Annual Report • Oct 23, 2018
Annual Report
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CP – Comboios de Portugal, E. P. E. Calçada do Duque, nº 20 1249–109 Lisbon Corporate Taxpayer number: 500 498 601 Registered in the Commercial Registry Office of Lisbon under the no. 109 Statutory Capital € 3,850,091,940 (as at the 31st December, 2017)
Design and Coordination: Department of Planning and Activity Control Financial Management
Contacts: [email protected]
The content herein is in accordance with the Portuguese Language Orthographic Agreement
| SUMMARY OF THE YEAR | 6 |
|---|---|
| CP GROUP | 8 |
| Group Description | 9 |
| CP – Comboios de Portugal, E.P.E. |
10 |
| EMEF - Empresa de Manutenção de Equipamento Ferroviário, S.A. | 10 |
| SIMEF, A.C.E | 10 |
| Ecosaúde – Educação, Investigação e Consultoria em Trabalho, Saúde e Ambiente, S.A. |
11 |
| FERNAVE – Formação Técnica, Psicologia Aplicada e Consultoria em Transportes e Portos, S.A. |
11 |
| SAROS – Sociedade de Mediação de Seguros, Lda. |
12 |
| TIP, A.C.E. | 12 |
| OTLIS, A.C.E. | 12 |
| Intra-Group Relations | 13 |
| FRAMEWORK OF THE YEAR | 14 |
| Context | 15 |
| Non-Financial Reporting | 15 |
| Macroeconomic Framework | 15 |
| Governance Model | 16 |
| PERFORMANCE OF THE YEAR | 17 |
| CP – Comboios de Portugal, E.P.E. |
18 |
| EMEF–Empresa de Manutenção de Equipamento Ferroviário, S.A. | 28 |
| Fernave – Formação Técnica, Psicologia Aplicada e Consultoria em Transportes e Portos, S.A. |
36 |
| Ecosaúde – Educação, Investigação e Consultoria em Trabalho, Saúde e Ambiente, S.A. |
40 |
| SAROS – Sociedade de Mediação de Seguros, Lda. |
44 |
| FINANCIAL AND ECONOMIC ANALYSIS | 47 |
| PERSPECTIVES FOR 2018 |
55 |
| Forecasts | 56 |
| CP Group – Perspectives |
56 |
| RELEVANT FACTS AFTER THE END OF THE FINANCIAL YEAR |
60 |
| STATEMENT OF CONFORMITY | 62 |
|---|---|
| FINANCIAL STATEMENTS | 63 |
| NOTES TO THE FINANCIAL STATEMENTS | 70 |
| Identification of the Entity and Operability Notes (note 1) | 71 |
| Accounting Framework of Preparation of Financial Statements (note 2) | 73 |
| Main Accounting Policies (note 3) | 74 |
| Cash Flow (note 4) | 108 |
| Accounting Policies, Changes in Accounting Estimates and Errors (note 5) |
109 |
| Result Composition by Business Segment (note 6) | 109 |
| Fixed Tangible Assets (note 7) | 114 |
| Intangible Assets (note 8) | 117 |
| Financial Holdings – Equity Method (note 9) |
118 |
| Other Financial Investments (note 10) | 119 |
| Income Tax (note 11) | 120 |
| Inventories (note 12) | 122 |
| Customers (note 13) | 126 |
| State and Other Public Entities (note 14) | 127 |
| Other Accounts Receivable (note 15) |
128 |
| Deferrals (note 16) | 129 |
| Financial Assets Held for Trading (note 17) | 131 |
| Non-Current Assets Held for Sale (note 18) | 131 |
| Subscribed Capital (note 19) | 133 |
| Legal Reserves (note 20) | 134 |
| Other Reserves (note 21) | 134 |
| Results Brought Forward (note 22) | 135 |
| Adjustments/Other Variations in Equity (note 23) | 135 |
| Provisions (note 24) | 136 |
| Loans Obtained (note 25) | 137 |
| Other Debts Payable (note 26) | 139 |
| Suppliers (note 27) | 140 |
| Advance Payments from Customers (note 28) | 140 |
|---|---|
| Provided Sales and Services (note 29) | 141 |
| Operating Subsidies (note 30) |
141 |
| Gains/losses Attributed to Subsidiaries, Associated Companies and Joint Ventures (note 31) |
142 |
| Capitalised Production Costs (note 32) | 142 |
| Sold Commodities and Consumed Materials Costs (note 33) | 143 |
| External Services and Supplies (note 34) | 143 |
| Personnel Expenses (note 35) | 144 |
| Impairment of Non-Depreciable and Non-Amortisable Investments (note 36) |
145 |
| Other Income (note 37) | 145 |
| Other Expenses (note 38) | 146 |
| Fair Value Increases/Decreases (note 39) | 147 |
| Expenses/Reversal of Depreciation and Amortisation (note 40) | 147 |
| Impairment of Depreciable and Amortisable Investments (note 41) | 148 |
| Interest and Similar Income Gained (note 42) | 148 |
| Payable Interest and Similar Expenses (note 43) | 149 |
| Contingent Liabilities (note 44) | 149 |
| Guarantees and Sureties (note 45) | 149 |
| Remuneration of the Certified Public Accountant (note 46) | 150 |
| Relevant Events After the Balance Sheet Date (note 47) | 150 |
| Change | |||||
|---|---|---|---|---|---|
| Operating Indicators of the Group | 2017 | 2016 | Amount | % | |
| Demand | |||||
| Passengers (103) | 122 028 | 114 841 | 7 187 | 6,3% | |
| Passengers Kilometre (103) | 4 032 713 | 3 802 762 | 229 951 | 6,0% | |
| Supply | |||||
| Train-km (103) | 29 129 | 29 128 | 1 | 0,0% | |
| Human Resources | |||||
| CP | 2 681 | 2 708 | -27 | -1,0% | |
| EMEF | 1 036 | 1 048 | -12 | -1,1% | |
| Fernave | 18 | 20 | -2 | -10,0% | |
| Ecosaúde | 27 | 21 | 6 | 28,6% | |
| Saros | 1 | 1 | 0 | 0,0% | |
| Final Effective Staff | 3 763 | 3 798 | -35 | -0,9% | |
| Fleet - Active Fleet | |||||
| Railcars | 239 | 239 | 0 | 0,0% | |
| Locomotives | 31 | 31 | 0 | 0,0% | |
| Carriages | 104 | 103 | 1 | 1,0% |
| Financial Indicators of the Group | Change | ||||
|---|---|---|---|---|---|
| (Amounts in 103 €) | 2017 | 2016 | Amount | % | |
| Income Statement | |||||
| Operating Result | -33 626 | -53 587 | 19 960 | 37,2% | |
| Compensatory Allowances | 0 | 0 | 0 | 0,0% | |
| Net Result | -111 067 | -144 000 | 32 933 | 22,9% | |
| (1) EBITDA |
25 237 | 6 710 | 18 528 | 276,1% | |
| Balance Sheet | |||||
| Asset | 629 186 | 667 693 | -38 507 | -5,8% | |
| Equity | -2 246 273 | -2 651 383 | 405 110 | 15,3% | |
| Liability | 2 875 460 | 3 319 077 | -443 617 | -13,4% | |
| Loans Obtained | 2 615 920 | 3 026 948 | -411 028 | -13,6% |
(1) Does not include Compensation for Termination of Employment, Impairments, Provisions, Depreciations and other transactions unrelated to the Group's activity.
Group Description
companies as at 31-12-2017:
CP is a public railway transport company held 100% by the State. CP controls companies in the field of supplies in the sector, e.g. in the areas of maintenance of rolling stock, training, healthcare and insurance mediation, with minority case-by-case holdings, on a
The following diagram presents the holdings from CP and its affiliate
cooperation-based approach with other operators.
8
No changes were made to the shareholdings in 2017.
The Group carries out the following activities:
The main purpose of CP – Comboios de Portugal, E.P.E., is the provision of passenger railway transport services.
EMEF has a vast involvement in railway engineering. EMEF carries out the manufacture, reconditioning, large repair and maintenance of equipment, railway vehicles, as well as the study of workshop facilities for maintenance purposes.
SIMEF carries out the maintenance of "LE 5600" and "LE 4700" locomotives.
ECOSAÚDE provides services regarding healthcare, teaching, training and technical/professional development within the sectors of working conditions, health and environment. ECOSAÚDE also performs services related to recruitment, selection and assessment of staff, as well as technical assistance, consultancy and auditing, specifically regarding health, occupational health and safety, environment and environmental management. ECOSAÚDE performs drug and alcohol tests and ensures proper referral for the treatment of such addictions.
FERNAVE carries out training and professional technical development, as well as studies and projects within the scope of the creation, organisation and management of companies. FERNAVE also provides services related to applied psychology, as well as medical and psychological assessment, higher education and scientific research regarding transportation, communications or technological areas within the technological scope of the aforementioned companies.
SAROS provides mediation services within the category of insurance agents in the fields of LIFE and NON-LIFE. SAROS's activity is focused on managing the insurance portfolio of the companies in the CP Group.
TIP is responsible for the implementation and management of a common and exclusive ticketing system of the Grouping (CP, STCP and Metro do Porto) in the Greater Oporto area, as well as for establishing the common and exclusive intermodal tariff for the public means of transportation of passengers that are operated either directly or indirectly by the Grouping entities.
OTLIS is responsible for the development of the tele-ticketing project in the Greater Lisbon area in association with other international partners, in accordance with the commitments assumed by the companies comprising the grouping within the scope of the overall proposal of the aforementioned project (OTLIS, A.C.E.).
CP further has a few minority holdings based on cooperation with other Operators.
The following table shows the services the companies in the Group provide to each other:
| Receiving Entity | ||||||
|---|---|---|---|---|---|---|
| Provider | Service | CP | EMEF | Fernave | Ecosaúde | SAROS |
| Leasing of Workshop Buildings | | |||||
| CP | Service Provision (Accounting, IT, Etc.) | | | | | |
| Re-invoicing (housekeeping of premises, surveillance, utilities , etc.) |
| | | |||
| EMEF | Rolling Stock Maintenance and Repair Services | | ||||
| Fernave | Training | | | | ||
| EcoSaúde | Medical, occupational health and safety services as well as blood alcohol and drugs tests |
| | | | |
| SAROS | Insurance Mediation | | | | |
Pursuant to article 4 of Regulation no. 1606/2002 of the European Parliament and the European Council, of the 19th of July, the entities whose securities are admitted to trading in a regulated market shall draw up their consolidated accounts in accordance with the international financial reporting standards.
For this reason, CP presents its consolidated financial statements, which express the financial position and results of the Group's operations as if it were a single entity, aiming to highlight the results of the operations that the companies of the Group have carried out with third parties.
This consolidation shall not have an impact at a fiscal level, namely regarding Income Tax, given that there are no expectations for the group to obtain future taxable profits which allow using the accumulated tax losses.
As to the 2017 Non-Financial Reporting, CP draws up its Sustainability Report since 2008 and publishes it in its website on a date following the publication of the Report & Accounts or Annual Management Report. In 2018, CP will act accordingly, pursuant to Article 3 of Decree-Law no. 89/2017, of the 28th of July.
According to the estimates available during the preparation of this report1, the GDP increased by 2.7% in volume during 2017, a 0.2 p.p. increase compared with the previous year. This evolution resulted from an increased contribution of internal demand, reflecting mainly an acceleration of Investment, while net external demand had the same contribution as in 2016. Tourism continued its upward trend regarding the previous year.
1 "Banco de Portugal" Bank – Statistical Bulletin - Jan 2018 and www.INE.pt.
The degree of household savings reached 12.2% at the end of the year, whereas indebtedness regarding both companies and individuals accounted for a reduction throughout the 4 quarters, although interest rates remained at historically low levels.
The Harmonised Index of Consumer Prices (HICP) accounted for an average rate of change of 1.6% in 2017, exceeding the 0.6% of the previous year.
The unemployment rate kept a downward trend with special relevance for demand for mobility, whose annual rate was at 8.9%, a 2.2 p.p. decrease regarding the previous year.
The appointment of a new Board of Directors for CP was approved by the Council of Ministers on the 29th of June 2017, the former being composed as follows:
The Members of CP's Board of Directors hold the position of Directors in the following companies of the CP Group:
| Member of the | Accumulation of Tasks - 2017 | |||||
|---|---|---|---|---|---|---|
| Administration Board | Entity | Function | Scheme (Public/Private) |
|||
| Ana Maria dos Santos Malhó | EMEF | Voting Member of the A.B. (a) | Public | |||
| SIMEF | President of the A.B. (b) | Public | ||||
| Sérgio Abrantes Machado | EMEF | President of the A.B. (a) | Public | |||
| Nomad Tech | Manager (b) | Private |
Notes: (a) From the 20th of July 2017
(b) From the 1st of August 2017
CP's Management appointed the new Sole Director for the Affiliates FERNAVE, ECOSAÚDE and SAROS on the 21st of July 2017.
Although the Consumer Confidence Index started the year negative, it has been gradually rising, having remained positive during the 12
months for Services, Industry and Trade.
CP – Comboios de Portugal E.P.E. closed the year 2017 with a total of 122 million transported passengers and approximately 250 million euros in traffic income. There was an increase of 7.2 million Customers travelling in CP's trains, in comparison with the previous year, whilst traffic income increased by 19.6 million euros, corresponding to an improvement of 6.3% and 8.5% respectively. The growth in the number of passengers was common to all services of the company.
Notwithstanding the absence of Compensatory Allowances, CP had a positive recurrent EBITDA of 14.6 million euros, representing an improvement of 14.3 million euros compared with 2016.
The Financial Result also recorded an improvement of 11.2 million euros, mainly due to the decrease of the financial liability. The company has been counting on the financial support from the Portuguese State meant to ensure, namely, debt service and investment funding.
The Net Result showed an improvement of 23% compared with the previous year (+32.6 million euros), going from -144.6 million euros, in 2016, to -112 million euros in 2017.
2017 was particularly rich in activity, whereas the following should be highlighted:
Commissioning of the New Alfa Pendular Train – the three first refurbished units are now running.
Alfa Pendular and Intercity Discount Campaign with the claim "Always one Discount Away", it addressed the attributes Price and Origin/Destination for the Long-distance service, focusing on the Promo and Youth Ticket.
International Campaign Lusitânia, Sud Expresso and Celta under the theme "The best choice for your vacation", it aimed at creating interest and drive for "getaways" using the International service (Sud, Lusitânia and Celta), focusing in particular on the competitive price for each destination.
Renewal of Quality Certification - CP renewed the certification of its Quality Management System (QMS) in accordance with the ISO standard 9001:2015.
CP closed 2017 with 2,709 effective staff members, i.e. 28 employees less than at the end of the previous year.
During 2017, 25 employees joined the company's staff, including 22 by recruitment. 53 employees left the company, mainly due to termination of employment agreements by mutual consent.
The absenteeism rate and overtime work rate decreased in 2017 to 6.87% and 12.87%, respectively. These changes were mainly justified by the undertaken recruitment processes that were able to strengthen the operating permanent staff.
The Company maintained the investment in its employees during 2017, in particular through the development of a training cycle in the scope of traffic safety, regarding technical and regulatory improvements. There were 445 professional training programmes in 2017, most of them conducted by Fernave, a company belonging to the CP Group.
At the end of 2017, the total of CP's tractive and hauled stock was composed of 795 units. Of these units, 374 were active fleet, 327 were inoperable equipment, and 94 were occasional use equipment, of the Historical Train, the rescue train, or were assigned to the National Railway Museum Foundation of Portugal.
The active fleet of rolling stock in commercial service had 189 electric railcars, 50 diesel railcars, 24 electric locomotives, 7 diesel locomotives and 104 carriages. The active fleet had 20 diesel railcars, series 592 and 592.2, which are rented to RENFE.
The maintenance of most of the rolling stock is developed in the factories of EMEF, an affiliate company of CP. Maintenance of series 5600 locomotives is provided by SIMEF, ACE.
In 2017, 122 million passengers were transported by CP, corresponding to a 6.3% increase regarding 2016 and representing, in absolute terms, an increase of approximately 7.2 million transported passengers.
Such growth in demand was common to all CP services, such as the Long Distance Service with a growth of 6%, close to 6.4 million passengers, and the Urban Service in Lisbon with a 7.3% growth, representing an increase of 5.6 million passengers.
These results were influenced not only by the various fight against fraud and commercial programs, but also by the increase in tourism,
the peaceful environment at work and the recovery of Portugal's economic indicators.
| Passengers (*103) | 2017 | 2016 | 2015 | 2017-2016 | 2017 /2016 |
|---|---|---|---|---|---|
| Urban Service Lisbon | 83 005 | 77 375 | 75 865 | 5 630 | 7,3% |
| Urban Service Oporto | 21 591 | 20 794 | 20 060 | 797 | 3,8% |
| Long-distance Service | 6 388 | 6 025 | 5 508 | 363 | 6,0% |
| Regional Service | 11 044 | 10 647 | 10 591 | 397 | 3,7% |
| TOTAL | 122 028 | 114 841 | 112 024 | 7 187 | 6,3% |
In 2017, CP's supply, assessed in Trains*Kilometre, was of 29,129 thousand Trains*Km, which is similar to the value registered in the previous year.
There were some adjustments to supply, specified in the chapter "CP's Activity in 2017".
| Trains Kilometre (*103) | 2017 | 2016 | 2015 | 2017-2016 | 2017 /2016 |
|---|---|---|---|---|---|
| Urban Service Lisbon | 6 651 | 6 670 | 6 644 | -19 | -0,3% |
| Urban Service Oporto | 4 601 | 4 604 | 4 565 | -4 | -0,1% |
| Long-distance Service | 8 592 | 8 593 | 8 534 | -2 | 0,0% |
| Regional Service | 9 286 | 9 260 | 9 091 | 25 | 0,3% |
| TOTAL | 29 129 | 29 128 | 28 834 | 1 | 0,0% |
Income from traffic came close to 250 million euros in 2017, representing an increase of 19.6 million euros regarding the previous year (+8.5%).
Income followed the growth trend of demand, being influenced by the higher relative weight of occasional tickets and of the Long Distance Service. It is also worth considering the tariff increase of the urban services of Lisbon, Oporto and Coimbra by 1.5% in January 2017.
| Income Traffic (*103 € ) |
2017 | 2016 | 2015 | 2017-2016 | 2017 /2016 |
|---|---|---|---|---|---|
| Urban Service Lisbon | 86 322 | 78 396 | 75 058 | 7 926 | 10,1% |
| Urban Service Oporto | 26 925 | 25 189 | 24 704 | 1 736 | 6,9% |
| Long-distance Service | 107 085 | 98 616 | 92 725 | 8 469 | 8,6% |
| Regional Service | 29 585 | 28 121 | 28 072 | 1 464 | 5,2% |
| TOTAL | 249 916 | 230 322 | 220 558 | 19 594 | 8,5% |
In 2017, CP invested a total of 16.3 million euros, 84% of which were assigned to rolling stock.
Taking the financial restrictions into account, the investment decisions were, as in the previous years, assessed in order to ensure essential interventions for guaranteeing safety and operability of rolling stock, systems, equipment and railway premises, or for concluding ongoing projects.
In rolling stock, the most significant investments continue to be "Large Repairs R2+R3", amounting to 7.9 million euros, regarding scheduled maintenance interventions in several series of rolling stock, and the "half-life intervention of tilting trains (CPA)", amounting to 4.3 million euros, with delivery of the first three intervened units.
| (amounts in thousands of euros) | ||||||
|---|---|---|---|---|---|---|
| INCOME AND EXPENSES | PERIODS Change 2017/2016 |
|||||
| ACTUAL 31-12-2017 ACTUAL 31-12-2016 | Amount | % | ||||
| Provided sales and services | 258 650 | 239 243 | 19 407 | 8% | ||
| Operating subsidies | 21 | 17 | 4 | 22% | ||
| Other income | 23 469 | 26 757 | -3 288 | -12% | ||
| 282 140 | 266 017 | 16 122 | 6% | |||
| Sold commodities and consumed materials costs | -6 243 | -5 460 | -783 | -14% | ||
| External services and supplies | -159 350 | -158 701 | -649 | 0% | ||
| Personnel expenses (w/o Compensation and agreement on variables) | -98 514 | -96 683 | -1 831 | -2% | ||
| Other expenses | -3 407 | -4 830 | 1 423 | 29% | ||
| -267 514 | -265 674 | -1 840 | -1% | |||
| Operating result from transportation activity* (EBITDA) | 14 626 | 344 | 14 282 | 4156% | ||
| Expenses/reversals of depreciation and amortisation | -56 860 | -55 362 | -1 498 | -3% | ||
| Impairment of depreciable/amortisable investments (losses/reversals) | 574 | 856 | -282 | -33% | ||
| Compensations for termination of employment | -1 360 | -2 689 | 1 329 | 49% | ||
| Gains/losses attributed to subsidiaries, ass. comp. and joint ventures | 6 960 | 3 257 | 3 703 | 114% | ||
| Inventory impairment (losses/reversals) | -412 | -266 | -146 | -55% | ||
| Impairment of receivables (losses/reversals) | -437 | -290 | -147 | -51% | ||
| Provisions (increases/decreases) | -144 | -11 497 | 11 353 | 99% | ||
| Impairment of non-deprec. and non-amort. investments (losses/reversals) | 0 | 1 684 | -1 684 | -100% | ||
| Other income (reclassification by deferred taxes) | 0 | 11 025 | -11 025 | -100% | ||
| Other income (sale of basic equip./scrap) | 801 | 0 | 801 | s/s | ||
| Other income (sale of Praia das Maçãs) | 729 | 0 | 729 | s/s | ||
| Other income (recognition sale value CPCarga) | 0 | 1 634 | -1 634 | -100% | ||
| Other income (inv. grants recognised in result of written-off material) | 0 | 276 | -276 | -100% | ||
| Other expenses (write-off Build. Terr. Paço - Order_10759-A/2016) | 0 | -1 998 | 1 998 | 100% | ||
| Other expenses (other rolling stock write-offs) | 0 | -2 596 | 2 596 | 100% | ||
| Fair value increase/decreases | 0 | 1 292 | -1 292 | -100% | ||
| Operating result | -35 523 | -54 331 | 18 807 | 35% | ||
| Interest and similar income gained | 467 | 1 048 | -581 | -55% | ||
| Payable interest and similar expenses | -76 571 | -88 331 | 11 760 | 13% | ||
| Financial result | -76 104 | -87 283 | 11 179 | 13% | ||
| Result before taxes | -111 627 | -141 614 | 29 987 | 21% | ||
| Income tax for the period | -324 | -2 951 | 2 626 | 89% | ||
| Net result of the period | -111 952 | -144 565 | 32 614 | 23% |
* Before compensations for termination of employment, fair value, impairments, provisions, depreciations, financing expenses and taxes and other transactions unrelated to the company's activity.
The Net Result of CP showed an improvement of 23% compared with the previous year (+32.6 million euros), going from -144.6 million euros, in 2016, to -122 million euros in 2017.
This positive change was mainly due to the growth in sales and provided services associated with passenger transport, as previously analysed, and the improvement of the financial result, which is namely due to the decrease in the company's financial liability.
In 2017, recurrent EBITDA was positive at 14.6 million euros, representing an improvement of 14.3 million euros comparing with the previous year.
The Operating Result in 2017 amounted to -35.5 million euros, which translates into an improvement of 18.8 million Euros, comparing with 2016.
The reason for this situation, apart from the increase in Provided Sales and Services, was the increase in Gains attributed to Subsidiaries by 3.7 million euros, due to the improvement in the results of affiliate companies.
Personnel Expenses (without compensation) increased by 1.8 million euros as a result of the total reversal of temporary pay cuts (during the 1st, 2nd and 3rd quarters of 2016 there was a 40%, 60% and 80% reversal, respectively, reaching 100% from the 1st of October 2016), as well as the partial restitution of progressions and the growth in other bonuses. The decrease in the effective staff should also be noted.
As to External Services and Supplies, the increases in the headings regarding travels and accommodation (+2.7 million euros), surveillance / safety (+0.5 million euros), use of infrastructure (+0.4 million euros) and advertising (+0.4 million euros) should be noted, even if partially offset by the decrease in traction energy expenses (-3.5 million euros), on account of the renegotiation of the energy supply agreement, according to which energy expenses shall be directly invoiced to Medway, S.A.
EMEF closed the 2017 financial year with a positive Net Result (5.9 million euros, 2.4 million euros higher than 2016) for the fourth year in a row. EBITDA (without compensation for termination of employment) was also positive, at 9.8 million euros (72% higher than the previous year).
In 2017, the 14% increase in turnover was accompanied with a 2% increase in the total average staff and a 12% increase in variable operating expenses (billable consumption and sub-agreements). Concerning the labour productivity in the Company, it sustained a 20% increase regarding the previous year, when measured by using the GVA per capita indicator.
2017 was marked by the following events:
In September 2017, a credit facility agreement was entered into with Banco Popular, as a bank overdraft up to a limit of 2 million euros.
The services provided by EMEF remained characterised by a full maintenance supply of its Customers' fleets, comprising three main segments:
In addition to its main activity, the Company has also ensured:
This activity continued integrating the types of scheduled repairs in the tractive and hauled stock of passengers (repairs type R), in the hauled stock of goods (safety repairs – RS and RSP) and in equipment (general repairs – RG and intermediate repairs – RI), other repairs due to unforeseen causes or accidents on the railway vehicles (repairs due to malfunction - RAV and repairs due to accident - RAC) and, also, changes/modernisations in rolling stock in accordance with the specific request from customers.
In early 2017, the repair plan for the Customer, CP, sustained a decrease regarding the needs planned by such customer on account of the difficulty in hiring manpower, which remained throughout the year.
The R1 intervention to CPA4000 continued, whereas the delivery of the first three modernised units took place. The fourth CPA was being subject to intervention by the end of the year.
As to repairs to tractive and hauled passenger stock, 21 Rs to the fleet of the Customer, CP, have been completed (12 in carriages, 4 in electric railcars, 1 in diesel locomotives and 4 in diesel railcars) and 2 LPs to CPA4000. 2 Rs have also been performed to railcars 592 for the Customer, RENFE.
Only 344 RSP out of 380 that have been planned in the wagon repair plan were performed to the fleet of the Customer, MEDWAY, on account of the lack of manpower. 34 RSP have also been performed to wagons of other customers.
As to the agreement entered into between EMEF and Metro do Porto for the provision of services regarding the 960,000 Km general inspection to 35 Eurotram vehicles, 23 interventions have been carried out in 2017 and 2 interventions were ongoing by the end of the year. On the 5 th of December, Metro do Porto exercised its option to perform the 960,000Km General inspection to 5 additional vehicles, apart from the initial 35.
As a whole, the repair segment allowed the Company to obtain, in 2017, income amounting to 37,394 thousand euros, which is 51.9% of the amount of global income of the Company and an improvement of 33% visà-vis 2016.
This activity kept being carried out in the Workshop Yards and in the High Speed Maintenance Unit including the workshop facilities in Northern (Contumil, Guifões, Sernada do Vouga and Mirandela), Central (Entroncamento) and Southern Portugal (Barreiro, Poceirão, Vila Real de Santo António, Campolide, Santa Apolónia and Oeiras).
The goal of this activity has been centred in the compliance with the maintenance programmes set forth in the specific agreements of the
fleet/market segment of each customer: CP, Medway, Metro do Porto and RENFE.
Such programmes have generally been complied with regarding all fleets with agreed upon maintenance. The reached availability and reliability figures have been slightly lower than those of previous years, even if within the same order of magnitude, on account of the difficulties experienced in the service provision due to the lack of manpower.
At the same time, the seasonal maintenance service to historical trains of the customer, CP, continued being provided and the travels of the train of "The Presidential" project were prepared and monitored in technical terms during its two annual editions.
As a whole, the routine maintenance segment allowed the Company to obtain, in 2017, income amounting to 34,272 thousand euros, which corresponded to 47.6% of the amount of global income of the Company and a slight decrease (-1%) regarding 2016.
The following projects should be highlighted in this respect:
In 2017, the Engineering sector was very focused on the review and/or setting of specifications for the purchase of materials (nomenclatures), as well as opinions on conformity following repair and/or maintenance intervention, and the review of documents supporting the activity.
In addition, there was a continuation of the effort to make technical information available to the various production centres, thereby seeking to contribute to procedures' optimisation and standardisation.
Participation in several railway technical forums was further ensured ("Implementation of TSIs" promoted by the Portuguese Institute for Mobility and Transport (IMT) and CTE9 and CR143 meetings promoted by the APNCF (Portuguese Association for Railway Standardisation and Certification)).
As to the Metallurgy, Welding and Non-Destructive Testing sector, the qualification sessions for welders and training sessions in nondestructive testing continued to take place.
The consolidation of the commercial management based on SAP SD (quotations) continued, being extended to all organisational sectors of the Company and most customers, which was reflected by greater effectiveness and efficiency in business management.
By the end of 2017 (31st of December), EMEF had 1,036 staff members, which represents a 1% decrease regarding the end of 2016 (1,048).
Absenteeism was at 8.89%, having sustained a decrease of 0.07 p.p. regarding 2016. The main cause for absenteeism was disease. Overtime work increased by 0.99 p.p. vis-à-vis the previous year, which was caused by an increase in work demands.
Within the scope of professional expertise development, EMEF continued investing in the implementation of a transversal training plan, integrating workers from several bodies of the Company, having therefore relied on external training.
In 2017, EMEF's Turnover has registered a growth of approximately 14.3% regarding 2016.
As to turnover developments per customer, CP, MEDWAY and Metro do Porto remain to be the company's most important customers. As a whole, such customers make up 91% of the company's sales and service provisions.
| Customer | Amount in € 2017 |
Amount in € 2016 |
% |
|---|---|---|---|
| CP | 44 871 754 | 38 907 474 | 62% |
| MEDWAY | 8 683 605 | 13 144 619 | 12% |
| PROMETRO/METRO DO PORTO | 12 002 134 | 5 707 789 | 17% |
| EMEF / SIEMENS ACE | 3 582 254 | 3 192 511 | 5% |
| RENFE | 1 288 257 | 1 187 354 | 2% |
| INFRAESTRUTURAS DE PORTUGAL | 562 407 | 500 444 | 1% |
| Other | 1 080 591 | 404 617 | 1% |
| Total | 72 071 002 | 63 044 806 |
In 2017, the repair segment was the most significant, having grown by 33% vis-à-vis the previous year.
| Activity Segment | 2017 | 2016 | Change | ||
|---|---|---|---|---|---|
| (Amounts in €) | Amount | % | |||
| Repair* | 37 394 380 | 28 089 448 | 9 304 932 | 33% | |
| Maintenance* | 34 271 932 | 34 474 099 | -202 167 | -1% | |
| Reconditioning* | 371 944 | 445 598 | -73 654 | -17% | |
| TOTAL | 72 038 257 | 63 009 145 | 9 029 111 | 14% |
* Sales + Provided Services + Changes in production inventories
By continuing with an investment containment policy, the investments made were limited to equipment deemed as strictly necessary for pursuing the company's activity, approximately amounting to 514 thousand euros in 2017 (24% lower than 2016).
| (amounts in euros) | |||||
|---|---|---|---|---|---|
| INCOME AND EXPENSES | PERIODS | Change | |||
| 31/12/2017 | 31/12/2016 | Amount | % | ||
| Provided sales and services | 72 071 002 | 63 044 806 | 9 026 196 | 14,3% | |
| Operating subsidies | 2 073 | 0 | 2 073 | N.A. | |
| Gains/losses attributed to subsidiaries, assoc. comp. and joint ventures | 627 865 | 426 394 | 201 471 | 47,3% | |
| Changes in production inventories | -32 745 | -35 661 | 2 915 | 8,2% | |
| Capitalised production costs | 0 | 0 | 0 | N.A. | |
| Sold commodities and consumed materials costs | -20 138 665 | -17 827 250 | -2 311 416 | -13,0% | |
| External services and supplies | -14 970 494 | -15 529 870 | 559 376 | 3,6% | |
| Personnel expenses | -25 495 239 | -1 557 965 | -6,1% | ||
| Inventory impairment (losses/reversals) | -775 990 | -59 398 | -716 592 | -1206,4% | |
| Impairment of receivables (losses/reversals) | -1 019 811 | -33 514 | -986 297 | -2942,9% | |
| Provisions (increases/decreases) | -19 813 | 30 247 | -50 060 | -165,5% | |
| Other income and gains | 2 320 011 | 2 730 503 | -410 492 | -15,0% | |
| Other expenses and losses | -1 584 590 | -1 846 790 | 262 200 | 14,2% | |
| Result before depreciations, financing expenses and taxes | 9 425 637 | 5 404 228 | 4 021 409 | 74,4% | |
| Expenses/reversals of depreciation and amortisation | -973 800 | -1 020 879 | 47 079 | 4,6% | |
| Operating result (before financing expenses and taxes) | 8 451 837 | 4 383 350 | 4 068 488 | 92,8% | |
| Payable interest and similar expenses | -431 587 | -476 845 | 45 258 | 9,5% | |
| Result before taxes | 8 020 250 | 3 906 504 | 4 113 746 | 105,3% | |
| Income tax for the period | -2 099 349 | -406 577 | -1 692 771 -416,3% | ||
| Net result of the period | 5 920 902 | 3 499 927 | 2 420 975 | 69,2% |
In 2017, EMEF obtained a positive Operating Result, of 8,452 thousand euros, which represented an increase amounting to 4,068 thousand euros regarding the preceding year (+93%). This development is explained by the increase in the company's operating income, although it is partially offset by the increase in operating expenses.
The increase in operating expenses is directly related to the increase in activity, specifically in the heading Sold Commodities and Consumed Materials Costs (+2.3 million euros).
Personnel Expenses increased by 1.6 million euros due to the increase in average staff, the full restitution of pay cuts and compensations for termination of employment agreements by mutual consent.
The development in Impairment Losses of Receivables should also be noted, which is mainly justified by the creation of impairment
associated with the debt of Metropolitano de Lisboa, E.P.E., amounting approximately to 1 million euros.
In 2017, Fernave celebrated its 25th anniversary, having contributed for the assessment, qualification and upgrade of the skills of professionals working in the transport sector and adjacent sectors throughout the years, through its core activity - training - and associated activities, such as recruitment, psychological assessment and consultancy (particularly in human resources).
In the framework of the implementation of a new operational model seeking to create conditions so that the company is economically and financially sustainable, a fixed expense reduction process was initiated, thereby easing the expense structure and making the activity model based on a variable expenses perspective.
In this context, in 2017, Fernave's presence in rented fixed premises in Entroncamento and Oporto was discontinued and the allocated staff has been reduced.
Still, Fernave closed the year with a negative net result amounting to 287.3 thousand euros, which is a decrease vis-à-vis the previous year, due to the decrease in activity regarding 2016, when long-term initial trainings of CP occurred.
3,681 trainees from several companies – as well as individuals (mainly working in the road sector) - attended Fernave's training sessions, representing an increase of approximately 32%.
The amount of training sessions increased by 35% regarding the previous year. However, the amount of training hours was lower than that of the previous year (-48%), whereas the training volume was at
81,301 T.H (-56%), as the training sessions were largely performed on a "short-term" basis.
742 tests have been performed in the scope of psychology (selection, periodic monitoring and psychological assessment tests), which is an amount broadly similar to that of 2015, but is lower than that of 2016, when several recruitment processes were carried out, especially in CP.
In 2017, the consultancy activity sustained a 33% decrease regarding 2016.
By the end of the 2017 financial year, Fernave had 18 employees on duty, 5 of which were under an assignment scheme, where CP is the original company. The company closed the year with two less employees, one of whom is performing municipal functions and the other has returned to their original company.
The absenteeism rate was at 14.26% due to the significant number of long-term sick leaves. In the 2017 financial year, there was no record of occupational accidents.
In 2017, FERNAVE registered a significant decrease in activity vis-àvis 2016 (-60%), when several recruitment processes and initial training of CP occurred. Such decrease was common to the various activity sectors, especially in Training.
| Income | 2017 | 2016 | Change | |
|---|---|---|---|---|
| Amount | % | |||
| Training | 650 586 | 1 607 508 | -956 922 | -60% |
| Psychology | 34 566 | 67 881 | -33 315 | -49% |
| Consultancy | 10 300 | 66 901 | -56 601 | -85% |
| Other Services | 4 786 | 960 | 3 826 | 399% |
| TOTAL | 700 238 | 1 743 250 | -1 043 012 | -60% |
Fernave closed the 2017 financial year with a Net Result of -287.3 thousand euros (-58.6 thousand euros in 2016).
The Operating Result was negative, at 186.5 thousand euros, and EBITDA was at -162.6 thousand euros.
The coverage ratio of the main operating expenses headings (External Services and Supplies + Personnel Expenses) by turnover was at 69%, translating into a significant decrease regarding 2016 (113%), which is explained, as previously mentioned, by the substantial decrease in the volume of services provided, despite the decline in External Services and Supplies by 44% and in Personnel Expenses by 24%.
The shareholder's financing amounted to 2.6 million euros by the end of the year, an amount similar to that of 2016. The average financing cost for the year was slightly lower than that of 2016 due to the favourable fluctuations in the interest rate.
| (amounts in euros) | ||||
|---|---|---|---|---|
| PERIODS | Change 2017/2016 | |||
| INCOME AND EXPENSES | 31/12/2017 31/12/2016 | Amount | % | |
| Provided sales and services | 700 238 | 1 743 250 | -1 043 012 | -60% |
| External services and supplies | -410 109 | -733 088 | 322 979 | 44% |
| Personnel expenses | -610 051 | -805 534 | 195 483 | 24% |
| Impairment of receivables (losses/reversals) | 1 015 | 7 506 | -6 491 | -86% |
| Impairment of non-deprec. / non-amortisable investm. (losses/reversals) | 17 166 | -111 101 | 128 267 | 115% |
| Other income and gains | 151 581 | 9 452 | 142 129 | 1504% |
| Other expenses and losses | -12 411 | -36 370 | 23 959 | 66% |
| Result before depreciations, financing expenses and taxes -162 571 | 74 115 | -236 686 | -319% | |
| Expenses/reversals of depreciation and amortisation | -23 932 | -24 217 | 285 | 1% |
| Operating result (before financing expenses and taxes) | -186 503 | 49 898 | -236 401 | -474% |
| Payable interest and similar expenses | -95 644 | -96 738 | 1 094 | 1% |
| Result before taxes | -282 147 | -46 840 | -235 307 | -502% |
| Income tax for the period | -5 141 | -11 734 | 6 593 | 56% |
| Net result of the period | -287 288 | -58 574 | -228 714 | -390% |
Executive Summary
In 2017, ECOSAÚDE achieved a positive EBITDA, Operating Result and Net Result of the financial year for the third time in a row.
This factor was preceded by a corporate restructuring process started in 2009, through which the company has rationalised its structure of operating expenses, in External Services and Supplies and Personnel, and, simultaneously, has optimised its operational efficiency. The facilities in the two main regional hubs of the company were also renewed: Lisbon and Oporto, which allowed for a better quality in the provided services.
In 2017, the company has registered a slight decrease in turnover and level of activity, 3% and 4% lower than the previous year, respectively.
It should be mentioned that, throughout 2016, the company lost very important customers: GRUPO INFRAESTRUTURAS DE PORTUGAL, MEDWAY and CONTINENTAL TEVES. As a whole, such contracts represented a sales volume of approximately 240 thousand euros in 2016, making up 11% of sales that year. However, new businesses have been secured in 2017 that largely cover this loss.
ECOSAÚDE carries out its activity in several domains, which, as a whole and in an integrated manner, contribute for the improvement of working conditions, well-being and, as a result, the increase in its customer companies' productivity in the medium and long-term.
Through the monitoring and supervision of the Occupational Medicine Specialist Physicians, Occupational Nurses and other Healthcare Workers, Ecosaúde establishes risk prevention measures for the worker's health, as well as measures for occupational illness mitigation. In 2017, 12,200 medical interventions were carried out, 3% less than in the previous year.
The occupational safety auditing and safety consultancy activities enable the Customers to improve working conditions, as well as to prevent occupational accidents and incidents, by mitigating the negative human and material consequences of such events. In 2017, 2,081 interventions were carried out within the scope of this subject, which represents an increase of approximately 49%, compared with 2016.
With the inhibition of the negative influence of alcohol and drug consumption in the workplace, and supporting the assistance to workers affected by excessive consumptions of these substances as main objectives, 10,672 control interventions were carried out throughout 2017, -11% compared to 2016, due to the loss of one large Customer (IP Group) in April 2016.
Within the scope of Accident Management, 768 medical interventions for the monitoring and treatment of occupational accidents, as well as accidents involving passengers, have been performed.
Within the scope of CP's Railway Emergency Plans, the company also has an Emergency Department on a prevention and on-call basis, with a set of healthcare and safety professionals providing assistance and information services to passengers. The Emergency Department was not active throughout 2017.
In order to complement the occupational health activity, the company supports organisations and their employees by providing healthcare services in several medical specialties, by creating the conditions for preventing, detecting and treating each event. In 2017, 3,310
specialty appointments were conducted, as well as 71 nursing treatments and 1,936 physical therapy treatments.
The training activity within the Health and Safety fields aims to stimulate the health and safety culture, as well as to develop working conditions. In this regard, Ecosaúde provides inter-company training services within the scope of the subject matters and contents which are common to all the organisations and business sectors. Ecosaúde further provides intra-company training in line with the specific needs of each organisation.
Throughout 2017, 58 Training sessions were carried out, with a total of 8,436 training hours, provided to a total of 646 Trainees.
In the scope of the partnership established between Ecosaúde and Escola Superior de Enfermagem da Cruz Vermelha Portuguesa [Higher School of Nursing of the Portuguese Red Cross], the 3rd Post-Graduate Course in Occupational Nursing began in the fourth quarter of 2017.
Summary of the Activity
| Activity indicators | Year 2017 | Year 2016 Year 2015 Year 2014 | ||
|---|---|---|---|---|
| Occupational health (medical interventions) | 12 200 | 12 642 | 13 289 | 11 602 |
| Occupational safety (working conditions interventions) | 2 081 | 1 395 | 1 310 | 1 335 |
| Prevention and control of addictions (tests conducted in workplaces) | 10 672 | 12 062 | 13 650 | 12 410 |
| Medical and nursing specialties | 3 381 | 3 888 | 4 171 | 4 410 |
| Accidents management (appointments and treatments of OAs) | 1 051 | 1 076 | 1 123 | |
| Training - Amount of training hours | 8 436 | 13 169 | 5 905 | 6 883 |
| Training - No. of training sessions | 58 | 93 | 57 | 74 |
| Training - No. of trainees | 646 | 1 059 | 635 | 758 |
The company has 27 permanent employees (21 under open-ended employment agreements, 4 under fixed-term employment agreements and 2 under indeterminate duration employment agreements) as well as 60 highly qualified service providers.
The absenteeism rate was 4.5% and the overtime work rate was almost non-existent, at 0.2%. Absenteeism decreased regarding the previous year due to the return of an employee under long-term sick leave. Overtime work occurred due to missions without overnight accommodation of safety technicians for audits carried out to distant Customers.
| INCOME AND EXPENSES | PERIODS | Change | ||
|---|---|---|---|---|
| 31/12/2017 31/12/2016 | Amount | % | ||
| Provided sales and services | 2 077 053 | 2 134 589 | -57 536 | -3% |
| External services and supplies | -1 296 630 | -1 339 419 | 42 789 | 3% |
| Personnel expenses | -682 149 | -698 128 | 15 979 | 2% |
| Impairment of receivables (losses/reversals) | -5 065 | -8 928 | 3 863 | 43% |
| Provisions (increases/decreases) | 0 | 0 | 0 | 0% |
| Other income and gains | 6 030 | 40 826 | -34 796 | -85% |
| Other expenses and losses | -15 562 | -21 646 | 6 084 | 28% |
| Result before depreciations, financing expenses and taxes | 83 677 | 107 294 | -23 617 | -22% |
| Expenses/reversals of depreciation and amortisation | -66 483 | -79 595 | 13 112 | 16% |
| Operating result (before financing expenses and taxes) | 17 194 | 27 699 | -10 505 | -38% |
| Payable interest and similar expenses | -11 801 | -15 275 | 3 474 | 23% |
| Result before taxes | 5 393 | 12 424 | -7 031 | -57% |
| Income tax for the financial year | -4 725 | -8 059 | 3 334 | 41% |
| Net result of the period | 668 | 4 365 | -3 697 | -85% |
In 2017, Ecosaúde accounted for a positive EBITDA amounting to 84 thousand euros, a positive Operating Result amounting to 17 thousand euros and a positive Net Result amounting to 668 euros. The volume of Services Provided decreased by 3%, as previously discussed; however, it was offset by the decrease in External Services and Supplies and Personnel Expenses.
Throughout 2017, similarly to what had already happened in the previous three years, the company was autonomous, self-sufficient and did not need additional financial support from third parties.
In 2017, the company accounted for a 3% growth in Provided Sales and Services vis-à-vis the previous year and a positive EBITDA amounting to 486 thousand euros, an amount slightly higher than that of 2016 (483 thousand euros).
The company closed 2017 with a positive Net Result of 395 thousand euros, an amount similar to that of the previous year.
The company exclusively carries out the insurance mediation activity, which is its corporate purpose, whose financial year is governed by Decree-Law no. 144/2006, of the 31st of July.
Saros manages an insurance portfolio (largely composed of companies from the CP Group), being entitled to remuneration from the Insurers for its mediation services, and such remuneration (commissions on insurance premiums) is established in the corresponding Mediation Agreements.
The company carried out its activity with the current functioning ensured only by Management.
Management is composed of two Managers, wherefore it is legally required that one of the Managers is qualified as an insurance intermediary.
In 2017, the Sales and Services Provided by SAROS amounted to 476 thousand euros, representing a 3% increase vis-à-vis the preceding year.
It should be noted that, in 2017, the amount accounted for in the Provided Sales and Services heading only includes mediation commissions, however, in 2016, this heading totalled 463 thousand euros, including two parts:
The following table shows the commissions obtained per Insurance Branch:
| Branches | 2017 | 2016 | Change | |
|---|---|---|---|---|
| Amount | % | |||
| Health | 194 | 203 | -9 | -5% |
| Occupational Accidents | 190 | 162 | 2 8 |
18% |
| Civil Liability | 6 4 |
6 6 |
-2 | -4% |
| Multi-Risk Companies | 2 0 |
1 9 |
1 | 7 % |
| Other | 8 | 8 | 0 | 2 % |
| TOTAL | 476 | 458 | 1 8 |
4 % |
As in the previous year, the Health, Occupational Accidents and Civil Liability Branches represented the largest share of earned commissions, at 94% as a whole.
As to the commissions obtained per Insurer, Fidelidade SA and Mapfre SA have jointly represented 96% of the commissions earned by the company.
The company's Net Result amounted to 395 thousand euros, which represents an upward variation of 0.2% vis-à-vis the previous year.
The Provided Sales and Services heading was the main contributor to this result, with an upward variation of 12.9 thousand euros regarding the previous year, although it was partially offset by the increase in External Services and Supplies, by 2 thousand euros, and in Personnel Expenses, by 0.4 thousand euros, as a result of the total reversal of pay cuts.
Other Income decreased by 7.1 thousand euros. It should be noted that this heading, in 2017, exclusively includes the surplus of estimated tax recognised in 2017 (estimate relating to the 2016 financial year).
| (amounts in euros) | ||||
|---|---|---|---|---|
| INCOME AND EXPENSES | PERIODS | Change 2017/2016 | ||
| 31/12/2017 31/12/2016 | Amount | % | ||
| Provided sales and services | 476 238 | 463 348 | 12 890 | 2,8% |
| External services and supplies | -11 125 | -9 143 | -1 982 | -21,7% |
| Personnel expenses | -51 274 | -50 854 | -420 | -0,8% |
| Other income | 82 883 | 89 961 | -7 078 | -7,9% |
| Other expenses | -10 433 | -10 180 | -253 | -2,5% |
| Result before depreciations, financing expenses and taxes | 486 289 | 483 132 | 3 157 | 0,7% |
| Expenses/reversals of depreciations and amortisation | -484 | 0 | -484 | - |
| Operating result (before financing expenses and taxes) | 485 805 | 483 132 | 2 673 | 0,6% |
| Interest and similar income gained | 181 | 295 | -114 | -38,6% |
| Result before taxes | 485 986 | 483 427 | 2 559 | 0,5% |
| Income tax for the financial year | -90 617 | -88 803 | -1 814 | -2,0% |
| Net result of the period | 395 369 | 394 624 | 745 | 0,2% |
47
| (amounts in thousands of euros) | ||||
|---|---|---|---|---|
| PERIODS | Change 2017/2016 | |||
| INCOME AND EXPENSES | ACTUAL 31-12-2017 ACTUAL 31-12-2016 | Amount | % | |
| Provided sales and services | 286 660 | 266 219 | 20 441 | 8% |
| Operating subsidies | 23 | 17 | 6 | 34% |
| Capitalised production costs | 12 521 | 8 335 | 4 186 | 50% |
| Other income | 20 867 | 23 202 | -2 335 | -10% |
| 320 070 | 297 772 | 22 298 | 7% | |
| Changes in production inventories | -33 | -36 | 3 | 8% |
| Sold commodities and consumed materials costs | -26 381 | -23 287 | -3 095 | -13% |
| External services and supplies | -139 059 | -141 321 | 2 263 | 2% |
| Personnel expenses (w/o Compensation and agreement on variables) | -125 192 | -121 680 | -3 512 | -3% |
| Other expenses | -4 168 | -4 738 | 571 | 12% |
| -294 833 | -291 063 | -3 770 | -1% | |
| Operating result of the core activity* (EBITDA) | 25 237 | 6 710 | 18 528 | 276% |
| Expenses/reversals of depreciation and amortisation | -57 924 | -56 487 | -1 438 | -3% |
| Impairment of depreciable/amortisable investments (losses/reversals) | 574 | 856 | -282 | -33% |
| Compensations for termination of employment | -1 754 | -3 094 | 1 340 | 43% |
| Gains/losses attributed to subsidiaries, associated companies and joint ventures | 1 202 | 510 | 692 | 136% |
| Inventory impairment (losses/reversals) | -1 188 | -326 | -863 | -265% |
| Impairment of receivables (losses/reversals) | -1 461 | -325 | -1 136 | -350% |
| Provisions (increases/decreases) | 141 | -11 344 | 11 485 | 101% |
| Impairment of non-depreciable and non-amortisable investments (losses/reversals) | 17 | 1 573 | -1 556 | -99% |
| Other income (reclassification by deferred taxes) | 11 025 | -11 025 | -100% | |
| Other income (sale of basic equip./scrap) | 801 | 801 | s/s | |
| Other income (sale Praia das Maçãs) | 729 | 729 | s/s | |
| Other income (recognition sale value CPCarga) | 1 634 | -1 634 | -100% | |
| Other income (invest. grants recognised in result of written-off material) | 276 | -276 | -100% | |
| Other expenses (write-off Build. Terr. Paço - Order_10759-A/2016) | -1 998 | 1 998 | 100% | |
| Other expenses (other rolling stock write-offs) | -2 596 | 2 596 | 100% | |
| Operating result | -33 626 | -53 587 | 19 960 | 37% |
| Fair value increase/decreases | 1 292 | -1 292 | -100% | |
| Interest and similar income gained | 8 | 180 | -172 | -96% |
| Payable interest and similar expenses | -76 650 | -88 418 | 11 768 | 13% |
| Financial result | -76 643 | -86 947 | 10 304 | 12% |
| Result before taxes | -110 269 | -140 534 | 30 265 | 22% |
| Income tax for the period | -798 | -3 466 | 2 668 | 77% |
| Net result of the period | -111 067 | -144 000 | 32 933 | 23% |
The Net Result of the CP Group amounted to -111.1 million euros, which represented an improvement of 32.9 million euros (23%), comparing with the previous year (-144 million euros).
This improvement is primarily due to the growth in provided sales and services (+20.4 million euros) and the decrease in interest and similar expenses (-11.8 million euros).
In 2017, the Group's recurrent EBITDA was positive at 25.2 million euros, representing an improvement of 18.5 million euros comparing with the previous year. The headings with the most significant changes are as follows:
The Operating Result in 2017 amounted to -33.6 million Euros, which represents an improvement of approximately 20 million euros comparing with the previous year. Apart from the aforementioned reasons for the EBITDA, the following were the main factors which contributed to this development:
from the Offices of the Deputy Secretary of State of Treasury and Finance and of the Deputy Secretary of State of Infrastructure;
The Financial Result in 2017 was negative at 76.6 million euros, representing an improvement of 10.3 million euros (12%), comparing with the previous year. The decrease of the Group's financial liability largely contributed to this fact.
The decrease by 1.3 million euros of the favourable impact arising from holding derivatives compared with 2016 should also be mentioned, as a result of the termination in 2016 of the last financial risk management agreement in the Group's portfolio.
| (amounts in thousands of euros) | ||||
|---|---|---|---|---|
| HEADINGS | PERIODS | Change 2017/2016 | ||
| 31/12/2017 | 31/12/2016 | Amount | % | |
| ASSET | ||||
| Non-Current Asset | 542 517 | 571 583 | -29 066 | -5% |
| Current Asset | 86 669 | 96 110 | -9 441 | -10% |
| Total Asset | 629 186 | 667 693 | -38 507 | -6% |
| EQUITY AND LIABILITY | ||||
| Equity including: | -2 246 273 | -2 651 383 | 405 110 | 15% |
| Net Result of the period | -111 067 | -144 000 | 32 933 | 23% |
| Total Equity | -2 246 273 | -2 651 383 | 405 110 | 15% |
| LIABILITY | ||||
| Non-Current Liability | 2 228 203 | 2 640 638 | -412 435 | -16% |
| Current Liability | 647 256 | 678 438 | -31 182 | -5% |
| Total Liability | 2 875 460 | 3 319 077 | -443 617 | -13% |
| Total Equity + Liability | 629 186 | 667 693 | -38 507 | -6% |
In 2017, the Assets of the CP Group have decreased by 38.5 million euros, whereby the following impacts are the most significant:
The capital increases carried out by the Portuguese State throughout 2017 amounted to 516.4 million euros. Such statutory capital increases
have been approved by Joint Orders from the Secretary of State of Treasury and Infrastructure.
The liability of the CP Group has decreased by 443.6 million euros in 2017, whereas the following impacts are the most significant:
With the integration of CP in the consolidation perimeter of the State Budget in 2015, the company was able to stop relying on financing from credit institutions. This way, its financing needs were satisfied by loans from the Portuguese State, in accordance with the laws in force for Reclassified Public Companies (EPR).
In this sense, following the joint orders from the Sector and Financial Ministries, it was determined that the statutory capital of CP would be increased by 516.4 million euros in 2017, in order to meet the needs resulting from the historical debt service (amortisations, interest and other financial costs), investment and personnel expenses, arising from the historical agreement on variables.
In December, the Group had to take out financing amounting to 6 million euros in order to ensure the fulfilment of its operating current liabilities.
The remunerated debt of the CP Group decreased by approximately 411 million euros throughout 2017. At the end of the year, the debt amounted to 2,616 billion euros, with the following particulars by financing sources:
In 2017, the CP Group made amortisations amounting approximately to 411 million euros, specifically from loans from EIB and the Portuguese State.
The debt structure remained virtually unchanged; the medium and longterm debt is the most significant, as per the following chart:
The CP Group has undertaken all efforts needed for complying with the State Treasury Unit Principle, concentrating the maximum amount of services in IGCP.
However, as a result of the specificities of the Group's activity, it has been necessary to maintain the movement of some bank accounts in the National Commercial Banks, since some services needed for its functioning could not be provided by IGCP.
In this context, in compliance with the legal provisions established regarding the State Treasury Unit Principle, to which public companies are subject, the companies in the CP Group have requested exemption from it for some services on a yearly basis; such exemption has been granted for some services, specifically for amounts subject to collection, carrying and counting, meal card, bank guarantees that cannot be replaced by secured deposits, collections made through direct debit, amounts related to the service of factoring, leasing agreements and similar agreements, bank loans (in the short, medium or long-term), among others.
Therefore, the CP Group is deemed to be complying with the legislation applying in this area.
The prospects for the Portuguese economy over the time horizon 2018- 2020 point to a constant moderate recovery of the economy and employment, wherefore a gradual acceleration of the Gross Domestic Product (GDP) is expected.
In this context, a boost in mobility needs of communities is foreseen, enhanced by the increase in tourism and the households' disposable income and by the improvement of the labour market.
As for the transportation sector, national and community policies strengthen the focus on Customer satisfaction and the commitment to the railway sector, as a defining element in the mobility of people and goods, and as an important instrument for the economy and energetic policy improvement, channelling a significant part of investment support to this sector.
The Board of Directors of CP established the following strategic guidelines for 2018-2020, given the recommendations from the Sector and Financial Ministries, the economy forecasts, and the analysis of known opportunities and constraints:
continuing the recovery of historical debt, by rationalising expenses, by profiting from nonessential assets, and by promoting the sustainability of affiliate companies.
Despite the absence of Public Contracting and the fact that the absence of compensatory allowances remains to be the case, CP plans to maintain the operation in all lines and services currently operating, as well as to fully meet the public service provision obligations to which it is subject.
Sustained growth – which began at the end of 2013 - is also expected to continue regarding the number of transported passengers and income from traffic. This growth is based on the maintenance of the current commercial dynamics and the availability of human and material resources.
To ensure such availability of CP's human resources, it is essential to carry out new recruitment procedures that meet the needs of intermediate managements, which assume a fundamental role in the operating staff management, the replacement of employees who left the company due to retirement or unfitness for the corresponding tasks, and to lower the high levels found in overtime work.
As to rolling stock, CP is faced with significant growth in maintenance expenses in order to uphold its production operability and transportation safety, however, without ensuring the adequate levels of availability and reliability. Thus, and following the infrastructure investments foreseen in the FERROVIA 2020 Investment Plan, CP is willing to initiate a purchase process for rolling stock, replacing its current diesel fleet, outdated and compromised by imminent rupture of the production capacity, and strengthening its rolling stock fleet for long-distance services.
Regarding sales, the majority of CP's commercial equipment and information systems have operating obsolescence problems. Although their replacement processes have already been initiated, we expect a growth in maintenance and repair expenses in order to ensure minimum operating levels, in the short term.
Concerning EMEF, the strategic focus remains to be the improvement of the company's economic and financial balance, as well as the promotion of efficiency, through the following principles:
In 2018, EMEF's service provisions are expected to sustain significant growth as a result of the planned maintenance and repair interventions to rolling stock by its primary customers. This increase shall essentially focus on workshop facilities in Central and Northern Portugal, and the full compliance with the intervention plan shall rely on the completion of a new recruitment process for workshop personnel.
As to Fernave, following the reorganisation of the company's operating model to be implemented in 2018, the conditions needed to ensure its economic and financial sustainability are expected to be created.
In economic terms, the focus is on the loosening of the cost structure via a significant reduction in fixed expenses, specifically regarding the permanent staff, via subcontracting, where necessary, and charges incurred with facilities.
Such measures are complemented in financial terms through the recapitalisation of the company by converting existing credits into equity instruments and strengthening equities through cash contribution.
ECOSAÚDE shall continue to give priority to the commercial effort in medium and large customers (with occupational safety and health risks), as well as to the electronic platforms of public procurement, where access is given to large tenders, thereby profiting from the company's installed capacity, particularly in the Occupational Health and Medical Specialties sectors.
Apart from attracting new customers, the search for services based on the existing customers shall also be boosted in order to fully explore the company's capacity, whether through cross-selling or the increase in the intensity of the provision of already contracted services.
At the same time, it shall keep management policies focusing on the rationalisation of the operating expense structure and on matching supply to the expected level of activity.
Lastly, SAROS plans to continue ensuring the activities currently undertaken, optimising its strategic position as the captive mediator of the CP Group, by combining such potential with the aim of maximising results.
FACTOS RELEVANTES APÓS O TERMO DO EXERCÍCIO0
There were no relevant events after the balance sheet date to report.
(in accordance with paragraph c) of item 1 of article 245 of the Securities Code)
As far as we know: the information foreseen in paragraph a) of item 1 of article 245 of the Securities Code was established in compliance with the applicable accounting standards, providing a true and appropriate image of the asset and liability, the financial situation and the results of CP - Comboios de Portugal, EPE and of the companies included within the consolidation perimeter (CP Group), and the management report accurately shows the business evolution, the performance and the position of the CP Group and, furthermore, such report contains a description of the main risks and uncertainties of the Group.
Lisbon, 12th of April 2018
The Board of Directors
President: Dr. Carlos Gomes Nogueira
Voting Member: Eng. Sérgio Abrantes Machado
Voting Member: Dr. Ana Maria dos Santos Malhó
DEMONSTRAÇÕES FINANCEIRAS
64
| Statement of Consolidated Financial Position as at the 31st December, 2017 | (amounts in euros) | ||
|---|---|---|---|
| HEADINGS | NOTES | PERIODS | |
| 31/12/2017 | 31/12/2016 | ||
| ASSET | |||
| Non-current asset | |||
| Fixed tangible assets | 7 | 512 757 959 | 542 527 658 |
| Intangible assets | 8 | 193 279 | 261 198 |
| Financial holdings - equity method | 9 | 1 541 490 | 802 236 |
| Other financial investments | 10 | 28 024 305 | 27 992 171 |
| 542 517 033 | 571 583 263 | ||
| Current asset | |||
| Inventory | 12 | 28 273 068 | 27 740 855 |
| Customers | 13 | 13 494 452 | 12 794 087 |
| State and other public entities | 14 | 15 257 232 | 9 166 458 |
| Other receivables | 15 | 7 868 077 | 11 366 842 |
| Deferrals | 16 | 1 363 675 | 1 132 150 |
| Financial assets held for trading | 17 | - | 4 |
| Non-current assets held for sale | 18 | 5 908 397 | 16 995 564 |
| Cash and bank deposits | 4 | 14 504 270 | 16 914 089 |
| 86 669 171 | 96 110 049 | ||
| Total asset | 629 186 204 | 667 693 312 | |
| EQUITY AND LIABILITY | |||
| Equity | |||
| Subscribed capital | 19 | 3 850 091 940 | 3 333 713 276 |
| Legal reserves | 20 | 24 703 | 24 703 |
| Other reserves | 21 | 1 306 650 | 1 306 650 |
| Results brought forward | 22 | (6 078 119 710) (5 933 918 492) | |
| Adjustments/other changes in equity | 23 | 91 490 008 | 91 490 008 |
| Net result of the period Total equity |
( 111 066 936) | ( 143 999 549) (2 246 273 345) (2 651 383 404) |
|
| Liability | |||
| Non-current liability | |||
| Provisions | 24 | 13 959 460 | 17 969 218 |
| Loans obtained | 25 | 2 206 237 291 | 2 609 278 327 |
| Other debts payable | 26 | 8 006 555 | 13 390 899 |
| 2 228 203 306 | 2 640 638 444 | ||
| Current liability | |||
| Suppliers | 27 | 13 376 668 | 23 831 725 |
| Advance payments from customers | 28 | 374 000 | 574 500 |
| State and other public entities | 14 | 3 643 320 | 4 113 609 |
| Loans obtained | 25 | 409 682 868 | 417 669 625 |
| Other debts payable | 26 | 105 823 010 | 109 603 276 |
| Deferrals | 16 | 114 356 377 | 122 645 537 |
| 647 256 243 | 678 438 272 | ||
| Total liability | 2 875 459 549 | 3 319 076 716 | |
| Total equity and liability | 629 186 204 | 667 693 312 |
Statement of Consolidated Financial Position as at the 31st December, 2017
To be read together with the notes to the financial statements.
Voting Member - Dr. Ana Maria dos Santos Malhó
Voting Member - Eng. Sérgio Abrantes Machado
(amounts in euros)
Consolidated income statement and statement of other comprehensive income Period ended on the 31st December, 2017
| PERIODS | |||
|---|---|---|---|
| INCOME AND EXPENSES | Notes | 31/12/2017 | 31/12/2016 |
| Provided sales and services | 29 | 286 659 853 | 266 218 886 |
| Operating subsidies | 30 | 22 762 | 16 929 |
| Gains/losses attributed to subsidiaries, associated companies and joint ventures | 31 | 1 202 043 | 509 730 |
| Changes in production inventories | 12 | ( 32 745) | ( 35 661) |
| Capitalised production costs | 32 | 12 520 674 | 8 334 943 |
| Sold commodities and consumed materials costs | 33 | ( 26 381 446) | ( 23 286 771) |
| External services and supplies | 34 | ( 139 058 818) | ( 141 321 428) |
| Personnel expenses | 35 | ( 126 946 302) | ( 124 774 822) |
| Inventory impairment (losses/reversals) | 12 | ( 1 188 335) | ( 325 744) |
| Impairment of receivables (losses/reversals) | 13,15 | ( 1 460 963) | ( 324 716) |
| Provisions (increases/decreases) | 24 | 140 990 | ( 11 343 906) |
| Impairment of non-depreciable and non-amortisable investments (losses/reversals) | 36 | 17 163 | 1 573 246 |
| Other income | 37 | 22 396 933 | 36 135 636 |
| Other expenses | 38 | ( 4 167 564) | ( 9 331 995) |
| Result before depreciations, financing expenses and taxes | 23 724 245 | 2 044 327 | |
| Expenses/reversals of depreciation and amortisation | 40 | ( 57 924 291) | ( 56 486 597) |
| Impairment of depreciable/amortisable investments (losses/reversals) | 41 | 573 769 | 855 533 |
| Operating result (before financing expenses and taxes) | ( 33 626 277) | ( 53 586 737) | |
| Fair value increases/decreases | 39 | - | 1 291 916 |
| Interest and similar income gained | 42 | 7 612 | 179 648 |
| Payable interest and similar expenses | 43 | ( 76 650 283) | ( 88 418 439) |
| Result before taxes | ( 110 268 948) | ( 140 533 612) | |
| Income tax of the period | 11 | ( 797 988) | ( 3 465 937) |
| Net and comprehensive result of the period | ( 111 066 936) | ( 143 999 549) |
To be read together with the notes to the financial statements.
Certified Accountant - Dr. Ana Coelho President - Dr. Carlos Gomes Nogueira
Voting Member - Dr. Ana Maria dos Santos Malhó
Voting Member - Eng. Sérgio Abrantes Machado
| Consolidated statement of changes in equity in the 2016 period | (amounts in euros) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| DESCRIPTION | NOTES | Subscribed Capital | Legal reserves | Other reserves | Equity granted to capital owners of the parent company Results brought forward |
Other changes in Adjustments / equity |
Net result of the period |
Total | Non-controlling interests |
Total Equity | |
| Position at the beginning of the 2016 period | 1 | 19 to 23 | 2 678 800 000 | 24 703 | 1 306 650 | (5 655 108 293) | 91 490 008 | ( 278 657 308) | (3 162 144 240) | (3 162 144 240) | |
| Changes in the period | - | - | - | - | - | - | - | - | |||
| First implementation of the new accounting framework | - | - | - | - | - | - | - | - | |||
| Changes in accounting policies | - | - | - | - | - | - | - | - | |||
| Translation differences of financial statements | - | - | - | - | - | - | - | - | |||
| Realisation of revaluation surplus | - | - | - | - | - | - | - | - | |||
| Revaluation surplus | - | - | - | - | - | - | - | - | |||
| Adjustments by deferred taxes | - | - | - | - | - | - | - | - | |||
| Other changes recognised in equity | - | - | - | - | - | - | - | ||||
| 2 | - | - | - | - | - | - | - | ||||
| Net result of the period | 3 | - | - | - | - | - | ( 143 999 549) | ( 143 999 549) | ( 143 999 549) | ||
| Comprehensive result | 4 = 2 + 3 | - | - | - | - | - | ( 143 999 549) | ( 143 999 549) | ( 143 999 549) | ||
| Operations with capital owners in the period | |||||||||||
| Capital subscriptions | 654 913 276 | - | - | - | - | - | - | - | |||
| Share premium subscriptions | - | - | - | - | - | - | - | - | |||
| Distributions | - | - | - | - | - | - | - | - | |||
| Down payments to cover losses | - | - | - | - | - | - | - | - | |||
| Other operations | - | - | - | ( 278 810 199) | - | 278 657 308 | 278 657 308 | 278 657 308 | |||
| 5 | 654 913 276 | - | - | ( 278 810 199) | - | 278 657 308 | 654 760 385 | 654 760 385 | |||
| 1+2+3+5 6 = |
3 333 713 276 | 24 703 | 1 306 650 | (5 933 918 492) | 91 490 008 | ( 143 999 549) | (2 651 383 404) | (2 651 383 404) | |||
| Position at the end of the 2016 period To be read together with the notes to the financial statements. |
Certified Accountant - Dr. Ana Coelho President - Dr. Carlos Gomes Nogueira
Voting Member - Dr. Ana Maria dos Santos Malhó
Voting Member - Eng. Sérgio Abrantes Machado
| Consolidated statement of changes in equity in the 2017 period | (amounts in euros) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| DESCRIPTION | NOTES | Subscribed Capital | Legal reserves | Other reserves | Equity granted to capital owners of the parent company Results brought forward |
Other changes in Adjustments / equity |
Net result of the period |
Total | Non-controlling interests |
Total Equity | |
| Position at the beginning of the 2017 period | 1 | 19 to 23 | 3 333 713 276 | 24 703 | 1 306 650 | (5 933 918 492) | 91 490 008 | ( 143 999 549) | (2 651 383 404) | (2 651 383 404) | |
| Changes in the period | - | - | - | - | - | - | - | - | |||
| First implementation of the new accounting framework | - | - | - | - | - | - | - | - | |||
| Changes in accounting policies | - | - | - | - | - | - | - | - | |||
| Translation differences of financial statements | - | - | - | - | - | - | - | - | |||
| Realisation of revaluation surplus | - | - | - | - | - | - | - | - | |||
| Revaluation surplus | - | - | - | - | - | - | - | - | |||
| Adjustments by deferred taxes | - | - | - | - | - | - | - | - | |||
| Other changes recognised in equity | - | - | - | - | - | - | - | ||||
| 2 | - | - | - | - | - | - | - | - | |||
| Net result of the period | 3 | - | - | - | - | - | ( 111 066 936) | ( 111 066 936) | ( 111 066 936) | ||
| Comprehensive result | 4 = 2 + 3 | ( 111 066 936) | ( 111 066 936) | ( 111 066 936) | |||||||
| Operations with capital owners in the period | - | - | - | - | - | - | - | ||||
| Capital subscriptions | 516 378 664 | - | - | - | - | - | - | ||||
| Share premium subscriptions | - | - | - | - | - | - | - | - | |||
| Distributions | - | - | - | - | - | - | - | - | |||
| Down payments to cover losses | - | - | - | - | - | - | - | - | |||
| Other operations | - | - | - | ( 144 201 218) | - | 143 999 549 | 143 999 549 | 143 999 549 | |||
| 5 | 516 378 664 | - | - | ( 144 201 218) | - | 143 999 549 | 516 176 995 | 516 176 995 | |||
| Position at the end of the 2017 period | 6 = 1+2+3+5 | 3 850 091 940 | 24 703 | 1 306 650 | (6 078 119 710) | 91 490 008 | ( 111 066 936) | (2 246 273 345) | (2 246 273 345) | ||
| To be read together with the notes to the financial statements. |
Certified Accountant- Dr. Ana Coelho President - Dr. Carlos Gomes Nogueira
Voting Member - Dr. Ana Maria dos Santos Malhó
Voting Member - Eng. Sérgio Abrantes Machado
68
| Period ended on the 31st December, 2017 | (amounts in euros) | |
|---|---|---|
| CASH FLOW STATEMENT | 31-12-2017 | 31-12-2016 |
| Cash flows from operating activities - direct method | ||
| Collections from customers | 317 737 826 | 298 638 537 |
| Payments to suppliers | (211 712 477) | (203 177 910) |
| Payments to employees | (130 884 096) | (127 725 134) |
| Cash generated by the operations | (24 858 747) | (32 264 507) |
| Payment/receipt of income tax | ( 348 179) | ( 315 286) |
| Other receivables/payments | (4 127 781) | 20 203 471 |
| Cash flows from operating activities (1) | (29 334 707) | (12 376 322) |
| Cash flows from investment activities | ||
| Payments regarding: | ||
| Fixed tangible assets | (4 970 240) | (4 885 613) |
| Intangible assets | ( 308 176) | ( 55 828) |
| Other assets | (179 516 477) | (132 702 396) |
| Receivables from: | ||
| Fixed tangible assets | 1 859 758 | 472 567 |
| Other assets | 179 514 154 | 132 920 094 |
| Investment grants | 1 535 625 | 1 540 660 |
| Interest and similar income | 136 | 539 414 |
| Dividends | 460 418 | 351 098 |
| Cash flows from investment activities (2) | (1 424 802) | (1 820 004) |
| Cash flows from financing activities Receivables from: |
||
| Loans obtained | 6 000 000 | - |
| Realisations of capital and other equity instruments | 98 086 724 | 175 898 192 |
| Payments regarding: | ||
| Loans obtained | (36 930 188) | (118 555 188) |
| Interest and similar expenses | (38 808 003) | (40 582 703) |
| Cash flows from financing activities (3) | 28 348 533 | 16 760 301 |
| Changes in cash and cash equivalents (4) = (1) + (2) + (3) | (2 410 976) | 2 563 975 |
| Effect of exchange rate differences | ( 66) | 3 196 |
| Cash and cash equivalents at the beginning of the period | 16 688 653 | 14 121 482 |
| Cash and cash equivalents at the end of the period | 14 277 611 | 16 688 653 |
| To be read together with the notes to the financial statements. |
Consolidated cash flow statement
Certified Accountant - Drª Ana Coelho President - Dr. Carlos Gomes Nogueira
Voting Member - Dr. Ana Maria dos Santos Malhó
Voting Member - Eng. Sérgio Abrantes Machado
NOTAS ANEXAS ÀS
CP – Comboios de Portugal, E.P.E. is a corporate public entity, a legal person governed by public law, with administrative, financial and asset autonomy, with registered office in Calçada do Duque, nº 20, 1249-109 Lisbon, whose current legal framework and Articles of Association have been approved by Decree-Law 137-A/2009, of the 12th of June.
CP's main purpose is the provision of services of railway transportation of passengers in railway lines, sections of lines and branches which are, or will become, part of the national railway network, as well as the international transportation of passengers.
The transportation of goods was demerged in 2009, therefore, it started to be undertaken by CP Carga - Logística e Trasporte Ferroviário de Mercadorias, S.A., whose share capital was held entirely by CP until 2015, and disposed in 2016, to Mediterranean Shipping Company Rail (Portugal) – Operadores Ferroviários, S.A..
Through its subsidiaries and associated companies, the CP Group has carried out the following activities in 2017:
to recruitment, selection and assessment of staff; technical assistance, consultancy and auditing, specifically regarding health, occupational health and safety, environment and environmental management; carrying out of drug and alcohol tests, thereby ensuring proper referral for the treatment of such addictions (Ecosaúde, S.A.);
EMEF, S.A's 35% holding in NOMAD TECH, Lda., and Fernave's 19.1% holding in TRANSCOM - Sociedade de Formação, Consultoria e Auditoria em Transportes e Comunicações, S.A.R.L. (Mozambican), should also be noted.
CP, as a corporate public entity, is subject to the management guidelines established by the Government, the responsible ministries – sector and finance -, the Ministries of Economy and Finance, as well as the financial control of the Court of Auditors and of the Inspectorate General of Finance.
Furthermore, apart from the aforementioned control, the articles of association foresee a dualistic structure of financial supervision composed by the Supervisory Board and the Certified Public Accountant.
CP is the parent company of a group of subsidiary and associated companies, acting in several activity segments, whose characterisation is set forth in more detail in note 3, and the following are its consolidated financial statements.
The consolidated financial statements of the CP Group have been prepared on the assumption of continuity of operations, from the accounting records of the companies included in the consolidation perimeter, in accordance with the international financial reporting standards, as implemented by the European Union (EU), in force as at the 31st of December, 2017.
The International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB), as well as the International Accounting Standards (IAS), issued by the International Accounting Standards Committee (IASC), and their respective interpretations (IFRIC and SIC), issued by the International Financial Reporting Interpretation Committee (IFRIC) and the Standing Interpretation Committee (SIC), shall be construed as forming part of the aforementioned standards. Hereinafter, all such standards and interpretations thereof shall be generically referred to as IFRS.
Such financial statements, which are expressed in Euros, have been examined by the Board of Directors in a meeting held on the 12 th of April 2018, having decided to submit such statements to the responsible Ministry for approval.
The accounting policies set forth in note 3 were used in the consolidated financial statements for the period ended on the 31st of December 2017, as well as in the comparative financial information set forth in these financial statements for the period ended on the 31st of December 2016.
There were no derogations made to the provisions of the IFRS.
No changes were made to the accounting policies, and no errors which materially affect the comparison of values between financial years have been detected.
The main accounting policies applied when preparing the consolidated financial statements herein are described below, and have been applied in a consistent manner for the presented periods.
The consolidated financial statements were prepared in accordance with the historical cost principle, modified by the application of fair value for the derivative financial instruments, financial assets and liabilities held for trading, with the exception of those for which fair value is not available. Non-current assets held for sale and groups of assets held for sale are registered at the lower value between their book value and fair value deducted from the corresponding sale costs.
The preparation of financial statements in accordance with the IFRS requires the formulation of judgments, estimates and assumptions affecting the application of the accounting policies and the value of assets, liabilities, income and expenses. The associated estimates and assumptions are based on historical experience and on other factors deemed reasonable in accordance with the circumstances, and they are the basis for the judgments regarding the value of assets and liabilities whose valuation is not clear through other sources. The real results may differ from the estimates.
The matters requiring a larger index of judgment or complexity, or for which the assumptions and estimates are considered significant, are presented in the following headings: "Value judgments", "Main assumptions concerning the future" and "Main sources for uncertain estimates", which are set forth in this note.
Pursuant to the current legislation, the entities whose securities are admitted to trading in a regulated market shall draw up their consolidated accounts in accordance with the international financial reporting standards.
For this reason, CP presents its consolidated financial statements, which express the financial position and results of the Group's operations as if it were a single entity, aiming to highlight the results of the operations that the companies in the Group have carried out with third parties.
The Group and the Company
Throughout 2017, CP continued its purpose of developing a sustainable Group strategy, by structuring its existing shareholdings and by developing a culture of efficiency and added value, focused on its core business.
CP has provided self-sufficiency to activity segments by turning them into companies, aiming at creating positive synergies for its business. Such activity segments include railway equipment maintenance and technical training.
CP holds most of the capital of all subsidiary companies. Furthermore, CP has a few minority holdings, based on cooperation with other Operators.
CP – Comboios de Portugal E.P.E. is, from July 2009, a corporate public entity, which is 100% held by the Portuguese State. CP is responsible for the provision of services related to national and international passenger railway transportation.
CP has a nationwide activity, providing essential services for the Country's development and for the social and territorial cohesion thereof.
CP's financial holdings as at the 31st of December 2017, are as follows:
EMEF – Empresa de Manutenção de Equipamento Ferroviário, S.A.
CP's shareholding – 100% Subscribed Capital – 8,100,000 euros
EMEF, SA was incorporated in 1992, and its purpose is the manufacture, reconditioning, large repair and maintenance of equipment, railway vehicles, repair and maintenance of transportation vehicles; study of workshop facilities for maintenance purposes. Thus, this company is of utmost importance for the national market.
SAROS – Sociedade de Mediação de Seguros, Lda.
CP's shareholding – 100% Subscribed Capital – 5,000 euros
The company's purpose is the insurance mediation activity.
Fernave – Formação Técnica, Psicologia Aplicada e Consultoria em Transportes e Portos, S.A.
CP's shareholding – 100% Subscribed Capital – 50,000 euros
Incorporated in 1992, with the following corporate purpose:
ECOSAÚDE – Educação, Investigação e Consultoria em Trabalho, Saúde e Ambiente, S.A.
CP's shareholding – 100% Subscribed Capital – 50,000 euros
Company incorporated in 1995, whose corporate purpose is the provision of healthcare, creating and managing healthcare units as well as working conditions; higher and secondary teaching, training and technical/professional development, namely in the areas of working conditions, health and environment; the provision of services falling within the scope of recruitment, selection and assessment of personnel; technical assistance, consultancy and audit services, namely concerning health, occupational health and safety, environment and environmental management; preparation of studies and analyses, having widened its operation to prevention and control strategies within the scope of drug addiction, alcoholism and smoking, to the carrying out of drug and alcohol control programmes, and, also, to the proper referral and treatment of drug and alcohol addicts.
SIMEF, A.C.E.
EMEF's shareholding – 51% Capital – none
Complementary company grouping incorporated in 2009, whose corporate purpose is the synergy and optimisation of the activities of the grouped companies concerning the maintenance of locomotives type "LE 5600" and "LE 4700", under the agreement between the Grouping and CP – Comboios de Portugal, E.P.E.
CP's shareholding – 33.33% Subscribed Capital – 30,000 euros
TIP is a complementary company grouping incorporated in 2002, whose corporate purpose is the establishment and management of a common and exclusive ticketing system of the Grouping (CP, STCP and Metro do Porto) in the Greater Oporto area, as well as the establishment of the common and exclusive intermodal tariff for the public means of transportation of passengers that are operated either directly or indirectly by the grouping entities.
CP's shareholding – 14.29% Subscribed Capital – 392,832.02 euros
OTLIS is a complementary company grouping incorporated in 1996, whose corporate purpose is to ensure the development of the tele-ticketing project in association with other international partners, in accordance with the commitments assumed by the companies comprising the grouping within the scope of the overall proposal of the aforementioned project.
TRANSCOM – Sociedade de Formação, Consultoria e Auditoria em Transportes e Comunicações, S.A.R.L. (Mozambican)
Shareholding via Fernave – 19.1% Share Capital – 74,025,000 meticais
The company was incorporated in 1998, and its corporate purpose is higher university teaching, as well as scientific research, namely within the scope of technology, management, logistics, distribution, transportation, communications and computer science; technical teaching and training of upcoming and current middle management, specifically within the scope of technology, management, logistics, distribution, transportation, communications and computer science; training, as well as technical and professional development of personnel working mainly in transportation, communications and computer science organisations; consultancy and auditing for companies and other organisations, especially those related to transportation, communications and computer science.
Shareholding via EMEF - 35% Subscribed Capital – 160,000 euros
The company was incorporated in 2013, carrying out its activity within the scope of engineering, innovation and technology applied to transportation, manufacture, repair and maintenance of electronic components and the development of computer science solutions.
CP also has a set of small shareholdings in companies whose activities are connected to those carried out by the companies of the Group.
Such shareholdings are recognised at cost less impairment losses, given the fact that the value of such shareholdings is not publicly traded and there is no possibility of obtaining their fair value in a reliable manner.
Medway – Operador Ferroviário e Logístico de Mercadorias, S.A. (former CP Carga)
CP's shareholding – 5% Subscribed Capital – 121,312,810 euros
Its corporate purpose is the railway transportation of goods, logistics activities and related operations.
The company was incorporated by simple demerger, thereby complying with the commitment to liberalisation for the sector assumed by Portugal to the European Union.
Its share capital was fully held by CP until 2015, and disposed of in 2016 to Mediterranean Shipping Company Rail (Portugal) – Operadores Ferroviários, S.A.. As at the 31st of December 2017, CP still has a temporary 5% shareholding, and is awaiting for the completion of certain procedures foreseen in the reference sale agreement.
CP's shareholding – 3.33% Capital – 7,500.000 euros
Incorporated in 1993, its corporate purpose is the operation of a light metro system in the Oporto metropolitan area, under a concession scheme assigned by the State.
CP's shareholding – 10% Capital – 125,000 euros
Company incorporated in 1995, whose corporate purpose is the exclusive operation of the surface metro transportation in the Municipality of Mirandela, Carvalhais-Cachão section.
CP's shareholding – 2.5% Capital – 1,075,000 euros
This company was incorporated in 2002, and its main corporate purpose is the exclusive operation of a light surface metro network in the area of the Municipalities of Coimbra, Lousã and Miranda do Corvo.
CP's shareholding – 0.47% Capital – 1,064,825 euros
APOR was incorporated in 1997, and its corporate purpose is Oporto's economic modernisation, including urban development through the development of programmes aimed at contributing for the implementation of correction factors for the city's social, economic and cultural fabric.
CP's shareholding – 2.09% Capital – 18,300,000 euros
The company's corporate purpose is the organisation and development of combined transportation, as well as of refrigerated transportation at an appropriate temperature, comprising all the operations intended for obtaining and maintaining the temperature deemed appropriate for the various goods, as well as for the availability of supporting services concerning such transportation.
EUROFIMA – Société Européenne pour le Financement de Matériel Ferroviaire (Swiss)
CP's shareholding – 2% Capital – 2,600,000,000 CHF
Its main corporate purpose is to provide the financing needed for investments for the renewal and modernisation of rolling stock, in order to ensure a progressive integration of railways into the European level, playing a very competitive role in the granting of funds to shareholders.
CP's shareholding – 1.54% Capital – 110,250 euros
The company's corporate purpose is to provide financial services to its associates, as well as all commercial operations required for such purpose, and, particularly, to reduce the number and amount of payments between its associates through the centralisation and offsetting of their reciprocate debits and credits.
The obligation to prepare consolidated accounts shall apply to the parent company holding control over one or more subsidiaries. In accordance with the specifications of the IFRS, all companies of the Group over which the company holds control have been included in the consolidation, and the full consolidation method has been used for all such companies.
Thus, based on the specifications set forth in the IFRS 10, the financial statements have been prepared by grouping identical elements of assets, liabilities, equities, income and expenses, on a line-byline basis.
The consolidation procedures have further involved the elimination of the parent company's investment in each subsidiary against equity, as well as the elimination of balances, transactions, margins, intragroup income and gains, and expenses and losses.
Concerning joint ventures, the equity method was applied from January 2013, replacing the proportionate consolidation, in accordance with the provisions set forth in the IFRS 11.
By pursuing the specifications of the standard concerning the implementation of the equity method, the investment was initially recognised at cost, and the carrying amount is increased or decreased in order to recognise the investor's share in the investee's results
following the date of the incorporation/purchase of the joint venture. Distributions received reduce the carrying amount of the investment, and adjustments may also be made to the carrying amount for changes in the proportionate interest of the investor in the joint venture, as a result of changes in equity that have not been recognised in the joint venture's results.
Consolidation Perimeter
The share capital of CP Carga- Logística e Transportes Ferroviários de Mercadorias, S.A, was disposed in 2016 to Mediterranean Shipping Company Rail (Portugal)- Operadores Ferroviários, S.A. As at the 31st of December 2017, CP still has a 5% residual shareholding, which is temporary (and adjusted with impairment), given the fact that it is awaiting completion of certain procedures foreseen in the agreement, in order for the disposal to correspond to the entire shareholding. It is for this reason that CP Carga is not shown in the consolidation perimeter chart.
The companies included in the consolidation under the full consolidation method, their registered offices and the proportion of the capital which is directly and indirectly held by the Group, as at the 31st of December 2017, are the following:
| Company | Registered Office | Holders of Capital | % of held capital |
|---|---|---|---|
| EMEF, S.A. | Entroncamento | CP, E.P.E. | 100,00% |
| SAROS, LDA. | Lisbon | CP, E.P.E. | 100,00% |
| FERNAVE, S.A. | Lisbon | CP, E.P.E. | 100,00% |
| ECOSAÚDE, S.A. | Lisbon | CP, E.P.E. | 100,00% |
The companies included in the consolidation under the equity method, their registered offices and the proportion of the capital held, as at the 31st of December 2017, are the following:
| Company | Registered Office | Holders of Capital | % of capital |
|---|---|---|---|
| TIP, ACE | Oporto | CP, E.P.E. | 33,33% |
| SIMEF, ACE | Entroncamento | EMEF, S.A. | 51,00% |
| OTLIS, ACE | Lisbon | CP, E.P.E. | 14,29% |
| NOMAD TECH, LDA. | Oporto | EMEF, S.A. | 35,00% |
Financial investments whose fair values cannot be reliably identified shall be measured at their acquisition cost, less any accumulated impairment losses.
Fixed Tangible Assets
Fixed tangible assets concerning the passenger transportation segment are held by the parent company, and are accounted for at acquisition cost, less their corresponding accumulated depreciations and impairment losses.
At the date of transition for the IFRS, CP decided to consider as cost of fixed tangible assets their revalued amount determined in compliance with the previous accounting policies, which was, in general terms, comparable to the measured cost in accordance with the IFRS.
Subsequent expenses are recognised as fixed tangible assets only if it is likely that there will be future economic benefits therefrom for the entity. All expenses related to maintenance and routine repairs which do not increase the asset's useful life , or which do not constitute replacements in regular intervals (large interventions performed with intervals varying between 2 and 15 years) of items of the asset are recognised as expense, in accordance with the accruals principle.
CP's fixed tangible assets include assets owned by the State (assets set forth in joint order no. 261/99, of the 24th of March) and are assigned to operational use by the company. Such assets are accounted for in the financial statements in order to allow for an assessment of the company's economic performance.
Such policy was also implemented in the recognition and measurement of the fixed tangible assets used by the remaining subsidiaries in the carrying out of their activity, particularly in the manufacture and maintenance of railway equipment and vehicles, in technical training and applied psychology, as well as in the provision of healthcare and occupational safety services.
The cost of all fixed tangible assets includes the purchase price, import duties, non-refundable taxes and all necessary costs in order to place the asset in the working location and condition, namely the transportation and assembly expenses, excluding trade discounts and rebates.
Subsequent expenses are recognised as fixed tangible assets only if it is likely that there will be future economic benefits therefrom. All maintenance and repair expenses which do not increase the asset's useful life shall be recognised as costs, in accordance with the accruals principle.
thereof, are recognised as fixed tangible assets and depreciated by the lengthening of its expected useful life.
Land is not depreciated. Depreciation of the remaining fixed tangible assets is calculated by the straight-line method, in accordance with the following expected useful life periods of the assets.
| Description of the asset | Years |
|---|---|
| Buildings and other constructions – State |
3 to 50 |
| Buildings and other constructions – CP |
3 to 50 |
| Rolling Stock: | |
| Diesel and electric locomotives: | |
| - Main Component | 17 to 35 |
| - Secondary Component | 5 to 15 |
| Diesel and electric railcars: | |
| - Main Component | 14 to 30 |
| - Secondary Component | 2 to 15 |
| Passenger carriages: | |
| - Main Component | 15 to 30 |
| - Secondary Component | 2 to 12 |
| Transportation equipment | 4 to 12 |
| Administrative equipment and tools | 3 to 18 |
| Other fixed tangible assets | 5 to 20 |
Fixed tangible assets belonging to the State (assets set forth in joint order no. 261/99 from March 24th) are being depreciated since 1999 at a rate of 2%, in accordance with regulating decree no. 25/2009 from September 14th.
No residual amounts were considered when determining the depreciated amounts.
Government grants relating to fixed tangible and intangible assets are initially recognised as deferred income when there is a guarantee that the grant shall be received and that the conditions regarding the award of the grant shall be complied with. Subsequently, such grants are recognised in the income statement on a systematic basis, in accordance with the asset's useful life.
Grants offsetting incurred expenses and losses are recognised as income in the income statement on a systematic basis, in the same period in which the expenses are recognised.
Interest on loans directly attributable to the acquisition or construction of assets is capitalised as part of the cost of such assets. An asset eligible for capitalisation is an asset needing a substantial period of time in order to be available for use or sale. The amount of interest to be capitalised is determined through the application of a capitalisation rate on the value of the investments made. The capitalisation of costs with loans begins when the investment begins, when interest on loans has already been incurred and when the activities necessary for preparing the asset in order for it to be available for use or sale are already under way. The capitalisation is concluded once all the activities necessary for the asset to be available for use or sale are substantially concluded.
Considering the nature of rolling stock for passenger transportation and, particularly, the absence of interoperability with the European network, the determination of a market value that is appropriate for such assets becomes unfeasible due to the absence of an active market where such assets are traded. Thus, this amount is only determined when there are offers for the purchase of specific material.
As to the determination of the use value, the latter shall reflect the expected cash flows, discounted at a discount rate appropriate for the business. It is considered that, for the calculation of expected cash flows, the features of the provided public service shall be taken into account, as well as the specificities of the funding structure that has been followed until now.
In the absence of a public service agreement, it is understood that it is not possible to determine the use value as defined in the IAS 36, given the fact that there are no specific rules defined for companies providing public service.
However, when there are specific situations showing that an asset may be impaired, in particular when rolling stock ceases to operate, the recoverable amount is determined, and an impairment loss is recognised whenever the net amount of an asset exceeds its recoverable amount. Thus, impairment losses are recognised in results.
As defined in the IAS 36, when there is an indication that an asset may be impaired, its recoverable amount is estimated, and an impairment loss shall be recognised whenever the net book value of an asset exceeds its recoverable amount. Impairment losses are recognised in results. The recoverable amount is determined as the highest between its selling price (net realisable value) and its use value, which is calculated based on the current value of the estimated cash flows which are expected to be obtained from the continued use of the asset and of its disposal at the end of its useful life.
The companies of the Group classify the leasing transactions as financial or operating leases, depending on their substance and not on
their legal form. The transactions classified as financial leases are those where the risks and advantages inherent to the ownership of an asset are substantially transferred to the lessee. All remaining leasing transactions are classified as operating leases.
Payments of an operating lease are recognised as an expense on a linear basis during the lease period.
Financial lease agreements are accounted for at the date such agreements take effect, in assets and in liabilities, at the lower between the fair value of the leased property, or the current value of the due rents of the lease.
Rents are composed of the financial cost which is deducted in results, and of the reduction of the outstanding liability. Financial costs are recognised as expenses throughout the lease period, in order to produce a constant periodic interest rate on the remaining balance of the liability in each period.
Assets acquired through financial lease are depreciated in accordance with the policy established for fixed tangible assets.
The intangible assets of the companies in the Group are accounted for at the acquisition cost deducted from the corresponding accumulated amortisations and impairment losses.
The companies in the Group carry out impairment tests whenever there are occurrences or circumstances indicating that the book value exceeds the recoverable value. If a difference arises, it shall be recognised in results. The recoverable amount is determined as the highest amount between its net selling price and its use value, the latter being calculated based on the current value of the estimated future cash flows expected to be obtained from the continued use of the asset and of its disposal at the end of its useful life.
Amortisations are calculated by the straight-line method for a 3-year period.
Financial derivatives are recognised on their trade date, at their fair value. Subsequently, the fair value of the financial derivatives is reassessed on a regular basis, and the gains or losses arising from such reassessment are directly accounted for in the results of the period, except for cash flow hedging derivatives. The recognition of fair value variations in hedging derivatives, in the results of the period, depends on the nature of the hedged risk and the hedging model employed.
The fair value of the financial derivatives matches their market value, when available. If it is not available, it is established by an external entity, based on valuation techniques used on the market.
Designating a financial derivative as a hedging instrument complies with the provisions set forth in the IAS 39. Financial derivatives which do not comply with all the provisions set forth in the IAS 39 concerning the possibility of being classified as hedge accounting – although such instruments have been entered into with the purpose of economic hedging in accordance with the Group's risk management policies – are classified as financial instruments held for trading, and their corresponding variations in fair value are accounted for in results in the period when they occur.
The CP Group does not have risk management instruments in its portfolio at the moment, whereas the last agreement ended in April 2016. However, even though the financial instruments available in the Group until 2015 aimed at hedging the interest rate risk, such instruments did not fully comply with IAS 39 requirements, in order for them to be classified as financial hedging instruments. For that same reason, they were classified as financial instruments held for trading.
The companies of the CP Group only recognise a financial asset, a financial liability or an equity instrument when they become part of the instrument's contractual provisions.
The CP Group classifies its investments on their trade date in accordance with the purpose of the acquisition thereof, in the following categories: financial assets at fair value through results (held for trading and fair value option); loans and accounts
receivable; held-to-maturity assets; and financial assets available for sale, in compliance with the provisions set forth in the IAS 39 – Financial instruments.
This category includes:
Following their initial recognition, financial assets at fair value through results are valued at fair value, and their variations shall be recognised in results.
This category includes derivatives that do not qualify for hedge accounting purposes. The changes in their fair value are directly recognised in the results of the financial year.
Such investments are non-derivative financial assets with fixed or determinable payments and maturities, for which there is the intention and ability to hold to maturity.
Such investments are measured at amortised cost, based on the effective interest rate method, and are deducted from impairment losses. Impairment losses are accounted for based on the estimate and assessment of losses, associated with doubtful credits on the date of the financial statements.
Impairment losses are the difference between the asset's book value and the current value of estimated future cash flows (by considering the recovery period) discounted at the financial asset's original effective interest rate.
Such assets are shown in the statement of financial position, net of recognised impairment.
They are non-derivative financial assets, with fixed or determined payments, which are not quoted in an active market. They arise from the normal course of operating activities, in the supply of goods or services, with no intention for trading.
Loans and receivables are initially recognised at their fair value, and are subsequently valued at amortised cost, based on the effective interest rate method.
Impairment losses are accounted for when there is proof suggesting that the company of the CP Group will not receive all the amounts to which it was entitled pursuant to the original terms of the agreements that have been concluded. Several indicators are used in the identification of impairment situations, such as:
i. Default analysis; ii. Default for more than 6 months; iii. Financial difficulties of the debtor; iv. Likelihood of the debtor's bankruptcy.
Impairment losses are the difference between the asset's book value and the current value of estimated future cash flows (by considering the recovery period) discounted at the financial asset's original effective interest rate.
Such assets are shown in the statement of financial position, net of recognised impairment.
Financial assets available for sale are non-derivative financial assets which the CP Group intends to keep indefinitely. Such assets are designated as available for sale at the time of their initial recognition, or if they do not fall under the aforementioned categories.
Financial assets available for sale are accounted for at fair value, and the corresponding fair value variations are directly recognised in the equities, in the "fair value reserves" heading, until the investments are derecognised, or an impairment loss is identified, in which case the accumulated amount of the potential gains and losses accounted for in reserves is transferred to results. Assets are carried at acquisition cost if there is no market value. However, impairment tests shall be carried out.
Accrued interest of fixed income instruments, when classified as assets available for sale, as well as the differences between the acquisition cost and the nominal value (premium or discount), are accounted for in results in accordance with the effective interest rate method.
Financial assets/liabilities are measured at cost or at amortised cost less any impairment loss, or at fair value along with the changes in fair value to be recognised in the income statement, in accordance with the provisions set forth in the IAS 39.
Following initial recognition, the CP Group measures the financial assets, including derivatives that are assets, by their fair values without any deduction for the transaction costs the Group may incur upon sale or other disposal, except for the following financial assets:
Financial assets designated as hedged items are subject to measurement according to the hedge accounting requirements set forth in the IAS 39.
All financial assets are subject to review concerning impairment, except for those measured at fair value through results, in accordance with the IAS 39.
Following initial recognition, the CP Group measures all financial liabilities by the amortised cost by using the effective interest method, except for financial liabilities at fair value through results. Such liabilities, including derivatives forming part of the liability, are measured at fair value, except for a derivative liability that is linked to, and should be settled by, the delivery of
an unquoted equity instrument, whose fair value cannot be measured in a reliable manner, and such fair value shall be measured at cost.
Financial liabilities designated as hedged items are subject to the hedge accounting requirements set forth in the IAS 39.
Upon determining the fair value of a financial asset or liability, the market price shall apply if there is an active market. This is level 1 of the fair value hierarchy as defined in the IFRS 7.
If there is no active market, which is the case for some financial assets and liabilities, valuation techniques generally accepted in the market shall be used, which are based on market assumptions. This is level 2 of the fair value hierarchy as defined in the IFRS 7, and which is used by the CP Group.
The CP Group includes unquoted financial instruments in the 2nd level of the fair value hierarchy, such as derivatives. The most frequently used valuation models are discounted cash flows models and option assessment models, which include, for instance, interest rate curves as well as market volatility.
In the case of more complex derivatives, more advanced valuation models are used, which include assumptions and data not directly observable in the market. This is level 3 of the fair value hierarchy as defined in the IFRS 7.
In accordance with the IAS 36 – Impairment of assets, every time the book value of an asset exceeds its recoverable amount, its value is reduced to the recoverable amount, and the impairment loss is recognised in results of the financial year.
At the date of each financial reporting period, the impairment of assets is assessed and, if there is objective evidence of impairment, an impairment loss is recognised in the income statements.
In the case of financial assets presenting impairment indicators, the corresponding recoverable amount is determined, and the impairment losses are accounted for against results.
In the railway transportation components, the inventories of goods, as well as of raw, auxiliary and consumable materials, are accounted for at acquisition cost, by adopting the weighted average cost as the costing method for outgoings. When necessary, the impairment is recognised for obsolete, slow-moving and defective inventories, and it is presented as a deduction from the asset.
As to railway material maintenance, inventories (raw and auxiliary materials, finished and intermediate products and ongoing products and works) are accounted for at acquisition cost (in the case of raw and auxiliary materials) or at production cost (in the case of intermediate and finished products and of ongoing products and works), or at net realisable value, the lowest from the two.
The acquisition or production cost includes all purchase costs, conversion costs and other costs incurred in order to place inventories in their location as well as in condition of use or sale. The net realisable value is the estimated selling price during the normal course of business, less the corresponding selling costs, as provided in the IAS 2 – Inventories.
The value of inventories is written down to its net realisable value whenever such assets are carried at amounts higher than those that would foreseeably result from their sale or use.
As to the recognition and measurement of inventories of ongoing products and works, as well as finished products, the CP Group also takes into account the provisions set forth in the IAS 11 - Construction contracts, regarding the costs associated with construction contracts.
Raw, auxiliary and consumable materials are measured at the lowest value between their acquisition cost and their net realisable value. The amounts inherent to the purchase, conversion and other costs incurred in order to place the inventories in their location and condition of use or sale are considered as cost.
Raw, auxiliary and consumable materials are adjusted based on the assets' movement, obsolescence, nature and useful life. The amount of any adjustment in inventories to the net realisable value is recognised as expense in the period when the loss takes place. When
the circumstances that previously resulted in an adjustment to the value of inventories cease to take effect, or when there is an increase in the net realisable value due to the change in the economic circumstances, the amount of the adjustments is reversed, and such reversal shall be limited to the amount of the original adjustment.
The weighted average cost shall be the adopted method for the costing of outgoings.
Ongoing products and works inventories are valued at the lowest amount between the production cost (including the cost of the incorporated materials and of the subcontracting of services, direct labour and general manufacture expenses) and the net realisable value.
The net realisable value is considered to be the estimated selling price during the normal course of business, less estimated completion costs and estimated costs necessary for the sale.
This heading accounts for products transferred from ongoing products and works following their completion, and such products are valued at production cost or at net realisable value, if the latter is lower.
Cash and cash equivalents include cash, bank deposits and other shortterm investments of high liquidity, as well as bank overdrafts. Bank overdrafts are shown in the Balance Sheet, in current liability, in the heading Loans obtained.
Loans are initially recognised in the liability through the received nominal value, net of expenses related with issuance, which is the corresponding fair value at that date. Afterwards, loans are measured using the amortised cost method. Any difference between the liability component and the payable nominal amount, at the maturity date, is recognised as interest expenses using the effective interest rate method.
Any amounts in debt of the funding agreements satisfying any of the following criteria are classified as current liability:
All remaining loans are classified as non-current liability.
The amount in debt of the funding agreements whose contractually established maturity exceeds one year is classified as non-current liability.
Non-current assets or groups of non-current assets held for sale (groups of assets together with the corresponding liabilities, including at least one non-current asset), are classified as held for sale when their cost is primarily recovered through sale, when assets or groups of assets are available for immediate sale and when there is a significant likeliness for their sale, in accordance with the provisions set forth in the IFRS 5.
The companies in the CP Group also classify non-current assets or groups of assets acquired only with the purpose of subsequent sale – being available for immediate sale and there being a significant likeliness thereof – as non-current assets held for sale.
Immediately before being classified as held for sale, the measurement of all non-current assets and all assets and liabilities included in a group of assets for sale is carried out in accordance with the applicable standards. Following their classification, such assets or groups of assets are measured at the least amount between their carrying amount and their fair value deducted from the selling costs.
Functional and Presentation Currency
The elements included in the financial statements of the companies in the CP Group are measured by using the currency of the economic environment in which the entity operates ("functional currency"). The Financial Statements are presented in euros, which is CP's functional and presentation currency.
All transactions in currencies other than euro are converted into functional currency by using the exchange rates in force at the date of the transaction.
In each balance sheet date, the monetary assets and liabilities denominated in foreign currency are converted into euros using the exchange rates in force at that date.
Exchange differences, whether favourable or unfavourable, arising from the differences between the exchange rates in force at the date of the transactions and those in force at the date of collection/payment, or at the balance sheet date, are accounted for as income and expenses in the income statement of the period.
Non-monetary assets and liabilities accounted for in accordance with their fair value denominated in foreign currency are translated into euros. For such purpose, the exchange rate in force at the date when the fair value was determined shall be used.
Revenue generated from this activity segment is related to the provision of passenger transportation services, the sale of goods and other services linked to railway transportation, less discounts and deductions to the payable price. Revenue is recognised at its fair value.
The provided services are generally concluded within each reporting period.
Income resulting from the activity is recognised in the income statement at the time when the service is provided, which is the date of the beginning of the travel, and when it is likely that the amount of revenue and expenses is reliably measurable and, also, that the economic benefits associated therewith will revert to the entity.
In the case of recognition of revenue linked to this activity segment, the provisions set forth in the IAS 11 – Construction contracts – are the ones used. Thus, it is ascertained whether the conditions necessary for considering a reliably estimated transaction outcome are met, which shall enable the percentage of completion method to be applied.
The percentage of completion method applied to the provision of services considers the total estimated costs, an amount assessed by the operating part, by taking the work to be carried out and past experience in similar works into account.
When the conditions required for considering a reliably estimated transaction outcome are not met, the extent to which the recognised expenses are recoverable is assessed. If there are no indicators showing a likeliness of recoverability of the costs incurred, revenue is not recognised and the costs incurred are recognised as expense.
Revenue is measured at fair value of the received or receivable consideration. Revenue associated with service provision is recognised with reference to the stage of completion of the transaction at the balance sheet date, once the outcome of a transaction may be reliably estimated. The outcome of a transaction may be reliably estimated once all the following conditions are met:
Revenue comprises the sums invoiced upon the sale of products or the provision of services, net of value added taxes, rebates and discounts. When the inflow of cash or cash equivalents is deferred, the fair value of the consideration may be lower than the nominal amount. Such difference is recognised as interest revenue.
Expenses and income are accounted for in their relevant period, regardless of their payment or reception, in accordance with the underlying assumption of the accrual basis (economic periodisation).
The prepared financial statements provide information not only on past transactions involving the payment and reception of cash but also on future payment obligations and resources representing cash to be received in the future.
Accrual-based accounting is carried out through the use of the other accounts receivable and payable heading, as well as the deferrals heading.
Provisions are recognised when:
The provisioned amount is the amount deemed necessary in order to address estimated economic losses. Where the effect of the time value of money is material, the amount of a provision shall be the present value of the expenditures expected to be required to settle the obligation.
Interest is recognised in accordance with the accruals principle. Receivable dividends are recognised at the date when the right to their reception is established.
Since they are recognised in expenses and losses of the period, their recognition is carried out in accordance with the accrual basis and in accordance with the applicable effective interest rate.
CP is the controlling company of a group of companies, which is taxed in accordance with the Special Taxation Scheme for Groups of Companies, as provided for in article 69 of the Portuguese Corporate Income Tax Code. Apart from CP itself, such group includes the following affiliate companies: EMEF – Empresa de Manutenção de Equipamento Ferroviário, SA; SAROS – Sociedade de Mediação de Seguros, Lda., and, since the 2014 financial year, Fernave – Formação Técnica, Psicologia Aplicada e Consultoria em Transportes e Portos, S.A., and Ecosaúde – Educação, Investigação e Consultoria em Trabalho, Saúde e Ambiente, S.A.
The CP Group did not account for deferred tax assets associated with the reporting of tax losses, as well as temporary impairments and provisions which have not been accepted for tax purposes, because the Group considers that there are no expectations that the aforementioned group of companies – which is under the special taxation scheme – will obtain future taxable profits enabling the use of CP's accumulated tax losses. At the end of 2017, the total deductible tax losses of the CP Group amounted approximately to 508 million euros, which may be used between 2017 and 2027.
Similarly, deferred tax liabilities connected with reassessed fixed tangible assets (rolling stock) have not been accounted for in previous periods, since it is considered that there is no expectation of significant changes to the form of funding of the public transportation service and to the economic conditions that may result in a tax base that is enough to create assessment and, as a result, that gives rise to income tax payments.
Further, as for income tax, CP joined the special scheme applicable to deferred tax assets in 2014 (Law no. 61/2014, of August 26th), which, provided certain requirements are met, enables the formation of an active deferred tax that may be converted into tax credit, used for the payment of income and wealth taxes or, at most, such active deferred tax may be refunded to the taxpayer. Therefore, in 2014, CP recognised a deferred tax asset based on the proceeds of the total liability relating to occupational accident pensions at the corporate income tax rate in force, plus the corresponding surtax. Due to the fact that the company's responsible entities did not approve its application to join the aforementioned special scheme, this amount was derecognised in the 2016 financial year.
The accounting result has been adjusted in order to reflect the estimated corporate income tax to be paid, associated with autonomous taxation, state surtax and municipal surtax.
A contingent asset is a possible asset resulting from past events and whose existence will only be confirmed by the occurrence, or otherwise, of one or more uncertain future events which are not entirely under the entity's control.
Contingent assets are not recognised in the financial statements, but are disclosed in the attachment when it is likely there will be an inflow of economic benefits.
A contingent liability occurs when there is:
Contingent liabilities are not recognised in the financial statements, though they are disclosed in the attachment to the corresponding statements, unless there is a remote possibility of an outflow of resources incorporating future economic benefits.
The financial statements set forth herein reflect the subsequent events occurred until the 12th of April 2018. The Management Board has
approved such financial statements on the aforementioned date, as referred to in note 2.
Events occurred after the balance sheet date on conditions existing at the balance sheet date are considered in the preparation of the financial statements. Material events after the balance sheet date which do not lead to adjustments are disclosed in note 47.
The preparation of the financial statements in accordance with the IFRS requires that the managers express their judgment in the process of application of the accounting policies.
The value judgement made in the application process of the accounting policies and which can have the greatest impact in the recognised amounts in the financial statements are the following:
transaction outcome are not met, the extent to which the recognised expenses are recoverable is assessed. If there are no indicators showing a likeliness of recoverability of the costs incurred, revenue is not recognised and costs incurred are recognised as expense;
The financial statements were prepared based on the going concern principle regarding operations.
The Board of Directors considers it appropriate to prepare the financial statements based on continuity, considering the following factors:
The preparation of the financial statements in accordance with the IFRS requires the use of a number of important accounting estimates.
Estimates are based on the knowledge existing at any given moment and on the actions planned to be carried out, which are permanently reviewed based on the available information. Changes in the facts and circumstances may lead to the revision of the estimates, hence, actual future results can be different from estimates.
The key sources of estimation uncertainty at the balance sheet date, which have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities during the accounting period are:
The useful life of an asset is defined in terms of the expected utility of the asset for the entity. The asset management policy may involve the disposal of assets after a specific period of time or after the consumption of a specified proportion of the future economic benefits incorporated into the asset. Therefore, the useful life of an asset may be shorter than its economic life. The estimated useful life of the asset is a matter of value judgment based on the entity's experience with similar assets.
Fair value is based on market quotations, when available. If there is no quotation, the fair value is determined in accordance with the use of recent transaction prices, which are similar and performed in market conditions, or in accordance with assessment methodologies based on techniques of future cash flows - which are discounted by considering market conditions, the time value, the yield curve and volatility factors. Such methodologies may require the use of assumptions or judgements when estimating fair value.
The fair value of financial derivatives is determined by an external entity, using the discounted cash flows method. All calculations were made based on yield curves set forth by Reuters at the reference day of the financial statements. Thus, the moment in which the estimates are made is the main source of uncertainty.
Impairment losses concerning doubtful credits are based on the assessment of the likelihood of recoverability of the balances of receivables, ageing of balances, debt cancellations and other factors. There are certain circumstances and facts which might alter the estimation of impairment losses of balances of receivables vis-à-vis the considered assumptions, including changes in the economic environment, of sectorial trends, of the deterioration of the credit standing of the main customers and of significant defaults. This assessment process is subject to several estimates and judgements. Changes in these estimates may imply the establishment of different impairment levels, thus resulting in different impacts in results.
Provisions are liabilities of an uncertain amount or temporal event. By taking into account the principle of prudence, the companies in the CP Group have built provisions whenever there is an actual obligation (legal or constructive), derived from a past event, in which it is likely that an outflow of resources for settling the obligation will occur, and a reliable estimate of the mentioned obligation may be carried out. As to the establishment of provisions for legal proceedings, they require the use of judgment, based on the last known information at the time of preparation of the financial statements, namely regarding the likelihood of losing the legal proceedings and the estimated value of such loss. Changes in these estimates may imply impacts on results.
Non-current assets held for sale should be recognised by the lowest value between their net book value and their fair value, deducted from selling costs, according to the IFRS 5. When determining fair value, particularly concerning rolling stock, and bearing in consideration the absence of an active market, the value of recent transactions with similar material is considered by the CP Group as a reference, by adjusting such value to the technical features of the material and to the existing demand. The existence and amount of impairment to be recognised is established based on the estimated selling cost, whereas the actual impact will only be known at the time of the effective sale of the assets - which may imply variations of significance in results.
The amendments to the standards with effect as of the 1st of January 2017 that may have an impact on the CP Group are as follow:
The amendment to the IAS 7 introduces an additional disclosure as to the changes in financing liabilities disaggregated between transactions resulting in cash movements and other movements, and the way such transactions reconcile with cash flows from financing activities, which are shown in the Cash Flow Statement, as disclosed in note 25.
This amendment clarifies how to account for deferred tax assets associated with assets measured at fair value, how to estimate future taxable profit when there are temporary deductible differences and how to assess the recoverability of deferred tax assets when there are restrictions in the tax law.
There were no impacts arising from the amendment to this IAS in the CP Group.
The cash flow statement is prepared using the direct method, through which gross cash flow receivables and payments in operating activities, either from investment or funding, are disclosed.
The Group classifies paid interest and dividends as financing activities, and received interest and dividends as investment activities.
By application of the IAS 7 and with reference to the 1st of January 2017, note 25 discloses the reconciliation of changes in liabilities from financing activities, including changes arising from cash flows as well as changes without cash offsetting.
As at the 31st of December 2017, all cash and cash equivalents balances are available for use.
| (amounts in euros) | ||
|---|---|---|
| Description | 31/12/2017 | 31/12/2016 |
| Cash | 420 868 | 395 880 |
| Bank deposits | 14 083 402 | 16 518 209 |
| Subtotal | 14 504 270 | 16 914 089 |
| Bank overdrafts (a) | ( 226 659) | ( 225 436) |
| Total | 14 277 611 | 16 688 653 |
Cash and bank deposits comprise the following balances:
(a) the amount of the bank overdrafts is accounted for in loans obtained
There were no changes to report regarding accounting policies and estimates or errors with material impacts in the financial statements of the Group.
The mode of business segmentation used by the CP Group is based on the nature of services provided. This is the mode in which the Board of Directors analyses and manages its business, and it is also the mode of organising and communicating information.
Considering that IFRS 8 defines quantitative schemes from which the segments must be deemed as operating segments to be disclosed, the following segments to be disclosed within the scope of this note were identified:
The aggregation performed to operating segments aimed at ensuring that they had similar economic features, according to the provisions set forth in the IFRS 8.
The data regarding other non-reportable business activities and operating segments were combined and disclosed in a category called "all other segments". Such category includes segments such as training, healthcare services and insurance mediation, which did not reach the quantitative levels of the IFRS 8.
The financial information of the main business segments of the Group, relating to the periods ended on the 31st of December 2016 and 2017, is detailed below:
Operating result per business segment of the CP group 2016 (amounts in euros)
| OPERATING CONSOLIDATED INCOME AND EXPENSES | Transportation of passengers in Suburban services |
of passengers in Transportation long-distance, international and regional services |
maintenance Rolling stock and upkeep |
Remaining areas |
statement of Individual operating CP group income |
decomm. and Intra-group adjustments |
Consolidated statement of operating CP group income |
|---|---|---|---|---|---|---|---|
| Provided sales and services | 103 684 528 | 130 093 043 | 63 044 806 | 9 807 080 | 306 629 457 | (40 410 571) | 266 218 886 |
| * Provided sales and services - intra-group decommitments | ( 363) | ( 544) | (38 181 702) | (2 227 962) | |||
| Operating subsidies | - | - | - | 16 929 | 16 929 | - | 16 929 |
| * Operating subsidies - intra-group decommitments | - | - | - | - | |||
| Gains/losses attributed to subsidiaries, associated companies and joint ventures | - | - | 426 394 | 3 256 950 | 3 683 344 | (3 173 614) | 509 730 |
| * Gains/losses attributed to subs., assoc. comp. and joint ventures - intra-group decommitments | - | - | - | (3 173 614) | |||
| Changes in production inventories | - | - | ( 35 661) | - | ( 35 661) | - | ( 35 661) |
| * Changes in production inventories - intra-group decommitments | - | - | - | - | |||
| Capitalised production costs | - | - | - | - | - | 8 334 943 | 8 334 943 |
| * Capitalised production costs - intra-group decommitments | - | - | 8 334 943 | - | |||
| Sold commodities and consumed materials costs | ( 840 878) | (4 214 070) | (17 827 250) | ( 404 573) | (23 286 771) | - | (23 286 771) |
| * Sold commodities and consumed materials costs - intra-group decommitments | - | - | - | - | |||
| External services and supplies | (56 726 337) | (87 632 813) | (15 529 870) | (16 423 593) | (176 312 613) | 34 991 185 | (141 321 428) |
| * External services and supplies - intra-group decommitments | 12 528 481 | 13 948 909 | 4 454 760 | 4 059 035 | |||
| Personnel expenses | (33 381 826) | (44 104 898) | (25 495 239) | (23 439 715) | (126 421 678) | 1 646 856 | (124 774 822) |
| * Personnel expenses - intra-group decommitments | - | - | 80 718 | 1 566 138 | |||
| Inventory impairment (losses/rever.) | - | - | ( 59 398) | ( 266 346) | ( 325 744) | - | ( 325 744) |
| * Inventory impaiment (losses/rever.) - intra-group decommitments | - | - | - | - | |||
| Impairment of receivables (losses/reversals) | ( 25 749) | ( 295 843) | ( 33 514) | 30 390 | ( 324 716) | - | ( 324 716) |
| * Impairment of receivables (losses/reversals) - intra-group decommitments | - | - | - | - | |||
| Provisions (increases/decreases) | - | - | 30 247 | (11 496 936) | (11 466 689) | 122 783 | (11 343 906) |
| * Provisions (increases/decreases) - intra-group decommitments | - | - | - | 122 783 | |||
| Impairm. of non-depr./non-amort. invest. (losses/reversals) | - | - | - | 1 573 246 | 1 573 246 | - | 1 573 246 |
| * Impairm. of non-depr./non-amort. invest. (losses/reversals) - intra-group decommitments | - | - | - | - | |||
| Other income | 9 640 006 | 4 158 946 | 2 730 503 | 26 032 043 | 42 561 498 | (6 425 862) | 36 135 636 |
| * Other income - intra-group decommitments | ( 79 384) | ( 118 973) | (1 385 886) | (4 841 619) | |||
| Other expenses | (1 779 172) | (1 519 985) | (1 846 790) | (6 192 407) | (11 338 354) | 2 006 359 | (9 331 995) |
| * Other expenses - intra-group decommitments | 135 | 1 753 | 1 823 896 | 180 575 | |||
| Result before depreciations, financing expenses and taxes | 20 570 572 | ( 3 515 620) | 5 404 228 | ( 17 506 932) | 4 952 248 | ( 2 907 921) | 2 044 327 |
| Result before depreciations, financing expenses and taxes - intra-group decommitments | 12 448 869 | 13 831 145 | ( 24 873 271) | ( 4 314 664) | - | - | - |
| Expenses/reversals of depreciation and amortisation | (29 630 997) | (18 028 029) | (1 020 879) | (7 806 692) | (56 486 597) | - | (56 486 597) |
| Impairment of depreciable/amortisable investments (losses/reversals) | - | ( 48 060) | - | 903 593 | 855 533 | - | 855 533 |
| Operating result (before financing expenses and taxes) | 3 388 444 | ( 7 760 564) | ( 20 489 922) | ( 28 724 695) | ( 50 678 816) | ( 2 907 921) | ( 53 586 737) |
Operating result per business segment of the CP group 2017 (amounts euros)
| OPERATING CONSOLIDATED INCOME AND EXPENSES | passengers in Transportatio Suburban services n of |
of passengers in Transportation long-distance, international and regional services |
maintenance Rolling stock and upkeep |
Remaining areas |
statement of Individual operating CP group income |
decomm. and Intra-group adjustments |
Consolidated statement of operating CP group income |
|---|---|---|---|---|---|---|---|
| Provided sales and services | 113 466 610 | 140 031 958 | 72 071 002 | 8 405 178 | 333 974 748 | (47 314 895) | 286 659 853 |
| * Provided sales and services - intra-group decommitments | - | 84 | (45 471 549) | (1 843 430) | |||
| Operating subsidies | - | - | 2 073 | 20 689 | 22 762 | - | 22 762 |
| * Operating subsidies - intra-group decommitments | - | - | - | - | |||
| Gains/losses attributed to subsidiaries, associated companies and joint ventures | - | - | 627 865 | 6 959 833 | 7 587 698 | (6 385 655) | 1 202 043 |
| * Gains/losses attributed to subs., assoc. comp. and joint ventures - intra-group decommitments | - | - | - | (6 385 655) | |||
| Changes in production inventories | - | - | ( 32 745) | - | ( 32 745) | - | ( 32 745) |
| * Changes in production inventories - intra-group decommitments | - | - | - | - | |||
| Capitalised production costs | - | - | - | - | - | 12 520 674 | 12 520 674 |
| * Capitalised production costs - intra-group decommitments | - | - | 12 520 674 | - | |||
| Sold commodities and consumed materials costs | (1 101 098) | (4 603 108) | (20 138 665) | ( 538 575) | (26 381 446) | - | (26 381 446) |
| * Sold commodities and consumed materials costs - intra-group decommitments | - | - | - | - | |||
| External services and supplies | (58 301 074) | (90 944 569) | (14 970 494) | (11 822 511) | (176 038 648) | 36 979 830 | (139 058 818) |
| * External services and supplies - intra-group decommitments | 16 643 562 | 15 198 279 | 4 474 330 | 663 659 | |||
| Personnel expenses | (33 279 213) | (39 754 501) | (27 053 205) | (28 183 554) | (128 270 473) | 1 324 171 | (126 946 302) |
| * Personnel expenses - intra-group decommitments | - | - | 72 364 | 1 251 807 | |||
| Inventory impairment (losses/rever.) | - | - | ( 775 990) | ( 412 345) | (1 188 335) | - | (1 188 335) |
| * Inventory impaiment (losses/rever.) - intra-group decommitments | - | - | - | - | |||
| Impairment of receivables (losses/reversals) | ( 29 247) | ( 458 958) | (1 019 811) | 47 053 | (1 460 963) | - | (1 460 963) |
| * Impairment of receivables (losses/reversals) - intra-group decommitments | - | - | - | - | |||
| Provisions (increases/decreases) | - | - | ( 19 813) | ( 143 856) | ( 163 669) | 304 659 | 140 990 |
| * Provisions (increases/decreases) - intra-group decommitments | - | - | - | 304 659 | |||
| Impairm. of non-depr./non-amort. invest. (losses/reversals) | - | - | - | 17 163 | 17 163 | - | 17 163 |
| * Impairm. of non-depr./non-amort. invest. (losses/reversals) - intra-group decommitments | - | - | - | - | |||
| Other income | 9 714 768 | 3 533 708 | 2 320 011 | 11 990 681 | 27 559 168 | (5 162 235) | 22 396 933 |
| * Other income - intra-group decommitments | ( 11 837) | ( 50 218) | ( 854 960) | (4 245 220) | |||
| Other expenses | (1 337 197) | (1 479 718) | (1 584 590) | ( 628 371) | (5 029 876) | 862 312 | (4 167 564) |
| * Other expenses - intra-group decommitments | 911 | 28 | 821 321 | 40 052 | |||
| Result before depreciations, financing expenses and taxes | 29 133 549 | 6 324 812 | 9 425 638 | ( 14 288 615) | 30 595 384 | ( 6 871 139) | 23 724 245 |
| Result before depreciations, financing expenses and taxes - intra-group decommitments | 16 632 636 | 15 148 173 | ( 28 437 820) | ( 10 214 128) | - | - | - |
| Expenses/reversals of depreciation and amortisation | (29 287 182) | (19 256 434) | ( 973 800) | (8 406 875) | (57 924 291) | - | (57 924 291) |
| Impairment of depreciable/amortisable investments (losses/reversals) | ( 240 529) | ( 278 713) | - | 1 093 011 | 573 769 | - | 573 769 |
| Operating result (before financing expenses and taxes) | 16 238 474 | 1 937 838 | ( 19 985 982) | ( 31 816 607) | ( 26 755 138) | ( 6 871 139) | ( 33 626 277) |
112
The financial result is not shown per segment, since operating decisions are made based on operating results per business segment, and it is not possible to allocate/assign the existing financing to all segments.
Assets and liabilities of such business segments show the following amounts on the 31st of December 2016 and 2017:
| Assets and liabilities per segments of the CP Group as at the 31st December, 2016 | (amounts in euros) | |||||
|---|---|---|---|---|---|---|
| Transportation of passengers in suburban, long distance, international and regional services |
Rolling stock maintenance and upkeep |
Remaining areas |
Total reported by segments |
Intra-group decomm. and adjustments |
Total consolidated assets and liabilities 2016 |
|
| Non-current asset of the reportable segments | 597 974 557 | 6 767 743 | 571 023 | 605 313 323 | (33 730 060) | 571 583 263 |
| Current asset of the reportable segments | 52 742 879 | 43 261 922 | 1 499 461 | 97 504 262 | (1 394 213) | 96 110 049 |
| Total asset of the reportable segments | 650 717 436 | 50 029 665 | 2 070 484 | 702 817 585 | ( 35 124 273) | 667 693 312 |
| Non-current liability of the reportable segments | 2 641 545 579 | 15 084 547 | 295 824 | 2 656 925 950 | (16 287 506) | 2 640 638 444 |
| Current liability of the reportable segments | 538 377 885 | 23 565 195 | 4 383 555 | 566 326 635 | 112 111 637 | 678 438 272 |
| Total liability of the reportable segments | 3 179 923 464 | 38 649 742 | 4 679 379 | 3 223 252 585 | 95 824 131 | 3 319 076 716 |
| Assets and liabilities per segments of the CP Group as at the 31st December, 2017 | (amounts in euros) | |||||
|---|---|---|---|---|---|---|
| Transportation of passengers in suburban, long distance, international and regional services |
Rolling stock maintenance and upkeep |
Remaining areas |
Total reported by segments |
Intra-group decomm. and adjustments |
Total consolidated assets and liabilities 2016 |
|
| Non-current asset of the reportable segments | 573 946 029 | 6 530 446 | 523 353 | 580 999 828 | (38 482 795) | 542 517 033 |
| Current asset of the reportable segments | 43 887 589 | 48 634 797 | 1 194 343 | 93 716 729 | (7 047 558) | 86 669 171 |
| Total asset of the reportable segments | 617 833 618 | 55 165 243 | 1 717 696 | 674 716 557 | ( 45 530 353) | 629 186 204 |
| Non-current liability of the reportable segments | 2 230 270 286 | 12 979 361 | 285 480 | 2 243 535 127 | (15 331 821) | 2 228 203 306 |
| Current liability of the reportable segments | 520 784 791 | 24 885 058 | 4 238 582 | 549 908 431 | 97 347 812 | 647 256 243 |
| Total liability of the reportable segments | 2 751 055 077 | 37 864 419 | 4 524 062 | 2 793 443 558 | 82 015 991 | 2 875 459 549 |
The existing assets and liabilities are not segregated by business segment, since it is impossible to obtain such information for all segments, particularly with regard to passenger transportation, in which changes to the allocation of assets to different segments are usually performed, and considering the fact that such information is not presented on a detailed and regular basis for decision making purposes for all segments. In fact, assets and liabilities are only reported on a regular basis per company of the Group, for decision making purposes.
By the end of 2017, the CP Group had fixed tangible assets organised by fixed asset categories, as shown in the following table:
| (amounts in euros) | ||
|---|---|---|
| Description | 31/12/2017 | 31/12/2016 |
| Gross Amount: | ||
| Land and natural resources | 21 571 871 | 20 810 386 |
| Buildings and other constructions | 95 522 219 | 82 637 424 |
| Basic equipment | 1 408 183 733 | 1 392 911 086 |
| Transportation equipment | 2 976 434 | 2 957 989 |
| Administrative equipment | 24 556 982 | 24 019 619 |
| Other fixed tangible assets | 65 412 912 | 64 607 954 |
| Ongoing investments | 581 047 | 500 635 |
| Advance payments on account of investments | 22 859 | - |
| Subtotal | 1 618 828 057 | 1 588 445 093 |
| Accumulated depreciation and impairment: | ||
| Depreciation of the period | 57 823 619 | 56 465 759 |
| Accumulated depreciation of previous periods | 1 042 610 451 | 983 231 595 |
| Impairment losses of the period | ( 573 768) | 855 533 |
| Impairment losses of previous periods | 6 289 415 | 5 433 882 |
| Cancellations of the period | ( 79 619) | ( 69 334) |
| Subtotal | 1 106 070 098 | 1 045 917 435 |
| Net book value | 512 757 959 | 542 527 658 |
The movements in the fixed tangible assets heading throughout 2017 are summarised in the following table:
| Description | Opening balance | Additions | Disposals | Assets classified | Write-offs | Transfers | Other | Closing balance |
|---|---|---|---|---|---|---|---|---|
| as held for sale | settlements | |||||||
| Gross amount: | ||||||||
| Land and natural resources | 20 810 386 | - | - | 761 485 | - | - | - | 21 571 871 |
| Buildings and other constructions | 82 637 424 | 16 921 | - | 11 903 329 | - | 964 545 | - | 95 522 219 |
| Basic equipment | 1 392 911 086 | 736 403 | ( 41 345) | 658 336 | ( 71 359) | 11 797 596 | 2 193 016 | 1 408 183 733 |
| Transportation equipment | 2 957 989 | 18 446 | ( 1) | - | - | - | - | 2 976 434 |
| Administrative equipment | 24 019 619 | 832 695 | ( 55 787) | - | ( 340 743) | 100 706 | 492 | 24 556 982 |
| Other fixed tangible assets | 64 607 954 | 476 787 | - | - | ( 6 510) | 334 681 | - | 65 412 912 |
| Ongoing investments | 500 635 | 8 548 172 | - | - | - | ( 8 467 760) | - | 581 047 |
| Advance payments on account of investments | - | 22 859 | - | - | - | - | - | 22 859 |
| 1 588 445 093 | 10 652 283 | ( 97 133) | 13 323 150 | ( 418 612) | 4 729 768 | 2 193 508 | 1 618 828 057 | |
| Accumulated depreciation and impairment: | ||||||||
| Buildings and other constructions | 38 105 366 | 4 044 943 | - | 2 853 322 | - | - | - | 45 003 631 |
| Basic equipment | 928 959 890 | 50 405 660 | ( 41 345) | 658 336 | ( 71 359) | - | ( 93 612) | 979 817 570 |
| Transportation equipment | 2 881 894 | 39 057 | - | - | - | - | - | 2 920 951 |
| Administrative equipment | 22 207 112 | 930 937 | ( 55 788) | - | ( 340 724) | - | 492 | 22 742 029 |
| Other fixed tangible assets | 47 473 759 | 2 403 022 | - | - | ( 6 510) | - | - | 49 870 271 |
| Fix. Tang. Assets-Acc. Impair. Losses - Basic Equip. | 6 289 414 | ( 573 768) | - | - | - | - | - | 5 715 646 |
| 1 045 917 435 | 57 249 851 | ( 97 133) | 3 511 658 | ( 418 593) | - | ( 93 120) | 1 106 070 098 | |
| Total | 542 527 658 | 512 757 959 |
115
The fixed tangible assets of the CP Group are measured at cost, which are depreciated on a straight-line basis, in accordance with the useful lives specified in note 3.
The most significant investments performed in the financial year of 2017 relate essentially to occasional R2 and R3 repairs and the halflife intervention of tilting trains (CPA).
As to write-offs, the most significant heading is associated with administrative equipment, as a result of write-off of equipment, with a book value of virtually zero.
Accumulated depreciations mentioned in the additions column are associated with the depreciation of assets, in accordance with their useful life, from which the depreciation of rolling stock stands out due to its weight.
The change in the heading of land and natural resources and buildings and other constructions is worth highlighting vis-à-vis the previous year, resulting from the reclassification of the immovable property called River Terminal of Barreiro from non-current assets held for sale to fixed tangible asset, since its disposal cannot be foreseen in a near future.
As at the 31st of December 2017, the following fixed tangible assets were granted as loan guarantee obtained by CP from Eurofima:
| (amounts in euros) | |
|---|---|
| Description | Book value |
| Railcars | 197 565 780 |
| Total | 197 565 780 |
Intangible assets of the CP Group relate essentially to the implementation of IT systems. There is no situation in which the asset has been internally developed, as per the following table:
| (amounts in euros) | ||
|---|---|---|
| Description | 31/12/2017 | 31/12/2016 |
| Gross Amount: | ||
| Research and development expenses | 41 876 | 30 591 |
| Computer programmes | 1 426 577 | 1 417 380 |
| Intangible assets under construction | 12 270 | - |
| Subtotal | 1 480 723 | 1 447 971 |
| Accumulated amortisation and impairment: | ||
| Amortisation of the period | 100 671 | 20 838 |
| Reversals of the period | - | - |
| Accumulated amortisation of previous periods | 1 186 773 | 1 165 935 |
| Subtotal | 1 287 444 | 1 186 773 |
| Net book value | 193 279 | 261 198 |
For amortisation purposes, the useful life of these assets is considered to be, as a rule, 3 years. However, this estimate is reviewed on an annual basis according to the expected use of the asset. Intangible assets are measured at cost and amortised by the straight-line method in twelfths starting on the date of entry into production of the asset.
The variation in the heading of intangible assets throughout 2017 is analysed as follows:
| (amounts in euros) | ||||||||
|---|---|---|---|---|---|---|---|---|
| Description | Opening balance | Additions | Reval / Impairments | Disposals | Assets held for sale |
Write-offs | Transfers | Closing balance |
| Gross Amount: | ||||||||
| Research and development expenses | 30 591 | 11 285 | - | - | - | - | - | 41 876 |
| Computer programmes | 1 417 380 | 9 197 | - | - | - | - | - | 1 426 577 |
| Intangible assets under construction | - | 12 270 | - | - | - | - | - | 12 270 |
| 1 447 971 | 32 752 | - | - | - | - | - | 1 480 723 | |
| Accumulated amortisation and impairment: | ||||||||
| Amortisation of the period | - | 100 671 | - | - | - | - | - | 100 671 |
| Accumulated amortisation of previous periods | 1 186 773 | - | - | - | - | - | - | 1 186 773 |
| 1 186 773 | 100 671 | - | - | - | - | - | 1 287 444 | |
| Total | 261 198 | 193 279 |
The additions occurred in the period result from the purchase of software for remote management and installation of programmes on computers for the training segment and online management platforms.
The particulars of the financial holdings in which the equity method applies are shown in the following table:
| (amounts in euros) | |||||||
|---|---|---|---|---|---|---|---|
| 31-12-2017 | 31-12-2016 | ||||||
| Description | Type | Gross amount Impairment | Net amount | Gross amount Impairment | Net amount | ||
| SIMEF A.C.E. | Investment | 455 238 | - | 455 238 | 437 323 | - | 437 323 |
| NOMAD TECH, LDA. | Investment | 334 019 | - | 334 019 | 161 393 | - | 161 393 |
| OTLIS, ACE | Investment | 242 222 | - | 242 222 | - | - | - |
| TIP, ACE | Investment | 510 011 | - | 510 011 | 203 520 | - | 203 520 |
| Total | 1 541 490 | - | 1 541 490 | 802 236 | - | 802 236 |
The following movements in these financial holdings were made in 2017, as per the following table:
| (amounts in euros) | ||||||
|---|---|---|---|---|---|---|
| Opening balance |
Additions | Disposals | Equity Method | Other changes |
Closing balance | |
| Gross amount | ||||||
| SIMEF A.C.E. | 437 323 | - | - | 455 238 | ( 437 323) | 455 238 |
| NOMAD TECH, LDA. | 161 393 | - | - | 172 626 | - | 334 019 |
| OTLIS A.C.E. | 203 520 | - | - | 64 167 | ( 25 465) | 242 222 |
| TIP, ACE | - | - | - | 510 011 | - | 510 011 |
| Subtotal | 802 236 | - | - | 1 202 042 | ( 462 788) | 1 541 490 |
| Impairment | - | - | - | - | - | |
| Subtotal | - | - | - | - | - | - |
| Total | 802 236 | - | - | 1 202 042 | ( 462 788) | 1 541 490 |
The increase of TIP's financial holding during 2017 should be noted, presenting positive equities in the financial statements of 2017, contrary to 2016.
The summarised financial information concerning associated companies (values awaiting approval in meeting) is presented as follows:
| (amounts in euros) | |||||||
|---|---|---|---|---|---|---|---|
| Associated company |
Holding % | Reference date | Assets | Liabilities | Equity | Income | Net result |
| SIMEF A.C.E. | 51 | 31.12.2017 | 7 873 539 | 6 980 914 | 892 625 | - | 892 625 |
| Nomad Tech Lda | 35 | 31.12.2017 | 2 786 805 | 1 832 464 | 954 341 | - | 22 190 * |
| TIP, ACE | 33 | 31-12-2017 | 17 930 155 | 16 384 669 | 1 545 486 | 7 425 255 | 1 184 645 |
| OTLIS, ACE | 14 | 31-12-2017 | 5 996 221 | 4 300 666 | 1 695 555 | 6 569 056 | 515 723 |
* This amount is the Net Result of the period from 01/07/2017 to 31/12/2017,
as previously mentioned, Nomad Tech closes its financial year on the 30th of June, every year
The CP Group holds small financial holdings in several companies which are recognised at cost less impairment losses, given the fact that the value of such holdings is not publicly traded and, therefore, there is no possibility of obtaining their fair value in a reliable manner.
At the date of each period of financial reporting, the possibility of impairment of these financial assets is assessed, whereby an impairment loss is recognised in the income statement if there is objective evidence of such impairment.
The particulars of this heading are shown in the following table:
| (amounts in euros) | |||||||
|---|---|---|---|---|---|---|---|
| 31-12-2017 | 31-12-2016 | ||||||
| Description | Method | Gross amount Impairment | Net amount | Gross amount Impairment | Net amount | ||
| CP Carga, SA | Acquisition cost | 80 000 | ( 80 000) | - | 80 000 | ( 80 000) | - |
| MLM, SA | Acquisition cost | 12 721 | ( 12 721) | - | 12 721 | ( 12 721) | - |
| METRO DO PORTO, SA | Acquisition cost | 249 399 | ( 249 399) | - | 249 399 | ( 249 399) | - |
| METRO-MONDEGO, SA | Acquisition cost | 3 595 | - | 3 595 | 3 595 | - | 3 595 |
| ICF | Acquisition cost | 382 269 | ( 382 269) | - | 382 269 | ( 382 269) | - |
| EUROFIMA | Acquisition cost | 27 760 679 | - | 27 760 679 | 27 760 679 | - | 27 760 679 |
| BCC | Acquisition cost | 1 460 | - | 1 460 | 1 460 | - | 1 460 |
| APOR | Acquisition cost | 5 000 | - | 5 000 | 5 000 | - | 5 000 |
| FUNDAÇÃO MUSEU NAC. FERROVIÁRIO | Acquisition cost | 31 944 | ( 31 944) | - | 31 944 | ( 31 944) | - |
| INEGI | Acquisition cost | 2 500 | ( 2 500) | - | 2 500 | ( 2 500) | - |
| TRANSCOM, S.A. | Acquisition cost | 388 280 | ( 161 224) | 227 056 | 388 280 | ( 178 390) | 209 890 |
| Bonds CONSOLIDATED 1942 | Acquisition cost | 662 | - | 662 | 662 | - | 662 |
| Work Compensation Fund | 25 853 | - | 25 853 | 10 885 | - | 10 885 | |
| 28 944 362 | ( 920 057) | 28 024 305 | 28 929 394 | ( 937 223) | 27 992 171 |
The movement of these financial holdings in 2017 is analysed in the following table:
| (amounts in euros) | ||||||
|---|---|---|---|---|---|---|
| Opening balance Additions | Disposals | Fair value |
Other changes |
Closing balance | ||
| Gross amount | ||||||
| CP Carga, SA | 80 000 | - | - | - | - | 80 000 |
| MLM, SA | 12 721 | - | - | - | - | 12 721 |
| METRO DO PORTO, SA | 249 399 | - | - | - | - | 249 399 |
| METRO-MONDEGO, SA | 3 595 | - | - | - | - | 3 595 |
| ICF | 382 269 | - | - | - | - | 382 269 |
| EUROFIMA | 27 760 679 | - | - | - | - | 27 760 679 |
| BCC | 1 460 | - | - | - | - | 1 460 |
| APOR | 5 000 | - | - | - | - | 5 000 |
| FUNDAÇÃO MUSEU NAC. FERROVIÁRIO | 31 944 | - | - | - | - | 31 944 |
| INEGI | 2 500 | - | - | - | - | 2 500 |
| TRANSCOM, S.A. | 388 280 | - | - | - | - | 388 280 |
| Bonds CONSOLIDATED 1942 | 662 | - | - | - | - | 662 |
| Work Compensation Fund | 10 885 | 14 968 | - | - | - | 25 853 |
| 28 929 394 | 14 968 | - | - | - | 28 944 362 | |
| Impairment | ||||||
| CP Carga, SA | ( 80 000) | - | - | - | - | ( 80 000) |
| MLM, SA | ( 12 721) | - | - | - | - | ( 12 721) |
| METRO DO PORTO, SA | ( 249 399) | - | - | - | - | ( 249 399) |
| ICF | ( 382 269) | - | - | - | - | ( 382 269) |
| FUNDAÇÃO MUSEU NAC. FERROVIÁRIO | ( 31 944) | - | - | - | ( 31 944) | |
| INEGI | ( 2 500) | - | - | - | ( 2 500) | |
| TRANSCOM, S.A. | ( 178 390) | - | - | 17 166 | ( 161 224) | |
| ( 937 223) | - | - | - | 17 166 | ( 920 057) | |
| Total | 27 992 171 | 14 968 | - | - | 17 166 | 28 024 305 |
CP is the controlling company of a group of companies, which is taxed in accordance with the Special Taxation Scheme for Groups of Companies, as provided for in article 69 of the Portuguese Corporate Income Tax Code. Apart from CP itself, such group includes the following affiliate companies: EMEF – Empresa de Manutenção de Equipamento Ferroviário, SA; SAROS – Sociedade de Mediação de Seguros, Lda., and, since the 2014 financial year, Fernave – Formação Técnica, Psicologia Aplicada e Consultoria em Transportes e Portos, S.A., and Ecosaúde – Educação, Investigação e Consultoria em Trabalho, Saúde e Ambiente, S.A.
The CP Group did not account for deferred tax assets associated with the reporting of tax losses, as well as temporary impairments and provisions which have not been accepted for tax purposes, because the Group considers that there are no expectations that the aforementioned group of companies – which is under the special taxation scheme – will obtain future taxable profits enabling the use of CP's accumulated tax losses. At the end of 2017, the total deductible tax losses of the CP Group amounted approximately to 508 million euros, which may be used between 2017 and 2027.
Similarly, deferred tax liabilities related to reassessed fixed tangible assets (rolling stock) have not been accounted for in previous periods, since it is considered that there is no expectation of significant changes to the form of funding of the public transportation service and to the economic conditions that may result in a tax base that is enough to create assessment and, as a result, that gives rise to income tax payments.
Further, as for income tax, CP joined the special scheme applicable to deferred tax assets in 2014 (Law no. 61/2014, of August 26th), which, provided certain requirements are met, enables the formation of an active deferred tax that may be converted into tax credit, used for the payment of income and wealth taxes or, at most, such active deferred tax may be refunded to the taxpayer. Therefore, in 2014, the company recognised a deferred tax asset based on the proceeds of the total liability of occupational accident pensions by the Corporate Income Tax rate in force, plus the corresponding surtax. Due to the fact that the company's responsible entities did not approve its application to join the aforementioned special scheme, this amount was derecognised in the 2016 financial year.
The accounting result has been adjusted in order to reflect the estimated corporate income tax to be paid, associated with autonomous taxation, state surtax and municipal surtax, as per the following table:
| (amounts in euros) | ||
|---|---|---|
| Company | 31/12/2017 | 31/12/2016 |
| CP - Auton. Taxation | ( 324 359) | ( 396 506) |
| CP - Deferred tax | - | (2 554 258) |
| CP - Total | ( 324 359) | ( 2 950 764) |
| Fernave | ( 5 141) | ( 11 734) |
| Ecosaúde | ( 5 494) | ( 8 059) |
| Emef | ( 456 953) | ( 406 577) |
| Saros | ( 6 041) | ( 88 803) |
| Total | ( 797 988) | ( 3 465 937) |
As at the 31st of December 2017, the CP Group has the following amounts of inventory, detailed by classification:
| (amounts in euros) | ||
|---|---|---|
| Description | 31/12/2017 | 31/12/2016 |
| Gross Amount: | ||
| Raw, auxiliary and consumable materials | 42 045 664 | 40 224 774 |
| Finished and intermediate products | 908 708 | 941 453 |
| Advance payments for purchasing purposes | 230 647 | 298 244 |
| 43 185 019 | 41 464 471 | |
| Accumulated impairments | ||
| Impairments of the period | (1 188 335) | ( 325 744) |
| Impairments of previous periods | (13 723 616) | (13 397 872) |
| ( 14 911 951) | ( 13 723 616) | |
| Net book value | 28 273 068 | 27 740 855 |
The increase in the raw, auxiliary and consumable materials heading was mainly due to the purchase of materials needed for three ongoing projects: half-life intervention of the CPA 4000 fleet, whose end is expected to occur in mid-2019, and 960,000 km intervention of Metro do Porto's fleet, expected to end by the end of 2018. At the same time, there was a gap between the operating activity and the annual planning, specifically due to delays in scheduled interventions and changes in the consistency of some interventions, with the resulting impact on consumption and increase in materials on stock.
As previously mentioned, the agreement for the half-life intervention of CPAs 4000 shall be in force until mid-2019, therefore, certain purchases of material have been negotiated based on advance payments for purchasing purposes. Such advance payments shall be settled as the corresponding supplies occur. Out of all advance payments for purchasing purposes, 62.1% relate to such purchases.
The recognition of inventory impairments had the following variations:
| (amounts in euros) | |||||
|---|---|---|---|---|---|
| Description | Opening balance | Uses | Losses | Reversal | Closing balance |
| Inventory impairment | |||||
| Raw, auxiliary and consumable materials | ( 13 249 200) | - | ( 1 177 811) | 2 364 | ( 14 424 647) |
| Finished and intermediate products | ( 474 416) | - | ( 32 630) | 19 742 | ( 487 304) |
| Total | ( 13 723 616) | - | ( 1 210 441) | 22 106 | ( 14 911 951) |
Impairment losses related to raw, subsidiary and consumable materials and to finished and intermediate products arise essentially from the passenger transportation and rolling stock maintenance and repair segments.
For the calculation of impairment of inventories assigned to the passenger transportation segment, it is verified on a half-yearly basis whether the realisable value of inventory is lower than the amount for which they are recognised in the accounts. If the amount by which the inventory is recognised is higher than the net realisable value, an impairment loss is recognised by the difference between those two variables.
Until 2011, the basic criterion for assessing the impairment of such materials was the non-movement for over 5 years, applied to all inventory in storage. Since the 2012 financial year, and by considering the durability of most of the parts used for repairs of rolling stock, the company opted to assess the impairment of this set of assets more thoroughly. In order to do so, the impairment of storage parts of rolling stock was calculated in accordance with the estimated useful life of the series of material with which the parts were associated, which enabled the identification of the actual obsolete materials and of those without use. The criterion of nonmovement for over 5 years was maintained for the remaining materials.
The total inventory impairments recognised in 2017 also results from the weight of the maintenance and repair segment.
The following criteria were used for the calculation of impairment in the maintenance and repair segment:
The calculation of impairment losses of inventories in the maintenance and repair segment is indexed to the duration of each service agreement entered into with each customer, and the amounts are calculated based on the number of years left for the agreements to expire, as well as material consumption/movement perspectives. The criteria used are as follows:
Inventories belonging to active series or equipment with consumption in the last 9 years
All material assigned to active series or equipment and also with strategic classification is deemed ordinary, and therefore not subject to any impairment, except for the surplus resulting from the expected average consumption until the expiry date of the
corresponding agreement. A 75% impairment is taken into account on such surplus.
Inventories classified as Slow-moving or Non-moving by the Logistics Department, purchased over 2 years ago and that indicated consumption in the last 9 years, but whose consumption perspectives, vis-à-vis the available information, are residual and subject to an 80% impairment loss on their value.
Inventories classified as Strategic by the Logistics Department and which have not indicated consumption in the last 9 years are subject to an impairment loss at a constant rate, calculated on 75% of their value depending on the number of years left until the expiry date of the agreement. On the last year, the assets will have a net realisable value of 25%.
Impairment losses related to inventories which mainly comprise material for upkeep (painting products, industrial cleaning, electric and electronic material, bearings, joint/attachment elements...), some of which with possible use in equipment from other customers, will be recognised based on average consumption and estimates of needs for the next 3 years, due to the fact that they are not associated with any specific agreement and due to their nature. If the average consumption is maintained, in case the inventory is not over in 3 years, an impairment of 95% shall be applied to the surplus.
In case it has been purchased over 2 years ago and has not indicated any consumption, a 95% impairment shall be applied.
As for the changes in Production Inventories, the CP Group had the following amounts in 2017 and 2016:
| (amounts in euros) | ||
|---|---|---|
| Description | 2017 | 2016 |
| Changes in Production inventories | ||
| Finished and intermediate products | ( 32 745) | ( 35 661) |
| Total | ( 32 745) | ( 35 661) |
As at the 31st of December 2017, the heading of customers had the following amounts:
| (amounts in euros) | ||
|---|---|---|
| Description | 31/12/2017 | 31/12/2016 |
| Gross Amount: | ||
| Customers current account | ||
| General | 13 493 248 | 12 779 747 |
| Customers - doubtful collection | 2 656 890 | 2 178 603 |
| Subtotal | 16 150 138 | 14 958 350 |
| Accumulated impairment | ||
| Impairment losses of the period | ( 491 423) | ( 316 289) |
| Impairment losses of previous periods | (2 164 263) | (1 847 974) |
| Subtotal | ( 2 655 686) | ( 2 164 263) |
| Net book value | 13 494 452 | 12 794 087 |
The movements of impairment losses are analysed as follows:
| (amounts in euros) | ||||
|---|---|---|---|---|
| Description | Opening balance | Losses | Reversals Closing balance | |
| Impairment losses | ||||
| General customers | ( 2 164 263) | ( 506 270) | 14 847 | ( 2 655 686) |
| Total | ( 2 164 263) | ( 506 270) | 14 847 | ( 2 655 686) |
The heading State and other public entities is analysed as follows:
| (amounts in euros) | ||
|---|---|---|
| Description | 31/12/2017 | 31/12/2016 |
| Asset | ||
| Income tax | 1 291 158 | 1 243 146 |
| VAT | 13 931 834 | 7 910 836 |
| VAT receivable | 13 547 268 | 6 534 362 |
| VAT requested refunds | 384 566 | 1 376 474 |
| Soc. Sec. Contributions National Pensions Centre | 34 240 | 12 476 |
| Total | 15 257 232 | 9 166 458 |
| Liability | ||
| Income tax | 659 394 | 888 375 |
| Income tax withheld | 296 404 | 315 628 |
| VAT payable | 2 141 560 | 2 384 895 |
| Social Security Contribution | 545 058 | 522 066 |
| Other taxes | 904 | 2 645 |
| Total | 3 643 320 | 4 113 609 |
The main change is essentially due to the increase of the heading of VAT receivable, as a result of the acceptance, at the end of IP's invoicing year regarding the charges for the use of the infrastructure.
The heading Other accounts receivable is analysed as follows:
| (amounts in euros) | ||
|---|---|---|
| Description | 31/12/2017 | 31/12/2016 |
| Gross Amount: | ||
| Advance payments to suppliers: | ||
| SISCOG-Sistemas Cognitivos, LDA. | 128 391 | 128 391 |
| IP - Infraestruturas de Portugal, S.A. | 2 120 | 2 120 |
| Other | 182 070 | 215 950 |
| Other Debtors - personnel | 101 111 | 76 095 |
| Sundry Debtors - current account | 8 868 520 | 9 420 494 |
| Debtors by income accruals | 2 742 611 | 4 710 998 |
| Subtotal | 12 024 823 | 14 554 048 |
| Accumulated impairment | ||
| Impairment of the period - Other debts from third parties | ( 969 540) | 32 932 527 |
| Impairment of previous periods - O. Deb. from third parties | (3 187 206) | (36 119 733) |
| Subtotal | ( 4 156 746) | ( 3 187 206) |
| Net book value | 7 868 077 | 11 366 842 |
The decrease vis-à-vis 2016 is mainly found in the heading of debtors by accrual of income. This decrease is due to the issuance of regular invoicing of 2017 to Medway, S.A. regarding the leasing of locomotives, and others, but also due to the termination of the traction electricity re-invoicing agreement with this entity.
The movements of impairment losses are analysed as follows:
| (amounts in euros) | |||||
|---|---|---|---|---|---|
| Description | Opening balance | Losses | Use | Reversals Closing balance | |
| Impairment losses | |||||
| Other debts from third parties | ( 3 187 206) | ( 1 100 359) | - | 130 819 | ( 4 156 746) |
| Total | ( 3 187 206) | ( 1 100 359) | - | 130 819 | ( 4 156 746) |
The following table shows the amounts accounted for in the heading of deferrals:
| (amounts in euros) | ||
|---|---|---|
| Description | 31/12/2017 | 31/12/2016 |
| Asset | ||
| Expenses to be recognised | ||
| Defer. - exp. to be recogn. - other - miscellaneous | 921 891 | 704 866 |
| Defer. - exp. to be recogn. - insurance | 429 509 | 415 069 |
| Defer. - exp. to be recogn. - rents | 12 275 | 12 215 |
| Total | 1 363 675 | 1 132 150 |
| Liability | ||
| Income to be recognised | ||
| Defer. - inc. to be recogn. - invest. grants | 114 006 126 | 122 448 574 |
| Def. - inc. to be reco. - invo. on acc. - work to be und. | 236 647 | 185 383 |
| Def. - inc. to be reco. - other def. - inc. to be recog. | 113 604 | 11 580 |
| Total | 114 356 377 | 122 645 537 |
The decrease in the liability deferrals heading mainly arises from the recognition of part of the received investment grants as income for the financial year, on a systematic and rational basis during the asset's useful life, in the proportion in which its depreciation is also recognised.
The particulars of the heading of allowances are shown in the following table:
| (amounts in euros) | ||
|---|---|---|
| Description | 31/12/2017 | 31/12/2016 |
| 59300004 Reserves Grants - Rolling Stock | 433 343 | 495 395 |
| 59300100 FEDER-Sub Proj 12UQE | 4 091 726 | 4 965 660 |
| 59300700 PIDDAC-Sub Proj 12+4UQE | 3 822 482 | 4 169 978 |
| 59300800 FEDER-Sub Proj 12+4UQE | 10 447 351 | 11 397 095 |
| 59301001 PIDDAC-Sub Proj 34UQE/UTE | 2 540 202 | 2 857 727 |
| 59301002 PIDDAC-Sub Proj 19UDD | 382 625 | 433 493 |
| 59301003 PIDDAC-Sub Proj 21ALLAN | 661 934 | 702 904 |
| 59301004 PIDDAC-Sub Proj 42UQE | 342 904 | 382 808 |
| 59301005 PIDDAC-Sub Proj 34UME | 16 753 970 | 17 841 400 |
| 59301006 PIDDAC-Sub Proj 57UTE Silicon | 14 038 418 | 14 878 163 |
| 59301009 PIDDAC-Sub Proj 57CORRAIL | 468 786 | 532 646 |
| 59301010 PIDDAC-Sub Proj 12Locomotives | 390 009 | 390 009 |
| 59301013 PIDDAC-Sub Proj Contactless ticket | 172 860 | 920 931 |
| 59301014 PIDDAC-Improv Interface Branch Line Lousã | 162 680 | 190 568 |
| 59301024 PIDDAC-SubProj Change Max Veloc 45 Modern. Carriag. | 50 383 | 77 727 |
| 59301025 PIDDAC-Repl. Wheelset Transmission Boxes UDD's450 | 384 919 | 422 829 |
| 59301027 PIDDAC-Modernisation of 4 railcars 3500 | 995 313 | 1 100 313 |
| 59301028 PIDDAC-Large Repair R2 - 453 | - | 8 297 |
| 59301029 PIDDAC-Large Repair R2 - 2334 | 294 630 | 322 037 |
| 59301030 PIDDAC-Large Repair R2 - 2340 | 290 062 | 317 469 |
| 59301031 PIDDAC-Large Repair R2 - 2326 | 222 146 | 242 341 |
| 59301032 PIDDAC-Large Repair R3 - 9635 | 32 662 | 54 437 |
| 59301033 PIDDAC-Large Repair R2 - 464 | - | 22 377 |
| 59301034 PIDDAC-Large Repair R2 - 2197010 | 67 997 | 86 972 |
| 59301035 PIDDAC-Large Repair R2 - 2403 | 181 412 | 197 780 |
| 59301036 PIDDAC-Large Repair R2 - 2404 | 417 244 | 454 060 |
| 59301037 PIDDAC-Large Repair R2 - 360 | 26 227 | 48 707 |
| 59301039 PIDDAC-Large Repair R2 - 2405 | 292 578 | 317 130 |
| 59301040 PIDDAC-Large Repair R2 - 468 | 8 296 | 33 186 |
| 59301041 PIDDAC-Large Repair R2 - 2197025 | 117 540 | 133 753 |
| 59301042 PIDDAC-Large Repair R2 - 463 | 33 518 | 58 656 |
| 59301043 PIDDAC-Large Repair -Gr R-R2 461 | 83 794 | 146 640 |
| 59301044 PIDDAC-Large Repair R2 469 | 53 419 | 91 126 |
| 59301045 PIDDAC-Large Repair R2 2197012 | 89 283 | 99 997 |
| 59301046 PIDDAC-Large Repair R2 2197034 | 115 574 | 129 443 |
| 59301047 PIDDAC-Large Repair R2 2197011 | 70 038 | 78 360 |
| 59301048 PIDDAC-Large Repair R2 2197020 | 115 574 | 129 443 |
| 59301049 PIDDAC-Large Repair R2 8597004 | 46 892 | 52 000 |
| 59301050 PIDDAC-Large Repair R2 8597007 | 69 642 | 77 999 |
| 59301051 PIDDAC-Large Repair R2 1415 | 150 953 | 162 715 |
| 59301052 PIDDAC-Large Repair R2 2197028 | 116 730 | 130 599 |
| 59301053 PIDDAC-Large Repair R2 1997008 | 57 785 | 64 650 |
| 59301054 PIDDAC-Large Repair R2 2197019 | 132 911 | 146 780 |
| 59301055 PIDDAC-Large Repair R2 0451 | 94 268 | 131 976 |
| 59301056 PIDDAC-Large Repair R2 2197027 | 132 911 | 146 780 |
| 59301057 PIDDAC-Large Repair R2 1997002 | 139 203 | 150 265 |
| 59301058 PIDDAC-Large Repair R2 3154 | 330 624 | 354 816 |
| 59301059 PIDDAC-Large Repair R2 9634 | 98 966 | 120 958 |
| 59301060 PIDDAC-Large Repair R2 2197007 | 132 911 | 146 780 |
| 59301061 PIDDAC-Large Repair R2 3266 | 262 047 | 280 877 |
| 59301062 PIDDAC-Large Repair R2 0458 | 205 208 | - |
| 59301063 PIDDAC-Large Repair R2 0457 | 77 874 | - |
| 59301064 PIDDAC-Large Repair R2 1997004 | 89 471 | - |
| 59301065 PIDDAC-Large Repair R2 1997009 | 58 166 | - |
| 59301066 PIDDAC-Large Repair R2 2197015 | 87 559 | - |
| 59301067 PIDDAC-Large Repair R2 2197016 | 59 423 | - |
| 59301068 PIDDAC-Large Repair R2 2197001 | 88 482 | - |
| 59301069 PIDDAC-Large Repair R2 1413 | 111 745 | - |
| 59301070 PIDDAC-Large Repair R2 3260 | 56 502 | - |
| 59301071 PIDDAC-R1 CPA´s 4000 | 596 471 | - |
| 59301101 FEDER-Sub Proj 19UDD | 790 925 | 896 076 |
| 59301102 FEDER-Sub Proj 21ALLAN | 1 293 103 | 1 373 141 |
| 59301103 FEDER-Sub Proj 34UME | 29 845 204 | 31 779 552 |
| 59301104 FEDER-Sub Proj 57UTE Silicon | 18 000 718 | 19 113 387 |
| 59301107 FEDER-Sub Proj 57CORRAIL | 939 987 | 1 068 037 |
| 59301108 FEDER-Sub Proj 12Locomotives | 903 370 | 903 370 |
| 59301700 FEDER-Improv Interfaces Branch Line Lousã | 348 588 | 414 264 |
| 59301800 FEDER-Contactless ticket-CPLX | 35 588 | 201 696 |
Total 114 006 126 122 448 574
The heading financial assets held for trading is analysed as follows:
| (amounts in euros) | ||
|---|---|---|
| Description | 31-12-2017 | 31-12-2016 |
| Financial assets | - | 4 |
| Total | - | 4 |
At the reference date for the presentation of these Financial Statements, the Group has no amounts accounted for in the heading of financial assets held for trading.
The only existing amount as at the 31st of December 2016 was the value from shares belonging to Millennium BCP, transferred from the company Fergráfica, S.A. following the liquidation of the latter company, which were disposed of during 2017.
One of the goals of the Group is to dispose of assets unnecessary to its activity. These assets mainly include buildings and rolling stock. In that sense, top management is committed to the development of actions which allow the conclusion of those disposals through the prospection of eventual stakeholders, either in the domestic market or in the foreign market.
Despite some of these assets being classified as fixed assets held for sale for over a year, it is believed they must remain in this heading of asset since their amount can be recovered, not through usage, but through sale, and the top management is strongly committed to the development of efforts for that purpose.
Assets classified as held for sale are valued at the lowest amount between their book value and their expected sale value.
On a half-yearly basis, the occurrence of impairments in these assets is assessed and, whenever necessary, adjustments of amounts which have already been recognised are performed.
After the establishment of these impairments, rolling stock classified in the non-current assets held for sale category got a value equal to zero as per the particulars below reported as at the 31st of December 2017:
| (amounts in euros) | |||||
|---|---|---|---|---|---|
| Description | Book value | Grants to be recognised |
Scrap value | Impairment | (1)–(2)-(3)-(4) |
| (1) | (2) | (3) | (4) | ||
| Several series | 14 375 691 | 3 041 141 | 2 643 256 | 8 691 294 | - |
The following table summarises, by class of fixed asset, the noncurrent assets held for sale:
| (amounts in euros) | |||
|---|---|---|---|
| Description | 31/12/2017 | 31/12/2016 | |
| Assets | |||
| Land and natural resources | 84 796 | 1 744 117 | |
| Buildings and other constructions | 139 204 | 9 567 050 | |
| Basic equipment | 5 684 397 | 5 684 397 | |
| Total | 5 908 397 | 16 995 564 |
The change accounted for in 2017, in comparison with the previous year, is originated in the heading of land and natural resources and buildings and other constructions, resulting from the reclassification of the immovable property called River Terminal of Barreiro to fixed tangible asset, since its disposal cannot be foreseen in a near future. An agreement with Transtejo for the use of this immovable property is under negotiation.
Concerning the building still classified as non-current asset held for sale, it is also worth mentioning that the Group did not identify any proof of existing impairment compared with that which has been previously recognised, remaining strongly committed to the sale of this asset.
In accordance with article 3 of Decree-law no. 59/2012 of March 14th which defines CP's Statutes, the statutory capital of the company is 3,850,091,940 Euros, which is entirely held by the Portuguese State and is meant to meet the company's permanent needs. This amount is entirely subscribed as at the 31st of December 2017.
In 2015 and 2016, joint orders from the Sector and Financial Ministries determined an increase to the statutory capital of CP, EPE, by 683,483 million euros (in 2015) and by 654,913 million euros (in 2016), having been subscribed during the corresponding years, which allowed the company to cover the payments resulting from historic debt (amortisations and financial costs) as well as investment.
During 2017, and in accordance with the law in force, it was equally determined that the statutory capital of CP, EPE, would be increased by 516.4 million euros following the joint orders from the Sector and Financial Ministries, to be subscribed by the State as follows:
These amounts were meant to cover the needs arising from debt service (amortisations, interest and other costs), investment and personnel expenses related to the historical agreement on variables.
The Subscribed capital heading therefore shows, in accumulated terms, an increase of 516.4 million euros in 2017, corresponding to the capital amount subscribed by the State during the period.
Thus, at the end of 2017, the company has a subscribed capital of 3,850,091,940 euros.
In accordance with article 295 of the Portuguese Commercial Companies Code and in accordance with article 30 of Decree-law no. 137-A/2009 from June 12th, amended by Decree-law no. 59/2012 from March 14th that defines CP's Statutes, the company must have reserves and funds deemed necessary, and the constitution of legal reserve in the amount of 5% of the profits of each financial year is mandatory. The legal reserve may be used in the hedging of losses of the financial year.
During the period, legal reserves were not strengthened, nor were they used for hedging losses.
This heading accounts for the statutory reserve corresponding to the amount of the Amortisation and Renovation of Rolling Stock Fund as at the 31st of December 1974.
The Amortisation and Renovation of Rolling Stock Fund was meant for the renovation of rolling stock, as foreseen in article 16 of the Concession Contract of 1951 between the State and "Companhia dos Caminhos de Ferro Portugueses", and it concerned the surplus of revenues from the Fund on investments funded thereby.
The variation in results brought forward is mainly related to the inclusion of the net result from the previous period. However, the movements set forth in the following table also contribute to this variation:
| (amounts in euros) | |
|---|---|
| Reconciliation of the consolidated result brought forward | |
| Results brought forward in 2017 | -6 078 119 710 |
| Results brought forward in 2016 -5 933 918 492 |
|
| + Net result of the 2016 period -143 999 549 |
-6 077 918 041 |
| Movements of 2017 directly into Results brought forward: | -201 669 |
| Identification: The reason for this variation is the Net impact of several operations in results brought forward, which are related to the cancellation of balances and intercompany transactions. |
The particulars of this heading are analysed as follows:
| (amounts in euros) | |||
|---|---|---|---|
| Description | 31/12/2017 | 31/12/2016 | |
| Financial repair | 91 357 368 | 91 357 368 | |
| Transitional adjustments | 132 640 | 132 640 | |
| Total | 91 490 008 | 91 490 008 |
The financial repair heading reflects the liability assumed by the State in accordance with the Protocol from the 24th of August 1993, concerning debts payable to the Tax Authority, to the General Directorate of Treasury and to the Banking System amounting to 97,975,959 euros, and the use in the settlement of the remaining outstanding amount by the State of 6,618,591 Euros, as a result of the financial repair carried out in the scope of Decree-law no. 361/85.
The movement in the heading of provisions is analysed as follows:
| (amounts in euros) | |||||
|---|---|---|---|---|---|
| Description | Opening balance Additions | Uses | Reversals Closing balance | ||
| Ongoing legal actions | 4 341 606 | 54 207 | ( 3 080 000) | ( 15 188) | 1 300 625 |
| Railway accidents | 1 792 051 | - | - | ( 68 814) | 1 723 237 |
| Occupational accidents and illnesses, and other provisions | 11 680 467 | 43 899 | ( 788 768) | - | 10 935 598 |
| Financial investments | 155 094 | - | - | ( 155 094) | - |
| Total | 17 969 218 | 98 106 | ( 3 868 768) | ( 239 096) | 13 959 460 |
The change in the heading of provisions is mainly due to the transfer of the liability value determined in accordance with the agreement entered into with the Organisations Representing Employees regarding the incorporation of variable bonuses in the concept of remuneration used for the calculation of holiday compensation and holiday allowances, which is no longer considered as a provision of legal proceeding and is transferred to the heading of other debts payable.
Liabilities for occupational accidents and illnesses were calculated based on the actuarial assessment of the liabilities of the Group as at the 31st of December 2017, with pensions for occupational accidents occurred until December 31st, 1999. This calculation was carried out by a third party (CGD PENSÕES).
The increases or decreases in liabilities arising from changes to the granted benefits are recognised as losses or gains in the financial year in which they occur. The methodology and financial and actuarial assumptions of the assessment of liabilities are the following:
Calculation method: For the valuation of liabilities regarding retired staff with occupational accident pensions, the current value of immediate lifetime income annuities was calculated. Discount rate: 1.75%. Pensions' growth rate: 1.0%. Mortality tables: the French table TV 88/90 was used. Period for payment of occupational accident pensions: life annuities. Effective date of the calculations: December 31st, 2017.
At the end of the period of 2017, the heading of loans obtained had the following particulars:
| (amounts in euros) | ||
|---|---|---|
| Description | 31-12-2017 | 31-12-2016 |
| Non-current | ||
| Credit institutions and financial companies | ||
| Bank loans | 115 149 167 | 144 091 375 |
| Debenture loans | 700 000 000 | 700 000 000 |
| Applic. of Effective Rate Debenture Loans | (6 453 876) | (6 869 048) |
| Other funders | 1 397 542 000 1 772 056 000 | |
| Total | 2 206 237 291 2 609 278 327 | |
| Current | ||
| Credit institutions and financial companies | ||
| Bank loans | 28 942 209 | 36 930 189 |
| Bank overdrafts | 226 659 | 225 436 |
| Other funders | 380 514 000 | 380 514 000 |
| Total | 409 682 868 | 417 669 625 |
As per note 19, the capital increases allowed the Group to cover the payments resulting from historic debt (amortisations and financial costs), representing a decrease in the loans obtained heading.
The heading of loans obtained, by maturity, is analysed as follows:
| (amounts in euros) | ||
|---|---|---|
| Description | 31/12/2017 | 31/12/2016 |
| Credit institutions and financial companies | ||
| Bank loans | ||
| Up to 1 year | 28 942 209 | 36 930 189 |
| From 1 to 5 years | 106 282 500 | 111 558 042 |
| Over 5 years | 8 866 667 | 32 533 333 |
| Bank overdrafts | ||
| Up to 1 year | 226 659 | 225 436 |
| Debenture loans | ||
| From 1 to 5 years | 500 000 000 | 500 000 000 |
| Applic. of Effective Rate Debenture Loans | ( 313 588) | ( 429 855) |
| Over 5 years | 200 000 000 | 200 000 000 |
| Applic. of Effective Rate Debenture Loans | ( 6 140 288) | ( 6 439 193) |
| Other funders | ||
| Up to 1 year | 380 514 000 | 380 514 000 |
| From 1 to 5 years | 1 345 542 000 1 622 056 000 | |
| Over 5 years | 52 000 000 | 150 000 000 |
| Total | 2 615 920 159 3 026 947 952 |
In accordance with IAS 7 and with reference to the 1st of January 2017, the reconciliation of changes in liabilities from financing activities, including changes arising from cash flows as well as changes without cash offsetting is shown below:
| (amounts in euros) | |||||
|---|---|---|---|---|---|
| Financing | Bank loans | Debenture loans | Other funders | Bank overdrafts | Total |
| Balance on the 31st of December, 2016 | 181 021 564 | 693 130 952 | 2 152 570 000 | 225 436 | 3 026 947 952 |
| Cash flows: | |||||
| Amortisations in cash 2017 | (36 930 188) | - | - | - | (36 930 188) |
| New Financing 2017 | - | - | 6 000 000 | - | 6 000 000 |
| Amortisations in kind 2017 | - | - | (380 514 000) | - | (380 514 000) |
| Application of effective rate | - | 415 172 | - | 415 172 | |
| Other changes | - | - | - | 1 223 | 1 223 |
| Balance on the 31st of December, 2017 | 144 091 376 | 693 546 124 | 1 778 056 000 | 226 659 | 2 615 920 159 |
The heading of other accounts payable is analysed as follows:
| (amounts in euros) | ||
|---|---|---|
| Description | 31/12/2017 | 31/12/2016 |
| Non-current | ||
| Creditors by expenditure accruals | 8 006 555 | 13 390 899 |
| Total | 8 006 555 | 13 390 899 |
| Current | ||
| Investment providers | 912 839 | 311 500 |
| Creditors by outstanding subscriptions | 35 477 347 | 38 665 181 |
| Other debtors and creditors | 7 972 495 | 4 647 625 |
| Creditors by expenditure accruals | 61 460 329 | 65 978 970 |
| Total | 105 823 010 | 109 603 276 |
Regarding non-current liability, in 2017, the recognition of liability concerning the settlement of historic debt arising from the integration of variable bonuses in the calculation of holiday allowances and holidays still remains, following the agreement entered into with the Organisations Representing Employees, which shall be paid until the financial year of 2019. The amounts payable in the subsequent year are transferred to current asset in accordance with the signed agreements.
The reduction in current liability is essentially due to the reduction of accrued interest payable as a result of the amortisation of some financing. This reduction of financing was achieved mainly through capital increases granted by the Portuguese State. It is also worth noting the decrease in the need for accrual of expenses associated with external services and supplies, since invoicing was registered in 2017. For the reduction of current liability, the change in exchange rates of Swiss francs is noted, which is the currency of valuation of shares subscribed and not paid-up of Eurofima, which decreased the value of said shares as at 31.12.2017 upon conversion.
The heading of suppliers shows the following particulars:
| (amounts in euros) | ||
|---|---|---|
| Description | 31/12/2017 | 31/12/2016 |
| Suppliers current account | ||
| General | 12 528 536 | 22 699 491 |
| Invoices received and pending approval | 848 132 | 1 132 234 |
| 13 376 668 | 23 831 725 |
In 2017, there was an overall decrease of outstanding balances to general suppliers, such as the decrease of the average time for payment, and the decrease of the debt to Infraestruturas de Portugal, S.A. stands out as a contribution to such fact.
This heading has the following amounts:
| (amounts in euros) | ||
|---|---|---|
| Description | 31/12/2017 | 31/12/2016 |
| Advance payments from customers | ||
| CP Customers | - | 200 500 |
| Fernave Customers | 374 000 | 374 000 |
| 374 000 | 574 500 |
The disposal certificate of the immovable property Praia das Maçãs was carried out in 2017 and the advance payment received in 2016 was settled.
The promissory agreement of purchase and sale entered into in 2014 regarding a building in Mozambique held by Fernave is still in effect, for which a down payment amounting to 374 thousand euros was received.
Provided sales and services have the following particulars:
| (amounts in euros) | |||
|---|---|---|---|
| Description | 2017 | 2016 | |
| Provided services | |||
| Passengers | 257 691 742 | 233 776 664 | |
| Other | 28 968 111 | 32 442 222 | |
| Total | 286 659 853 | 266 218 886 |
The heading of provided sales and services increased by approximately 20.4 million euros, as a result of the growth in passenger services, namely in one-way ticket sales, presenting an accumulated growth of 13.6 million euros, vis-à-vis the same period in the previous year.
Operating subsidies recognised as income in the financial years of 2017 and 2016 are identified in the following table:
| (amounts in euros) | ||
|---|---|---|
| Description | 2017 | 2016 |
| Operating subsidies: | ||
| IEFP Training | - | 16 929 |
| Energy Efficiency Fund | 10 000 | - |
| Shift2Rail–IMPACT Project | 3 578 | - |
| Shift2Rail–IMPACT2 Project | 2 073 | |
| Shift2Rail-PIVOT Project | 7 111 | - |
| Total | 22 762 | 16 929 |
It is also worth mentioning that the amounts granted to CP by the State in 2017 correspond exclusively to the State's contribution for passes and the intermodal system Andante, and CP did not receive any additional compensation for the provision of its public service.
The gains/losses attributed to subsidiaries, associated companies and joint ventures show the following particulars:
| (amounts in euros) | ||
|---|---|---|
| Description | 2017 | 2016 |
| Losses | ||
| Application of the equity method | - | ( 10 929) |
| Gains | ||
| Application of the equity method | 1 202 043 | 520 659 |
| Total | 1 202 043 | 509 730 |
The increase in gains allocated to subsidiaries, associated companies and joint ventures, is due to the improvement in the results of the companies of the Group, namely TIP, Otlis, SIMEF and Nomad Tech.
The heading Capitalised production costs accounts for works carried out by the rolling stock maintenance component and is analysed as follows:
| (amounts in euros) | ||
|---|---|---|
| Description | 2017 | 2016 |
| Passenger transportation | ||
| Fixed tangible assets | 12 520 674 | 8 334 943 |
| Total | 12 520 674 | 8 334 943 |
Capitalised production costs relate to rolling stock maintenance and repair, whereas its increase vis-à-vis the previous year is due to the half-life interventions performed in Alfa Pendular trains.
Sold commodities and consumed materials costs are as follows:
| (amounts in euros) | ||
|---|---|---|
| Description | 2017 | 2016 |
| Goods | - | - |
| Raw, auxiliary and consumable materials | 26 381 446 | 23 286 771 |
| Total | 26 381 446 | 23 286 771 |
The increase in this heading is mainly associated with the growth in the rolling stock repair activity, specifically due to the half-life interventions - R1 – of Alfa Pendular (CPA 4000) trains, and the 960,000 Km general inspection to vehicles comprising the Eurotram Fleet.
The heading of external services and supplies has the following particulars:
| (amounts in euros) | ||
|---|---|---|
| Description | 2017 | 2016 |
| Sub-agreements | 26 456 314 | 25 639 645 |
| Specialised and other services | 83 938 427 | 86 177 105 |
| (Including infrastructure usage fee) | 56 175 213 | 55 789 977 |
| Materials | 643 019 | 685 852 |
| Energy and fluids | 24 057 437 | 27 550 083 |
| Travels, accommodation and transportation | 3 963 621 | 1 268 743 |
| Total | 139 058 818 | 141 321 428 |
As a result of the effort to contain expenses, in 2017, external services and supplies decreased by approximately 2.3 million euros.
There was an increase in expenses with travels, to which the agreements concluded by CP with trade unions in mid-2016 were instrumental, where a transport bonus is now awarded to the operating personnel from the commercial and traction career, in certain circumstances. It should be noted that, in 2016, such bonus was only awarded half-year, by taking the dates of conclusion of the agreements into account.
There was also an increase in the subcontracting of services, specifically regarding maintenance sub-agreements.
Such increases were largely offset by the decrease in traction energy expenses, on account of the renegotiation of the energy supply agreement, according to which energy expenses shall be directly invoiced to Medway S.A..
The heading of personnel expenses has the following particulars:
| (amounts in euros) | ||
|---|---|---|
| Description | 2017 | 2016 |
| Remuneration of governing bodies | 416 529 | 387 249 |
| Remuneration of personnel | 98 872 813 | 95 975 569 |
| Compensations | 1 754 018 | 3 094 424 |
| Charges on remuneration | 21 989 773 | 21 318 380 |
| Insurance for occupational accidents and illnesses | 3 041 474 | 3 138 965 |
| Social action expenses | 384 008 | 319 034 |
| Other personnel expenses | 487 687 | 541 201 |
| Total | 126 946 302 | 124 774 822 |
The increase in this heading vis-à-vis 2016 was a result of the total reversal of temporary pay cuts, which began in January 2016, reaching 100% from the 1st of October 2016), as well as the publication of the Decree-Law for the 2017 State Budget Implementation – DL no. 25/2017, according to which the increase in the wage bill was allowed, arising from the unfreezing of seniority bonuses and career progressions, restitution of progressions and the increase in other bonuses.
The particulars of this heading are shown in the following table:
| (amounts in euros) | |||
|---|---|---|---|
| Description | 2017 | 2016 | |
| Losses | |||
| In financial investments | ( 3) | ( 111 112) | |
| Reversals | |||
| From financial investments | 17 166 | - | |
| Non-current assets held for sale | - | 1 684 358 | |
| Total | 17 163 | 1 573 246 |
In contrast to 2016, in 2017 there was no need to adjust impairments with non-current assets held for sale. In 2016, the reversal was due to the write-off of rolling stock.
The heading of other income has the following particulars:
| (amounts in euros) | ||
|---|---|---|
| Description | 2017 | 2016 |
| Supplementary income | 6 278 674 | 9 194 761 |
| Prompt payment discounts received | 1 647 | 1 279 |
| Inventory gains | 69 307 | 44 117 |
| Remaining financial assets | 3 461 517 | 3 620 550 |
| Non-financial investments | 781 205 | 37 831 |
| Other | 11 804 583 | 23 237 098 |
| Total | 22 396 933 | 36 135 636 |
There was a decrease in the heading of other income in 2017, mainly due to the following elements:
Financial Ministries regarding CP's application to join the special scheme for deferred tax assets.
The heading of other expenses and losses has the following particulars:
| (amounts in euros) | |||
|---|---|---|---|
| Description | 2017 | 2016 | |
| Taxes | 183 469 | 180 643 | |
| Bad debts | - | 7 998 | |
| Inventory losses | 41 945 | 108 001 | |
| Non-financial investments | 19 | 4 594 182 | |
| Other | 3 942 131 | 4 441 171 | |
| Total | 4 167 564 | 9 331 995 |
There was a reduction in the heading of other expenses in 2017, mainly due to the following elements:
The Other expenses heading essentially encompasses the recognition of losses resulting from the non-recognition of the entire State contribution associated with sold subsidised transport cards, since it exceeds the assigned amounts, expenses with electronic terminals and indemnities of various kinds, namely contractual indemnities and indemnities for train delays.
The heading of fair value increases/decreases is analysed as follows:
| (amounts in euros) | ||
|---|---|---|
| Description | 2017 | 2016 |
| Gains | ||
| Financial instruments | - | 1 291 916 |
| Total | - | 1 291 916 |
The CP Group has no financial derivatives at the end of 2017.
The fair value gain recognised in 2016 was caused by the expiration of the last release procedure regarding the portfolio of derivatives, in April 2016, upon the expiration of the last financial risk management instrument held in CP's portfolio, along with the amortisation of the Eurofima loan that served as base for said derivative. The assessment of these derivatives was ensured by a third party.
The heading expenses/reversal of depreciation has the following amounts:
| (amounts in euros) | ||
|---|---|---|
| Description | 2017 | 2016 |
| Expenses | ||
| Fixed tangible assets | 57 964 873 | 56 465 759 |
| Intangible assets | 100 671 | 20 838 |
| Reversals | ||
| Fixed tangible assets | 141 253 | - |
| Total | 57 924 291 | 56 486 597 |
Expenses that were accounted for are the result of depreciation/amortisation of assets in accordance with their determined useful lives and particulars presented in note 3. The expected useful lives of assets are revised annually, in order to verify their accuracy. The registered reversal is due to an adjustment made to the useful life of rolling stock in 2017.
The increase in amortisation of intangible assets in the 2017 period is directly associated with the purchases made in December 2016.
The heading of impairment of depreciable and amortisable investments has the following amounts:
| (amounts in euros) | ||
|---|---|---|
| Description | 2017 | 2016 |
| Losses | ||
| Fixed tangible assets | ( 455 819) | - |
| Reversals | ||
| Fixed tangible assets | 1 029 588 | 855 533 |
| Total | 573 769 | 855 533 |
The change in the heading of impairment reversals is due to the completion of the repairs of damaged rolling stock. The change in the heading of impairment losses is due to the impairment accounted for in rolling stock repairs.
The heading of interest and similar income gained is analysed as follows:
| (amounts in euros) | ||
|---|---|---|
| Description | 2017 | 2016 |
| Interest gained | 7 612 | 179 648 |
| Total | 7 612 | 179 648 |
This heading essentially accounts for interest associated with the agreement entered into with Metro Ligeiro de Mirandela.
148
The heading of payable interest and similar expenses shows the following amounts:
| (amounts in euros) | ||
|---|---|---|
| Description | 2017 | 2016 |
| Interest charges | 73 047 555 | 82 718 467 |
| Other expenses and losses | 3 602 728 | 5 699 972 |
| Total | 76 650 283 | 88 418 439 |
During the financial year of 2017, the heading of payable interest and similar expenses decreased by approximately 11.8 million euros mainly due to the amortisation of financing held by the company, arising from capital increases granted by the State for that purpose.
Not applicable.
| (amounts in euros) | |
|---|---|
| Guarantees and sureties provided to the CP Group: | Amount |
| - By the State | 642 778 876 |
| - By bank entities in favour of third parties Guarantees and bank sureties provided by the CP Group in favour of third |
1 531 401 * |
| parties | 1 256 568 |
* includes escrow account at IGCP amounting to 150.000€
The company Oliveira, Reis & Associados – SROC, Lda. has annual fees, within the scope of the revision and legal certification of the individual and consolidated accounts of CP, amounting to 21,500 Euros, plus VAT at the legal rate in force.
The company Ribeiro, Rigueira, Marques, Roseiro & Associados, SROC, Lda. has annual fees, within the scope of the audit of the individual and consolidated accounts of CP, amounting to 11,750 Euros, plus VAT at the legal rate in force.
There were no relevant events after the balance sheet date to report.
[Logo] RIBEIRO, RIGUEIRA, MARQUES, ROSEIRO & ASSOCIADOS, SROC [Certified Public Accountants], LDA.
We have audited the attached consolidated financial statements of CP – Comboios de Portugal, E.P.E. and its subsidiaries (the Group), comprising the statement of the consolidated financial position as at 31st of December, 2017, (showing a total of 629,186,204 Euros and a total negative equity of 2,246,273,345 Euros, including a net loss of 111,066,936 Euros), the consolidated income statement and the statement of other comprehensive income, the consolidated statement of changes in equity, and the consolidated statement of cash flows of the year that ended on that date, and the attachments to the consolidated financial statements, including a summary of the relevant accounting policies.
In our opinion, the attached consolidated financial statements truly and appropriately present, in all material aspects, the consolidated financial position of the Group as at 31st of December, 2017, and its consolidated financial performance and cash flows regarding the year that ended on that date, in accordance with the International Financial Reporting Standards (IFRS), as adopted in the European Union.
Our audit was carried out in accordance with the International Standards on Auditing (ISA) and further technical and ethical provisions and guidelines of the Portuguese Certified Public Accountant Association. Our responsibilities under said provisions are specified in the "Responsibilities of the auditor regarding the consolidated financial statements audit" section below. We are independent from the Entities in the Group in accordance with the law and comply with all further ethical requirements foreseen in the ethics code of the Portuguese Certified Public Accountant Association.
We are certain that the audit evidence we obtained serves as sufficient and appropriate foundation for our opinion.
The Group has been accumulating consecutive net losses of significant amounts (particularly, the net loss of the years ended on the 31st of December, 2015 and 2016, whose Report and Accounts have not yet been approved by the Sector and Financial responsible Ministries), presenting, on the 31st of December, 2017, a total negative equity of 2,246,273,345 Euros.
Additionally, we note that there was a significant decrease of funding in the analysed year, in the amount of 411,027,793 Euros, of which 410,154,015 Euros were converted into capital. Nevertheless, the Group still has a high degree of indebtedness, with net assets mostly financed by the Sector and Financial responsible Ministries.
Ribeiro, Rigueira, Marques, Roseiro & Associados, SROC, Lda. -
Registered in the Portuguese Certified Public Accountant Association under the no. 197 - Registered in CMVM under no. 20161495 – Share Capital of 10,000 Euros – Corporate Taxpayer/VAT no.: 507 327 314 - Registered in the Commercial Registry Office of Lisbon - Head Office: Rua Julieta Ferrão, 12 – Sala 903 – Torre A – 1600-131 LISBON – PORTUGAL – Tel: +351 217 910 703 – Fax: +351 217 910 685
Office: Beloura Office Park, Edifício 4 – Escritório 1.6 – 2710-693 SINTRA – PORTUGAL – Tel: +351 219 242 943 – Fax: +351 219 242 944 www.rrmr-sroc.pt
Since the Group renders a public service, the financing of its activity still depends on the financial support of the Portuguese Government, who holds the total capital of the Group.
Our opinion is not altered on this matter.
Key audit matters are those of greater importance in the audit of the consolidated financial statements for the current year according to our own professional judgement. Said matters were considered as a whole within the audit of the consolidated financial statements, and we did not issue a separate opinion regarding them.
| Most important risks of material misstatement |
Summary of solutions applied to the most important risks of material misstatement |
|---|---|
| Revenue Recognition | We undertook the following auditing procedures, among others: |
| As at 31st of December, 2017, the revenue from the services rendered by the Group, which essentially include the transportation of passengers and the maintenance and repair of rolling stock, increased to 286,659,883 Euros, as per note 29. The risk of revenue recognition is related to the high number of records in the ticketing system and their incorporation into accounting, and to the level of judgement of the Board of Directors in determining the state of completion of the ongoing services as at the date of the balance sheet, for which we considered it a key audit matter. |
a) Surveying and analysing the relevant controls identified in the revenue cycle; b) Testing the operability of controls used in the incorporation of revenue into accounting, with the assistance of an auditor specialised in computer auditing, qualified in information technologies; c) Analysing the assumptions considered in the recognition of works in progress; d) Analysing revenue adjustments at the end of the year; and e) Identifying and analysing the main variations in the revenue heading. |
| Impairment of fixed tangible assets | We undertook the following auditing procedures, among others: |
| As at 31st of December, 2017, the impairment of fixed tangible amounts to 5,715,646 Euros, as per note 7. |
a) Analysing the criteria defined by the Group for the identification of slow-moving or obsolete rolling stock; |
| The impairment tests carried out by the Group are based on validations conducted by the responsible operating officers regarding rolling stock, which are associated with the movement level of the rolling stock and with the expectation of disposal of the obsolete material, and by independent experts regarding immovable properties, leading us to consider this topic as a key audit matter. |
b) Analysing the support for the recognised impairments' calculation, including the corresponding adopted criteria and independent evaluations of immovable properties; |
| c) Analysing the main impairment movements registered in the year; |
|
| d) Inquiring the Group's management; and | |
| e) Verifying the suitability of the impairment disclosures presented in the attached notes. |
Provisions present a balance of 13,959,460
Euros as at 31st of December, 2017, as per note 24. This heading essentially includes the provisions for ongoing legal actions, occupational accidents, work-related diseases, and railway accidents. The liability associated with occupational accidents and work-related diseases is supported by an actuarial study prepared by an independent expert. The transactions accounted for in these provisions are covered in the opinions from the legal secretaries of the Group. Provisions are considered a key audit matter due to the high level of judgement and uncertainty associated with them. transactions of the year; the attorneys, and analysing the replies; and c) Inquiring the management; work-related diseases; and presented in the attached notes. Inventory impairment Inventories – which amounted to 28,273,068 Euros as at the 31st December, 2017 – are accounted for at the lower of their cost and the net realisable value. Due to the responsibilities taken vis-à-vis its customers, the Group holds inventories for long periods of time. Therefore, in view of the amount of inventories and the high level of judgement by the Board in estimating impairment losses (as per note 12), we considered it a key audit matter. We undertook the following auditing procedures, among others: a) Analysing the accounting policies on this matter; b) Providing assistance in physical inventory counts carried out by the Group; c) Testing the underlying assumptions to the calculation of the estimated impairment losses in inventories; d) Corroborating the underlying assumptions with the Group's technical teams; e) Analysing the main transactions of the year; f) Assessing the consistency of criteria with those used in the preceding year; and g) Verifying the suitability of the impairment disclosures presented in the attached notes.
The management board is responsible for:
a) Breaking down the balance of the Provisions' heading and analysing the main
b) Obtaining a list of ongoing legal actions through external confirmation procedures with
d) Obtaining and analysing the actuarial study which supports the current value of the liabilities with occupational accidents and
e) Verifying the suitability of the disclosures
accordance with the International Financial Reporting Standards (IFRS), as adopted in the European Union;
The supervisory board is responsible for the supervision of the process concerning the preparation and disclosure of the Group's financial information.
Our responsibility is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISA will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISA, we exercise our professional judgment and maintain professional scepticism throughout the audit, as well as:
Conclude on the appropriateness of the management board's use of the assumptions of continuity and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we shall be required to draw attention in our report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify the opinion. The conclusions are based on the audit evidence obtained up to the date of the report. However, future events or conditions may cause the Group to cease to continue as a going concern;
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation;
Our responsibility further includes the verification regarding the compliance of the information of the management report with the consolidated financial statements, and the verifications foreseen in items 4 and 5 of article 451 of the Portuguese Commercial Companies Code.
In compliance with article 451, item 3, paragraph e) of the Portuguese Commercial Companies Code, we believe that the management report was prepared in accordance with the applicable legal and regulatory requirements in force, that the information provided therein complies with the audited consolidated financial statements and, considering the knowledge and assessment of the Group, we did not identify any material misstatement.
In compliance with article 451, item 6 of the Portuguese Commercial Companies Code, we inform that the Group mentioned in its management report that it will prepare a report separate from the management report, which shall include the consolidated non-financial information, in accordance with article 508 – G of the Portuguese Commercial Companies Code and shall be published in its website within the legal deadline.
In compliance with article 451, item 4 of the Portuguese Commercial Companies Code, we believe that the corporate governance report, presented in the individual accounting, includes the elements required of the Group under article 245-A of the Securities Code, and no material misstatements were identified in the information disclosed therein, complying with paragraphs c), d), f), h), i) and m) of said article.
In compliance with article 10 of the European Union Regulation no. 537/2014 of the European Parliament and of the Council, from April 16th, 2014, and in addition to the aforementioned key audit matters, we also report that:
Lisbon, on the 13th of April, 2018.
RIBEIRO, RIGUEIRA, MARQUES, ROSEIRO & ASSOCIADOS, SROC, LDA.
Represented by:
[Signature]
Joaquim Eduardo Pinto Ribeiro, Certified Public Accountant no. 1015. Registered in CMVM under no. 20160630
[Logo]
OLIVEIRA, REIS & ASSOCIADOS, SROC [Certified Public Accountants], Lda.
FERNANDO MARQUES OLIVEIRA JOAQUIM OLIVEIRA DE JESUS CARLOS MANUEL GRENHA JOÃO CARLOS CRUZEIRO PEDRO MIGUEL MANSO MARIA BALBINA CRAVO OCTÁVIO CARVALHO VILAÇA
We have audited the attached consolidated financial statements of CP – COMBOIOS DE PORTUGAL, E.P.E. (the Group), comprising the consolidated statement of financial position as at 31st of December, 2017, (showing a total of 629,186,204 Euros and a total negative equity of 2,246,273,345 Euros, including a Net loss of 111,066,936 Euros), the consolidated income statement, the statement of other comprehensive income, the consolidated statement of changes in equity, and the consolidated statement of cash flows of the year that ended on that date, and the Attachments to the consolidated financial statements, including a summary of the relevant accounting policies.
In our opinion, the attached consolidated financial statements truly and appropriately present, in all material aspects, the financial position of the Group as at 31st of December 2017, and its financial performance and consolidated cash flows regarding the year that ended on that date, in accordance with the International Financial Reporting Standards (IFRS), as adopted in the European Union.
Our audit was carried out in accordance with the International Standards on Auditing (ISA) and further technical and ethical provisions and guidelines of the Portuguese Certified Public Accountant Association. Our responsibilities under said provisions are specified in the "Responsibilities of the auditor regarding the financial statement audit" section below. We are independent from the Entities in the Group in accordance with the law and comply with all further ethical requirements foreseen in the ethics code of the Portuguese Certified Public Accountant Association.
We are certain that the audit evidence we obtained serves as sufficient and appropriate foundation for our opinion.
Registered in the Portuguese Certified Public Accountant Association under no. 23 Registered in the CMVM under no. 20161381 Share capital of € 15,000 Registration/Corporate Taxpayer no. 501266259 Commercial Registry Office of Lisbon
Head Office Avenida Columbano Bordalo Pinheiro, n.º 75, 8º Piso, Fração 8.02 1070-061 Lisbon, Portugal T: +351 217 271 197 – F: +351 217 273 129 www.orasroc.pt – E-mail: [email protected]
Center Branch Avenida 22 de Maio, n.º 24, Escritório 3 2415-396 Leiria, Portugal T: +351 244 822 175 – F: +351 244 822 178
North Branch Centro Empresarial Capitólio Av. de França, 256, 6º, Sala 6.4 4050-276 Porto, Portugal T: +351 228 324 132
We point out that the Reports and Accounts of the Group for the financial years of 2015 and 2016 have not yet been formally approved by the responsible Ministries. We also point out that the Group has been accumulating consecutive net losses of significant amounts, presenting as at 31st of December 2017, a total negative equity of 2,246,273,345 Euros. Although there was a decrease of 411,027,793 Euros in funding, including a debt-to-equity swap of 410,154,015 Euros, the Group still has a high degree of indebtedness. Since the Group renders a public service with relevant obligations, the activity funding essentially depends on the financial support of the Portuguese Government.
Our opinion is not altered on this matter.
Key audit matters are those of greater importance in the audit of the consolidated financial statements for the current year according to our own professional judgement. Said matters were considered as a whole within the audit of the consolidated financial statements, and we did not issue a separate opinion regarding them.
| Key audit matter | Solution of the Auditor |
|---|---|
| Impairment of fixed tangible assets | |
| As at 31st December 2017, the book value of fixed tangible assets amounted to 512,757,959 Euros. As disclosed in note 3, |
We undertook the following procedures regarding this matter: |
| the Group recognises impairment losses when the recoverable amount of a certain asset is inferior to its book value. |
i) Analysing the criteria defined by the Group for the identification of slow-moving or obsolete rolling stock, as well as the adjustment criteria defined to reduce the asset |
| The impairment tests carried out by the Group are based on validations prepared by the |
value to its realisable value; |
| responsible operating officers who are based on several assumptions and criteria defined by the Group, particularly the rolling stock movement and the expected remaining useful life related to the operation, leading us to |
ii) Obtaining the support to the impairment calculation conducted by the management, assessing if its recoverable amount is superior to its book value; |
| consider this topic as a key audit matter. | iii) Reviewing the movements occurred in the year in the impairment losses of fixed tangible |
| Following its analysis process, the Group presents, in its financial statements as at 31st |
assets heading; |
| of December 2017, accumulated impairment losses of 5,715,646 Euros, regarding the fixed |
iv) Inquiring the management; |
| tangible assets (Note 7). | v) Verifying the suitability of the disclosures presented in the attached notes. |
| Key audit matter | Solution of the Auditor |
| Revenue Recognition |
The revenue from the services rendered by the Group as at 31st of December 2017 increased to 286,659,853 Euros. Said revenue is essentially due to passenger ticket sales. The disclosures related to this matter are presented in note 29 of the attached notes.
The materiality of the value and the high number of records in the ticketing system and their incorporation into accounting is considered a key audit matter.
We undertook the following procedures regarding this matter:
i) Surveying and analysing the process design and implementation and relevant controls identified in the revenue cycle;
ii) Conducting several analytical procedures, including the analysis of monthly developments by service type and the comparison with values of previous financial years;
iii) Performing specific procedures of validation of the correct cut-off operations, particularly through the analysis of the current accounts where the invoiced and collected revenue is recorded.
| Key audit matter | Solution of the Auditor |
|---|---|
| Provisions Valuation | |
| The provisions heading presents a balance of 13,959,460 Euros as at 31st of December 2017, of which 3,023,862 Euros correspond to |
We undertook the following procedures regarding this matter: |
| ongoing legal actions and railway accidents, 10,935,598 Euros to occupational accidents, work-related diseases, among others. |
i) Breaking down the balance of the Provisions heading; |
| The liability associated with occupational accidents and work-related diseases is supported by an actuarial study prepared by independent actuarial experts hired by the |
ii) Obtaining and analysing lists of ongoing legal actions in which the Group is involved through external confirmation procedures with the attorneys of the Group; |
| Group. | iii) Inquiring the legal department of the Group |
| Given the materiality of the value and the judgement complexity regarding the assumptions used in the assessment of the liability amount and the possible outcome of the ongoing legal actions, as well as used in the establishment of the liabilities related to occupational accidents and work-related diseases (actuarial study prepared by independent experts), we decided to consider this topic as a key audit matter. |
iv) Inquiring the management. |
| v) Obtaining and analysing the study prepared by the independent experts to measure the current value of the liabilities with occupational accidents and work-related diseases; |
|
| vi) Assessing the reasonableness actuarial assumptions used to measure the current value of the liabilities with occupational accidents; |
|
| vii) Verifying the suitability of the disclosures presented in the attached notes. |
| Key audit matter | Solution of the Auditor |
|---|---|
| Inventory impairment |
| Inventories – which amounted to 28,773,068 Euros as at the 31st December, 2016 – are accounted for in the financial statements at the lower of their cost and the net realisable value. |
We undertook the following auditing procedures: |
|---|---|
| i) Analysing the accounting policies on this matter; |
|
| Within the scope of the development activity, the Group is required to hold inventories for long periods of time, with the purpose of meeting the needs arising out of its responsibilities. Therefore, in view of the amount of inventories and the high level of judgement by the Board in estimating impairment losses (as per note 12), we considered it a key audit matter. |
ii) Providing assistance in physical inventory counts carried out by the Group; |
| iii) Testing the underlying assumptions to the calculation of the estimated impairment losses in inventories, indexed to the |
|
| consumption/movement perspective of materials; |
|
| iv) Corroborating the underlying assumptions with the Group's technical teams; |
|
| v) Analysing the main transactions of the year; and |
|
| vi) Assessing the consistency of criteria with those used in the preceding year. |
The management board is responsible for:
The supervisory board is responsible for the supervision of the process concerning the preparation and disclosure of the Group's financial information.
Our responsibility is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISA will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISA, we exercise our professional judgment and maintain professional scepticism throughout the audit, as well as:
Our responsibility further includes the verification regarding the compliance of the information of the management report with the consolidated financial statements, and the verifications foreseen in items 4 and 5 of article 451 of the Portuguese Commercial Companies Code.
In compliance with article 451, item 3, paragraph e) and article 508 – D, item 3 of the Portuguese Commercial Companies Code, we believe that the management report was prepared in accordance with the applicable legal and regulatory requirements in force, that the information provided therein complies with the audited consolidated financial statements and, considering the knowledge and assessment of the Group, we did not identify any material misstatement.
In compliance with article 451, item 6 of the Portuguese Commercial Companies Code, we inform that CP – COMBOIOS DE PORTUGAL, E.P.E. mentioned in its management report that it will prepare a report separate from the management report, which shall include the consolidated non-financial information, in accordance with article 508-G of the Portuguese Commercial Companies Code and shall be published in its website within the legal deadline.
In compliance with article 451, item 4 of the Portuguese Commercial Companies Code, we believe that the corporate governance report – presented upon the individual accounting process – includes the elements required of CP – COMBOIOS DE PORTUGAL, E.P.E., under article 245-A of the Securities Code, and no material misstatements were identified in the information disclosed therein, complying with paragraphs c), d), f), h), i) and m) of said article.
In compliance with article 10 of the European Union Regulation no. 537/2014 of the European Parliament and of the Council, from April 16th, 2014, and in addition to the aforementioned key audit matters, we also report that:
We confirm that the audit opinion we issued is consistent with the additional report we prepared and submitted to the supervisory board of the Group on the 13th of April, 2018;
We declare that we did not render any services prohibited under article 77, item 8, of the Statute for the Portuguese Certified Public Accountant Association and that we preserved our independence from the Group during the audit;
Lisbon, 13th of April, 2018 OLIVEIRA, REIS & ASSOCIADOS, SROC Lda. Represented by [Signature] Joaquim Oliveira de Jesus, Certified Public Accountant no. 1056
In the scope of legal and statutory provisions, namely paragraph d), item 2, Article 15, from CP Articles of Association1 and articles 420 and 452 from Portuguese Commercial Companies Code2 (CSC), the Supervisory Board is tasked with presenting the report of its supervisory action and expressing opinions regarding the management report and the consolidated financial statements of CP – Comboios de Portugal, E.P.E., hereinafter referred to as CP or CP Group, documents regarding accounting of the financial year, which ended on the 31st of December, 2017.
This Report and Opinion takes into account the legal certification of accounts issued by the Certified Public Accountant, and the information contained in the Additional Audit Report3. Furthermore, the conclusions in the Audit Report of the External Auditors on the CP's consolidated financial statements regarding such period have also been considered, which are consistent with the conclusions of the legal review conducted to the accounts of the CP Group.
It should be noted, for information and context purposes, that:
1 Approved by Decree-Law no. 137-A/2009, from June 12th, modified and republished by Decree-Law no. 59/2012, from March 14th. 2 According to Decree-Law no. 133/2013, Article 60, item 2, from October 3rd, the governing and supervisory
bodies have generic competence, foreseen in commercial law, without prejudice to what is foreseen in said legal scheme.
3 Submitted to the Supervisory Board pursuant to article 11 of Regulation (EU) no. 537/2014, of the European Parliament and of the Council, from 16th of April, 2014, and item 1 and 2 of article 24 of the Legal Framework on Audit Supervision, approved by Law no. 148/2015, from 9th of September.
4 At a meeting held on the 12th of April 2018, where the Board of Directors resolved on their submission for approval of the sector and financial ministries.
5 Issued on September 2014.
6 ESA 2010.
Consequently, several institutional units, which were previously classified outside such sector, became included in the frame of Public ministrations for National Accounts purposes, having such situation occurred to CP, the Group's parent company, whose inclusion in the Public Administrations perimeter resulted from the change7 in the socalled 50% ratio, or "marketability ratio";
The consolidated financial statements and the group's performance as one entity are presented within this framework.
During the analysed financial year, the Supervisory Board has held meetings and has followed certain points deemed relevant within the scope of its function, having:
i) Met with members of the Board of Directors in order to monitor the company's performance;
ii) Met with the Certified Public Accountant;
iii) Met with the External Auditors;
iv) Met with several CP departments, and more frequently with the divisions of finance and planning and control of the company's activity;
v) Made reports addressing the activity reports and quarterly budgetary implementation, submitted by the Board of Directors, in accordance with RJSPE;
vi) Expressed an opinion regarding the 2017 Budget and Activities Plan;
vii) Prepared an opinion regarding the Interim Consolidated Report and Accounts for the 1st semester of 2017.
CP is a public corporation, legal person governed by public law, with administrative, financial and asset autonomy, which is subject to, according to the corresponding articles of association, the RJSPE, the sector and financial responsible ministries (i.e., Ministry of Planning and Infrastructure and Ministry of Finance), as well as to the financial control from the Court of Auditors and the Inspectorate-General of Finance.
The company is liable to public service obligations and has as its main purpose the service of public railway transportation of passengers, in railroads, railroad sections and byways integrating, or soon integrating, the national railroad, as well as international passenger transport.
The public service obligations, as well as the corresponding financial compensation, are defined by entering into agreements. The agreement signed between CP and the State on the 24th of March 2011, named 'Transitional Arrangement for the Public Service Financing' is in force until the 31st of December, 2019.
7 The denominator of the ratio – corresponding to operating costs – now includes net charges with interest payment.
However, taking into consideration the Transport Strategic Plan (PET)8, covering the 2011-2015 term, CP and the State have agreed on its termination, by considering the inadequacy of the agreement in force.
In the meantime, a new public service agreement has not yet been entered into, and no operations subsidies have been granted to CP for the third year in a row.
CP manages an array of companies whose activity range from maintenance of railway equipment to insurance, health and technical training, thereby seeking synergies and the maximisation of the integrated efficiency of the entire CP Group.
The activity of the companies of the group focuses on CP's strategic guidelines, set out along with the guidelines of the sector and financial ministries and those of the Transport Strategic Plan (PET) in force for the 2014-2020 term.
Within this framework, CP, as parent company of the CP Group, directly and majority-owns, on the 31st of December, 2017, companies called "subsidiaries" by CP, whose shareholdings are recognised by the full consolidation method, which are as follows:
CP also has financial shareholdings – both directly and indirectly – in companies or other entities recognised under the equity method, due to the strategic interest for the company's operations10, which are as follows:
8 Approved by the Council of Ministers Resolution no. 45/2011, of November 10th.
9 Complementary grouping of companies.
10 As is the case of OTLIS, ACE, and TIP, ACE, entities which are active in the ticketing field.
Apart from the aforementioned shareholdings in "subsidiary" and "associated" companies, CP also has minority and temporary shareholdings, outside the consolidation perimeter, in 13 other entities and companies, including the shareholding in Medway (former CP Carga) (5%), which are recognised in the heading "Other Financial Investments", valued at cost less impairment losses11, representing a net total of 28 million Euros, already deducted from impairments amounting to 0.9 million Euros.
The Group closed the 2017 financial year with a net loss of 111.1 million Euros, which represents a relief of 32.9 million Euros (23%) compared with 2016 (- 144 million Euros).
This improvement was primarily due to an increase of more than 20.4 million euros in sales and services, and due to a decrease of the interest and similar expenses of 11.8 million euros, which arose from the debt relief achieved through capital injections made by the State (shareholder) and through the maintenance of financing interest rates at historically low levels.
The CP Group's recurrent (or adjusted) EBITDA12 in 2017 was 25.2 million Euros, which is better than that of 2016 (6.7 million Euros), by 18.5 million Euros (+276.1%). This is primarily due to an increase:
Despite the aforementioned improvement, the Operating income of the CP Group has remained negative (-33.6 million Euros), highlighting, however, the relief of 20 million Euros compared with 2016.
The Financial Result of the CP Group has improved vis-à-vis 2016 by 10.3 million Euros. However, the Result remains significantly negative (76.6 million Euros) as a result of its high debt (2,615.9 million Euros), as analysed further ahead.
11 Since it is not possible to reliably obtain the fair value of most shareholdings.
12 Corresponding to the operating results of the Core activity of the CP Group, as defined by CP. 13 With no compensation.
14 Resulting from the application of the provisions set forth in Articles 20 and 21 of the 2017 State Budget Law (Law no. 42/2016, of December 28th) and the provisions foreseen in Decree-Law of Budget Implementation (Decree-Law no. 25/2017, of March 3rd), whose effects are carried out in a phased manner (50% from July and 100% from January, 2018) and without retroactive effects.
As to the asset of the CP Group, there was a decrease of 38.5 million Euros compared with 2016, thus underlining a total of 629.2 million Euros on December 31st, 2017. The most significant variations worth mentioning are the following:
Regarding the Group's Equity, there was a relief of 405.1 million Euros, thereby decreasing from negative 2,651.4 million Euros in 2016 to negative 2,246.3 million Euros in 2017, mainly due to capital increases carried out by the State, which amounted to 516.4 million Euros15.
Lastly, the liabilities of the CP Group decreased by 443.6 million Euros in 2017, thereby decreasing from 3,319.1 million Euros in 2016 to 2,875.5 million Euros, primarily due to the remunerated debt relief by 411 million Euros. In fact, the CP Group was able to secure the payment of the debt service overdue by 2017 through the down payments in cash made by the State, as well as through the conversion into equity of the due debt regarding the loan of the Directorate-General of Treasury and Finance. The CP Group also needed to contract a new finance of 6 million Euros from the Directorate-General of Treasury and Finance, in order to ensure the compliance with its operating liabilities.
Still regarding the liabilities, it is worth highlighting the decrease in provisions by 4 million Euros, primarily justified by the transfer for the heading of other payable debts (non-current liabilities) of the amount of payable liabilities in 2018 (3.1 million Euros), in accordance with the agreement included with the Organisations Representing Employees (ORT), regarding the integration of variable bonuses in holiday allowances.
The following should be noted concerning the remaining companies of the CP Group:
EMEF's net profit amounted to 5.9 million Euros, which is 2.4 million Euros higher than the profit accounted for in 2016, with a positive EBITDA of 9.8 million Euros.
EMEF's operating income amounted to 8.5 million Euros, thereby representing an increase of 4.1 million Euros compared with 2016 (+93%), mainly by reason of the significant growth in its activity, whose provided sales and services reflect an improvement of about 14.3% compared with the previous financial year. However, due to such growth, the operating expenses also increased, mainly in the heading of sold commodities and consumed material costs (+2.3 million Euros).
It should be noted that CP, Medway and Metro do Porto continue to be the more important clients of the company, representing 91% of the total of sales and services provision.
By the end of 2017, EMEF employed 1036 workers, thereby representing a 1% decrease compared with 2016 (1048), and, even so, personnel expenses have sustained a 6.1% increase,
due to the restitution of pay cuts and compensations for termination of employment by mutual agreement.
The following events occurring in 2017 should also be noted:
On November 2017, the Competition Authority decided to close the case which was prompted by a complaint, on the basis that there was no evidence of practices that restrict competition;
The company decided to reincorporate the health and safety services at work, in the quality and environment field of the company;
On September 2017, a credit facility agreement with Banco Popular has been concluded, in the form of bank overdrafts up to 2 million Euros.
FERNAVE sustained a net loss of 287.3 thousand Euros, increased by 58.5 thousand Euros compared with 2016 (-228.7 thousand Euros), due to the decrease in activity (-60%).
Within this framework, FERNAVE's operating income was negative by 186.5 thousand Euros, thereby reaching a negative value of 162.6 thousand Euros.
The company closed the year of 2017 with 18 employees, less 2 compared with 2016, since one of whom has returned to the parent company (CP) and the other is performing municipal functions.
However, the ratio of the main operating expenses (External Services and Supplies and personnel expenses) per turnover was 69%, presenting a sharp decrease compared with 2016 (113%), due to the considerable reduction of the volume of services provided.
In 2017, the company sustained a 3% decrease in turnover compared with the previous year, compensated by the cut in expenses with External Services and Supplies and personnel.
ECOSAÚDE has reached a positive EDITDA of 84 thousand Euros, a positive operating income of 17 thousand Euros and an equally positive net result of 668 thousand Euros.
It should be noted that, in 2016, ECOSAÚDE lost one of its main customers in the occupational health sector, Infraestruturas de Portugal, SA, and the second largest customer in the occupational safety sector, Medway (former CP Carga). In 2017, new businesses have been secured, which allowed to cover most of the downturns in 2016 due to the loss of customers.
In terms of human resources, the company employed 27 permanent workers by the end of 2017, representing an addition of 6 workers (4 under a fixed-term employment agreement and 2 under an employment agreement for an uncertain term).
It should be noted that the company was autonomous and self-sufficient regarding its treasury and it did not require any financial support from third parties.
In line with performances obtained in previous financial years, SAROS had a net profit of 395 thousand Euros, similar to the preceding year.
In 2017, it sustained a 3% growth in Provided Sales and Services, at 476.2 thousand Euros, and had a positive EBITDA of 486 thousand Euros, slightly higher compared with 2016 (483 thousand Euros).
In terms of human resources, the company developed its activity with the two managers it has, one of whom is a legally-qualified insurance intermediary.
The External Services and Supplies heading has shown an increase of 2 thousand euros (21.7%) vis-à-vis 2016, while personnel expenses had an increase of 0.4 thousand Euros (0.8%) due to the reversal of pay cuts.
The Supervisory Board took note of the Legal Certification of Accounts arising from the assessment performed by Oliveira, Reis & Associados, SROC, Lda., and the External Auditors' Report, Ribeiro, Rigueira, Marques, Roseiro e Associados, SROC, Lda., which were taken into account for the preparation of this Report and Opinion.
The Supervisory Board analysed the consolidated financial statements, prepared in compliance with the International Financial Reporting Standards, having concluded that such elements truly and appropriately convey the financial position of the CP Group, as at 31st of December, 2017, and how the results for the financial year ended on said date were obtained, by taking into account the emphases mentioned in the Legal Certification of Accounts and in the external auditors' report.
Within the scope of its functions, the Supervisory Board ascertained that the set of consolidated financial statements allows an adequate understanding of the CP Group's financial position.
In conclusion, the Supervisory Board's opinion points to the approval of the Consolidated Financial Statements of the CP Group, concerning the financial year of 2017, considering the emphases mentioned in the Legal Certification of Accounts and by the external auditors' report.
Lisbon, on the 31st of April, 2018.
The Supervisory Board,
The President, [Signature] António Farinha Simão
The Voting Members, [Signature] Mª. de Lurdes Correia de Castro
[Signature] Nelson Costa Santos
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