2017 HALF-YEAR FINANCIAL REPORT

Transcription

1 2017 HALF-YEAR FINANCIAL REPORT

2 1 Half-year Management Report Message from the Chief Executive Officer Activities of the Korian group in the 2017 first half Consolidated financial statements Material events since 1 July Risk factors Related-party transactions 9 2 Condensed half-year consolidated financial statements Condensed consolidated financial statements at 30 June Statutory auditors review report on the half-yearly financial information 36 3 Declaration of the responsible person 37

3 1 CHAPTER 1 Half-year Management Report 1.1 MESSAGE FROM THE CHIEF EXECUTIVE OFFICER ACTIVITIES OF THE KORIAN GROUP IN THE 2017 FIRST HALF Key indicators Highlights Changes in governance Pursuit of the development strategy Increased financial flexibility Company s share capital increased Financial authorisations Dividend CONSOLIDATED FINANCIAL STATEMENTS Simplified income statement Revenue EBITDAR EBITDA Net income Financial structure MATERIAL EVENTS SINCE 1 JULY Changes in governance Pursuit of the development strategy RISK FACTORS RELATED-PARTY TRANSACTIONS HALF-YEAR FINANCIAL REPORT KORIAN

4 1. Message Half-year Management Report from the Chief Executive Officer 1.1 Message from the Chief Executive Officer In the first half of 2017, the business of Korian, the European leader in Ageing Well, confirmed the positive trend set in motion by the implementation of the Korian 2020 strategic plan. During the first half of the year, the Group: continued its community-based development strategy in its four business sectors long-term care nursing homes, specialised clinics, assisted living facilities and home care networks by opening or acquiring over 1,700 beds during the period, primarily internationally; undertook an ambitious programme to modernise and reconfigure its facilities in France in order to reinforce the attractiveness of its offer and accelerate organic growth; began to deploy its new real estate strategy, with the objective of acquiring the means to extend its development capacities and to raise its ownership rate of real estate assets; and completed key stages in the integration of its German operations. The impact of these actions resulted in a dynamic first six months of 2017 consistent with the roadmap established by the Group to achieve its Korian 2020 strategic plan, and which saw revenue grow by 4.9% and an operating margin of 13.5% that was stable compared to the restated margin for the first half of Taking into account the acquisitions completed, primarily in Belgium, where Korian is now the leading operator in the market for services to seniors, revenue generated outside France increased by 9.4% and accounts for nearly 50% of the Group s total revenue. We also announced that we were converting our research institute into a corporate foundation, the Korian Foundation for Ageing Well, which will be the primary focus of our research and innovation partnerships, consistently with the Company s commitment to promote positive care, which means caring for persons in a compassionate and respectful manner, regardless of their health. In the second half of 2017, the Group will accelerate its expansion by opening eight facilities and by making selective acquisitions, with the goal of reaching a total of 2,500 additional beds over all of In order to provide the best possible day-to-day service for the residents, patients and families who place their trust in Korian s facilities and care networks, we will continue to pursue our strategic roadmap, which focuses on: increased growth, in particular, by reconfiguring the portfolio of facilities in France, broadening the offer of services and continuing a policy of selective acquisitions; optimising the portfolio of real estate assets, to promote growth and create value; improving operating performance by optimising support functions and taking advantage of the economies of scale and synergies made possible by the size of the network; innovating with respect to therapeutic care policies, for example by mobilising digital technologies; and developing the skills of our employees. The Group confirms its objectives for 2017 of revenue growth over 5% and an operating margin (EBITDA) of around 13.7%, equal to the restated margin for Together with all Korian group employees, we are fully committed to successfully implementing our Korian 2020 plan, and to making Korian the reference company in providing care and support for seniors and their families. Our aim is to confirm Korian s position as a company recognised for its compassion, the quality of its medical care and the utility of its services over time. Sophie Boissard Chief Executive Officer of Korian 2017 HALF-YEAR FINANCIAL REPORT KORIAN 2

5 Half-year Management Report Activities of the Korian group in the 2017 first half 1.2 Activities of the Korian group in the 2017 first half KEY INDICATORS Korian, the expert in senior care services, saw a sustained improvement in its business, with revenue (and other income) growing by 4.9% in the first half of 2017, to 1,541.8 million. As at 13 September 2017, the Group had the capacity to accommodate over 73,800 residents and patients in Europe (France, Germany, Belgium and Italy) and managed over 730 facilities in four business lines: long-term care nursing homes, specialised clinics, assisted living facilities and home care networks HIGHLIGHTS Changes in governance Statutory governance bodies 33CHANGES IN THE COMPOSITION OF THE BOARD At its meeting on 15 March 2017, the Board of Directors acknowledged: the decision of Martin Hoyos not to request the renewal of his term of office as Director; the resignation of Guy de Panafieu from his office as Director effective 21 June 2017 at midnight; the decision of Jean-Claude Georges-François not to request the renewal of his term of office as Board Observer. At the combined general meeting held on 22 June 2017 (the 2017 Meeting ), the shareholders voted: to renew the terms of office as Director of Christian Chautard and Jérôme Grivet, as well as of Office d Investissement des Régimes de Pensions du Secteur Public ( Investissements PSP ) (represented by Jérôme Bichut), for a term of three years that will expire at the conclusion of the general meeting of shareholders convened to vote on the financial statements for the year ending 31 December 2019; to appoint Markus Müschenich as an independent Director for a term of three years, which will expire at the conclusion of the general meeting of shareholders convened to vote on the financial statements for the year ending 31 December 2019; to ratify the co-optation of Elisabeth T. Stheeman as an independent Director, to replace Guy de Panafieu for the remaining duration of his term of office, i.e. until the conclusion of the general meeting of shareholders that will be convened to vote on the financial statements for the year ending 31 December 2018; and to approve the candidacy of Guy de Panafieu to the position of Board Observer for a term of two years, i.e. until the conclusion of the general meeting of shareholders that will vote on the financial statements for the year ending 31 December As a result, the Board of Directors now comprises members, including the Director representing the employees: Christian Chautard (Chairman), Jérôme Grivet, Predica Prevoyance Dialogue du Crédit Agricole ( Predica ) (represented by Françoise Debrus), Investissements PSP (represented by Jérôme Bichut), Malakoff Médéric Assurances (represented by Hugues du Jeu), Jean-Pierre Duprieu, Markus Müschenich, Anne Lalou, Elisabeth T. Stheeman, Catherine Soubie and Hafida Cola. 33CHANGES IN THE COMPOSITION OF THE BOARD S SPECIALISED COMMITTEES At its meeting on 22 June 2017, which was held at the conclusion of the 2017 Meeting, the Board of Directors voted to change the composition of the specialised committees as follows: Audit Committee: Catherine Soubie (Chair), Jean-Pierre Duprieu, Markus Müschenich, Elisabeth T. Stheeman, Predica (represented by Françoise Debrus) and Investissements PSP (represented by Jérôme Bichut); Investment Committee: Jérôme Grivet (Chair), Christian Chautard, Investissements PSP (represented by Jérôme Bichut) and Malakoff Médéric Assurances (represented by Hugues du Jeu); Appointments and Compensation Committee: Jean- Pierre Duprieu (Chair), Catherine Soubie and Predica (represented by Françoise Debrus); Ethics and Quality Committee: Anne Lalou (Chair), Markus Müschenich, Malakoff Médéric Assurances (represented by Hugues du Jeu) and Hafida Cola. Internal governance As at 30 June 2017, the General Management Committee, whose members report to Sophie Boissard, the Chief Executive Officer, was composed of Didier Armaingaud (Group Chief Medical, Ethics and Quality Officer), Bart Bots (CEO Korian Belgium), Rémi Boyer (Group Chief Human Resources Officer), Frédéric Durousseau (Group Chief Real Estate and Development Officer), Cécile Jolly (Group Marketing and Digital Director), Laurent Lemaire (Group Chief Financial Officer), Nicolas Mérigot (France Healthcare Division Executive VP), Charles-Antoine Pinel (France Seniors Division Executive VP), Mariuccia Rossini (CEO Korian Italy) and Ralf Stiller (CEO Korian Germany). Furthermore, at the 2017 Meeting, the shareholders decided to reappoint Ernst & Young et Autres, the principal Statutory auditor, for a term of six years, which will expire at the conclusion of the general meeting of shareholders that will be convened to vote on the financial statements for the year ending 31 December HALF-YEAR FINANCIAL REPORT KORIAN

6 1. Activities Half-year Management Report of the Korian group in the 2017 first half Pursuit of the development strategy France In January 2017, a specialised clinic with a capacity of 105 beds was opened in the French department of Yvelines. It replaces two other specialised clinics and includes a hospital home care unit (Yvelines Sud) and out-patient services. In February 2017, a hospital facility also located in the French department of Yvelines, with a capacity of 71 beds, which had been acquired in 2014 while it was in insolvency proceedings, was sold to the Vivalto group. Germany In January 2017, the Group disposed of a facility in Olsberg, with a capacity of 88 long-term care nursing home beds and 31 beds in special care units. In April 2017, Korian acquired a facility in Dettelbach, which specialises in home care services. In addition, in June 2017, Korian opened two long-term care nursing homes in Vlotho and Hainichen with a capacity of 100 and 124 beds, respectively. Belgium In January 2017, Korian acquired two long-term care nursing homes in Flanders with a capacity of 60 beds, and supplemented the acquisition of the Foyer de Lork group with the takeover of OTV, a group also located in Flanders, which specialises in home care services and has a capacity of 88 long-term care nursing home beds and 57 assisted living beds. In addition, in January 2017, Korian opened a facility in Flanders with a capacity of 64 long-term care nursing home beds. In June 2017, Korian acquired eight facilities in Flanders and Wallonia from the Senior Assist group, with a total capacity of around 1,000 beds. This acquisition, which is highly complementary with Korian s existing network in Belgium, also enables the Group to pursue its dynamic growth strategy and to consolidate its position as the leader in the Belgian market for senior care services. Italy In February 2017, Korian acquired a long-term care nursing home in Liguria with a capacity of 120 beds. In March 2017, Korian also acquired a specialised clinic in the Apulia region with a capacity of 120 beds Increased financial flexibility On 28 June 2017, Korian announced the issue of undated, unsubordinated and unsecured bonds with an option for repayment in cash and/or new and/or existing shares ( ODIRNANE bonds) for an amount of 240 million. The bond issue was settled on 3 July On 28 June 2017, the Group also issued 60 million in undated hybrid unlisted bonds that do not give access to equity. These issues, for a total amount of 300 million, provide the Group with increased financial flexibility to pursue its development strategy through targeted acquisitions (bolt-ons) Company s share capital increased Pursuant to the decision adopted by the Chief Executive Officer on 31 March 2017, in accordance with the provisions of article L , paragraph 4, of the French Commercial Code, following the final allotment, on 31 March 2017, of 26,361 shares to certain members of General Management (bonus share plan approved by the Board of Directors on 10 September 2014), the Company s share capital was increased by 131,805, from 400,890,210 to 401,022,015, by issuing 26,361 new shares with a nominal value of 5 each HALF-YEAR FINANCIAL REPORT KORIAN 4

7 Half-year Management Report Activities of the Korian group in the 2017 first half Financial authorisations At the 2017 Meeting, the following financial authorisations and powers were granted and/or renewed. Type Resolution 17 Share buyback programme Term: 18 months Resolution 18 Authorisation to reduce the Company s share capital by cancelling treasury shares Term: 18 months Resolution 19 Authorisation to increase the share capital, cancelling preferential subscription rights, through a public offering Term: 14 months Resolution 20 Authorisation to increase the share capital, cancelling preferential subscription rights, through a private offering Term: 14 months Resolution 21 Authorisation to increase the number of securities issued in connection with a capital increase in the event of over-subscription Term: 14 months Resolution 22 Authorisation to set the issue price for various issues of securities Term: 14 months Resolution 23 Authorisation to grant free shares subject to performance conditions Term: 38 months Resolution 24 Authorisation to carry out capital increases for the benefit of members of a company savings plan, cancelling preferential subscription rights Term: 26 months Purpose Authorisation of a share buyback programme of up to 10% of the share capital, through trading orders, buybacks of blocks of shares and disposal, by any means, of the shares thus acquired. Possible capital reduction through the cancellation of the shares thus acquired. Maximum purchase price 50 per share. To authorise the Board of Directors to decide to reduce the Company s share capital by cancelling treasury shares (currently or in connection with the share buyback programme). Decrease limited to 10% of the Company s share capital in a 24-month period. To authorise the Board of Directors to increase the share capital by issuing ordinary shares of the Company or any other transferable securities conferring equity rights in the Company (other than transferable securities that confer rights to preference shares) or that confer the right to a grant of debt securities, cancelling shareholders preferential subscription rights, carried out by a public offering (on a regulated market), capped at a total nominal amount of 150 million (1) for equity securities and 1 billion (1) for the issuance of debt securities conferring equity rights. To authorise the Board of Directors to increase the share capital by issuing ordinary shares of the Company or any other transferable securities conferring equity rights in the Company (other than transferable securities that confer rights to preference shares) or that confer the right to a grant of debt securities, cancelling shareholders preferential subscription rights, carried out by a private placement (qualified investors or an investors circle), capped at a total nominal amount of 150 million (1) for equity securities and 1 billion (1) for the issuance of debt securities conferring equity rights. To authorise the Board of Directors to increase the number of securities offered in connection with the capital increases covered by the delegations of authority submitted under Resolution 17 to the general meeting held on 23 June 2016 and under Resolutions 19 and 20 to the general meeting held on 22 June 2017, up to a maximum of 15% of the initial issue. To authorise the Board of Directors to set the price of the issues carried out pursuant to the delegations of authority covered by Resolutions 19 and 20 submitted to the general meeting held on 22 June 2017: (i) for ordinary shares, issue price the weighted average share price on the Euronext Paris regulated market on the three trading days before the price is set, less a maximum discount of 5% if necessary; (ii) for transferable securities conferring rights to capital other than ordinary shares, the issue price shall be the amount immediately received by the Company, plus, if applicable, the amount likely to be received at a later time by the Company i.e. for each ordinary share issued as a consequence of the issuance of these securities, an amount at least equal to the amount stated in section (i) above, after adjustment, if applicable, of such amount to take into account the different vesting date. The maximum nominal amount of the capital increase is limited to 10% of the share capital per annum. To authorise the Board of Directors to award free shares, either existing or to be issued, subject to performance conditions, up to a maximum of 1% of the Company s share capital on the date of the Board of Directors decision (0.1% of the share capital for executive corporate officers). The grant of shares to their beneficiaries will vest at the end of a minimum vesting period of three years, and the duration of the beneficiaries obligation to retain the shares, if any, shall be set by the Board of Directors. To authorise the Board of Directors to carry out capital increases, up to a maximum nominal amount of 2 million, by issuing shares or transferable securities conferring equity rights, for members of a company savings plan. 1 (1) Shared maximum amount with Resolution 23 described in this table HALF-YEAR FINANCIAL REPORT KORIAN

8 1. Consolidated Half-year Management Report financial statements Dividend Following shareholder approval at the 2017 Meeting, the Company distributed a dividend of 0.60 per share, with the option to receive payment in shares (based on a share price of 28.82). The exercise of this option resulted in the issuance of 777,940 new shares, which were issued on 19 July 2017 and were admitted to trading on the Euronext Paris exchange on 21 July These shares carry dividend rights as from 1 January 2017 and enjoy the same rights as the outstanding ordinary shares. The cash dividend totalled 25.6 million and was paid to the shareholders on 21 July The Company s share capital now stands at 404,9,715 and is divided into 80,982,343 shares. 1.3 Consolidated financial statements Korian uses EBITDAR as its benchmark indicator because it makes it possible to assess its operating performance separately from its real estate policy (the ownership or rental of the facilities premises impacts operating income). EBITDAR is gross earnings from operations before rental expenses. EBITDA is EBITDAR, as defined above, less rental expenses SIMPLIFIED INCOME STATEMENT In millions of euros H H Change Revenue (1) 1, , % EBITDAR % % 26.0% 26.7% -0.7% External rents % EBITDA % % 13.5% 14.1% -0.5% Depreciation and amortisations % EBIT % % 8.4% 8.7% -0.3% Other operating income and expenses % Operating income % Net Financial income % Pre-tax income % Income tax % % -42.5% -46.4% 3.9% Non-controlling interests % NET PROFIT GROUP SHARE % (1) (and other income) REVENUE (2) In millions of euros H H Change GROUP 1, , % France % Germany % Belgium % Italy % (2) (and other income) HALF-YEAR FINANCIAL REPORT KORIAN 6

9 Half-year Management Report Consolidated financial statements The Korian group generated revenue of 1,541.8 million in the first half of 2017, an increase of 4.9% over the previous year. Organic growth totalled 2.5%, driven by the International business, which grew by 4.2%. The scope impact was primarily due to the acquisitions in Belgium in the second half of 2016 and early In the first half, the number of beds grew by over 1,700, primarily in Belgium. France: Revenue in France totalled million in the first half of 2017, up 0.8%. This figure includes the impact of the disposal of Centre Hospitalier des Courses in early Organic growth totalled 1.0%. Growth in the Seniors business (long-term care nursing homes) continued at a rate approaching 2%, which was driven by healthy average daily rates. In the Healthcare business (comprising primarily postacute and rehabilitation care facilities), whose occupancy rate remains high, growth was slightly negative due to a drop in rates, which was partially offset by the sale of additional services and a favourable business mix. Germany: Organic growth in Germany totalled 4.1%. Revenue increased by 3.7% in reported figures after taking into account the transfer in the first quarter of the operation of a facility in connection with the portfolio optimisation policy. Growth was driven by the ramping-up of facilities opened over the last 18 months and by a favourable price impact. Two new facilities opened at the end of June. Belgium: Belgium continues to experience a very high organic growth (8.3%), driven primarily by the ramping-up of beds opened in 2016 and since the start of Revenue increased by 46.7% in reported figures due to the addition of Foyer de Lork (as from 1 September 2016), OTV (as from 1 January 2017) and eight facilities acquired from Senior Assist (as from 1 June 2017). Italy: Organic growth in Italy totalled 1.1%, bolstered by high occupancy rates. Reported growth was -3.0% due to the transfer of the operation of four facilities in 2016, which was partially offset by the acquisition of two facilities in the first quarter of EBITDAR In millions of euros H Revenue % H Revenue % Change GROUP % % 2.0% France % % 0.6% Germany % % -5.8% Belgium % % 40.1% Italy % % 2.1% The Group s EBITDAR totalled million in the first half of 2017, up 7.8 million (+2.0%) compared to the first half of The Korian group s EBITDAR margin is 26%, a drop of 70 basis points. Adjusted for non-recurring favourable items in Germany in the first half of 2016, the drop was only 40 basis points. France: EBITDAR was million, up 0.6%. The EBITDAR margin remained stable. Germany: EBITDAR was million, a drop of -5.8%. EBITDAR in the first half of 2016 included 5 million of favourable non-recurring items in Germany. Adjusted for these items, EBITDAR fell by 130 basis points. This change is primarily due to the implementation of the new PSG II Act on 1 January 2017, which has increased staffing needs to comply with the greater care obligations the law imposes for persons with high dependence levels, higher wage levels in line with the general trend of the German market, and the ramp-up impact of facilities opened over the last 18 months. Belgium: EBITDAR was 42.6 million, up 40.1%, a figure that integrates the impact of various recent acquisitions. These acquisitions had a dilutive impact that led to a drop of 120 basis points in the EBITDAR margin. Italy: EBITDAR was 36.6 million, up 2.1%. The margin rate rose by 120 basis points due to the favourable impact of changes in scope and solid operating performance EBITDA In millions of euros H Revenue % H Revenue % Change Group EBITDA % % 0.9% The Group s EBITDA was million, up 0.9%. EBITDA in the first half of 2016 included 9 million of favourable non-recurring items. Adjusted for these items, the EBITDA margin remained stable between the first half of 2016 and the first half of HALF-YEAR FINANCIAL REPORT KORIAN

10 1. Material Half-year Management Report events since 1 July NET INCOME Depreciation and amortisations are stable. Non-current items include reorganisation expenses in Germany and a tax reimbursement in France. The net financial loss amounted to million (+6.3%). This increase includes the increased margin of the syndicated loan following the acquisition of Casa Reha. The net profit attributable to the Group s owners was 38.4 million, up from 32.3 million in the first half of 2016, an increase of 18.8% FINANCIAL STRUCTURE At 30 June 2017, Korian s equity attributable to owners of the Group stood at 2,086 million. The Group s net debt totalled 2,317.3 million, an increase of 2 million over financial debt at 31 December The financial structure remains sound with a debt ratio excluding real estate debt of 3.8x which is significantly below the covenant limit of 4.75x. 1.4 Material events since 1 July CHANGES IN GOVERNANCE On 1 July 2017, Arno Schwalie was appointed as CEO of Korian Germany and became a member of the General Management Committee, replacing Ralf Stiller, who sits on the Korian Germany Management Board and focuses on expanding the Group s business in Germany and neighbouring countries. On 21 July 2017, Caroline de Jessey was appointed Group Chief Communication Officer and became a member of the General Management Committee, replacing Cécile Jolly. The General Management Committee, whose members report to Sophie Boissard, the Chief Executive Officer, now comprises Didier Armaingaud (Group Chief Medical, Ethics and Quality Officer), Bart Bots (CEO Korian Belgium), Rémi Boyer (Group Chief Human Resources Officer), Frédéric Durousseau (Group Chief Real Estate and Development Officer), Caroline de Jessey (Group Chief Communication Officer), Laurent Lemaire (Group Chief Financial Officer), Nicolas Mérigot (France Healthcare Division Executive VP), Charles-Antoine Pinel (France Seniors Division Executive VP), Mariuccia Rossini (CEO Korian Italy) and Arno Schwalie (CEO Korian Germany) PURSUIT OF THE DEVELOPMENT STRATEGY France On 4 September 2017, Korian opened a specialised clinic in the department of Aube, with a capacity of 70 beds and a hospital day care unit with 10 beds. In addition, the Saint Bruno specialised clinic in Marseille was relocated to Martigues. Germany Belgium In July 2017, Korian acquired the home care business of the Senior Assist group, via Senior Assist Home Care, a leading operator in the home care market in Belgium. This acquisition is consistent with Korian s strategy to enhance its service offering in the home care sector, and will enable the Group to consolidate its strong position in the fast-growing home care services sector. In August 2017, Korian opened a specialised clinic in Immenhasen, in the state of Hesse, with a capacity of 36 beds, and a specialised clinic in Dresden-Gruna with a capacity of 150 beds. In addition, in August 2017, Korian also opened a facility in Lower Saxony, which specialises in home care services HALF-YEAR FINANCIAL REPORT KORIAN 8

11 Half-year Management Report Related-party transactions 1.5 Risk factors No risks are foreseen other than those described in section 3.6 Risk management of the 2016 Registration Document, which was filed with the Autorité des Marchés Financiers ( AMF ), the French Financial Markets Authority on 26 April 2017 under number D There were no significant changes to these risk factors in the first half of Related-party transactions Details of related-party transactions in the first half of 2017 can be found in Note 5.1 of the notes to the condensed half-year financial statements in this Half-Year Management Report. There have been no significant changes from the information provided in the Company s 2016 Registration Document HALF-YEAR FINANCIAL REPORT KORIAN

12 CHAPTER 2 Condensed half year consolidated financial statements 2.1 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AT 30 JUNE Consolidated statement of financial position Consolidated income statement Consolidated statement of cash flows Changes in consolidated equity Notes to the financial statements STATUTORY AUDITORS REVIEW REPORT ON THE HALF-YEARLY FINANCIAL INFORMATION HALF-YEAR FINANCIAL REPORT KORIAN 10

13 Condensed half year consolidated financial statements Condensed consolidated financial statements at 30 June Condensed consolidated financial statements at 30 June CONSOLIDATED STATEMENT OF FINANCIAL POSITION Assets In thousands of euros Notes Goodwill 3.1 2,201,544 2,175,429 Intangible assets 3.1 1,719,602 1,717,635 Property, plant and equipment 1,712,045 1,670,218 Financial Assets ,658 32,606 Deferred tax assets 182, ,506 Non-current assets 5,849,480 5,778,393 Inventories 10,023 9,707 Trade receivables and related accounts , ,241 Other receivables and currents assets , ,575 Financial instruments assets 3.2 / 3.5 6,499 1,500 Cash and cash equivalents , ,875 Current assets 837, ,897 Assets held for sale 1,887 TOTAL ASSETS 6,686,880 6,494,178 2 Liabilities In thousands of euros Notes Share capital 401, ,890 Premiums 841, ,519 Consolidated earnings and retained earnings 843, ,605 Equity attributable to the Group s owners 2,085,848 2,023,015 Non-controlling interests 10,995 13,915 Total equity 2,096,843 2,036,930 Provisions for retirement benefits 62,400 58,567 Deferred tax liabilities 673, ,084 Other provisions , ,200 Loans and other borrowings 3.5 2,470,891 2,442,222 Non-current liabilities 3,355,135 3,314,072 Short-term provisions ,362 13,555 Trade payables and related accounts , ,496 Other payables and accruals , ,039 Borrowings due within 1 year and bank overdrafts , ,014 Financial instruments liabilities ,596 18,072 Current liabilities 1,234,902 1,143,176 Liabilities held for sale 0 0 TOTAL LIABILITIES 6,686,880 6,494, HALF-YEAR FINANCIAL REPORT KORIAN

14 2. Condensed Condensed half year consolidated financial statements consolidated financial statements at 30 June CONSOLIDATED INCOME STATEMENT Comprehensive income In thousands of euros Notes Revenue 4.1 1,539,669 2,981,404 1,469,476 Other income 2,093 5, Operating revenue 1,541,763 2,986,886 1,470,443 Purchases used in the business 123, ,467 7,629 Personnel expenses ,257 1,504, ,2 External expenses , , ,431 Taxes and contributions 55,445 96,661 50,008 Depreciation, amortisation and provisions 78, ,954 78,499 Other revenue and expenses from operations 7, Profit/(loss) on acquisition and disposal of consolidated entities 4.3-1, ,782 Other operating income and expenses 4.3-3,491-24,456 -,957 Operating income , ,919 4,453 Cost of net financial debt ,774-88,121-41,207 Other items of financial income 4.4 -,214-35,223 -,446 Net financial income , ,344-52,653 Profit/(loss) before tax 69,520 7,575 61,801 Income tax ,526 15,583-28,678 Profit/(loss) of consolidated companies 39, ,158 33,122 Share of profit/(loss) of equity affiliates attributable to the Group s owners Non-controlling interests 1,564 1, Share attributable to the Group s owners 38, ,293 32,338 Net profit/(loss) per share attributable to owners of the Group (in euro) Net profit/(loss) per share (diluted) attributable to owners of the Group (in euro) NET PROFIT/(LOSS) ATTRIBUTABLE TO THE GROUP S OWNERS 38, ,293 32,338 Recyclable items: IAS 39 impact (measurement of hedging instruments and free share plan) net of tax 4,904 1,649-3,8 Non-recyclable items: IAS 19 impact (actuarial gains and losses) -1,148-2,186-4,126 Gains and losses recognised directly in equity (attributable to the Group s owners) 3, ,937 Net profit/(loss) and gains and losses recognised directly in equity (attributable to the Group s owners) 42, ,756 24,400 Profit/(loss) and gains and losses recognised directly in equity (non-controlling interests) 1,563 1, HALF-YEAR FINANCIAL REPORT KORIAN 12

15 Condensed half year consolidated financial statements Condensed consolidated financial statements at 30 June CONSOLIDATED STATEMENT OF CASH FLOWS In thousands of euros Net profit/(loss) 39,994 33,122 Of which income tax expense 29,526 28,678 Net depreciation/amortisation and provisions 77,881 82,629 Deferred taxes ,651 Gain/(loss) at fair value and non-cash items -5,595-1,865 Gain on disposal of assets 4,997 2,417 Cash flow after cost of net debt 6, ,653 Elimination of investment acquisition costs 1,006 1,782 Elimination of net interest paid 44,774 44,264 Cash flow before cost of net debt 162, ,698 Change in inventories Change in trade receivables -10,574 -,151 Change in trade payables -8,071 2,091 Change in corporate income tax 24,331 7,130 Change in other items -23,509-21,676 Change in working capital requirements -17,890-23,942 Net cash generated from operations 144, ,756 Impact of changes in scope (acquisitions) -33, ,234 Impact of changes in scope (disposals) 4 Payment for property, plant and equipment and intangible assets -76,695-91,981 Payment for other financial investments -14,006-18,464 Proceeds from disposals of non-current assets (excluding securities) 3, Net cash flow in connection with investment transactions -120, ,956 Net cash flow 24, ,199 Capital increase of non-controlling interests 51 Treasury shares charged to equity Increase in financial liabilities 146,122 43,761 Repayment of financial liabilities -91,959-48,536 Other cash flows in connection with financing transactions 59,400 Net interest paid -38,652-37,878 Dividends paid to shareholders of the parent Dividends paid to non-controlling interests in consolidated companies -1-1 Dividends payable Cash flow from financing transactions 74,930-42,083 CHANGE IN CASH POSITION 98, ,282 Cash and cash equivalents at the start of the period 294, ,974 Cash and cash equivalents at the end of the period 393, ,692 Marketable securities 91,442 8,251 Cash 316, ,553 Bank overdrafts and advances -15,014-20,2 CASH POSITION 393, , HALF-YEAR FINANCIAL REPORT KORIAN

16 2. Condensed Condensed half year consolidated financial statements consolidated financial statements at 30 June CHANGES IN CONSOLIDATED EQUITY In thousands of euros Share capital Premiums Charged directly to equity Consolidated reserves and income Equity attributable to the Group s owners Noncontrolling interests Total equity At 31 December , , , ,564 1,922,727,184 1,933,9 Dividend distribution -47,681-47, ,694 Capital increase Share-based payment Business combinations Treasury shares Other changes Profit/(loss) for H ,338 32, ,122 IAS 19 impact (actuarial gains and losses) -4,126-4, ,133 Measurement of hedging derivatives and free share plans (net of tax) -3,8-3,8-3,8 Comprehensive income -7,937 32,338 24, ,178 At 30 June , , , ,644 1,899,444 12,008 1,9,452 Dividend distribution Capital increase 3,547 15,327 18,873 18,873 Share-based payment Business combinations Treasury shares Other changes -101,000 97,412-3, ,768 Profit/(loss) for H ,955 98,955 1, ,035 IAS 19 impact (actuarial gains and losses) 1,940 1, ,946 Measurement of hedging instruments and free share plans (net of tax) 5,460 5,460 5,460 2,462 2,462 2,462 Comprehensive income 7,400 98, ,355 1, ,440 At 31 December , , ,0 539,494 2,023,014 13,914 2,036,930 Dividend distribution -48,123-48,123-4,615-52,737 Capital increase Share-based payment Business combinations 3,016 3,016 3,016 Treasury shares Equity instruments 59,396 59,396 59,396 Other changes Profit/(loss) for H ,430 38,430 1,564 39,994 IAS 19 impact (actuarial gains and losses) -1,148-1, ,150 Measurement of hedging derivatives and free share plans (net of tax) 4,904 4,904 4,904 6,490 6,490 6,490 Comprehensive income 3,755 38,430 42,186 1,563 43,749 AT 30 JUNE , , , ,008 2,085,848 10,995 2,096, HALF-YEAR FINANCIAL REPORT KORIAN 14

17 Condensed half year consolidated financial statements Condensed consolidated financial statements at 30 June 2017 There are no rights, privileges or restrictions attached to the shares comprising the share capital. Furthermore, no shares are reserved for issue in connection with options or share sale contracts. Following shareholder approval at the 2017 Meeting, the Company distributed a dividend of 0.60 per share, with the option to receive payment in shares (based on a share price of 28.82). The dividend approved for the period totalled 48.1 million. The share capital was 401,022,015 on 30 June It is divided into 80,204,403 shares, all of which are fully paid up, are of the same class and have a nominal value of 5 each. The Group carried out an issue of undated bonds in June In accordance with IAS 32, this hybrid financial instrument was recognised as an equity instrument for an amount net of issue expenses of 59.4 million. Treasury shares Treasury shares held by the Group are recorded at acquisition cost and deducted from equity until they are cancelled or sold. Proceeds from the sale of treasury shares are recognised directly as an increase in equity and, therefore, any gains or losses and impairment do not have an impact on consolidated income HALF-YEAR FINANCIAL REPORT KORIAN

18 2. Condensed Condensed half year consolidated financial statements consolidated financial statements at 30 June NOTES TO THE FINANCIAL STATEMENTS CONTENTS Note 1 Accounting policies 17 SOMMAIRE Note 1.1 Declaration DES NOTES of compliance ANNEXES 17 Note 1.2 Presentation of the financial statements 17 Note 1.3 Consolidation basis 17 Note 1.4 Significant accounting estimates and judgements 17 Note 1.5 Method of conversion 18 Note 1.6 Eliminated transactions 18 Note 2 Consolidation scope 18 Note 2.1 Consolidation scope accounting principles 18 Note 2.2 Change in the consolidation scope 20 Note 2.3 Material information on significant changes in scope 20 Note 2.4 Discontinued operations and assets held for sale 21 Note 3 Notes on the statement of financial position 22 Note 3.1 Goodwill, intangible assets 22 Note 3.2 Financial assets 24 Note 3.3 Cash and cash equivalents 26 Note 3.4 Other provisions 26 Note 3.5 Financing and financial instruments 27 Note 4 Notes on the income statement 31 Note 4.1 Calculation of operating income 31 Note 4.2 Operating sectors 31 Note 4.3 Other operating income and other operating expenses 32 Note 4.4 Net financial income 33 Note 4.5 Income tax 33 Note 4.6 Earnings per share 34 Note 5 Additional information 34 Note 5.1 Related-party transactions 34 Note 5.2 Commitments and contingent liabilities 34 Note 5.3 Commitments under leases 34 Note 5.4 Events after the reporting period 35 The consolidated financial statements were examined by the Audit Committee on 12 September 2017 and were approved by the Board of Directors on 13 September The Group provides and develops an extensive range of dependency care services in France, Germany, Belgium and Italy HALF-YEAR FINANCIAL REPORT KORIAN 16

19 Condensed half year consolidated financial statements Condensed consolidated financial statements at 30 June 2017 NOTE 1 Accounting policies Note 1.1 Declaration of compliance The consolidated financial statements have been prepared in accordance with the international accounting standards and interpretations issued by the International Accounting Standards Board (IASB) and adopted by the European Union at the balance sheet date. These standards include International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS), together with their interpretations, which are available on the European Union s website at The condensed half-year consolidated financial statements ( consolidated financial statements ) were prepared in accordance with IAS 34 Interim Financial Reporting, as adopted by the European Union. The consolidated financial statements were prepared using the same accounting policies and methods as those used to prepare the consolidated financial statements for the year ended 31 December In addition, the Group chose not to early adopt the following new standards, amendments to standards and interpretations: Standards and amendments adopted by the European Union but only subject to mandatory application after 30 June 2017: IFRS 15 Revenue from Contracts with Customers, with amended application date, which will supersede IAS and IAS 18; IFRS 9 Financial Instruments, which will supersede IAS 39 on financial instruments. Standards, amendments and interpretations not adopted by the European Union: IFRS 16 Leases, which introduces a new lease recognition model and will supersede IAS 17 and its related interpretations; amendments to IAS 7 Statement of Cash Flows: Disclosure Initiative ; amendments to IFRS 15 Clarifications on IFRS 15 ; amendments to IAS 12 Income Taxes: Recognition of Deferred Tax Assets on Unrealised Losses ; amendments to IFRS 2 Classification and Measurement of Share-Based Payment Transactions ; amendments resulting from the annual standards improvement processes for ; amendments to IFRS 10 and IAS 28 Sales and Contributions of Assets between a Group and its Equity Affiliates (application is postponed indefinitely); amendments to IAS 40 Transfers of Investment Property ; IFRIC 22 Foreign Currency Transactions and Advance Consideration ; IFRIC 23 Uncertainty over Income Tax Treatments. The Group is in the process of analysing the impact of these standards and amendments, in particular the potential impacts of IFRS 15, IFRS 16 and IFRS 9 on the consolidated financial statements. Note 1.2 Presentation of the financial statements The consolidated financial statements are prepared on a historical cost basis except for the following assets and liabilities, which are recorded at fair value: investments held for trading; investments available for sale; derivative financial instruments. Current assets and liabilities are: assets and liabilities held for use or sale as part of the normal operating cycle; cash, cash equivalents and bank overdrafts; assets and liabilities held primarily for trading purposes. All other assets and liabilities are non-current. The consolidated financial statements are presented in thousands of euros. Note 1.3 Consolidation basis The consolidated financial statements comprise the financial statements of Korian, as well as of the subsidiaries it controls, for the period between 1 January and 30 June Note 1.4 Significant accounting estimates and judgements To prepare the consolidated financial statements, the Group applies estimates and judgements that are regularly updated and that are based on historical experience and other factors, including expectations of future events deemed reasonable in view of the circumstances. The assumptions underlying the main estimates made for the first half of 2017 are of the same nature as those described in the notes to the consolidated financial statements at 31 December The significant estimates and judgements applied by the Group in preparing the consolidated financial statements concern the items described below. Goodwill, intangible assets and plant, property and equipment The value in use of intangible assets and plant, property and equipment is derived from the Company s internal valuations, based on the medium-term business plan. The main assumptions used in this valuation (medium-term growth rate, discount rate, margin and growth rate to infinity) are those of the Group. Liabilities in relation to commitments to purchase non-controlling interests are measured on the basis of information or situations existing at the date the financial statements are prepared (medium-term business plan), which may prove to be different from actual outcomes HALF-YEAR FINANCIAL REPORT KORIAN

20 2. Condensed Condensed half year consolidated financial statements consolidated financial statements at 30 June 2017 The accounting value of assets is reviewed at least annually, and whenever events or circumstances indicate that they may have been impaired. Such events and circumstances may be due to material adverse changes of a lasting nature that affect either the economic environment or the assumptions and objectives used at the last balance sheet date. Leases Each lease is reviewed. Leases are classified as operating leases when no facts suggest that the large majority of the risks and rewards incidental to ownership of the leased asset is transferred to the lessee and, therefore, that the Group is acting as if it were the owner of the leased property. turnover and retirement age. Any change to these assumptions has an impact on the accounting value of obligations associated with employee benefits. Financial instruments Derivative financial instruments are measured at fair value. Note 3.5 Funding and Financial Instruments describes the measurement of these instruments. Note 1.5 Method of conversion No transactions in foreign currencies are reported in the consolidated financial statements as at 30 June All subsidiaries are located in the euro zone. Employee benefits The discounted value of liabilities associated with employee benefits is calculated using various assumptions, such as the discount rate, the salary growth rate, employee Note 1.6 Eliminated transactions Commercial and financial transactions and balances, and profits or losses on inter-company transactions, are eliminated in the consolidated financial statements. NOTE 2 Consolidation scope Note 2.1 Consolidation scope accounting principles Subsidiaries Subsidiaries are entities controlled directly or indirectly by the Company. A subsidiary is controlled when the Company: has the power, directly or indirectly, to set its operating and financial policies; obtains variable returns from its activities; is able to use its power to influence returns. In general, controlled companies are those in which Korian directly or indirectly holds more than 50% of voting rights. The financial statements of subsidiaries are fully consolidated from the date on which the Company acquires effective control until such time as control is transferred outside the Group. The consolidated financial statements include all of the subsidiary s assets, liabilities, income and expenses. Equity and income are shared between the owners of the Group and non-controlling interests. Joint arrangements This standard does not apply to any Group entity at 30 June Associates Associates are companies over which the Company directly or indirectly exercises significant influence over operating and financial policies, without having control. They are generally companies in which the Company directly or indirectly holds at least 20% of voting rights. The Group s interests in associates are consolidated using the equity method. The financial statements of associates are included in the consolidated financial statements from the date significant influence is obtained until the date when the Company ceases to have such influence. The balance sheet value of investments in associates consolidated using the equity method includes the acquisition cost of the investments (including goodwill) plus or minus changes in the Group s share of the associate s net assets after the acquisition date. The income statement reflects the Group s share of the results of the associate. There are no investments consolidated using the equity method or other equity interests in joint ventures. Business combinations A) BUSINESS COMBINATIONS At the acquisition date, and in accordance with IFRS 3R, business combinations are recognised as follows: the identifiable assets acquired and liabilities assumed are measured at fair value at the acquisition date; non-controlling interests in the acquired business are measured either at fair value (i.e. with goodwill allocated to the non-controlling interests: the full goodwill method ) or as a proportionate share of the fair value of the net identifiable assets of the acquired entity (i.e. without goodwill allocated to the non-controlling interests: the partial goodwill method ). This option is available on a case-by-case basis for each business combination; 2017 HALF-YEAR FINANCIAL REPORT KORIAN 18

21 Condensed half year consolidated financial statements Condensed consolidated financial statements at 30 June 2017 acquisition costs are recognised as expenses for the period and are reported in the consolidated income statement under Gain/Losses on acquisition and disposal of consolidated entities ; any earn-out payments on business combinations are recognised at fair value at the acquisition date. After the acquisition date, earn-outs are measured at fair value at each balance sheet date. After a period of one year following the acquisition date, any change in fair value is recognised in income. Within this one-year period, any changes in fair value explicitly linked to events subsequent to the acquisition date are also recognised in income. Other changes are charged to goodwill. At the acquisition date, goodwill is the difference between: the fair value of the consideration transferred, plus the amount of non-controlling interests in the acquiree and, where a business combination takes place in several stages, the fair value at the acquisition date of the acquirer s previously held equity interest in the acquiree, which is recognised in income; and the net fair value of identifiable assets acquired and liabilities assumed at the acquisition date, measured at fair value. Goodwill is not amortised. In accordance with IAS 36 Impairment of Assets, goodwill is tested for impairment at least annually, and more frequently if there is evidence of impairment. B) COMMITMENTS TO PURCHASE NON-CONTROLLING INTERESTS ENTERED INTO UNDER BUSINESS COMBINATIONS The following accounting treatment has been adopted in accordance with currently applicable IFRS standards and the recommendation of the French financial markets authority (AMF): on initial recognition, these commitments are recognised as liabilities at the present value of the purchase price, offset by equity; subsequent changes in the value of the commitment are recognised by adjusting equity, on the grounds that it is a transaction between shareholders. C) ACQUISITION OF ADDITIONAL INTERESTS AFTER EXCLUSIVE CONTROL IS OBTAINED When additional interests are acquired in an entity that is already controlled exclusively, the difference between the purchase price of these interests and the share of additional consolidated equity acquired is recognised in equity attributable to owners of the Company. The accounting value of the subsidiary s identifiable assets and liabilities, including goodwill, is left unchanged. In the statement of cash flows, the acquisition of additional interests in a controlled entity is presented in net cash flows in relation to financing activities. D) ADDITIONAL PURCHASES OF SECURITIES LEADING TO EXCLUSIVE CONTROL OF AN ENTITY OVER WHICH SIGNIFICANT INFLUENCE WAS PREVIOUSLY HELD The acquisition of exclusive control gives rise to the recognition of a gain/loss on disposal calculated on the entire investment at the date of the transaction. The share previously held is re-measured at fair value through income when exclusive control is obtained. E) DISPOSAL OF INTERESTS WITHOUT LOSS OF EXCLUSIVE CONTROL In the event of a partial sale of interests in an exclusively controlled entity that does not modify control of said entity, the difference between the fair value of the sale price of the interest and the share of consolidated equity that this interest represents at the date of disposal is recognised in equity attributable to owners of the Company. The consolidated value of the subsidiary s identifiable assets and liabilities, including goodwill, is left unchanged. F) DISPOSAL OF INTERESTS WITH LOSS OF EXCLUSIVE CONTROL The loss of exclusive control gives rise to the recognition of a gain/loss on disposal calculated on the entire investment at the date of the transaction. Any residual interest is therefore re-measured at fair value through income when exclusive control is lost HALF-YEAR FINANCIAL REPORT KORIAN