JCDECAUX SA CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2005

Transcription

1 JCDECAUX SA CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2005 Translated from French and in accordance with International Financial Reporting Standards

2 JCDECAUX SA CONSOLIDATED FINANCIAL STATEMENTS TABLE OF CONTENTS STATUTORY AUDITOR S REPORT BALANCE SHEET 1 INCOME STATEMENT 3 CASH FLOW STATEMENT 4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 5

3 FIDUCIAIRE REVISUNION Mazars 169 boulevard Malesherbes Paris SA au capital de Commissaire aux Comptes Membre de la compagnie régionale de Paris BARBIER FRINAULT & AUTRES Ernst & Young 41, rue Ybry Neuilly-sur-Seine S.A.S. à capital variable minimum de Commissaire aux Comptes Membre de la compagnie régionale de Versailles Statutory auditor's report on interim financial information 2005 (Article L of French Company Law (Code de commerce) and article of the decree, of March 23 rd, 1967) Period from January 1 st to June 30 th, 2005 To the shareholders, In our capacity as statutory auditors of JCDecaux S.A., and in accordance with Article L of French Company Law (Code de Commerce), we have performed the following procedures: - a review of the accompanying summary of operations and income statement as they appear in the consolidated interim financial statements for the six-month period ended June 30, an examination of the information provided in the Company's interim report. These interim consolidated financial statements are the responsibility of the Executive Board. Our responsibility is to issue a report on these financial statements based on our review. These interim consolidated financial statements have been prepared in the process of application of IFRS as adopted in the European Union for 2005 consolidated financial statements, using IFRS accounting and measurement methods expected to be effective in the European Union and applied by JCDecaux S.A. for 2005 consolidated financial statements, as described in the notes to the financial statements, and in compliance with disclosures of interim financial statements as defined by the General Rules of the French Financial Market Regulatory Authority (Règlement général de l autorité des marchés financiers). They include, for comparison purposes, information related to the year 2004 and the first semester of 2004, restated using the same rules. We conducted our review in accordance with French professional standards. These standards require that we plan and perform the review to obtain moderate assurance, lesser than that which would result from an audit, as to whether the consolidated interim financial statements are free from material misstatement. The review excluded certain audit procedures and was limited to performing analytical procedures and to obtaining information from Company management and other appropriate sources. Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim consolidated financial statements are not in compliance, in all material respects, with the IFRS accounting and measurement methods adopted by the European Union, as described in the notes to the interim consolidated

4 financial statements, and with the disclosures of financial statements as defined by the General Rules of the French Financial Markets Regulatory Authority (Règlement Général de l AMF). Without qualifying our conclusion, we draw your attention to section 1.1 of the notes to the consolidated financial statements that: - presents the options used for the presentation of the interim consolidated financial statements, which, in compliance with article of the General Rules of French Financial Market Regulatory Authority (Règlement Général de l AMF) relating to the options for IFRS accounting and measurement methods, do not include all the information in the notes to the interim consolidated financial statements required by IFRS as adopted by the European Union, - explains the reasons why the accompanying mid-year consolidated financial statements may require adjustments before their inclusion as comparative information in the consolidated financial statements as at 31 December 2005 and in interim consolidated financial statements as at 30 June We have also examined, in accordance with French professional standards, the information contained in the interim report on the consolidated interim financial statements that were the subject of our review. We have nothing to report with respect to the fairness of such information and its consistency with the consolidated interim financial statements. Paris and Neuilly-Sur-Seine, September 13 th, 2005 The Statutory Auditors FIDUCIAIRE REVISUNION Mazars BARBIER FRINAULT & AUTRES Ernst & Young Michel Rosse Claude Chezaud Gilles Galippe

5 JCDecaux SA - Consolidated Financial Statements BALANCE SHEET Assets (In million euros) 06/30/ /30/ /31/2004 Intangible assets (net) Goodwill (net) 1, , ,041.2 Tangible assets (net) Investments in equity affiliates Financial investments Other financial assets (net) Deferred tax assets (net) Non current tax assets Other receivables (net) NON CURRENT ASSETS 2, , ,240.5 Inventories (net) Trade and other receivables (net) Current tax assets Financial instruments Cash and cash equivalents CURRENT ASSETS TOTAL ASSETS 3, , ,

6 JCDecaux SA - Consolidated Financial Statements BALANCE SHEET Liabilities and Equity (In million euros) 06/30/ /30/ /31/2004 SHAREHOLDERS ' EQUITY Share capital Share premium Consolidated reserves Current year net income SHAREHOLDERS ' EQUITY (Group share) 1, , ,600.2 Minority interests (22.5) (17.9) (16.4) TOTAL EQUITY 1, , ,583.8 Provisions for risks and contingencies Deferred tax liabilities Financial debt Other debt NON CURRENT LIABILITIES Provisions for risks and contingencies Financial debt Financial instruments Trade and other payables Current tax payable Bank overdrafts CURRENT LIABILITIES TOTAL LIABILITIES 3, , ,

7 JCDecaux SA - Consolidated Financial Statements INCOME STATEMENT (In million euros) 1st half st half NET REVENUES ,627.3 Direct operating expenses (456.6) (426.9) (871.1) Sales, general and administrative expenses (148.0) (144.6) (291.9) OPERATING MARGIN Depreciation charges & provision (net) (67.3) (69.6) (141.2) Maintenance spare parts (13.6) (12.9) (37.3) Other income and deduction (9.9) (0.7) 1.3 EBIT Net financial income / (loss) (9.7) (16.2) (31.6) Income tax (45.2) (45.2) (93.6) Income from equity affiliates NET INCOME BEFORE GOODWILL IMPAIRMENT AND NET RESULT FROM DISCONTINUED OPERATIONS Goodwill impairment (3.0) (3.0) CONSOLIDATED NET INCOME Minority interests NET INCOME (GROUP SHARE) Earnings per share (in Euros) (1) Earnings per share diluted (in Euros) (1) Number (average) of shares (1) 221,794, ,400, ,411,893. Number (average) of shares (diluted) (1) 222,630, ,596, ,808,944 (1) After deduction of treasury shares acquired by JC Decaux SA in 2002 and cancelled in

8 JCDecaux SA - Consolidated Financial Statements CASH FLOW STATEMENT (In million euros) 1st half st half Net income before tax Income from equity affiliates (4.3) (3.3) (6.5) Dividends received from non consolidated subsidiaries (0.1) (0.2) (0.3) Stock options Net amortization & provision allowance Capital (Gain/Loss) (0.5) Discounting expenses Net financial interest expenses Financial derivatives and translation differences (7.9) (1.0) (2.5) OPERATING INCOME BEFORE CHANGE IN WORKING CAPITAL Change in working capital (13.6) (43.5) (7.2) CASH GENERATED FROM OPERATIONS Net financial interests paid (9.6) (11.3) (21.3) Income taxes paid (37.8) (28.6) (65.0) NET CASH FROM OPERATING ACTIVITIES Acquisitions of intangible and tangible assets (63.0) (71.0) (151.2) Acquisitions of financial assets (long term investments) (63.4) (15.4) (14.8) Acquisitions of financial assets (others) (7.5) (5.7) (5.6) Total Investments (133.9) (92.1) (171.6) Disposals of intangible and tangible assets Disposals of financial assets (long term investments) Disposals of financial assets (others) Total Disposals of assets NET CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES (130.8) (84.0) (159.8) Dividends paid to JCDecaux SA shareholders Dividends paid to minority shareholders of subsidiaries (5.1) (9.6) (12.5) Reduction of capital Purchases of treasury shares Repayment of debt (78.7) (332.3) (349.2) Repayment of debt (finance lease) (1.3) (0.8) (2.3) Cash outflow from financing activities (85.1) (342.7) (364.0) Dividends received Increase in shareholders' equity Sales of treasury shares Increase in debt Cash inflow from financing activities NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (5.4) (155.6) (279.7) Effect of exchange rates fluctuations 1.6 (0.2) (0.9) CHANGE IN NET CASH POSITION 6.1 (117.4) (106.9) Net cash position beginning of period Net cash position end of period

9 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. ACCOUNTING METHODS AND PRINCIPLES 1.1 General principles The Group s consolidated interim financial statements for the first semester of 2005 have been prepared using for the first time accounting and measurement principles of International Financial Reporting Standards (IFRS) as adopted by the European Union as at June 30, 2005 and described hereafter. These interim financial statements have been presented in compliance with article of the General Rules of the French Financial Markets Regulatory Authority (Réglement Général de l Autorité des Marchés Financiers), which authorizes their preparation either in accordance with standard IAS 34, or under the form of interim financial statements including a balance sheet, an income statement, a table of changes in stockholders equity, a cash-flow statement, and notes to the financial statements. The group having chosen the latter option, the interim mid-year consolidated financial statements do not include all the information in the notes as required by IFRS adopted by the European Union. Besides, as the 2005 annual consolidated financial statements and the comparative information for 2004 included therein will be prepared on the basis of the accounting principles applicable at December 31, 2005, the data for December 31, 2004 presented in this document may be subject to modifications in line with any changes in IFRS and the related interpretations, as endorsed by the European Commission. This rule prevails also for the 2006 semi-annual consolidated financial statements and the comparative information presented for the first semester Section 2 reconciles the impacts, on the June 30, 2004 income statement, of the differences of the IFRS compared with the French generally accepted accounting principles applied previously. Use of estimates Within the framework of the establishment process of consolidated financial statements, the assessment of some assets and liabilities requires the use of judgements, assumptions and estimates, notably in respect of valuation of tangible, intangible and financial fixed assets, provisions for risks and contingencies or writedowns of inventories. These judgements, assumptions and estimates are made on the basis of information available or situations existing at closing date, which could prove to be different from reality in the future. 1.2 Scope and methods of consolidation The subsidiaries of the Group that are of significant size are consolidated. Generally, subsidiaries meeting one of the following three criteria are consolidated: Amount (absolute value) In million euros greater than Revenues 0.8 Equity (Group Share) 1.5 Net Income (Group Share) 0.6 There are also consolidated companies: - that are below these criteria but which have synergies with other companies of the Group, - for which the Group holds share call options that have the potential to give the Group voting power or to reduce another party s voting power over the financial and operating policies (IAS and 15). The aggregation of the non-consolidated companies is not significant. The financial statements of companies under exclusive control are fully consolidated. Companies that are jointly controlled by the Group in association with other shareholders are consolidated following the proportional method, where such companies financial statements are consolidated to the extent of the Group s proportionate interest. The financial statements of companies over which the Group exercises, either directly or indirectly, a significant influence on the management and financial policy are accounted for under the equity method

10 All significant transactions between Group fully consolidated companies are eliminated upon consolidation. Transactions with companies consolidated under the proportional method are eliminated up to the percentage of integration. Results within consolidated companies are also eliminated. 1.3 Translation of transactions in foreign currencies The assets and liabilities of the subsidiaries denominated in foreign currencies are converted into the functional currency of the Group (euro) at the closing exchange rate, their income statements are translated at the average exchange rate for the year. The exchange differences arising on the conversion are booked directly as a separate component of equity. The Group has decided to apply the option proposed by IFRS 1, which permits not-compliance with the provisions of IAS 21 The Effects of Changes in Foreign Exchange Rates for the cumulative amount of foreign exchange differences outstanding at the date of transition to IFRS. Accordingly, the cumulative amount of foreign exchange differences for all foreign activities is considered to be zero as of January 1, Upon disposal of a foreign entity, the deferred cumulative exchange differences recognized in equity from January 1 st, 2004 onwards (or from the entry date of this entity within the consolidation scope, if later) and relating to that particular foreign operation shall be recognized in the income statement. Financial instruments are measured and recognized in accordance with the general principles described in section Intangible assets Development costs According to IAS 38, development costs must be capitalized as intangible assets if the Group can demonstrate that: - it is its intention, and it has financial and technical ability to complete the development project; - the future economic benefits attributable to the development costs will more likely benefit to the Group; - the cost of the asset can be measured reliably. Development costs capitalized in the balance sheet from January 1, 2004 onwards include all costs related to the development, modification or improvement to the street furniture range in connection with any contract proposals having a strong probability of success. Given JCDecaux s statistical success rate in its responses to street furniture bids for tender, the Group considers it is legitimate to capitalize the tender preparation costs. Amortization, spread out over the term of the contract, would begin when the project is awarded. Should the bid be lost, the amount capitalized would be expensed. No development cost has been capitalized in opening net worth as of January 1, 2004 since the Group does not have the possibility to reliably identify costs responding to the standard s definition retrospectively Valuation of contracts from operating activities The application of IFRS 3 «Business Combinations» results in the valuation of the contracts relating to operations and the recognition of intangible assets amortized over contract durations Other intangible assets Start-up costs as well as research costs are included in operating expenses in the income statement, as incurred. Patents are amortized over their legal useful life. Only significant, individualized and clearly identified software (such as ERP) are capitalized and amortized over a period of 5 years maximum. Other software are included in operating expenses

11 1.5 Goodwill IFRS 3 requires the application of the purchase accounting method which consists in valuing assets, liabilities and contingent liabilities of the acquired company at fair value. Any difference between the price paid and the share of the adjusted net equity is recognized in goodwill. This method results notably in contract valuations and their recognition as intangible assets. Any negative goodwill is directly recognized as a profit in the income statement. With respect to acquisitions performed in successive stages, the purchase accounting method is applied to each transaction until control is acquired. In the case of an increase in the ownership percentage of companies previously consolidated under the proportional method, resulting in no change to the consolidation method, the difference between the price paid and the share of the acquired net equity valuated at fair value is recognized as goodwill, in the absence of an IFRS position on the issue. Goodwill is not amortized, but is subject to impairment tests to determine any losses in accordance with IAS 36. When particular circumstances justify it (profound and structural changes of the technical, lawful conditions or of market, in the event of project of divestment or insufficient profitability...), a depreciation of the goodwill is recorded, by the constitution of a loss in value in accordance with described methodology in note 1.7. The Group has chosen the option to apply IFRS 3 Business Combinations to all transactions achieved since January 1, Tangible assets Tangible assets appear on the balance sheet at historical acquisition cost. Structural street furniture maintenance costs are recognized as expenses. The discounted dismantling costs expected to be paid at the end of contract are recorded in assets and amortized over the duration of the contract. Street Furniture: Street Furniture (Bus shelters, MUPIs, City Light Billboards, Seniors, Electronic Information Boards, Automatic Public Toilets, Morris Columns, etc.) is depreciated over the average actual life of the contracts (between 4 to 20 years). Billboards: Billboards are depreciated according to the method of depreciation prevailing in the countries concerned in accordance with local regulations and economic conditions. The main method of depreciation is the straight-line method over a period of 2 to 10 years. Depreciation allowances are calculated on a straight-line basis over the following normal useful lives: DEPRECIATION PERIOD Tangible assets: - Buildings and constructions 10 to 50 years - Technical installations, tools and equipment 5 to 10 years (excluding street furniture and billboards) - Street furniture and billboards 2 to 20 years - 7 -

12 Other tangible assets: - Fixtures and fittings 5 to 10 years - Transport equipment 3 to 10 years - Computer equipment 3 to 5 years - Furniture 5 to 10 years 1.7 Valuation of tangible and intangible fixed assets and of goodwill In accordance with IAS 36 «Impairment of Assets», the valuation of assets (intangible, tangible assets and goodwill) is assessed at the end of the accounting year based on future profitability prospects resulting from the comparison between the net booked value of such assets and their fair value which may eventually lead to the recognition of an impairment loss. Tests for impairment are set up at least once a year based on the following position: - Impairment tests for tangible and intangible assets are performed at the level of each subsidiary (Cash- Generating Unit). - For goodwill, impairment tests are performed for each business segment (Street Furniture, Billboard and Transport) taking into consideration the expected synergies between the entities. Accordingly, for the Transport segment, where worldwide coverage is a key success factor for the activity both from a commercial and contract win renewal point of view, tests are performed at the business segment level. For Street Furniture and Billboard segments, tests are performed at the level where the activity and geographic segments intersect, which is the level where the commercial synergies and contract renewals for these segments are found. - The values used in the impairment tests are determined based up on the expected future cash flows before tax, discounted at weighted average capital cost before tax. These cash flows are calculated over periods generally exceeding 5 years due to the nature of the Group s activity: long-term contracts in the Street Furniture segment and a historically stable portfolio of commercial leases in the Billboard segment. In the Transport segment, it is assumed that contracts with major airports will be renewed upon expiration. 1.8 Investments in equity affiliates Financial statements of the equity affiliates in the JCDecaux Group s consolidated financial statements are restated under IFRS standards if the impact is considered to be significant on the scale of the JCDecaux Group. This restatement is booked that the equity affiliates have or not the legal obligation to publish their financial statements under IFRS standards. 1.9 Financial investments This item consists of equity interests in companies that did not have any activity during the first half of 2005; or on which the Group has no significant influence; or finally that do not significantly contribute to the consolidated financial statements, pursuant to conditions described in section 1.2. Investments in non-consolidated companies are carried at historical cost, which the Group considers it representative of fair value in the absence of an active market for the shares. They are assessed on an individual basis and written down to their realizable or useful value if lower than cost. The realizable and useful values take into account the equity share and the profitability prospects. The related changes in fair value are recognized in equity. Nevertheless, when an impairment loss is certain, it will be deducted from profit or loss Inventories Inventories mainly consist of: - Parts necessary for the maintenance of installed street furniture, - Street furniture or billboards in kit form or partially assembled

13 Inventories are valued on the basis of the weighted average cost, which may include internal assembly costs, direct and indirect production costs. Inventories are written down to their realizable value, when as a result of business prospects, their realizable value is less than their book value Provisions for bad debt A provision for bad debt is recorded when the collection value of receivables is less than the book value Cash and cash equivalents Cash and cash equivalents in the balance sheet include cash at bank and in hand and short-term deposits. Cash equivalents include marketable securities. Marketable securities are measured at fair value. Changes in fair value are recorded in financial income. For the purpose of the consolidated cash flow statement, net cash consists of cash and cash equivalents as defined above, net of outstanding bank overdrafts Provision for retirement benefits and other benefits The Group s obligations resulting from defined benefit plans, as well as their cost, are determined under the projected credit unit method. This method consists in measuring the obligation in accordance with the projected wage at the end of the working life and the rights acquired at the valuation date, determined in accordance with the collective agreements, branch agreements or legal rights in force. The actuarial assumptions used to determine the obligations are based on the economic conditions prevailing in the country of the plans and the demographic assumptions adapted to each company. These benefit plans are either funded, their assets being managed by an entity legally separate from the Group, or partially funded or unfunded, the Group s obligations being then covered by a provision in the balance sheet. For post-employment defined benefits, actuarial gains or losses exceeding the greater of 10% of the present value of the defined benefit obligation or of the fair value of the related plan assets are recognized as an expense or a profit over the remaining average working lives of employees within the Group. Past service costs are recognised as an expense, on a straight-line basis, over the average period until the benefits become vested. For other long-term benefits, actuarial gains or losses and past service costs are recognized as an expense or a profit when they occur. The Group decided to apply the option proposed by IFRS 1, which is the recognition of all cumulative actuarial gains and losses as of the IFRS transition date, in accordance with IAS Dismantling provisions The entire amount of the provisions recognized to cover the dismantling costs for street furniture upon contract expiration are recognized upon contract origination in liabilities and discounted. The dismantling costs are recorded in assets and amortized over the duration of the contract

14 1.15 Options to purchase existing or newly-issued shares at an agreed price In connection with stock option plans allocated to employees, IFRS 2 requires the recognition in expenses of the fair value of the services received, with an offsetting increase in equity as they are consumed, the consumption period corresponding in principle to the period during which the rights to benefit from the equity instrument are vested. This standard applies to all plans granted on or after November 7, 2002, but not yet vested as of January 1, The Group uses the Black & Scholes option-pricing model for the valuation. Changes in the fair value of options after the grant date have no impact on the initial valuation Revenues Group revenues mainly consist in sales of advertising spaces on street furniture equipment, billboards and advertising in transport systems. Advertising space revenues, rentals and services provided are recorded as revenues for the period in which the service is performed. Revenues resulting from the sale of advertising spaces are recorded on a net basis after deduction of commercial rebates. For the Billboard line of business and in some countries, commissions are paid by the Group to advertising agencies and buying groups when they are intermediaries between the Group and advertisers. These commissions are in this case deducted from the revenues. In agreements where the Group pays variable royalties or pays back a part of its advertising revenues to franchisers, the Group classifies gross advertising revenues as revenues and books royalties and the sales part repaid as operating charges, as the Group is not dealing as an agent but bears the risks and rewards incidental to the activity. Discounts granted to customers for early payments are deducted from revenues Operating margin The operating margin is defined as revenues less direct operating and SG&A expenses, excluding consumption of spare parts used for maintenance, depreciation charges and provisions (net), and other income and deduction. It includes charges to provisions net of reversals relating to trade receivables. The operating margin is impacted by cash discounts granted to customers deducted from revenues and cash discounts received from suppliers deducted from direct operating expenses on the one hand and stock option expenses recognized in personnel costs on the other hand EBIT EBIT is determined based on the operating margin less consumption of spare parts used for maintenance, depreciation charges and provisions (net), and other income and deduction. Net charges for inventory writedown are recognized in the line item Maintenance spare parts. Other income and deduction include the gains and losses generated on the sale of tangible and intangible assets and non-recurring items. The net charges related to impairment tests performed on tangible and intangible assets are recognized in the line item Depreciation charges and provisions (net) Current and deferred income tax The Group records deferred tax resulting from temporary differences in the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. Using the liability method, deferred tax is calculated by applying the most recent applicable tax rate. Deferred tax assets are subject to a valuation allowance when they are unlikely to be used within a reasonable time frame

15 The income tax charge in the consolidated income statement corresponds to the current tax due by each consolidated taxable entity, adjusted for deferred tax. The amount of deferred tax recorded results mainly from consolidation adjustments (standardization of Group accounting principles and amortization/depreciation periods for tangible and intangible assets), and from temporary differences between accounting and taxable income. Deferred tax assets on tax losses carried forward are systematically computed, and are subject to a depreciation allowance when their recoverability over a reasonable period is not quite probable Financial instruments and valuation of financial debt The Group uses derivative financial instruments for hedging foreign exchange and interest rate risks. Derivatives are recognized at fair value and any changes in fair value are recorded in the balance sheet against profit and loss, except for certain hedge transactions. Hedge accounting may be adopted if a hedging relationship between the hedged item and the financial instrument is established and documented from the time the hedge is set up and its effectiveness is demonstrated from inception and at each closing period. As of today, the Group only uses derivatives instruments for hedging financial assets and liabilities, which can be of two types according to IAS 39: Fair Value Hedge, the purpose of which is to limit the impact of changes in the fair value of assets, liabilities or firm commitments, due to changes in market conditions. Included in this category are, for example, receive-fixed pay-floating interest rate swaps used to hedge a fixed rate liability. From an accounting point of view, the change in the fair value of the hedged item is recorded in profit or loss. However, this impact is cancelled out as a result of the equivalent and opposing changes in the fair value of the hedged item (to the extent of hedge effectiveness). Cash Flow Hedge, the purpose of which is to limit changes in cash flows attributable to a particular risk associated with a recognized asset, liability or highly probable forecasted transactions. Included in this category are, for example, pay-fixed receive-floating interest rate swaps used to lock in the cost of the floating rate liability. From an accounting point of view, the effective portion of the hedging instrument is directly recorded in equity, and the non-effective portion is recorded in financial income. The amount included in equity is reclassified in profit or loss when the hedged item itself has an impact on profit or loss. The change in the fair value of the hedged transaction is not recognized in either the balance sheet or in profit or loss. The hedging relationship involves a single market parameter which is, as of today for the Group, either foreign exchange rates or interest rates. When the same derivative hedges both a foreign exchange and interest rate risk, the foreign exchange and interest rate impacts are treated separately. For derivatives that do not qualify for hedge accounting, any gains or losses arising from changes in fair value are taken directly to financial income for the year. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. At that point in time, any cumulative gain or loss on the hedging instrument recognized in equity is kept on equity until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognized in equity is transferred to financial income for the year. Moreover, according to the standard, the consequence of recognizing loans and borrowings at amortized cost results in the deduction of issuance costs from the initial fair value of the borrowing. The impact on profit or loss as a result of using an effective interest rate (EIR) as required by the standard (the internal rate of return which notably takes into account issuance costs) is not significantly different from an approach consisting of amortizing issuance costs on a straight-line basis. The amortization of this cost is recorded as a financial expense

16 1.21 Commitments to purchase minority interests The application of IAS 32 results in the recognition of a financial liability relating to commitments to purchase shares held by minority interests in Group s subsidiaries, not only for the portion already recognized in minority interests (transferred to liabilities), but also for the excess resulting from the current value of the commitment. In the absence of a final position on this issue, the Group has decided to deduct the excess portion from minority interests within equity. Subsequent changes in the fair value of the liability will be recognized in profit or loss Finance lease and operating lease Finance leases, which transfer to the Group substantially all the risks and benefits associated with the ownership of the leased item, are capitalized at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and a reduction of the lease liability so as to obtain a constant rate of interest on the remaining balance of the liability. Finance charges are recognized directly in profit and loss. Capitalized leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term. Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are considered as operating leases. Operating lease payments are recognized as an expense in the income statement Earnings per share Earnings per share are computed based upon the weighted average number of shares excluding stock options. The diluted earnings per share take into account the dilutive effect of the issue, cancellation and exercise of stock options. The weighted average number of treasury shares repurchased by the Group is deducted from the weighted average number of shares taken into account for the calculation of these ratios

17 2. IMPACTS OF THE FIRST-TIME ADOPTION OF IFRS 2.1 Reconciliation of the June 30, 2004 income statement The table hereafter presents the impacts of the transition to IFRS in the income statement of the Group as of June 30, 2004: The nature of the IFRS restatements on the Group s financial statements is fully explained, on the basis of the annual 2004 results, in the Comments on the transition to IFRS and figures published on March 31, 2005 and included in the 2004 annual report. In summary, the impact of IFRS on the June 30, 2004 income statement is mainly the following:. a 10.4 million increase in EBIT, 9.1 million of which is related to restatements made to tangible assets (change in the depreciation period for street furniture and the fact that the maintenance expenses are no longer capitalized);. a 41.1 million increase in net income, 36.5 million of which is related to the cancellation of goodwill amortization under IFRS

18 3. COMMENTS ON THE BALANCE SHEET 3.1 Scope of consolidation The main changes that took place in the consolidation scope during the first semester of 2005 are as follows: Entries into the scope of consolidation At the end of January 2005, JCDecaux Pearl & Dean (Hong Kong) created a joint-venture in partnership with Shanghai Airports (SIA/SAA) and with a media company Momentum. The new company JCDecaux Momentum Shanghai Airport Advertising Co. Ltd, operates the Shanghai contract won in 2004 and is consolidated under the proportional method at 35%. MediaNation Inc. company (China), which was acquired for 38.2 million has been consolidated under the full integration method for the first time in At the end of April 2005, JCDecaux Pearl & Dean (Hong Kong) acquired 79.67% of MediaNation Inc., and in June 2005, increased its percentage of ownership up to 98.59% through a public takeover bid. MediaNation Inc. operates advertising services for the Beijing metro network and two lines of the Shanghai metro. It is also the leading supplier of advertising services on the bus network in the People s Republic of China (15 cities) and holds a contract for the installation and advertising on 1,000 newspaper kiosks in Shanghai. JCDecaux Asia Singapore acquired 100% of Texon International Ltd, Hong Kong s number 1 bus shelter company, at a price of 15.8 million. This company is consolidated under the full integration method. The company Cestrian Imaging Ltd (UK), over which the Group exercises a de facto control, is consolidated under the full integration method with minorities taken at 100%, for the first time in Changes in percentage of ownership and in method of consolidation On April 1, 2005, the JCDecaux Group acquired an additional 25% interest in the company Univier Communications BV, at a price of 6.7 million. As a consequence the Unicom group which is composed of Univier Communications BV (The Netherlands) and its 100% owned subsidiaries, JCDecaux Latvija SIA (formerly JCDecaux Unicom Baltic SIA) (Latvia), JCDecaux Unicom Eesti OU (Estonia), and JCDecaux Lietuva UAB (formerly JCDecaux Unicom UAB) (Lithuania), is 100% held by JCDecaux Group. These companies are consolidated under the full integration from April 1, 2005 onwards, considering the exclusive control exercised by the JCDecaux Group since that date. During the first semester 2005, the Group reorganized its companies in Slovenia formerly consolidated under the proportional method at 50%. This led to the entry of the company Madison Doo within the scope of consolidation and to a change in the shareholding s interest of the Slovenian companies, consolidated under the proportional method at 16.5% since January 1 st, During the first semester of 2005 the JCDecaux Group purchased 2.09% of the company Red Portuguesa SA (Portugal), at a price of 23,000, which brought the percentage of ownership in this company to 94.86%. The company DSM Decaux GmbH (Germany) is consolidated following the proportional method since the first 2005 semester, the Group having no longer its exclusive control on this company. Exit from the scope of consolidation The companies Pearl & Dean Group Pty Ltd (Australia), Ilg Aussenwerbung Zacharias GmbH (Germany) and Rencar Media Sro (Czech Republic), whose impact is considered immaterial, have been excluded from the consolidation scope as at January 1,

19 3.2 Intangible assets As of June 30, 2005, net intangible assets amount to 96.2 million compared to 40.9 million as of December 31, This increase is mainly due to the acquisitions during the first half of 2005 of MediaNation Inc., Texon International and the 25% remaining of Univier Communications BV. The acquisition of MediaNation Inc. has a net positive impact of 26.6 million on this item because of the net intangible assets booked in its balance sheet as from the acquisition. Furthermore, the application of the purchase accounting method, such as required by IFRS 3 Business Combinations leads to the recognition in the intangible assets of street furniture and transport contracts, for respectively 4.4 million, 10.6 million and 11.0 million on these three operations (net book value as of June 30, 2005). These intangible assets are amortized over contract durations. The values of these intangible assets, as well as that of the residual goodwill relating to these operations (detailed below), are temporarily determined and may change during the window period for goodwill allocation, which ends 12 months after the acquisition date. 3.3 Goodwill As of June 30, 2005, net goodwill amounts to 1,055.8 million compared to 1,041.2 million as of December 31, This increase during the first semester 2005 mainly concerns the new goodwill generated by the acquisitions of MediaNation Inc. for 16.3 million and Texon International for 3.6 million and by the acquisition of the 25% remaining of Univier Communications BV for 2.1 million. This increase is partially offset by a decrease of the goodwill of Univier Communications BV for 8.0 million consequently to the allocation in intangible assets of a part of the initial goodwill of 14.1 million, subsequent to the control taken by the Group over this company. 3.4 Tangible assets As of June 30, 2005, net tangible assets amount to million compared to million as of December 31, As of June 30, 2005, in the Street Furniture segment, net tangible assets amount to million compared to million as of December 31, As of June 30, 2005, in the Billboard segment, net tangible assets amount to million compared to million as of December 31, As of June 30, 2005, in the Transport segment, net tangible assets amount to 31.0 million compared to 27.8 million as of December 31, Financial assets These consist of shares in equity affiliates, financial investments and other financial assets. As of June 30, 2005, net value of financial assets amounts to million compared to million as of December 31, Inventories As of June 30, 2005, net value of inventories amounts to 88.2 million compared to 75.8 million as of December 31,

20 3.7 Changes in Shareholders equity Group (In million euros) Share capital Share premium Treasury shares Non distributed reserves Other reserves Total Minority interests Total Cash flow hedge Financial investments Translation adjustments Equity as of December 31, (2.1) (0.1) (0.7) 0.0 1,435.9 (13.7) 1,422.2 Net income for the period Change in translation adjustments (2.6) (2.6) 0.2 (2.4) Capital increase Dividends paid 0 (12.5) (12.5) Stock options Change in consolidation scope 0 (0.1) (0.1) Other Equity as of December 31, (2.1) (0.1) (0.7) (2.6) 1,600.2 (16.4) 1,583.8 Net income for the period Change in translation adjustments Capital increase (1) Dividends paid 0.0 (5.1) (5.1) Stock options Cancellation of treasury shares 2.1 (2.1) Change in consolidation scope 0.0 (5.5) (5.5) Equity as of June 30, (0.1) (0.7) 7.0 1,698.8 (22.5) 1,676.3 (1) In 2005, the increase in JCDecaux SA s share capital and share premium is related to the exercise of stock options

21 3.8 Net financial debt The net financial debt of the Group breaks down as follows: (in million euros) 06/30/ /31/2004 Economic net debt (1) IAS 39 : impact on net debt (19.7) (35.7) IAS 32 purchase commitment of minority interests Net financial debt in balance sheet (1) Net of net cash for 44.2 million as of June 30, 2005 and for 38.1 million at the end of December Net financial debt increases by 14.9 million from million as of December 31, 2004 to million as of June 30, This rise is mainly due to the increase in the value of the debt denominated in US Dollars because of the rise of the US Dollar against Euro since December 31, As of June 30, 2005, the net financial debt takes into account: - the impact of the IAS 39 for (19.7) million, against (35.7) million at the end of December 2004, - the recognition in liabilities of commitments to purchase minority interests for 61.3 million, compared to 60.0 million at the end of December the finance leases for 12.0 million, against 11.4 million at the end of December In addition, JCDecaux SA fully repaid the committed revolving credit facility set-up in 2003, and set up a new credit line with the same characteristics for an amount of million with an outstanding amount of 65.0 million as of June 30, COMMENTS ON THE INCOME STATEMENT 4.1 Revenues As of June 30, 2005, consolidated revenues amounted to million, increasing by 5.5% compared to million for the same period last year. Revenues, excluding acquisitions, divestitures and foreign exchange impacts, increased by 5.1% for the first half 2005 compared to the same period last year, which reflects a good performance in Street Furniture and the continued improvement in Transport. Street Furniture revenues, for the first half of 2005, increased by 5.9% to million compared to the same period last year ( million). The new consolidation method of the German company DSM-Decaux, now proportionally integrated on a 50% basis, while previously on a 100% basis, negatively impacts revenues compared to the same period of last year. Excluding acquisitions, divestitures, foreign exchange impacts and before the reclassification of some revenues between segments in 2005, Street Furniture organic revenues increased by 5.9% compared to the same period last year and advertising revenues rose by 6.7%. The Street Furniture market has been very robust in several European countries including UK, Sweden, Portugal and Spain where double-digit growth was reported. In France, advertising revenues were flat. The United States produced strong revenue growth, as well as Asia growing by double digits, where Korea, Japan and Thaïland reported the best performances. Billboard revenues decreased by 0.2% to million for the first half year of 2005 compared to the same period last year ( million). Excluding acquisitions, divestitures and foreign exchange impacts, Billboard organic revenues decreased by 0.2% compared to the same period last year, reflecting tougher advertising conditions in the second quarter in France and UK. Market conditions were favorable in Ireland and Spain. However, revenues were down in Austria, Belgium and Italy. Transport revenues increased by 12.5 % to million for the first half of 2005 compared to the same period last year ( million), with the recent acquisition of MediaNation Inc. making a first contribution

22 Excluding acquisitions, divestitures, foreign exchange impacts and before the reclassification of some revenues between segments in 2005, Transport organic revenues increased by 10.2% over the period. Double-digit growth was achieved in many European countries including UK, Spain, Norway, Germany and Austria. However, as for Street Furniture and Billboard segments, business was more difficult in France, as well as in Portugal, which had reported record-high revenue figures last year thanks to the Euro 2004 soccer championship. In Asia, a significant revenue increase was reported in Hong Kong. 4.2 Operating Margin The Operating Margin is the main indicator used by the Group for measuring the operating performance of its business activities. As of June 30, 2005, the Group s Operating Margin amounted to million, increasing by 4.7% compared to million for the same period last year. This amount represented 27.5% of revenues, compared to 27.7% for the same period last year. The impact of changes in consolidation scope contributed to this small decrease, particularly the change in the consolidation method for the German Street Furniture company DSM-Decaux. The significant part of Transport in the total increase in revenues on the first half-year also explains this slight decrease, Transport Operating Margin being generally lower as a percentage of revenues than it is in the Street Furniture or Billboard activities. For the first half of 2005, Street furniture Operating Margin rose by 2.7% to million compared to the same period last year ( million). For the first half of 2005, Billboard Operating Margin increased by 15.1% to 29.8 million compared to the same period last year ( 25.9 million). For the first half of 2005, Transport Operating Margin increased by 17.6% to 8.0 million compared to 6.8 million for the same period last year. Compared to the same period last year, regarding the relative weight of each region in the Group s Operating Margin, the share of France (39.4% against 43.6% for the same period last year) and UK (9.2% against 9.5% for the same period last year) decreased, while the share of the Rest of Europe (47.4% against 45.2% for the same period last year) and Asia-Pacific (3.1% against 1.1% for the same period last year, thanks to the impact of acquisitions in China and in Hong Kong and significant growth in Hong Kong, Japan, Korea and Thailand) grew significantly. 4.3 EBIT JCDecaux Group s EBIT amounted to million for the first half of 2005 compared to million for the same period last year, increasing by 1.9%. The impact of the 4.7% growth in Operating Margin was partly offset by a 10 million fine decided by the Conseil de la Concurrence and recorded in the accruals as of June 30, 2005 in France. The Group appealed the decision. The contribution as of June 30, 2005 of each business sector in the total Group s EBIT is as follows: - Street furniture: 88.1% compared to 89.4% for the same period last year, - Billboard: 10.3% compared to 8.0% for the same period last year, - Transport: 1.6% compared to 2.6% for the same period last year. Compared to the same period last year, the EBIT breakdown by geographic areas shows a decrease of the share of France (35.6% against 43.8% for the same period last year) and an increase of the other regions. The negative contribution of North America and the Rest of the world is less significant than last year. The contribution of the area Rest of Europe is increasing from 48.5% to 53.8%. EBIT in the Asia-Pacific area increased by 58 % to 2.7 million, which represents 2.0 % of the Group s EBIT, compared to 1.3 % of the Group s EBIT for the same period last year