Financial Report 30 June 2020 SNCF Group v30.07 à 17h10 v3

SNCF.COM

FINANCIAL REPORT 30 JUNE 2020 SNCF GROUP

SNCF GROUP 01 – SNCF GROUP HALF-YEAR ACTIVITY REPORT PAGE 1

02 – SNCF GROUP CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS

PAGE 21 03 – STATUTORY AUDITORS’ REPORT ON THE CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS

PAGE 55

SNCF GROUP BOARD OF DIRECTORS MEETING OF 30 JULY 2020

S

LA PLAINE SAINT-DENIS, 30 JULY 2020,

We declare that, to the best of our knowledge, the condensed half-year consolidated financial statements for the six months ended 30 June 2020 have been prepared in accordance with the applicable accounting standards and give a true and fair view of the assets and liabilities, financial position and results of the issuer and of the group of companies included in the consolidation as of and for the period ended 30 June 2020, and that the half-year activity report fairly presents trends in the operations, results and financial position of the issuer and of the group of companies included in the consolidation as well as a description of the principal risks and uncertainties that we face.

JEAN-PIERRE FARANDOU

CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF THE SNCF GROUP

LAURENT TRÉVISANI

DEPUTY CEO FINANCIAL STRATEGY

DECLARATION BY THE PERSONS RESPONSIBLE FOR THE HALF-YEAR FINANCIAL REPORT

SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT

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30 JUNE 2020

01 – SNCF GROUP HALF-YEAR ACTIVITY REPORT

Rapport de gestion

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SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT

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THE SNCF GROUP IN THE FIRST HALF OF 2020 3�

1. SIGNIFICANT EVENTS OF THE FIRST HALF OF 2020 3�

2. SNCF GROUP KEY FIGURES 4�

3. EVENTS AFTER THE REPORTING PERIOD 4�

GROUP RESULTS 5�

1. ANALYSIS OF GROUP RESULTS 5�

2. SEGMENT RESULTS 8�

3. INVESTMENT AND NET DEBT 17�

4. ACQUISITIONS OF EQUITY INVESTMENTS 18�

5. FINANCIAL RELATIONS WITH THE STATE AND LOCAL

AUTHORITIES 18�

6. EMPLOYEE MATTERS 19�

OUTLOOK AND CHALLENGES 20�

SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 1 - SIGNIFICANT EVENTS OF THE FIRST HALF OF 202003

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01 – HALF-YEAR ACTIVITY REPORT

THE SNCF GROUP IN THE FIRST HALF OF 2020

The New Railway Pact Law (law no 2018-515 of 27 June 2018), as supplemented by Order no 2019-552 of 3 June 2019, came into force on 1 January 2020. With effect from that date, the SNCF Group has adopted a new organisational structure based on eleven operating segments.

1. SIGNIFICANT EVENTS OF THE FIRST HALF OF 2020

1.1 COVID-19 PUBLIC HEALTH CRISIS The Covid-19 public health crisis has had a severe impact on the operations of the SNCF Group.

SNCF Voyageurs was particularly hard hit. Operations were sharply reduced from 16 March 2020; services gradually recovered from the first easing of lockdown measures, subject to compliance with governmental biosecurity requirements.

The financial consequences for revenue and for key financial indicators by business line and operating segment are described in section 2 of the half-year activity report.

The new economic landscape was taken into account when testing CGUs and goodwill for impairment, as described in Note 4.3 to the condensed half-year consolidated financial statements.

The Group also adapted its treasury management policies during this period to ensure that it can meet all its obligations and financial commitments as they fall due. A specific note describing the measures implemented is presented in Note 5 to the condensed half-year consolidated financial statements.

Finally, the Group has drawn up a specific action plan aimed at generating additional savings by the end of 2020, to mitigate the financial effects of the crisis. In parallel, in mid-March the Group implemented partial lay-off measures (see Note 1.2.1 to the condensed half-year consolidated financial statements).

1.2 STRIKE ACTION The strike action that began on 5 December 2019 in opposition to proposed pension reforms continued until February 2020.

This resulted in a loss of business which, along with refunds and other concessions, had an adverse impact on revenue in the Group’s 2020 first-half financial statements.

1.3 PARTIAL ASSUMPTION OF DEBT BY THE STATE On 1 January 2020, the State assumed €25bn (at nominal value on redemption) of the debt carried by SNCF Réseau, in line with the French 2020 Budget Act.

The mechanism used is described in the notes to the condensed half-year consolidated financial statements.

The impact of this transaction on net finance costs is an amount of net financial income that exactly mirrors the finance cost effectively borne by SNCF Réseau on the portion of its historical debt assumed by the State.

2 - SNCF GROUP KEY FIGURES SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT 03 Rapport de gestion

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01 – HALF-YEAR ACTIVITY REPORT 1.4 NEGOTIATION OF THE ÎLE-DE-FRANCE

MOBILITÉS 2020-2023 CONTRACT A new contract for the 2020-2023 period relating to the implementation of passenger transport pricing and service policies in the Île-de-France (Greater Paris) region is currently being negotiated with Île-de-France Mobilités (the regional Transport Organising Authority). Pending finalisation of that contract, SNCF Voyageurs is recognising revenue equal to the aggregate amount of the fixed monthly payments on account paid by Île-de-France Mobilités under article R.1241-25 of the French Transport Code, which specifies the provisional fixed contribution that Île-de-France Mobilités must pay SNCF Voyageurs to ensure continuity of service.

2. SNCF GROUP KEY FIGURES

€ million 30/06/2020 30/06/2019

Revenue 14,129 17,854

EBITDA 69 2,906 Net profit/(loss) attributable to equity holders of the parent -2,389 20 Recurring net profit/(loss) attributable to equity holders of the parent (1) -2,384 10

Net investment (2) 2,397 3,055

Investment all funding sources (3) 3,752 4,299

Free cash flow (4) -2,809 -1,666

Headcount 271,949 274,234

€ million 30/06/2020 31/12/2019

SNCF Group net debt 38,327 60,281

of which SNCF Réseau net debt 28,784 51,852

(1) For a definition of “Recurring net profit/(loss)”, see the “Group Results” section of this half-year activity report.

(2) “Net investment” is calculated as follows:

€ million 30/06/2020 30/06/2019

by aggregating the following line items from the cash flow statement: - Acquisitions of intangible assets and property, plant and equipment 3,033 3,587 - Investment grants received -764 -886 - New concession financial assets 693 730 - Cash inflows from concession financial assets -565 -376

Total net investments 2,397 3,055

(3) “Investment all funding sources” is calculated as follows:

€ million 30/06/2020 30/06/2019

by aggregating the following line items from the cash flow statement: - Acquisitions of intangible assets and property, plant and equipment 3,033 3,587 - New concession financial assets 693 730 minus changes in working capital requirement relating to investing activities, as presented in Note 4.2 to the condensed half-year consolidated financial statements -26 18

Total investment all funding sources 3,752 4,299

(4) Free cash flow is calculated as follows:

€ million 30/06/2020 30/06/2019

by aggregating the following line items from the cash flow statement: - Cash from operations after cost of net debt and taxes -520 1,903 - Acquisitions of intangible assets and property, plant and equipment -3,033 -3,587 - Investment grants received 764 886 - Repayments of lease liabilities -502 -479 - Repayment of IFRS 16 lease receivables 1 1

- Proceeds from disposals of intangible assets and property, plant and equipment 91 139 - New concession financial assets -693 -730 - Cash inflows from concession financial assets 565 376 - Impact of change in working capital requirement 398 -341 change in working capital requirement relating to income taxes, included in the cash flow statement line item “Taxes (paid)/collected” 109 138 accrued interest on IFRS 16 lease liabilities, included in the cash flow statement line item “Interest paid on lease liabilities” 0 14 dividends received from entities accounted for by the equity method, included in the cash flow statement line item “Dividends received” 12 13

Total free cash flow -2,809 -1,666

3. EVENTS AFTER THE REPORTING PERIOD The principal events after the reporting period are described below.

3.1 SIGNATURE OF BUILDING PERMIT FOR THE GARE DU NORD MODERNISATION PROJECT The Paris Gare du Nord 2024 project, housed within the single-purpose semi-public company Stationord, obtained consent from the Paris Prefecture when the building permit was signed on 6 July 2020.

Work on this project, which aims to enhance the attractiveness of public transport in the Île-de-France region and hence reduce pollution, is due to start in the summer of 2020.

3.2 SUSPENSION OF PAYMENTS FROM ÎLE-DE-FRANCE MOBILITÉS TO SNCF TRANSILIEN Pending signature of the contract for the 2020-2024 period, Île-de-France Mobilités is paying a provisional fixed monthly contribution to SNCF Transilien to ensure continuity of service under Article R.1241-25 of the French Transport Code. The monthly payments scheduled for the first half of 2020 were made each month on the dates specified in the previous contract.

However, the Board of Directors of Île-de-France Mobilités voted on 8 July 2020 to suspend those payments from July onwards, until such time as the State makes good the loss of revenue due to the Covid-19 crisis.

Consequently, the operating component of the fixed monthly contribution from Île-de-France Mobilités (€190m) that was expected in July was not received by SNCF Transilien. In the short term, SNCF is drawing on its own liquidity sources to ensure continuity of public transport services in the Île-de-France region.

SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT 1 - ANALYSIS OF GROUP RESULTS03

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GROUP RESULTS

1. ANALYSIS OF GROUP RESULTS 1.1 GROUP RESULTS

€ million H1 2020 H1 2019 Change

2020 vs 2019

Revenue 14,129 17,854 -3,726 -20.9%

Infrastructure fees -373 -448 75 -16.6%

Purchases and external charges other than infrastructure fees -5,612 -6,283 671 -10.7%

Taxes and duties other than income tax -892 -912 20 -2.2%

Employee benefit expense -7,140 -7,358 217 -3.0%

Other operating income and expenses -43 52 -94 -182.1%

EBITDA 69 2,906 -2,837 -97.6%

Depreciation and amortisation -1,980 -1,884 -95 5.1%

Net movement in provisions -55 33 -88 -267.1%

Current operating profit/(loss) -1,966 1,054 -3,021 -286.4%

Net proceeds from asset disposals 61 31 29 93.5%

Fair value remeasurement of previously-held equity interest - - - n/a

Impairment losses -13 -6 -7 115.2%

Operating profit/(loss) -1,918 1,080 -2,998 -277.6%

Share of net profit/(loss) of companies accounted for by the equity method 9 8 1 9.7%

Operating profit/(loss) after share of net profit/(loss) of companies accounted for by the equity method -1,909 1,088 -2,997 -275.4%

Net finance costs of employee benefits -5 28 -34 -119.2%

Cost of net debt and other finance costs -547 -912 365 -40.0%

Net finance costs -552 -884 331 -37.5%

Net profit/(loss) before tax -2,462 205 -2,666 -1302.7%

Income taxes -97 -175 78 -44.4%

Net profit/(loss) from ordinary activities -2,559 30 -2,589 -8623.3%

Net profit/(loss) from transferred operations - - - n/a

Net profit/(loss) for the period -2,559 30 -2,589 -8623.3%

Net profit/(loss) for the period attributable to equity holders of the parent -2,389 20 -2,409 -11941.0%

Net profit/(loss) for the period attributable to non-controlling interests -170 10 -180 -1827.5%

Recurring net profit/(loss) attributable to equity holders of the parent -2,384 10 -2,394 -24581.0%

EBITDA/Revenue 0.5% 16.3%

Current operating profit or loss/revenue -13.9% 5.9%

(1) For both internal and external financial reporting purposes, the SNCF Group uses “Recurring net profit/(loss) attributable to equity holders of the parent” as a key indicator. It is determined by eliminating the following items from “Net profit/(loss) for the period attributable to equity holders of the parent”:

– impairment losses;

– transactions generating an impact on profit or loss that is individually greater than €50m in absolute value, generally included in and/or allocated between “Fair value remeasurement of previously-held equity interest” and “Net proceeds from asset disposals”;

– the share attributable to equity holders of the parent of any such transactions recognised in the books of equity

investees, and recognised within “Share of net profit/(loss) of companies accounted for by the equity method”;

– changes in the fair value of financial instruments included within “Cost of net debt and other finance costs” that exceed €50m in absolute value;

– non-routine transactions involving financial instruments (including restructurings and renegotiations) with an impact of more than €50m in absolute value on “Cost of net debt”;

– movements in deferred tax assets recognised for entities belonging to the SNCF tax group, and recognised within “Income taxes”;

1 - ANALYSIS OF GROUP RESULTS SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT 03 Rapport de gestion

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01 – HALF-YEAR ACTIVITY REPORT – the portion of all the above items attributable to non-

controlling interests, included within “Net profit/(loss) for the period attributable to non-controlling interests”.

This indicator better reflects the net profit or loss for the period attributable to equity holders of the parent relating to the Group’s recurring performance. The table below shows how it was determined for the periods presented:

€ million Note (*) 30/06/2020 30/06/2019

Net profit/(loss) attributable to equity holders of the parent -2,389 20

Impairment losses 4.3 13 6

Included in “EBITDA” 3 - -30

Included in “Net movement in provisions” - -33

Included in “Net proceeds from asset disposals” - -1

Included in “Cost of net debt and other finance costs” (non-routine financial instrument transactions) 5.2 1 47

Included in “Income taxes” -2 1

Included in “Net profit/(loss) attributable to non-controlling interests” -7 -

Recurring net profit/(loss) attributable to equity holders of the parent -2,384 10 (*) Refers to the notes to the condensed half-year consolidated financial statements.

1.2 COMPARABILITY OF THE FINANCIAL STATEMENTS The table below shows the effects of (i) changes in scope of consolidation and (ii) exchange rate fluctuations on the comparability of 2020 first-half results with 2019 first-half results:

€ million Effects on year-on-year

change in revenue

Voyages SNCF

Changes in scope of consolidation in 2019 (1)

Sale of OUIbus -27

Sale of Ecolutis (iDVroom) -1

Exchange rate fluctuations -3

Keolis

Changes in scope of consolidation in 2019 (1)

Keolis Santé acquisitions 1

CarPostal France acquisition 33

MyPark acquisition 6

Sale of LeCab - minicab business -5


Geodis Change in scope of consolidation in 2019 (1)

Sale of Geodis Euromatic -37


TFMM (rail/multimodal freight transport)

Change in scope of consolidation in 2019 (1)

Railtraxx/KCR acquisition 6


Freight & Logistics – Other Change in scope of consolidation in 2019 (1)

Raffles Lease acquisition 8

Exchange rate fluctuations 0

Internal transactions 4

Total -46

(1) Transactions completed in 2019 and impacting the year-on-year change in revenue.

1.3 2020 FIRST-HALF RESULTS 1.3.1 Revenue

The SNCF Group generated consolidated revenue of €14,129m in the first half of 2020, a year-on-year decrease of €3,726m (-20.9%), reflecting:

– negative effects of €12m from changes in the scope of consolidation;

– negative effects of €34m from exchange rate fluctuations;

– negative organic growth at Group level of €3,680m (-20.7%). Organic growth trends by business segment are shown in the following table (segment level data):

2020 first-half organic growth at segment level SNCF Réseau -€645 m -19.5% SNCF Gares & Connexions -€38 m -5.0% Transilien -€244 m -14.3% TER -€442 m -16.7% Voyages SNCF -€2,555 m -57.5% Industrial Division -€114 m -13.4% Passengers - Other -€98 m -28.4% Keolis -€394 m -12.1% Geodis +€13 m +0.3% TFMM (train/multi-modal freight transport) -€172 m -19.6% Freight & Logistics - Other -€9 m -3.7% SNCF Immobilier (real estate) +€40 m +14.6% Corporate -€45 m -8.2%

SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT 1 - ANALYSIS OF GROUP RESULTS 03

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1.3.2 EBITDA

– At €69m for the first half of 2020, EBIDTA was €2,837m lower year-on-year, a decrease of 97.6%. The ratio of EBITDA to revenue fell from 16.3% to 0.5% over the same period.

– The loss of EBITDA caused by strike action in 2020 and by the Covid-19 crisis has been estimated at €237m and €3,230m respectively.


2020 vs 2019

Change on a constant structure and exchange

rate basis Revenue 14,129 17,854 -3,726 -20.9% -3,680 -20.6%

Employee benefit expense -7,140 -7,358 217 -3.0% 215 -2.9%

Purchases and external charges (other than infrastructure fees, traction energy and fuel), and other income and expenses -5,190 -5,602 412 -7.4% 332 -5.9% Infrastructure fees -373 -448 75 -16.6% 74 -16.6%

Traction energy and fuel -464 -629 165 -26.2% 166 -26.4%

Taxes and duties other than income tax -892 -912 20 -2.2% 21 -2.3%

EBITDA 69 2,906 -2,837 -97.6% -2,872 -98.8%

Ratio of EBITDA to revenue 0.5% 16.3%

1.3.3 Current operating profit/loss

The current operating loss for the period was €1,966m, representing a negative movement of €3,021m compared with the first half of 2019.

Consequently, the conversion rate of revenue into current operating profit went from +5.9% in the first half of 2019 to -13.9% in the first half of 2020.

The €2,837m deterioration in EBITDA was accentuated by an increase of €95m in depreciation and amortisation and by a negative shift in the net movement in provisions, with a net charge of €55m in the first half of 2020 versus a net reversal of €33m a year earlier.

1.3.4 Operating profit/loss

The negative movement of €2,998m at operating level was in line with the year-on-year change at current operating level.

1.3.5 Net finance costs

The year-on-year improvement of €331m in net finance costs was mainly due to the partial assumption by the State of the debt carried by SNCF Réseau (see note 2.1 to the condensed half-year consolidated financial statements).

1.3.6 Income taxes

Income tax expense decreased by €78m. Current income taxes fell by €42m, and the tax on rail company profits (TREF) by €25m.

1.3.7 Net profit/loss attributable to equity holders of the parent

As a result of all the trends described above, the SNCF Group reported a net loss attributable to equity holders of the parent of €2,389m, compared with a profit of €20m in the first half of 2019, after a net loss of €170m attributable to non-controlling interests.

2 - SEGMENT RESULTS SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT 03 Rapport de gestion

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01 – HALF-YEAR ACTIVITY REPORT 2. SEGMENT RESULTS

The contributions to revenue, EBITDA, net investment, and investment all funding sources made by each of the Group’s segments are presented below (unless otherwise indicated, the segment data presented in the table below and in the following pages represent the segment’s contribution to the Group):

€ million SNCF Réseau

SNCF Gares &

Connexions Transilien TER Voyages SNCF

Industrial Division

Passengers - Other Keolis

a) External revenue 1,214 100 1,311 2,052 1,720 32 32 2,836

b) Internal revenue 1,443 611 154 154 167 701 216 46

a+b Revenue 2,658 711 1,465 2,206 1,887 733 248 2,883

c) External EBITDA 222 93 -41 16 -905 -12 32 189

d) Internal EBITDA 52 5 16 18 30 13 4 8

c+d EBITDA 274 98 -25 35 -875 1 35 197

Net investment (1) -1,575 10 -356 112 -237 -46 3 -103

Investment all funding sources (1) -1,989 -261 -522 -268 -350 -37 -17 -115

(1) For a definition refer to Section 2, “SNCF Group key figures”.

� � � � � � � � �

€ million Geodis TFMM Logistics -

Other SNCF

Immobilier Corporate

Inter-segment

eliminations Total +

a) External revenue 3,949 664 199 13 7 14,129 +

b) Internal revenue 48 47 36 303 495 -4,423 - +

a+b Revenue 3,998 711 235 316 502 -4,423 14,129 +

c) External EBITDA 283 -44 139 99 -2 - 69

d) Internal EBITDA 3 31 1 0 26 -207 -

c+d EBITDA 286 -14 140 99 24 -207 69 +

Net investment (1) -61 -16 -90 -1 -38 -2,397 +

Investment all funding sources (1) -52 -14 -97 -4 -25 -3,752 +

(1) For a definition refer to Section 2, “SNCF Group key figures”.

Unless otherwise indicated, the analysis of segment results is presented without adjusting for effects of changes in the scope of consolidation or exchange rate fluctuations. Comments on revenue and EBITDA relate to data calculated at the level of each individual operating segment.

SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 2 - SEGMENT RESULTS03

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2.1 SNCF RÉSEAU

SNCF RÉSEAU

SA Réseau Subsidiaries

Customers& Services Directorate

Operations & Production Directorate

Industrial & Engineering Directorate

Sferis Altametris

Strategy, Planning & Commissioning Directorate

�le-de-France

System Operations Directorate

SNCF Réseau sells track slots and handles the management, maintenance, upgrading and development of the national rail network. Its customers are the 29 rail operators that use the national rail network, plus 12 other companies (combined transport operators, ports, etc) that reserve track slots which they then assign to the rail operator of their choice. The segment includes the Sferis and Altametris subsidiaries.

€ million H1 2020

H1 2019 Change

a) External revenue 1,214 1,228 -14

b) Internal revenue 1,443 2,075 -631

a+b Revenue 2,658 3,303 -645

c) External EBITDA 222 904 -682

d) Internal EBITDA 52 43 9

c+d EBITDA 274 946 -673


Net investment 1,575 1,714 -140 Investment all funding sources 1,989 2,392 -403

� �

Significant events

Despite the health crisis and the imposition of lockdown on 17 March 2020, operations were never interrupted:

– During lockdown, urgent network maintenance was carried out, cuttings and embankments were brought back into service, and a dedicated task force ensured that work continued on priority projects.

– Since lockdown began, works essential for network continuity have been resumed:

• Intensification of infrastructure monitoring and maintenance, to ensure optimal traffic performance and safety.

• Technical inspections of all level crossings.

• Use of the IRIS 320 track inspection train to ensure safe resumption of traffic on high speed lines

2020 first-half results

– Revenue Revenue at SNCF Réseau was down 19.5%, or €645m, on the first half of 2019. There were negative impacts of €709m from Covid-19 and €80m from the January strikes, relating to the infrastructure fees billed to the Group’s passenger and freight transport operations.

– EBITDA EBITDA was down €673m or 71.1% year-on-year. Covid-19 had a negative impact of €718m, including a €135m reduction in capitalized labour costs due to a decline in own production capitalized during lockdown. The January strikes had a negative impact of €70m. The crisis plan succeeded in cutting costs by €70m, with a drop in other purchases and external charges and in employee benefit expense following implementation of the partial layoff scheme (€27m).

– Net investment The volume of net investment in the period (€1,575m) was €140m lower year-on-year. That change was due mainly to delays in gross investment versus 2019, with an equivalent level of grants received. Upgrade and performance projects were substantially down on the previous year (mainly track and signalling works), although the effect was partly offset by higher gross investment in major national projects (especially Charles de Gaulle Express).

– Investment all funding sources The volume of investment from all funding sources in the period was down €403m at €1,989m. Investment during the first half of 2020 broke down as follows:

• Upgrade and performance: €1.0bn, including €0.6bn for track upgrades and new switchgear and €0.3bn for signalling, engineering structures and catenaries.

• Major and regional development projects: €0.9bn, mainly comprising €0.3bn for EOLE, €0.1bn for CDG Express, and €0.4bn for State Regional Development Plan contracts.

• Compliance upgrades: €0.05bn (mainly on safety).

• Industrial and other investment: €0.2bn, including information systems, land and buildings, contracting for third parties, maintenance plant, and tooling.

Outlook for the second half of 2020

– Post-Covid-19 recovery: the works programme is expected to pick up faster than anticipated, with lower cost overruns and a continuation of the cost savings implemented in the first half to limit the impact of the crisis on the financial statements.

– Safety: continued commitment to reducing the accident rate on the rail network, and to ensuring occupational health and safety.

– Employee relations: • Government order (announced by ministerial communiqué) on the grade and pay scale review, locking in the reference framework.

• Launch of initiatives in career progression, skills development and training. The aim is to produce a reference framework for employee relations within two years.

– Referral to the Transport Regulatory Authority (ART) of pricing scales for the national rail network for 2021-2023.

2 - SEGMENT RESULTS SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 03 Rapport de gestion

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01 – HALF-YEAR ACTIVITY REPORT – Finalisation of the performance contract with the State

for the 2020-2029 period.

– “Mobilities Orientation Law” (LOM) - local rail services: decree being prepared on the terms for transferring some lines to regional authorities once regulated service arrangements have been agreed.

2.2 SNCF GARES & CONNEXIONS

SNCF GARES & CONNEXIONS

Gares & Connexions SA Subsidiaries

Management and development of French rail stations

AREP Group Retail & Connexions Group

SNCF Gares & Connexions is responsible for developing and operating all rail stations, and for ensuring equal access to all operators. It includes Gares & Connexions SA, and its subsidiaries Arep Group and Retail & Connexions.

€ million H1 2020

H1 2019 Change

a) External revenue 100 142 -42

b) Internal revenue 611 607 4

a+b Revenue 711 749 -38



c+d EBITDA 98 104 -5


Net investment -10 140 -149 Investment all funding sources 261 159 103

Significant events

– Favourable opinion issued by the ART on 28 February 2020 on pricing scales and fees for regulated services provided in passenger stations by SNCF Réseau and SNCF Gares & Connexions for the 2020 timetable, except for prices for access to boarding gates in a few sectors.

– Health crisis: major impact on station retail outlets, which were closed during lockdown and have seen only a very slow recovery in trade, leading to a significant drop in concession revenue for SNCF Gares & Connexions.

– Implementation of cost-saving measures to limit the impact of the health crisis.


– Revenue SNCF Gares & Connexions revenue for the first half of 2020 was €38m (5.0%) lower than in the first half of 2019. Covid-19 had a negative impact of €82m. After stripping out the impact of Covid-19, the residual increase of €44m (5.9%) reflected the inclusion in SNCF Gares & Connexions revenue of platform access fees (previously included in SNCF Réseau) from 2020.

– EBITDA EBIDTA was €5m lower year-on-year. Covid-19 had a negative impact of €66m. After stripping that out, the

residual increase of €61m mainly reflected the inclusion in 2020 of platform access fees (previously included in SNCF Réseau) in SNCF Gares & Connexions (€58m) and the positive impact of the crisis plan (€12m).

– Net investment Net investment for the period was negative €10m, a year-on-year increase of €149m. SNCF Gares & Connexions delivered a higher volume of projects in the period (+€102m), largely because a number of platform-related projects were transferred in from SNCF Réseau (impact €140m to end June). SNCF Réseau is still carrying out the related works, generating an increase in trade payables owed by G&C to SNCF Réseau: this had a very favourable effect on the investment working capital requirement of G&C but was neutral at Group level.

– Investment all funding sources The volume of investment from all funding sources was €261m, representing an increase of €103m year-on-year.


– Publication of 2021 rail station reference document for regulatory approval.

– Issuance of building permit for the Gare du Nord 2024 project.

– Continuation of the operating and capital expenditure cost savings plans to limit the impacts of the health crisis.

– Uncertainties about the pace of recovery of station retail outlets.

2.3 TRANSILIEN

TRANSILIEN

SA Voyageurs Transilien

Transilien provides local rail transport services in the Île-de-France (Greater Paris) region.

€ million H1 2020

H1 2019 Change


b) Internal revenue 154 201 -46

a+b Revenue 1,465 1,709 -244

c) External EBITDA -41 67 -108


c+d EBITDA -25 72 -97

EBITDA/Revenue -1.7% 4.2%

Net investment 356 336 20 Investment all funding sources 522 524 -2

Significant events

– Delivery on investment programmes:

– Gradual rollout of new rolling stock funded by the Transport Organising Authority as part of the accelerated rolling stock master plan: 10 Regio2N trainsets (6 on line D, 4 on line N) and 9 NAT trainsets on lines L and J.


11



– Revenue 2020 first-half revenue at Transilien was down €244m (-14.3%) year-on-year, with negative impacts of €253m from Covid-19 and €33m from the January strikes. After stripping those impacts out, the residual €42m (2.5%) increase was due to favourable revenue adjustments from 2019 booked in 2020 (€58m). Revenue from traffic was down 36%.

– EBITDA Transilien’s EBITDA was down €97m year-on-year, with negative impacts of €163m from Covid-19 and €11m from strike action, partly offset by (i) favourable revenue adjustments from 2019 booked in 2020 (+€58m); (ii) the counter-effect in 2020 of the ending of the Cézembre operation (+€21m); and the benefits of the cost savings plan (+€14m).

– Net investment and investment all funding sources There was no material change in either net investment or investment all funding sources during the period.


– Continuation and finalisation of negotiations on the 2020-2023 contract, against a backdrop of financial difficulties highlighted by Île-de-France Mobilités.

2.4 TER

TER

SA Voyageurs Subsidiaries TER Ritmx

TER provides regulated regional passenger transport services (rail and road, including urban and suburban), and associated services (via the Ritmx subsidiary).

€ million H1 2020

H1 2019 Change



a+b Revenue 2,206 2,647 -442



c+d EBITDA 35 203 -169


Net investment -112 86 -198 Investment all funding sources 268 267 2

Significant events

– Transfer of the Intercités lines in Normandy to TER Normandie on 1 January.

– During the health crisis, the collective efforts of all enabled TER to run a core service at around 15% of capacity, helping front line health workers and law enforcement officers get to work every day. The same commitment went into preparing for the resumption of services on 11 May, since when TER has operated a good quality service while complying strictly with public health rules for the benefit of passengers and employees alike.

– A crisis plan covering procurement, investment and headcount has been implemented at TER, and the first results have already flowed through into the June 2020 financial statements.

– To encourage French people to travel, and to promote France as a tourist destination this summer, all the French regional authorities (under the auspices of Régions de France) linked up with SNCF Voyageurs to launch the “TER De France” campaign. To date, 15,000 young person’s railcards have already been sold.


– Revenue Revenue at TER was down €442m, or -16.7%, on the first half of 2019. This reflects the adverse impacts of Covid-19 and the January strikes, which led to a 46% loss of direct revenue and a 27% drop in revenue from recharged infrastructure fees, partly offset by the transfer of the Normandy Intercités lines to TER in 2020. Traffic was down 47%, and traffic revenue down 45%.

– EBITDA EBITDA at TER was €169m (-83.0%) lower year-on-year, despite the substantial €442m loss of revenue, thanks to the implementation of an operating cost-cutting plan and tight control over production costs.

– Net investment The sharp fall in net investment at TER (€198m) was due to the receipt of a much greater volume of grants in the first half of 2020 for new rolling stock orders (Régiolis and Regio2N).

– Investment all funding sources Investment all funding sources was stable year-on-year.


– Rollout of a recovery plan in September, focused on adapting our services and digital tools to new customer behaviour (especially tele-working); on developing new multi-modal offers for occasional travellers using bicycles; and continuing use of load factor monitoring so each traveller can choose the train that suits them best.

– Preparation and review of the TER Auvergne-Rhône-Alpes, Grand Est and Pays de Loire agreements, and extension of the TER Centre Val de Loire agreement.

– Issuance on 8 June of the call for tenders by the SUD Provence-Alpes-Côte d’Azur Transport Organising Authority, with submission of tenders by 31 August ahead of the competitive dialogue process that will run from September to December 2020.


12

01 – HALF-YEAR ACTIVITY REPORT 2.5 VOYAGES SNCF

VOYAGES SNCF

SA Voyageurs Subsidiaries

Train operators

TGV France INOUI and OUIGO

Eurostar

Westbahn Lyria Elipsos TGV Italia

Thalys Alleo

TGV Europe

Intercités

Luxembourg-Basle Special trains

Sales

OUI.sncf

CRM Services Rail Europe Avancial Rail Solutions

Voyages SNCF offers its customers:

– door-to-door passenger transport in France and across Europe via Voyageurs SA (TGV, OUIgo, Intercités) and its subsidiaries (Eurostar, Thalys, Lyria, Rielsfera, etc);

– sales of travel-related products (including via the subsidiary Oui.sncf).

€ million H1 2020

H1 2019 Change

a) External revenue 1,720 4,221 -2,501


a+b Revenue 1,887 4,472 -2,585

c) External EBITDA -905 643 -1,548


c+d EBITDA -875 657 -1,532


Net investment 237 326 -88 Investment all funding sources 350 585 -235

Significant events

– Voyages SNCF excluding Intercités • The action plans implemented in the midst of the health crisis on the production side, especially to safeguard rolling stock, delivered satisfactory results: H00 punctuality 86.9% (cumulative to June) and 90.9% for June (+1.4 points versus 2019), passenger information 89% (cumulative to June), 4 points over the target.

• Despite the crisis, ongoing impairment testing indicated there was no risk of asset write-downs.

– Intercités • Confirmation of the tendering process for future medium/long-distance multiple unit trainsets, with the signature of a funding agreement with the State worth nearly €800m.

• Serious difficulties reaching commercial targets due to the strikes early in the year and Covid-19.


– Revenue Revenue at Voyages SNCF fell by €2,585m or -57.8% year-on-year. This takes account of:

– an unfavourable effect of €28m from changes in structure (see section 1.2, “Comparability of the financial statements”);

– unfavourable exchange rate effects of €3m. On a constant structure and exchange rate basis, revenue at Voyages SNCF fell by €2,555m (-57.5%), due to adverse impacts from Covid-19 (€2,395m) and the January strikes (€143m). Revenue from traffic was down 60%.

Voyages (excluding Intercités) saw revenue decline by €2,343m (-57%), with adverse impacts of €2,308m from Covid-19 and €130m from strike action:

– Voyages revenue excluding subsidiaries was €1,864m (-57%) lower, with adverse impacts of €1,748m from Covid-19 and €121m from strike action. Traffic decreased by 53% and revenue from traffic by 59%, as the health crisis stalled progress on the recovery plan launched in February after the January strikes. Despite the ending of social distancing restrictions and of the ban on travelling more than 100 kilometres, trainsets are restricted to 90% of capacity in order to reduce health risks. The gradual resumption of normal timetables means that 70% of InOui services and 85% of OuiGo services were running by the end of June.

– Eurostar revenue was down €340m (-61%), with adverse impacts of €399m from Covid-19 and €6m from strikes. After stripping this out, there was a year-on-year rise of €65m (11%), due to the non-recurrence of the 2019 French customs officers’ work-to-rule (+€39m) and the opening of the new Amsterdam-London route. Traffic was down 62%.

– Thalys revenue was down €159m (-57%), with adverse impacts of €156m from Covid-19 and €4m from strikes. Traffic was down 55%.

– Revenue from other subsidiaries fell by €100m, affected by a reduction in intra-group sales commission due to Covid19.

Intercités revenue decreased by €232m (-58%) due to the adverse impacts of Covid-19, the January strikes and the transfer of the Normandy lines to TER. Traffic was down 71%, and traffic revenue was 77% lower.

– EBITDA EBITDA declined by €1,532m. On a constant structure and exchange rate basis, EBITDA was down €1,554m, with the adverse effects of Covid-19 (€1,579m) and strikes (€104m) partly offset by €127m of cost savings under the crisis plan.

Voyages (excluding Intercités) saw EBITDA fall by €1,498m, with adverse impacts of €1,536m from Covid-19 and €98m from strikes.

– Voyages excluding subsidiaries was down €1,166m, with the adverse effects of Covid-19 (€1,137m) and strikes (€90m) partly offset by €68m of cost savings - mainly on IT projects, overheads, and survey and marketing costs.

– Eurostar EBITDA was down €207m with adverse impacts of €261m from Covid-19 and €5m from strikes, partly offset by the achievement of €36m of cost savings and €39m from the non-recurrence of the 2019 French customs officers’ work-to-rule.


13


– EBITDA at Thalys was down €86m, with adverse impacts of €93m from Covid-19 and €3m from strikes partly offset by cost savings of €10m.

– Other subsidiaries saw EBITDA decrease by €39m. The adverse effect of reduced intra-group sales commission due to Covid-19 (€46m) was partly offset by cost savings of €13m.

Intercités posted a fall of €49m in EBITDA, due mainly to Covid-19 and strike action.

– Net investment Net investment reached €237m in the first half of 2020, versus €326m in the first half of 2019. At Voyages SNCF, acquisitions of new TGV trainsets and fleet upgrades were at low levels due to production delays linked to the Covid-19 crisis.

– Investment all funding sources Investment from all funding sources was €350m in the first half of 2020, versus €585m a year earlier.


– Voyages SNCF excluding Intercités • Ambitious commercial plan to encourage the return of business travellers.

• Continued high level of vigilance around health measures in anticipation of a potential second wave.

• Launch of the OUIGO offering on the Paris-Lyon route at the start of July, ahead of it being opened up to competition.

• Ongoing work on the FALBALA project in preparation for the launch of a low-cost offering on the Spanish domestic market in March 2021.

• Restructuring of the Eurostar and Thalys subsidiaries in anticipation of Green Speed, and of subsidiaries offering international services, to make our European business models more resilient.

– Intercités • Continuation and finalisation of regulated service agreement: new one-year extension.

• Negotiations with the Transport Organising Authority (TAO) on additional financial support for the impact of Covid-19.

• Ongoing efforts to adapt resources to the new Intercités scope.

• Commercial relaunch plan, supported by a specific action plan on costs.

2.6 INDUSTRIAL DIVISION

INDUSTRIAL DIVISION

SA Voyageurs Subsidiaries Equipment Masteris

Traction

The Industrial Division coordinates all of the SNCF Group’s other operations and business lines. It comprises Equipment, Traction, Rail Production, and their subsidiary Masteris.

€ million H1 2020

H1 2019 Change



a+b Revenue 733 847 -114



c+d EBITDA 1 50 -48


Net investment 46 42 3 Investment all funding sources 37 34 4

Significant events

– Technical input and support by Engineering and Maintenance teams during lockdown.

– Start of the test phase of the first RER NG test trainset (Alstom/Bombardier) on the test track at the Bar-Le-Duc Rail Testing Centre.

– Shutdown of production at Industrial Technicentres from mid-March to mid-May. There was serious disruption of work programmes being conducted for other business lines: Transilien (Waouh upgrade programme), TER (video-surveillance, programmed 18-year overhauls, etc.), Intercités (on-board WiFi). Operations started to resume gradually in June.

– Ongoing restructuring of the ISM Matériel maintenance business.

– Launch of “ATOUT CONDUITE” to promote train-driving as a key performance driver and source of corporate pride.

– Implementation of traction safety upgrades (including train dispatching) programmed in connection with the December 2019 timetable changes.

– Continuation of the H00 and FIRST programmes (including PULSIV).


– Revenue Industrial Division revenue for the first half of 2020 was down €114m (-13.4%) year-on-year. There were adverse impacts from Covid-19 (€169m) and strikes (€13m).

– EBITDA Industrial Division EBITDA for the first half of 2020 was down €48m year-on-year, with negative impacts of €89m from Covid-19 and €6m from strikes. After stripping those impacts out, the residual increase reflects a pricing uplift for Equipment services (in line ART recommendations) and savings generated by the crisis plan.



14

01 – HALF-YEAR ACTIVITY REPORT Outlook for the second half of 2020

– Implementation of a major cost savings plan covering research/design, overheads and investment.

– A drive to reduce spare parts inventory has begun, to run down the surplus inventory built up during the health crisis.

– Gradual resumption of industrial operations to almost normal levels on wagon and locomotive maintenance, and to around 75% on industrial refurbishment and upgrade works.

– Tests on Spanish high speed lines of the first TGV trainset to be adapted for operating in Spain.

– Continuation of the ISM Matériel masterplan, with site restructurings to come.

– Implementation of action plans from the ATOUT CONDUITE roadmap.

– INFO FIRST: Launch of a pilot service disruption simulator, and a national master agreement to train staff in speaking to the public.

– H00: Continuation of initiatives with operating units, towards more robust punctuality performances.

2.7 KEOLIS

KEOLIS

Keolis International Keolis France United Kingdom Major networks

Continental Europe Mass transit

Australia Regions

North America Île-de-France

New territories

New Mobilities Effia Navya Parking

Kisio Cykleo

Keolis Santé

Keolis is a mass transport operator with a presence in 16 countries. Keolis has expertise in all forms of transport (train, bus, coach, metro, tram, ferry, bicycle), and in managing transport hubs (railway stations, airports) and parking.

€ million H1 2020

H1 2019 Change



a+b Revenue 2,883 3,253 -370



c+d EBITDA 197 314 -116



Significant events

– Acquisitions, divestments and equity investments in France and abroad:

• The integration of CarPostal France is proceeding well (excluding the Covid-19 impact).

• At Effia, the integration of MyPark is also going well (excluding the Covid-19 impact).

– Contract start-ups and extensions, and new contracts won, in France and abroad:

• United States: Keolis obtained a 4-year extension to its operating and maintenance contract for the Boston commuter rail network, and a 5-year extension to its rail contract in Virginia.

• Denmark: 4-year extension to the electric bus contract in Odense.

• Hyderabad: Inauguration of the final section of the automated metro system, transporting more than 400,000 passengers a day.

– Action plans • Action plans are under way to mitigate the economic effects of the Covid-19 crisis.

• Negotiations with the Transport Organising Authorities are ongoing.

• Agreement reached with the banking syndicate on a waiver to end June, and a covenant holiday until end December 2020.


– Revenue Keolis revenue for the first half of 2020 was down €370m (11.4%) on the first half of 2019. This takes into account:

– a favourable effect of €34m from changes in structure (see section 1.2, “Comparability of the financial statements”);

– unfavourable exchange rate effects of €11m. On a constant structure and exchange rate basis, Keolis revenue fell by €394m (-12.1%). The adverse impact of Covid-19 was €353m. After stripping that out, the residual decrease of €41m was due largely to the loss of some contracts in France (including Angers and Brest) at the end of 2019.

– EBITDA EBITDA at Keolis was down €116m year-on-year. On a constant structure and exchange rate basis, EBITDA fell by €123m, mainly due to the Covid-19 effect.

– Net investment Net investment at Keolis was sharply down (by €42m) versus the first half of 2019, mainly at international level (€31m drop, relating to postponed or cancelled projects including postponed IT projects in Australia and real estate projects not carried out in Wales & Borders).

– Investment all funding sources The amount of investment from all funding sources was stable year-on-year.


– Numerous tenders bids are expected for the Optile bus network in the Île-de-France region as it is opened up to competition.

– Cost savings plans with a gross value of more than €330m (before rebates to the Transport Organising Authorities) have been implemented to mitigate the economic impacts of the Covid-19 crisis.

– Several areas for negotiation have been identified and are being explored with a view to TOAs compensating Keolis for some of the impacts of the crisis.


15


– Weekly monitoring of the Group cash position, in liaison with the subsidiaries and with the SNCF Financing and Treasury Department.

– Ongoing discussions with the banking syndicate on financing issues.

2.8 GEODIS

GEODIS

Distribution & Express Contract Logistics

Freight Forwarding Road Transport

Supply Chain Optimization

US Contract Logistics

Geodis is a European operator with global reach, offering management solutions across all or part of the logistics chain (Supply Chain Optimization, Air & Sea Freight Forwarding, Contract Logistics, Distribution & Express, Road Transport, US Contract Logistics).

€ million H1 2020

H1 2019 Change



a+b Revenue 3,998 4,042 -44


d) Internal EBITDA 3 6 -2

c+d EBITDA 286 353 -67


Net investment 61 59 1 Investment all funding sources 52 50 2

Significant events

– From mid-February, Geodis operations were affected by the repercussions of the Covid-19 in China, with the effects spreading to other regions of the world from March onwards. Operations in France were particularly hard hit from mid-March.

– All Geodis business lines implemented action plans to limit the impact of the crisis:

• adapting operations;

• introducing cost savings plans;

• tightening controls over credit risk and debt recovery.

– Geodis also acted rapidly to set up charters to meet demand for urgent freight services at a time of reduced air freight capacity. Those steps limited the impact of the crisis on the financial results of Geodis.

– US Contract Logistics operations reported growth in the first half, driven by strong volumes in the e-commerce market and with major customers.

– As a result of all these actions, Geodis was able to remain in profit in the first half, and keep debt under control.


– Revenue Revenue at Geodis for the first half of 2020 was €44m, 1.1% lower than in the first half of 2019. This takes account of:

– an unfavourable effect of €37m from changes in structure (see section 1.2, “Comparability of the financial statements”);

– unfavourable exchange rate effects of €20m. On a constant structure and exchange rate basis, revenue rose by 0.3% or €13m. The resilience of Geodis revenue, despite an adverse effect from Covid-19 estimated at €324m, was driven by strong momentum in US Contract Logistics (especially in e-commerce) and revenue growth in Freight Forwarding (which was boosted by the use of charters to meet demand for urgent freight services at a time of reduced air freight capacity).

– EBITDA EBIDTA was down €67m.

Covid-19 had an adverse effect of €133m. After stripping this out, the residual increase reflects savings generated by the crisis plan (€50m, including €12m from the partial lay-off scheme).



– There is still a high level of uncertainty as to the length and intensity of the ongoing crisis. One of the key issues for Geodis will be the pace of the recovery in market volumes in the second half, and in particular the intensity of the peak season in Freight Forwarding and Contract Logistics.

2.9 TFMM (RAIL/MULTI-MODAL FREIGHT TRANSPORT)

RAIL/MULTI-MODAL FREIGHT TRANSPORT

Fret SNCF SAS Subsidiaries Fret SNCF SAS Naviland Cargo

Captrain France Captrain Europe VIIA SNCF Forwardis

TFMM is a rail/multi-modal freight specialist, including rail and combined freight operators and freight forwarders operating through various companies (Fret SNCF SAS, Captrain France, Naviland Cargo, Captrain Europe, Forwardis and VIIA SNCF).


16


€ million H1 2020

H1 2019 Change



a+b Revenue 711 877 -166



c+d EBITDA -14 45 -58



Significant events

– Fret SNCF • Activity levels sharply reduced as a result of the strike action in January and the Covid-19 health crisis, and of tough conditions across all segments of the steel industry.

• Launch of a project to streamline how the business operates by rethinking processes and support/transverse functions. The aims include making the business more efficient and bring overheads into line with market standards; delivering higher quality service via more effective and flexible structures; and regaining market share through higher-powered customer offerings.

– Rail Freight • Acquisition of the “Aggregates” business by VFLI.

• Marked economic slowdown in Europe, especially in Germany with the steel and auto industries.

• Shipping of face masks and hand gel by Forwardis over a 12,000 route from Nanchang in China to Valenton in France, in coordination with subsidiaries including Captrain Polska, Captrain Deutschland and Naviland.

– Multi-Modal Freight • Marked slowdown for rolling highways:

Satisfactory service frequency and load factors only on the Bettembourg-Le Boulou line.

The Bettembourg-Perpignan-Barcelona and Calais-Orbassano lines were temporarily suspended.


– Revenue Revenue at TFMM for the first half of 2020 was down €166m (-18.9%) on the first half of 2019. This takes account of:

– a favourable effect of €6m from changes in structure (see section 1.2, “Comparability of the financial statements”);

– unfavourable exchange rate effects of €1m. On a constant structure and exchange rate basis, revenue fell by 19.6% or €172m. There were negative impacts of €118m from Covid-19 and €36m from the January strike, on top of which came the loss of some contracts at Fret SNCF.

– EBITDA EBITDA fell by €58m.

This includes adverse impacts of €67m from Covid-19 and €22m from strikes.



– Fret SNCF • Steel industry significantly impacted beyond the immediate crisis, with major customers like ArcelorMittal affected through to August (shutdown of blast furnaces, and closure of the Florange coking plant brought forward).

• Auto industry also expected to take a big hit in 2020, with only a 50% recovery predicted. However there are signs of recovery in other major sectors including chemicals, petroleum products and LPG.

• Little visibility for combined operators on freight traffic, with risks of a drop in consumption and tough competition from road post-Covid-19.

• Uncertain prospects for Minerals, Quarrying and Cement operators, who are working with a construction industry still on standby.

• Implementation of a €10m post-Covid savings plan, including €5m of investment cuts.

– Rail Freight • Gradual resumption of the Freight Plan, but persistent difficulties in some sectors (especially steel and auto).

• For CTI, rebates on track slot fees (anti-Covid law) to help mitigate the economic losses inflicted by the Covid-19 crisis.

• Potential commercial successes: ETEA (CTI), K-LOG (CTE) and Eurovia Nord (VFLI/Railtraxx).

– Multi-Modal Freight • Proposed resumption of service on the Orbassana and Barcelona lines in the fourth quarter of 2020 with gradual ramp-up of load factors, but no rapid return to full performance levels for the rolling highway business.

2.10 SNCF IMMOBILIER

SNCF IMMOBILIER

SNCF SA Subsidiaries Real Estate Division

S2FIT Land management

Rail assets

ICF habitat (NOVEDIS)

SNCF Immobilier acts as agent or service-provider for the other SNCF business lines in four main areas:

– managing real estate used in operations (including master plans to optimise real estate assets, the construction and refurbishment of buildings, and managing leased properties);

– monetising assets not required for railway operations;

– managing the working environment in key office premises;

– managing residential properties through the ICF Habitat group, a subsidiary of SNCF SA.

SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 3 - INVESTMENT AND NET DEBT03

17


€ million H1 2020

H1 2019 Change


b) Internal revenue 303 249 54

a+b Revenue 316 276 40

c) External EBITDA 99 87 12


c+d EBITDA 99 89 10


Net investment 1 9 -8 Investment all funding sources 4 -2 6

� �

Significant events

– Management/Optimisation • Implementation of the office space master plan aimed at a €20m reduction in rental expense by 2026 relative to 2019 levels: preparation for relocation to the Rimbaud Campus in St Denis from two existing office buildings: Equinoxe (18,000 m² in the 13th arrondissement of Paris, occupied by SNCF Réseau) and Innovia (16,000 m² in Clichy, occupied mainly by the Information Systems department).

• Inauguration of the Technicentre at Hellemes (28,000 m²), specialising in mid-life servicing of TGV and Transmanche rolling stock, fitting-out (WiFi installation), and component repairs. This “factory of the future” includes 6,000 m² of roof-mounted solar panels.

– Urban regeneration: • Sale of the Gares des Mines site to Paris City Council for over €40m within the agreed timeframe.

• Signature of a memorandum of understanding with Nantes City Council with a view to the sale of a 15-hectare site to construct the new Nantes University Hospital. Reciprocal commitment from the City Council to contribute over €100m to upgrades of network and freight installations at Nantes Blottereau.

• Signature of a memorandum of understanding on a partnership with Strasbourg City Council, opening up approximately 30 hectares for monetisation.

• SNEF: signature of a promise to sell Lot I at La Chapelle International to Legendre Immobilier for €12m (March 2020).


– Revenue Revenue at SNCF Immobilier for the first half of 2020 was up €40m (14.6%) year-on-year.

– EBITDA EBITDA for the first half of 2020 was €99m, versus €89m a year earlier, a rise of 11.7%.



– Monetisation of land banks: reopening of discussions with local councils and with the cities of Paris, Lyon, Strasbourg, Marseille and Rennes.

– Resumption of onsite works post-Covid-19: selection of projects to be prioritised for completion (cost savings plan).

– Real estate management: negotiations with tenants facing the severest financial difficulties.

– Implementation of “Immo 2021” project, reorganising the business to offer more integrated solutions, thereby improving customer satisfaction and unlocking synergies (subject to the opinion of the Social and Economic Committee).

– Further progress towards the objective of reducing the built area by 2% (160,000 m²), helping to reduce the energy footprint.

3. INVESTMENT AND NET DEBT

3.1 INVESTMENT


Investment all funding sources -3,752 -4,299 547 -13% Disposals 91 139 -48 -35%

Investment net of disposals -3,662 -4,160 595 -14%

Investments all funding sources was €547m lower year-on-year at -€3,752m for the first half of 2020.

Disposals were €48m lower than in the first half of 2019, and mainly comprised real estate assets.

3.2 GROUP NET DEBT

€ million 30/06/2020 31/12/2019 Change

Non-current debt 77,369 68,155 9,214

Non-current receivable -34,967 -6,380 -28,587

Non-current net debt used in the net debt calculation 42,402 61,775 -19,373

Current debt 9,918 9,132 787

Current receivable -13,994 -10,576 -3,418

Current net debt used in the net debt calculation -4,076 -1,444 -2,631

Net debt 38,327 60,281 -21,954

Net debt / EBITDA 13.6 10.7

Gearing (net debt / equity) 2.9 -7.0

Net debt amounted to €38,327m as at 30 June 2020, giving gearing (net debt / equity) of 2.9 (compared with -7.0 as at 31 December 2019). The ratio of net debt to EBITDA (on a twelve months rolling basis) increased from 10.7 as at 31 December 2019 to 13.6 as at 30 June 2020.

4 - ACQUISITIONS OF EQUITY INVESTMENTS SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 03 Rapport de gestion

18

01 – HALF-YEAR ACTIVITY REPORT Movements in net debt during the first half of 2020 are

shown below:

Net debt at start of period 60,281

Cash from operations 520

Net investment 2,397

Disposals -91

Dividends received from companies accounted for by the equity method -12

Repayments of lease liabilities and associated interest 501

Changes in scope of consolidation 1 Change in operating working capital requirement -398

Dividends paid 8

Changes in fair value/amortised cost, currency translation differences 221

Change in tax working capital requirement -109

Assumption of SNCF Réseau debt by the State -25,000

Other 8

Net debt at end of period 38,327

3.3 FUNDING SOURCES AND DEBT MANAGEMENT Non-current debt and current debt increased by €9,214m and €787m respectively during the period.

The main reasons for those movements were:

– a new financial grant of €6,132m, linked to the assumption by the State of €25,000m of the debt carried by SNCF Réseau (see Note 2.1 to the condensed half-year consolidated financial statements);

– an increase in bond issues (net of issue premium) of €3,916m ;

– new bank borrowings contracted (net of issue premium) of €887m;

– redemptions of bond issues amounting to €557m;

– repayments of bank borrowings of €241m. The non-current and current receivable increased by €28,587m and €3,418m respectively.

The main reasons for those movements were:

– a new receivable of €31,132m from the Public Debt Fund (CDP), linked to the assumption by the State of €25,000m of the debt carried by SNCF Réseau (see Note 2.1 to the condensed half-year consolidated financial statements);

– movements in cash and cash equivalents of €732m. The SNCF Group’s long-term debt is rated as follows by the main credit ratings agencies:

Long-term rating Outlook

Date of report

Standard & Poor's AA- Negative 7 July 2020

Moody's Aa3 Stable 12 June 2020

Fitch Ratings A+ Negative 22 May 2020

On 7 July 2020, Standard & Poor’s Global Ratings downgraded the outlook for its AA- rating from Stable to Watch Negative, reflecting the consequences of the Covid-19 crisis for the Group.

3.4 EXPOSURE OF THE GROUP TO MARKET RISKS AND RECOURSE TO FINANCIAL INSTRUMENTS Market risks are managed within an overall framework approved by the SNCF Group Board of Directors.

For details of the strategy adopted, refer to note “Capital and Funding” of the annual consolidated financial statements.

4. ACQUISITIONS OF EQUITY INVESTMENTS No material equity investments were acquired in the first half of 2020.

5. FINANCIAL RELATIONS WITH THE STATE AND LOCAL AUTHORITIES SNCF receives:

– network investment grants;

– public service orders (as is the case with any public service operator or supplier to the French state or local authorities), in the legal and regulatory context of SNCF’s status as a monopoly operator;

– operating and investment grants received mainly for Transilien, TER and Intercités operations.

5.1 PUBLIC SERVICE ORDERS The table below shows revenue generated by SNCF Voyageurs SA and SNCF Réseau SA with the French regional authorities, Île-de-France Mobilités and the State:


Regional fare subsidies 11 11 0 Services for Transport Organising Authorities (French regions and Île-de-France Mobilités) 2,656 2,740 -84

Defence 37 78 -41

Public-interest inter-city train services (TET) 74 109 -35

TER and TET access fees 953 931 22

Total 3,731 3,868 -137

5.2 GRANTS AND PUBLIC SUPPORT RECEIVED FROM THE FRENCH STATE AND OTHER PUBLIC BODIES The table below summarises support received by the SNCF Group from the State and other public bodies:

SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 6 - EMPLOYEE MATTERS03

19



Operating grants 176 69 107

Cash inflows from concession financial assets 565 376 189

Investment grants on property, plant and equipment and intangible assets (1) 764 886 -122

Pricing support for freight operations 38 40 -2

Public-interest inter-city train services (TET) 74 109 -35

Total 1,618 1,480 137

(1) See Note 4.1 to the condensed half-year consolidated financial statements.

To support investment in the network, SNCF Réseau receives co-financing from partners in the public and private sectors. For the public sector, a differentiated approach is taken depending on the partner: AFITF (the French infrastructure funding agency), or other public bodies.

SNCF Voyageurs and Keolis receive investment grants in the form of third-party funding, primarily from regional authorities, particularly for rolling stock.

In accordance with IFRIC 12, grants received under concession arrangements are presented in the statement of financial position as a deduction from intangible assets or as a financial asset, depending on which accounting model is applicable based on an analysis of each concession agreement. In the case of concession financial assets, grants received are treated as a means of reimbursing the asset.

Investment grants received are deducted from intangible assets and property, plant and equipment in the statement of financial position. In the income statement, they are recognised in operating profit or loss (as a deduction from depreciation and amortisation) over the estimated economic life of the corresponding asset.

Pricing support for freight operations is intended to cover the marginal cost of freight traffic over and above fees paid by freight companies.

6. EMPLOYEE MATTERS

6.1 HEADCOUNT

30/06/2020 30/06/2019

Change vs H1 2019

Change on constant structure basis

SNCF Réseau 57,607 58,017 -0.7% -410 -0.7% -410

SNCF Gares & Connexions 4,885 4,044 +20.8% 841 +20.8% 841

Transilien 14,467 14,689 -1.5% -222 -1.5% -222

TER 28,516 28,689 -0.6% -173 -0.6% -173

Voyages SNCF 23,760 25,227 -5.8% -1,467 -5.7% -1,450

Industrial Division 10,988 11,013 -0.2% -25 -0.2% -25

Passengers - Other 507 61 +727.7% 445 +727.7% 445

Keolis 68,908 68,519 +0.6% 389 -0.8% -543

Geodis 40,904 41,017 -0.3% -113 +1.1% 453

TFMM (train/multi-modal freight transport) 9,535 10,194 -6.5% -659 -6.5% -659

Freight & Logistics - Other 755 760 -0.6% -5 -0.6% -5

SNCF Immobilier (real estate) 1,576 1,100 +43.3% 477 +43.3% 477

Corporate 9,542 10,906 -12.5% -1,364 -12.5% -1,364

TOTAL 271,949 274,234 -0.8% -2,285 -1.0% -2,634

6.2 PRINCIPAL AGREEMENTS SIGNED IN 2020 No collective agreements were signed at SNCF Group level in the first half of 2020.

OUTLOOK AND CHALLENGES SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT 03 Rapport de gestion

20


OUTLOOK AND CHALLENGES

SNCF remains highly vigilant on measures to protect the health of passengers, working alongside the State and the Transport Organising Authorities.

Exceptional pricing concessions, including the sale of cut-price tickets for both TGV and TER services, should generate a further significant increase in train load factors this summer.

Since July, OUIGO services have been running from Paris to Lyon city centre, ahead of the route being opened up to competition.

In September, a recovery plan will be launched, focused on adapting price bands and digital tools to new customer behaviour patterns. New multi-modal offerings for occasional travellers will be unveiled, and an ambitious sales strategy launched to tempt back business travellers.

It is still difficult to judge the long-term financial impact of the Covid-19 crisis with any degree of precision, given the high level of uncertainty about how and when the crisis will end, and what the economic fallout will be. It will also

depend on the Group’s ability to ride the rebound, in particular through the continuation of exceptional measures to support the recovery in economic activity in France and around the world.

Against this backdrop, the SNCF Group is now in talks with the State to define the financial support measures needed to secure the resilience of the national rail network and to achieve the target level of rail service delivery. The objective is to provide a sound financial position, without incurring further debt in the longer term.

An outcome from those discussions is expected by the end of the year.

In any event, the Group enjoys particularly sound liquidity as of now, and is able to meet its obligations. Investor confidence has not wavered, as shown by the successful rounds of bond issues carried out in April, May, June and July. In mid-July, the Group had liquid resources of €6.8bn, plus an available credit facility of €3.5bn.

SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT

21

Comptes Consolidés Annuels

03

30 June 2020

02 – SNCF GROUP CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS

SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT 03 03État s fi nanciers consolidés

22

02 – CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENT 23�

STATEMENT OF PROFIT OR LOSS AND GAINS/LOSSES RECOGNISED DIRECTLY IN EQUITY 24�

CONSOLIDATED STATEMENT OF FINANCIAL POSITION 25�

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 26�

CONSOLIDATED CASH FLOW STATEMENT 27�

NOTES TO THE CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS 29�

1. ACCOUNTING STANDARDS 29�

1.1 APPLICATION OF IFRS 29�

1.2 VALUATION METHODS SPECIFIC TO INTERIM

REPORTING PERIODS 31�

1.3 CHANGES MADE TO THE CURRENT PERIOD AND

COMPARATIVE PERIODS 31�

2. SIGNIFICANT EVENTS 32�

2.1 SIGNIFICANT EVENTS OF THE FIRST HALF OF 2020 32�

2.2 EVENTS AFTER THE REPORTING PERIOD 33�

3. PERFORMANCE FOR THE PERIOD 33�

3.1 SEGMENT INFORMATION 33�

3.2 REVENUE 37�

3.3 TRANSACTIONS WITH TRANSPORT ORGANISING

AUTHORITIES 37�

3.4 OTHER ITEMS 38�

4. OPERATING ASSETS AND LIABILITIES 38�

4.1 GOODWILL 38�

4.2 PROPERTY, PLANT AND EQUIPMENT AND RIGHT OF

USE ASSETS 39�

4.3 IMPAIRMENT TESTING OF NON-CURRENT ASSETS 42�

4.4 PROVISIONS FOR RISKS AND LITIGATION 47�

5. CAPITAL AND FUNDING 48�

5.1 LIQUIDITY MANAGEMENT DURING THE HEALTH

CRISIS 48�

5.2 COST OF NET DEBT 49�

5.3 CALCULATION OF NET DEBT 50�

5.4 RECONCILIATION TO “CASH GENERATED BY/(USED

IN) FINANCING ACTIVITIES” 52�

5.5 SHAREHOLDERS’ EQUITY 54�

6. OFF BALANCE SHEET COMMITMENTS 54�

7. SCOPE OF CONSOLIDATION 54�

SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT CONSOLIDATED INCOME STATEMENT 03

23


CONSOLIDATED INCOME STATEMENT

€ million Note 30/06/2020 30/06/2019

Revenue 3 14,129 17,854

Purchases and external charges 3 -5,985 -6,731

Employee benefit expense -7,140 -7,358

Taxes and duties other than income tax -892 -912

Other operating income and expenses -43 52

EBITDA 69 2,906

Depreciation and amortisation 4.2 -1,980 -1,884

Net movement in provisions 4.4 -55 33

Current operating profit/(loss) -1,966 1,054

Net proceeds from asset disposals 4.2 61 31

Fair value remeasurement of previously-held equity interest - -

Impairment losses 4.3 -13 -6

Operating profit/(loss) -1,918 1,080

Share of net profit/(loss) of companies accounted for by the equity method 9 8

Operating profit/(loss) after share of net profit/(loss) of companies accounted for by the equity method -1,909 1,088

Net finance costs of employee benefits -5 28

Cost of net debt and other finance costs 5 -547 -912

Net finance costs -552 -884

Net profit/(loss) before tax from ordinary activities -2,462 205

Income taxes -97 -175

Net profit/(loss) from ordinary activities -2,559 30

Net profit/(loss) from discontinued operations - -

Net profit/(loss) for the period -2,559 30

Net profit/(loss) for the period attributable to equity holders of the parent -2,389 20 Net profit/(loss) for the period attributable to non-controlling interests -170 10

Notes 1 to 7 are an integral part of the half-year consolidated financial statements.

STATEMENT OF PROFIT OR LOSS AND GAINS/LOSSES RECOGNISED DIRECTLY IN EQUITY

SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 03 03Consolidated Financial Statements

24

02 – CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS STATEMENT OF PROFIT

OR LOSS AND GAINS/LOSSES RECOGNISED DIRECTLY IN EQUITY

€ million 30/06/2020 30/06/2019 Net profit/(loss) for the period -2,559 30 0

Change in foreign currency translation differences -97 8

Tax on change in foreign currency translation differences 4 0 0

-93 8 Change in fair value of cash flow hedges -204 -633

Tax on change in fair value of cash flow hedges 4 0 0

-200 -633 Change in fair value of hedging costs -44 20

Tax on change in fair value of hedging costs 0 0

0 -44 20 Share of reclassifiable other comprehensive income of companies accounted for by the equity method -3 1 Total items subsequently reclassifiable to profit or loss -340 -604 0

Actuarial gains/(losses) on employee defined-benefit plans 59 -221

Tax on actuarial gains/losses on employee defined-benefit plans 0 3

0 59 -217 0

Change in value of equity instruments at fair value through equity 0 0 0

0 0 Share of non-reclassifiable other comprehensive income of companies accounted for by the equity method -4 0 Total items not subsequently reclassifiable to profit or loss 55 -218

Total gains/(losses) recognised directly in equity -286 -822

Profit/(loss) and total gains/(losses) recognised directly in equity for the period -2,844 -792

Attributable to equity holders of the parent -2,627 -782 Attributable to non-controlling interests -217 -10

0


SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT CONSOLIDATED STATEMENT OF FINANCIAL POSITION 03

25


CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED ASSETS € million Note 30/06/2020 31/12/2019

Goodwill 4.1 2,386 2,513

Intangible assets 2,413 2,368

Rights of use of leased assets 4.2 3,778 3,948

Property, plant and equipment 4.2 51,701 51,674

Non-current financial assets 5 36,201 7,562

Investments accounted for by the equity method 1,015 1,026

Deferred tax assets 4,471 4,473

Non-current assets 101,964 73,565

Inventories and work-in-progress 1,480 1,361

Operating receivables 9,878 10,496

Operating assets 11,359 11,857

Current financial assets 5 5,750 2,876

Cash and cash equivalents 5 8,490 7,754

Current assets 25,599 22,488

Assets classified as held for sale - 0

Total assets 127,562 96,052

CONSOLIDATED EQUITY AND LIABILITIES € million Note 30/06/2020 31/12/2019

Share capital 1,000 13,736

Consolidated reserves 14,571 -21,681

Net profit/(loss) for the period attributable to equity holders of the parent -2,389 -801 Equity attributable to equity holders of the parent 13,183 -8,746

Non-controlling interests 55 118 Total equity 13,237 -8,628

Non-current employee benefit liabilities 2,708 2,767

Non-current provisions 4.4 1,396 1,260

Liabilities related to non-current concession assets outside the scope of IFRIC 12 2,434 2,549

Non-current financial liabilities 5 78,733 69,994

Non-current lease liabilities 3,027 3,137

Deferred tax liabilities 164 157 Non-current liabilities 88,461 79,864

Current employee benefit liabilities 176 179

Current provisions 4.4 126 164

Operating payables 14,790 14,429

Operating liabilities 15,092 14,771

Current financial liabilities 5 9,920 9,132

Current lease liabilities 852 913 Current liabilities 25,864 24,816

Liabilities associated with assets classified as held for sale - 0 Total equity and liabilities 127,562 96,052


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 03 03Consolidated Financial Statements

26

02 – CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED

STATEMENT OF CHANGES IN EQUITY

€ million Share capital

Reserve related to share capital

Actuarial gains/

(losses) on employee defined benefit plans

Equity instru-ments at fair value

through equity

Group translation reserves

Cash flow

hedges Hedging costs

Debt instru-

ments at fair value through equity

After-tax

reser-ves of trans-ferred opera-tions

Retained earnings/(accumu-lated losses)

Equity attribu-table to equity

holders of the parent

Non-controlling interests

Total equity

Published equity as at 01/01/2019

13,736 - -387 -66 -246 -1,013 -135 0 - -18,519 -6,629 139 -6,491

Net profit/(loss) for the period

- - - - - - - - - 20 20 10 30

Gains/(losses) recognised directly in equity

- - -200 - 9 -632 20 0 - 1 -802 -20 -822

Profit/(loss) and total gains/(losses) recognised directly in equity

- - -200 - 9 -632 20 0 - 21 -782 -10 -792

Dividends paid - - 0 - - 0 - - - -537 -537 - -537 Dividends of subsidiaries

- - - - - - - - - - - -55 -55

Changes in scope of consolidation, non-controlling interests and commitments to buy out non-controlling interests (*)

- - 0 - 0 0 - - - -202 -202 52 -149

Other changes - - 1 0 - -2 5 - - 10 13 1 13

Equity as at 30/06/2019

13,736 - -586 -66 -237 -1,646 -111 0 - -19,226 -8,136 127 -8,010


13,736 - -607 -66 -181 -1,465 -47 0 - -20,117 -8,746 118 -8,628

Net profit/(loss) for the period

- - - - - - - - - -2,389 -2,389 -170 -2,559

Gains/(losses) recognised directly in equity

- - 64 - -65 -192 -44 - - -2 -239 -47 -285

Profit/(loss) and total gains/(losses) recognised directly in equity

- - 64 - -65 -192 -44 - - -2,391 -2,627 -217 -2,844

Dividends paid - - - - - - - - - -762 -762 - -762 Dividends of subsidiaries

- - - - - - - - - - - -16 -16

Transactions involving share capital

- - - - - - - - - - - 4 4

Changes in scope of consolidation, non-controlling interests and commitments to buy out non-controlling interests (*)

1,000 29 2 - - - - - - -713 317 165 482

Other changes (**) -13,736 - 0 - - 100 - - - 38,636 25,001 - 25,001


1,000 29 -541 -65 -246 -1,557 -91 0 - 14,653 13,183 55 13,237

(*) Includes €1bn for the constitution of the share capital of SNCF SA after its transformation into a société anonyme on 1 January 2020 (see Note 2.1.2), and changes in commitments to buy out non-controlling interests in Eurostar and THI Factory. (**) Includes transfer of €13,736m from share capital as at 31 December 2019 to consolidated reserves (see Note 2.1.2), and assumption by the State of €25bn of SNCF Réseau debt (see Note 2.1.3).


SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT CONSOLIDATED CASH FLOW STATEMENT03

27


CONSOLIDATED CASH FLOW STATEMENT

€ million Note 30/06/2020 30/06/2019

Net profit/(loss) for the period IS(1) -2,559 30

Eliminations:

share of net (profit)/loss of companies accounted for by the equity method IS(1) -9 -8

deferred tax expense/(gain) -24 -10

depreciation, amortisation, impairment losses and provisions 2,127 1,839

gains and losses on fair value remeasurements 11 88

net proceeds from disposals and gains and losses on dilution -66 -36

Cash from operations after cost of net debt and taxes -520 1,903

Eliminations:

current income tax expense/(gain) 121 184

cost of net debt 535 823

dividend income -2 -3

Cash from operations before cost of net debt and taxes 134 2,908

Impact of change in working capital requirement 398 -341

Taxes paid/(collected) -12 -46

Dividends received 14 15

Cash generated by/(used in) operating activities 534 2,536

Acquisitions of subsidiaries, net of cash acquired 30 -46

Disposals of subsidiaries, net of cash transferred -5 -16

Acquisitions of intangible assets and property, plant and equipment 4.2.3 -3,033 -3,587

Disposals of intangible assets and property, plant and equipment 91 139

New concession financial assets -693 -730

Cash inflows from concession financial assets 3.3 565 376

Cash inflows from lease receivables 1 1

Acquisitions of financial assets 0 -85

Disposals of financial assets 0 0

Changes in loans and advances -215 -212

Changes in cash assets -473 -400

Investment grants received 764 886

Cash generated by/(used in) investing activities -2,969 -3,674

(1) Consolidated income statement

CONSOLIDATED CASH FLOW STATEMENT SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 03 03Consolidated Financial Statements

28


€ million Note 30/06/2020 30/06/2019

Cash inflows from equity transactions 4 -4

New borrowings 4,969 3,726

Repayments of borrowings net of Public Debt Fund (PDF) loan receivables -325 -618

Cash inflows from PPP receivables 138 137

Cash outflows on PPP payables -141 -141

Net interest paid -866 -837

Repayments of lease liabilities -502 -479

Interest paid on lease liabilities -73 -56

Dividends paid to Group shareholders (*) SCE (2) 0 0

Dividends paid to non-controlling interests -8 -41

Increase/(decrease) in cash borrowings 157 110

Cash generated by/(used in) financing activities 5 3,354 1,796

Impact of exchange rate fluctuations -25 -1

Impact of changes in accounting policies 1 0

Impact of changes in fair value 1 -2

Increase/(decrease) in cash and cash equivalents 896 656

Opening cash and cash equivalents 7,273 7,728

Closing cash and cash equivalents 8,169 8,384

(*) The dividend was paid in July 2020. (2) Consolidated statement of changes in equity.


SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 1 - ACCOUNTING STANDARDS03

29


NOTES TO THE CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS


All amounts are in millions of euros (€ million), unless stated otherwise. As the Group has elected not to eliminate rounding errors, some minimal discrepancies may appear.

1. ACCOUNTING STANDARDS Pursuant to European Regulation 1606/2002 of 19 July 2002, the SNCF Group prepares its consolidated financial statements in accordance with IFRS (International Financial Reporting Standards), as adopted in the European Union and available to view on the European Commission website.

SNCF already applied IFRS, pursuant to Article L.2012-10 of the French Transport Code as amended with effect from 1 January 2015 by the Rail Reform Law (law no. 2014-872 of 4 August 2014), in preparing the consolidated financial statements of the group formed by the Groupe Public Ferroviaire (Public Rail Group – PRG) and the subsidiaries of the group’s entities.

Consequently, the entry into force on 1 January 2020 of the New Railway Pact Law (law no 2018-515 of 27 June 2018), as supplemented by Order no 2019-552 of 3 June 2019, has not affected the presentation of the consolidated financial statements for the half-year ended 30 June 2020.

The comparative figures for the six months ended 30 June 2019 were not published during the 2019 financial year.

The consolidated financial statements for the half-year ended 30 June 2020 were closed off by the Board of Directors of the SNCF Group on 30 July 2020.

1.1 APPLICATION OF IFRS The accounting policies used for the preparation of the SNCF Group consolidated financial statements for the half-year ended 30 June 2020 are the same as those adopted for the year ended 31 December 2019, adapted to reflect new standards and interpretations endorsed by the European Commission.

The consolidated financial statements for the half-year ended 30 June 2020 were prepared in accordance with IAS 34, “Interim Financial Reporting”. Consequently, they do not include all the disclosures and notes required by IFRS for the preparation of annual consolidated financial statements, but only selected notes explaining significant events for the period. These half-year consolidated financial statements should therefore be read in conjunction with the 2019 full-year consolidated financial statements.

The basis of preparation of the half-year consolidated financial statements, as described in the following notes, derives from:

– standards and interpretations mandatorily applicable for financial periods commencing on or before 1 January 2020;

– elective accounting options and exemptions applied in preparing the financial statements for the half-year ended 30 June 2020 (those options and exemptions are described in Note 1.1.3, and valuation methods specific to interim reporting periods are described in Note 1.2).

1 - ACCOUNTING STANDARDS SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 03

30

02 – CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS 1.1.1 Standards and interpretations applicable to half-

year consolidated financial statements for financial periods beginning on or after 1 January 2020

A summary is provided below of (i) amendments to standards and interpretations and (ii) newly-issued standards that are applicable as of 1 January 2020 and are of specific relevance to the Group’s half-year consolidated financial statements:

Standard or interpretation

Summary Impacts

Amendments to IFRS 3, “Definition of a Business”

Issued by the IASB: 22 October 2018.

Endorsed by the EU: Regulation (EU) 2020/551 of 21 April 2020, published in the Official Journal on 22 April 2020.

These amendments help stakeholders determine whether an acquisition is of a business or a group of assets when IFRS 3 is applied.

The amended definition emphasises that the output of a business is to provide goods and services to customers, whereas the previous definition focused on returns in the form of dividends, lower costs or other economic benefits to investors and other third parties.

The SNCF Group has applied this amendment with effect from 1 January 2020. No material impacts were identified as of 30 June 2020.

Amendments to IFRS 9, IAS 39 and IFRS 7, “Interest Rate Benchmark Reform”

Issued by the IASB: 26 September 2019

Endorsed by the EU: Regulation (EU) 2020/34 of 15 January 2020, published in the Official Journal on 16 January 2020.

These amendments are intended to enable entities to provide useful financial information during the period of uncertainty relating to interest rate benchmark reform. They amend some hedge accounting requirements, so as to prevent the discontinuation of hedge accounting for hedging relationships documented in accordance with IFRS 9, notwithstanding the uncertainties arising from ongoing benchmark reform. The amendments also require entities to provide investors with additional disclosures about hedging relationships that are directly affected by such uncertainties.

There has been no discontinuation of hedge accounting as a result of benchmark reform.

Amendments to

IAS 1, “Presentation of Financial Statements” and

IAS 8, “Accounting policies, changes in accounting estimates and errors”

IASB: 01/01/2020, with option to early adopt as of 01/01/2019

EU: 01/01/2020

Group: 01/01/2020

These amendments clarify the definition of “material” used in IAS 1 and IAS 8.

The SNCF Group has applied these amendments with effect from 1 January 2020. No material impacts were identified as of 30 June 2020.

1.1.2 Standards and interpretations early adopted in preparing the 2020 half-year consolidated financial statements

Standard or interpretation

Summary

Amendment to IFRS 16, “Covid-19-Related Rent Concessions”

On 28 May 2020, the IASB issued the final version of an amendment to IFRS 16, dealing with rent concessions related to Covid-19.

The amendment permits lessees, as a practical expedient, not to assess whether particular rent concessions relating to the Covid-19 pandemic are lease modifications and instead to account for those rent concessions as if they are not lease modifications and recognise their impact in profit or loss for the period.

The Group has not elected early adoption of the other standards and interpretations mandatorily applicable to financial periods commencing on or after 30 June 2020,

regardless of whether they have been endorsed by the European Commission.

SNCF GROUP - 2020 HALF-YEAR FINANCIAL REPORT 1 - ACCOUNTING STANDARDS03

31


1.1.3 Description of accounting policies applied

The accounting principles applied by the Group are described in the relevant notes to the 2019 full-year consolidated financial statements. They apply to the consolidated financial statements for the half-year ended 30 June 2020 with the exception of the tax on rail company profits (TREF) and income tax, which are subject to valuation methods specific to interim reporting periods as described in Note 1.2.

1.2 VALUATION METHODS SPECIFIC TO INTERIM REPORTING PERIODS 1.2.1 Employee benefits

Use of the partial lay-off scheme in response to the Covid-19 crisis has been made easier by the latest government job protection measures. Order no. 2020-346 of 27 March 2020 extended the scheme to “non-State employees of enterprises included in the national register of undertakings under majority State control, as mentioned in paragraph 3 of Article L.5424-1 of the French Labour Code”, thereby bringing all SNCF Group companies within the scheme.

As a result, the SNCF Group companies were able to use the scheme from mid-March onwards. The Group has recognised a net €94m of lay-off allowances (excluding the portion self-insured under the UNEDIC unemployment insurance scheme), which are being offset against the expected cost of short-term employee benefits. It was not possible to recognise the expected gain due to exemption from social security charges in respect of partial lay-off allowances and supplementary allowances, because not all the conditions had been met as at 30 June.

The net provision for employee benefits is updated based on the most recent actuarial valuations available on the closing date of the previous period. Actuarial assumptions relating to companies within the SNCF Unified Public Group (UPG), the main contributors within the Group, were reviewed in full as at 30 June 2020.

The Group’s employee benefit liabilities reduced by €60m in the first half of 2020. This decrease mainly reflected (i) an increase in the discount rate from 0.60% as at 31 December 2019 to 0.69% as at 30 June 2020, and (ii) a decrease in the inflation rate from 1.90% to 1.80% over the same period.

The actuarial gain arising from changes in the discount and inflation rates was €38m. Of this, €9m related to the finance cost of long-term employee benefits and was recognised in “Finance costs”, and €29m related to post-employment benefits and was recognised in non-reclassifiable reserves.

Experience adjustments generated actuarial gains of €27m, including €31m for post-employment benefits recognised in non-reclassifiable reserves.

1.2.2 Income taxes

Income taxes for the half-year are calculated by applying to the pre-tax profit or loss of consolidated companies the best known estimate for the effective tax rate of the period for each tax entity.

Profit forecasts as of 30 June 2020, which form part of the assessment of the recoverability of deferred tax assets, have not been updated given that the new financial trajectory was still under discussion with the State on the date the half-year financial statements were closed off.

1.3 CHANGES MADE TO THE CURRENT PERIOD AND COMPARATIVE PERIODS With effect from 1 January 2020, the SNCF Group has decided to report EBITDA as a performance indicator in the consolidated income statement, in place of gross profit.

The definition adopted by the SNCF Group for EBITDA is the same as that previously used for gross profit, except that it (i) excludes changes in provisions for employee benefits, which are not dependent on operating activities and have no direct cash impact and (ii) includes changes in provisions for current assets, which are directly related to operating activities. Provisions for employee benefits mainly comprise retirement benefits; annuities paid as compensation for work-related accidents and illnesses; social welfare; the provident plan; the phased retirement and time savings account schemes; and long service awards.

The impact of the change in performance indicator on the income statement for the half-year ended 30 June 2019 is an improvement of €5m in “Employee benefit expense” and of €12m in “Other operating income and expenses”, and a deterioration of €17m in “Net movement in provisions”.

A reconciliation of restated and recalculated figures for the comparative period is presented below:

€ million 30/06/2020 published

30/06/2019 restated

30/06/2019 recalculated (*)

Reclassification

Revenue 14,129 17,854 17,854 Purchases and external charges -5,985 -6,731 -6,731 Employee benefit expense -7,140 -7,358 -7,363 -5 Taxes and duties other than income tax -892 -912 -912 Other operating income and expenses -43 52 40 -12 Gross profit 2,889 -17

EBITDA 69 2,906

Depreciation and amortisation -1,980 -1,884 -1,884 Net movement in provisions -55 33 50 17 Current operating profit/(loss) -1,966 1,054 1,054 0

(*) The SNCF Group is presenting a recalculated gross profit figure for the half-year ended 30 June 2019 because it did not publish a half-year financial report in 2019.

2 - SIGNIFICANT EVENTS SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT 03

32

02 – CONDESNSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS 2. SIGNIFICANT EVENTS

2.1 SIGNIFICANT EVENTS OF THE FIRST HALF OF 2020 2.1.1 Covid-19 public health crisis

The Covid-19 public health crisis has had a severe impact on the operations of the SNCF Group.

The Passengers business line was particularly hard hit. Operations were sharply reduced from 17 March 2020; services gradually recovered from the first easing of lockdown measures, subject to compliance with governmental biosecurity requirements.

The new economic landscape was taken into account when testing CGUs and goodwill for impairment, as described in Note 4.3 to the condensed half-year consolidated financial statements.

The Group also adapted its treasury management policies during this period to ensure that it can meet all its obligations and financial commitments as they fall due. A specific note describing the measures implemented is presented in Note 5 to the condensed half-year consolidated financial statements.

Finally, the Group has drawn up a specific action plan aimed at generating additional savings by the end of 2020, to mitigate the financial effects of the crisis. In parallel, the Group implemented partial lay-off measures from mid-March onwards (see Note 1.2.1 to the condensed half-year consolidated financial statements).

2.1.2 Implementation of rail industry reform

The reform of the French rail industry resulting from the New Railway Pact Law (law no 2018-515 of 27 June 2018), as supplemented by Order no 2019-552 of 3 June 2019, took effect on 1 January 2020.

The changes to the Group’s organisational structure, governance and missions – as described in the 2019 Annual Financial Report – are now operational.

All the accounting entries required for asset and capital transfers to the Group’s new legal entities have been made. They have no impact on the consolidated financial statements, as the legal implementation of the reform qualifies under IFRS as a legal reorganisation of businesses under common control.

To reflect the new organisational structure, the SNCF Group has adapted its segment information, and now reports eleven operating segments (see Note 3.1 to the condensed half-year consolidated financial statements).

2.1.3 Partial assumption of debt by the State

On 1 January 2020, the State assumed €25bn (at nominal value on redemption) of the debt carried by SNCF Réseau, in line with the French 2020 Budget Act.

The mechanism used is described below:

– SNCF Réseau and the Caisse de la Dette Publique (Public Debt Fund – PDF) put in place, simultaneously, mirror loans with identical characteristics that perfectly reflect the characteristics (maturity, repayment profile, average interest rate, etc) of SNCF Réseau’s gross debt, including hedging instruments. – The State substituted itself for SNCF Réseau in the repayment of its debt to the PDF and waived its own debt, such that SNCF Réseau retained only its loan receivable from the PDF.

In accounting terms, this transaction resulted in:

– The recognition of the loan receivable and the mirror loan payable at market value, including a €6.1bn fair value remeasurement uplift on the assets and liabilities sides of the balance sheet relative to the €25bn nominal value.

– Simultaneously, the SNCF Group recognised the State’s debt waiver by (i) incorporating into reserves the €25bn nominal value of the assumed debt and (ii) recognising a financial grant on the liabilities side of the balance sheet corresponding to the differential between the average rate on the Réseau debt and the current market rate.

With effect from 1 January 2020, the PDF loan receivable is accounted for as a financial asset at amortised cost. In parallel, the financial grant is being written back to profit or loss on an actuarial basis, as and when the fair value remeasurement associated with the receivable is reclassified to profit or loss via the amortised cost calculation.

Consequently, the impact of this transaction on net finance costs is an amount of net financial income that exactly mirrors the finance cost effectively borne by SNCF Réseau on the portion of its historical debt assumed by the State.

2.1.4 Strike action

The strike action that began on 5 December 2019 in opposition to proposed pension reforms continued until February 2020.

This resulted in a loss of business which, along with refunds and other concessions, had an adverse impact on revenue in the Group’s 2020 first-half financial statements.

2.1.5 Impairment

Background

In 2017, the State began work on developing a “New Railway Pact”, to be based on:

– the New Railway Pact Law (no. 2018-515), which became law on 27 June 2018, and various Orders and Decrees specifying the arrangements for its implementation;

– a strategic business plan, prepared by the PRG at the request of the State, aimed at improving performance;

– a new collective agreement for the rail industry by 2020.

– This work formed the basis of a financial trajectory for the Group for the 2019-2028 period.

– As of the date the 2020 half-year financial statements were closed off, that financial trajectory had not yet been amended or updated. The collective agreement has not been finalised, and discussions have been provisionally suspended.

– The latest versions of the Group’s strategic business plan and financial trajectory are currently being updated. Those updates will take account of the changes in the economic landscape due to the effects of the Covid-19 public health crisis. Work is ongoing on these matters, as are discussions with the State. The business plan and financial trajectory are expected to be finalised by the end of 2020.

Indications of impairment identified in the period and tests performed

The Group’s business units and entities have checked for potential indications of changes in the fair value of CGUs and goodwill (primarily Geodis, Keolis, Eurostar and Thalys), in particular relating to the potential effects of the Covid-19 public health crisis.

To better evaluate those effects, the business units and entities applied various scenarios using different

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assumptions about how soon and at what level operations would recover over time; those scenarios were then applied to the cash flows from the most recent financial trajectory.

Impairment tests were carried out for entities showing potential indications of impairment. In parallel, all weighted average cost of capital (WACC) assumptions for the business units affected were updated to reflect changes in market parameters. The effects of the crisis on the rates used was also assessed by reference to the impact on discounted cash flows.

On completion of those analyses, some business units performed further testing. However, those tests did not require any adjustment to the values of the assets involved. For a detailed presentation of the analyses and impairment tests carried out, see Note 4.3 to the condensed half-year consolidated financial statements.

2.1.6 Negotiation of the Île-de-France Mobilités 2020-2023 contract

A new contract for the 2020-2023 period relating to the implementation of passenger transport pricing and service policies for passengers in the Île-de-France (Greater Paris) region is currently being negotiated with Île-de-France Mobilités (the regional Transport Organising Authority). Pending finalisation of that contract, SNCF Voyageurs is recognising revenue equal to the aggregate amount of the fixed monthly payments on account paid by Île-de-France Mobilités under article R.1241-25 of the French Transport Code, which specifies the provisional fixed contribution that Île-de-France Mobilités must pay SNCF Voyageurs to ensure continuity of service.

2.2 EVENTS AFTER THE REPORTING PERIOD The principal events after the reporting period are described below.

2.2.1 Credit rating

On 7 July 2020, Standard & Poor’s Global Ratings downgraded the outlook for its AA- rating from Stable to Watch Negative, reflecting the consequences of the Covid-19 crisis for the Group.

2.2.2 Signature of building permit for the Gare du Nord modernisation project

The Paris Gare du Nord 2024 project, housed within the single-purpose semi-public company Stationord, obtained consent from the Paris Prefecture when the building permit was signed on 6 July 2020.

Work on this project, which aims to enhance the attractiveness of public transport in the Île-de-France region and hence reduce pollution, is due to start in the summer of 2020.

2.2.3 Suspension of payments from Ile de France Mobilités to SNCF Transilien

Pending signature of the contract for the 2020-2024 period, Ile-de-France Mobilités is paying a provisional fixed monthly contribution to SNCF Transilien to ensure continuity of service under Article R.1241-25 of the French Transport Code. The monthly payments scheduled for the first half of 2020 were made each month, on the dates specified in the previous contract.

However, the Board of Directors of Ile-de-France Mobilités voted on 8 July 2020 to suspend those payments from July onwards, until such time as the State makes good the loss of revenue due to the Covid-19 crisis.

Consequently, the operating component of the fixed monthly contribution from Ile-de-France Mobilités (€190m)

that was expected in July was not received by SNCF Transilien. In the short term, SNCF is drawing on its own liquidity sources to ensure continuity of public transport services in the Île-de-France region.

3. PERFORMANCE FOR THE PERIOD

3.1 SEGMENT INFORMATION 3.1.1 Determination of reported segments

The operations of the SNCF Group are organised into five business lines and eleven segments:

– The Infrastructure Management business line, comprising two segments:

• SNCF Réseau, whose mission is to commercialise, manage, maintain, upgrade and develop the French national rail network. Its customers are the 29 rail operators that use the national rail network, plus 12 other companies (combined transport operators, ports, etc) that reserve track slots which they then assign to the rail operator of their choice. This segment includes the following SNCF Réseau subsidiaries: Sferis and Altametris.

• SNCF Gares & Connexions handles the operation and development of France’s 3,030 railway stations, ensuring that all operators have fair and equal access. It includes Gares & Connexions SA, and its subsidiaries Arep Group and Retail & Connexions.

– The Passengers business line comprises four segments: • Transilien: local rail transport services in the Île-de-France (Greater Paris) region.

• TER: regulated regional passenger transport services (rail and road, including urban and suburban), and associated services (Ritmx).

• Voyages SNCF: door-to-door passenger transport in France and across Europe via SNCF Voyageurs SA (TGV, OUIgo, Intercités) and its subsidiaries (Eurostar, Thalys, Lyria, Rielsfera, etc), and sale of travel-related products (including via the subsidiary Oui.sncf).

• Industrial Division: comprising Equipment, Traction, Rail Production, and the subsidiary Masteris, this segment co-ordinates all of the Group’s industrial operations.

– Keolis handles mass transit systems in 16 countries around the world. Keolis has expertise in all forms of transport (train, bus, coach, metro, tram, ferry, bicycle), and in managing transport hubs (railway stations, airports) and parking.

– The Freight & Logistics business line, comprising two segments:

• Geodis: a European operator with global reach, offering management solutions across all or part of the logistics chain (Supply Chain Optimization, Air & Sea Freight Forwarding, Contract Logistics, Distribution & Express, Road Transport, US Contract Logistics).

• TFMM: a rail/multi-modal freight specialist, including rail and combined freight operators and freight forwarders: Fret SNCF SAS, Captrain France (formerly VFLI), Captrain Europe (formerly Captrain), Naviland Cargo, Forwardis and VIIA SNCF.

– SNCF Immobilier acts as agent or service-provider for the other SNCF Group companies in four main areas: managing real estate assets used in operations (master plans to optimise real estate assets, the construction and refurbishment of buildings, and managing leased properties); monetising assets not required for railway

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02 – CONDESNSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS operations; managing the working environment in key

office premises; and managing residential properties through SNCF SA subsidiary ICF Habitat Group.

All of these segments are served by corporate support functions and other service-providers from within the SNCF Group: Shared Service Centres, holding company activities within SNCF Participations, and SUGE (rail safety). Along with certain operational subsidiaries, these constitute the “Other” segment.

3.1.2 Indicators reported

The key indicators reported for each segment are:

– External revenue, which excludes transactions with other Group segments.

– Internal revenue, which consists of transactions with other Group segments.

– EBITDA, which consists of revenue and other income minus expenses directly attributable to operating activities. Those expenses mainly comprise purchases; sub-contracting and other external services; employee benefit expenses; taxes and duties other than income tax; disposals of operating assets (property, plant and equipment – mainly transport equipment – used in the operating cycle and disposed of in connection with upgrades to production facilities); and movements in provisions for current assets. EBITDA does not include changes in provisions for employee benefits, which are presented within the line item “Net movement in provisions”, a component of “Current operating profit”. Nor does it include reversals of utilised provisions, which are also presented within “Net movement in provisions”; this is because EBITDA is only affected when the loss is effectively realised.

– Net investment, which comprises cash outflows on gross acquisitions of property, plant and equipment and intangible assets (including own production capitalised and finance costs), net of (i) investment grants received and (ii) new concession financial assets net of cash inflows, i.e. after the impact of changes in working capital requirements relating to investing activities.

– Gross investment all funding sources, which comprises gross acquisitions of property, plant and equipment and intangible assets as recognised for accounting purposes (including own production capitalised and finance costs), plus new gross concession financial assets.

– Net debt, which is the sum total of current and non-current financial liabilities minus current and non-current financial assets derived from transactions that in substance relate solely to exchanges of cash flows (outflow or inflow of cash, in exchange for an expected repayment or disbursement of cash).

The accounting policies used to prepare financial data for each segment are the same as those used in the preparation of the consolidated financial statements. Internal revenue is eliminated on a separate “Inter-segment eliminations” line to allow for a reconciliation to the consolidated financial statements.


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3.1.3 Segment information

30/06/2020

€ million External revenue

Internal revenue

Revenue

External EBITDA

Net investment

Investment all funding sources

Net debt

SNCF Réseau 1,214 1,443 2,658 222 -1,575 -1,989 28,784

SNCF Gares & Connexions 100 611 711 93 10 -261 1,150 Intra-business line eliminations

-223 -223

Infrastructure Management 1,314 1,831 3,145 315 -1,565 -2,250 29,934

Transilien 1,311 154 1,465 -41 -356 -522 1,064

TER 2,052 154 2,206 16 112 -268 -1,353

Voyages SNCF 1,720 167 1,887 -905 -237 -350 4,001

Industrial Division 32 701 733 -12 -46 -37 902

Other 32 216 248 32 3 -17 -1,330 Intra-business line eliminations

-1,038 -1,038

Passengers 5,147 354 5,501 -910 -523 -1,195 3,284

Keolis 2,836 46 2,883 189 -103 -115 994

Geodis 3,949 48 3,998 283 -61 -52 899

TFMM 664 47 711 -44 -16 -14 14

Other 199 36 235 139 -90 -97 1,076 Intra-business line eliminations

-43 -43

Freight & Logistics 4,812 88 4,901 378 -166 -163 1,989

SNCF Immobilier 13 303 316 99 -1 -4 -290

Corporate 7 495 502 -2 -38 -25 2,415

Inter-segment eliminations -4,423 -4,423

Total 14,129 0 14,129 69 -2,397 -3,752 38,327

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02 – CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS 30/06/2019 31/12/2019

€ million External revenue

Internal revenue

Revenue

External EBITDA

Net investment

Investment all funding sources

Net debt

SNCF Réseau 1,228 2,075 3,303 904 -1,714 -2,392 51,852

SNCF Gares & Connexions 142 607 749 100 -140 -159 748 Intra-business line eliminations

-115 -115

Infrastructure Management 1,370 2,566 3,936 1,003 -1,854 -2,551 52,600

Transilien 1,508 201 1,709 67 -336 -524 746

TER 2,409 238 2,647 199 -86 -267 -887

Voyages SNCF 4,221 251 4,472 643 -326 -585 2,923

Industrial Division 32 814 847 41 -42 -34 923

Other 80 267 346 22 -26 -24 -1,862 Intra-business line eliminations

-1,294 -1,294

Passengers 8,251 477 8,728 971 -816 -1,433 1,844

Keolis 3,195 58 3,253 307 -145 -117 1,121

Geodis 3,983 58 4,042 348 -59 -50 726

TFMM 818 59 877 13 -21 -15 5,408

Other 196 39 235 126 -104 -111 883 Intra-business line eliminations

-49 -49

Freight & Logistics 4,998 107 5,105 487 -185 -164 7,017

SNCF Immobilier 27 249 276 87 -9 2 -236

Corporate 14 532 546 51 -47 -36 -2,064

Inter-segment eliminations -5,448 -5,448

Total 17,854 0 17,854 2,906 -3,055 -4,299 60,281


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3.2 REVENUE

The SNCF Group derives revenue from providing services at a point in time, or continuously over a period of time, to private individuals and to public and private sector customers. The key revenue-generating service lines are:

€ million 30/06/2020 30/06/2019 Change Segment

Passenger transport revenue 1,480 3,661 -2,181 Voyages SNCF

Freight transport revenue 3,404 3,580 -176 Freight & Logistics business line

Other services ancillary to transport 1,207 1,275 -67 Voyages SNCF, Freight & Logistics business line

Fees from Transport Organising Authorities (TOA) for regulated operations

6,069 7,235 -1,166 Transilien, TER, Keolis

Rail network management fees 1,123 1,110 12 SNCF Réseau

Station management revenue 101 144 -43 SNCF Gares & Connexions

Real estate rental revenue (excluding rent generated by stations)

50 69 -19 Freight & Logistics business line, Voyages SNCF, Corporate

Transport equipment leasing revenue 179 168 10 Freight & Logistics business line, Transilien, TER, Keolis

Upkeep and maintenance services 103 135 -32 All segments

Other revenue 413 478 -65 All segments

Revenue generated by key service line 14,129 17,854 -3,726

Public sector (governmental bodies) 7,128 8,412 -1,285

Private individuals 1,555 3,662 -2,107

Private sector companies 5,446 5,780 -334

Revenue by customer type 14,129 17,854 -3,726

Services provided immediately or within one day 2,770 5,242 -2,472

Services provided continuously over no more than one year (logistics, freight transport, and TOA fees)

10,829 12,298 -1,469

Services provided continuously over more than one year (real estate, some station management operations, etc)

530 315 215

Revenue by pattern of recognition 14,129 17,854 -3,726

3.3 TRANSACTIONS WITH TRANSPORT ORGANISING AUTHORITIES

Transactions with Transport Organising Authorities (TOAs) have the following effects on the SNCF Group’s consolidated financial statements:

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02 – CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS € million 30/06/2020 30/06/2019 Change

Services provided to TOAs 5,199 5,640 -441

Revenue from passenger ticket sales 761 1,469 -708 Services to the State as TOA of public-interest inter-city train services (TET) 72 105 -34

Interest income from concession financial assets 38 21 16

Effects on revenue (*) 6,069 7,235 -1,166

New concession financial assets -693 -730 36

Cash inflows from concession financial assets 565 376 189 Investment grants on property, plant and equipment and intangible assets (1) 764 886 -122

Effect on cash generated by/ (used in) investing activities 636 532 104

(*) of which Keolis revenue 2,579 3,004 -426

of which SNCF Voyageurs revenue 3,490 4,231 -740

€ million 30/06/2020 30/06/2019 Change

Intangible concession assets 119 112 8

Non-current concession financial assets 1,019 966 53

Effect on non-current assets 1,138 1,078 61

(1) Includes €538m in 2020 (€696m in 2019) of grants for SNCF Réseau rail network infrastructure.

3.4 OTHER ITEMS Purchases, sub-contracting and other external charges:

€ million 30/06/2020 30/06/2019 Change

Sub-contracting -2,932 -2,988 56 Eurotunnel and other infrastructure fees -373 -448 75

Other purchases and external charges -2,422 -2,961 540

Traction energy -259 -334 75

Purchases and external charges -5,985 -6,731 746

4. OPERATING ASSETS AND LIABILITIES

4.1 GOODWILL

The table below shows movements in goodwill during the period:

€ million Gross value Impairment

Carrying amount

1 January 2019 2,731 -402 2,330

Acquisitions 174 0 174

Impairment losses 0 -1 -1

Disposals -14 2 -12

Currency translation 34 -1 32

Other movements -10 0 -10

31 December 2019 2,914 -402 2,513

1 January 2020 2,914 -402 2,513

Acquisitions -98 0 -98

Impairment losses 0 0 0

Disposals 0 0 0

Currency translation -30 1 -29

Other movements 0 0 0

30 June 2020 2,787 -401 2,386 Movements in 2020 related to the allocation of goodwill on Effia to contractual rights (negative movement of €98m).

For 2019, acquisitions mainly comprised STEMI (€82m), Parking Cathédrale SA (€63m) and Parking de l’Esplanade SA (€12m), all acquired by Keolis; and Railtraxx (€12m), acquired by TFMM. Disposals relate to Euromatic. The “Other movements” line was impacted by a reallocation of goodwill to intangible assets (concession, patents and other rights) at Keolis Santé.

The main goodwill balances at the end of the reporting period are:

€ million 30/06/2020 31/12/2019 Change

Keolis 630 729 -98

SNCF Voyageurs (*) 404 418 -14

Freight & Logistics 1,351 1,354 -3

of which Geodis CGU 1,122 1,125 -3

of which Fleet Management CGU 197 197 0

of which Other rail operations 32 32 0 SNCF Corporate (**) 0 11 -11

Total 2,386 2,513 -127 (*) Includes €348m for Eurostar (€373m in 2019). (**) Includes Ouicar (€11m in 2019), transferred from Corporate to SNCF Voyageurs on 1 January 2020.

The Group has elected to use the partial goodwill method in accounting for business combinations made during the period. This means that the Group has recognised in the balance sheet only the portion of goodwill attributable to equity holders of the parent, excluding goodwill attributable to non-controlling interests.

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4.2 PROPERTY, PLANT AND EQUIPMENT AND RIGHT OF USE ASSETS 4.2.1 Property, plant and equipment

Property, plant and equipment breaks down as follows by category: 30/06/2020 31/12/2019

€ million Gross value

Depreciation and impairment

Carrying amount

Gross value


Carrying amount

Investment property 305 -21 284 312 -24 288

Land and buildings 25,526 -11,361 14,165 24,537 -10,957 13,581

Tracks, earthworks, engineering structures, and level crossings 56,784 -23,464 33,320 55,702 -23,043 32,659

Technical, electrical, telecoms and signalling equipment, plant and tooling, and other assets 29,965 -14,598 15,367 29,497 -14,071 15,426

Transport equipment(*) 34,908 -22,741 12,168 34,758 -22,462 12,296 Property, plant and equipment under construction 14,641 -16 14,625 14,877 -21 14,857 TOTAL EXCLUDING GRANTS 162,129 -72,201 89,928 159,684 -70,578 89,107

Investment grants 51,905 -13,678 38,228 50,471 -13,038 37,433 TOTAL 110,224 -58,523 51,701 109,213 -57,539 51,674 (*) Includes €1,125m for transport equipment under construction (2019: €965m).

The table below gives an analysis of movements in property, plant and equipment after investment grants:

€ million Investment property

Land and buildings

Tracks, earthworks, engineerin

g structures, and level crossings

Technical, electrical, telecoms

and signalling equipment, plant and tooling, and

other assets

Transport equipment

(*)

Property, plant and equipment

under construction

Investment grants

Total after investment

grants

Carrying amount at 01/01/2019

298 13,203 31,222 15,545 12,265 12,678 -34,809 50,401

Acquisitions 0 34 0 176 1,220 6,627 -3,133 4,924

Disposals -9 -47 0 -7 -40 -1 2 -101

Net depreciation expense

-1 -599 -1,075 -1,092 -1,280 0 1,302 -2,744

Impairment losses 0 -43 0 -7 -18 14 0 -55 Changes in scope of consolidation

0 36 0 6 199 -6 26 261

Currency translation differences

0 3 0 4 52 0 1 60

Other movements 0 995 2,512 801 -101 -4,456 -823 -1,072

Carrying amount at 31/12/2019 288 13,581 32,659 15,426 12,296 14,857 -37,433 51,674

of which assets held under finance leases 0 52 0 4 658 0 0 714

Acquisitions 0 7 0 67 415 2,415 -1,800 1,105

Disposals -5 -3 0 -1 -4 0 0 -13

Net depreciation expense 1 -327 -545 -555 -536 0 663 -1,300

Impairment losses 0 14 0 0 3 3 0 20 Changes in scope of consolidation 0 521 -534 6 0 1 0 -6 Currency translation differences 0 -4 0 -7 -71 0 2 -79

Other movements 0 376 1,739 431 65 -2,651 340 300

Carrying amount at 30/06/2020 284 14,165 33,320 15,367 12,168 14,625 -38,228 51,701 (*) Includes transport equipment under construction.

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02 – CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS For details of the principal acquisitions and of

depreciation charges during the period, refer to Notes 4.2.3 and 4.2.4; for details of the impact of impairment losses on the income statement, refer to Note 4.3.

Other movements during the period mainly comprise items previously recorded as property, plant and

equipment under construction that were completed and brought into use during the period. Details of grant received during the period are provided in Note 4.2.3. Other movements in grants during the period relate to grants invoice in advance by SNCF Réseau during the period.

4.2.2 Leases

Right-of-use assets break down by category as follows:

30/06/2020 31/12/2019

€ million Gross value Depreciation

and impairment Carrying amount Gross value


Carrying amount

Land and buildings 3,092 -916 2,176 2,969 -717 2,252

Transport equipment 2,281 -813 1,468 2,226 -667 1,559

Other 221 -87 134 219 -81 138 TOTAL 5,593 -1,816 3,778 5,413 -1,465 3,948

– Leases in the “Land and Buildings” category relate mainly to buildings such as warehousing, retail stores, offices, etc. Leases in the “Transport equipment” category include leases of rail and road transport equipment (including buses, trainsets, locomotives, cars, etc).

– Leased assets in the “Other” category mainly comprise technical equipment used in the operating cycle with significant financial implications.

Movements in this line item are shown in the table below:

€ million Land and buildings

Transport equipment Other Total

Carrying amount at 01/01/2019 2,436 1,605 127 4,169

New leases contracted 366 338 66 769

Impact of expired or terminated leases -17 -1 0 -18

Depreciation -495 -419 -51 -966

Changes in scope of consolidation -12 30 -5 12 Other movements (lease modifications, changes in assumptions, etc)

-26 6 1 -19


New leases contracted 232 136 24 392

Impact of expired or terminated leases -25 -1 -1 -26

Depreciation -268 -211 -28 -507

Impairment losses 0

Changes in scope of consolidation 12 -21 -1 -10 Other movements (lease modifications, changes in assumptions, etc)

-27 5 2 -19


For details of depreciation charged to profit or loss, see Note 4.2.4.

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4.2.3 Investment

Net cash outflows from investing activities relating to acquisitions of property, plant and equipment and intangible assets break down as follows:

€ million 30/06/2020 30/06/2019

Intangible assets -154 -171

Property, plant and equipment -2,905 -3,398

Total acquisitions -3,059 -3,569 Change in investing working capital requirement 26 -18 Net cash outflow on acquisitions of intangible assets and property, plant and equipment -3,033 -3,587

Investments in property, plant and equipment in the period relate mainly to:

– rail infrastructure investment by SNCF Réseau, comprising:

• €1,867m of direct production;

• €24m of major overhauls;

• €14m of direct acquisitions;

• €44m of capitalised interest on borrowings.

– acquisitions and fixtures/fittings carried out in rail stations and other buildings, amounting to €391m (including works on the Tangentielle Ouest tramway, extending and adapting maintenance workshops to accommodate Régiolis and Régio2N trainsets, and construction of a new industrial facility at the Hellemmes Technicentre);

– acquisitions and upgrades of rail and road transport equipment amounting to €397m (including acquisitions of “NAT” multiple units for Transilien; Océane trainsets; the “TGV of the future”; TGC UFC trainsets; Eurostar trainsets; wagons; transcontainers and containers; TGV upgrades; and electric multiple units).

Investment grants recognized in the period to fund property, plant and equipment amounted to €1,800m, comprising €80m for rail equipment and €1,720m for fixed installations and rail infrastructure projects (expansions/upgrades). The difference between that amount and the amount of grants received is mainly due to the change in working capital requirement during the period relating to investment grant receivables.

4.2.4 Depreciation and amortisation

Depreciation and amortisation breaks down as follows:

€ million 30/06/2020 30/06/2019 Change Amortisation of intangible assets -209 -182 -27 Depreciation of property, plant and equipment -1,952 -1,967 15 Depreciation of right-of-use assets -507 -466 -41 Grants released to profit or loss 663 651 12 Reversal of liabilities related to non-current concession assets outside the scope of IFRIC 12 25 79 -55 Depreciation and amortisation -1,980 -1,884 -95

4.2.5 Net proceeds from asset disposals

Asset disposals had the following impacts on profit or loss:

€ million 30/06/2020 30/06/2019 Change

Disposals of intangible assets -1 -3 2

Disposals of property, plant and equipment 58 43 15 Disposals of right-of-use assets 3 0 3

Disposals of financial assets 1 -9 10 Net proceeds from asset disposals 61 31 29

Net proceeds from asset disposals in the first half of 2020 related mainly to sales of real estate assets by SNCF Réseau (€41m), including the sale of the Gare des Mines site in the 18th arrondissement of Paris, and by ICF-NOVEDIS (€4m).

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02 – CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS 4.3 IMPAIRMENT TESTING OF NON-CURRENT ASSETS

Impacts on the income statement were as follows:

€ million 30/06/2020 30/06/2019 Change

Property, plant & equipment and intangible assets -13 -5 -8

Goodwill 0 -1 1

Provisions for risks and charges 0 0 0

Impairment losses -13 -6 -7

4.3.1 Background

The Covid-19 crisis in the first half of 2020 triggered a major downgrade of SNCF’s operating projections, leading to a review of the financial trajectory for the Group’s core business lines, taking account of various effects including:

– lower activity levels, with an adverse effect on revenue relative to the projected trajectory;

– spending (operating and capex) on safety and compliance measures for spaces used by customers and employees;

– an increase in the amount of past due receivables.

– All those factors led to impairment tests being conducted on the assets of most of the Group’s CGUs in accordance with IAS 36, which requires such tests to be performed:

– at least once a year for goodwill and indefinite-lived intangible assets;

– whenever there is an indication of potential impairment, in the case of other non-current assets.

– The estimates and assumptions used in these tests are subject to the uncertainties and difficulties of judgment inherent in the situation, in terms of the duration and consequences of the crisis, and its impacts on competition and on demand from the Group’s main customers.

The values for assets tested as presented in the tables below are shown net of impairment losses charged or reversed during prior periods, and exclude any acquisition or loss of control during the period.

4.3.2 CGUs carrying high levels of goodwill relative to total goodwill

Those CGUs that carry high levels of goodwill are described below.

4.3.2.1 Geodis CGU

Of the total amount of goodwill (net of impairment), €1,122m (€1,125m as at 31 December 2019) is allocated to the Geodis cash generating unit, which houses the logistics and freight transport operations of the Freight and Logistics business line. The CGU is tested for impairment at least annually.

The main assumptions used to determine the recoverable amount are:

2020 2019

Segment Freight & Logistics SNCF Logistics

CGU Geodis Geodis

Assets tested €1,562m €1,555m

Base used for recoverable amount Value in use Value in use

Source used

5-year plan + normative

year discounted to infinity

5-year plan + normative

year discounted to infinity

Discount rate (min-max) 7.2% - 8.5% 6.8% - 7.8%

Long-term growth rate 1.80% 1.90%

The test performed as at 30 June 2020 substantiates the carrying amount of the CGU’s assets. Sensitivity analyses performed on the discount rate (± 50 bp), the long-term growth rate (± 10 bp) and the operating margin rate (± 50 bp) support the results of the test.

4.3.2.2 Keolis CGU

Of the total amount of goodwill, €630m (€729m as at 31 December 2019) is allocated to the Keolis cash generating unit, which houses all operations in the multi-modal passenger transport solutions business of the Keolis segment. Indefinite-lived intangible assets allocated to this CGU amount to €83m (€53m as at 31 December 2019), and mainly comprise brands and licences. The CGU is tested for impairment at least annually. The main assumptions used to determine the recoverable amount are:

2020 2019

Segment Keolis Keolis

CGU Keolis Keolis



Source used

5-year plan

+ normative year

discounted to infinity

5-year plan

+ normative year discounted to

infinity



No impairment loss was recognised as of 30 June. Sensitivity analyses performed on the discount rate (± 50 bp) and the long-term growth rate (± 50 bp) show a variation of ± €332m in the recoverable amount (± €437m in 2019). The sensitivity analysis performed on the operating margin rate (± 50 bp) shows a variation of ± €430m in the recoverable amount (± €402m in 2019).

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4.3.2.3 Fleet Management CGU

Of the total amount of goodwill, €197m (€197m as at 31 December 2019) is allocated to the Fleet Management cash generating unit.

The test performed, based on value in use, gives a recoverable amount greater than the carrying amount. The main assumptions used to determine the recoverable amount are:

2020 2019

Segment Freight & Logistics SNCF Logistics

CGU Fleet

Management Fleet

Management



Source used

5-year plan


infinity

5-year plan


infinity



No impairment loss has been recognised, as the recoverable amount exceeds the carrying amount. Sensitivity analyses performed on the discount rate (± 50 bp), the long-term growth rate (± 50 bp) and the operating margin rate (± 50 bp) support the results of the test.

4.3.2.4 Eurostar CGU

Of the total amount of goodwill, €348m (€373m as at 31 December 2019) is allocated to the Eurostar cash generating unit, which houses all the cross-channel passenger operations of the Voyages SNCF segment. Indefinite-lived intangible assets allocated to this CGU amount to €255m (€273m as at 31 December 2019), and mainly comprise brands. The CGU is tested for impairment at least annually.

The main assumptions used to determine the recoverable amount are:

2020 2019

Segment Passengers Voyages SNCF

CGU Eurostar Eurostar



Source used

10-year plan


infinity

10-year plan


infinity



The cash flow projections used to assess the recoverable amount of the assets are derived from an Information Memorandum related to the Grand Slam funding project approved by the Board of Directors on 19 June 2020, and based on core assumptions including:

– Trends in traffic revenue that build in a catch-up effect after the Covid-19-related slowdown (U-shaped recovery).

– Amounts for expenses (employee benefits, purchases, etc) which will in some cases be subject to performance plans.

– Infrastructure fee projections.

– Positioning of the arrival of rail competition.

– The level of investment required to upgrade the fleet, taking account of performance plans relating to trainset use optimisation and to the arrival of new rolling stock and of competitors.

The terminal value is calculated by extrapolating the target operating margin rate (relative to revenue) derived from the new trajectory prepared in June 2020, and builds in the assumption about the positioning of the arrival of rail competition.

Those estimates and assumptions were made in the context of difficulties in assessing the impact of (i) the Covid-19 crisis; (ii) issues around multi-modal competition, especially low-cost airlines; (iii) the arrival of rail competition; and (iv) Brexit (the withdrawal of the United Kingdom from the European Union), which took place on 31 January 2020 and is being followed by an 11-month transition period.

No impairment loss has been recognised, as the recoverable amount exceeds the carrying amount.

In addition, sensitivity tests supported the value of the economic asset as at 30 June 2020.

– A movement of ± 100 bp in the normative year operating margin rate would have an effect of ± €89m on the recoverable amount (± €130m in 2019).

– A movement of ± £10m in normative year investment would have an effect of ± €85m on the recoverable amount (± €132m in 2019).

– A delay of 1 year in the date of arrival of competition would lead to a variation of approximately ± €215m in the recoverable amount (± €151m in 2019).

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02 – CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS – A movement of ± 25 bp in the discount rate would have

an effect of ± €80m on the recoverable amount (± €122m in 2019).

– A movement of ± 10 bp in the normative year growth rate would have an effect of ± €20m on the recoverable amount (± €32m in 2019 for a ± 10 bp movement).

A further fall in normative year operating margin rate of approximately 2% would give a value in use equal to the carrying amount. However, additional steps would be taken by management to minimise the impacts of such a fall.

Conversely, such a fall in operating margin would have a favourable effect on the financial liability relating to the purchase commitment given by SNCF Mobilités.

The financial liability relating to the irrevocable purchase commitments by SNCF to buy out the stakes in Eurostar held by the CDPQ/Hermès consortium and SNCB are valued on the same bases.

4.3.3 CGUs with indications of potential impairment losses or reversals in 2020 and/or 2019

4.3.3.1 TGV France and Europe CGU (excluding Eurostar and Thalys)

Against the backdrop of rail reform and the French government’s announcement of associated financial measures, including pegging infrastructure fees to the consumer price index, management updated the strategic plan for the TGV business, which was then approved by the Board of Directors on 26 July 2018.

The financial trajectory in that plan built in (i) the new index-linking of infrastructure fees; (ii) scenarios for the opening of services to competition; (iii) additional performance gains; and (iv) new projections for the CST/TREF tax take based on expected trends for Intercités operations.

The factors listed above, especially the new index-linking of infrastructure fees, have a strong impact on operating margins for TGV operations, and gave an indication of a potential reversal of impairment. Consequently, management conducted impairment tests at end June 2018 that led to the determination of a value in use significantly higher than the carrying amount of the assets of the TGV France and Europe CGU (excluding Eurostar and Thalys).

The impairment losses recognised in previous periods, with a residual balance of €3,193m (€3,160m for the Voyages SNCF segment, and €33m for corporate support assets), were therefore reversed in full as at 30 June 2018.

During the first half of 2020, new trends emerged that caused SNCF Voyages to review its financial trajectory:

– the adverse effects of the strike action that began on 5 December 2019 in opposition to proposed pension reforms and continued in the early months of 2020; and

– the slump in activity caused by the fallout from the Covid-19 crisis and the lockdown measures imposed by the authorities.

The events described above led to a downgrade to the Voyages SNCF financial trajectory, and constitute an indication of potential impairment.

Consequently, SNCF tested the assets of the TGV CGU for impairment, using the following key assumptions:

– Scenario for post-Covid-19 return to normal activity levels from 2022.

– Operating and capital expenditure productivity plan that builds in the consequences of the Covid-19 crisis.

– Arrival of rail competition from mid-June 2021 (versus 2024 in the 2018 version 2 strategic plan), and more intense competition with more new entrants declaring an interest.

– Positive effects in relation to air travel in the post Covid-19 world.

–

– The other methodological components used to determine the recoverable amount as at 30 June 2020 are:

2020

Segment Passengers

CGU

TGV France and Europe (excluding

Eurostar and Thalys)

Assets tested €5,761m

Base used for recoverable amount

Value in use

Source used 10-year plan

+ normative year discounted to infinity

Discount rate (min-max) 6.6% - 7.7%

Long-term growth rate 1.80%

The test performed as at 30 June 2020 substantiates the carrying amount of the CGU’s assets. Sensitivity analyses performed on the discount rate (± 50 bp), the long-term growth rate (± 10 bp) and the operating margin rate (± 50 bp) support the results of the test.

4.3.3.2 Gares & Connexions CGU

As at 30 June 2020, following implementation of rail reform and as part of the deployment of the Group’s new strategic plan, the new entity SNCF Gares & Connexions SA reworked its business plan based on a scope of consolidation that includes the assets transferred from SNCF Réseau on 1 January 2020. This readjusted business plan builds in:

– the effect of changes in scope related to rail reform (assets transferred from SNCF Réseau);

– the effects of the Covid-19 crisis on the revised 2020 forecasts and on the business plan (investment overruns, and short/medium-term decrease in concession revenue in line with reduced footfall in station retail outlets);

– certain productivity efforts in operating and capital expenditure, to limit the financial impacts of the end-2019 strike and the Covid-19 crisis.

The assumptions used to determine value in use are summarised below:

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2020

Segment SNCF Gares & Connexions

CGU Gares & Connexions

Assets tested €3,005m

Base used for recoverable amount Value in use

Source used

10-year plan


infinity


Long-term growth rate 1.80%

This amended financial trajectory confirms that there is no indication of impairment, and supports the carrying amounts of the assets of the Gares & Connexions CGU as at 30 June 2020.

This position will have to be confirmed by further financial information expected during the second half of 2020 in time for the annual accounting close.

4.3.3.3 Intercités CGU and Passenger Charter CGU

The operating agreement signed on 27 February 2017 and covering the 2016-2020 period expires on 31 December 2020.

Negotiations on a new agreement for 2021 and beyond have not yet reached a conclusion, and at this stage a one-year extension appears to be under consideration.

Consequently, at this stage the assets are being tested for impairment based on the 2016-2020 agreement and on the associated financial trajectory, which in the event that the agreement ends:

– lays down the principle that the State will underwrite and compensate all investments made in rolling stock from 2011 onwards;

– does not include a clause underwriting and compensating investments made in rolling stock prior to 2011;

– does not specify any compensation for asbestos-related issues;

– does not specify what happens to other assets (e.g. fixed non-ISM installations).

As at 31 December 2019, the carrying amount of assets not underwritten by a guarantee of compensation in the event the agreement ends (see above) was written down to zero.

As at 30 June 2020, the deterioration in activity levels caused by the Covid-19 crisis, the lack of visibility on the post-2020 trajectory, and the rise in discount rates all lead to the conclusion that the carrying amount of assets not covered by the agreement at the reporting date should continue to be written down in full.

The carrying amount of the assets tested, and the assumptions used to determine the recoverable amount, are as follows:

2019

Segment Intercités

CGU Intercités

Assets tested Immaterial

Base used for recoverable amount Value in use

Source used 2016-2020 agreement


Long-term growth rate Not applicable

NB: The operations of the “Unpowered Rolling Stock” unit of the SNCF Voyages Passenger Charter division were taken over by Intercités on 1 January 2018, resulting in the transfer of rolling stock with a carrying amount of €8.5m. A new (unregulated) Passenger Charter CGU was identified to house these assets and test them for impairment. Given that this CGU generates negative operating margin, Intercités recognised an €8.5m impairment loss as at 30 June 2018.

4.3.3.4 Infrastructure CGU

The following indications of potential impairment were identified as at 30 June 2020:

– impacts of the Covid-19 crisis on revenue, investment and the working capital requirement; and

– risk of downgrade to the support fund trajectory. The impairment test performed - against this backdrop of uncertainty - did not result in the value of the Infrastructure CGU assets being written down as at 30 June 2020.

The test was based on cash flows derived from the financial trajectory in the new SNCF Group strategic plan, which builds in the effects of:

– the Covid-19 crisis;

– the opening of passenger traffic to competition;

– the impact of cost savings plans initiated by the SNCF Group;

– the additional investment needed to restore the resilience of the network;

– revisions to the trajectory for upgrade grants collected through the support fund.

Strategic plan scenarios were presented to the Board of Directors for information on 24 June 2020.

Those scenarios represented the best estimate of the financial trajectory of SNCF Réseau as of now, and will be updated in the coming months.

Work is ongoing between SNCF and the State to define support funding measures that will strengthen the resilience of the national rail network and deliver the cash flows necessary to protect the value of the assets carried in the SNCF Réseau balance sheet. That work is expected to be completed by the end of the year.

The other methodological components used to determine the recoverable amount as at 30 June 2020, and the key assumptions applied, are:

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02 – CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS 2020 2019

Segment SNCF Réseau SNCF Réseau

CGU Infrastructure Infrastructure

Assets tested €31.4bn €31.6bn

Base used for recoverable amount

Value in use Value in use

Source used

Performance contract

extended to 2030 +

normative year discounted to

infinity

Performance contract

extended to 2030 +

normative year discounted to

infinity

Discount rate (min-max)

5.0% - 5.9% 5.05% - 5.15%

Long-term growth rate

1.80% 1.70%

– The methodology used is that same as that applied in the previous impairment test carried out in 2019:

– Discounted cash flow projections are calculated for the years covered by the economic trajectory derived from the 2020-2029 performance contract with the State, updated for newly available information and extended to 2030, which continues to be the normative year as it is considered that the network will by then have stabilised at a sufficient performance/upgrade level to optimise the amount of maintenance.

– As regards the Sud Europe Atlantique (SEA) concession, the cash flow projections assume that operation of the line will be taken back from 2061, when the concession held by the current operator expires.

– The terminal value is obtained by projecting the values for the normative year (2030) to infinity at a rate of 1.8%, and represents 87% of the value in use.

– The projected cash flows are after tax, adopting a theoretical tax charge calculated using a known rate at each date that is then applied to projected current operating profit.

– Future cash flows were discounted at 5.3% (versus 5.15% as at 31 December 2019).

– The key assumptions used in the test relate to the level of infrastructure fees, the level of investment, productivity level, and public support funding.

Those assumptions take account of agreements entered into between SNCF and the State, as derived from the latest economic and financial trajectory presented to the Board of Directors and relating to:

– Trends in index-linking of infrastructure fees: TGV and freight infrastructure fees pegged to the CPI (1.75%) instead of the index-linking specified in the most recent performance contract, and index-linking maintained for regulated infrastructure fees (i.e. TER and TET access fees), in accordance with the current performance contract and the applicable regulations.

– Freight pricing scales: retention of the State compensation scheme, the amount of which is uplifted to reflect changes in index-linking and the switch to a new marginal cost model starting with 2019 pricing scales.

– Additional upgrade investment relative to the end-2019 test, scheduled from 2020 onwards and worth in the region of €2bn over the period tested. That investment will safeguard the quality of the upgraded network in 2030.

– Gradual ramping-up of funding for safety and accessibility expenditure (excluding the Île-de-France region), reaching 100% funding from 2024.

– Further productivity efforts over and above the performance contract, amounting to a recurring €300m in 2026, to be achieved in addition to the recurring €1.2bn productivity gains already written into the performance contract.

– Payment of investment grants from the State to SNCF Réseau allocated to the funding of upgrades (amounts revised downward relative to the end-2019 test), in the region of €1.1bn. Those grants come from the State earmarking some or all of the dividends received from SNCF out of the profits of its subsidiaries, topped up as necessary by passing on a share of the tax gain generated by the group tax election of the Unified Public Group (UPG). The timing of investment and upgrade grants used in the model is based on the SNCF Group’s economic and financial trajectory.

The 10-year traffic projections for passenger and freight operations were prepared at the level of the SNCF Group so as to ensure reciprocity with the relevant entities.

It should be borne in mind that on 6 February 2020, the ART issued a dissenting opinion on the index-linking of the pricing scales (published on 13 December 2019) for regulated operations in respect of 2021-2023 service timetables. SNCF Réseau published new draft track slot pricing scales on 5 June 2020. The ART is expected to issue an opinion on these new pricing scales in August 2020.

Measures relating to the new pension regime, and more broadly to the new labour relations framework derived from rail industry collective agreements, were still under negotiation at the reporting date and hence could not be modelled.

Consequently, the carrying amount of Infrastructure CGU assets as at 30 June 2020 was €31.4bn, versus €31.6bn as at 31 December 2019. Those assets cover lines currently in service, plus upgrade works in progress. Other property, plant and equipment under construction (€2.1bn as at 30 June 2020, versus €1.9bn as at 31 December 2019) relate to capacity investments under development, the value of which is analysed separately in a specific review.

The results of the sensitivity analyses carried out as part of the test are:

– A movement of +/- 10 bp in the discount rate represents a movement of -/+ €1bn in the recoverable amount.

– A movement of +/- 10 bp in the perpetual growth rate represents a movement of +€0.8bn.

– A movement of +/- €100m in annual net upgrade expenditure represents a movement of +/- €2bn in the recoverable amount. That value is provided for indicative purposes only because above a certain threshold, the impact of changes in upgrade expenditure on the recoverable amount of the assets ceases to be linear, and the resulting impacts on maintenance costs and traffic (and hence on infrastructure fees) can be substantial.

– A movement of +/- €100m in annual infrastructure fees or State support fund payments represents a movement of +/- €1.8bn in the recoverable amount.

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4.4 PROVISIONS FOR RISKS AND LITIGATION

The table below shows movements in provisions for risks and charges:

€ million 01/01/2020 Charges in the period

Reversals in the period (used)

Reversals in the period (unused)

Other movements 30/06/2020

of which current

of which non-

current

Litigation and contractual risks 230 82 -15 -17 3 282 42 240

Tax, employee-related and customs risks 151 13 -1 0 0 162 26 136

Environmental risks 781 52 -14 -5 41 855 0 855

Restructuring costs 10 1 -3 0 0 8 4 4

Other 252 22 -30 -26 -3 215 54 161

Total provisions 1,423 170 -63 -48 41 1,522 126 1,396

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02 – CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS 4.4.1 Provisions for environmental risks

The main environmental risks covered by provisions at the end of the year are:

– asbestos-related costs: €689m (€622m in 2019).

– creosoted railway sleeper processing costs: €93m (€92m in 2019).

– site decontamination costs: €59m (€54m in 2019). The increase in the provision for asbestos-related costs relates mainly (€62m) to a reassessment of the costs of dismantling asbestos-contaminated rolling stock. Of that amount, €40m is shown in the “Other movements” column, with the corresponding debit recorded in the “Dismantling of capitalised rail equipment” component; the remaining €22m was debited to the line item “Net movement in provisions” within current operating profit.

This increase was due mainly to an increase in the projected cost of processing.

4.4.2 Provisions for litigation and contractual risks

The provision for litigation and contractual risks primarily covers risks associated with legal disputes and contract completions, plus other contractual risks.

4.4.2.1 Litigation

Ongoing litigation

There were no material movements in provisions for litigation occurred during the first half of 2020.

4.4.2.2 Provisions for onerous contracts

An additional €45m was charged to the provision for onerous contracts as at 30 June 2020. That extra charge reflects a remeasurement by Keolis of losses on some of its contracts in Germany that are experiencing persistent operational difficulties.

4.4.3 Provisions for tax, employee-related and customs risks

Provisions for tax risks primarily cover risks relating to taxes and duties other than income taxes; uncertain tax treatments relating to income taxes are recognised as operating payables in accordance with IAS 12, “Income taxes”.

Provisions for employee-related risks mainly relate to an URSSAF social security audit of SNCF, SNCF Mobilités and SNCF Réseau covering the years ended 31 December 2016, 2017 and 2018, which was already provided for as at 31 December 2019. The amount of the provision was adjusted as at 30 June 2020.

5. CAPITAL AND FUNDING

5.1 LIQUIDITY MANAGEMENT DURING THE HEALTH CRISIS The SNCF Group, like all businesses in the transport and tourism sectors, has been very severely affected by the consequences of the Covid-19 health crisis and by the lockdown measures imposed by the authorities in the various countries where the Group operates, especially France.

By initially shutting down economic activity, and then allowing only a gradual resumption, the measures taken to contain the coronavirus have had a very significant impact on both corporate cash flows and the financial markets. Companies have seen their cash needs rise substantially just when there has been intense pressure in financial markets, including several days when the markets were closed.

5.1.1 Funding and liquidity management

Faced with this liquidity crisis, and potentially with a credit risk at some of its subsidiaries and partners, SNCF has implemented a range of measures.

Changes to forecasting and liquidity management tools

To obtain a best estimate of the impact of the Covid-19 crisis, SNCF’s Financing and Treasury Department prepared several scenarios and built them into its liquidity forecasting tools. The assumptions used took account of the potential losses arising from flat economic activity, and the impact of strong volatility in the financial markets on weekly margin calls (posting of collateral).

The Financing and Treasury Department also introduced a new detailed daily review of changes in its liquidity position.

The resulting data on the amount, accessibility, and autonomy (from the financial markets) of the Group’s sources of liquidity are calculated and monitored very frequently.

The amount of liquidity that can be accessed and mobilised day-to-day, which stood at €5.46bn as at 30 June 2020 in the books of SNCF SA, is regarded by management as highly satisfactory.

Reorganisation of liquidity flows

The Financing and Treasury Department has taken steps to reorganise and monitor liquidity flows by:

– accelerating the transfer of cash from subsidiaries through various measures including automated cash remittances within some subsidiaries and the inclusion of cash-positive subsidiaries in the cash pool;

– optimising working capital requirements within the subsidiaries, at both operating and financing levels, through the monetisation or securitisation of receivables. For example, securitising CICE tax credits receivable by SNCF as the lead company in a tax group improved the cash position by €306m. All the risks and rewards associated with this receivable were transferred to the bank that acted as counterparty in the securitisation;

– detailed tracking of the liquidity position of subsidiaries outside the cash pool, and support for subsidiaries in managing their credit risk.

– Expanding the Group’s sources of funding

The Group operates the following funding programmes:

– a Euro Commercial Paper (ECP) programme capped at €5bn;

– a Negotiable European Commercial Paper (NEU CP) programme capped at €3bn;

– a Euro Medium Term Note (EMTN) programme capped at €12bn.

The Group also has a Revolving Credit Facility (RCF) of €3.5bn, all of which is accessible, contracted with 20 partner banks. No drawdowns have been made under that facility.

To date, a total of €4.3bn has been raised by SNCF SA through nine long-term funding issues, representing 61.2% of the 2020 issuance programme and with an average maturity of 10.95 years. Those issues comprise eight bond issues with a nominal value of €4bn, and the securitisation of a CICE tax credit receivable of €306m.

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5.1.2 Review of cash flow hedges and bank loan covenants

To protect against the risk of fluctuations in the price of petroleum products and other commodities purchased for operations, the SNCF Group customarily uses derivative financial instruments, including forward contracts and options.

Because the uncertainties surrounding the Covid-19 crisis could question the highly probable nature of the hedged transactions, the Group has analysed those transactions to assess whether they remain highly probable.

That analysis did not identify any cases where the hedging relationship was in doubt.

The SNCF Group regards the risk relating to future cash flows arising from borrowings covered by cash flow hedges as very low because the Group’s funding is primarily arranged through the parent company SNCF SA, which obtains refinancing on the international capital markets, mostly in the form of public or private bond issues. An analysis of entities funded partially through bank loans did not identify any renegotiations of contractual cash flows that could result in the discontinuation of hedging relationships.

At the same time, the Group checked whether the impacts of the Covid-19 crisis had led to potential breaches of commitments or covenants contained in bank loan

agreements. Based on that analysis, there was no risk of any breach of covenants as at 30 June 2020.

5.1.3 Credit risk management

The SNCF Group is exposed to credit risk through its dealings with banks and credit institutions, and with its customers.

Bank credit risk arises from deposits placed with banks, and derivative financial instruments contracted with banks. No increase in the level of risk has been identified. However, to limit the potential risk, the Financing and Treasury Department has decided (over and above the internal control procedures already in place) to amend the master agreements governing collateral arrangements with counterparties to switch from monthly to weekly margin calls.

Under IFRS 9, the measurement of expected losses on receivables must take account of forward-looking information, including forecasts of future economic conditions. Consequently, the Group has reviewed the impact of potential late payments related to the Covid-19 crisis. That review did not identify any material increase in credit risk. No major default had been recorded as of the date on which the 2020 half-year financial statements were closed off.

5.2 COST OF NET DEBT “Cost of net debt” breaks down as follows:

€ million 30/06/2020 30/06/2019 Change

Net gain/(loss) on fair value and hedge accounting -4 -95 91

Gains and losses on derivative instruments -259 -143 -116

Gains and losses on fair value hedged items 230 2 228

Gains and losses on equity instruments at fair value through profit or loss 7 -1 8

Gains and losses on debt instrument assets at fair value through profit or loss 0 2 -2

Gains and losses on financial liabilities at fair value through profit or loss 2 0 2

Other fair value gains and losses 18 43 -25

Cost of net debt -457 -745 288

Of which interest income/(expense) on financial assets at amortised cost 420 43 378

Of which interest income/(expense) on financial liabilities at amortised cost -906 -828 -78

Other financial income/(expenses) -86 -72 -14

Of which interest expense on lease liabilities -73 -71 -2

Cost of net debt and other finance costs -547 -912 365

€ million 30/06/2020 30/06/2019 Change

Financial expenses -1,311 -1,137 -174

Financial income 764 225 539

Cost of net debt and other finance costs -547 -912 365

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02 – CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS 5.3 CALCULATION OF NET DEBT

30/06/2020 Financial instruments Total Fair value

Line item and financial instrument category € million

Non- current Current

Net debt

At fair value

through equity

At amortised

cost

At fair value

through profit or

loss

Derivatives qualifying as hedges

Carrying amount of category

Fair value of category Level 1 Level 2 Level 3

Public-private partnership (PPP) receivables

2,180 268 2,448 - 2,448 - - 2,448 2,448 - 2,448 -

Public Debt Fund (PDF) receivable

29,376 2,751 32,127 - 32,127 - - 32,127 33,238 - 33,238 -

Cash collateral assets - 1,994 1,994 - 1,994 - - 1,994 1,994 - 1,994 -

Other loans and receivables 1,222 82 1,304 - 1,303 0 - 1,303 1,440 0 1,440 0

Concession financial assets 1,019 245 - - 1,264 - - 1,264 1,183 - 1,183 -

Lease receivables 9 1 - - 9 - - 9 - - - -

Debt instruments 162 - 162 - - 162 - 162 162 - 78 85

Sub-total: debt instruments

33,967 5,341 38,035 - 39,145 162 - 39,307 40,466 0 40,380 85

Pension plan assets 13 - - - - - - - - - - -

Investments in equity instruments

194 0 - 173 - 21 - 194 194 3 0 191

Held-for-trading instruments

- 107 107 - - 107 - 107 107 7 100 -

Positive fair value of hedging derivatives

1,415 243 1,658 - - - 1,658 1,658 1,658 - 1,658 -

Positive fair value of trading derivatives

613 58 671 - - 671 - 671 671 - 671 -

Cash and cash equivalents - 8,490 8,490 - - 8,490 - 8,490 8,491 7,156 1,334 0

Total current and non-current financial assets

36,201 14,240 48,961 173 39,145 9,452 1,658 50,427 51,586 7,167 44,143 276

Bond issues 60,869 6,586 67,455 - 67,306 149 - 67,455 81,506 - 81,506 -

Bank borrowings 4,248 166 4,413 - 4,413 - - 4,413 4,506 0 4,506 -

Asset finance liabilities 120 99 219 - 219 - - 219 219 - 219 -

Sub-total: borrowings 65,236 6,851 72,087 - 71,939 149 - 72,087 86,231 0 86,231 -

of which: - - - - - - - - - - - -

- unhedged 47,910 4,628 52,538 - 52,538 - - 52,538 66,319 0 66,319 -

- cash flow hedge accounted 13,395 1,841 15,236 - 15,236 - - 15,236 15,533 - 15,533 -

- fair value hedge accounted 3,789 376 4,165 - 4,165 - - 4,165 4,230 - 4,230 -

- designated at fair value(*) 143 5 149 - - 149 - 149 149 - 149 -

Negative fair value of hedging derivatives

3,556 59 3,615 - - - 3,615 3,615 3,615 - 3,615 -

Negative fair value of trading derivatives

544 79 623 - - 623 - 623 623 - 623 -

Borrowings and financial liabilities

69,337 6,989 76,326 - 71,939 772 3,615 76,326 90,469 0 90,469 -

Cash borrowings and overdrafts

- 2,650 2,650 - 2,650 - - 2,650 2,649 321 2,328 -

Liabilities for commitments to buy out non-controlling interests

1,356 - - 1,356 - - - 1,356 1,356 - - 1,356

Lease liabilities 3,027 852 - - 3,879 - - 3,879 - - - -

Public-private partnership (PPP) payables

2,232 279 2,511 - 2,511 - - 2,511 2,511 - 2,511 -

Financial grant 5,801 - 5,801 - 5,801 - - 5,801 5,801 - 5,801 -

Concession financial liabilities

8 1 - - 9 - - 9 9 - 9 -

Total current and non-current financial liabilities (**)

81,760 10,772 87,288 1,356 86,789 772 3,615 92,532 102,795 321 101,117 1,356

Group net debt (***) 42,402 -4,076 38,327 - 45,029 -8,659 1,958 38,328 51,220 -6,843 58,148 -85

The Group does not designate financial assets at fair value through profit or loss. (*) The nominal value of liabilities designated at fair value is €124m. Those liabilities were designated at fair value on initial recognition. (**) Includes lease liabilities, presented as a separate line item in the consolidated statement of financial position. (***) The State has assumed €25bn (at nominal value on redemption) of SNCF Réseau debt (see Note 2.1.3).


51


31/12/2019 Financial instruments Total Fair value

Line item and financial instrument category € million

Non- current Current

Net debt

At fair value

through equity

At amortised

cost

At fair value

through profit or

loss

Derivatives qualifying as hedges

Carrying amount of category

Fair value of category Level 1 Level 2 Level 3

Public-private partnership (PPP) receivables

2,250 268 2,518 - 2,518 - - 2,518 2,518 - 2,518 -

Public Debt Fund (PDF) loan receivable

965 542 1,507 - 1,507 - - 1,507 1,756 - 1,756 -

Cash collateral assets - 1,623 1,623 - 1,623 - - 1,623 1,623 1,142 480 -

Other loans and receivables 1,029 84 1,112 - 1,112 0 - 1,112 1,123 1 1,121 2

Concession financial assets 966 53 - - 1,019 - - 1,019 1,038 - 1,038 -

Lease receivables 9 1 - - 11 - - 11 - - - -

Debt instruments 161 - 161 - - 161 - 161 161 - 77 84

Sub-total: loans and receivables

5,380 2,571 6,921 - 7,789 161 - 7,950 8,219 1,143 6,989 87

Pension plan assets 13 - - - - - - - - - - -

Investments in equity instruments

194 0 - 173 - 20 - 194 194 4 22 168

Held-for-trading instruments

- 6 6 - - 6 - 6 6 6 - -

Positive fair value of hedging derivatives

1,349 148 1,498 - - - 1,498 1,498 1,498 - 1,498 -

Positive fair value of trading derivatives

626 152 778 - - 778 - 778 778 - 778 -

Cash and cash equivalents - 7,754 7,754 - - 7,754 - 7,754 7,754 6,749 1,005 0

Total current and non-current financial assets

7,562 10,630 16,956 173 7,789 8,719 1,498 18,179 18,448 7,902 10,291 255

Bond issues 58,826 5,633 64,459 - 64,312 147 - 64,459 75,673 - 75,673 -

Bank borrowings 3,461 250 3,711 - 3,711 - - 3,711 3,771 0 3,771 -

Asset finance liabilities 117 105 223 - 223 - - 223 223 - 223 -

Sub-total: borrowings 62,404 5,989 68,393 - 68,246 147 - 68,393 79,667 0 79,667 -

of which: - - - - - - - - - - -

- unhedged 46,787 4,181 50,968 - 50,968 - - 50,968 61,913 0 61,912 -

- cash flow hedge accounted

11,337 1,771 13,108 - 13,108 - - 13,108 13,370 - 13,370 -

- fair value hedge accounted

4,136 34 4,170 - 4,170 - - 4,170 4,236 - 4,236 -

- designated at fair value (*) 145 2 147 - - 147 - 147 147 0 147 -

Negative fair value of hedging derivatives

2,860 66 2,925 - - - 2,925 2,925 2,925 - 2,925 -

Negative fair value of trading derivatives

539 125 663 - - 663 - 663 663 - 663 -

Borrowings and financial liabilities

65,803 6,180 71,982 - 68,246 810 2,925 71,982 83,255 0 83,256 -

Cash borrowings and overdrafts

- 2,673 2,673 - 2,673 - - 2,673 2,673 481 2,192 -

Liabilities for commitments to buy out non-controlling interests

1,839 - - 1,839 - - - 1,839 1,839 - - 1,839

Lease liabilities 3,137 913 - - 4,050 - - 4,050 - - - -

Public-private partnership (PPP) payables

2,353 279 2,582 - 2,631 - - 2,631 2,631 - 2,631 -

Total current and non-current financial liabilities (**)

73,131 10,045 77,237 1,839 77,601 810 2,925 83,176 90,398 481 88,079 1,839

Group net debt (***) 61,726 -1,444 60,281 - 66,732 -7,888 1,428 60,271 71,293 -7,417 78,797 -87

The Group does not designate financial assets at fair value through profit or loss. (*) The nominal value of liabilities designated at fair value is €124m. Those liabilities were designated at fair value on initial recognition. (**) Includes lease liabilities, presented as a separate line item in the consolidated statement of financial position.

5 - CAPITAL AND FUNDING SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT 03

52

02 – CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS 5.4 RECONCILIATION TO “CASH GENERATED BY/(USED IN) FINANCING ACTIVITIES”

The table below reconciles movements in components of net debt presented in the statement of financial position with cash generated by/used in financing activities:

31/12/19 Cash generated by/(used in) financing activities Non-cash movements 30/06/20

€ million Total

New borrowings

Repay-ments of

borrow-ings

Cash inflows/ (outflows) on PPP receiv-ables and

payables

Net inte-rest paid

Repay-ments of lease

liabilities

Interest paid on lease

liabilities

Increase/ (decrease) in cash borrow-ings

Changes in fair

value

Exchange rate

fluctu-ations

Changes in scope

of consoli-dation

Non-cash lease move-ments Other Total

Liabilities (A) 82,697 4,969 -820 -141 -525 -502 0 157 27 -90 -65 392 -27 86,403

Bond issues 64,459 3,978 -557 0 -123 0 0 0 -302 0 0 0 0 67,455

Bank borrowings 3,711 992 -256 0 7 0 0 0 17 -54 10 0 -13 4,414

Asset finance liabilities 223 0 -7 0 0 0 0 0 0 0 0 0 3 219

Cash borrowings (excluding overdrafts) 2,192 0 0 0 0 0 0 157 -18 0 -1 0 0 2,329

Lease liabilities 4,050 0 0 0 0 -502 0 0 26 -32 -74 392 18 3,880

Liabilities for commitments to buy out non-controlling interests 1,840 0 0 0 0 0 0 0 -483 0 0 0 0 1,356

Public-private partnership (PPP) payables 2,631 0 0 -141 0 0 0 0 71 0 0 0 -50 2,511 Negative fair value of hedging and trading derivatives 3,589 0 0 0 -78 0 0 0 717 -4 0 0 16 4,239

Financial grant 0 0 0 0 -332 0 0 0 0 0 0 0 6,132 5,801

Assets (B) 6,337 0 -495 -138 -122 0 0 0 226 -1 0 0 31,139 36,946

Public Debt Fund (PDF) loan receivable 1,507 0 -500 0 -4 0 0 0 -7 0 0 0 31,132 32,127

Public-private partnership (PPP) receivables 2,518 0 0 -138 0 0 0 0 68 0 0 0 0 2,448 Other loans and receivables - Accrued interest 3 0 0 0 1 0 0 0 0 0 0 0 0 4

Deposits and caution money 34 0 6 0 0 0 0 0 0 -1 0 0 0 39

Positive fair value of hedging and trading derivatives 2,276 0 0 0 -119 0 0 0 164 0 0 0 7 2,328

Financial income and expenses (C) 0 0 0 -463 0 -73 0 0 0 0 0 0

Expenses 0 0 0 -1,020 0 -73 0 0 0 0 0 0

Income 0 0 0 557 0 0 0 0 0 0 0 0 Financing cash flows per the cash flow statement (A + B + C) 76,359 4,969 -325 -3 -866 -502 -73 157 -198 -89 -65 392

-31,166 49,457


53


31/12/18 Cash generated by/(used in) financing activities Non-cash movements 30/06/19

€ million Total

New borrowings

Repay-ments of

borrow-ings

Cash inflows/ (outflows) on PPP receiv-

ables and payables

Net inte-rest paid

Repay-ments of lease

liabilities

Interest paid on lease

liabilities

Increase/ (decrease) in cash borrow-ings

Changes in fair

value

Exchange rate

fluctu-ations

Changes in scope of

consoli-dation

Non-cash lease move-ments Other Total

Liabilities (A) 75,183 3,726 -629 -141 19 -479 14 110 903 0 145 259 3,834 82,944

Bond issues 60,239 3,482 -512 0 -54 0 0 0 19 0 0 0 7 63,181

Bank borrowings 2,830 244 -83 0 1 0 0 0 0 0 161 0 -14 3,138

Asset finance liabilities 493 0 -35 0 0 0 0 0 0 2 0 0 -152 308

Cash borrowings (excluding overdrafts) 3,912 0 0 0 0 0 0 110 -73 0 0 0 2 3,951

Lease liabilities 0 0 0 0 0 -479 14 0 -1 -1 -16 259 4,121 3,897

Liabilities for commitments to buy out non-controlling interests 1,558 0 0 0 0 0 0 0 145 0 0 0 0 1,703

Public-private partnership (PPP) payables 2,717 0 0 -141 0 0 0 0 74 0 0 0 23 2,672

Negative fair value of hedging and trading derivatives 3,433 0 0 0 72 0 0 0 740 0 0 0 -151 4,093

Assets (B) 6,586 0 -11 -137 103 0 0 0 11 0 0 0 -145 6,408

Public Debt Fund (PDF) loan receivable 1,520 0 0 0 31 0 0 0 -7 0 0 0 0 1,545

Public-private partnership (PPP) receivables 2,650 0 0 -137 0 0 0 0 72 0 0 0 0 2,584 Other loans and receivables - Accrued interest 5 0 0 0 0 0 0 0 0 0 0 0 0 5

Deposits and caution money 43 0 -11 0 0 0 0 0 0 0 0 0 0 32

Positive fair value of hedging and trading derivatives 2,369 0 0 0 71 0 0 0 -54 0 0 0 -145 2,242

Financial income and expenses (C) 0 0 0 -752 0 -71 0 0 0 0 0 0 0

Expenses 0 0 0 -898 0 -71 0 0 0 0 0 0 0

Income 0 0 0 145 0 0 0 0 0 0 0 0 0 Financing cash flows per the cash flow statement (A + B + C) 68,596 3,726 -618 -4 -837 0 -56 110 892 0 145 259 3,979 76,536

6 - OFF BALANCE SHEET COMMITMENTS SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT 03

54

02 – CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS 5.5 SHAREHOLDERS’ EQUITY

As at 1 January 2020 the share capital of the parent company SNCF SA – wholly owned by the State in accordance with Article L. 2101-1 of the French Transport Code – was €1bn, divided into 10 million shares with a par value of €100.

An amount of €13,736m was reclassified from “Share capital” to “Consolidated reserves” on 1 January 2020.

At the same time, the consolidated reserves of the SNCF Group increased by €25bn following the assumption by the State of SNCF Réseau debt (see Note 2.1).

A dividend of €762m was approved by the Board of Directors of SNCF SA on 24 June 2020, and paid in July.

In 2019, a dividend of €537m was approved and paid to the shareholder in July of that year.

6. OFF BALANCE SHEET COMMITMENTS The main changes in commitments given since 31 December 2019 are as follows:

– Investment commitments for the operation of rail equipment decreased by €305m in line notably with deliveries of NAT, Regio2N and RER NG trainsets for Transilien; Omnéo Normandie trainsets for Intercités; Régiolis trainsets for TER; and TGV trainsets for Voyages SNCF. Investment commitments at Transilien, which relate to fleet and equipment maintenance, were also lower year-on-year. However, the decrease was partly offset by new notifications of Regio2N rolling stock acquisitions of €606m at TER.

– Purchase and funding commitments relating to property, plant and equipment other than rail equipment increased by €7,146m.

– During the first half of 2020, the SNCF Réseau group reviewed its policies for reporting off balance sheet commitments to align them on the policies used by the Group. This resulted in an increase of €7,661m in this item (€5,433m at SNCF Réseau, and €2,228m at SNCF Gares & Connexions in respect of projects transferred from SNCF Réseau as of 1 January 2020). Commitments given by the SNCF Réseau group comprise those entered into via signed funding agreements minus costs incurred to date, and (where no funding agreement is in place, which applies mainly to regeneration projects) on the amount of firm orders and contracts with works contractors. Where a funding agreement links a commitment to build with a commitment to operate, the entire commitment is presented as works to be completed.

– In addition, new investment programmes at SNCF Gares & Connexions, both in the Île-de-France region (mainly soundproofing of railway stations, replacement and installation of screens, signage, and elevator/escalator replacement and maintenance) and in the rest of France (such as the multi-modal transport hub at Toulouse railway station), contributed to a €656m increase in these commitments. Conversely, commitments incurred by Transilien decreased by €1,197m, pending approval of the funding package by Île-de-France Mobilités.

– Operational and financial guarantees increased by €67m, due mainly to new operational guarantees entered into by Keolis in the UK and for the CDG Express project.

– The main changes in commitments received since 31 December 2019 are as follows:

– Undrawn confirmed credit facilities increased by €948m. This is related to a new revolving credit facility contracted by the Group with 20 partner banks.

– Investment funding commitments for the operation of rail equipment decreased by €430m as a result of calls for funds during the period; this related mainly to NAT, Regio2N and RER NG rail equipment for Transilien, Omnéo Normandie equipment for Intercités, and Régiolis equipment for TER; the effect was partly offset by a €554m increase in investment grants receivable on new acquisitions of Regio2N trainsets at TER.

– Investment funding commitments receivable for the operation of property, plant and equipment other than rail equipment increased by €5,982m.

– During the first half of 2020, the SNCF Réseau group reviewed its policies for reporting off balance sheet commitments to align them on the policies used by the Group. This resulted in an increase of €5,640m in this item (€4,230m at SNCF Réseau, and €1,410m at SNCF Gares & Connexions in respect of projects transferred from SNCF Réseau as of 1 January 2020). Commitments received by the SNCF Réseau group in respect of future grants comprise funding receivable via signed funding agreements, minus earned grants recognised in the financial statements to date.

– In addition, new investment programmes at SNCF Gares & Connexions, both in the Île-de-France region (mainly soundproofing of railway stations, replacement and installation of screens, signage, and park-and-ride schemes) and in the rest of France (such as the multi-modal transport hub at Toulouse railway station), contributed to a €317m increase in these commitments .

– Operational and financial guarantees increased by €361m, mainly comprising €194m of financial guarantees received by SNCF Gares & Connexions for the Gare du Nord 2024 project; €72m of financial guarantees received by TER in connection with orders for Régiolis equipment; and a €42m guarantee received by SNCF Gares & Connexions from ALTA Austerlitz in connection with the Paris-Austerlitz station upgrade project.

– Commitments relating to equipment and real estate operating leases rose by €587m, mainly due to the new rental agreement between SNCF Gares & Connexions and ALTA Montparnasse relating to retail space at Paris-Montparnasse station.

SNCF uses a revolving trade receivables factoring facility in the Geodis segment. Factoring transactions cover the entire amount of the receivables assigned, and can be carried out on a monthly basis. Counterparty and late payment risks are transferred to the factor, as are the benefits associated with the receivables. As the receivables are denominated and assigned in euros, there is no foreign exchange risk. Consequently, the Group is deemed to have transferred substantially all the risks and rewards relating to the receivables. Because these are operating receivables, the cash inflows from assigning them are presented as cash flows from operating activities in the cash flow statement. Factoring transactions in the period to 30 June 2020 generated a net cash inflow of €171m (€168m for the period to 30 June 2019) being collected upfront from the factor, in advance of the usual debt collection period.

7. SCOPE OF CONSOLIDATION There were no material changes in the scope of consolidation during the period..

SNCF GROUP – 2020 HALF-YEAR FINANCIAL REPORT

55

Comptes Consolidés Annuels

03

03 – STATUTORY AUDITORS’ REPORT ON THE CONDENSED HALF-YEAR CONSOLIDATED FINANCIAL STATEMENTS

Société Nationale SNCF Statutory Auditors’ review report on the 2020 interim financial information

(For the six months ended 30 June 2020)

PricewaterhouseCoopers Audit 63, rue de Villiers 92208 Neuilly-sur-Seine, France Commissaire aux Comptes Membre de la compagnie régionale de Versailles

Ernst & Young Audit Tour First TSA 14444 92037 Paris-La Défense Cedex, France S.A.S. à capital variable 344 366 315 R.C.S. Nanterre Commissaire aux Comptes Membre de la compagnie régionale de Versailles

Statutory Auditors’ review report on the 2020 interim financial information

(For the six months ended 30 June 2020) Société Nationale SNCF

This is a free translation into English of the Statutory Auditors’ review report issued in French and is provided solely for the convenience of English speaking readers. This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.

To the Shareholder, In compliance with the engagement entrusted to us by the French Minister for the Economy, Industry and Digital Affairs and in accordance with the requirements of Article L. 451‑1‑2 III of the French Monetary and Financial Code (Code monétaire et financier), we hereby report to you on:

- the review of the accompanying condensed interim consolidated financial statements of Société

Nationale SNCF, for the six months ended 30 June 2020; - the verification of the information contained in the interim management report. These condensed interim consolidated financial statements were prepared under the responsibility of the Board of Directors on 30 July 2020 based on information available at that date and in the evolving context of the Covid-19 crisis and the difficulties in assessing its impacts and the future prospects of the Company. Our role is to express a conclusion on these financial statements based on our review. I – Conclusion on the financial statements We conducted our review in accordance with professional standards applicable in France, with the exception of the items described in the following paragraphs. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with professional standards applicable in France and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

SNCF SA

Statutory Auditors’ review report on the 2020 interim financial information – Page 2

As stated in Note 4.3 to the condensed interim consolidated financial statements concerning

impairment testing of the assets of the Infrastructure Cash-Generating Unit (the

“Infrastructure CGU”), the health crisis that began in March 2020 had an impact on the

Infrastructure CGU’s revenue, investing flows as well as and working capital requirements.

Accordingly, the Company carried out another impairment test at 30 June 2020 based on a similar

methodology to that used for the previous impairment test in 2019.

This test did not result in a change in the Infrastructure CGU’s carrying amount, as the balance in

the negotiations between the French State and SNCF Réseau underlying the financial trajectory

used in the test was not challenged. This balance in the negotiations remains based on the

assumption that (i) the Company will achieve its productivity goals and (ii) the French State will

effectively implement all means and make all commitments necessary to support the recoverable

amounts of the Infrastructure CGU’s assets in the context of the current health crisis, although the

French State did not confirm these undertakings before the 30 June 2020 closing.

The cash flow projections used for the test comprised (i) cash inflows (infrastructure fees, access

charges and investment subsidies) mainly arising from commitments received from the French

State, and (ii) expenses (installation work and maintenance), capital investment in renovations,

and productivity gains.

The assumptions underlying these projections are subject to a number of risks and uncertainties:

• The projections used for the impairment test carried out on the Infrastructure CGU at 30 June 2020 are based on a strategic plan for which scenarios were presented for information purposes to Société Nationale SNCF’s Board of Directors on 24 June 2020. This strategic plan should be finalised in the coming months. Consequently, some of the assumptions used, particularly those which rely on a decision by the French State, may change.

• Work is currently underway between Société Nationale SNCF and the French State to define the terms and conditions of the support provided by the French State to Société Nationale SNCF in the context of the current health crisis. The work is expected to be completed by the end of the year. The assumption used in the impairment test is that the French State will provide financial support to ensure that Société Nationale SNCF has the necessary cash flows to maintain the value of the Infrastructure CGU’s assets.

• The new performance agreement between SNCF Réseau and the French State for the 2020-2029 period is currently under discussion and its impacts cannot be measured at present. Key decisions are pending, in particular concerning network consistency and local transport services.

• The investment subsidies allocated to renovation work – which are financed by the dividends received by the French State from Société Nationale SNCF and redistributed to SNCF Réseau – are based on a financial trajectory resulting from a new strategic plan that is currently being finalised (see above).

• The indexation trajectory for contractual infrastructure fees has been left unchanged from the previous reporting date, at a higher level than for TGV and Rail Freight operations despite the non-compliance opinions issued by the French transport authority (ART, formerly the French road and rail office [ARAFER]) regarding the rates indexation for contractual activities for the 2020 and 2021-2023 service timetables.

SNCF SA

Statutory Auditors’ review report on the 2020 interim financial information – Page 3

• 2030 was maintained by the Company as the standard final year for the railway network currently in service, considering that 2030 will correspond to the year in which the network will be stabilised at expected performance levels, although these levels have never previously been attained. Terminal value therefore represents the essential factor in measuring the recoverable amount.

• The measures concerning the new pension scheme and, more broadly, the new social framework resulting from the rail industry agreements were still under negotiation at the reporting date and consequently could not be modelled in the impairment test.

These major risks and uncertainties weigh on the discounted future cash flow projections used to measure the Infrastructure CGU’s property, plant and equipment and intangible assets as presented in the Company’s statement of financial position at 30 June 2020. Consequently, the amount of the related impairment loss could increase significantly. These projections are also used to estimate the likelihood of recovering deferred tax assets and therefore to determine their amount in the statement of financial position. However, the projections used to measure deferred tax assets were not updated at 30 June 2020. Consequently, the amount of deferred tax assets in the statement of financial position may be overestimated. As a result, we are unable to assess the pertinence of the projections used and are therefore unable to form a conclusion on the carrying amount of the assets concerned which, at 30 June 2020, amounted to €33.5 billion (including work-in-progress) for property, plant and equipment and intangible assets and €4.5 billion for deferred tax assets. Based on our review and subject to the above qualifications, nothing has come to our attention that causes us to believe that the accompanying condensed interim consolidated financial statements have not been prepared, in all other material respects, in accordance with IAS 34 “Interim Financial Reporting”, as adopted by the European Union. II – Specific verification We have also verified the information given in the interim management report prepared on 30 July 2020 on the condensed interim consolidated financial statements subject to our review. With the exception of the possible impact of the matters set out above, we have no matters to report as to its fair presentation and its consistency with the condensed interim consolidated financial statements.

Neuilly-sur-Seine and Paris-La Défense, 30 July 2020

The Statutory Auditors

PricewaterhouseCoopers Audit Ernst & Young Audit François Guillon Philippe Vogt Nicolas Pfeuty Valérie Descleves

Rapport des CAC Rapport des Commissaires aux Comptes sur les Comptes Consolidés

04

SA SNCF Direction de la Communication 2, place aux Etoiles – 93633 La Plaine St Denis Cedex English translation by Stephen Reynolds ACA and Jane Lambert

Financial Report 30 June 2020 SNCF Group v30.07 à 17h10 v3

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Transcript of Financial Report 30 June 2020 SNCF Group v30.07 à 17h10 v3