Financial Report 2008

Transcription

1 Financial Report 2008 SNCF Financial Report 2008 Management Report Page I

2 sncf.com Page II sncf.com

3 Management Report page 2 Consolidated Financial Statements page 34 Company Financial Statements page 148 SNCF Financial Report 2008 Contents Page 1

4 Management Report (IFRS) In millions Page 2 sncf.com

5 Contents SNCF Group in 2008 page 4 1. SNCF Group s ambition page 4 2. Key figures page 4 3. Significant events of 2008 page 5 4. Post-balance sheet events page 6 Group results and financial position page 7 1. General observations on Group results page 7 2. Activity and results by core business page Group financial position page Consolidated balance sheet and ratios page Financial relations with the French State, Réseau Ferré de France and local authorities page Social segment page Group exposure to market risk page Outlook for 2009 page 30 Corporate Governance page Board of Directors page Management team page 32 Management Report Company financial statements page 33 SNCF Financial Report 2008 Page 3

6 SNCF Group in SNCF Group s ambition Fiscal year 2008 was marked by the roll-out of an ambitious growth and development strategy. Known as Destination 2012, the goal is to transform SNCF into a truly competitive and global company based on ecomobility services. Objectives have been set for each of the four divisions: Infrastructure and Engineering: Add to the French rail system and become a worldwide reference in terms of technical expertise; Local Transport: Play a leading role in urban and regional local transport in France and in Europe by 2012; Passenger France and Europe: Further the global leadership position in High Speed operations, with a third of traffic outside of France; Transport and Logistics: Develop into one of the sector s top five global players by 2012, with greater competitiveness in the Equipment, Traction, and Safety activities serving the divisions. From an economic and financial perspective, this corporate plan has the following objectives: reach a revenue level of approximately 36 billion by 2012 (a 50% increase compared to 2007) and a current operating profit of approximately 2 billion, by building a very solid financial structure (debt) that is at least equivalent to that of the top competitors, by developing the Group and investing significantly to prepare for the future, by limiting costs (increasing the service life of rolling stock, establishing new breakeven points for employees, cutting overheads). 2 Key figures In a delicate economic context (inception of a global economic downturn in a competitive environment that is brisk), the Group has posted a 12% rise in gross profit, driven by revenue growth of 7%, a limited increase in costs and a one-off impact from an electricity price adjustment. This had a positive effect on gross profit for 212 million and on current operating profit for 120 million. Excluding this impact, gross profit rose by 75 million (3%), while current operating profit declined by 138 million (14%) and net profit fell by 662 million (59%). (In millions) Revenue 25,188 23,560 Gross profit 2,591 2,304 Current operating profit Finance costs Net profit attributable to equity holders of the parent 575 1,117 Cash flow from operations 2,043 1,856 Net debt - 5,965-4,480 Gross investments 3,658 2,990 ROCE * 6.3 % 6.6 % Employees 201, ,545 *ROCE or Return On Cash Employed = the ratio between current operating profit and average capital employed. The capital entering into this calculation is the algebraic sum of equity (including minority interests), provisions and net indebtedness. The average with the prior year s equity gives the average equity. Equity for 2007 was restated for non-recurring pension and provident fund impacts. Page 4 sncf.com

7 3 Significant events of 2008 Fiscal year 2008 marked an important step in terms of Group development. 3-1 Major external growth transactions a) SNCF has placed itself among the top five world players in freight transport Takeover bid for Geodis As part of the takeover bid for Geodis that was closed at the end of July 2008 followed by a squeeze-out on 8 August 2008, SNCF Group acquired 4,535,912 Geodis shares at a price of per share, ex dividend. SNCF thus holds 100% of the subsidiary. Signature of an agreement with IBM On 2 December 2008, Geodis announced the acquisition of IBM Global Logistics, world platform for the management of IBM logistics activities. This acquisition was materialised by the purchase of 58 businesses in various countries, making Geodis the top global player in 4PL businesses of this size. Other Transport and Logistics acquisitions Geodis carried out several acquisitions in the first half. On 3 January 2008, it acquired 100% of the Rohde and Liesenfeld (R&L) group, which had been its main freight forwarding partner since On 18 April 2008, it acquired the British company, Oughtred & Harrison (Shipping) LTD, a maritime and air transport agent. On 20 May 2008, BM Luxembourg acquired France Toupie Location. At the end of May 2008, SNCF took control of the German group ITL, via its subsidiary Transports Logistique Partenaires, by acquiring 75% of the parent company s voting rights. The ITL group handles freight rail traffic in Germany, the Czech Republic, Benelux and, in the second half of 2008, Poland. b) SNCF is forging partnerships based on high speed NTV, a new high-speed train operator in Italy, has chosen SNCF as its industrial partner On 9 October 2008, Nuovo Trasporto Viaggiatori (NTV), the leading Italian private operator for high-speed passenger rail links, designated SNCF as its exclusive industrial partner in Italy and Europe. SNCF acquired a 20% interest in NTV under a partnership agreement. Creation of a joint venture, Connexion TGV, in partnership with Bolloré (high-speed internet) In September 2008, Bolloré and SNCF announced the extension of onboard Wi-Fi service for all Eastern high-speed trains and the creation of a joint subsidiary (SNCF 51% and Bolloré SA 49%) that will design, develop and operate the service (internet access and multimedia portal). Its inauguration is planned for October Significant programmes and operations The following programmes and operations were launched in 2008: Launch of the D maintenant! programme and commitment to the Impaqt service quality programme in Ile de France; Launch of the Midi-Pyrénées Rail Plan on 5 September, with the goal of renovating 500 km of railway track and gearing the network for the increase in traffic; Launch of an exceptional national operation in September covering the diagnostic and management of the catenary and pantograph system. Management Report SNCF Financial Report 2008 (1) Fourth Party Logistic (4PL) service providers meet customer logistics requests by supplying storage, transport and distribution facilities, while combining supply chain information systems. Page 5

8 SNCF Group in Highlights on a human scale Notable developments for parent company salaries included an overall 1.64% increase (with an average agent cost that rose by 4.09%), a twofold increase in management performance bonuses ( 18 million impact on 2008 results vs. 2007), and pension support measures (a 77 million impact for 2008). Based on the 2007 results, parent company agents each received a 200 dividend for the first time in An employee dividend of 207 per agent will be paid in 2009, based on the 2008 results. The total impact of these dividends amounted to 81 million in the 2008 financial statements. Under a joint declaration signed by six trade unions, SNCF would seek to enter within the scope of the employee profitsharing law. 4 Post-balance sheet events 4-1 Withdrawal of pledges on Geodis Freight Forwarding and Geodis Freight Management securities To finance the acquisition of TNT Freight Management (Geodis Wilson) and the change in the Group s working capital requirement, Geodis secured a syndicated loan in January 2007 that was underwritten by BNP Paribas. To partially finance the January 2008 acquisition of Rhode & Liesenfeld, a loan was secured with Caisse Régionale de Crédit Agricole Mutuel de Paris et d Ile de France. At the initiative of Geodis, all of these loans were repaid in advance in January 2009, and the Geodis Freight Forwarding and Geodis Freight Management security pledges were thus withdrawn. 3-4 Other significant events Other significant events also marked fiscal year 2008: On 27 June 2008, a 131 million dividend was paid for the first time to the French State, based on the 2007 results; Labour unrest had a negative impact of 44 million on parent company traffic revenue (national strikes), and resulted in a 9 million revenue loss at SeaFrance (officers strike in March); A number of incidents affected production quality and triggered major delays. The Eurotunnel fire of 11 September totally shut down traffic until 13 September and had a substantial impact in terms of capacity, sales and service reliability over the last four months of The TGV network was impacted by several major incidents (catenary failures, acts of malice), whose effects were multiplied tenfold by the growing traffic density, particularly in peak zones and periods. 4-2 Parcel delivery in Spain Geodis Iberia parcel delivery has posted recurring losses since The Group thus decided to terminate this activity and, in December 2008, negotiated its sale to the Azkar group, Spain s leading parcel delivery company. All revenue will be transferred between mid January and March In return, Azkar pledges to retain between 190 and 240 employees of the 486 working for Geodis Iberia. A redundancy plan was announced on 7 January 2009, subsequent to the balance sheet date. No provision was therefore recognised in the 2008 financial statements. 4-3 Seafrance On 17 February 2009, the maritime subsidiary SeaFrance announced its intention to eliminate 650 jobs, or 40% of its workforce, as part of a recovery plan to deal with the severe economic and financial crisis. The company is planning to resize its fleet in order to adapt to its market and cut its operating costs. The project is vital for a return to the breakeven point as of As the redundancy plan was announced subsequent to the balance sheet date, the financial consequences will be taken into account in 2009 once the terms and conditions are approved and quantified. Page 6 sncf.com

9 Group results and financial position 1 General observations on Group results (In millions) pro forma 2007 comparative (1) 2008 vs pro forma Revenue 25,188 23,560 23,598 1, % Infrastructure fees - 3,038-2,760-2, % Purchases and external expenses - 8,805-8,139-8, % Taxes and duties other than income tax % Employee benefits expense - 9,841-9,494-8, % Other income and expenses % Gross profit 2,591 2,304 2, % Depreciation and amortisation, net of grants - 1,257-1,175-1, % Charges to provisions % Current operating profit , % Impairment losses ,692.7 % Net proceeds from asset disposals % Operating profit 856 1,090 1, % Finance cost of employee benefits % Net borrowing costs % Finance costs % Net profit before tax % Income tax expenses % Share of profit of associates % Net profit from ordinary activities 633 1,196 1, % Net profit from discontinued operations % Net profit attributable to minority interests % Net profit attributable to equity holders of the parent 575 1,117 1, % Management Report SNCF Financial Report 2008 Net profit from recurring operations (2) % Gross profit / revenue 10.3 % 9.8 % 12.2 % Net profit from recurring operations / revenue 2.4 % 3.1 % 2.8 % ROCE = Current operating profit / capital employed (3) 6.3 % 6.6 % 6.9 % (1) 2007 comparative income statement presented in the notes to the 2008 consolidated financial statements (see 1.1 below). (2) 2008 net profit from ordinary activities ( 633 million) less the impact of impairment losses ( 368 million), net proceeds from asset disposals (- 244 million), non-recurring finance costs ( 141 million), capitalised deferred taxes (- 287 million), for 611 million in 2008; 2007 pro forma net profit from ordinary activities ( 1,196 million) adjusted for the impact of impairment losses ( 21 million), net proceeds from asset disposals (- 112 million), capitalised deferred taxes (- 353 million), non-recurring finance costs (- 29 million), for 724 million. (3) See definition of ROCE in Key figures. Page 7

10 Group results and financial position 1-1 Comparability of financial statements a) 2007 comparative The 2007 comparative income statement takes into account various modifications listed in 4.1 below and described in Note 1.4 to the consolidated financial statements. b) 2007 pro forma The 2007 pro forma income statement is based on the 2007 comparative income statement, to which the following main restatements were added for comparison with the 2008 amounts: cancellation of the pension commitments impact corresponding to the employee-related benefits service account that was deconsolidated as at 30 June 2007 (in the 31 December 2007 published financial statements, positive impact of 553 million on employee benefits expense and negative impact of 650 million on finance costs); application of 2008 parent company rules; classification of IFRS fair value of swaps in non-recurring items. All observations on the changes between 2007 and 2008, as presented in this document, are based on the 2007 pro forma income statement. c) Comparison between the 2007 pro forma and 2008 results The comparison of 2008 annual results with the 2007 pro forma results is affected by the following changes in Group structure: (In millions) Impacts on: revenue Impacts on: gross profit Rohde & Liesenfeld (acquired 03/01/08) Wilson (acquired 05/02/07) 79 1 ITL (acquired end of May 2008) 35 1 Oughtred & Harrison (acquired 18/04/08) 34 1 Other Impact of changes in scope results a) Revenue Group revenue amounted to 25,188 million in 2008, for an increase of 1,628 million compared to The 7% increase is attributable for 375 million to the external growth of the Transport and Logistics division (primarily the 2008 acquisitions of Rohde & Liesenfeld, ITL, Oughtred & Harrison and the consolidation of Wilson over 12 months). The organic growth of the other divisions breaks down as follows: Infrastructure and Engineering: 282 million, 6% Local Transport: 427 million, 7% Passenger France Europe: 553 million, 8%. Page 8 sncf.com

11 b) Gross profit Standing at 2,591 million in 2008, gross profit rose by 287 million, or 12%. As a percentage of revenue, the gross profit rate rose from 9.8% to 10.3% in a troubled economic context. (In millions) pro forma 2008 vs pro forma Revenue (net of infrastructure fees repaid by OA) 24,648 23,066 1,582 7 % Employee benefits expense - 9,841-9, % Purchases and external charges (excluding infrastructure fees and energy) - 7,962-7, % Infrastructure fees (net of OA repayments) - 2,498-2, % Fuel and electricity % Taxes and duties other than income tax % Gross profit 2,591 2, % Gross profit / gross revenue 10.3 % 9.8 % Management Report The increase in the employee benefits expense, which was limited to 4%, is primarily explained by a 4.09% increase in the average agent cost for the parent company ( 311 million), the impact of 2007 and 2008 employee dividends ( 81 million), a Group structure impact ( 48 million), and a GIR (performance bonus) increase (- 18 million), which offset the 1% decline in the number of group employees ( 98 million). The increased weight of Purchases and external charges (excluding infrastructure fees and energy) for 10% was driven by Group structure impacts ( 302 million). On a constant Group structure basis, growth stood at 6%, mainly attributable to the following items: adjustments, which was positive for 212 million, offset by higher fuel costs for 125 million (particularly in terms of the price surge over the first half). The increase in taxes and duties other than income tax is due to the increase in the business license tax and other duties (EPSF (1) tax, etc.). c) Current operating profit Current operating profit stood at 980 million, a decline of 18 million or 2% compared to the 2007 pro forma. SNCF Financial Report 2008 increase in SNCF Infra and Equipment production purchases, growth in Geodis freight forwarding activity (for which 80% of the revenue stems from sub-contracting), increase in employer contributions (leases and rental costs), increase in IT and telecom costs, higher maintenance-repair costs due to changes in Passenger France Europe cleanliness criteria. Infrastructure fees (net of Organising Authority reimbursements) rose by 10%. There was a net improvement in fuel and electricity costs for 5%, as a result of several impacts: one-off impact of price The rate of conversion of revenue to current operating profit fell from 4.2% in 2007 to 3.9% in 2008, a decrease of 0.3 basis points. The increase in net depreciation and amortisation charges is related to the substantial investments of prior years. The increase in the net change in provisions for 2008 mainly comprises: the change in environmental provisions: provision for site decontamination (compliance): - 66 million mainly for SNCF Infra (- 25 million) and Traction (- 18 million); provision for the risk to humans from asbestos (- 10 million); the recognition of a provision for losses under the Infra management agreement (- 60 million). (1) Etablissement Public pour la Sécurité Ferroviaire (French rail safety public authority) Page 9

12 Group results and financial position d) Operating profit Standing at 856 million, operating profit declined by 234 million compared to the 2007 pro forma. The 2008 impairment losses had a net negative impact of 368 million on net profit, attributable to: the impairment of SNCF Infrastructure assets: 325 million; the impairment of new investments in impaired SNCF activities (Freight, Corail and Corail IC): 116 million; the reversal of the France Wagons impairment provision: 63 million. The 2008 proceeds from asset disposals for 244 million primarily comprise real estate capital gains for over 220 million (housing sold to low-rental housing companies (ESH) and other organisations by the parent company and Novedis, the property on rue des Poissonniers, the building at 18 rue de Dunkerque, the Freight real estate, etc.), and the SNCF Freight rolling stock ( 14 million). e) Finance costs The million deterioration in finance costs primarily stems from: A 170 million decline in non-recurring finance costs resulting from changes on floating-rate foreign exchange contracts against fixed-rate contracts that did not qualify as hedges under IFRS. The significant decline in interest rates at the end of 2008 (1.50% on average for these contracts) significantly hindered 2008 market values compared to 2007; A 117 million decline in recurring finance costs. This includes a volume impact for the financing of capital expenditure on property, plant and equipment and external growth operations, an interest rate impact relating to the increase in short-term interest rates primarily during the second half, and a Group structure impact (- 4 million). f) Share of profit of associates The share of profit of associates amounted to 32 million, compared to 37 million in The result includes the increase in contributions from Keolis ( 27 million vs. 24 million in 2007) and Eurofima ( 7 million vs. 6 million in 2007) and the decrease in contributions from the Transport and Logistics division (negative for 1 million vs. positive for 6 million in 2007). g) Income tax Income tax for 2008 (positive at 250 million) includes the one-time capitalisation of 287 million in deferred taxes, primarily based on the parent company tax loss carry-forwards and calculated according to future revenue. The 2007 income tax also included capitalisation of deferred taxes in the amount of 353 million. The current tax charge decreased from 53 million in 2007 to 37 million in h) Net profit from recurring operations Net profit from recurring operations corresponds to net profit from ordinary activities adjusted for the following non-recurring items: gain or loss on asset disposals, impairment losses, non-recurring financial items (fair value of financial instruments) and parent company deferred tax assets. Overall net profit from recurring operations stood at 611 million in 2008, compared to 724 million in i) Net profit for the year attributable to equity holders of the parent Following all these changes, net profit for the year attributable to equity holders of the parent is positive at 575 million, compared to 1,117 million in 2007, after recognition of 18 million in minority interests. It was impacted by changes in non-recurring items (mainly the impairment loss recognised for the SNCF Infra activity for 325 million in 2008 and the 170 million decline in non-recurring finance costs compared to 2007). The ROCE (calculated on current operating profit) fell from 6.6% to 6.3%. Page 10 sncf.com

13 2 Activity and results by core business SNCF Group activity is structured according to four divisions that are supported by common operations: Infrastructure and Engineering, Local Transport, Passenger France and Europe and Transport and Logistics. SNCF Infrastructure and Engineering Local Transport Passengers France Europe Transport and Logistics Management Report Infrastructure & Engineering Systra, AREP, Inexia, SNCF Intern. TER, Transilien, Corail Intercity Effia TGV, Corail, Stations, Distribution Thalys, Eurostar, Lyria, VSC, idtgv, A2C Global offering Rail freight SNCF Financial Report 2008 Keolis* Asset management * consolidated using the equity method Division contributions to revenue, current operating profit and net profit from recurring operations break down as follows: (In millions) Infrastructure & Engineering Local transport Passengers France Europe Transports & Logistics Common operations & Investments & Inter-division eliminations Revenue 4,823 6,340 7,469 8,027-1,471 25,188 Gross profit , ,591 Cash flow from operations , ,043 Free cash flow Group Page 11

14 Group results and financial position 2-1 Infrastructure and Engineering The Infrastructure and Engineering division encompasses the delegated management activities of Infrastructure (SNCF) and Engineering (Systra, AREP, SNCF International and Inexia). Infrastructure & Engineering Infra SNCF Systra Greater industrialisation of maintenance: 2,660 km in additional track (for a total of 4,290 km in two years including all the Rhone-Alpes lines) were maintained via the pooling of working zones. Operations: the audit training by Ecole Polytechnique Fédérale de Lausanne (EPFL) on capacity management contributed to a draft law on the creation of an independent department for network operations and traffic management. Substantial increase in the volume of work for RFF, for both renewal ( 992 million in 2008, for an increase of 15% compared to 2007) and development (excluding new lines, 1,047 million in 2008, for an increase of 9.5% vs. 2007), including the successful conclusion of major projects (Bordeaux and Oissel railway bridges, etc.). SNCF International Inexia Arep Exceptional diagnostic of network catenaries and submission of specific proposals to the RFF and the French State on 25 November 2008 regarding maintenance trends and the reinforcement of installations. Launch of Infrarail, an internal service chain for rail project supplies and logistics and conclusion of a major first contract for the Rhin-Rhone high-speed line ( 130 million). a) Highlights The main highlights for Infrastructure & Engineering were as follows: Significant change in management agreement revenue ( 120 million, 4.5% vs. 2007) of which major repairs ( 21 million), the annual fixed price adjustment ( 18 million including the full-year impact of the Eastern high-speed line), the New Local Dynamic and Impaqt programmes ( 27 million) and a highly favourable indexing ( 50 million vs. 2007) corresponding to a consumer price index that reached a peak as at 30 June, the date of recognition. New contracts for the engineering subsidiaries obtained in France and abroad, particularly by Systra (Baffin Island project, rail lines in Turkey, assistance with the Santiago, Chile subway, engineering and project management for the Hyderabad subway), by SNCF International (technical assistance for the South Korea high-speed line) and by Inexia (safety for the Fréjus traffic tunnel, the Canal Seine Nord Europe project, and contracts for the Rhin-Rhone high-speed line). Asset impairment and provisions for losses on completion (see Division results). Page 12 sncf.com

15 b) Division results In millions pro forma Change Revenue 4,823 4, Gross profit Gross profit / revenue 0.3 % % Cash from operations Investments - all financing * Free cash flow * Investments net of grants and disposals decreased from 161 million in 2007 to 101 million in Results Division revenue and gross profit rose sharply. Work carried out (a 118 million increase, or 11.5%, to 1,148 million) and the management agreement (see Highlights below) are driving SNCF Infra revenue and gross profit, which is almost at the breakeven point (negative by 5 million). The subsidiaries contribution to revenue was stable. SYSTRA is up by 8 million (7%) due to the development of its urban transport activity. Although INEXIA revenue has shrunk with the completion of the Eastern high-speed line, its gross profit rose by 3 million. Asset impairment The asset valuations conducted at the end of 2008 to determine SNCF Infra s ability to generate future cash flows confirmed the necessity of a 325 million asset impairment, based on the prevailing rules governing relations between SNCF Infra and its clients (primarily RFF). Provisions for loss on completion for the Management Agreement A 60 million provision has been recognized due to the risk of a 2009/2010 loss arising from a declining economy, and hence the potential of a sharp drop in the main economic indicators underlying the agreement s revenue indexation (GDP, price, etc.). RFF and the French State have not stated their position regarding the compensation arising from the special pension regime reform and the consequences on payroll. Investment and financing Investments totalled 120 million in 2008, the priorities being the renewal of an increasingly obsolescent vehicle fleet and the development of Infrarail and new information systems. Free cash flow remained negative at 94 million, but improved by 103 million. Cash from operations rose by 43 million, driven by the division s profitable revenue growth. c) Outlook In order to respond to a changing network and its maintenance requirements while improving finance costs, the division will have to undergo significant transformations: Maintenance: Optimise SNCF Infra rail maintenance by extending and pooling working zones. The volume of track maintained in 2008 will almost double in 2009 (5,160 km vs. 2,660 km in 2008). The first conclusions of an international study on network maintenance efficiency, initiated at the end of 2008, should enable the launch of optimisation measures; Operations: Create an independent operations department for the management of rail rights of way and circulation; Work: Renew the network with RFF. The increase in renewal volumes included in the State-RFF performance plan is significant: 1.8 billion in 2012 compared to 1.1 billion in The work in connection with State-Region Project Contracts can be added to these volumes; Management Report SNCF Financial Report 2008 Page 13

16 Group results and financial position Subsidiaries: Pursue profitable revenue growth, particularly through high-speed line (Inexia and SNCF International), and subway and tramway (Systra) development; Major negotiations to be conducted with RFF: - Assumption of all impacts arising from reform of special pension regimes, - Day/night differentiation, - Extensive renegotiation of agreements that should lead to full compensation for our know-how and positive free cash flows. 2-2 Local Transport The Local Transport division encompasses all the Group s local transport activities: medium distance links (Corail Intercity), rail transport regulated services (TER, Transilien, Chemins de Fer de la Corse and the Keolis UK subsidiaries), bus, tramway and subway (Keolis) and complementary services (Effia). Local Transport Contracts The new STIF/SNCF contract was signed. It calls for an annual business volume of 2.5 billion over and an investment volume of 1.7 billion over four years to be financed by SNCF for 47%. Five new TER agreements negotiated with the Organising Authorities in 2007 were implemented: Haute Normandie, Basse Normandie, Nord Pas de Calais, Midi-Pyrénées and Pays de la Loire. A framework agreement was signed between Corail Intercity and the Haute Normandie regional council. Development of the offering and operations Transilien has reorganised rail services and developed the offering for the Paris Est and RER A and C lines. Rescheduling was continued: modification to Bourgogne, Rhône-Alpes, Haute and Basse Normandie and Aquitaine services. TER has pursued inter-modality extension and price range simplification (development of subscriptions and regional multimodal and intermodal pricing solutions). TER Transilien SNCF Corail Intercités Keolis Effia Corail Intercity worked on the branding of lines and a Qualicités plan. The revamped Bordeaux-Limoges-Montluçon-Lyon transversal rail service was inaugurated. The Tangentielle Nord for the Greater Paris Region was declared to be in the public interest at the end of May Investment projects TER continued to modernise its fleet with the arrival of nearly 600 new passenger cars including the high-capacity motorised carriages. a) Highlights Fiscal year 2008 was marked by the division s development according to various strategies (contracts, new offerings, capital expenditure, etc.). Transilien pursued its acquisition programmes for new Transilien motorised carriages for 1,850 million and highcapacity motorised carriages for 136 million. A supplementary IMPAQT development contract for Île de France was jointly signed with STIF and RFF ( 627 million over eight years co-financed for 50% by SNCF) for the modernisation of rolling stock and the renovation of Transilien stations and infrastructures. Page 14 sncf.com

17 The D maintenant! plan was launched. It calls for 100 million in investments over 18 months in order to improve RER D line operations. Keolis Keolis acquired the Belgian group EBH (annual revenue of 109 million), which makes Keolis the leading private bus carrier in Belgium, Evrard transport (Oise, annual revenue of 9 million) and the Sofitra group (central-western France, annual revenue of 7 million). A new subsidiary, Aerolis, was created jointly with Air France. Regional trains were launched on the Hellweg-Netz network (Rhenania North-Westphalia in Germany) on 13 December Keolis won tender bids, including all the Charente-Maritime transport services ( 150 million over eight years) with a consortium. The contract renewal rate is satisfactory in an aggressive commercial environment. Other highlights The act incorporating Transferis was signed on 8 February This will associate SNCF and CFF for a future RER in the greater Geneva region. National strikes had a negative impact of 11 million on traffic revenue. Management Report b) Division results In millions pro forma Change Revenue 6,340 5, Current operating profit (COP) COP / Revenue 7.2 % 6.7 % Cash from operations Investments (all financing sources)* 1,492 1, Free cash flow SNCF Financial Report 2008 * Investments net of grants and disposals decreased from 414 million in 2007 to 260 million in Results The 7% increase in Local Transport revenue is explained by: The increase in traffic revenue (10.6% for TER traffic, 6.2% for Transilien traffic); Indexation impacts provided for under contract and induced by higher prices (with no impact on net profit since it parallels the higher charges); Base impacts relating to the fixed increase in charges arising from new agreements signed with the Organising Authorities and the STIF, and limited by the impact of the increase in contractual objectives; The drop in labour unrest (positive impact of 37 million) compared to 2007; The 8 million (8%) in growth in the EFFIA contribution to revenue ( 104 million in 2008), thanks to new fleets. The 15% increase in gross profit essentially stems from the TER growth (25%), whereas Transilien grew by 3% and Effia grew by 11% ( 22.1 million to 24.6 million in 2008). The division s gross profit/revenue ratio has thus increased from 6.7% to 7.2%. The New Local Dynamic and IMPAQT projects had more significant consequences for: Transilien purchases and external charges (excluding infrastructure fees and energy). TER purchases and external charges rose in proportion to revenue; TER employee benefits expenses (5.1% increase in the number of employees). Page 15

18 Group results and financial position Investment and financing Total investment (all financing sources) increased by 9% between 2007 and In 2008, the item primarily comprised new generation Double-decker TER trains, new Transilien motorised carriages, high-capacity motorised carriage trains, the new TER RITM X sale system, the renovation of stations (Transilien + loin programme), and the launch of a video surveillance programme in stations. Net of agreements and disposals, investments decreased from 414 million to 260 million. The 64 million (25%) increase in cash from operations stems from Transilien for 33 million and TER for 22 million. The increase in cash from operations and the decrease in investments net of agreements and disposals generated a significant turnaround in free cash flow, which was positive at 59 million in Keolis Keolis was consolidated using the equity method. The positive contribution of Keolis to the net profit of equity-accounted companies amounted to 27 million, compared to 24 million in The increase was primarily driven by revenue growth, resulting from a combination of acquisitions (particularly EBH in Belgium in early 2008), share capital increases in 2007, and a 2008 portfolio impact (relating to the gain of the London Midland concession at the end of 2007). On a constant Group structure basis: France posted a substandard performance due to intercity difficulties and the troubled economy at the year-end; International activity grew thanks to England and Scandinavia. c) Outlook Beginning of negotiations with Alsace; Expanded offering with the reopening of Aix-Marseille, new PACA offerings, continued rescheduling in Bourgogne, Aquitaine, Haute and Basse-Normandie; Pursuit of fleet modernisation: commissioning of 673 new rail cars. By the end of 2009, 54% of the fleet will comprise new equipment. Transilien Development of the offering (+4%): rescheduling of the Paris-Montereau-Montargis, Paris-Mantes and Paris-Dreux lines; Continuing roll-out of IMPAQT and D maintenant! service quality programmes; Arrival of the new Transilien motorised carriage at the end of 2009 and the dual-mode high-capacity motorised carriage. Corail Intercity Modernisation of 120 Corail cars, roll-out of cars designed for persons with reduced mobility. Keolis Maintenance of leading position in city and inter-city transport in France; International growth. Effia Reinforcement of its role as a major player in the parking sectors with the creation of 10,000 additional spaces and the development of sustainable mobility solutions. Fiscal year 2009 will be highlighted by the following items: TER Renewal of agreements: finalisation and signature effective 1 January 2009 for Aquitaine, Auvergne and Champagne- Ardennes; Page 16 sncf.com

19 2-3 Passenger France Europe The Passenger France and Europe division encompasses the TGV, Corail and Europe (Eurostar, Thalys, Lyria, etc.) carriers, and the related service providers, Stations and Staging Points, Distribution (with among others Voyages-sncf.com), Train Management and their administrative support functions and information systems. Passengers France Europe Transporters Service providers Management Report TGV Corail Stations Trains Distribution IDTGV EUROPE CRM Services Eurostar Thalys Artesia Elipsos TGV lyria Alleo A2C Parvis Voyages-sncf. com Rail Europe SNCF Financial Report 2008 a) Highlights The year 2008 saw the successful launch of numerous innovations, in terms of the offering and service, and a step-up in the division s international development. Success of the new fare and service offering Constant improvement in the first class occupancy rate, following the introduction of a service offering that was better adapted to the needs of business travellers; Ambitious training plan covering 5,500 customer agents combined with the new service offering; Success of Lunéa fares tested on the Internet since March. New offerings First full year of operation for the TGV East European and High Speed 1 (Eurostar) lines. Excellent results in terms of service reliability and sales, mitigated by Eurostar and the consequences of the Eurotunnel fire in September 2008; Development of idtgv offerings (idnight, new day services and strengthening of current services) and launch of the TGV Prêt-à-Partir offering (400,000 trips in 2008); New TGV East European services: new Paris and Zurich and TGV Paris-Munich services; Launch of a sixth Thalys service to Amsterdam and creation of Lyon/Lille and Nantes/Montpellier services, an eighth Paris/Nice summer service, and a third Paris/St Malo service. Page 17

20 Group results and financial position Division development NTV, a new high-speed train operator in Italy, selected SNCF as its industrial partner on 9 October SNCF acquired a 20% stake in NTV; Decision to roll out wide band Internet on the Eastern high-speed line and creation of a Connexion TGV joint venture in partnership with Bolloré to develop the service. New services rolled out by the division and its subsidiaries Launch of Voyages-sncf.mobi (m-commerce) and tgv-europe.com sites; Roll-out of new Internet sale sites on the UK and US markets by the Rail Europe network; Possibility of travelling on both the Thalys and Île-de-France networks using only a Navigo pass; New Auto-train offering at very attractive prices; 25 November launch, with Banque Postale, of Regliss, a prepaid bank card for young people; Step-up in CRM Services, Grand Voyageur and Gagner à Voyager loyalty programmes; A2C roll-out of new concessions in the Eastern line stations, including the completion of boutiques in the Gare de l Est, Gare de Lyon Galerie Diderot, and Halle Honorat in Marseilles. Roll-out of Accès Plus in over 300 stations; b) Division results In millions pro forma Change Revenue 7,469 6, Gross profit 1,573 1, Gross profit / revenue 21.1 % 18.4% Cash from operations 1,333 1, Investments - all financing * Free cash flow * Investments net of grants and disposals increased from 581 million in 2007 to 731 million in Results Passenger France and Europe posted 2008 sales figures that were more than satisfactory (revenue was up by 8%), despite a progressive decline in the economic and financial situation over the year and the consequences of the Eurotunnel fire. The high oil prices that persisted until the summer in fact contributed to a modal shift from air and road transport to the train. There was a dynamic rise in passenger traffic revenue (8.7% compared to 2007, 7.7% excluding the impact of the 2007 and 2008 strikes): The solid TGV performance is due to the full-year impact of the TGV East, the increase in the number of first class reservations, relating to the introduction of new fare and service offerings, and an active promotional policy for Leisure customers; The decrease in Corail activity (relating to the roll-out of the TGV East) was limited by the solid results of Lunéa, whose traffic was stimulated by the launch of a new Internet fare offering; Despite dynamic growth in international traffic, activity in Europe posted a clear slowdown in terms of revenue, due to the fall-out from the Eurotunnel fire and the significant depreciation of the pound in relation to the euro. Gross profit rose by 13% compared to 2007 (24% if the one-off impact of the electricity price adjustment over is included). Excluding this impact, the ratio of gross profit over revenue rose from 18.4% to 19.3% (or 21.1% with the impact). These solid performances are explained by the appeal of rail, from both an economic and environmental perspective, ongoing sales initiatives and tighter control over increases in operating expenses and overheads. Page 18 sncf.com

21 Investments and financing Investments (all financing sources) amounted to 812 million over 2008 and primarily comprised: The Double-decker TGV acquisition (15 trains delivered in 2008, 516 million in investments); The transformation of current rolling stock (TGV trains and Corail cars in the amount of 157 million); and Construction work ( 105 million) for new stations (Bellegarde) and renovation/modernisation of existing stations (Gare St Lazare, video surveillance). Cash flow from operations provided financing for the division s investments in Cash from operations increased by 11% (23% with the one-off impact of the energy price adjustment), to 1,333 million in Free cash flow rose from 501 million in 2007 to 602 million in 2008, for a 20% increase, fully attributable to this one-off impact, without which free cash flow would have declined by 7% compared to c) Outlook In terms of division revenue, there will probably be a net slowdown in 2009 due to a deteriorating economy. New momentum for Thalys based on three focal points: - A new Thalys: gradual roll-out of renovated trains, new on-board service contract and new uniforms; - Commissioning of high-speed lines to Germany and the Netherlands, escalation in frequency, and use of Double-decker trains; - Adaptation of the sales strategy: new corporate offering, extension of electronic ticketing and launch of a loyalty programme. There will be organisational change to support the division s objectives: Arrival of five strategy project managers for Passenger France and Europe in January 2009 in order to create a more flexible and customer-friendly division; Introduction of a new economic management approach so that line managers are more accountable; In order to prepare the opening to competition, creation of Guichet Gares (roll-out on 13 December 2008), a platform for processing the requests of new entrants wishing to use the passenger stations. Management Report SNCF Financial Report 2008 The following strategies will be developed: Pursuit of TGV gains in the business travel market (improved service quality) and Leisure customer business volume (steady low prices combined under the Prem s label for greater visibility), in addition to sales drives; Acceleration in Corail service optimisation, particularly for the Auto-train activity; Return to a normal transport plan for Eurostar beginning March-April 2009; Page 19

22 Group results and financial position 2-4 Transport and Logistics The Transport and Logistics division encompasses a full range of transport and freight logistics businesses. Transport & Logistics Asset management Rail freight Global Offering Rail cars France Wagons, Ermewa, CTC, Transengrais, CWS, Sci Retif, SGW Workshops Segi, Sari SGVMT (Rosco) FRET SNCF Rail companies Freight UK, Benelux Italie, Cargo docks, Rail euro concept, Sibelit, ITL, VFLI Combined operators CME, Lorryrail, Naviland, Novatrans, Froid combi, AFA Service providers Edifret, Transinform., Logifer, Cadefer, Sideuropa, Séfergie, Logistra, Ecorail, Fret Deutsch. Geodis Groupe STVA Parcel delivery and express Freight Forwarding Contractual logistics Route Other transport commissioners Sealogis, Rouch, Districhrono, STSI a) Highlights Transport and Logistics highlights in 2008 involve the division s international positioning and its development in France. Pursuit of the division s international growth and its positioning as global leader in new businesses relating to integrated supply chain management, through the following actions: Takeover of Geodis to transform the group into a global European operator in freight transport and logistics; Acquisition of the German group Rohde & Liesenfeld (R&L) by Geodis on 3 January 2008 (an international player in the air and sea freight forwarding sector with annual revenue of 270 million in 2007); Acquisition of 75% of the Import Transport Logistik (ITL) group, a German private rail company, on 24 May 2008 (annual revenue of 47 million in 2007, for a freight traffic volume of 1.3 GTK); Signature of a Geodis contract with IBM ( 1 billion annually over 15 years) and acquisition of IBM Global Logistics, making Geodis the leading 4PL player of this size; Page 20 sncf.com

23 Rail license obtained in the UK via Fret Europe UK and in Poland via ITL Polska. Step-up in the roll-out of the Rail Wide Band action programme through: The programme s development: Reconfiguration of the network based on three hubs, industrial consolidation of Freight, five business divisions, and five regional Freight units, which have all been operational since 1 October 2008; b) Division results Modification of the work time reorganisation project to better use scarce resources in terms of conductors and locomotives, following the decision of 900 volunteer conductors not to test new working conditions. Labour unrest SNCF Freight national strikes had a negative impact of 21 million on traffic revenue. In millions pro forma Change Revenue 8,027 7, Gross profit Gross profit / revenue 3.3 % 3.4 % Cash from operations Investments - all financing * Free cash flow * Investments net of grants and disposals increased from 294 million in 2007 to 513 million in Results Acquisitions in 2008 (Rohde & Liesenfeld, ITL, Oughtred & Harrison) and 2007 (Wilson) highlighted the Transport and Logistics division results. These acquisitions contributed 375 million in revenue. Excluding the Group structure impact, revenue was stable (increase of 24 million, or 0.3%). Global Offering: Growth was driven by the acquisition of R&L. On a constant Group structure basis, activity increased by 2% due to growth over the first three quarters of the year, before posting a decline in the fourth quarter because of a net deterioration on the economic front. The decline involved all businesses and particularly Parcel Delivery, Freight Forwarding and the iron activity of STVA. Rail Transport: The 133 million decline in SNCF Freight traffic revenue over the last quarter was partially offset by the consolidation of ITL ( 35 million) and the organic growth of Naviland Cargo ( 16 million). Asset Management: The revenue increase at France Wagons, relating to rate revaluations for SNCF Freight, had no impact on the contribution to division revenue. Gross profit rose by 11 million, including 9 million relating to Group structure impacts. On a constant Group structure basis, gross profit rose by 2 million (1%). The stagnation is due to the year-end drop in activity, which was shared by the Global Offering (Geodis, STVA rail activity) and Rail Transport (SNF Freight, for which the significant decline in the accounts is slightly mitigated by one-off rate adjustments for the energy line item). Investments and financing The 371 million decrease in the division s free cash flow is explained by an increase in investments and a decrease in disposals and cash from operations: Global Offering: Investments rose (Bonneuil platform for 48 million, STVA trucks and rail cars for 33 million) in parallel to a decrease in real estate disposals compared to Rail Transport: Investments were up by 69 million with the acquisition of main line (BB 75000) and switcher (BB 60000) thermal locomotives. Asset Management: Investment amounted to 27 million. Management Report SNCF Financial Report 2008 Page 21

24 Group results and financial position c) Outlook The division expects to realise its ambition of becoming a global European logistics and freight transport player. Accordingly, there will be five focal points to its strategy: Gain ground with respect to the international and specialised logistics activity; Develop the rail mode throughout Europe; Develop freight road transport in a responsible manner; Position SNCF Group as an organiser of innovative multimodal solutions; Develop the asset management activity. SGVMT, a rolling stock piggy-back and leasing entity created on 1 January 2009, will recover the locomotives transferred by SNCF Freight. 2-5 Common Operations and Investments The Common Operations and Investments division encompasses the Group s support functions, the Equipment and Traction service providers, the Real Estate activities (ICF, SNEF Group) and a few subsidiaries and affiliates such as SeaFrance. a) Support Functions The 2008 net profit of the support functions includes certain specific items: The impact on net profit of the tax consolidation group deferred tax asset that amounted to 286 million in 2008 vs. 352 million in 2007; Non-recurring finance costs (see General observations on Group results) ; The impact of the 2007 and 2008 employee dividends (- 81 million). b) Equipment Fiscal year 2008 was the first year of implementation for the Performance 2010 programme, the goal of which is to make the Equipment division the leader in European maintenance. The programme is based on the following main strategies: Modernisation of its industrial facilities in order to meet the steady arrivals of new equipment. This was reflected by the optimised set-up of new maintenance workshops for TER (scheduled between 2004 and 2010), Transilien (new Val-Notre Dame workshop inaugurated in early September) and TGV trains (maintenance workshop in Lyon inaugurated in early 2009); Professionalization of engineering (reorganisation based on two core businesses: life series engineers and key components engineers); Improvement of quality for services rendered to activities participating in the New Local Dynamic, D maintenant! and plan pantographe programmes, as well as TER rescheduling; Modification of the management method for establishments and a reduced and more flexible organisation; More efficient production planning (Agirre and Osmose projects). In 2008, the division continued to provide support for the commissioning of new rolling stock, which remains at a high level with the late December delivery of 23 Transilien dual voltage locomotives, 101 Freight locomotives, 13 DASYE trains, 2 POS trains, 32 TER2N NGs and 135 high-capacity motorised carriages. c) Traction In 2008, the Traction activity was highlighted by: The industrial consolidation of SNCF Freight. The transfer of drivers from Traction to SNCF Freight was completed on 1 July 2008 for the Fret Nord division and on 1 October 2008 for the four other Freight divisions; The reduction by half of days lost due to strikes; Rescheduling: Development of the TER Rhone Alpes rescheduling set up in December 2007, rescheduling for line A in February 2008 and for lines N, R and J with respect to the December 2008 change in service, rescheduling preparation for the TER PACA and TER Bourgogne Nord lines, and the Normandie lines for both TER and Corail Intercity; Interoperability for line B, which began in July 2008, will be completed by the summer of 2009; The review of TGV South East schedules, roll-out of the V200 for Paris-Clermont and an inter-sector step-up for the TGV East; Page 22 sncf.com