ANNUAL FINANCIAL STATEMENTS for FY In compliance with the International Financial Reporting Standards (IFRS)

Transcription

1 for FY from January 1 to December 31, 2017 ANNUAL FINANCIAL STATEMENTS for FY 2017 In compliance with the International Financial Reporting Standards (IFRS) It is hereby confirmed that the attached annual Financial Statements for the period 1/1 31/12/2017 are the ones approved by the Board of Directors of HELLENIC POST S.A. on July 12 th, As and on behalf of HELLENIC POST S.A. Chairman of the BoD Chief Executive Officer Euphrosyne Stavraki Ioannis Zaroliagkis Page 1 of 77

2 for FY from January 1 to December 31, 2017 TABLE OF CONTENT Independent Auditor s Report... 4 Report of the Board of Directors... 9 Explanatory Report of the Board of Directors Statement of Financial Position Statement of Comprehensive Income Statement of Changes in Equity Statement of Cash Flows Notes to Financial Statements General Information Framework for Preparation of Financial Statements New Standards, Interpretations and Amendments to effective Standards New Standards, Interpretations, Revisions and Amendments to existing Standards that are effective and have been adopted by the European Union New Standards, Interpretations, Revisions and Amendments to existing Standards that are not effective yet and have not been adopted by the European Union Significant Accounting Judgements, Estimates and Assumptions The Company s Going Concern Summary of accounting policies General Consolidation and investments in associates Basis for Consolidation Business Combinations Associates Foreign Currency Translation Recognition of Revenue and Expenses Other Intangible Assets Property, Plant and Equipment Leases The Group as a Lessee The Group as a Lessor Impairment Test of Tangible and Intangible Assets Investment Property Non-Current Assets Held for Sale and Discontinued Operations Financial Assets Financial Assets Available for Sale Loans and Receivables Fair Value Inventory Income Tax Current Income Tax Deferred Income Tax Cash and Cash Equivalent Equity Retirement Benefits and Short-term Employee Benefits Retirement Benefits Financial Liabilities Other Provisions, Contingent Assets and Liabilities Rounding The Group Structure Financial Statements Items Analysis Property, Plant and Equipment Intangible Assets Investment Property Investments in Subsidiaries Assets Available for Sale Other Long-term Receivables Deferred Tax Assets and Obligations Inventory Trade and Other Receivables Other Current Assets Advance Payments Cash and Cash Equivalent Equity Share Capital Reserves Page 2 of 77

3 for FY from January 1 to December 31, Employee Termination Benefits Other Long-term Liabilities Long-term Provisions Bank Overdrafts Suppliers and Other Trade Liabilities Short-term Loan Liabilities Advance Payment Liabilities Income Statement Accounts Analysis Financial Income / Expenses Income Tax Related Parties Transactions Receivables from the Universal Service Employee Benefits Transactions with Key Executives Contingent Assets Liabilities Guarantees Risk Management Objectives and Policies Currency Risk Interest rate risk sensitivity analysis Credit Risk Analysis Fair Value Hierarchy Liquidity Risk Analysis Equity Management Policies and Procedures Post Statement of Financial Position Date Events Page 3 of 77

4 Independent Auditor s Report Annual Financial Statements for FY from January 1 to December 31, 2017 To the Shareholders of HELLENIC POST S.A. Report on the Separate and Consolidated Financial Statements We have audited the accompanying Separate and Consolidated Financial Statements of HELLENIC POST S.A. (the Company), which comprise the Separate and Consolidated Statement of Financial Position as at December 31, 2017, the Separate and Consolidated Statements of Comprehensive Income, Changes in Equity and Cash Flows for the year then ended and a summary of significant accounting policies and other explanatory information. In our opinion, apart from the effects of the matters recorded in the paragraph Basis for Qualified Opinion, the accompanying Separate and Consolidated Financial Statements present fairly, in all material respects, the financial position of the Company and its subsidiaries (the Group) as at December 31, 2017, their financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards that have been adopted by the European Union. Basis for Qualified Opinion The following issues have arisen from our audit: 1. The Company and the Group account Receivables from Universal Services amounting to Euro k pertains to receivables for compensation from the Greek State regarding the cost of providing the Universal Postal Services in Greece for years from 2013 to Since we were not in position to obtain sufficient and adequate audit evidence, we have, based on the International Financial Reporting Standards, certain reservations regarding the potential recognition, as at December 31, 2017, of the amount of Euro k pertaining to the cost of the universal service for years , approved by the Hellenic Telecommunications and Post Commission (EETT), as well as the amount of Euro k, of which an amount of Euro k pertains to the cost of universal service for 2016 and 2017, while an amount of Euro k pertains to financial revenue claimed by the Company from the Greek State for the delay in submitting the amounts for rendering the universal service from 2013 to Regarding the amount of Euro k, no Joint Ministerial Decision regulating the payment of the amount to the Company has been issued defining the way of payment and no such provision has been included in the State Budget, regarding which it is necessary to complete the procedures with the European Commission in the context of the state aid measures. Regarding the amount Euro , EETT audit has not yet been finalized and no Joint Ministerial Decision regulating the payment of the amount to the Company has been issued. As far the aforementioned amounts are concerned, the Company and the Group have calculated deferred tax obligation totaling Euro k. Given the aforementioned, the account Receivables from Universal Services is overstated by an amount of Euro k, the account Deferred tax obligation is overstated by an amount of Euro k, the equity is overstated by an amount of Euro k (Euro k receivables from the Universal Service less Euro k pertaining to deferred tax obligation corresponding to this obligation) and the income statements for the closing and previous years are overstated by Euro k and Euro k respectively. 2. The Group and the subsidiary accounts Trade and Other Receivables and Other Current Assets include bad balances totally amounting to Euro k, regarding which, no relative provision has been made for the purpose of covering losses from Page 4 of 77

5 for FY from January 1 to December 31, 2017 non-capitalization of part of these disputed receivables. Based on the results of our audit, we estimate that the provision made by the Group, standing at Euro k is lower that the one that should have been made by Euro k. Not making the required provision constitutes a deviation from the accounting principles under the International Financial Reporting Standards and, therefore, the value of the aforementioned receivables, the equity of the Group are overstated by Euro k, while the income statement of the Group for the current year is overstated by Euro 385 and for the previous years overstated by Euro k. 3. The Group and the Company account Property, Plant and Equipment records acquisition value of real estate (land plots and building) totaling Euro k. The Company has not conducted impairment test regarding its real estate amounting to Euro k in order to define whether its accounting value is lower than its recoverable amount. Therefore, we have reservations regarding the proper valuation of the aforementioned assets and the contingent effect on the Group and the Company equity and income statements of the closing and previous years. 4. The account Investments in Subsidiaries of Euro 14,067 k pertains to acquisition value of the subsidiary, in which the Company holds participating interest of 99.98%. Moreover, the account Receivables from Associates includes trade receivables amounting to approximately Euro k from the same subsidiary. The Company has not conducted impairment test regarding the value of its investment and receivables from the subsidiary in order to define whether their accounting value is lower than the recoverable amount. Therefore, we have reservations regarding the proper valuation of the accounts Investments in Subsidiaries and Receivables from Associates and the contingent effect on the Group and the Company equity and income statements of the closing and previous years. 5. The Company and the Group account Deferred Tax Obligations includes offset deferred tax assets amounting to Euro k, whose collectability was not possible to estimate, given the current financial conditions and on-going financial losses. Therefore, we have reservations regarding the proper valuation of deferred tax obligations and the contingent effect on the Group and the Company equity and income statements of the closing and previous years. We conducted our audit in accordance with International Standards on Auditing (ISAs) incorporated into the Greek Legislation. Our responsibilities under those standards are described in the Auditor s Responsibilities for the Audit of the Separate and Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (IESBA Code) incorporated into the Greek Legislation and ethical requirements relevant to the audit of separate and consolidated financial statements in Greece and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material Uncertainty Related to Going Concern We draw your attention to the fact that the Company s Total Equity, taking into account the effects of matters recorded in the paragraph Basis for Qualified Opinion, has been presented as negative and, therefore, there are effective the requirements for the application of Article 48 of the CL 2190/1920. Moreover, the Company s current liabilities, taking into account the effect of matter 1 recorded in the paragraph Basis for Qualified Opinion, exceed its current assets by an amount of Euro k. The conditions described in Note Page 5 of 77

6 for FY from January 1 to December 31, to Separate and Consolidated Financial Statements indicate the existence of material uncertainty regarding the Company s ability to continue as a going concern. Our opinion is not qualified in respect of this matter. Responsibilities of Management and Those Charged with Governance for the Separate and Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the separate and consolidated financial statements in accordance with International Financial Reporting Standards that have been adopted by the European Union and for such internal control as management determines is necessary to enable the preparation of separate and consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the separate and consolidated financial statements, management is responsible for assessing the Company s and the Group s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the management s intention is to procced with liquidating the Company and the Group or discontinuing its operations or unless the management has no other realistic option but to proceed with those actions. The Company s Audit Committee (Article 44, Law 4449/2017) is responsible for overseeing the Company s and the Group s financial reporting process. Auditor s Responsibilities for the Audit of the Separate and Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the separate and consolidated financial statements as an aggregate, are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs, incorporated into the Greek Legislation, will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to affect the economic decisions of users taken on the basis of these separate and consolidated financial statements. As part of an audit in accordance with ISAs, incorporated into the Greek Legislation, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the separate and consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than that resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company s and the Group s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management. Page 6 of 77

7 for FY from January 1 to December 31, 2017 Conclude on the appropriateness of management s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company s and the Group s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor s report to the related disclosures in the separate and consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor s report. However, future events or conditions may cause the Company and the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the separate and consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding financial information of entities or business activities within the Group for the purpose of expressing an opinion on the separate and consociated financial statements to be able to draw reasonable conclusions on which to base the auditor s opinion. Our responsibility is to design, supervise and perform the audit of the Company and the Group. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Report on Other Legal and Regulatory Requirements Taking into consideration the fact that under the provisions of Par. 5, Article 2 (part B), Law 4336/2015, management has the responsibility for the preparation of the Board of Directors Report, the following is to be noted: 1. In our opinion, the Board of Directors Report has been prepared in compliance with the effective legal requirements of Article 43a and 107A, CL 2190/1920, and its content corresponds to the accompanying financial statements for the year ended as at 31/12/ Based on the knowledge we acquired during our audit, we have not identified any material misstatements in the Board of Directors Report in relation to the Company HELLENIC POST S.A. and its environment. Athens, 12 July, 2018 Certified Auditor Accountant Panagiotis Christopoulos S.O.E.L. No Page 7 of 77

8 for FY from January 1 to December 31, 2017 Page 8 of 77

9 Report of the Board of Directors Annual Financial Statements for FY from January 1 to December 31, 2017 OF HELLENIC POST S.A. TO THE REGULAR GENERAL MEETING OF SHAREHOLDERS Dear Shareholders, We are submitting for your approval the Separate and Consolidated Financial Statements of HELLENIC POST S.A. ("ELTA" or the "Company") for FY The Financial Statements are presented in accordance with the International Financial Reporting Standards (IFRS), as adopted by the European Union. The Financial Statements are also in accordance with the 62784/2017 Circular of the Ministry of Economy and Development regarding the commercial publicity of the Annual Financial Statements that expire on 07/07/2016 onwards, in accordance with the provisions of Law 4403/2016 in combination with the provisions of Law 4308/ The Group structure and the Company s market position HELLENIC POST Group of companies comprises the parent Company - HELLENIC POST S.A. and its subsidiaries: Tachimetafores ELTA S.A. (ELTA Courier) and KEK ELTA S.A. (ELTA's Vocational Training Center) - whose basic sizes have been incorporated in the current Report. In particular: Tachimetafores ELTA S.A.: Tachimetafores ELTA S.A. was established 2000 and operates in Courier Services market. The parent Company holds a patriating interest of 99,98%, while a participating interest of 0,02% is held by the employees through the Panhellenic Federation of Postal Associations (P.F.P.A.). KEK ELTA S.A.: KEK ELTA S.A. was established in Its main activities pertain to providing training and continuous development of ELTA's human resources. ELTA holds a participating interest of 70% in the share capital of KEK ELTA S.A., while a participating interest of 30% is held by the employees through the Panhellenic Federation of Postal Associations (P.F.P.A.). 2. Evolution of the Group's and Company's operations The course of the Group economic development is reflected in the Consolidated Financial Statements for FY 2017, since the key financial sizes were formed as follows: 1. In 2017, the turnover at consolidated level stood at EURO 340,757 k versus EURO 342,870 k in 2016, presenting a decrease of 0.6%. The Parent Company turnover stood at EURO 310,750 k versus EURO 311,754 k in 2016, decreased by 0.3%. 2. Consolidated Gross Profit stood at EURO 43,189 k versus EURO 35,266 k in The Parent Company Gross Profit stood at EURO 35,129 k versus profit of EURO 28,722 k in The Group gross profit margin stood at 12.7% in 2017 versus 10.3% in the previous FY. The Company gross profit margin stood at 11.3% in 2017 versus 9.2% in the previous FY. 3. EBITDA for the Group rerecorded losses of EURO 6,706 k versus profit of EURO k in Moreover, for the Parent Company, it stood at EURO 8,243 k versus profits of EURO k in It is to be noted that income from deprecation of granted assets have been excluded from EBITDA calculation. 4. The Group Earnings Before Tax recorded profit of EURO 1,275 k versus profit of EURO 436 k in The Company Earnings Before Tax stood at profit of EURO 634 k versus profit of EURO 396 k in Financial Position of the Company The decrease in value of the Company financial assets within the recent years has imposed a significant burden on the Company Equity. The total equity stands at approximately EURO 14,012 k, representing 4.1% of the Company Share Capital. It is to be noted that the Page 9 of 77

10 for FY from January 1 to December 31, 2017 decrease in Equity has arisen from the previous years mainly following the recognition of impairment amounting to EURO k of the Company s participating interest in the Postbank S.A. as well as the recognition of loss amounting to EURO k arising from the Company s investments in PSI program, Buyback implemented regarding the held for sale government bonds in Therefore, the Company s Total Equity is lower than ½ of its paid up Share Capital given the impairment and thus, there are effective the conditions dictating the implementation of Article 47, CL 2190/1920. Moreover, in the nearest future there shall be also taken into account the provisions of Article 48 of the same Law that are applied when the total equity of the Company is lower than one tenth (1/10) of its Share Capital. It is obvious that ELTA should sustain its profitability in the future. In this context, the Company Management is implementing a series of measures aimed at strengthening its turnover as well as at limiting its operating costs. 4. Financial and Non-Financial Performance The key financial ratios of the Group and the Company for 2017 and 2016 are as follows: Ι) Economic Structure Capital ratio allocated to current assets 70,6% 66,5% 67,9% 64,0% Capital ratio allocated to fixed assets 29,4% 33,5% 32,1% 36,0% Economic self-sufficiency index 0,8% 3,5% 26,0% 5,7% Index of foreign capital use 99,2% 96,6% 97,5% 94,6% Fixed Asset Rate Rating (From Equity) 2,6% 10,2% 7,9% 14,9% ΙΙ) Liquidity Working capital ratio 110,8% 109,3% 109,9% 108,3% Immediate cash ratio 13,3% 17,4% 11,9% 16,7% ΙΙΙ) Efficiency Gross Profit Margin Ratio 12,7% 10,3% 11,3% 9,2% Net / Total profit margin ratio 0,4% 0,1% 0,2% 0,1% Index of return on equity 29,7% 2,4% 4,5% 1,4% ΙV) Effectiveness Financial Performance Indicators of ELTA Group & Company GROUP COMPANY Current asset turnover ratio 0,6 0,7 0,6 0,6 The quality rates have been formed as follows: Domestic Correspondence Quality Rates 2017 The annual results of GREX system, taking into account the exemptions imposed by the Hellenic Telecommunications and Post Commission (EETT), in compliance with the estimates of ELTA competent services in the end of 2017, are as follows: Χ+1: 78,2% in 2017, 87,3% in 2016, 87,0% in 2015, 87,3% in 2014, versus 90,1% in 2013, Χ+3: 98,0% in 2017, 99,0% in 2016, 99,1% in 2015, 99,6% in 2014, versus 99,8% in Foreign Correspondence Quality Rates 2017 The annual results of foreign correspondence quality, taking into account the most recent measurements of UNEX τand IPC systems, are as follows: Χ+3: 44.2% regarding inflowing correspondence and 64.1% regarding outflowing correspondence (2016: 52.7% and 71.0% respectively), Page 10 of 77

11 for FY from January 1 to December 31, 2017 Χ+5: 77.8% regarding inflowing correspondence and 88.4% regarding outflowing correspondence (2016: 81.2% and 92.8% respectively). 5. Our vision, values, strategies, basic resources, risks and uncertainties Hellenic Post vision is, with experience and knowledge of two centuries, to combine citizens and businesses by providing them modern, complete and reliable services throughout the country, throughout the world. Therefore its mission is that the Hellenic Post, as the only and most reliable provider of simple, modern and quality post and logistics services, financial transactions and energy throughout the country, has the mission to contribute to the transition of the Greek economy to the new digital era. Hellenic Post renders the aforementioned services in accordance with the Company s fundamental values, which are: - Best Customer Service - Innovation and Change - Respect & Personal Responsibility - Social Responsibility - Corporate Effectivity. In particular, ELTA places their customers and their level of service at the center of attention. The customer-centric approach that has been adopted aims at constantly offering the customer the best quality of service in line with market needs but also European trends. Furthermore, ELTA tries to successfully respond to their ever changing needs, promote innovation, develop new products at the cutting edge of technological developments and continuously enrich the services they provide. It is a priority for the company to continuously and successfully adapt to a dynamically changing environment. Respect for the client, colleagues and the community with personal responsibility, as well as access to services of general financial interest for every business and citizen throughout the country, in accordance with the terms of rendering universal service, are key elements of the operation of ELTA. The efficiency of operation through the achievement of business objectives yields revenue that develops the business while maintaining competitive cost and profitability. ELTA key strategic objectives, which also constitutes the object of the Strategic and Business Planning of ELTA , reflect its desired course of development aimed at fulfilling its mission and constitute the criterion for successful application and implementation of its strategy. ELTA key strategic objectives are: - Ensuring the Company s economic viability, - Exploring possibilities for expanding the Company's operations, - Optimizing internal efficiency and business procedures. It is noted that under the effective legal and institutional framework, ELTA is the provider of Universal Postal Services in Greece. Law On Postal Service, Electronic Communications and Other Provisions 4053/2012, of the Ministry Postal Service for a period of 15 years from the start of full liberalization, ie till December 31, Rendering the universal services identifies the nature of ELTA in respect of its place and role in the operations of the postal market in the sense of its commitment to the regulations Page 11 of 77

12 for FY from January 1 to December 31, 2017 regarding provisions of acceptable quality universal services at affordable prices to all the citizens. The result of this commitment in line with the geographical layout of Greece - is maintaining and operating an extensive postal network with post offices and agencies throughout the country, offering services throughout the entire network range. The main aim of ELTA is to remain the largest and most reliable player in the Greek postal market. The financial difficulties faced by the company in recent years combined with the adverse macroeconomic circumstances have made it imperative to design, adopt and implement specific actions to ensure economic viability and consequently the continuation of the work of ELTA. These development actions under the "Strategic & Business Planning of ELTA " are expected to contribute positively to the increase of the company s revenue flows with a direct impact on the improvement of profitability and liquidity. ELTA invests especially in upgrading the skills of Human Resources aiming at a more efficient respond to new needs (new products, new technologies) that are shaped in the rapidly evolving postal environment. Given the increase in e-commerce and digital substitution, the company is constantly investing in new technologies in order to be able to offer new combined high added value postal services. The completion of the automation of the company's branch network combined with the automation process of the postal agencies contributes to the modernization and homogenization of the entire customer service network, thus ensuring both the absolute control of transactions and the implementation of a single, modern corporate profile of the Hellenic Posts. Diversifying the product portfolio through the creation and support of new alternative revenue streams is a top priority for the business. This includes the Company s dynamic entry into the electricity sales activity. The ability to reform and adapt to new trends and the development of multi-channel services are two of the most important success factors for postal businesses for the future. Risks Uncertainties ELTA has been operating in a particularly difficult business environment in the recent years. Macroeconomic developments in Greece for many years create strong pressures on the postal market, leading both to declining consumer demand for postal services and to the continuing saving trend in the postal expenses by the businesses. In this context the businesses provide incentives to their clientele for electronical communication, reduce the frequency of postal items and shift letters to lower weight rages, resulting in a change in the pricing scale. Developments at the same time in the regulatory environment through the full liberalization of the market and the rapid increase in competition imply large-scale price depression and profit margins. The fully liberalized market entails additional cases of loss of great customers, especially in large urban centers. Efforts are being made to re-integrate already lost customers into the clientele as well as to hold existing ones through responding to their individualized requirements. The immediate redefinition of commercial policy is expected to contribute to the targeted effort to reduce the rate of revenue reduction of the company, when required, based on the attractiveness/profitability of products and services. The increasingly widespread electronic substitution (eg e-banking, e-statement, e-invoice) as well as electronic governance (a more prominent example being the exclusively electronic processing of tax returns) which is now being extended to the whole of the Greek State exerts further pressure on ELTA revenue from its kay business operations - correspondence - that represents 60% of the total revenue. Page 12 of 77

13 for FY from January 1 to December 31, 2017 Furthermore, the revenue of the financial products of ELTA (the second largest source of revenue of the business) with most significant the payback and the cooperation with Eurobank present a downward trend as a result of the economic crisis and competition in the industry, but also the penetration of internet banking and other technologies. Revenue from domestic checks, which had recorded an increase as an alternative to the imposition of capital controls, declines mainly as a result of their easing. In December 2015, ELTA participated in the share capital increase of Attica Bank and received 10 m shares versus EURO 0,30 (total consideration of EURO 3 m.). The decrease in the share priced, recorded on Athens Stock Exchange (EURO 0,0365 as at 29/12/2017) has resulted in the relative losses under the valuation of this investment. The most intense problem of the company is the tightness of cash reserves. The delay in collecting the net cost compensation of the Universal Service for the three-year period and beyond 2016 (which has been submitted for verification to EETT) intensifies the pressure on the company's liquidity. The increasing pressure from great customers to lengthen credit time also contributes to the same direction. The suppliers of a postal operator do not have a special negotiating power in their cooperation with the operator and therefore do not particularly affect the business conduct of the Hellenic Post. Addressing the above risks and difficulties also has to do with the implementation of the completed Restructuring Plan Strategic & Business Planning of ELTA , which was approved by the 1745/ meeting of the Board of Directors of ELTA. More specifically, the objectives of the Strategic & Business Planning of ELTA are specified in a set of measures that include: - reduction of operating cost - increase of share in Special Management services market - redefinition of trade policy - enhancement of share in Electricity market - use of electronic commercial and customs clearance - entry of new financial products - organization of the network - change of production procedures - use of new technologies - reorganization of organizational positions - development of Human Resources "Strategic & Business Planning ELTA " is a long-lasting and integrated business plan with concrete actions that recognizes and addresses the challenges of the market, exploits opportunities and ensures the company's going concern. 6. Additional Information Environmental Issues Page 13 of 77

14 for FY from January 1 to December 31, 2017 Protecting the environment and contributing to the vision of sustainable development is a strategic choice for the Company. ELTA develops environmental actions and participates in international environmental programs. The Company has subscribed to the Collective Alternative Packaging Management System of the Greek Recycling Recovery Company, it also pays the relevant for recycled packaging for the year 2018 in the Paper-Cardboard category (of a total weight of ,08 kg.) In addition, ELTA has been registered with the Greek Recycling Organization (EOAN) Packaging Producers Registry under the registration number Labor Issues In matters of employment, the Company applies equal opportunities policies (regardless of gender, etc.) and recognizes through the human resources management systems and processes the right of workers to enjoy equality, equal treatment and acceptance and respect by other workers and the executives of the Administration. With regard to recruitment, transfer and posting, promotion, selection in positions of responsibility, payroll, principal and auxiliary compulsory insurance, and optional insurance, etc. the legislation and the General Staff Regulations are strictly enforced and there are no exclusions. On the other hand, in cases of disadvantaged workers, there are positive measures (eg in the case of temporary disability due to an accident at work, the allocation of certain social groups (for example, multi-ethnic, third-party, unemployed, etc.). Promotions to positions of responsibility are performed in accordance with the Staff Regulations (which is a chapter of the General Staff Regulations), which regulates the procedure for the proclamation and coverage of positions of responsibility and special positions for a three-year term, the terms and conditions for participation, the candidates' selection criteria, the selection bodies of the candidates, the procedure for the placement of the persons selected in the post, their rights and obligations, and the obligation to assess them to achieve the rally secretariat corresponding to positions of responsibility. In terms of facilities, the Company has a regulatory framework that provides extensive protection to workers with family or other obligations (reduced hours, permits, facilities, parental leave, parental leave, etc.) or workers in need of protection (illness, pregnancy, childbirth, briefs, etc.). Trade union action is free and independent, is exercised by elected employee representatives and facilitated by trade union licenses and other facilities provided not only by labor legislation but also by the General Staff Regulations of ELTA under Article 18 of the Law 1264/1982, as amended and in force. Training is provided indiscriminately to all the staff of the ELTA and covers thematic units for health and labor insurance, professional development and education, vocational training related to educational needs at the work place, programs designed and implemented by the World Postal Union, foreign language training as well as undergraduate and postgraduate programs of the Hellenic Open University or other Universities of the Greek Territory, following a decision of the Board of Directors. The training is implemented through the utilization of information technology, with modern and asynchronous tele-education methodologies using computer and with educational programs that follow the conventional training methodology in the room. Training is complemented by information and awarenessraising activities (workshops). Education, training, awareness-raising actions, apart from the knowledge and skills they target as learning outcomes, seek to overturn stereotypical perceptions, enhance selfknowledge, self-esteem, self-esteem for learners. Similarly, in the cultivation of a value-based equality and parity climate. Also, in the direction of enhancing business policies and practices that seek to remove the constraints associated with the diversity of workers in the workplace. Page 14 of 77

15 for FY from January 1 to December 31, 2017 All human resource management and exploitation policies are inspired by the principles of equality, equal opportunities and non-discrimination. If non-discrimination and nondiscrimination phenomena are detected, they are subject to the disciplinary control provisions of the General Staff Regulations. ELTA S.A. is responsible for Health and Safety of employees through the Health and Safety at Work Department of the General Directorate of Human Resources, in which the Head of the Department is employed, two administrators, four Security Technicians (ST) and two Doctors of Labor (DL), who constitute the Internal Protection and Prevention Service (I.P.P.S) of ELTA SA. Additionally, our Service in order to meet its obligations under the current legislation and for the coverage of its Health Service Operational Operations throughout Greece has concluded a contract for cooperation with a Technical Assistance Service (TA) and a Occupational Physician, recommending the External Service Protection and Prevention (E.S.P.P). The work of the health and safety service is complemented by two Scientific Technicians (ST) and Occupational Health Practitioners (OHP) supervising the work of all Safety technicians and doctors at the same time as the Head of the Health and Safety at Work Service, IPPS ELTA & ESPP. Scientific Technicians and Occupational Health Practitioners visiting the service functions inspect the workplace, make suggestions and recommendations to the workers written in the Guidance Book or verbally on safety and health issues and on the prevention of accidents at work. They recommend the use of Personal Protective Equipment (PPE) as measures to prevent accidents at work and to eradicate occupational hazards. In addition, the D.L carries out and advises on the physical and mental health of employees, informs about first aid issues, proposes changes of job positions for workers or re-inserts of disadvantaged employees into the production process. All Business Functions of ELTA S.A. have the documents in compliance with the current legislation, regarding Health and Safety Service, such as the Technical Security and Occupational Practitioner's (OP) Visits Schedule, Guidance Book, Written Assessment of Occupational Risks (W.A.O.R), Occupational Accident List, Employee Personal Medical Records, Certificate of Inspection of Electrical Installations, Fire Protection Certificate, First Aid Pharmacy and Work Accident List. Finally, the Health and Safety Department ensures that every worker has adequate and appropriate health and safety education in the form of instructions and information, with the help of Circulars, appendices to existing WAORs, as well as with seminars or training programs. Research & Development activities ELTA has many years of experience in participating in EU co-funded projects, infrastructure projects and human resources education, and pay particular attention to research and development actions. In the recent years Hellenic Posts have participated as end-user in proposals for innovative research and development projects co-funded by the EU. within the framework of the actions of the FP7, HORIZON, ERASMUS+ and CEF programs. The Company s objective is to extend its operations to digital services and provide innovative services to its customers. In 2017, among others, the Company was a candidate partner for proposed actions on European and national level for projects with object: e-delivery, eid, big data, drones sorting and transport systems, digital platforms for electricity providers, education agricultural distributors for first aid and health services, training with intercultural mediators in postal branches etc. Page 15 of 77

16 for FY from January 1 to December 31, 2017 In particular, within the framework of the Connecting Europe Facility (CEF) Program, which supports the development of trans-european networks of high performance, sustainability and efficiency in the transport, energy and digital services sectors, in 2017 ELTA participated in the implementation of the following co-funded projects related to Information & Communication Technologies with emphasis on digital services: 1. NO Barriers in edelivery (NOBLE) In the period Ocotber 2016 November 2017 in the framework of the European program CEF Telecom ELTA participated as partner in the project funded by the European Committee NO Barriers in edelivery (NOBLE). The objective of the project was the development of digital services provision structures throughout the E.U. for the support of transactions and cooperation between citizens, businesses and public authorities. One of the actions of the Program is the Electronic delivery of documents edelivery. Its objective is to increase the use of the Digital Service Infrastructure DSI through the creation of additional access points throughout the E.U., aiming at the support of the crossborder transaction of electronic documents of citizens and businesses. The edelivery pertains to the creation of a gate which allows the interoperability both on European level and between the state-members, not depending on the standards which are used for the digital services provision, in order for the guarantee of transactions to be effective. The implementation of "NOBLE" was the establishment, operation and integration of the individual National Access Points (APs), to be used as a means of secure communication between national public bodies, especially in the context of the interconnection of their document management systems. Project partners were public and private stakeholders from 4 European countries: Germany, France, Greece and Slovenia. The project was successfully completed in Leveraging eid in the Private Sector (L.E.P.S.) The European Committee (Innovation and Networks Executive Agency - ΙΝΕΑ) approved the project Leveraging eid in the Private Sector (L.E.P.S.) in the framework of the European Program CEF eid DSI. LEPS aims at the promotion of the use of (electronic identification - eid) in the private sector, especially in Spain and Greece, thus promoting the development of cross-border operations between these two counties and generally the other countries of Europe. In particular, it will allow the use of the pan-european eid infrastructure for cross-border electronic identification and authentication via effective certified e-delivery and e-notifications services, electronic delivery and remote electronic signature, while complying with eidas specifications and rules. The project coordinator is a business from Spain and the following participate as partners: i) three providers of electronic services for individual consumers and businesses (especially), including Hellenic Post (ELTA), ii) three universities with significant know-how and experience in EU-funded Research & Development projects and (iii) the Ministry of Administrative Reconstruction. The project is also supported by the Spanish Ministry of Finance and Civil Service (MINHAP). The project is being implemented already since September 2017 and will be completed in November Under the ERASMUS+ Program, in 2017 ELTA participated in projects with educational actions distinguished for their innovation. As a research and development project integrating new technologies into educational actions, it was as follows: Page 16 of 77

17 for FY from January 1 to December 31, Experiential Training in 3D Virtual (Extra-3D) The project aims to the development of a simulation application based on real-life scenarios which incorporate serious games techniques to facilitate the development, assessment and certification of the knowledge, skills and competencies which are related to customer service in postal organizations, while it opens up further possibilities for horizontal generalization in any service-oriented business sector. In general, it focuses on research, independent and experiential strategies through the development of innovative training techniques and tools which can positively influence employee access to lifelong learning experiences by providing new and effective tools for developing key competencies. The project is addressed to front-office employees, who are the main sales force as well as contact persons. The efficiency of front office employees is vital to boosting the organization's brand, increasing market share, gathering user needs and feedback, as well as servicing and managing customer complaints. Project coordinator is an enterprise from Greece and apart from ELTA and KEK-ELTA, postal operators and businesses from Cyprus, Romania, France, Portugal, Latvia and Greece participate as partners. The project is being implemented already since September 2015 and will be completed in May Company Branches The postal infrastructure of the Company consists of 745 stores and distribution units and 657 agencies (1 agency A, 64 agencies B & 592 C class agencies). ELTA has additional 9 Distribution Units across the country, 9 Sorting Centers (4 fully automated) and 3 Parcel Customs Clearance Services. Risk Management Financial Risk Factors The Group is exposed to not very high financial risks such as changes in exchange rates, interest rates, credit risk, liquidity risk and fair value risk from interest rate changes. The Group's overall risk management program focuses on the unpredictability of the financial markets and seeks to minimize their potential negative impact on the Group's financial performance. Currency Risk The Group operates internationally and is therefore exposed to currency risk, mainly due to the change in SDR. SDR is an exchange rate based on the average daily price of four major currencies and used for non-euro postal transactions as well as non-euro-zone air fares. This risk is not considered to be particularly important. Credit Risk & Liquidity Risk The Group does not have significant credit risk concentrations. A significant proportion of the Group's sales are made in cash, and credit sales are mainly made to the Greek State, DEKO, Banks and customers with an estimated credit history. Risk of Changes in Fair Value Due to Changes in Interest Rates The operating income and cash flows of the Group are not independent of changes in interest rates. The Group manages significant amounts and the income from financial activities is significant. Policy regarding the permanent impairment of available-for-sale financial assets Page 17 of 77

18 for FY from January 1 to December 31, 2017 The Company's management follows the instructions of the IAS. 39 for the determination of the time of permanent impairment of the value of the shares. This determination requires a subjective judgment and the Company's Management makes estimates of what constitutes a significant or prolonged decline in the fair value of equity investments below their acquisition cost. In its judgment, the Company assesses, among other things, the factors for the shares traded on an organized stock market, the volatility of the share price. Impairment may be necessary when there is evidence of deterioration in the issuer's financial position, industry performance and business sector, operating and financial cash flows and technological change. For equity investments that are classified as held for sale, an indication of impairment is a significant or prolonged decline in the fair value of the security relative to the initial cost. Corporate Governance The Group has adopted the Principles of Corporate Governance, as determined by the existing Greek legislation and the international practices. Corporate Governance, as a set of rules, principles and control mechanisms, on which the company s operation and management are based, aims at transparency to the investment community, as well as ensuring the interests of the investors and of any person involved in its operation. The Board of Directors of ELTA is comprised of 1 executive and 9 non-executive members Regarding the non-executive members, 3 members meet the conditions laid down by the provisions of Law 3016 / 2002 on Corporate Governance, and are independent members. The Audit Committee is composed of non-executive BoD members and its mission is to conduct objective internal and external audits and facilitate effective communication between the auditing bodies and the Board of Directors. Its responsibilities include ensuring that the Company complies with the Corporate Governance rules, as well as facilitating the proper operation of the Internal Control System and monitoring the Internal Control Department of the Company. Internal control is a basic and essential element of Corporate Governance. ELTA Internal Control Department is an independent organizational unit accountable to the BoD. Its responsibilities include assessing and improving risk management and internal control systems, as well as verifying compliance with the established policies and procedures stated in the Company s Internal Regulations, current legislation (mainly stock exchange legislation) and the decisions of the Board of Directors. The Company has established the Internal Control Department in complained with the Internal Regulations, directly applying the provisions of Law 3016/2002 on Corporate Governance. The responsibilities of the Internal Control Department are specified in Article 30 of ELTA Articles of Association. The Board of Directors has appointed an Internal Auditor, Mrs. Julia Pantazopoulou, a graduate of University of Piraeus, who is in charge of the organization of the Internal Control Department. The Head of the Internal Control Department has been occupied in our Company under full time and exclusive employment contract. As and on behalf of the Company s Board of Directors Chairman of the BoD Chief Executive Officer Euphrosyne Stavraki Ioannis Zaroliagkis Page 18 of 77