Annual Report for publication purposes

Transcription

1 Annual Report 2013 for publication purposes

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3 Table of contents 1. Report from the Supervisory Board 4 2. Report from the Management Board Financial Statements Other information 74 3

4 1 Report from the Supervisory Board The report of the Supervisory Board is available at the head offices of the Company. 4

5 Intentionally left blank. 5

6 2 Report of the Management Board The report of the Management Board is available at the head offices of the Company. 6

7 Intentionally left blank. 7

8 2 Intentionally left blank. 8

9 Intentionally left blank. 9

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11 Financial Statements 3.1 Consolidated statements of financial position Consolidated statements of income Consolidated statements of comprehensive income Consolidated statements of cash flow Consolidated statements of changes in equity Notes to the consolidated financial statements Company statements of financial position Company statements of income Notes to the company financial statements 71 11

12 3 3.1 Consolidated statements of financial position Before proposed profit appropriation In EUR millions Notes Assets Non-current assets Property, plant and equipment Intangible assets Investments in associates and jointly controlled entities Other investments, including derivatives Deferred tax assets Total non-current assets Current assets Inventories Trade and other receivables Cash and cash equivalents Total current assets Total assets The notes on pages 20 to 67 are an integral part of these consolidated financial statements. 12

13 In EUR millions Notes Equity and liabilities Equity attributable to equity holders Non-current liabilities Loans and borrowings Provisions Deferred tax liabilities Derivatives Total non-current liabilities Current liabilities Loans and borrowings Current tax payable Trade and other payables, including derivatives Deferred income Provisions Total current liabilities Total liabilities Total equity and liabilities

14 3 3.2 Consolidated statements of income In EUR millions Notes Revenue ,055.6 Operating costs Cost of sales (136.7) (136.0) Personnel costs (540.5) (587.5) Depreciation, amortisation and impairments (83.7) (64.5) Other operating costs (241.1) (256.2) Total operating costs (1,002.0) (1,044.2) Results from operating activities (35.3) 11.4 Finance income and finance expense (6.8) (4.0) Net finance result (6.8) (4.0) Result before income tax (42.1) 7.4 Income tax (16.1) (5.2) Result for the year attributable to equity holders of the Company (58.2) 2.2 The notes on pages 20 to 67 are an integral part of these consolidated financial statements. 14

15 3.3 Consolidated statements of comprehensive income In EUR millions Result for the year (58.2) 2.2 Other comprehensive income: Other comprehensive income to be reclassified to profit or loss in subsequent periods Changes in fair value of cash flow hedges (1.0) (4.3) Income tax effect of changes in fair value of cash flow hedges Other comprehensive income (0.8) (3.2) Comprehensive income attributable to equity holders of the Company (59.0) (1.0) The notes on pages 20 to 67 are an integral part of these consolidated financial statements. 15

16 3 3.4 Consolidated statements of cash flow In EUR millions Notes Cash flows from operating activities Profit before income tax (42.1) 7.4 Adjustments for: Depreciation, amortisation and impairments Result on disposal of non-current assets (1.0) 1.2 Addition to, release from and usage of provisions (13.6) Finance income and expense Change in working capital (21.2) (36.8) Dividend received - - Result of associates Interest received Income taxes (0.5) - (21.3) (36.4) Net cash generated from operating activities Cash flows from investing activities Acquisition of subsidiaries, net of cash acquired (2.3) - Investments in property, plant and equipment and intangible assets (35.2) (49.5) Proceeds from sale of property, plant and equipment and intangible assets Change in other investments Other changes (0.1) (0.1) Net cash used in investing activities 2.5 (17.1) 16

17 In EUR millions Notes Net cash used in investing activities 2.5 (17.1) Cash flows from financing activities Proceeds from loans and borrowings Repayment of loans and borrowings (15.3) (60.2) Interest paid (4.7) (6.7) Net cash used in financing activities (20.0) (18.9) Net increase / (decrease) cash and cash equivalents 10.0 (8.9) Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Net increase / (decrease) cash and cash equivalents 10.0 (8.9) The notes on pages 20 to 67 are an integral part of these consolidated financial statements. Interest paid Interest paid includes capitalized initial financing cost of EUR 0 million (2012: EUR 1.5 million). Investments in property, plant and equipment and intangible assets Investments in property, plant and equipment and intangible assets mainly relate to investments in rolling stock and payment systems, net of the change in payables related to capital expenditures of EUR 10.7 million negative (2012: EUR 10.1 million) excluding investments through finance lease obligations of EUR 5.2 million (2012: EUR 48.8 million) and excluding capitalized borrowing costs regarding investments in other intangibles of EUR 0 million (2012: EUR 1.5 million) that have been presented as interest paid. Proceeds from sale of property, plant and equipment and intangible assets The proceeds from sale of property, plant and equipment and intangible fixed assets mainly relate to disposal of rolling stock. Other investments The change in other investments includes receipts of loans receivable net of new loans granted amounting to EUR 0.6 million (2012: EUR 1.5 million including the redemptions of available for sale financial assets of EUR 5.3 million). 17

18 3 3.5 Consolidated statements of changes in equity In EUR millions 2012 Equity attributable to equity holders Statutory and other non- distri butable Other Profit / loss Retained Total Share capital reserves reserves for the period earnings equity Carrying amount at 1 January Profit / (loss) for the year Other comprehensive income - - (3.2) - (3.2) Total comprehensive income - - (3.2) (1.0) Allocation of prior period profit / loss (4.9) Allocations to and withdrawals from statutory and other non-distributable reserves - (6.4) Carrying amount at 31 December

19 In EUR millions 2013 Equity attributable to equity holders Statutory and other non- distri butable Other Profit / loss Retained Total Share capital reserves reserves for the period earnings equity Carrying amount at 1 January Profit / (loss) for the year (58.2) - (58.2) Other comprehensive income - - (0.8) - (0.8) Total comprehensive income - - (0.8) (58.2) - (59.0) Allocation of prior period profit / loss (2.2) Allocations to and withdrawals from statutory and other non-distributable reserves Carrying amount at 31 December (58.2) The notes on pages 20 to 67 are an integral part of these consolidated financial statements. 19

20 3 3.6 Notes to the consolidated financial statements General information Connexxion Holding NV (referred to as the Company ) is a company limited by shares incorporated under the laws of the Netherlands. All shares are held by Transdev-BNG-Connexxion Holding BV, the consortium between the French passenger transport company Transdev SA and Bank Nederlandse Gemeenten NV. The Company has its statutory seat in Utrecht, the Netherlands and its head office is located in Hilversum, the Netherlands. The consolidated financial statements of the Group for the financial year ended 31 December 2013 comprise the information of the Company and its subsidiaries (jointly referred to as the Group ) and the Group's interest in (non-consolidated) associates and jointly controlled entities. The Group s principal activities are providing public and private passenger transport and related services. The Company statement of income has been prepared using the exemption pursuant to Section 402, Part 9, Book 2 of the Dutch Civil Code. The Management Board prepared the financial statements and the Supervisory Board authorised the financial statements for issue on 22 May The financial statements will be submitted for adoption by the next Annual General Meeting of Shareholders Summary of significant accounting policies Basis of preparation The consolidated financial statements have been prepared in conformity with International Financial Reporting Standards (IFRS) as adopted by the European Union ( EU-IFRS ) and IFRIC interpretations. The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by all group entities. The consolidated financial statements are prepared on the historical cost basis, except for the following: derivative financial instruments are measured at fair value; available for sale financial assets are measured at fair value. Unless stated otherwise, amounts in these financial statements are stated in millions of euros, rounded to the nearest 0.1 million. Changes in accounting policies and disclosures New and amended standards and interpretations A number of new standards and amendments to standards are mandatory for the first time for the financial year beginning on 1 January 2013 including IAS 19 Employee Benefits (Revised 2011). The Company early adopted this standard in its 2012 Financial Statements. Several other amendments apply for the first time in They do not impact the Financial Statements of the Company. IFRS 7 Financial Instruments: Disclosures Offsetting Financial Assets and Financial Liabilities The amendments require disclosure about rights to set-off and related arrangements (e.g. collateral agreements). These disclosures are required for all recognised financial instruments that are set off in accordance with IAS 32. The disclosures also apply to recognised financial instruments that are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are set off in accordance with IAS 32. As the Group is not setting off financial instruments in accordance with IAS 32 and does not have relevant offsetting arrangements, the amendment does not have an impact on the Group s current disclosures. 20

21 IFRS 13 Fair Value Measurement IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when fair value is required to be used, but rather provides guidance on how to measure fair value under IFRS. IFRS 13 defined fair value as an exit price. As a result of the guidance in IFRS 13, the Group re-assessed its policies for measuring fair values, in particular, its valuation inputs such as non-performance risk for fair value measurement of liabilities. IFRS 13 also requires additional disclosures. Application of IFRS 13 has not materially impacted the fair value measurements of the Group. Additional disclosures where required, are provided in the individual notes relating to the assets and liabilities whose fair values were determined. Fair value hierarchy is provided in this note. IAS 1 Presentation of Items of Other Comprehensive Income Amendments to IAS 1 The amendments to IAS 1 change the grouping of items presented in other comprehensive income (OCI). Items that could be reclassified (or recycled ) to profit or loss at a future point in time (for example, actuarial gains and losses on defined benefit plans) would be presented separately from items that will never be reclassified (for example, net gain on hedge of net investment, net movement on cash flow hedges and net loss or gain on available-for-sale financial assets). The amendment affects presentation only and has no impact on the Group s financial position or performance. IAS 19 Employee Benefits (Revised) The IASB has issued numerous amendments to IAS 19. These range from fundamental changes such as removing the corridor mechanism and the concept of expected returns on plan assets to simple clarifications and re-wording. The amendment becomes effective for annual periods beginning on or after 1 January The Group has early adopted the standard in its 2012 Financial Statements. IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine IFRIC 20 applies to waste removal (stripping) costs incurred in surface mining activity, during the production phase of the mine. The interpretation addresses the accounting for the benefit from the stripping activity. This interpretation did not have an impact on the Group s financial position and performance. Improvements to IFRSs (Issued May 2012) In May 2012, the IASB issued the cycle improvements to its standards and interpretations, primarily with a view to removing inconsistencies and clarifying wording. When the adoption of an improvement is deemed to have an impact on the financial statements or the performance of the Group, its impact is described below: IAS 1 Presentation of Financial Statements: The amendments clarify the difference between voluntary additional comparative information and the minimum required comparative information. An entity must include comparative information in the related notes to the financial statements when it voluntary provides comparative information beyond the minimum required comparative period. The amendments also clarify that the opening statement of financial position (as at 1 January 2012 in the case of the Group), presented as a result of retrospective restatement or reclassification of items in financial statements, does not have to be accompanied by comparative information in the related notes. As a result, the Group has not included comparative information in respect of the opening statement of financial position as at 1 January The amendments affect presentation only and disclosure only, and have no impact on the Group s financial position of performance. IAS 16 Property, Plant and Equipment: The amendment clarifies that major spare parts and servicing equipment that meet the definition of property, plant and equipment are not inventory. The amendments affect presentation only and disclosure only, and have no impact on the Group s financial position of performance. IAS 32 Financial Instruments: Presentation: The amendment clarifies that income taxes arising from distributions to equity holders are accounted for in accordance with IAS 12. The amendment removes existing income tax requirements from IAS 32 and requires entities to apply the requirements in IAS 12 to any income tax arising from distributions to equity holders. This improvement did not have an impact on the Group s financial position. 21

22 3 Standards issued but not yet effective Standards and interpretations issued but not yet effective up to the date of issuance of the Group s financial statements are listed below. The listing of standards and interpretations issued are those that the Group reasonably expects to have an impact on disclosures, financial position or performance when applied at a future date. The Group intends to adopt these standards and interpretations when they become effective. IFRS 9 Financial Instruments, effective date has been postponed and has not yet been determined IFRS 10 Consolidated Financial Statements, effective 1 January 2014 IFRS 11 Joint Arrangements, effective 1 January 2014 IFRS 12 Disclosure of Interests in Other Entities, effective 1 January 2014 IFRS Transition Guidance, effective 1 January 2014 IFRS 10, IFRS 12 and IAS 27 - Investment Entities, effective 1 January 2014 IAS 19 Employee Benefits Defined benefit Plans: Employee Contributions, effective 1 July 2014 IAS 27 Separate Financial Statements, effective 1 January 2014 IAS 28 Investments in Associates and Joint Ventures, effective 1 January 2014 IAS 32 Financial Instruments: Presentation Offsetting Financial Assets and Financial Liabilities, effective 1 January 2014 IAS 36 Recoverable amount disclosures (ammendments), effective 1 January 2014 IAS 39 Financial Instruments: Recognition and Measurement - Novation of Derivatives and Continuation of Hedge Accounting, effective 1 January 2014 IFRIC 21 Levies, effective 1 January 2014 Annual Improvements to IFRSs Cycle (Issued December 2013), effective 1 July 2014 Annual Improvements to IFRSs Cycle (Issued December 2013), effective 1 July 2014 IFRS 9 Financial Instruments: Classification and Measurement IFRS 9 as issued reflects the first and the third phase of the IASBs work on the replacement of IAS 39 and applies to classification and measurement of financial assets and liabilities as defined in IAS 39 (first phase) and hedge accounting (third phase). In subsequent phases, the IASB is addressing impairment of financial assets and hedge accounting. The adoption of the first phase of IFRS 9 will have an effect on the classification and measurement of the Group s financial assets and on hedge accounting, but will not have an impact on the classification and measurement of the Group s financial liabilities. The Group will quantify the effect in conjunction with the other phases, when the final standard including all phases is issued. The effective date of IFRS 9 has been postponed and has not yet been determined. IFRS 10 Consolidated Financial Statements IFRS 10 establishes a single control model that applies to all entities including special purpose entities. IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements. It also includes the issues raised in SIC-12 Consolidation - Special Purpose Entities. IFRS 10 changes the definition of control such that an investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. To meet the definition of control in IFRS 10, all three criteria must be met, including: (a) an investor has power over an investee; (b) the investor has exposure, or rights, to variable returns from its involvement with the investee; and (c) the investor has the ability to use its power over the investee to affect the amount of the investor s returns. The standard becomes effective for financial years beginning on or after 1 January This standard will not have an impact on the Group s financial position. IFRS 11 Joint Arrangements IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities Non-monetary Contributions by Venturers. IFRS 11 removes the option to account for jointly controlled entities using proportionate consolidation. Instead, jointly controlled entities that meet the definition of a joint venture must be accounted for using the equity method. The standard becomes effective for financial years beginning on or after 1 January This standard will not have an impact on the Group s financial position. 22

23 IFRS 12 Disclosure of Interests in Other Entities IFRS 12 sets out the requirements for disclosures relating to an entity s interests in subsidiaries, joint arrangements, associates and structured entities. The requirements in IFRS 12 are more comprehensive than the previous existing disclosure requirements for subsidiaries. While the Group has subsidiaries with non-controlling interests, there are no unconsolidated structured entities. The standard becomes effective for financial years beginning on or after 1 January IFRS Transition Guidance The amendments clarify the transition guidance in IFRS 10 Consolidated Financial Statements and also provide additional transition relief in IFRS 10, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities. The amendments will have no impact on the Group s financial position and performance. The transition guidance becomes effective for financial years beginning on or after 1 January IFRS 10, IFRS 12 and IAS 27 Investment Entities The amendments provide an exception to the consolidation requirement for entities that meet the definition of an investment entity under IFRS 10. The exception to consolidation requires investment entities to measure particular subsidiaries at fair value through profit or loss. It is not expected this amendment would be relevant to the Group, since none of the entities in the Group would qualify to be an investment entity under IFRS 10. The amendments become effective for financial years beginning on or after 1 January IAS 19 Employee Benefits Defined Benefit Plans: Employee Contributions The amendment simplifies the accounting for contributions from employees or third parties to defined benefit plans that are independent of the number of years of employee service. The Group is currently assessing the impact of this standard. The amendment becomes effective for financial years beginning on or after 1 July IAS 27 Separate Financial Statements (as revised in 2011) As a consequence of the new IFRS 10 and IFRS 12, what remains of IAS 27 is limited to accounting for subsidiaries, jointly controlled entities, and associates in separate financial statements. The revised standard will have no impact on the Group s financial position and performance. The revised standard becomes effective for financial years beginning on or after 1 January IAS 28 Investments in Associates and Joint Ventures (as revised in 2011) As a consequence of the new IFRS 11 and IFRS 12, IAS 28 has been renamed IAS 28 Investments in Associates and Joint Ventures, and describes the application of the equity method to investments in joint ventures in addition to associates. The revised standard will have no impact on the Group s financial position and performance. The revised standard becomes effective for financial years beginning on or after 1 January IAS 32 Financial Instruments: Presentation Offsetting Financial Assets and Financial Liabilities The amendments clarify the meaning of currently has a legally enforceable right to set-off and the criteria for non-simultaneous settlement mechanisms of clearing houses to qualify for offsetting. As the Group is not setting off financial instruments in accordance with IAS 32 and does not have relevant offsetting arrangements, the amendment will not have an impact on the Group. The amendments become effective for financial years beginning on or after 1 January IAS 36 Impairment of Assets Recoverable Amount Disclosures for Non-financial Assets The amendments remove the unintended consequences of IFRS 13 on the disclosures required under IAS 36. In addition, these amendments require disclosure of the recoverable amounts for the assets or CGUs for which impairment losses have been recognised or reversed during the period. These amendments are effective retrospectively for annual periods beginning on or after 1 January 2014 with earlier application permitted, provided IFRS 13 is also applied. 23

24 3 IAS 39 Financial Instruments: Recognition and Measurement Novation of Derivatives and Continuation of Hedge Accounting These amendments provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria. The Group has not novated its derivatives during the current period. However, these amendments would be considered for future novations. The amendments become effective for financial years beginning on or after 1 January IFRIC 21 Levies IFRIC 21 clarifies that an entity recognises a liability for a levy when the activity that triggers payment, as identified by the relevant legislation, occurs. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that no liability should be anticipated before the specified minimum threshold is reached. This interpretation will have no impact on the Group s financial position and performance. IFRIC 21 becomes effective for financial years beginning on or after 1 January Improvements to IFRSs Cycle (Issued December 2013) The IASB issued the cycle improvements to its standards and interpretations, primarily with a view to removing inconsistencies and clarifying wording. IFRS 2 Share-based Payment: The performance condition and service condition definitions were clarified to address several issues. IFRS 3 Business Combinations: It was clarified that contingent consideration in a business combination that is not classified as equity is subsequently measured at fair value through profit or loss whether or not it falls within the scope of IFRS 9 Financial Instruments. IFRS 8 Operating Segments: It was clarified that if operating segments are combined, the economic characteristics used to assess whether the segments are similar must be disclosed. It was clarified that the reconciliation of segment assets to total assets is only required to be disclosed if this reconciliation is reported to the chief operating decisions maker, similar to the required disclosure for segment liabilities. IFRS 13 Fair Value Measurement: It was clarified in the Basis for Conclusions that short-term receivables and payables with no stated interest can be held at invoice amounts when the effect of discounting is immaterial. IAS 16 Property, Plant & Equipment and IAS 38 Intangible Assets: The revaluation method was clarified: accumulated depreciation or amortisation is eliminated so that the gross carrying amount and carrying amount equal the market value. IAS 24 Related Party Disclosures: It was clarified that a management entity - an entity that provide key management personnel services - is a related party subject to related party disclosure requirements. An entity that uses a management entity is required to disclose the expenses incurred for management services. The Group is currently assessing the impact of this standard. The improvements become effective for financial years beginning on or after 1 July Improvements to IFRSs Cycle (Issued December 2013) The IASB issued the cycle improvements to its standards and interpretations, primarily with a view to removing inconsistencies and clarifying wording. IFRS 3 Business Combinations: It was clarified that joint arrangements, and not only joint ventures, are outside the scope of IFRS 3. It was further clarified that the scope exemption only applies to the accounting in the financial statements of the joint arrangement itself. IFRS 13 Fair Value Measurement: It was clarified that the portfolio exception can be applied to financial assets, financial liabilities and other contracts. IAS 40 Investment Property: The interrelationship between IFRS 3 and IAS 40 was clarified. The description of ancillary services in IAS 40 differentiates between investment property and owner-occupied property. IFRS 3 is used to determine if the transaction is the purchase of an asset or a business combination. The Group is currently assessing the impact of this standard. The improvements become effective for financial years beginning on or after 1 July

25 Significant accounting policies Subsidiaries Subsidiaries are companies in which Connexxion Holding NV directly or indirectly exercises control. Control means the Group directly or indirectly has the power to govern the financial and operating policies of a company so as to obtain benefits from the activities of that company. The financial statements of such subsidiaries are included in the consolidated financial statements as from the date control is acquired up to the date the Group ceases to hold control. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group. The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Acquisition related cost are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. On an acquisition to acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest s proportionate share of the acquiree s net assets. The principal Group companies included in the consolidation of Connexxion Holding NV are: Connexxion Openbaar Vervoer NV, Haarlem, 100% Hermes Groep NV, Weert, 100% Connexxion Taxi Services BV, IJsselmuiden, 100% Connexxion Tours BV, Hilversum, 100% Connexxion Ambulancezorg BV, Haarlem, 100% Transactions eliminated on consolidation Intra group balances and intra group transactions, and any unrealised gains or losses arising from intra group transactions are eliminated. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, to the extent that there is no evidence of impairment. Associates and jointly controlled entities Associates are companies over which financial and operational policies the Group has significant influence but not control. These are investments in equity accounted investees, net of any impairments from the date the significant influence commences to the date it effectively ceases. The principal associates are and the Group s percentage of ownership in the capital of the associates are: REISinformatiegroep BV, Utrecht, the Netherlands, 32.8% ANT (Advanced Netherlands Transport) BV, Capelle a/d IJssel, the Netherlands, 20% Bedrijfsvervoer Limburg, Roermond, the Netherlands, 25% Jointly controlled entities are companies in which the Group has joint control with two or more parties under contractual arrangements. Jointly controlled entities are investments in equity accounted investees from the date joint control commences to the date it effectively ceases. The principal jointly controlled entities are: Schiphol Travel Taxi BV, Schiphol, the Netherlands, 50% CTS Noord BV, Assen, the Netherlands, 51%. The entity is accounted for as a jointly controlled entity based on an unanimous voting clause 25

26 3 When the Group s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest (including any long-term investments) is reduced to nil in the Group s statement of financial position and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee. The accounting policies of jointly controlled entities and associates have been aligned with those of the Group. The list with information on capital interests as referred to in Sections 379 and 414, Part 9, Book 2 of the Dutch Civil Code, has been filed with the Trade Register of the Hilversum Chamber of Commerce. Foreign currencies Transactions in foreign currencies are translated into the respective functional currencies of group entities at exchange rate on the date of transaction. Any result on translation is recognised as profit or loss. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Goodwill All business combinations are accounted for using the purchase method. Goodwill is recognised upon acquisition of subsidiaries. Goodwill represents the difference between the acquisition price and the fair value of the net identifiable assets acquired. Goodwill is valued at historical cost net of accumulated impairments, and is tested annually for impairment or more frequent if events indicate that the asset might be impaired. Hereby the cash generating units are equal to the product lines; Public Transport, Taxi Services, Tours and Ambulance Services. Negative goodwill arising upon acquisition is recognised directly in the statement of income. For jointly controlled entities and associates, the carrying amount of goodwill is included in the carrying amount of the investment in the jointly controlled entity or associate. Capitalised contract rights Capitalised contract rights relate to acquired passenger transport contracts recognised upon acquisition of businesses. The fair value upon acquisition is determined using future cash flows of revenues and costs of passenger transport contracts. Capitalised contract rights are amortised on a straight-line basis over the contract period. Contract rights with indefinite useful life are not amortised but tested for impairment annually. At each reporting date the Group assesses whether there is an indication for a possible impairment of the capitalised contract rights. If such an indication exists, the Group determines the recoverable value of the capitalised contract rights. An impairment loss is recognised when the book value exceeds the recoverable value. The recoverable value is based on future cash flows discounted at a rate that reflects the risks of the underlying contract. Property, plant and equipment Property, plant and equipment are stated at cost or deemed cost, net of accumulated depreciation and impairments. The cost includes expenditure that is directly attributable to the acquisition of the item. Property, plant and equipment that are expected to be recovered primarily through sale, are classified as not used in operations. Gains and losses on disposal are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised within expenses in the statement of income. Insofar as an item of property, plant or equipment contains substantial components having different useful lives, these components are recognised as individual items of property, plant and equipment, where possible. The Group applies a componentbased approach in depreciating these substantial components. Fixed assets under construction are carried at expenditure incurred. Leases effectively transferring all the risks and rewards incidental to ownership to the Group are classified as finance leases. Property, plant and equipment acquired under lease agreements that are classified as finance lease are carried at the lower of fair value or the present value of the minimum lease payments at inception of the lease less accumulated depreciation and impairments. The accounting treatment of finance lease assets subsequent to initial recognition is equal to the accounting treatment of owned assets, whilst consideration is given to the lease period. 26

27 Replacement costs relating to property, plant and equipment are capitalised if the future economic benefits of the asset will flow to the Group and the costs of such replacement investments can be reliably measured. All other costs are recognised in the statement of income as incurred. The replaced part is derecognised in accordance with the provisions of IAS Depreciation is based on the useful life and calculated using fixed percentages of cost, taking into account any (guaranteed) residual value. Depreciation starts as from the moment the asset is put into use. The annual depreciation as a percentage of cost for various categories of property, plant and equipment, based on the estimated useful life of the asset, is listed below: Land: 0% Buildings 1) : 2% Rolling stock 2) : 3% 20% Other: 5% 34% 1) Buildings on land on long leases are depreciated over shorter of the term per the depreciation policy and the term per the lease agreement. 2) Depending on the term of the concession and relating assets. Impairment of non-financial assets The carrying amounts of the Group s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset s recoverable amount is estimated. For goodwill and other intangible assets with indefinite lives or which are not yet available for use, the recoverable amount is estimated at each reporting date. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the cash generating unit ). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination. Within the Group the Public Transport division and the Taxi Services, Tours and Ambulance Services division are considered to be the lowest level of cash generating units. For all other assets, impairment tests are conducted at the level of cash-generating units, generally represented by a customer contract. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. 27

28 3 Financial Asset Classification The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, and available for sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Group s loans and receivables comprise trade and other receivables and cash and cash equivalents in the statement of financial position. Recognition and measurement Regular purchases and sales of financial assets are recognised on the trade-date, the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Loans and receivables are subsequently carried at amortised cost using the effective interest method. Non-derivative financial instruments are initially recognised at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs. Subsequent to initial recognition non-derivative financial instruments are measured as described below. The Group s investments in equity securities and certain debt securities are classified as available for sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes there in are recognised through other comprehensive income. Impairment of financial assets A financial asset is assessed at each reporting date to determine whether there is objective evidence that it is impaired. The criteria that the Group uses to determine whether objective evidence of impairment exists include: Significant financial difficulty of the issuer or obligor. A breach of contract, such as a default or delinquency in interest or principal payments. The Group, for economic or legal reasons relating to the borrower s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider. It becomes probable that the borrower will enter bankruptcy or other financial reorganisation. The disappearance of an active market for that financial asset because of financial difficulties. Observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including: a) Adverse changes in the payment status of borrowers in the portfolio; and b) National or local economic conditions that correlate with defaults on the assets in the portfolio. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor s credit rating), the reversal of the previously recognised impairment loss is recognised in the consolidated statement of income. 28

29 Other investments including derivatives Non-current receivables and loans are carried at amortised cost net of impairments. All investments are reviewed at the statement of financial position date for objective indications that their carrying value may not be recoverable. The impairment amounts to the difference between amortised cost and the value of future cash flows, discounted at the original effective interest rate. Cash flows with a remaining term to maturity under twelve months are not discounted. The accounting treatment of derivative financial instruments is disclosed in an earlier paragraph. Trade and other receivables Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Inventories Inventories are carried at the lower of historical cost and net realisable value. Provisions for inventories are determined by means of an individual assessment of the inventories at product group level. Realisable value is the estimated selling price in ordinary operations, net of estimated costs of completion and costs to sell. Historical cost is based on weighted average prices, and includes the costs of purchase and transport. Derivative financial instruments The Group uses derivatives to mitigate the risk of interest fluctuations of interest payable on loans and borrowings and fuel price fluctuations. Derivatives are initially recognised at fair value; attributable transaction costs are recognised in profit or loss when incurred. Subsequent to initial recognition, derivatives are measured at fair value. The Group designates the derivatives as hedges of a particular risk associated with a highly probable forecast transaction (cash flow hedge). The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in the statement of income. Amounts accumulated in equity attributable to equity holders are released to profit or loss in the periods when the hedged item affects profit or loss. The effective portion of movements in fair value for derivatives is recognised directly in other comprehensive income. The ineffective portion of any change in fair value is taken directly to the net finance expenses in the statement of income. Hedge documentation is prepared which includes the method of prospective and retrospective testing for effectiveness. If a hedging transaction terminates, the deferred gains or losses will continue to be included in equity attributable to equity holders and is recognised in the statement of income when the forecast transaction is recognised in the statement of income. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity attributable to equity holders is immediately transferred to the statement of income. 29

30 3 Cash and cash equivalents Cash and cash equivalents comprise cash in hand and cash at banks. Demand deposits are considered cash and cash equivalents. All cash and cash equivalents are at immediate disposal of the Group. The Group changed the presentation of bank overdrafts. Bank overdrafts are now presented as a component of cash and cash equivalents as these overdrafts are an integral component of the Group s cash management. Comperative numbers have been adjusted to reflect this change in presentation. Equity attributable to equity holders The share capital is classified as equity. Dividends are recognised as a liability in the period in which they are declared. Loans and borrowings At inception of the loan, loans and borrowings are recognised at fair value, net of transaction costs incurred. Subsequent to initial recognition, loans and borrowings are carried at amortised cost applying the effective interest method. Any difference between cost and the amount of the repayment is recognised in the statement of income over the term to maturity. Interest paid on loans and borrowings is recorded in the statement of income as finance expense. The capitalised financing fees are amortised over the expected life of the related borrowing using the effective interest method and are presented in the statement of income as finance expense. Provisions Provisions are recognised for present, legal or constructive obligations on statement of financial position date, when the liability can reliably be estimated and settlement is likely to require an outflow of resources in the future. Provisions with a term exceeding one year are measured by discounting expected future cash flows based on a pre-tax discount rate that reflects the current market situation and risks specific to the liability. Provisions with a term of less than one year are presented as current provisions at nominal value. Long-term employee benefits For defined benefit plans, the operating and financing costs are recognised separately in the statement of income. The amount charged to operating cost in the statement of income is the cost of accruing pension benefits promised to employees over the year, plus the costs of individual events such as past service benefit enhancements, settlements and curtailments (such events are recognised immediately in the statement of income). Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. Any differences between the interest on assets and the return actually achieved, and any changes in the liabilities over the year due to changes in assumptions or experience within the plans, are recognised immediately in the statement of comprehensive income. The defined benefit plan surplus or deficit in the balance sheet comprises the total for each plan of the fair value of plan assets less the present value of the defined benefit obligation (using a discount rate based on high quality corporate bonds). For defined contribution plans and multi-employer plans to which the company is a relatively small contributor, the charges to the statement of income are the company contributions payable, as the company s obligation is limited to contributions paid into the plans. The assets and liabilities of such plans are not included in the balance sheet of the holding. 30

31 All other pension funds the Group uses have stated that they are unable to provide the required information for the IAS 19 calculations and disclosures. All plans are multi-employer plans. The Group is not obliged in case of underfunding in the pension funds to pay supplementary contributions other than by way of future premium increases. Contributions to pension schemes are accounted for as defined contribution schemes accordingly and are recognised as an expense in the statement of income as incurred. Other long-term employee benefits relate to provisions for long-term absenteeism, future jubilee benefits, employment termination benefits and job-related discharge from service dictated by age. Provision for pending damage claims The provision for pending damage claims mainly pertains to future settlements of bodily injuries involving the Group s vehicles. The provision is determined by the WAM-insurers (Wet Aansprakelijkheidsverzekering Motorrijtuigen Dutch Motor Insurance Liability Act) on the basis of the applicable standards for bodily injuries using insurers historical data. Provision for onerous contracts A provision for onerous contracts is recognised when the unavoidable costs of contractual commitments are expected to exceed the prospective economic benefits of the contract. Restructuring provision Restructuring provisions are recognised based on detailed and formal restructuring plans, which have been approved by the Executive Board and which have either been started or communicated to the parties involved. Environmental provision The environmental provision is used for the restoration of contaminated land caused by the Group or its legal predecessors. The extent of the provision has been determined with the assistance of experts in this field based on specific environmental reviews. Risks from claims, disputes and legal proceedings Provisions for present obligations arising from claims, disputes and legal proceedings to the extend that it is more likely than not that an outflow of economic benefits will occur. Current liabilities Current liabilities are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Current taxes and deferred taxes The amount of tax included in the statement of income represents the total amount of taxes based on the reported result adjusted for non-deductible expenses and non-taxable income. Deferred tax assets and deferred tax liabilities are recognised for temporary differences, non-utilised net operating losses or unused tax facilities. Deferred tax assets and deferred tax liabilities are calculated based on the statutory tax rates prevailing at year-end or at the rates prevailing in the next few years that have been enacted or substantively enacted. Temporary differences arise from the difference between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. A deferred tax asset is recognised if it is likely that it will be offset against future taxable profits. The carrying amount of the deferred tax assets are reviewed at statement of financial position date and reduced insofar as it is no longer likely that sufficient profits for tax purposes will be available to realise the asset in whole or in part. Current and deferred tax assets and current and deferred tax liabilities are only netted if the Group has a right enforceable at law to do so, and the assets and liabilities relate to the same tax authorities and taxpayer, as well as the same term. Corporate income tax is allocated to the subsidiaries as if they were autonomous taxpayers. 31

32 3 Revenue Revenue, net of discounts and turnover taxes, including governmental grants other than those related to assets, represents amounts derived from rendering services and delivering goods during the period. Revenue is recognised in proportion to the services rendered on statement of financial position date if: the amount of revenue can be measured reliably; it is probable that the economic benefits will flow to the Group; the extent to which the services were rendered on statement of financial position date can be measured reliably; the costs already incurred for the transaction and the costs required for its completion can be measured reliably. Leases Leases in which a significant part of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Operating lease payments are recognised as an expense on a straight-line basis over the lease term, unless another allocation is more representative of the time pattern of the Group s benefits. Incentives received associated with leases are recognised over the lease period. If the Group acts as lessor in an operating lease, assets are presented in its statement of financial position according to the nature of the asset. Income from operating leases is recognised in income on a straight-line basis over the lease term, unless another allocation is more representative of the time pattern of the Group s benefits. Finance income and finance expense Finance income and finance expense include interest paid on loans and interest received on funds invested and realised gains or losses on the ineffective portion of a hedge. Interest income is recognised in the statement of income as incurred. The interest expense component of payments under finance lease contracts is recognised in the statement of income based on the implicit interest rate. The effect of discounting non-current statement of financial position items is included in profit or loss in the net finance expense. Cash flow statement The cash flow statement is prepared using the indirect method and distinguishes cash flows from operating activities, investing activities and financing activities and reconciles earnings before tax to net cash flows to the change in cash and cash equivalents. Interest paid is presented as financing cash flow, interest received is presented as operating cash flow. Managing financial risk Inherent to the nature of the Group s ordinary activities in the field of public and private passenger transport and related services, the Group is exposed to certain financial risks. The Group s strategy within the alliance Transdev focuses on reinforcing its leading position in the Netherlands. The Group finances its activities in a proper balance between interest-bearing facilities and equity. 32

33 Capital management Capital of the Group includes equity and can be broken down as follows: share capital; other comprehensive income; statutory and other non-distributable reserves; retained earnings. The Group s objectives when managing capital are: to safeguard the Group s ability to continue as a going concern; to provide an adequate return on capital by choosing a capital structure in line with business risk; to comply with external capital requirements. The Group manages its capital on the long run by forecasting the development of its asset base and using target leverage levels. These multi-year forecasts and the underlying capital expenditure budget are an integral part of the business plan, which has a forecast horizon from 2014 through In the annual plan the most recent information is included on concessions that have been awarded to the Group. These concessions largely determine the amount of capital expenditures in the coming years. The Group uses a revolving credit facility to fund its operations. For further detail, reference is made to Section Credit risk The Group management has formulated a credit policy. For each counterparty, including clients, a credit rating is performed and credit limits are set, if relevant. These limits are reviewed periodically. The Group considers the credit risk exposure to be limited, since the main part of the revenues is realised with (local) government authorities. Derivative transactions are solely concluded with financial institutions having a credit rating which is equal to or higher than an A-credit rating. In addition, The Group always requires a settlement agreement with the counterparty. For details on the hedge policy, reference is made to Section For an overview of exposure to credit risk, reference is made to Section Liquidity risk The Group s policy is to have adequate access to financial resources at all times in order to fulfil its obligations. In this context, it should be noted that a change of control clause has been included in the agreements with financial institutions. This means that the financing agreements are cancellable if an important change in ownership occurs. For details on the maturity of non-current receivables and loans and borrowings, reference is made to Section and Section respectively. The Group uses a revolving credit facility for the funding of its operations. For further detail, reference is made to Section The amount available under the facility totalled EUR 40.0 million at 31 December 2013 (2012: EUR million). 33

34 3 Market risk Market risks consist of: Price risk; Interest rate risk; Currency risk. Price risk The policy in relation to price risk is to hedge price risks resulting from the purchase of diesel fuel for current transport concessions, insofar as this price risk has not been hedged or has been hedged insufficiently by stipulations in the contract for revenue indexation. The fair value of the outstanding positions amounts to EUR 0.2 million at year-end 2013 (2012: EUR 1.3 million). Under these contracts, the Group is obliged to settle the difference between the fixed and variable price with the hedging party. The Group periodically tests the sensitivity of the diesel hedges. A 1% change in the fuel price (excluding excise taxes) would have an impact of EUR 0.5 million (2012: EUR 0.5 million) on the profit for the period on a yearly basis. However, for 2014, the Group has hedged over 75% of its estimated fuel consumption. Interest rate risk With a view on its strategy, the Group constantly evaluates capital markets for opportunities to adjust her financing. The Group mainly finances its activities through long-term interest-bearing loans, finance lease commitments and operating leases. The long-term loans have a floating interest rate. The financial and operating lease obligations in general have a longer maturity with an accompanying long-term interest rate. Cash and cash equivalents, comprising cash and bank balances, are EUR 45.1 million at year-end 2013 (2012: EUR 35.1 million). The Group s exposure to interest rate risk is limited. Currency risk The Group is not exposed to currency risks, as nearly all transactions are conducted in euros. Liability risk Owing to its size, the Group only insures risks for which an existing legal obligation exists and/or risks that may have a material effect on the Group. As a result the Group is insured for liability risks. Furthermore assets are insured against a number of risks with a significant level or retained exposure. The Group has procedures in place to prevent damage to vehicles and allow for frequent monitoring of the insured risks. Liabilities for subsidiaries The Company and its subsidiaries form a tax group for corporate income tax purposes and for VAT purposes. As a result the Group is jointly and severally liable for all tax debts of subsidiaries for the period during which it was a member of this tax group. Legal proceedings The Group recognised a provision for risks resulting from claims, disputes and legal proceedings. Based on the currently available data, legal advice sought and the amounts provided for, the Group does not expect the outcome of legal proceedings to have a material adverse effect on the Group s financial position. 34

35 Fair value estimates The table below summarizes financial instruments carried at fair value by valuation method. The different levels have been defined as follows: 1. Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1). 2. Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly (derived from prices) (level 2). 3. Inputs for the assets or liabilities that are not based on observable market data (level 3). For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transactions have occurred between levels in the hierarchy be re/assessing categorisation, based on the lowest level input that is significant to the fair value measurement as a whole at the end of each reporting period. The fair value of financial instruments traded in active markets is based on quoted market prices at the statement of financial position date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm s length basis. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1. The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required for fair value are observable, the instrument is included in level 2. If one or more of the significant inputs is not traded on an active market and not based on observable market data, the instrument is included in level 3. The Group s specific credit risk was taken into account to determine the fair value of long term loans. The Group s own nonperformance risk as at 31 December 2013 was assessed to be insignificant. The Group s specific credit risk was taken into account to determine the fair value of long term loans. As at 31 December 2013 and 31 December 2012 the fair value was materially the same as the carrying value for assets and liabilities not measured at fair value. The value measurement classification is as follows: Fair value measurement Quoted prices (level 1) Observable input (level 2) Unobservable inputs (level 3) Financial assets and financial liabilities Available for sale financial assets Diesel swaps Not applicable 35

36 3 The following table presents the Group's assets and liabilities that are measured at fair value at 31 December 2013: Level 1 Level 2 Level 3 Total Financial assets and liabilities at fair value through profit or loss Derivatives used for hedging Available for sale financial assets Debt investments Liabilities for which fair values are disclosed Finance lease obligations Floating rate borrowing Total The following table presents the Group s assets and liabilities that are measured at fair value at 31 December 2012: Level 1 Level 2 Level 3 Total Financial assets and liabilities at fair value through profit or loss Derivatives used for hedging Available for sale financial assets Debt investments Liabilities for which fair values are disclosed Finance lease obligations Floating rate borrowing Total The Group enters into derivative financial instruments with various counterparties, principally financial institutions with investment grade credit ratings. Derivatives valued using valuation techniques with market observable inputs are commodity forward contracts. The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, interest rate curves and forward rate curves of the underlying commodity. As at 31 December 2013, the marked-to-market value of derivative asset positions is net of a credit valuation adjustment attributable to derivative counterparty default risk. The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships and other financial instruments recognised at fair value. Long-term fixed and floating rate receivables and borrowings are evaluated by the Group based on parameters such as interest rate and individual creditworthiness of customers. Based on this evaluation, allowances are taken into account for expected losses as at balance sheet date. 36

37 Critical accounting estimates and judgements Public Transport revenue In Public Transport, passenger transport revenue from subscriptions and student travel cards are estimated for the fourth quarter. This estimate is based on an extrapolation of historical data derived from information received from third parties with regard to passenger transport revenue year to date October. In the past, deviations from these estimates proved not to have a significant influence on the prior-year revenues. Any deviation, relative to sales which is recognised in the subsequent year, is however directly taken as a component of profit and loss. Deferred tax assets The Group recognises deferred tax assets for losses carried forward based on the probability that sufficient future taxable profits will be available to utilise the losses carried forward before expiration. The assessment is based on the Group s business plan. The plan has a planning horizon through Lease accounting In the course of business, the Group enters into lease arrangements and classifies the arrangement as a finance lease or an operating lease in accordance with the provisions of IAS 17 Leases. The classification involves a degree of managerial judgement. Impairment testing The Group performed its annual impairment tests in December 2013 and The outcome of this test is largely dependent on a number of assumptions including future operating margins, discount rates and market shares. The estimate of these parameters involves management judgment. Any deviation will be taken as a component of profit and loss. 37

38 Property, plant and equipment 2012 Other property, Land and Under Not used plant and buildings Rolling stock construction in operations equipment Total Cost Balance at 1 January Additions Effect of acquisition Disposals (5.1) (121.8) - - (12.8) (139.7) Reclassification (0.1) 0.7 (0.8) Other changes (0.3) (0.3) Balance at 31 December Accumulated depreciation and impairments Balance at 1 January 2012 (18.2) (288.6) - (36.2) (84.0) (427.0) Depreciation (1.6) (45.2) - (1.0) (15.1) (62.9) Impairment losses recognised in the income statement (including reversal) Effect of acquisition Disposals Reclassification - (1.7) (0.9) Other changes Balance at 31 December 2012 (17.7) (238.2) (0.9) (35.4) (86.4) (378.6) Carrying amount At 1 January At 31 December

39 2013 Other property, Land and Rolling Under Not used plant and buildings stock construction in operations equipment Total Cost Balance at 1 January Additions Effect of acquisition Disposals (1.6) (87.3) - - (9.4) (98.3) Reclassification (9.1) Other changes Balance at 31 December Accumulated depreciation and impairments Balance at 1 January 2013 (17.7) (238.2) (0.9) (35.4) (86.4) (378.6) Depreciation (1.4) (38.7) - - (15.5) (55.6) Impairment losses recognised in the income statement (including reversal) - (9.1) - - (10.6) (19.7) Effect of acquisition - (2.6) - - (0.1) (2.7) Disposals Reclassification (0.1) (5.1) 0.1 (0.5) Other changes Balance at 31 December 2013 (18.2) (233.9) (0.9) (40.5) (103.8) (397.3) Carrying amount At 1 January At 31 December

40 3 Assets held under finance lease Rolling stock includes finance lease contracts with a carrying amount of EUR 58.2 million (2012: EUR 66.3 million). Land and buildings includes finance leases with a carrying amount of EUR 3.7 million (2012: EUR 4.2 million). Pledged property, plant and equipment The Group pledged its moveable assets (including rolling stock) with a carrying amount of EUR million (2012: EUR million) as security for financing Intangible assets Capitalised Other contract intangible Goodwill rights assets Total Cost Balance at 1 January Additions Effect of acquisition Disposals (1.6) (1.3) (20.3) - (0.2) - (22.1) (1.3) Other changes Balance at 31 December Accumulated amortisation and impairments Balance at 1 January - (0.4) (19.6) (18.0) - - (19.6) (18.4) Amortisation - - (2.7) (1.6) (0.1) - (2.8) (1.6) Impairment losses recognised in the income statement (4.5) - (0.5) - (0.6) - (5.6) - Effect of acquisition Disposals Other changes Balance at 31 December (2.9) - (2.5) (19.6) (0.7) - (6.1) (19.6) Carrying amount At 1 January At 31 December

41 Goodwill Goodwill relates to acquired businesses which have been integrated in our divisions and is tested for impairment annually at balance sheet date or more often when conditions indicate an impairment may exist. Goodwill and capitalized contract rights primarily relate to Ambulance Services. In 2013 goodwill impairment charges were recorded for an amount of EUR 4.5 million (2012: EUR 0 million). The disposals in 2013 of net EUR 0 million (2012: EUR 0.9 million) relate to ceased activities. Capitalised contract rights Capitalised contract rights relate to acquired businesses within Ambulance Services. The contract rights acquired in 2013 relate to De Grooth Vervoer BV. No contract rights were acquired in Other intangible assets Other intangible assets relate to the contractual right to transfer initial financing costs towards future concession operators and to software. The right of transfer is depreciated in a straight line over 30 years Impairment testing of goodwill, intangible assets with indefinite lives and tangible assets The Group performed its annual impairment tests in December 2013 and For the purpose of impairment testing, the Group recognizes five cash flow generating units presenting its four main product groups and a corporate unit. All corporate assets and cash flows are allocated to product cash flow generating units (CGU s). During the year, the Group experienced material loss of contracts in three of its most significant CGU s, Public Transport, Taxi Services and Tours. The recoverable amount of each CGU as at 31 December 2013 has been determined based on a value in use calculation using cash flow projections from financial budgets approved by senior management covering a six-year period. The pre-tax discount rate applied to cash-flow projections is 7.7% (2012: 6.5%) and cash flows beyond the six-year period are extrapolated using a 1.40% growth rate (2012: 2.0%). The pre-tax rate represents a net rate of 6.6%. It was concluded that the fair value less cost of disposal did not exceed the value in use. As a result of this analysis, the Group recognised impairment charges amounting to EUR 25.3 million. Impairment of goodwill, other intangible assets and tangible assets Goodwill Other intangible assets Tangible assets Total Public transport (0.7) - (0.2) - (14.7) - (15.6) - Taxi services (3.8) - (0.9) - (3.7) - (8.4) - Tours (1.3) - (1.3) - Total (4.5) - (1.1) - (19.7) - (25.3) - 41

42 3 The table below presents the carying amount of Goodwill, Other Intangible Assets and Tangible Assets at year-end after imparment. Carrying amount of goodwill, other intangible assets and tangible assets Other intangible Goodwill assets Tangible assets Total Public transport Taxi services Tours Ambulance Services Total For all CGU s, the recoverable amount approximates the carrying amount, with the exception of Ambulance Services, where the recoverable amount significantly exceeds the carrying amount. The calculation of the value in use for all CGU s is most sensitive to the following assumptions: gross margin discount rates market share 42

43 Gross margin Gross margins are based on historical experience data and adjusted for anticipated efficiencies. Margin assumptions are specific to each CGU. Discount rates Discount rates represent the current market assessment of the risks specific to the Group, taking into consideration the time value of money and individual risks to the underlying assets that have not been incorporated in the cash flow estimates. The discount rate is based on the specific circumstances of the Group and is derived from its weighted average cost of capital (WACC). The WACC takes into account both debt and equity. The beta-factors are evaluated annually based on publicly available market data. The discount rate is applied to all CGU s. Market share Particularly for the Public Transport and Taxi Services CGU s, market share is largely dependent on winning public tenders. Management has assessed its possibilities to win each public tender and incorporated its assessment in the cash flow forecasts. Assumptions are specific to each CGU. The effect on the recoverable amount are discussed below. Gross margin sensitivity For Public Transport and Tours a decline in gross margin of 0.2 percent point would result in additional impairment. For Taxi Services, a decline in gross margin of 0.3 percent point would result in additional impairment. Ambulance Services is not susceptible to foreseeable changes in gross margin. Discount rate sensitivity For Public Transport and Tours, an increase of the discount rate of 0.2 percent point would result in additional impairment. For Taxi Services, an increase of the discount rate of 0.4 percent point would result in additional impairment. Ambulance Services is not susceptible to foreseeable changes in the discount rate. Market share sensitivity For Public Transport and Tours, a decrease of the growth rate of 0.2 percent point would result in additional impairment. For Taxi Services, a decrease of the growth rate of 0.8 percent point would result in additional impairment. Ambulance Services is not susceptible to foreseeable changes in the growth rate. 43

44 Financial assets and financial liabilities The carrying amounts of each of the categories as defined in IAS 39 is broken down below: Derivative financial instruments Cash flow hedges Diesel swaps Loans, receivables and payables Trade and other receivables Cash and cash equivalents Trade and other payables (140.3) (152.0) Finance lease commitments (64.2) (74.1) Loans from financial institutions (2.6) (1.1) Investments in associates and jointly controlled entities Investments in equity accounted investees includes associates and jointly controlled entities. The movement is detailled in the table below: Associates Jointly controlled entities Total Balance at 1 January (0.2) (0.2) Profit / (loss) for the period (0.3) (0.2) - Balance at 31 December (0.1) (0.2)

45 2013 REISinformatiegroep BV 32.8% Bedrijfsvervoer Limburg BV 25.0% Advanced Netherlands Transport BV 20.0% REISinformatiegroep BV 32.8% Bedrijfsvervoer Limburg BV 25.0% Advanced Netherlands Transport BV 20.0% Investments in associates The total amount of assets, liabilities, revenue and profit or loss of the associates as at 31 December can be broken down as follows (based on 100% share): Off-balance sheet Share Profit / commitments Connexxion Assets Liabilities Equity Revenue loss (-) Investments in jointly controlled entities The total amount of assets, liabilities, revenue and profit or loss of the jointly controlled entities as at 31 December can be broken down as follows (based on 100% share): Off-balance sheet Share Profit / commitments Connexxion Assets Liabilities Equity Revenue loss (-) 2013 Schiphol Travel Taxi BV 50.0% (0.1) CTS Noord BV 51.0% Schiphol Travel Taxi BV 50.0% (0.1) CTS Noord BV 51.0% (0.1)

46 Other investments, including derivatives Notes Derivative financial instruments Loans receivable Total other investments, including derivatives Diesel swaps are disclosed under derivative financial instruments (reference is made to Section ). Non-current receivables mainly pertain to Ambulance Services acquired in Repayments on other non-current loans receivable in the coming year amounting to EUR 0.6 million (2012: EUR 0.3 million) are presented as current receivables. Changes in other non-current loans receivable The changes in other non-current loans receivable were as follows: Balance at 1 January Receivables granted Repayments (0.7) (3.0) Effect of amortisation Reclassifications Balance at 31 December

47 Breakdown of other non-current receivables based on their term and interest rate 2013 < 1 year 1-5 years > 5 years Total Interest rate To 4% Total < 1 year 1-5 years > 5 years Total Interest rate To 4% Total Deferred tax assets and deferred tax liabilities The deferred tax assets and deferred tax liabilities can be allocated to the following items: Deferred tax Deferred tax Deferred tax Deferred tax assets liabilities assets liabilities Property, plant and equipment Provisions Tax losses available for carry-forward Valuation allowance (25.7) - (1.6) - Derivative financial instruments Other Total deferred taxes The deferred tax asset has an expected term of approximately 2 years. During the year, the Group changed its method for estimating future taxable profits. Also the amount of foreseeable taxable income was adversely impacted by loss of concession. The change in estimate includes a time limitation of 5 years. A valuation allowance was recognised for all losses available for carry-forward. The resulting valuation allowance has been recorded as a component of profit and loss. Reference is made to the critical accounting estimates disclosure as included in section

48 3 Statement of changes in temporary income tax differences The changes in temporary income tax differences can be shown as follows: Balance at Balance at 1 January Recognised in Recognised in 31 December 2013 income equity 2013 Property, plant and equipment (0.1) Provisions Tax losses available for carry-forward Valuation allowance (1.6) (24.1) - (25.7) Derivative financial instruments (0.3) (0.1) Other (0.3) Total deferred taxes 18.2 (16.8) Balance at Balance at 1 January Recognised in Recognised in 31 December 2012 income equity 2012 Property, plant and equipment 1.0 (1.1) - (0.1) Provisions 7.4 (2.8) Tax losses available for carry-forward 18.4 (2.5) Valuation allowance (3.2) (1.6) Derivative financial instruments (1.4) (0.3) Other (0.6) (0.3) Total deferred taxes 21.6 (4.5) Inventories Spare parts Other inventories Total inventories At year-end 2013 the provision for inventories amounted to EUR 0.2 million (2012: EUR 0.3 million). 48

49 Trade and other receivables Notes Trade receivables Public transport funds receivable Repayments on non-current receivables in the coming year Derivative financial instruments Prepayments and accrued income Other receivables Total trade and other receivables Trade receivables Gross amount Valuation allowance (4.8) (5.3) Balance at 31 December Ageing trade receivables The ageing of trade receivables can be broken down as follows: Not due Overdue 0-30 days Overdue days Overdue days Overdue more than 90 days Total Trade receivables have been pledged as a security for interest-bearing loans and borrowings. The Group expects to collect the full amount of undue balances of trade receivables based on experience. 49

50 3 The changes in valuation allowances of trade receivables were as follows: Balance at 1 January (5.3) (2.7) Additions (0.6) (4.0) Usage Release Balance at 31 December (4.8) (5.3) Exposure to credit risk The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was: Trade receivables Loans and other receivables Cash and cash equivalents Derivatives used for cash flow hedging Cash and cash equivalents include bank overdrafts of EUR 0.7 million (2012: EUR 0.3 million). Previously the bank overdrafts were presented separate from cash and cash equivalents. As bank overdrafts are integral part of the Group s cash management policy, these amounts have been included in cash and cash equivalents. The comperative numbers have been adjusted to reflect this change. 50

51 Equity attributable to equity holders Authorised share capital The authorised share capital of Connexxion Holding NV amounts to EUR million, divided into 350,000 ordinary registred shares with a nominal value of EUR 1,000 each. Neither the nominal value of the authorised share capital nor the number of shares changed during the current and previous year. Issued capital The issued capital of Connexxion Holding NV amounts to EUR 79.5 million, divided into 79,553 ordinary shares with a nominal value of EUR 1,000 each. The issued capital is fully paid up. Neither the value of the issued capital nor the number of shares changed during the current and previous years. Statutory and other non-distributable reserves The statutory and other non-distributable reserves relate to undistributed profits of subsidiaries, associates and jointly controlled entities. The restricted capital of the Ambulance Services totalled EUR 6.2 million as at year-end 2013 (2012: EUR 6.2 million). Other reserves Other reserves amount to EUR 0.2 million at year-end 2013 (2012: EUR 1.0 million) and relate to the cash flow hedge reserve. The cash flow hedge reserve is a legal reserve. Retained earnings The Executive Board proposes to add the loss for 2013 attributable to equity holders of the Company, in an amount of EUR 58.2 million negative to the retained earnings. The movements in the line item retained earnings are included in the consolidated statement of changes in equity. 51

52 Loans and borrowings Non-current loans and borrowings Finance lease commitments Loans from financial institutions Total non-current loans and borrowings Repayments on loans and borrowings in the coming year Finance lease commitments Total repayments on loans and borrowings in the coming year Total loans and borrowings The repayments on loans and borrowings are presented under the current liabilities. The movement can be detailed as follows: Balance at 1 January Loans granted Repayments (15.3) (62.9) Financing fees (0.4) (2.4) Amortisation of financing fees Balance at 31 December Senior Credit Facility In 2013, the Group ammended its Credit Facilities Agreement to reflect the changes in future financing needs. Upon amendment of the Credit Facilities Agreement, the Group charged the capitalized finance fees to the statement of income. The interest rate margin varies with the leverage ratio (pricing grid) and was initially set at 2.55%. The Credit Facilities Agreement imposes certain restrictions on the Group including the ability to incur additional debt. The Group is also required to partly apply the proceeds of sale of assets to the repayment of debt. Under the Credit Facilities, the Group must adhere to certain covenants including leverage ratio. As of 31 December 2013 the Group complied to these covenants. 52

53 Break-down of loans and borrowings based on their term and interest rate Interest rate 2013 < 1 year 1 5 years > 5 years Total To 4% % to 6% Total Interest rate 2012 < 1 year 1 5 years > 5 years Total To 4% % to 6% Total Finance lease commitments The Group concluded finance lease contracts for rolling stock and buildings. The nominal lease payments at present value can be broken down as follows: Nominal Present Nominal Present lease value lease lease value lease payments payments payments payments < 1 year years > 5 years Total nominal lease payments Effect of discounting Total present value of lease payments Finance lease commitments are subject to the following conditions: The Group undertakes to keep the property in good condition, to insure it and to have it used by Connexxion only. Ownership of the property shall only pass to the lessee after payment of the last instalment and the transfer price. The lease contract will only be terminated due to a destruction of the property or the lessee s bankruptcy. The Group has not recognised any contingent lease payments as a cost in the statement of income. No limitations have been imposed in the lease contract. 53

54 3 The carrying amount of rolling stock under finance lease contracts totalled EUR 58.2 million as at 31 December 2013 (2012: EUR 66.3 million). The carrying amount of land and buildings under finance lease contracts totalled EUR 3.7 million as at 31 December 2013 (2012: EUR 4.2 million) Provisions The movement of the provisions can be broken down as follows: Carrying amount Additions Usage Effect of Release discounting Long-term employee benefits ,3 (1.9) (0.6) Pending damage claims 9.3 1,1 (0.4) (0.4) Onerous contracts 0.4 0,1 (0.4) Restructuring (0.8) (0.1) Environmental 1.6 0,2 (0.1) Litigation and claims - 1, Other 0.9 0,9 (0.1) - - (0.1) 1.6 Total provisions (3.7) (1.1) Carrying amount Additions Usage Effect of Release discounting Other Carrying reclassifications amount Other Carrying reclassifications amount Long-term employee benefits (3.0) (2.7) Pending damage claims (2.0) Onerous contracts (0.6) Restructuring (2.7) (0.3) (0.2) (0.2) 1.8 Environmental (0.7) Litigation and claims (2.2) Other (0.5) (1.2) Total provisions (11.0) (4.9)

55 Breakdown of provisions based on their term Term < 1 year > 1 year < 1 year > 1 year Long-term employee benefits Pending damage claims Onerous contracts Restructuring Environmental Litigation and claims Other Total provisions For a general description of the provisions, reference is made to the accounting policies (reference is made to Section 3.6.2). Long-term employee benefits The provision for long-term employee benefits is intended for benefits paid to employees due to long-term illness, jubilee benefits, termination benefits and for payments for job-related discharge from service dictated by age. For the calculation of provisions for future jubilee benefits, termination benefits and discharge from service dictated by age the Group applies a wage trend of 2.0%. The life expectancy rates are based on AG prognosetafel met ervaringssterfte TW 2010 without backward age adjustments. Effective market bonds with a double A rating have been used as the discount rate. Pending damage claims The provision presents the discounted maximum stop loss amount for bodily insurance net of payments made. Onerous contracts The provision for onerous contracts relates to public transport contracts which are expected to incur a loss during the full term of the concession (i.e. the contract). In this estimate, the Group compares the costs of the contract with the expected economic benefits. Costs that can be avoided by future actions are excluded from the estimated future cash-flows and, in addition, only those costs that can directly be attributed are included in the determination of the total costs. The incremental borrowing rate was used as the discount rate. Restructuring Restructuring provisions are provisions for future payments to employees. The balance at 31 December 2013 mainly relates to the cost associated to the 2011 restructuring and cost saving program. 55

56 Derivative financial instruments The Group acquired derivative financial instruments for hedging the diesel price risk. A hedging policy has been formulated for the hedging of future diesel purchases. The policy stipulates the hedged volume shall not exceed the expected future exposure. Derivative transactions are solely contracted with financial institutions with an A-credit rating, or better. The book value of the derivatives can be specified as follows: Other investments, including derivatives Trade and other receivables Derivatives (0.1) - Trade and other payables, including derivatives (0.5) Total The following table shows the periods in wich the cash flows associated with derivatives that qualify as cash flow hedges are expected to occur in accordance with its contractual obligations as of 31 December Any negative variances between the market rate and the strike are recorded as a component of profit and loss at maturity. As of 31 December Number of litres diesel hedged (x 1 million) Total Gross contractual cash flow of swap in EUR x 1 million (25.8) (7.0) (7.6) (40.4) Total (25.8) (7.0) (7.6) (40.4) The following table shows the periods in wich the cash flows associated with derivatives that qualify as cash flow hedges are expected to occur in accordance with its contractual obligations as of 31 December Any negative variances between the market rate and the strike are recorded as a component of profit and loss at maturity. As of 31 December Number of litres diesel hedged (x 1 million) Total Gross contractual cash flow of swap in EUR x 1 million (22.5) - - (22.5) Total (22.5) - - (22.5) 56

57 Trade and other payables, including derivatives Notes Trade payables Derivative financial instruments Personnel costs Accruals Other liabilities Total trade and other payables, including derivatives Deferred income Public transport funds Other payments received in advance Total deferred income Public transport funds include student card money received in advance for the year Post retirement benefits Plan Characteristics The Group is the main contributor to the separately administred industry-wide pension scheme for the Dutch public transport sector (SPOV). A substantial number of employees, former employees, and retirees are covered by these plans. The SPOV plan is a career average plan with discretionary indexation. As there is insufficient publicly available information the Group is not able to disclose the following requirements under IAS 19 (revised 2011) Employee benefits: IAS Assets and liabilities matching strategies IAS Effects on future cash flows The plans typically expose the Group to actuarial risks, such as investment risk, interest risk, longevity risk and salary risk. Additionally, the fund is exposed to property market risk as the fund has significant holdings in this market. At year end 2013 and 2012, the inability to directly get an economic benefit out of the plan resulted in a net asset of zero due to the limitation on net assets. 57

58 3 Net periodic benefit cost, which is presented in the income statement according to its function as a component of operating cost and finance cost, was as follows: Total benefit income and expense Profit & Loss (P&L) Current service cost (including provision for future costs) (43.8) (53.9) Contributions by plan participants (actual) Service cost (32.0) (39.7) Benefit income / (expense) recognized in statement of income (32.0) (39.7) Other comprehensive income (OCI) Actuarial gain / (loss) due to liability experience Actuarial gain / (loss) due to liability assumption changes - (369.1) Return on plan assets greater / (less) than discount rate (271.9) (1.2) Change in irrecoverable surplus (excluding interest) Remeasurement effects recognised in OCI - - Statement of comprehensive income Total benefit income / (expense) recognised in statement of comprehensive income (32.0) (39.7) 58

59 The changes in present value of the defined benefit obligation and plan assets were as follows: Changes in present value of defined benefit obligation Defined benefit obligation at 1 January (1,623.1) (1,366.8) Current service cost (including provision for future costs) (43.8) (53.9) Contributions by plan participants (actual) Employer service cost (32.0) (39.7) Interest cost on the defined benefit obligation (52.3) (65.2) Actuarial gains / (losses) Experience adjustments Financial assumption adjustments - (369.1) Cash flows Contributions by plan participants (actual) (11.8) (14.2) Benefits paid Defined benefit obligation at 31 December (1,392.9) (1,623.1) The changes in the fair value of the plan assets are as follows: Change in plan assets Plan assets at 1 January 1, ,613.2 Interest income on plan assets Return on plan assets greater / (less) than discount rate (271.9) (1.2) Cash flows Contribution by the employer Contributions by plan participants Benefits paid (63.7) (65.1) Plan assets at 31 December 1, ,677.6 Actual return (217.9)

60 3 Change in irrecoverable surplus Irrecoverable surplus at 1 January Interest cost on the irrecoverable surplus Change in irrecoverable surplus during the period (9.3) (203.5) Irrecoverable surplus at 31 December Amounts recognized in the statement of financial position Defined benefit obligation (1,392.9) (1,623.1) Fair value of plan assets 1, ,677.6 Funded status Irrecoverable surplus (effect of asset ceiling) (46.9) (54.5) Net defined asset (liability) - - Changes in net balance sheet position Net defined benefit asset / (liability) at 1 January - - Defined benefit (cost) / income recognized in statement of income (32.0) (39.7) Contributions by the employer Net defined benefit asset (liability) at 31 December

61 Relative asset allocation and real rate of return Non quoted assets Equity 4.0% 4.2% Diversified 0.2% 0.1% Real Estate 5.7% 6.4% Quoted assets Liquid assets 1.8% 2.2% Government bonds 30.7% 31.8% Equity 34.7% 28.2% Corporate bonds 9.4% 9.3% Emerging market loans 4.1% 4.8% Derivatives 0.0% 2.8% Asset backed securities 4.8% 5.6% Commodities 4.6% 4.6% Company contributions are expected to remain at the level of The assumptions used in the actuarial calculations of the defined benefit obligations and net periodic benefit cost require a large degree of judgment. Actual experience may differ from the assumptions made. The assumptions required to calculate the actuarial present value of benefit obligations and net periodic benefit costs are as follows (expressed as weighted averages if applicable): Actuarial assumptions Discount rate 3.2% 3.2% Expected rate of return on assets 3.2% 3.2% Future salary increases 0.0% 0.0% Future pension increases 1.0% 1.0% The AG Prognosetafel was used. No plan specific adjustments were made. The discount rates used to calculate the present value of the obligations are based on the market yields on high-quality corporate bonds (i.e. bonds rated AA) with the same currency and term as the obligations. 61

62 3 The following table shows the effect on the defined benefit obligation if the discount rate had been 0.50 percentage-points higher or lower as of year-end Positive amounts represent increases and negative amounts represent decreases in defined benefit obligations: Increase Decrease Present value of funded obligations (1,487.2) (1,298.5) Fair value of plan assets 1, ,439.8 (Deficit) / surplus for funded plans (47.4) Effect of asset cap IAS 19.58b - (141.3) Net asset (liability) (47.4) Business combinations The Group acquired De Grooth Vervoer effective 1 January During 2012 the Group didn t acquire any entities that qualify as a business combination under IFRS 3. The acquisition underlines the Group s stategy of expansion in the Taxi market. Pre-acquisition carrying amounts were determined based on applicable IFRSs immediately before the acquisitions. The adjustment did not have a significant impact on the valuation of carrying amounts. The values of assets, liabilities and contingent liabilities recognised on acquisition are their estimated fair values Off-balance sheet commitments Capital commitments The Group entered into contracts for the purchase of assets for an amount of EUR 26.0 million (2012: EUR 26.5 million). Capital commitments all relate to Operating leases, rent and land leases The Group has concluded operating lease contracts for rolling stock, real estate and land leases. The total nominal lease payments for non-cancellable operating leases, future rentals commitments entered into with third parties for real estate and ground leases amounted to EUR million (2012: EUR million) and can be broken down as follows < 1 year years > 5 years Total operating leases, rent and ground leases In 2013 EUR 43.3 million (2012: EUR 41.1 million) in operating lease costs were charged to the statements of income. 62

63 Guarantees As at 31 December 2013, the Group furnished guarantees up to an amount of EUR 18.6 million (2012: EUR 31.2 million). This amount can be broken down as follows: < 1 year years > 5 years Total guarantees Guarantees mainly relate to operating lease contracts and future performance obligations under concession contracts. Senior Credit Facility The Group pledged rolling stock with a carrying amount of EUR million (2012: EUR million) and certain future benefits resulting from its operations (reference is made to Section 3.6.3). Borrowings under the Credit Facilities bear interest at floating rates related to EURIBOR. Furthermore trade receivables and bank accounts have been pledged as security for interest-bearing loans and borrowings Revenue Services Other revenue Total revenue Cost of sales Cost of work contracted-out (129.7) (127.8) Cost of spare parts (7.0) (8.2) Total cost of sales (136.7) (136.0) 63

64 Personnel costs Wages and salaries (369.7) (403.8) Social charges (49.7) (54.1) Pension charges (52.9) (58.3) Hired staff (48.5) (49.1) Other personnel costs (19.7) (22.2) Total personnel costs (540.5) (587.5) The number of employees of the Group in full-time equivalents at year-end was: 7,234 FTE s (2012: 8,818 FTE s). The Group expensed EUR 20.9 million (2012: EUR 18.6 million) in relation to defined contribution pension plans Depreciation, amortisation and impairments Depreciation of property, plant and equipment (55.6) (62.9) Amortisation of intangible assets with useful lifes (2.8) (1.6) Impairments of property, plant and equipment net of reversals (19.7) - Impairments of intangible assets (5.6) - Total depreciation, amortisation and impairments (83.7) (64.5) Finance income and finance expense Finance income can be specified as follows: Interest income Reversal of impairment of bonds Effect of discounting Total finance income

65 Finance expense can be specified as follows: Finance expense (6.2) (4.9) Effect of discounting (0.8) (1.3) Total finance expenses (7.0) (6.2) Finance expense includes EUR 1.7 million impairment of capitalized financing fees Income tax The following table reconciles the tax amount calculated at the applicable statutory rate with the tax charge recorded in the statement of income. Reconciliation of effective tax rate As a % Profit before taxes (42.1) 7.4 Income tax using the statutory tax rate 25.0% 25.0% 10.5 (1.8) Adjustment valuation deferred tax asset and liability previous years (44.7)% - (18.8) - Adjustment valuation deferred tax asset and liability 2013 (10.9)% - (4.6) - Non-deductible costs (0.7)% 5.4% (0.3) (0.4) Benefits exempted from income taxes (3.1)% (10.8)% (1.3) 0.8 Settlement of prior periods relating to change of tax status (3.8)% 51.4% (1.6) (3.8) Total income taxes (38.2)% 70.3% (16.1) (5.2) 65

66 Related-party transactions The following related parties of the Group are distinguished: the associates and joint ventures (reference is made to Section 3.6.2), the Management Board and Supervisory Board of Connexxion and its Shareholders; the consortium of Transdev, a French transport company and Bank Nederlandse Gemeenten (BNG). All related-party transactions are conducted at arm s length. The following related-party transactions took place: 2013 Amounts Amounts Purchased receivable payable Sold to from from to Name of related party Group Transdev REISinformatiegroep BV Amounts Amounts Purchased receivable payable Sold to from from to Name of related party Group Transdev REISinformatiegroep BV No transactions took place with the Management Board or the Supervisory Board of Connexxion during the reporting year. 66

67 Audit fees Audit fees have not been disclosed pursuant to the provisions of BW 2 art. 382a-3. Remuneration and benefits of current and former Management Board members Remuneration of the Management Board The Remuneration Committee of the Supervisory Board determined the variable remuneration of the members of the Management Board. The remuneration of the Management Board totalled EUR 0.9 million in 2013 (2012: EUR 0.8 million). The amount can be broken down as follows: Amounts in EUR thousands Salaries Variable remuneration Pension charges Total remuneration of current and former Management Board Members At 31 December 2013 the members of the Management Board were Mr H.A.B. Guyot and Mrs J.H.P.M. van der Wijst. Mr R. Dujardin resigned from the board on 14 January The remuneration of the Management Board over 2013 includes EUR 70 thousand additional wage taxes (2012: EUR 31 thousand). Remuneration of the Supervisory Board The amount can be broken down as follows: As Supervisory committee Total Total Amounts in EUR thousands Board member Total payments Supervisory Board During the year 2013 Mr. F.N.P. Gagey resigned from the Supervisory Board and Mr. M. Garcia was appointed to the Supervisory Board Subsequent events Effective 1 January 2014 the Group acquired all activities of Van Dijk Personenvervoer Delfzijl BV. The acquisition does not significantly impact the Group s financial position. This acquisition is part of the expansion strategy of the Group. No further significant events between the balance sheet date and the date of approval of the financial statements of 2013 occured that would require amendment of or additional disclosure in the 2013 financial statements. 67

68 3 3.7 Company statements of financial position Before proposed profit appropriation In EUR millions Notes Assets Non-current assets Investments in subsidiaries Deferred tax assets Total non-current assets Current assets Trade and other receivables Total current assets Total assets The notes on pages 71 to 73 are an integral part of these company financial statements. 68

69 In EUR millions Notes Equity and liabilities Equity Share capital Statutory and other non-distributable reserves Other reserves Retained earnings Profit / (loss) for the period (58.2) 2.2 Total equity Non-current liabilities Loans and borrowings Provisions Deferred tax liabilities Total non-current liabilities Current liabilities Trade and other payables Total current liabilities Total liabilities Total equity and liabilities

70 3 3.8 Company statements of income In EUR millions Revenue - - Operating costs - - Results from operating activities - - Finance income and finance expense (0.7) (2.9) Share in profit or loss of subsidiaries (41.5) 4.3 Result before income tax (42.2) 1.4 Income tax (16.0) 0.8 Result for the year attributable to equity holders of the Company (58.2) 2.2 The notes on pages 71 to 73 are an integral part of these company financial statements. 70

71 3.9 Notes to the company financial statements Accounting policies Introduction A condensed company statement of income has been drafted as permitted by Section 402, Part 9, Book 2 of the Dutch Civil Code. Accounting policies The company financial statements of Connexxion Holding NV have been prepared in accordance with Part 9, Book 2 of the Dutch Civil Code, using the option to apply the valuation principles of the consolidated financial statements (Section 362 (8)). The investments in subsidiaries are accounted for using the equity method. For the other policies of the company financial statements, reference is made to the notes to the consolidated financial statements. The share of profit or loss of subsidiaries comprises the share of Connexxion Holding NV in the profits or losses of these subsidiaries. Gains or losses on transactions in which assets and liabilities were transferred between Connexxion Holding NV and its subsidiaries and among its subsidiaries, have not been recognised insofar as they are unrealised. For the statement of changes in equity reference is made to the consolidated financial statements Investments in subsidiaries Equity and profit/loss of subsidiaries Equity and profit/loss of subsidiaries as at 31 December can be broken down as follows: % of share capital Equity Profit/loss Subsidiaries Connexxion Nederland NV, Utrecht, the Netherlands 100% 100% (31.1) 2.9 Connexxion Vastgoed BV, Hilversum, the Netherlands 100% Other (1.9) (0.3) Subtotal subsidiaries with a positive equity value (33.0) 4.0 Subtotal subsidiaries with a negative equity value (52.3) (59.1) (8.5) 0.3 Total subsidiaries (11.6) (41.5) 4.3 Other subsidiaries comprises of Connexxion Finance BV and Connexxion Multimodal BV. Subsidiaries with a negative equity value are classified as a provision (reference is made to Section 3.9.5). 71

72 Subsidiaries (including subsidiaries with a negative equity value) Balance at 1 January Profit for the period (41.5) 4.3 Changes in fair value of financial instruments (0.8) (3.2) Subsidiaries transferred within the Group (117.3) (5.5) Balance at 31 December (11.6) Subsidiaries transferred within the Group of EUR million (2012: 5.5 million) relate to merger and transfer of multiple direct subsidiaries of Connexxion Holding N.V. and contribute to improving efficiency of administrative processes within the Group Trade and other receivables Receivables from subsidiaries Other receivables, prepayments and accrued income 0.9 Total trade and other receivables Loans and borrowings Non-current loans and borrowings Subsidiaries Total non-current loans and borrowings Balance at 1 January Loans granted Repayments (56.2) (48.0) Balance at 31 December

73 3.9.5 Provisions Provisions relate to subsidiaries with a negative equity value for an amount of EUR 52.3 million in 2013 (2012: EUR 59.1 million). As the Company has submitted guarantees conform Section 403, Part 9, Book 2 of the Dutch Civil Code, a provision was recognised for the subsidiaries with a negative equity value as this is the best estimate of the future cash outflow Trade and other payables Accruals and deferred income Total trade and other payables Off-balance sheet commitments For the off-balance sheet commitments, including legal proceedings and events after the balance sheet date, reference is made to the notes to the consolidated financial statements and other information. In addition, the Company has submitted guarantees to their subsidiaries conform Section 403, Part 9, Book 2 of the Dutch Civil Code. Connexxion Holding NV is the ultimate parent company in a tax group for corporate income tax and VAT purposes. By virtue of the standard conditions, the Company is jointly and severally liable for all tax liabilities of the subsidiaries being members of the tax group Related-party transactions In 2013 the interest expenses from related parties amounted to EUR 0 million (2012: EUR 2.6 million). Hilversum, 22 May 2014 On behalf of the Management Board of Connexxion Holding NV, J.H.P.M. van der Wijst Chief Financial Officer 73

74 4 Other Information 4.1 Independent auditor s report Report on the financial statements We have audited the accompanying financial statements 2013 of Connexxion Holding NV as set out on pages 11 to 73. The financial statements include the consolidated and company financial statements. The consolidated financial statements comprise the consolidated statements of financial position as at 31 December 2013, the consolidated statements of income, the consolidated statements of comprehensive income, the consolidated statements of changes in equity and cash flows for the year then ended and notes, comprising a summary of the significant accounting policies and other explanatory information. The company financial statements comprise the company statements of financial position as at 31 December 2013, the company statements of income for the year then ended and the notes, comprising a summary of the accounting policies and other explanatory information. Management s responsibility Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the Dutch Civil Code, and for the preparation of the Report of the Management Board in accordance with Part 9 of Book 2 of the Dutch Civil Code. Furthermore, management is responsible for such internal control as it determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion with respect to the consolidated financial statements In our opinion, the consolidated financial statements give a true and fair view of the financial position of Connexxion Holding NV as at 31 December 2013, and of its result and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the Dutch Civil Code. Opinion with respect to the company financial statements In our opinion, the company financial statements give a true and fair view of the financial position of Connexxion Holding NV as at 31 December 2013, and of its result for the year then ended in accordance with Part 9 of Book 2 of the Dutch Civil Code. Report on other legal and regulatory requirements Pursuant to the legal requirement under Section 2:393 sub 5 at e and f of the Dutch Civil Code, we have no deficiencies to report as a result of our examination whether the Report of the Management Board, as set out on pages 6 to 9, to the extent we can assess, has been prepared in accordance with Part 9 of Book 2 of this Code, and whether the information as required under Section 2:392 sub 1 at b-h has been annexed. Further, we report that the Report of the Management Board, as set out on pages 6 to 9, to the extent we can assess, is consistent with the financial statements as required by Section 2:391 sub 4 of the Dutch Civil Code. Eindhoven, 22 mei 2014 Ernst & Young Accountants LLP Signed by W.J. Spijker 74