2016 Closing rate 1.137 1.210 1.168 Average rate 1.161 1.273 1.216B.4 Principal accounting policies
The half-year summary consolidated financial statements have been prepared in accordance with IFRS. The accounting principles and bases of calculation used for these half-year summary consolidated financial statements are consistent in all significant aspects with those used for GET SE’s 2016 annual consolidated financial statements.
i. Texts adopted by the European Union whose application is compulsory
The texts adopted by the European Union, the application of which is compulsory for financial years beginning on or after 1 January 2017, are as follows:
The application of these texts has no significant impact on the Group's consolidated financial statements.
ii. Texts adopted by the European Union but not yet mandatory
IFRS 15 “Revenue from Contracts with Customers”
On 22 September 2016, the European Union adopted IFRS 15 “Revenue from Contracts with Customers”, which is mandatory from 1 January 2018. The associated amendments, subject to their adoption by the European Union, will be applicable on the same date as IFRS 15. The Group does not intend to apply these provisions in advance.
The Group's analysis of products and contracts with customers in its various activities did not identify any significant impact of the application of this standard in the consolidated financial statements.
As set out in note D.2 to GET SE’s financial statements as at 31 December 2016, sales are recognised in revenue when the customer uses the services:
IFRS 9 “Financial Instruments”
“IFRS 9 - Financial Instruments”, issued by the IASB in July 2014 and adopted by the EU on 29 November 2016, will replace IAS 39 “Financial Instruments” as of 1 January 2018. This new standard defines new principles for the classification and measurement of financial instruments, impairment for credit risk on financial assets and hedge accounting.
The Group does not intend to apply this provision in advance.
The analysis carried out by the Group on the first application of this new standard is in progress and has not identified any significant potential impact on its consolidated financial statements. The Group will finalise this work during the second half of 2017.
iii. Other texts and amendments published by the IASB but not approved by the European Union
The following texts concerning accounting rules and methods specifically applied by the Group have not yet been approved by the European Union:
Subject to approval by the European Union, IFRS 16 “Leases” will be mandatory for financial years beginning on or after 1 January 2019. Under this standard, all leases other than short-term leases and those of low-value assets, must be recognised in the lessee's statement of financial position in the form of a right of use asset and a financial liability. To date, leases classified as “simple” are presented off-balance sheet.
The potential impact of these other texts will be assessed by the Group in subsequent years.
B.5 Use of estimates
The preparation of consolidated financial statements requires the use of estimates and assumptions that affect the amounts of assets and liabilities in the statement of financial position, as well as the amount of revenue and expenses during the period. The Group’s management and the Board of Directors periodically review the valuations and estimates based on experience and other factors considered relevant for the determination of a reasonable and appropriate valuation of assets and liabilities in the statement of financial position. Accordingly, the estimates underlying the preparation of half-year consolidated financial statements to 30 June 2017 have been established in the context of the decision by the UK to leave the European Union, as described in note A.3 above. Depending on the evolution of these assumptions, the actual figures may differ from current estimates.
The use of estimations concerns mainly the valuation of fixed assets (see note F), evaluation of the Group's deferred tax position (see note I) and some elements of valuation of financial assets and liabilities (see note G.6).
B.6 Seasonal variations
The revenue and the trading result generated in each reporting period are subject to seasonal variations over the year, in particular for the Passenger Shuttle’s car activity during the peak summer season. Therefore the results for the first half of the year cannot be extrapolated to the full year.
C. Scope of consolidation
C.1 Changes to the scope of consolidation
At 31 December 2016 and at 30 June 2017, all the Group’s companies are fully consolidated. At 30 June 2016, prior to the purchase by the Eurotunnel Group of Star Capital’s 51% shareholding in ElecLink Limited in August 2016, GET SE’s shareholding of 49% (held by its subsidiary GET Elec Limited) was accounted for under the equity method.
C.2 Assets held for sale and discontinued operations
The net results of discontinued operations are as follows:
€’000 1st half2017 1st half2016 Full year2016 Maritime segment (see i below) 2,316 21,675 17,127 GB Railfreight (see ii below) 2,889 6,185 46,907 Net result from discontinued operations 5,205 27,860 64,034 Earnings per share from discontinued operations (€) : Basic 0.01 0.05 0.12 Diluted 0.01 0.05 0.12i. Maritime segment
Since the second half of 2015, the Group has applied IFRS 5 “Non-Current Assets Held for Sale and Discontinued Operations” to its maritime segment. The ferries Côte des Flandres and Côte des Dunes (formerly the Berlioz and the Rodin) have been leased to the DFDS group since February 2016 and the AL Andalus Express (formerly the Nord-Pas-de-Calais) has been leased to the Vansea Shipping Company Limited since 4 May 2016. At the start of the lease of each of the ferries, the lease contracts were recognised as finance leases for an amount equivalent to the minimum lease payments to be received in accordance with IAS 17 “Leases”. Accordingly, the Group recorded an income net of tax of €24 million in the consolidated income statement for the first half of 2016.
As indicated in note A.2 above, the Eurotunnel Group received €114 million from the purchaser DFDS on 23 June 2017 in consideration for the sale of the two ferries, the Côte des Flandres and the Côte des Dunes and extinguished the finance lease receivables recognised, in accordance with IAS 17, in "Other financial assets" in the statement of financial position. The sale of the two ferries generated an income of €15 million which is recognised in the income statement of the discontinued operations at 30 June 2017 under “Other operating income”.
As indicated in note A.2 above, during this process of selling the two ferries on 23 June 2017, DFDS notified the Eurotunnel Group that it disagreed with the option exercise price. The amount of the disagreement represents €15 million. The price paid by DFDS in relation to the put option corresponds to the terms of the agreement concluded between the parties in June 2015.
The option on the third ferry, the AL Andalus Express, was exercised by the Group on 5 July 2017 and the sale was completed on 10 July 2017.
The capital gain generated by the sale gives rise to a current tax charge in 2017 and the reversal of the deferred tax charge recorded in 2016.
As indicated in its 2016 Registration Document, the Group is the subject of a number of legal claims following the cessation of its maritime activity, including those from the liquidator of the SCOP SeaFrance and the AGS (the French insolvency fund for the management of employee claims). Further claims have been made during the first half of 2017, including a second claim by the liquidator of the SCOP SeaFrance and the contestation by DFDS of the put option exercise price of the two ferries referred to above. In its consolidated accounts at 30 June 2017, the Group has recognised a provision for risk of €12 million in relation to the various ongoing disputes relating to its maritime segment in the income statement of the discontinued operations under “Other operating charges”.
Maritime segment’s income statement
€’000First half2017
First half2016
Full year2016
Revenue – – – Operating costs (531) (2,338) (5,333) Operating margin (EBITDA) (531) (2,338) (5,333) Other operating income and (charges) 2,847 39,805 38,267 Operating profit 2,316 37,467 32,934 Other financial income and (charges) – (2) (17) Pre-tax result: profit 2,316 37,465 32,917 Deferred tax 15,790 (15,790) (15,790) Income tax (15,790) – – Net result: profit 2,316 21,675 17,127Maritime segment’s cash flow statement
€’000First half2017
First half2016Full year2016
Net cash outflow from operating activities (331) (16,647) (17 516) Net cash inflow from financing activities 119,552 5,399 10,357 Increase/(decrease) in cash in period 119,221 (11,248) (7,159)ii. GB Railfreight
Subsequent to completion on 15 November 2016 of the sale of its subsidiary GB Railfreight Limited, the purchaser submitted a claim to the Group on 29 December 2016 for a price adjustment under the terms of the sale contract. As a consequence, the Group included a provision of €5 million in its consolidated accounts as at 31 December 2016 as part of the calculation of the net profit on the sale recognised in “Other operating charges”. During the first half of 2017, an agreement was reached with the purchaser on a final price adjustment of €2,338,000. Accordingly, the Group has released the provision in its half-year consolidated accounts at 30 June 2017 and has adjusted the related tax; the net impact amounts to an income of €2.9 million.
Discontinued operation GB Railfreight’s income statement
€’000 First half 2017 First half2016* 31 October2016
Revenue – 81,062 128,814 Operating costs – (42,625) (69,901) Employee benefits expense – (26,977) (42,950) Operating margin (EBITDA) – 11,460 15,963 Depreciation – (4,229) (6,638) Trading loss – 7,231 9,325 Other net operating income and (charges) 2,889 (41) 39,336 Operating profit 2,889 7,190 48,661 Net finance costs and other financial charges – (1,005) (1,754) Pre-tax profit 2,889 6,185 46,907 Current income tax on the profit for the period in the UK at 20% – (1,237) (1,469) Current income tax on the profit of the sale in France at 34.43% (994) – (13,622) Tax consolidation and utilisation of tax loss carryforwards 994 1,237 15,091 Net tax – – – Net result 2,889 6,185 46,907* The most recent financial statements of the company available at 31 October 2016 were used as the basis for accounting for its exit from the scope of consolidation.
Discontinued operation GB Railfreight’s cash flow statement
€’000First half2017
First half201631 October2016
Net cash inflow from operating activities – 10,514 15,780 Net cash outflow from investing activities – (17,570) (21,734) Proceeds from sale of GB Railfreight Limited (2,338) – 129,660 Net cash inflow from financing activities – 15,722 14,091 (Decrease)/increase in cash in period (2,338) 8,666 137,797D. Operating data
D.1 Segment reporting
The Group is structured around the following three activities which correspond to the internal information reviewed and used by the main operational decision-makers (the Executive Committee):
* Restated in application of IFRS 5 following the sale of GB Railfreight Limited as explained in note C.2ii above.** See note C.2 above.
D.2 Operating expenses
Operating expenses can be analysed as follows:
€’000First half2017
* First half2016Full year2016
Operations and maintenance: subcontracting and spares 51,060 53,065 108,239 Electricity 14,349 16,104 31,905 Cost of sales and commercial costs 9,940 12,054 19,999 Regulatory costs, insurance and local taxes 22,960 24,870 39,276 General overheads and centralised costs 8,872 9,292 18,709 Sub-total Fixed Link 107,181 115,385 218,128 Europorte 33,029 33,631 66,612 ElecLink 909 – 838 Total 141,119 149,016 285,578* Restated in application of IFRS 5 following the sale of GB Railfreight Limited as explained in note C.2ii above.
D.3 Other operating income and (expenses)
€’000First half2017
* First half2016Full year2016
Revaluation of shares already held in ElecLink – – 49,872 Other 696 260 1,132 Sub-total other operating income 696 260 51,004 Net loss on disposal or write-off of assets (1,419) (1,380) (2,198) Other operating expenses (4,786) (3,144) (12,359) Sub-total other operating expenses (6,205) (4,524) (14,557) Total (5,509) 4,264 36,447* Restated in application of IFRS 5 following the sale of GB Railfreight Limited as explained in note C.2ii above.
Other operating expenses in the first half of 2017 relate to provisions for risks based on claims received.
D.4 Provisions
€’000 Note 1 January2017 Charge to income statement Release of unspent provisions Provisions utilised30 June2017
Continuing operations D.3 6,694 5,823 (165) (793) 11,559 Discontinued operations: maritime C.2i 7 12,000 – – 12,007 Total 6,701 17,823 (165) (793) 23,566E. Employee benefit expense
E.1 Share-based payments: grant of free shares
i. Free share plans with no performance conditions
Following the approval by the general meeting of shareholders on 27 April 2017 of the plan to issue existing free shares, GET SE’s board of directors decided on 27 April 2017 to grant a total of 253,800 GET SE ordinary shares (75 shares per employee) to all employees of GET SE and its related companies with the exception of executive and corporate officers of GET SE. The vesting period for these shares is one year and is followed by a three-year lock-up period.
During the first half of 2017, 332,100 free shares issued in 2015 and 248,325 free shares issued in 2016 were acquired by employees.
Number of shares 2017 2016 In issue at 1 January 954,550 1,264,750 Granted during the period 253,800 302,325 Renounced during the period (45,125) (43,325) Acquired during the period (580,525) (569,200) In issue at the end of the period 582,700 954,550The assumptions used to measure the fair value of the free shares were as follows:
Fair value of free shares and assumptions 2017 grant Fair value of free shares on grant date (€) 9.38 Share price on grant date (€) 10.095 Number of beneficiaries 3,384 Risk-free interest rate (based on government bonds) 0%ii. Free share plan subject to performance conditions
On 27 April 2017, the general meeting of shareholders authorised the Board of Directors to grant free shares to executives and senior staff of the company and its subsidiaries, subject to performance conditions, after a period of three years. The total number of shares may not give entitlement to more than 1,200,000 ordinary shares with a nominal of €0.40 each. Under this authorisation, the Board of Directors approved on 15 June 2017, the allocation of 1,200,000 shares.
Characteristics and conditions of the free share plan subject to performance conditions
Date of grant / main staff concerned Number ofordinary shares granted Conditions for acquiring rights Vesting period Ordinary shares granted to key executives and senior staff on 15 June 2017 1,200,000Staff must remain as employees of the Group.
Internal performance condition for 50% of the attributable volume: based on the Group's long-term economic performance measured by reference to the average rate of achievement of the EBITDA targets announced to the market for the years 2018 and 2019.
External performance condition (TSR) for 40% of the attributable volume: based on the stock market performance of the GET SE share compared to the performance of the DJI index (dividends included) over a three-year period.
CSR performance condition for 10% of attributable volume: based on the performance of the 2019 composite CSR index.
3 yearsInformation on the free share plan subject to performance conditions
Number of preference shares 2017 2016 In issue at 1 January 1,179,750 – Granted during the period 1,195,000 1,179,750 Renounced during the period – – Exercised during the period – – Expired during the period – – In issue at the end of the period 2,374,750 1,179,750 Exercisable at the end of the period – –Assumptions used for the fair value measurement on the grant date
The fair value on grant date of the rights granted to staff as part of the plan (the 1,200,000 ordinary shares) was calculated by using the Monte Carlo valuation model. The assumptions used to measure the fair value of the plan on grant date were as follows:
Fair value of shares and assumptions 2017 plan Fair value on grant date (€) 6.93 Share price on grant date (€) 10.10 Number of beneficiaries 55 Risk-free interest rate (based on government bonds) 0.0%iii. Charges to income statement
A charge of €3,144,000 was made for the first half of 2017 relating to all free and preference shares (first half of 2016: €3,919,000).
F. Property, plant and equipment
Intangible assets of €120 million represent the goodwill arising on the acquisition of control of ElecLink in 2016. The allocation of the purchase price between identifiable assets and liabilities and goodwill will be completed during the second half of 2017.
Other property, plant and equipment consists mainly of the Europorte subsidiaries’ rolling stock fleet and ElecLink’s construction works.
Fixed asset additions during the first half of 2017 relate mainly to construction works on the ElecLink project.
The Group has not identified any indication of impairment in either the tangible or intangible assets of its Concession, ElecLink or Europorte activities.
G. Financing and financial instruments
Accounting principles
In accordance with IAS 39, the Group has carried out an analysis to determine if the terms of the new tranches of the debt (C1a, C2a and C2b) are substantially different compared to those of the old tranches C1 and C2. This analysis concluded that the value of cash flows under the new terms discounted by application of the original effective interest rate, is different by more than 10% of the present value of the cash flows of the initial financial liability. As a result, the operation is accounted for as an extinguishment of the old debt and the costs and fees of the C1 and C2 tranches not yet amortised amounting to £5 million and €14 million respectively are recognised in the income statement for the first half of 2017 under "Other financial expenses" (see note G.4 below).
G.1 Refinancing of tranche C of the debt
As indicated in note A.1 above, the Group completed the partial refinancing of its debt on 6 June 2017 which consisted of:
i. Refinancing of tranche C1
Put in place in 2007 for a nominal value of £350 million, tranche C1 bore a variable rate of interest (LIBOR) plus a margin of 3.39% and was fully hedged by a fixed/floating interest rate swap for which the Group paid a fixed rate of 5.26% and received a floating rate (LIBOR). In 2016, the effective interest rate of this tranche including hedging was 8.8%. Repayment of this tranche was to begin on 20 June 2046 and to end on 20 June 2050.
This variable rate debt was refinanced on 6 June 2017 by the issue of a new tranche, C1a. This new tranche of £350 million bears a fixed interest rate of 3.043% until June 2029. In the absence of a refinancing prior to this date, tranche C1a will revert to bearing a variable interest rate of LIBOR +5.78% (being a margin of 1.78% plus a step-up of 4%) and be fully hedged by a fixed/floating interest rate swap for which the Group will pay a fixed rate of 5.26% and will receive a floating rate (LIBOR). The contractual maturity and amortisation profile of this tranche remain the same as those of the tranche C1 it refinances.
ii. Refinancing of tranche C2
Put in place in 2007 for a nominal value of €953 million, tranche C2 bore a variable rate of interest (EURIBOR) plus a margin of 3.39% and was fully hedged by a fixed/floating interest rate swap for which the Group paid a fixed rate of 4.90% and received a floating rate (EURIBOR). In 2016, the effective interest rate of this tranche including hedging was 8.43%. Repayment of this tranche was to begin on 20 June 2041 and to end on 20 June 2050.
This variable rate debt was refinanced on 6 June 2017 by the issue of two new tranches:
The contractual maturity and amortisation profile of these tranches remain the same as those of the C2 tranche they refinance.
iii. Partial termination of the interest rate hedging contracts
As a result of the structure of the new tranches of the debt, the hedging contracts have been amended to suspend them for the duration of the initial fixed-rate periods of the new tranches C1a, C2a and C2b. The cost of the partial termination was €490 million (£154 million and €311 million), being €502 million corresponding to the market value of the contracts for the periods of their suspension less the discounts net of fees negotiated with the counterparties to the contracts.
The portion of the fair value of the partially terminated hedging instruments amounting to €502 million is recorded as a reduction in the liability of derivative instruments on the statement of financial position and, in accordance with IAS 39, will be recycled to the consolidated income statement over the period of partial termination of the contracts.
The net profit from the discounts negotiated with the counterparties for the partial termination of the hedging contracts less the associated costs is recognised in the income statement for the first half of 2017 in “Other financial income”.
By aligning them with changes in the Group’s underlying exposure to interest rate risk on its debt, the partial termination of hedging contracts is in line with its rate risk management strategy which was put in place in 2007. As a result, the effective portions of these contracts continue to be treated as cash flow hedges on the basis of their initial recognition as such.
iv. Tranches C1b, C2c and C2d
In order to finance the costs of the partial termination of the hedging contract and the costs of the refinancing, the Group contracted three new tranches of debt for a total amount of €606 million (at the exchange rate of 30 June 2017):
v. Costs and fees of the 2017 refinancing operation
Costs of the operation totalling €25 million are treated as follows in the consolidated accounts as at 30 June 2017:
vi. Redemption of the floating rate notes
In 2011 and 2012, the Group acquired notes issued by Channel Link Enterprises Finance (CLEF) which corresponded to the securitisation of tranche C of the Group’s debt. These notes, which had a nominal value of €164 million and were recorded under “Other financial assets” on the statement of financial position, had been acquired at an average discount of approximately 11%.
As part of the refinancing of tranche C on 6 June 2017, the nominal value of these notes was redeemed by the Group and as a result, the discount that had not yet been recognised by this date, amounting to €14 million, was recorded in “Other financial income” in the income statement at 30 June 2017 (see note G.5 below).
G.2 Financial liabilities
The movements in financial liabilities during the period were as follows:
€’000 31 December2016published 31 December2016* restated Reclassification Drawdown Repayment Interest,indexation and fees 30 June 2017 Term Loan 3,673,637 3,625,057 (37,731) 1,956,708 (1,351,030) 27,424 4,220,428 Other loans 13,576 13,576 (505) – – – 13,071 Total non-current financial liabilities 3,687,213 3,638,633 (38,236) 1,956,708 (1,351,030) 27,424 4,233,499 Term Loan 25,342 25,076 37,731 – (18,196) – 44,611 Other loans 981 981 505 – (485) – 1,001 Accrued interest on Term Loan 4,942 4,879 – – – 2,432 7,311 Total current financial liabilities 31,265 30,936 38,236 – (18,681) 2,432 52,923 Total 3,718,478 3,669,569 – 1,956,708 (1,369,711) 29,856 4,286,422* The financial liabilities at 31 December 2016 (calculated at the year-end exchange rate of £1=€1.168) have been recalculated at the exchange rate at 30 June 2017 (£1=€1.137) in order to facilitate comparison.
The Term Loan put in place on 28 June 2007, as modified on 24 December 2015 and 6 June 2017, comprises the following elements at 30 June 2017:
Nominal amount In millions Currency in currency in euros * Effectiveinterestrate Contractualinterest rate Maturity Tranche A1 GBP 300 341 7.47% 2.89 % June 2018 - June 2042 Tranche A2 GBP 150 171 7.46% 2.89 % Tranche A3 GBP 300 341 7.61% 3.49 % Tranche A4 EUR 73 73 5.75% 3.38 % June 2018 - June 2041 Tranche A5 EUR 147 147 5.74% 3.38 % Tranche A6 EUR 147 147 5.89% 3.98 % Tranche B1 GBP 329 374 6.77% 6.63 % June 2013 - June 2046 Tranche B2 EUR 562 562 6.33% 6.18 % June 2013 - June 2041 Tranche C1a ** GBP 350 398 3.31% 3.043 % June 2046 - June 2050 Tranche C1b GBP 336 383 3.92% 3.848 % Tranche C2a ** EUR 425 425 2.40% 1.761 % June 2041 - June 2050 Tranche C2b** EUR 528 528 3.05% 2.706 % Tranche C2c EUR 83 83 3.88% 3.748 % Tranche C2d EUR 140 140 3.88% 3.748 % Total 4,113 5.20%* Nominal amount excluding impact of effective interest rate and inflation indexation and at the exchange rate at 30 June 2017 (£1=€1.137).** The contractual interest rates for C1a, C2a and C2b are respectively LIBOR +5.78% from June 2029, EURIBOR +5.55% from June 2022 and EURIBOR +5.90% from June 2027. From these dates, the effective interest rates for C1a, C2a and C2b with hedging are respectively 6.24%, 7.58% and 6.42%.
The effective rate of interest includes costs directly attributable to the debt, and for the A tranches, also includes the effect of the indexation on the nominal value.
Interest rate hedging instruments
In 2017, the Eurotunnel Group put in place hedging contracts to cover its floating rate loans (tranches C1 and C2) in the form of swaps for the same duration and for the same value (EURIBOR against a fixed rate of 4.90% and LIBOR against a fixed rate of 5.26%). The nominal value of the swaps is €953 million and £350 million.
These derivatives were partially terminated as part of the refinancing of tranche C in June 2017 as set out in note G.1iii above.
These derivatives have been measured at their fair value on the balance sheet as follows:
€’000 31 December 2016 Partial termination June 2017 * Changes in market value Exchange difference 30 June 2017 Contracts in euros Liability of 903,487 (315,105) (96,014) – Liability of 492 368 Contracts in sterling Liability of 405,499 (187,148) (18,414) (6,504) Liability of 193 433 Total Liability of 1,308,986 (502,253) (114,428) (6,504) Liability of 685 801* Recorded directly in equity.
The amount of reserves for hedging instruments changed as follows:
€’000 31 December 2016 Recycling of partial termination June 2017 Changes in market value Exchange difference 30 June 2017 Contracts in euros 903,487 (1,367) (96,014) – 806,106 Contracts in sterling 405,499 (440) (18,414) (10,677) 375,968 Total 1,308,986 (1,807) (114,428) (10,677) 1,182,074These derivatives generated a net charge of €33,740,000 for the first half of 2017 which has been accounted for in the income statement (€33,640,000 for the first six months of 2016).
G.3 Finance costs
€’000First half2017
* First half 2016Full year2016
Interest on loans before hedging 75,091 84,999 165,019 Costs relating to hedging instruments 33,740 33,640 67,113 Effective rate adjustment 3,519 3,444 6,806 Sub-total 112,350 122,083 238,938 Inflation indexation of the principal 22,088 9,429 24,989 Total finance costs after hedging 134,438 131,512 263,927* Restated in application of IFRS 5 following the sale of GB Railfreight Limited as explained in note C.2ii above.
The inflation indexation of the loan principal estimated at 30 June 2017 reflects the estimated effect of annual French and British inflation rates on the principal amount of the A tranches of the Term Loan as described in note G.1 of the annual consolidated financial statements at 31 December 2016.
G.4 Other financial income and (charges)
€’000First half2017
** First half2016Full year2016
Financial income arising from the debt refinancing operation: Discount realised on the partial termination of the hedging contracts (see note G.1iii) 15,473 – – Remaining discount on the floating rate notes held by the Group (see note G.1vi) 14,316 – – Sub-total 29,789 – – Unrealised exchange gains * 20,320 40,230 52,421 Interest received on floating rate notes 2,655 3,246 6,347 Other exchange gains 4,275 2,725 5,534 Other 25 67 134 Other financial income 57,064 46,268 64,436 Financial charges arising from the debt refinancing operation: Unamortised costs on the old C1 and C2 tranches (see note G.1ii) (20,663) – – Costs of the operation (see note G.1v) (7,071) – – Cost of the partial termination of the hedging contracts(see note G.1iii) (3,371) – – Sub-total (31,105) – – Unrealised exchange losses * (11,540) (32,982) (40,641) Other exchange losses (4,628) (3,339) (8,272) Other (18) (12) (31) Other financial charges (47,291) (36,333) (48,944) Total 9,773 9,935 15,492 Of which net unrealised exchange gains/(losses) 8,780 7,248 11,780* Mainly arising from the re-evaluation of intra-group debtors and creditors.** Restated in application of IFRS 5 following the sale of GB Railfreight Limited as explained in note C.2ii above.
G.5 Other financial assets
€’00030 June2017
31 December2016
Floating rate notes – 150,987 Other 7,413 7,374 Total non-current 7,413 158,361 Accrued interest on floating rate notes – 184 Finance leases 2,256 106,852 Total current 2,256 107,036As part of the operation to refinance tranche C as described in notes A.1 and G.1vi above, the floating rate notes that were held by the Group were redeemed in June 2017.
The assets under finance leases related to contacts for the lease of the Group’s three ferries concluded by the Euro-TransManche maritime subsidiaries during the first half of 2016. As described in notes A.2 and C.2i above, the Group sold two of these ferries during the first half of 2017. At 30 June 2017, finance lease receivables related to the AL Andalus Express which was sold on 10 July 2017.
G.6 Matrix of class of financial instruments and recognition categories and fair values
The table below analyses the financial instruments which are accounted for at their fair value, according to their method of valuation. The different levels are defined in note G.6 to the consolidated financial statements at 31 December 2016.
€’000 Carrying amount Fair value Class of financial instrument Assets at fair value through profit and loss Available-for-salefinancialassets Loans andreceivables Hedginginstruments Liabilities atamortisedcost Total netcarrying value Level 1 Level 2 Level 3 Total Financial assets measured at fair value Other non-current financial assets n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a Financial assets not measured at fair value Other current and non-current financial assets 9,669 9,669 n/a n/a n/a n/a Trade receivables 99,896 99,896 n/a n/a n/a n/a Cash and cash equivalents 550,152 550,152 550,152 550,152 Financial liabilities measured at fair value Interest rate derivatives 685,801 685,801 685,801 685,801 Financial liabilities not measured at fair value Financial liabilities 4,286,422 4,286,422 5,379,460 5,379,460 Other financial liabilities 62,920 62,920 n/a n/a n/a n/a Trade payables 242,350 242,350 n/a n/a n/a n/aAt 30 June 2017, information relating to the fair value of the financial liabilities remains as described in note G.6 to the annual consolidated financial statements at 31 December 2016 and taking into account the partial debt refinancing operation completed on 6 June 2017 as well as the evolution of the yield curve at 30 June 2017. For the new tranches C1a, C2a and C2b, the fair value is based on an assumption that the debt will be repaid before the end of the periods of fixed rate interest and before the step-up.
G.7 Related parties with a significant influence on the Group
During the financial restructuring in 2007, the Eurotunnel Group concluded interest rate hedging contracts with financial institutions, in the form of swaps. Goldman Sachs International was one of the counterparties to these hedging contracts, and at 30 June 2017 held 2.7% of the contracts, representing a charge of €0.9 million in the first half of 2017 and a liability of €18 million at 30 June 2017.
As part of the partial refinancing of the debt in June 2017, the Group paid to Goldman Sachs:
Two of Goldman Sachs’s infrastructure funds (GS Global Infrastructure Partners I, L.P., and GS International Infrastructure Partners I, L.P., together known as GSIP) hold (on the basis of the last declaration of threshold crossing in September 2011) approximately 15.5% of GET SE’s share capital at 30 June 2017.
H. Share capital and earnings per share
H.1 Changes in share capital
€ 30 June201731 December2016
220,000,000 fully paid-up ordinary shares each with a nominal value of €0.40 220,000,000.00 220,000,000.00 245 category B fully paid-up preference shares each with a nominal value of €0.01 2.45 2.67 Total 220,000,002.45 220,000,002.67During the first half of 2017, 22 category B preference shares issued under the 2014 programme of preference shares convertible into ordinary shares as described in note E.5iii of the notes to the consolidated financial statements as at 31 December 2016, were cancelled.
H.2 Treasury shares
Movements in the number of treasury shares during the period were as follows:
Share buyback programme Liquidity contract Total At 1 January 2017 15,684,151 760,000 16,444,151 Share buyback programme 380,000 380,000 Shares transferred to staff (free share plans) (580,525) (580,525) Exercise of share options (270,950) (270,950) Net purchase/(sale) under liquidity contract (172,531) (172,531) 30 June 2017 15,212,676 587,469 15,800,145Treasury shares held as part of the share buyback programme renewed by the general meeting of shareholders and implemented by decision of the board of directors on 27 April 2017 are allocated, in particular, to cover share option plans and the grant of free shares, whose implementation was approved by the general meetings of shareholders in 2010, 2011, 2013, 2014, 2015, 2016 and 2017.
H.3 Changes in equity
Equity increased by €133 million as a result of the favourable change in the valuation of the the hedging contracts and related deferred tax (€193 million), a change in the cumulative translation reserve (€42 million) and the net profit for the period (€35 million) partly offset by the impact of the dividend payment (€139 million), as set out in the consolidated statement of changes in equity on page 14.
Dividend
On 27 April 2017, Groupe Eurotunnel SE’s shareholders’ general meeting approved the payment of a dividend relating to the financial year ended 31 December 2016, of €0.26 per share. This dividend was paid on 26 May 2017 for a total of €139 million (before 3% tax on dividends amounting to €4.2 million).
H.4 Earnings per share
i. Number of shares
30 June2017 30 June2016 31 December 2016 Weighted average number: – of issued ordinary shares 550,000,000 550,000,000 550,000,000 – of treasury shares (16,076,590) (12,686,881) (14,295,058) Number of shares used to calculate the result per share (A) 533,923,410 537,313,119 535,704,942 – effect of share options i 446,694 614,592 531,990 – effect of free shares ii 3,191,971 1,068,829 1,943,874 – effect of preference shares iii 1,063,055 1,983,837 1,501,796 Potential number of ordinary shares (B) 4,701,720 3,667,258 3,977,660 Number of shares used to calculate the diluted result per share (A+B) 538,625,130 540,980,377 539,682,602The calculations were made on the following bases:
(i) on the assumption of the exercise of all the options issued and still in issue at 30 June 2017. The exercise of these options is conditional on the achievement of criteria as described in note E.5i to the consolidated financial statements at 31 December 2016;
(ii) on the assumption of the acquisition of all the free shares issued to staff. During the first half of 2017, 580,525 of the free shares issued in 2015 and 2016 were acquired by staff and 253,800 new free shares were granted (see note E.1i above). Details of the free shares are described in note E.5ii to the consolidated financial statements at 31 December 2016; and
(iii) on the assumption of the acquisition of all the free preference shares issued and still in issue at 30 June 2017. Conversion of these preference shares is subject to achieving certain targets and remaining in the Group’s employment as described in note E.5iii to the consolidated financial statements at 31 December 2016. During the first half of 2017, 603 free preference shares issued in 2015 were cancelled because the performance conditions have not been met.
ii. Earnings per share
First half2017
* First half2016Full year2016
Group share: profit Net result (€’000) (C) 35,460 59,858 200,585 Basic earnings per share (€) (C/A) 0.07 0.11 0.37 Diluted earnings per share (€) (C/(A+B)) 0.07 0.11 0.37 Continuing operations: profit Net result (€’000) (D) 30,196 31,902 136,239 Basic earnings per share (€) (D/A) 0.06 0.06 0.25 Diluted earnings per share (€) (D/(A+B)) 0.06 0.06 0.25 Discontinued operations: profit Net result (€’000) (E) 5,205 27,860 64,034 Basic earnings per share (€) (E/A) 0.01 0.05 0.12 Diluted earnings per share (€) (E/(A+B)) 0.01 0.05 0.12* Restated in application of IFRS 5 following the sale of GB Railfreight Limited as explained in note C.2ii above.
I. Income tax expense
I.1 Tax accounted for through the income statement
€’000First half2017
First half2016
Full year2016
Current tax: Income tax (469) (109) 954 Tax on dividends (4,170) (3,545) (3,545) Total current tax (4,639) (3,654) (2,591) Deferred tax (1,300) (3,445) (14,858) Total (5,939) (7,099) (17,449)The tax charge is determined by applying to the half year’s result the estimated effective tax rate based on internal forecasts for the full year. The effective tax rate at 30 June 2017 excluding the tax on dividends was 4.9% (30 June 2016: 9.1%) as a result of the impact of changes in the exchange rate on current tax for the year and on the activation of deferred tax in respect of tax losses.
I.2 Changes to deferred tax
At 31 December 20161st half 2017Impact on:
At 30 June 2017
€’000 change in consolidation scope income statement other comprehensive income cumulative translation reserve Tax effects of temporary differences related to: Property, plant and equipment 217,520 – (6,859) – 5,991 216,652 Deferred taxation of restructuring profit (394,762) – – – – (394,762) Hedging contracts 53,817 – – 65,695 (94) 119,418 Profit on sale of ferries (15,790) 15,790 – – – – Other (918) – 504 93 (15) (336) Tax losses 261,831 – 5,055 – (5,991) 260,895 Net tax assets/(liabilities) 121,698 15,790 (1,300) 65,788 (109) 201,867Changes in the deferred tax asset in respect of the hedging contracts correspond to the effect of the partial termination of these contracts as part of the refinancing operation as described in note G.1iii above. This corresponds to the future reversal of this charge.
J. Events after the reporting period
As indicated in notes A.2 and C.2i above, the Eurotunnel Group exercised the put option on the Andalus Express (formerly the Nord-Pas-de-Calais) on 5 July 2017 and the sale was completed on 10 July 2017.
DECLARATION BY THE PERSON RESPONSIBLE FOR THE HALF-YEAR FINANCIAL REPORT AT 30 JUNE 2017
I declare that, to the best of my knowledge, these summary half-year consolidated financial statements have been prepared in accordance with applicable accounting standards and present fairly the assets, financial situation and results of Groupe Eurotunnel SE and of all the companies included in the consolidation, and that this half-year financial report presents fairly the important events of the first six months of the financial year, their effect on the summary half-year consolidated financial statements, the main transactions between related parties, and a description of the main risks and uncertainties for the remaining six months of the financial year.
Jacques Gounon,Chairman and Chief Executive Officer of Groupe Eurotunnel SE,24 July 2017
STATUTORY AUDITORS’ REVIEW REPORT ON THE 2017 HALF-YEAR FINANCIAL INFORMATION
This is a free translation into English of the statutory auditors’ review report on the half-year financial information issued in French and is provided solely for the convenience of English-speaking users. This report includes information relating to the specific verification of information given in the Group’s half-year management report. This report should be read in conjunction with, and construed in accordance with, French law and professional standards applicable in France.
To the Shareholders,
In compliance with the assignment entrusted to us by your general assembly 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:
These condensed half-year consolidated financial statements are the responsibility of the Board of Directors. 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. 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.
Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed half-year consolidated financial statements are not prepared, in all material respects, in accordance with IAS 34 - standard of the IFRSs as adopted by the European Union applicable to interim financial information.
II. Specific verification
We have also verified the information presented in the half-year management report on the condensed half-year consolidated financial statements subject to our review. We have no matters to report as to its fair presentation and consistency with the condensed half-year consolidated financial statements.
The statutory auditors, Paris La Défense and Courbevoie, 24 July 2017 KPMG AuditDepartment of KPMG S.A. Mazars Fabrice OdentPartner Francisco SanchezPartnerGROUPE EUROTUNNEL SEEuropean company with a share capital of €220,000,002.45483 385 142 R.C.S. ParisRegistered office: 3 rue la Boétie, 75008 Paris, France
View source version on businesswire.com: http://www.businesswire.com/news/home/20170724006331/en/
Eurotunnel Contacts:For UK media enquiries contactJohn Keefe, + 44 (0) 1303 284491press@eurotunnel.comorFor investor enquiries contact:Jean-Baptiste Roussille, +33 (0)1 40 98 04 81jean-baptiste.roussille@eurotunnel.comorMichael Schuller, +44 (0) 1303 288749Michael.schuller@eurotunnel.comorFor other media enquiries contactAnne-Laure Desclèves, +33(0)1 4098 0467
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