2017 INTERIM FINANCIAL REPORT

Transcription

1 2017 INTERIM FINANCIAL REPORT Financial period I 1 January to 30 June Translation disclaimer: This document is a free translation of the original French language version of the interim financial report (rapport semestriel) provided solely for the convenience of English-speaking readers. This report should consequently be read in conjunction with, and construed in accordance with French law and French generally accepted accounting principles. While all possible care has been taken to ensure that this translation is an accurate representation of the original French document, this English version has not been audited by the company s statutory auditors and in all matters of interpretation of information, views or opinions expressed therein, only the original language version of the document in French is legally binding. As such, the translation may not be relied upon to sustain any legal claim, nor be used as the basis of any legal opinion and Aubay expressly disclaims all liability for any inaccuracy herein. Registered office: 13, rue Louis Pasteur Boulogne Billancourt A Société Anonyme (French public limited company) with share capital of 6,544,498 Registered in Nanterre (RCS No ) - French industry code (APE): 6202A Aubay 2017 Interim Financial Report - 1

2 CONTENTS Contents CONTENTS... 2 INTERIM MANAGEMENT REPORT... 3 CONDENSED INTERIM FINANCIAL STATEMENTS Consolidated statement of financial position... 8 Consolidated statement of comprehensive income Consolidated statement of cash flows Changes in consolidated shareholders' equity Notes to the consolidated financial statements Notes to the balance sheet Notes to the income statement RESPONSIBILITY STATEMENT FOR THE ORIGINAL FRENCH VERSION OF THE INTERIM FINANCIAL REPORT Aubay 2017 Interim Financial Report - 2

3 INTERIM MANAGEMENT REPORT The Company's Board of Directors, chaired by Mr. Christian Aubert, met on 13 September 2017 to review the consolidated financial statements for the six-month period ended 30 June These financial statements are presented according to International Financial Reporting Standards (IFRS). First-half operating highlights Aubay posted revenues of million for the first half of 2017, up 3.7% like-for-like. Internal growth for the second quarter amounted to 0.3%, held back by a very unfavourable calendar effect (with growth down by an estimated 5 points in France) and a very high base effect (from internal growth of 14.6% in the same period in 2016). All management indicators improved between the first and second quarter of 2017: increase in sales prices (for consultants on secondment with the client), acceleration in recruitment, higher productivity rates, etc. Hampered by a tight job market, organic growth in France amounted to 1.9% for the first half of In international markets organic growth remained high at an excellent 5.9% bolstered by numerous contracts and a more favourable labour market. The calendar effect also weighed on growth in the second quarter with an impact of around 2 points. Italy reported one of the Group s best performances for the period, with Belgium and Luxembourg maintaining their strong momentum and delivering the highest growth as well as solid prospects for the second half of the year. Activity for the Iberian Peninsula also continued to flourish with Portugal leading the way. Aubay s productivity rate improved again in the second quarter of 2017, increasing to 93.4% from 92.3% for the first three months of Current operating income reached 14.0 million, down 3.4%, reflecting the negative impact of the number of working days in the 2017 first half compared to the same period in The current operating margin amounted to 8.2% with a homogeneous breakdown of 8.1% for France and 8.3% for international markets. The Group s headcount now exceeds the 5,000-mark, with employee numbers amounting to 5,057 at the end of June as against 4,899 at the end of 2016 and 4,890 one year earlier. Thanks to the different recruitment drives, numbers for the first half increased by a net amount of 158 staff members. Alongside prices, recruitment remains one of the main challenges for growth. m Q Q2 2016** Change (reported basis) Internal growth H H12016 *** Change (reported basis) Internal growth 3 months 6 months France % -1.6% % +1.9% International % +2.5% % +5.9% Total % +0.3% % +3.7% ** Reclassification in 2016 of a 0.3 million project from France to international markets ** Reclassification in 2016 of a 0.7 million project from France to international markets Aubay 2017 Interim Financial Report - 3

4 2017 first financial highlights: ( '000s) 30/06/ /06/2016 Change Revenue 170, , % Other operating income Purchases used in production and external charges (36,510) (33,635) Staff costs (117,739) (114,240) Taxes other than on income (1,601) (1,426) Amortisation, depreciation and provisions (836) (837) Change in inventories of work in progress and finished goods (18) (3) Other operating income and expenses Current operating income (EBIT) 14,003 14, % Current operating margin (%) 8.2% 8.8% Other operating income and expenses 420 (586) Net operating income 14,423 13, % Income from cash and cash equivalents Net borrowing costs (30) (247) Other financial income and expenses Net financial income (expense) 115 (3) Income tax expense (4,402) (4,140) Income from equity-accounted investees Net income before results of discontinued operations or assets held for sale 10,136 9,761 Net income after tax of discontinued operations or assets held for sale Net income 10,136 9, % Net margin (%) 5.9% 5.9% Attributable to shareholders 10,136 9,761 Attributable to non-controlling interests - - m Revenue Current operating margin (%) 30/06/ /06/ /12/2016 Revenue Current operating margin (%) Revenue Current operating margin (%) Group % % % France % % % International % % % Corporate 0.0% (0.6%) (0.2%) Headcount end of reporting period 30/06/ /06/ /12/2016 France 2,297 2,221 2,269 Belgium/Luxembourg Italy 1,143 1,093 1,120 Spain/Portugal 1,348 1,320 1,254 Total 5,057 4,890 4,899 Revenue-generating 4,693 4,554 4,552 Revenue-generating (%) 92.8% 93.1% 92.9% Administration and sales Total 5,057 4,890 4,899 Aubay 2017 Interim Financial Report - 4

5 Analysis of the interim condensed consolidated financial statements or the six-month period ending 30 June 2017Group results Revenue in the 2017 first half amounted to million compared to million in the same period in 2016, up 3.7% like-forlike. Current operating income amounted to 14,003,000, down from 14,490,000 in the 2016 first half, down 3.4%, representing a current operating margin of 8.2% compared to 8.8% one year earlier. Other operating income and expenses represented income of 420,000 compared to an expense of 586,000 in the 2016 first half. In June 2017, this included income of 1,355,000 from the settlement and remeasurement of debt linked to the acquisition of noncontrolling interests as well as expenses relating to the measurement of restricted stock unit plans in the amount of 514,000 and 421,000 in non-recurring expenses. Net operating income accordingly amounted to 14,423,000 (or 8.5% of sales) compared to 13,904,000 one year earlier. This represents a 3.7% improvement in the operating margin. Net financial income amounted to 115,000 compared to a net financial expense of 3,000 in 2016 after taking into account 145,000 in financial income and 30,000 in net interest expense. The tax expense amounted to 4,402,000, including current tax of 4,238,000 ( 4,063,000 in H1 2016) representing an effective tax rate of 30%, remaining stable from one year to the next. Net income amounted to 10,136,000 in the 2017 first half representing a net margin of 5.9% (compared to 9,751,000 in the 2016 first half), up 3.8%. Net earnings per share amounted to 0.78 for 13,072,092 shares (weighted average number) compared to 0.75 for 13,031,963 shares at the end of the 2016 first half. Consolidated statement of financial position Net equity amounted to 133 million, up 7 million from 31 December Key changes in the period included: Recognition of 10.1 million in net income, Payment of 3.5 million in dividends to shareholders, Non-current asset amounted to million, remaining unchanged from one period to the next. Net trade receivables (after deducting prepaid income) amounted to 89.9 million at 30 June 2017 compared to the 86.9 million at 31 December The number of days sales outstanding (DSO) remained stable at 79 days. Cash and cash equivalents amounted to 18.3 million compared to 24.1million six months earlier. Gross financial debt decreased by 4.7 million in the first half to 15.3 million. On that basis, net cash amounted to 3.0 million. The main items impacting net cash in the first half included: 5.7 million in cash flows provided by (used in) operating activities, 0.8 million in capital expenditures for intangible assets and property, plant and equipment, 2.8 million for the buyout of non-controlling interests, 3.5 million for the payment of a dividend to shareholders, 4.7 million for the repayment of bank loans. Aubay 2017 Interim Financial Report - 5

6 Organisation In the first half, the wholly-owned subsidiary Norma4 was merged into Aubay Spain (also wholly owned). As a result, there now are only two legal entities in this market, Aubay Spain and its subsidiary Cast Info. There were no other changes impacting the Group's overall structure. Buyout of non-controlling interests, acquisition of equity interests in or disposals of companies, mergers Buyout of non-controlling (minority) interests In Spain, in accordance with the undertakings of the Spanish subsidiary Aubay Spain (a wholly-owned subsidiary of Aubay SA) upon acquiring control in Norma4 in October 2014, a final stake was acquired in the 2017 first half, thus increasing Aubay Spain's stake to 100%. This organization was finalized before the merger of Norma4 into its parent company Aubay Spain at the end of the first half. In addition, also pursuant to the execution of undertakings in connection with the acquisition of Cast Info, a majority stake was acquired in Aubay Spain, increasing its holding in this entity from 75% to 87.50% in the 2017 first half. Acquisitions of equity interests No equity interests were acquired in the 2017 first half within Aubay Group. Disposals of equity interests/disposals of business lines None. Mergers Other than the merger of Norma4 (Spain) into its parent company Aubay Spain (Spain) there were no other changes in the Group structure in the first half. Principal risks and uncertainties for the remaining six months of the fiscal year There have been no substantial changes in the risk factors as presented in the registration document filed with the AMF (Autorité des Marchés Financiers), the French financial market authority, on 10 April 2017 (No. D ) in the first half period under review. Material subsequent events after 30 June 2017 Through its wholly-owned Italian subsidiary, Aubay Italia, in September 2017, Aubay acquired a going concern from an Italian industrial player. This going concern addresses the IT consulting and engineering services in the telecommunications sector, covering both carriers and equipment manufacturers through a staff of nearly 500 consultants spearheaded by a supervisory team of at least 50 people. This going concern is expected to generate annual revenue from services of approximately 30 million and a gross margin in line with the Group's standard metrics. The application of Aubay's management principles should rapidly lead to an improvement in the net margin outlook Aubay s business indicators for the third quarter are all up on the first half. Demand from its main clients is still robust which suggests that the Group can look forward to a strong end to the year. Accordingly, the Group has confirmed the targets announced on the publication of its annual results on 15 March 2017, while raising the guidance for revenue to factor in the acquisition in Italy, namely: Aubay 2017 Interim Financial Report - 6

7 - Organic growth of between 5% and 7% in revenues to 353 million. - A current operating margin of between 9% and 10% for the year. Board of Directors Aubay 2017 Interim Financial Report - 7

8 CONDENSED INTERIM FINANCIAL STATEMENTS 1. Consolidated statement of financial position ASSETS ( '000s) 30/06/ /12/ /06/2016 Goodwill 84,046 84,046 83,884 Intangible assets 23,574 23,543 23,655 Property, plant and equipment 4,272 4,225 4,746 Equity-accounted investees Other financial assets 1,930 1,862 1,999 Deferred tax assets 1,482 1,680 1,070 Other non-current assets 1 NON-CURRENT ASSETS 115, , ,355 Inventories and work in progress Trade receivables and related accounts 98,514 96, ,694 Other receivables and accruals 30,271 27,000 26,415 Marketable securities ,496 Cash at bank and in hand 17,946 23,673 14,944 CURRENT ASSETS 147, , ,579 TOTAL ASSETS 262, , ,934 EQUITY AND LIABILITIES ( '000s) 30/06/ /12/ /06/2016 Capital 6,541 6,518 6,518 Additional paid-in capital and consolidated reserves 116,307 98, ,329 Net income attributable to the Group 10,136 21,274 9,761 Shareholders' equity attributable to the Group 132, , ,608 Attributable to non-controlling interests SHAREHOLDERS' EQUITY 132, , ,608 Borrowings and financial liabilities: non-current portion 6,277 10,511 15,948 Deferred tax liabilities Provisions for contingencies and expenses 3,423 3,652 2,021 Other non-current liabilities 225 4,515 6,224 NON-CURRENT LIABILITIES 9,935 18,707 24,231 Borrowings and financial liabilities: current portion 8,984 9,198 8,960 Trade payables and related accounts 22,379 23,669 22,446 Other payables and accruals 88,111 85,731 88,689 CURRENT LIABILITIES 119, , ,095 TOTAL EQUITY AND LIABILITIES 262, , ,934 Aubay 2017 Interim Financial Report - 8

9 2. Consolidated income statement ( 000s) 30/06/2017 % 30/06/2016 % 31/12/2016 % Revenue 170, % 164, % 326, % Other operating income Purchases used in production and external charges (36,510) - (33,635) - (69,428) - Staff costs (117,739) - (114,240) - (221,153) - Taxes other than on income (1,601) - (1,426) - (2,960) - Amortisation, depreciation and provisions (836) - (837) - (1,771) - Change in inventories of work in progress and finished goods (18) - (3) Other operating income and expenses Current operating income 14, % 14, % 31, % Other operating income and expenses 420 (586) - (1,472) Net operating income 14, % 13, % 30, % Income from cash and cash equivalents Net borrowing costs (30) - (245) - (423) - Other financial income and expenses Net financial income (expense) (3) - (73) - Income tax expense (4,402) 30%* (4,140) 30%* (8,681) 29%* Income from equity-accounted investees Net income before results of discontinued operations or assets held for sale disposal Net income after tax of discontinued operations or assets held for sale 10,136-9,761-21, Net income 10, % 9, % 21, % Attributable to shareholders 10,136-9,761-21,274 - Attributable to non-controlling interests Basic weighted average number of shares 13,072,092-13,031,963-13,025,354 - Earnings per share Diluted weighted average number of shares 13,175,892-13,119,477-13,120,854 - Diluted earnings per share * Effective tax rates Consolidated statement of comprehensive income Net income and gains and losses recognised directly in equity 30/06/ /06/ /12/2016 Translation adjustments (7) (8) (9) Revaluation of hedging derivatives 25 (31) Items that will not be subsequently recycled through profit or loss Actuarial gains and losses on retirement schemes 103 (164) (878) Other impacts Items that will not be recycled through profit or loss 96 (147) (918) Net gains and loss recognised directly in equity attributed to the Group 96 (147) (918) Net income 10,136 9,761 21,274 Gains and losses recognised directly in equity attributed to the Group 96 (147) (918) Comprehensive income attributable to the Group 10,232 9,614 20,356 Aubay 2017 Interim Financial Report - 9

10 3. Consolidated statement of cash flows ( 000s) 30/06/ /06/ /12/2016 Consolidated net income(including non-controlling interest) 10,136 9,761 21,274 Income from equity-accounted investees Net exceptional depreciation, amortisation and provisions ,052 Non-cash expenses and income relating to share-based payments Other non-cash items (1,355) 0 0 Dividend income (7) 0 0 Gains and losses on disposals of fixed assets 89 (19) 61 Cash flow after net interest expense and tax 9,861 10,824 23,841 Net borrowing costs Tax expense (including deferred taxes) 4,402 4,140 8,681 Cash flow before net interest expense and tax (A) 14,293 15,209 32,945 Income tax payments (B) (6,161) (3,397) (9,080) Change in operating working capital requirements (including liabilities relating to employee (2,479) (12,007) (7,443) benefits) (C) Net cash provided by (used in) operating activities (D) = (A+B+C) 5,653 (195) 16,422 Outflows for the acquisition of tangible and intangible fixed assets (846) (1,197) (2,415) Inflows from the disposal of tangible and intangible fixed assets Outflows for the acquisition of financial assets - (74) (74) Inflows from the disposal of financial assets Change in loans and advances granted (68) (68) 73 Outflows (inflows) linked to business combinations net of cash acquired (2,813) (2,151) (2,153) Dividends and grants received Net cash provided by (used in) investing activities (3,719) (3,373) (4,452) Proceeds from capital increases Amounts received upon the exercise of stock options Purchases of treasury shares for cancellation Purchases of and proceeds from the sale of treasury shares (13) (58) 82 Dividends paid in the period Net dividends paid to parent company shareholders (3,008) (2,213) (4,806) Dividends paid to the non-controlling shareholders of consolidated companies (486) - - Inflows from new borrowings - 10,000 10,014 Repayment of financial debt (4,697) (11,850) (14,252) Net interest payments 133 (268) (445) Other financial flows - (4) (6) Net cash provided by (used in) financing activities (F) (8,042) (4,346) (9,386) Effects of changes in foreign exchange rates (G) (12) (14) (20) Change in net cash (D+E+F+G) (6,120) (7,948) 2,564 Opening cash and cash equivalents 24,146 21,582 21,582 Closing cash and cash equivalents 18,026 13,634 24,146 Aubay 2017 Interim Financial Report - 10

11 4. Changes in consolidated shareholders' equity Share capit al Additional paid-in capital and consolidated reserves Net income attributable to owners of the parent Equity attributable to the Group Noncontrolling interests Shareholders' equity at 1 January ,518 98,174 21, , ,965 Capital increase Share-based payments Dividends paid - (3,494) - (3,494) - (3,494) Net income appropriation - 21,274 (21,274) Net income for the period ,136 10,136 10,136 Change in treasury shares - (1) - (1) - (1) Transactions with non-controlling interests Flows related to equity-accounted investments Other changes - (32) - (32) - (32) Shareholders' equity at 30 June , ,308 10, , ,984 Total Share capit al Additional paid-in capital and consolidated reserves Net income attributable to owners of the parent Equity attributable to the Group Noncontrolling interests Shareholders' equity at 1 January ,515 88,345 15, , ,572 Capital increase Share-based payments Dividends - (2,213) - (2,213) - (2,213) Net income appropriation - 15,903 (15,903) Net income for the period - - 9,761 9,761 9,761 Change in treasury shares Change in Group structure - (756) - - (810) (1,556) Flows related to equity-accounted investments Other changes - (161) - (161) - (161) Shareholders' equity at 30 June , ,330 9, , ,608 Total 5. Notes to the consolidated financial statements Accounting policies Aubay Group prepared its consolidated financial statements in compliance with IFRSs (International Financial Reporting Standards) in effect as of 30 June 2017, as adopted by the European Union. Interim financial statements are prepared in accordance with the same rules and methods as those used to prepare the annual financial statements. The condensed interim financial statements for 2017 first half were prepared in accordance with the provisions of IAS 34 "Interim financial reporting". As such, they do not include all the information required for the annual financial statements and should be read in conjunction with the 2016 annual report. New standards and interpretations applicable in 2017 The rules and accounting methods applied to the interim financial statements are identical to those used to prepare the annual financial statements for the period ending on 31 December The standards, amendments and interpretations applicable as of 1 January 2017 have no significant impact on Aubay Group's accounts. Aubay 2017 Interim Financial Report - 11

12 IFRS 15 "Revenue from contracts with customers" The Group initiated an analysis at the end of 2016 based on a review of material contracts and their amendments. This work was that was carried out during the 2017 first half will continue until the end of this period is out based on the following steps: Identify the contract(s) with a customer, Identify the performance obligations in the contract, Determine the transaction price, Allocate the transaction price to the performance obligations in the contract, Recognition of the revenues. Based on analysis to date performed on a sample of contracts, the Group considers that the application of IFRS 15 will not have a material impact on either revenue or consolidated operating results. These financial statements were approved by the Board of Directors on 13 September Consolidation methods: Companies over which Aubay exercises exclusive control, whether directly or indirectly, are fully consolidated. Exclusive control is presumed to exist when Aubay holds the majority of a company s voting rights, exercises contractual control or power to manage a company s operations. The equity method is applied to the financial statements of companies in which Aubay exercises significant influence but without control. Under the equity method, the Group's share in the profit or loss of the associate (investee) for the year is recognised in its income statement while the carrying amount is adjusted to reflect cumulative changes after the acquisition date. The Group's investments in associates include goodwill. Financial reporting periods and consolidation dates: All companies are consolidated based on their interim financial statements for the six-month periods ending 30 June 2017, and restated, as applicable, in accordance with Group accounting principles. The consolidation date for companies on first-time consolidation is the date the shares acquired in these companies are legally transferred. This same principle applies in the case of deconsolidation. To this end, financial statements are prepared for all acquired companies. Translation of foreign financial statements: Only the United Kingdom's subsidiary (Aubay UK) is concerned by translation differences, as all other companies of the Group are in the Eurozone. Assets and liabilities are translated at the closing rate at the end of the reporting period; Income, expenses and cash flows are translated at the average exchange rate for the period; All resulting translation differences are recognised as a separate component of equity. Goodwill: Goodwill arises from the difference between the acquisition cost of shares and the Group's share of restated net assets of the acquiree. This difference in value is divided between: (1) Goodwill attributable to certain identifiable balance sheet items classified under the appropriate headings in accordance with applicable accounting rules. (2) Goodwill for the unallocated balance. Goodwill and intangible assets (mainly assets of going concerns) are tested for impairment whenever there is evidence of impairment and at least once a year using the discounted cash flow (DCF) method, completed by a comparison with market values. The impairment tests consist in measuring the recoverable amount of each cash generating unit (CGU). The CGUs used by the Group correspond to geographic regions. Measurement of the recoverable value of each CGU takes into account the criteria derived from the budget process and forecasts over a period of five years, including the rates of growth and return considered reasonable. At 31 December 2016, the same discount rate of 7.5% was applied to all CGUs (euro zone ) and the perpetuity growth rate was based on the growth potential of the different CGUs ranging between 2.5% and 5%. When an impairment loss is recognised, the difference between the carrying value of the asset and the remeasured value is recognised under "Other operating income and expenses" Put options written on non-controlling interests (business combinations) are accounted for as share buybacks to be recognised as an operating debt and offset by a reduction in non-controlling interests for the year they are recorded. Amounts recognised are calculated according to commitments incurred, and mainly a multiple of earnings for the subsidiaries in question. Any year-on-year changes in debt related to changes in estimates are offset against "Other operating income and charges". Aubay 2017 Interim Financial Report - 12

13 Research and development expenditures: Research and development expenditures for applications and products are expensed in the period incurred except when the company can demonstrate that it meets the following criteria according to IAS 38: the technical feasibility of completing the intangible asset so that it will be available for use or sale; its intention to complete the intangible asset and use or sell it; its ability to use or sell the intangible asset; the ability of this intangible asset to generate future economic benefits, the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset, its ability to measure reliably the expenditure attributable to the intangible asset during its development. Licenses and software: Licenses and software are amortised over a maximum of five years using the straight-line method except for inexpensive software packages which are amortised on a time proportion basis in the year acquired. Property, plant and equipment: (1) Property, plant and equipment are recognised at cost and depreciated over their expected useful lives. (2) By exceptions, they are subject to the same depreciation schedules used for the parent company financial statements (excluding items eligible for special tax depreciation provisions). These items are generally depreciated according to the straight-line method: Buildings Fixtures and fittings IT equipment Office furniture and equipment 20 years 5 to 10 years 3 to 5 years 3 to 5 years Trade receivables Receivables are stated at nominal value. They are assessed individually and, when necessary, a provision for depreciation is recorded to cover potential collection risks. Cash and cash equivalents: Cash and cash equivalents include cash assets immediately available for sale and subject to an insignificant risk of short-term changes in value. Marketable securities are recognised in the balance sheet at cost. A provision for impairment is recognised when the carrying value is less than the acquisition cost. Treasury shares: Aubay shares held by the parent company are deducted from consolidated shareholders' equity. Gains or losses from disposals are eliminated in changes in shareholders' equity. Grants and tax credits: operating grants and tax credits are deducted from expenses presented according to the function of expense method (mainly staff costs for the Research Tax Credit and the "CICE" wage tax credit). Provisions: The Group adheres to the provisions of IAS 37. This standard defines a liability as a balance sheet item with a negative value for the company, and namely an obligation towards a third party for which it is probable or certain to result in an outflow of resources to this third-party with no equivalent consideration expected in return. When business combinations are recognised, the Group may record provisions (for contingencies, litigation, etc.) in the opening balance sheet. These provisions constitute liabilities that create or increase the amount of goodwill. After the twelve-month allocation period from the opening balance sheet, the reversal of unused provisions resulting from changes in estimates as defined in IAS 8 is recorded in the income statement under "Other operating income and expenses". Provisions for pensions and similar obligations: In compliance with IAS 19, the Group records long-term post-employment benefits or benefits contingent on accruing seniority within the Group such as retirement severance benefits (indemnités de départ à la retraite), etc. These benefits may be provided under different types of plans: Defined-contribution plans for which the Group pays defined benefits to external organisations. The corresponding expenses are recognised as they are paid. Defined-benefit plans under which the Group has an obligation towards employees. The characteristics of these plans vary according to the laws and regulations which apply in each country. In France, the main actuarial assumptions applied to measure defined-benefit plan obligations are as follows: Aubay 2017 Interim Financial Report - 13

14 Retirement age: 67 Average salary of reference: 1/13th of annual remuneration excluding bonuses Salary escalation rate: 1% Social security contributions: 45% Discount rate: 1.67% Turnover ratio: based on the company's own table Life expectancy according to the INSEE 2015 table In Italy, the provision corresponds to the legal severance payments (TFR or Trattamento di Fine Rapporto). These severance benefits are recorded each year for a percentage of gross annual salary and payable to employees at the end of their employment contract. In Spain, Belgium and Luxembourg, there are no pension liabilities. Measurement and recognition of financial liabilities: Long-term financial debt includes mainly bank borrowings, bonds and put options written on non-controlling interests. Bonds are measured on their issue date at fair value and then recognised until maturity according to the amortised cost method. On the bond issue date, fair value is defined as the present value of future outflows at the market rate. In addition, issuance costs and bond issue premium are deducted from the fair value of the bond. The difference between the nominal value of the bond and its fair value as calculated above is recognised in shareholders' equity. For each period thereafter, interest expense recorded in the income statement represents the theoretical interest expense calculated by applying the effective interest rate to the carrying value of the debt. The effective interest rate is calculated when the bond is subscribed and corresponds to the rate used to bring future outflows in line with the initial fair value of the bond. The difference between the interest expense as calculated above and the nominal interest is recognised as an offset to the bond in the balance sheet under liabilities. Revenue: Revenue represents the amounts for services rendered and the sale of equipment related to the ordinary activities of the Group's fully consolidated subsidiaries. Billings are based on actual time worked by consultants in the performance of a contract. Earnings from flat-rate contracts spread over several periods are recognised according to the percentage-of-completion method. In addition, if the budgeted cost of a contract comes to exceed the contractual amount of sales, a provision for losses on completion is recorded at the end of the reporting period. Other operating income and expenses: This includes items that are infrequent or unusual nature and involving significant amounts. Such items include annual stock option expenses, restructuring costs, goodwill impairment charges, capital gains or losses from disposals Stock options: in accordance with IFRS 2, stock options are to be recognised under expenses at fair value on the date they are granted to employees or managers. This provision applies to plans established after 7 November Stock options are measured using the Black & Scholes model based on criteria that include namely, the exercise price of the options, their lifespan, the share price on the grant date, the implied volatility of the share price, employee turnover assumptions and the risk-free interest rate. The exact value of the options are set on their grant date. This value is amortised according to the straight-line method. Restricted stock awards: performance shares are granted to selected employees and officers of the Group subject to market performance and service conditions (2 years). The stock market benchmark is the "STOXX Europe TMI Software & Computer Services". The fair value of the share is determined by applying a model complying with IFRS 2 ("Monte Carlo") that includes the share price on the grant date, the implied volatility of the share price, the risk-free interest rate, the dividend yield for the period, the benchmark price on the grant date. Corporate income tax: Tax expenses are equal to the sum of current taxes, deferred taxes plus certain local French and Italian business taxes (namely the CVAE and IRAP respectively). Deferred taxes are calculated according to the expiration periods for tax liabilities under the different local tax regimes and to the probability that future taxable profit will be available against which unused tax losses can be utilised. Earnings per share: Basic earnings per share are calculated by dividing net income attributable to Group equity holders by the weighted average number of shares outstanding in the period. Diluted earnings per share are calculated by dividing net income attributable to Group equity holders, restated to eliminate the financial cost, net of tax, of dilutive debt instruments, by the weighted average number of shares outstanding in the period, increased by the average number of shares to be issued through the following dilutive instruments: stock options and performance stock awards in the money at 30 June Use of estimates: Producing financial statements according to IFRS requires the use of estimates and assumptions which affect the amounts presented in the financial statements, and concerning namely the following items: - the measurement of provisions and pension liabilities; Aubay 2017 Interim Financial Report - 14

15 - measurements used for impairment tests; - the measurement of share-based payments; - the measurement of financial liabilities. These estimates are based on assumptions established according to information available when the financial statements were prepared. They may be revised if there is a change in the circumstances on which they are based or on obtaining new information. Actual results may differ from the estimates. Notes to the balance sheet Changes in the Group structure in the 2017 first half No acquisitions were carried out in the 2017 first half. Goodwill ( 000s) Beginning of period Acquisitions/increases Disposals/reversals End of period Gross value 101, ,823 Amortisation (17,777) - - (17,777) Value 84, ,046 Trade receivables and related accounts ( 000s) 30/06/ /12/ /06/2016 Gross value 99,168 97, ,172 Impairment (654) (585) (478) Value 98,514 96, ,694 Advances and downpayments on orders Prepaid income and customer prepayments (8,600) (9,796) (8,770) Net trade receivables 89,914 86,895 94,924 Days sales outstanding (DSO) Dealings in own shares in the 2017 first half Number of treasury shares held at 01/01/2017 7,859 Acquisitions/Disposals 2017 (net) (180) Number of treasury shares held at 30/06/2017 7,679 Changes in provisions ( 000s) 30/06/ /12/ /06/2016 Provisions for litigation contingencies 1,315 1,528 1,058 Provisions for pensions and retirement benefits 2,108 2, Total 3,423 3,652 2,021 Aubay 2017 Interim Financial Report - 15

16 Breakdown of deferred taxes Opening Increase Decrease Closing amount Deferred tax assets Tax loss carryforwards Temporary differences 1, ,223 Total deferred tax assets 1, ,482 Deferred tax liabilities Temporary differences Total deferred tax liabilities Borrowings, financial debts and cash At 30 June /06/ ( 000s) Amount Less than 1 year More than 1 year Amount Bank debt 15,007 8,730 6,277 19,709 Creditor banks Other financial liabilities DEBT 15,261 8,984 6,277 19,709 Marketable securities Cash at bank and in hand 17, ,673 CASH AND CASH EQUIVALENTS 18, ,146 (NET DEBT)/NET CASH 3,019 (8,984) (6,277) 4,437 Cash and cash equivalents (( 000s)) 30/06/ /12/ /06/2016 Cash at bank and in hand 17,946 23,673 14,944 Short-term investments ,496 Bank overdrafts (254) - (2,806) Total cash and cash equivalents 18,026 24,146 13,634 Off-balance sheet commitments There were no significant changes having affected off-balance sheet commitments to report. Aubay 2017 Interim Financial Report - 16

17 Transactions with related parties There were no significant transactions with related parties in the 2017 first half. Notes to the income statement Income statement highlights by region and business segment m Revenue 30/06/ /06/ /12/2016 Curre nt opera ting incom e* Current operatin g margin (%) Revenue Curre nt opera ting incom e* Current operatin g margin (%) Revenue Curre nt opera ting incom e* Current operatin g margin (%) Group % % % France % % % International % % % Corporate 0.0% (0.6%) (0.2%) *Current operating income (EBIT) At 30 June 2017 (( 000s)) France International Intersegment eliminations Revenue 92,369 78,354 (317) 170,406 Other operating income Purchases (11,827) (14,800) 258 (26,369) External charges (3,755) (6,436) 50 (10,141) Staff costs (67,410) (50,329) - (117,739) Taxes other than on income (1,569) (32) - (1,601) Allowances for depreciation and amortisation (338) (429) - (767) Amortisation, depreciation and provisions - (69) - (69) Change in inventories of work in progress and finished goods Total (18) Other operating income and expenses Total current operating income 7,510 6, ,003 Proceeds from the disposal of consolidated investments Other operating income and expenses (676) 1, Total other operating income and expenses (676) 1, Net operating income 6,834 7, ,423 Aubay 2017 Interim Financial Report - 17

18 At 30 June 2016 (( 000s)) France International Intersegment eliminations Revenue 91,404 73,600 (641) 164,363 Other operating income Purchases (12,642) (11,315) 546 (23,411) External charges (4,008) (6,332) 116 (10,224) Staff costs (65,405) (49,486) - (114,891) Taxes other than on income (1,395) (31) - (1,426) Allowances for depreciation and amortisation (360) (398) - (758) Amortisation, depreciation and provisions (17) (62) - (79) Change in inventories of work in progress and finished goods Total (3) Other operating income and expenses (21) 112 Total current operating income 7,605 6, ,490 Proceeds from the disposal of consolidated investments Other operating income and expenses (573) (13) - (586) Total other operating income and expenses (573) (13) - (586) Net operating income 7,032 6, ,904 30/06/ /06/ /12/2016 Bank 40% 40% 41% Insurance 26% 26% 26% Public sector 8% 8% 8% Services/Utilities 9% 11% 10% Industry 9% 8% 8% Telecom 7% 6% 6% Retail and distribution 1% 1% 1% Total 100% 100% 100% Aubay 2017 Interim Financial Report - 18

19 Staff costs ( 000s) 30/06/ /06/ /12/2016 Salaries 87,244 84, ,912 Social charges 30,342 29,415 57,217 Net allowances for provisions for retirement Total 117, , ,153 Revenue 170, , ,400 Ratio Staff costs/revenue 69.1% 69.5% 67.8% Headcount end of reporting period 30/06/ /06/ /12/2016 France 2,297 2,221 2,269 Belgium-Luxembourg Italy 1,143 1,093 1,120 Spain/Portugal 1,348 1,320 1,254 Total 5,057 4,890 4,899 Revenue-generating 4,693 4,554 4,552 Revenue-generating (%) 92.8% 93.1% 92.9% Administrative and sales Total 5,057 4,890 4,899 Other operating income and expenses ( 000s) 30/06/ /06/ /12/2016 Stock options/rsus (514) (227) (454) Non-recurring expenses (421) (359) (1,480) Gains and losses on disposals of fixed assets Gains (losses) from remeasurement Sundry items Total 420 (586) (1,472) Income tax expenses ( 000s) 30/06/ /06/ /12/2016 Current taxes (4,238) (4,063) (8,667) Deferred taxes (164) (77) (14) Total (4,402) (4,140) (8,681) Current tax includes 3.0 million in income tax and 1.4 million in local French and Italian business taxes (namely the CVAE and IRAP respectively). Aubay 2017 Interim Financial Report - 19

20 RESPONSIBILITY STATEMENT FOR THE ORIGINAL FRENCH VERSION OF THE INTERIM FINANCIAL REPORT "To the best of my knowledge, and in accordance with applicable reporting principles for interim financial reporting, the interim condensed consolidated financial statements of the company and all consolidated operations provide a fair view of its assets and liabilities, financial position and earnings, and the interim management report provides a fair view of material events of the first six months, their impact on the interim financial statements, the main transactions with related parties as well as a description of the key risks and uncertainties for the remaining six months." Philippe Rabasse Chief Executive Officer of Aubay Group Aubay 2017 Interim Financial Report - 20