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Amendment No. 1 to Form 8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 14, 2017 (November 30, 2016)

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION

(Exact name of registrant as specified in its charter)


Delaware	033-90866	25-1615902
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1001 Air Brake Avenue, Wilmerding, Pennsylvania		15148
(Address of principal executive offices)		(Zip code)

Registrant’s telephone number, including area code: (412) 825-1000

Check the appropriate box below if the Form 8–K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a–12 under the Exchange Act (17 CFR 240.14a–12)

☐	Pre–commencement communications pursuant to Rule 14d–2(b) under the Exchange Act (17 CFR 240.14d–2(b))

☐	Pre–commencement communications pursuant to Rule 13e–4(c) under the Exchange Act (17 CFR 240.13e–4(c))

Item 2.01.

Completion of Acquisition or Disposition of Assets.

On December 1, 2016, Westinghouse Air Brake Technologies Corporation (“Wabtec”) filed a Current Report on Form 8-K (the “Initial Form 8-K”) with the Securities and Exchange Commission (the “SEC”) reporting that, on November 30, 2016, Wabtec completed the purchase from Financière Faiveley S.A., Famille Faiveley Participations, Mr. François Faiveley and Mr. Erwan Faiveley (collectively, the “Sellers”) of 7,475,537 ordinary shares of Faiveley Transport, S.A. (“Faiveley Transport”) owned in the aggregate by the Sellers, representing a total of approximately 51% of the outstanding share capital of Faiveley Transport, pursuant to the Share Purchase Agreement, dated October 6, 2015, by and among the Sellers, Wabtec and FW Acquisition LLC, as such agreement subsequently was amended, with approximately 25% of the consideration, or approximately $212 million, paid in cash, and the remaining consideration consisting of 6.3 million shares of Wabtec common stock.

This Current Report on Form 8-K/A is being filed to amend and supplement the Initial Form 8-K to provide certain historical financial statements of Faiveley Transport and related pro forma financial information, as described in Item 9.01 below, which were not previously filed with the Initial Form 8-K and which are permitted to be filed by amendment no later than 71 calendar days after the date the Initial Form 8-K was required to be filed with the SEC. Except as otherwise noted, all other information in the Initial Form 8-K remains unchanged.

Item 9.01.

Financial Statements and Exhibits.

(a) Financial Statements of a Business Acquired.

Faiveley Transport’s audited consolidated financial statements as of March 31, 2016, March 31, 2015 and March 31, 2014 and for the fiscal years of Faiveley Transport then ended are attached as Exhibit 99.1 to this Form 8-K/A and incorporated herein by reference. Unaudited consolidated financial statements of Faiveley Transport as of September 30, 2016 and for the six months then ended are incorporated herein by reference to Exhibit 99.1 to the Current Report on Form 8-K filed by Wabtec on December 22, 2016.

(b) Pro Forma Financial Information.

Unaudited pro forma condensed combined financial information of Wabtec as of September 30, 2016 and for the nine months then ended is incorporated herein by reference to Exhibit 99.2 to the Current Report on Form 8-K filed by Wabtec on December 22, 2016.

(d) Exhibits.



23.1		Consent of PricewaterhouseCoopers Audit.

99.1		Audited consolidated financial statements of Faiveley Transport, S.A. as of March 31, 2016, March 31, 2015 and March 31, 2014 and for the fiscal years of Faiveley Transport, S.A. then ended.

99.2		Unaudited consolidated financial statements of Faiveley Transport, S.A. as of September 30, 2016 and for the six months then ended (incorporated herein by reference to Exhibit 99.1 to the Current Report on Form 8-K filed by Westinghouse Air Brake Technologies Corporation on December 22, 2016).

99.3		Unaudited pro forma condensed combined financial information of Westinghouse Air Brake Technologies Corporation as of September 30, 2016 and for the nine months then ended (incorporated herein by reference to Exhibit 99.2 to the Current Report on Form 8-K filed by Westinghouse Air Brake Technologies Corporation on December 22, 2016).

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION

By:		/s/ Patrick D. Dugan
		Patrick D. Dugan
		Executive Vice President and
		Chief Financial Officer

Dated: February 14, 2017

EXHIBIT INDEX


Exhibit No.		Description

23.1		Consent of PricewaterhouseCoopers Audit.

99.1		Audited consolidated financial statements of Faiveley Transport, S.A. as of March 31, 2016, March 31, 2015 and March 31, 2014 and for the fiscal years of Faiveley Transport, S.A. then ended.

99.2		Unaudited consolidated financial statements of Faiveley Transport, S.A. as of September 30, 2016 and for the six months then ended (incorporated herein by reference to Exhibit 99.1 to the Current Report on Form 8-K filed by Westinghouse Air Brake Technologies Corporation on December 22, 2016).

99.3		Unaudited pro forma condensed combined financial information of Westinghouse Air Brake Technologies Corporation as of September 30, 2016 and for the nine months then ended (incorporated herein by reference to Exhibit 99.2 to the Current Report on Form 8-K filed by Westinghouse Air Brake Technologies Corporation on December 22, 2016).

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-53753, 333-39159, 333-02979, 333-115014, 333-137985, 333-41840, 333-40468, 333-35744, 333-89086 and 333-179857) of WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION of our report dated January 23, 2017 relating to the financial statements of Faiveley Transport, which appears in this Current Report on Form 8-K/A of WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION.

/s/ PricewaterhouseCoopers Audit

Neuilly-sur-Seine, France

February 13, 2017

EX-99.1

Exhibit 99.1

LOGO

Report of Independent Auditors

To the Management Board

We have audited the accompanying consolidated financial statements of Faiveley Transport and its subsidiaries, which comprise the consolidated balance sheets as of March 31, 2016, March 31, 2015 and March 31, 2014, and the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for the years then ended.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the International Accounting Standards Board; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on the consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

PricewaterhouseCoopers Audit SA, 63, rue de Villiers 92208 Neuilly-sur-Seine Cedex

Téléphone: +33 (0)1 56 57 58 59, Fax: +33 (0)1 56 57 58 60, www.pwc.fr

Société d’expertise comptable inscrite au tableau de l’ordre de Paris - Ile de France. Société de commissariat aux comptes membre de la compagnie régionale de Versailles.Société oar Actins Simplifiée au capital de 2 510 460 €. Siège social : 63, rue de Villiers 92200 Neuilly-sur-Seine. RCS Nanterre 672 006 483. TVA n° FR 76 672 006 483.

Siret 672 006 483 00362. Code APE 6920 Z. Bureaux : Bordeaux, Grenoble, Lille, Lyon, Marseille, Metz, Nantes, Neuilly-Sur-Seine, Nice, Poitiers, Rennes, Rouen, Strasbourg, Toulouse.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Faiveley Transport and its subsidiaries as of March 31, 2016, March 31, 2015 and March 31, 2014, and the results of their operations and their cash flows for the years then ended in accordance with International Financial Reporting Standards as adopted by the International Accounting Standards Board.

PricewaterhouseCoopers Audit

/s/ Philippe Vincent

Partner

Neuilly-sur-Seine, France

January 23, 2017

CONSOLIDATED

FINANCIAL

STATEMENTS

2015/16

LOGO

Contents



Contents		2

1.	Consolidated financial statements at 31 March 2016	3

1.1.	Consolidated financial statements	3
	Consolidated income statement	3
	Consolidated statement of comprehensive income	4
	Consolidated statement of financial position	5
	Consolidated statement of changes in equity	7
	Consolidated cash flow statement	8

1.2.	Notes to the consolidated financial statements	9
	Note 1: General information	9
	Note 2: Highlights	9
	Note 3: Accounting principles and methods	10
	Note 4: Changes in consolidation scope	23
	Note 5: Goodwill	24
	Note 6: Intangible assets	27
	Note 7: Property, plant and equipment	28
	Note 8: Investments in equity-accounted entities	29
	Note 9: Other non-current financial assets	30
	Note 10: Deferred tax	31
	Note 11: Inventories	32
	Note 12: Work-in-progress on projects	32
	Note 13: Current receivables	32
	Note 14: Current financial assets	33
	Note 15: Cash and cash equivalents	33
	Note 16: Assets held for sale	34
	Note 17: Group equity	34
	Note 18: Minority interests	36
	Note 19: Analysis of provisions	37
	Note 20: Borrowings and financial debt	40
	Note 21: Financial risk management	43
	Note 22: Current liabilities	53
	Note 23: Factoring	53
	Note 24: Segment reporting	53
	Note 25: Sales	55
	Note 26: Gross profit and Cost of sales	55
	Note 27: Other income and expenses from recurring operations	56
	Note 28: Restructuring costs and gains and losses on disposal of property, plant and equipment and intangible assets	56
	Note 29: Net financial income/(expense)	57
	Note 30: Income tax	57
	Note 31: Profit or loss of operations held for disposal and discontinued operations	58
	Note 32: Payroll costs and workforce	58
	Note 33: Earnings per share	58
	Note 34: Post-balance sheet events	59
	Note 35: Transactions with related parties	59
	Note 36: Dividends	62
	Note 37: Off-balance sheet commitments	62
	Note 38: Consolidation scope and method	63
	Note 39: Statutory Auditors’ fees	65
	Note 40: Financial communication	65

1. Consolidated financial statements at 31 March 2016

1.1.

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENT


(€ thousands)	Notes	31 March 2016			31 March 2015
NET SALES	NOTE 25		1 105 184			1 048 423

Cost of sales	NOTE 26		(824 062	)		(794 062	)

GROSS PROFIT			281 122			254 361

Administrative costs			(102 460	)		(88 997	)
Sales and marketing costs			(53 457	)		(46 667	)
Research and development costs			(18 405	)		(17 019	)
Other operating income	NOTE 27		4 288			6 797
Other expenses	NOTE 27		(25 445	)		(18 084	)
Restructuring costs	NOTE 28		(6 814	)		(1 597	)
Gain/(loss) on disposal of property, plant and equipment and intangible assets	NOTE 28		(38	)		(66	)

OPERATING PROFIT			78 791			88 728

Share of profit of joint ventures	NOTE 8		5 561			6 551

OPERATING PROFIT AFTER SHARE OF PROFIT OF EQUITY - ACCOUNTED ENTITIES			84 352			95 279

Amortisation and depreciation charges included in operating profit			19 702			17 446

*Operating profit before amortisation and depreciation charges*			*104 054*			*112 725*

Net cost of financial debt			(9 890	)		(10 970	)
Other financial income			39 574			33 097
Other financial expenses			(36 846	)		(35 994	)

NET FINANCIAL EXPENSE	NOTE 29		(7 162	)		(13 867	)

PROFIT BEFORE TAX			77 190			81 412

Income tax	NOTE 30		(21 189	)		(28 535	)

PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS			56 001			52 877

Profit of discontinued operations	NOTE 31		0			0

CONSOLIDATED NET PROFIT			56 001			52 877

*attributable to:*

Minority interests			4 711			(2 769	)

Net profit - Group share			51 290			55 645

*Earnings per share, in €:*	NOTE 33
Basic earnings per share			3.56			3.88
Diluted earnings per share			3.50			3.86
*Earnings per share, in € – Continuing operations:*
Basic earnings per share			3.56			3.88
Diluted earnings per share			3.50			3.86

The attached notes 1 to 40 form an integral part of the consolidated financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(€ thousands)

Notes

31 March 2016

31 March 2015

Net profit for the year

56,001

52,877

Translation adjustment

NOTE 17

(20,237

)

42,334

Financial assets available for sale

Gains (losses) on financial hedge instruments

NOTE 21

(787

)

1,057

Other items that can be reclassified

(29

)

126

Taxes on items that can be reclassified

271

(364

)

Items that can be reclassified to profit or loss

(20,782

)

43,153

of which Share of joint ventures in items that can be reclassified

(2,553

)

4,401

Actuarial gains and losses on post-employment benefits

NOTE 19

1,085

(10,313

)

Taxes on items that cannot be reclassified

(548

)

2,037

Items that cannot be reclassified to profit or loss

537

(8,276

)

of which Share of joint ventures in items that cannot be reclassified

—

Items of other comprehensive income, after tax

(20,245

)

34,877

of which Share of joint ventures

(2,553

)

4,401

Total comprehensive income

35,756

87,754

Attributable to:

- Parent Company shareholders

33,524

83,239

- minority interests

2,232

4,515

The attached notes 1 to 40 form an integral part of the consolidated financial statements.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION


ASSETS			31 March 2016		31 March 2015
(€ thousands)	Notes		Net		Net
Goodwill		NOTE 5		688,572		697,112

Intangible assets		NOTE 6		63,565		58,314

Property, plant and equipment		NOTE 7
Land				5,575		5,670
Buildings				19,152		19,175
Plant and machinery				34,603		32,063
Other property, plant and equipment				18,350		13,695

Equity interests in equity-accounted entities		NOTE 8
Shareholdings in equity-accounted joint ventures				20,742		21,817
Shareholdings in other equity-accounted entities

Other non-current financial assets		NOTE 9
Shareholdings in unconsolidated subsidiaries				255		255
Other long-term financial investments				2,644		3,049

Deferred tax assets		NOTE 10		62,274		66,429

TOTAL NON-CURRENT ASSETS (I)				915,732		917,579

Inventories		NOTE 11		161,222		167,665
Work-in-progress on projects		NOTE 12		123,425		121,703
Advances and prepayments paid on orders				2,323		2,625
Trade receivables		NOTE 13		215,806		224,130
Other current assets		NOTE 13		37,902		24,718
Taxation receivable				18,018		17,796
Current financial assets		NOTE 14		33,911		42,849
Short-term investments		NOTE 15		15,021		14,824
Cash		NOTE 15		221,048		222,021
Assets held for sale		NOTE 16		7,527		7,123

TOTAL CURRENT ASSETS (II)				836,203		845,454

TOTAL ASSETS (I + II)				1,751,935		1,763,033

The attached notes 1 to 40 form an integral part of the consolidated financial statements.

EQUITY AND LIABILITIES

(€ thousands)

Notes

31 March 2016

31 March 2015

SHAREHOLDERS’ EQUITY

NOTE 17

Share capital

14,614

Share premium

97,305

94,297

Translation difference

6,860

24,549

Consolidated reserves

486,683

436,629

Net profit for the period

51,290

55,645

TOTAL EQUITY – GROUP SHARE

656,752

625,734

MINORITY INTERESTS

NOTE 18

Share of reserves

27,397

34,781

Share of net profit

4,711

(3,063

)

TOTAL MINORITY INTERESTS

32,108

31,716

TOTAL CONSOLIDATED EQUITY (I)

688,860

657,450

Non-current provisions

NOTE 19

43,136

48,084

Deferred tax liabilities

NOTE 10

51,120

50,854

Non-current borrowings and financial debt

NOTE 20

360,930

396,510

TOTAL NON-CURRENT LIABILITIES (II)

455,186

495,448

Current provisions

NOTE 19

112,387

101,810

Short-term borrowings and financial debt

NOTE 20

57,682

54,630

Advances and prepayments received on orders

158,698

140,243

Current liabilities

NOTE 22

269,574

303,935

Tax payable

9,548

9,515

TOTAL CURRENT LIABILITIES (III)

607,889

610,134

TOTAL EQUITY AND LIABILITIES (I + II + III)

1,751,935

1,763,033

The attached notes 1 to 40 form an integral part of the consolidated financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(€ thousands)

Share
capital

Share
premium

Reserves

Translation
adjustment

Profit for
the period

Total
Group
share

Minority
interests

TOTAL

At 31 March 2014

14 614

90 250

405 522

(10 501

)

50 110

549 995

27 653

577 648

Allocation of 2013/2014 net profit

50 110

(50 110

)

Dividends paid

(11 454

)

(11 454

)

(256

)

(11 710

)

Treasury shares

4 048

(3 231

)

817

Stock option plans reserved for employees (value of services provided by staff)

2 162

2 162

Other movements

1 220

1 220

Other changes in consolidation scope

(243

)

(243

)

(196

)

(439

)

Net profit for the period

55 645

55 645

(2 770

)

52 875

Items of other comprehensive income

(7 457

)

35 049

27 592

7 285

34 877

Total income and expenses recognised in Comprehensive Income

(7 457

)

35 049

55 645

83 237

4 515

87 752

At 31 March 2015

14 614

94 298

436 629

24 549

55 645

625 734

31 716

657 450

Allocation of 2014/2015 net profit

55 645

(55 645

)

Dividends paid

(12 977

)

(12 977

)

(1 800

)

(14 777

)

Treasury shares

3 007

3 007

Stock option plans reserved for employees (value of services provided by staff)

7 582

7 582

Other movements and changes in consolidation scope

(187

)

(118

)

(40

)

(158

)

Net profit for the period

51 290

51 290

4 711

56 001

Items of other comprehensive income

)

(17 758

)

(17 767

)

(2 479

)

(20 246

)

Total income and expenses recognised in Comprehensive Income

)

(17 758

)

51 290

33 523

2 232

35 755

At 31 March 2016

14 614

97 305

486 684

6 860

51 290

656 752

32 108

688 860

The attached notes 1 to 40 form an integral part of the consolidated financial statements.

CONSOLIDATED CASH FLOW STATEMENT


CASH FLOW STATEMENT (€ thousands)	Notes	31 March 2016			31 March 2015
Net profit - Group share			51 290			55 645
Net profit - Minority interests			4 711			(2 769	)
Adjustments for non-cash items:
- Depreciation and amortisation charges			19 702			17 446
- Cost of performance-based shares			7 582			2 162

- Unrealised gains and losses on derivative instruments and revaluation of monetary assets and liabilities			386			3 392

- Movement in provisions for current assets and liabilities and charges			15 097			6 125
- Other calculated income and expenses			(44	)		—
- Net loss/(gain) on asset disposals			104			45
- Grant income			—			(248	)
- Share of profit of equity-accounted entities	NOTE 8		(5 561	)		(6 551	)
- Dividends received from equity-accounted joint ventures			2 463			3 214

Net cost of financial debt			9 890			10 970
Income tax charge (including deferred tax)			21 189			28 535

Change in current assets and liabilities			*(26 588*	)		*4 414*
Decrease (+) increase (-) in inventories			3 960			(13 071	)
Decrease (+) increase (-) in trade and other receivables			(9 675	)		(9 379	)
Increase (+) decrease (-) in trade and other payables			(17 883	)		29 094
Increase (+) decrease (-) in income tax			(2 990	)		(2 230	)

Income tax paid			(14 693	)		(25 799	)
Net financial interest paid			(8 886	)		(9 830	)

Cash flow from operating activities			76 641			86 751

Purchase of intangible assets			(13 402	)		(9 446	)
Purchase of property, plant and equipment			(22 628	)		(14 298	)
Proceeds from capital grants			—			88
Proceeds from disposal of PPE and intangible assets			79			169
Purchase of non-current financial assets			(2 915	)		(237	)
Proceeds from sale of non-current financial assets			728			544

Cash outflows/inflows related to acquisitions of subsidiaries and minority interests			(1 281	)		(1 880	)

Cash flow from investment activities			(39 419	)		(25 060	)

Buyback of treasury shares			3 021			817
Dividends paid to parent company shareholders	NOTE 36		(12 977	)		(11 248	)
Dividends paid to minority interests			(1 800	)		(256	)
Proceeds from new borrowings			8 337			16
Repayment of borrowings			(33 983	)		(36 710	)

Cash flow from financing activities			(37 402	)		(47 381	)

Net foreign exchange difference			(581	)		(17 574	)

Net increase/(decrease) in total cash and cash equivalents			(761	)		(3 265	)

Cash and cash equivalents at beginning of the year			234 675			237 935

Cash and cash equivalents at end of the year	NOTE 15		233 914			234 675

1.2.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: GENERAL INFORMATION

Faiveley Transport is a French public limited company (société anonyme) with a Management Board and a Supervisory Board. At 31 March 2016, its registered office was located at:

Immeuble le Delage, Hall Parc, Bâtiment 6A

3 rue du 19 mars 1962

92230 - GENNEVILLIERS

The consolidated financial statements are prepared by the Management Board and submitted for approval to the shareholders at the General Meeting.

The 2014/15 consolidated financial statements have been submitted for approval at the Shareholders’ General Meeting of 18 September 2015.

The financial statements for 2015/2016 were approved by the Management Board at its meeting of 25 May 2016. They were presented to and reviewed by the Supervisory Board at its meeting of 25 May 2016.

The financial statements have been prepared on the basis that the Faiveley Transport Group operates as a going concern.

The consolidated financial statements as approved by the Management Board on its meeting of 25 May 2016 have been prepared in accordance with IFRS (International Financial Reporting Standards) as adopted by the European Union. Minor presentation adjustments have been made to these financial statements in order to present consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the International Accounting Standards Board and to allow a US filing in the context of the acquisition of Faiveley Transport by Wabtec Corporation.

The Group’s functional and presentation currency is the Euro. Figures are expressed in thousands of Euros unless indicated otherwise.

NOTE 2: HIGHLIGHTS

SIGNIFICANT EVENTS

•

On 28 May 2015, during the presentation of its 2014/2015 annual results, Faiveley Transport Group presented its strategic plan for the next three years: Creating Value 2018. A dedicated press release is available on the Group’s website.

•

On 27 July 2015, Faiveley Transport announced it had begun exclusive negotiations with Wabtec Corporation. Following consultation with employee representative bodies, on 6 October 2015 the Faiveley family and Wabtec Corporation signed the share transfer agreement as well as a shareholder agreement; Faiveley Transport and Wabtec Corporation signed the agreement related to the public offering.

Wabtec’s firm offer relates to the acquisition of the entire Faiveley Transport share capital, valuing it at an enterprise value of approximately EUR 1.7 billion, and would give rise to one of the world’s leading rail equipment manufacturers with combined sales of approximately EUR 4 billion.

Finalisation of this project is subject to the fulfilment of standard closing conditions and specifically to the approval of the competent competition authorities (the European Commission and the US Department of Justice, as well as Russia’s Federal Antimonopoly Services).

The project has already been approved by the Russian competition authority. The process for applying to the European Commission for authorisation is ongoing. Following the formal notification submitted on 4 April 2016, on 12 May 2016 the European Commission opened an in-depth investigation (Phase 2) regarding certain segments which could be affected by the combination.

In the United States, the Department of Justice is continuing the additional information (“second request”) proceedings in relation to the planned acquisition.

In this context, the acquisition of a controlling interest from the Faiveley family by Wabtec is not expected before the fourth quarter of 2016 and the proposed public offer will be filed with the Autorité des Marchés Financiers (AMF – French financial markets authority) in the weeks following this change in control.

•

The Autorité des Marchés Financiers (“AMF”), the French regulatory authority for listed companies, had launched an investigation at the end of 2011 into Faiveley Transport’s financial information and market price from 1 April 2011 onwards.

Following the investigative procedure, in March 2014 the Board of the AMF notified Faiveley Transport of certain complaints in respect of which Faiveley Transport may have failed in its obligation of public disclosure at the end of the 2011/2012 financial year.

The Enforcement Committee issued its final decision on 27 July 2015, imposing a fine of EUR 300,000 on the Company. The only complaint upheld against the Company by the Committee was that of a late disclosure to the market between March and April 2012, the other complaints being deemed unfounded.

•

On 8 October 2015, the Group ended the liquidity contract dated 1 October 2012 awarded by Faiveley Transport to Exane BNP Paribas.

NOTE 3: ACCOUNTING PRINCIPLES AND METHODS

BASIS OF PREPARATION

The consolidated financial statements of the Faiveley Transport Group are prepared in accordance with IFRS (International Financial Reporting Standards), as adopted by the IASB (International Accounting Standards Board).

New standards of mandatory application

•

Employee benefits: employee contributions (amendments to IAS 19)

•

Annual improvements to IFRS 2010-2012, IFRS 2011-2013

These mandatory texts applicable from 1 April 2015 had no significant impact on the Group’s financial statements.

New standards and interpretations issued by the IASB, the application of which is not yet mandatory

•

Equity method in separate financial statements (amendments to IAS 27)

•

Disclosure initiative (amendments to IAS 1 “Presentation of financial statements”)

•

Recognition of acquisitions of interests in joint operations (amendments to IFRS 11)

•

Clarification of acceptable methods of depreciation and amortisation (amendments to IAS 16 – Property, plant and equipment and IAS 38 – Intangible assets)

•

Annual improvements to IFRS 2012-2014

The impact of these new texts on the consolidated financial statements is currently being analysed by the Group.

New standards and interpretations the application of which is not yet mandatory

•

Classification and measurement of financial assets (IFRS 9)

•

Regulatory deferral accounts (IFRS 14)

•

Revenue from contracts with customers (IFRS 15)

•

Investment entities: Application of the consolidation exemption, (Amendments to IFRS 10 and IAS 28)

•

Recognition of deferred tax assets for unrealised losses (IAS 12)

•

Amendment to IAS 7 “Cash flow statement”

•

IFRS 16 “Leases”

•

Sale or contribution of assets between an investor and its associate or joint venture (amendments to IAS 28 and IFRS 10)

The impact of these new texts on the consolidated financial statements is currently being analysed by the Group.

CONSOLIDATION SCOPE AND METHODS

Pursuant to IFRS 10, companies over which the Group directly or indirectly exercises exclusive control are consolidated using the full consolidation method.

In application of IFRS 11, the financial statements of jointly controlled entities are consolidated using the equity method when they qualify as joint ventures and according to the percentage of each entity’s interest in each balance sheet item and income statement line when they qualify as joint operations.

Other associate companies over which Faiveley Transport Group exercises significant influence over financial and operational policies are accounted for using the equity method. Significant influence is presumed when the Group holds more than 20% of the voting rights of a company.

Acquisitions or disposals arising during the financial year are reflected in the consolidated financial statements from the date on which effective control is transferred, unless the impact is not material to the income statement in the case of acquisitions carried out at the end of the financial year.

Intra-Group balances and transactions are eliminated for all consolidated companies.

Faiveley Transport Group companies that are consolidated are listed in Note 38. Note 9 lists companies that are not consolidated due to their insignificant impact on the Faiveley Transport Group’s financial statements.

USE OF ESTIMATES

As part of the preparation of the consolidated financial statements and in accordance with IFRS, Faiveley Transport Group management must make certain estimates and use assumptions that it considers realistic and reasonable. These estimates and assumptions affect the book value of the assets, liabilities, equity and results, and any contingent assets and liabilities, as presented at the balance sheet date. Group management regularly reviews its estimates on the basis of the information available to it. When events and circumstances are not in line with expectations, actual results may differ from such estimates.

The main accounting methods whose application necessitates the use of estimates relate to the following items:

Recognition of the margin on long-term building and service contracts and related provisions (see § below – presentation of income statement – 1)

Revenue from long-term building and service contracts is recognised in proportion to the stage of completion of the contracts, in accordance with IAS 11. Project reviews are organised on a regular basis so that the stage of completion and finalisation of the contract can be monitored. If the project review identifies a negative gross margin, a provision is immediately raised in respect of the loss relating to the work not yet carried out.

The total estimated income and expenses in respect of the contract reflect the best estimate of the future benefits and obligations under the contract. The assumptions used to determine the current and future obligations take into account technological, commercial and contractual constraints measured on a contract-by-contract basis.

Obligations under building contracts may result in penalties for delays in a contract’s implementation schedule or an unexpected cost increase due to amendments to the project, a supplier’s or subcontractor’s failure to comply with its obligations or delays caused by unforeseen events or circumstances. Similarly, warranty obligations are affected by product failure rates, equipment wear and tear and the cost of actions needed to return to normal service.

Although the Group measures risks on a contract-by-contract basis, the actual costs resulting from the obligations associated with a contract may prove to be greater than the amount initially estimated. It may therefore be necessary to re-estimate the costs to completion when a contract is still in progress or to re-estimate provisions when a contract is completed.

Measurement of deferred tax assets

The determination of the book values of deferred tax assets and liabilities and the amount of deferred tax assets to be recognised requires management to exercise its judgement as to the level of future taxable profits to be taken into consideration.

Measurement of assets and liabilities in respect of retirement and other benefits (see § below – Provisions for liabilities and charges – 1)

The measurement by the Group of the assets and liabilities relating to defined benefit schemes in accordance with IAS 19 requires the use of statistical data and other parameters used to predict future trends. Such parameters include discount rate, expected return on plan assets, salary increase rate, staff turnover rate and mortality rate. When circumstances where actuarial assumptions prove to be significantly different from actual data subsequently observed, this could result in a substantial amendment to the charge for retirement and similar benefits, actuarial gains and losses and assets and liabilities stated in the balance sheet relating to these commitments.

Measurement of property, plant and equipment and intangible assets (see § below – Amortisation and depreciation of Non-Current Assets)

Pursuant to IAS 36, goodwill, including intangible assets with an indefinite useful life, is tested for impairment each year on 31 March or more frequently if there are indications of impairment. The discounted future cash flow model used to determine the fair value of the Cash Generating Units utilises a certain number of parameters including estimated future cash flows, discount rates and other variables, and consequently requires the exercise of judgment to a significant degree.

The assumptions used to carry out impairment tests are the same for property, plant and equipment and intangible assets. Any future deterioration in market conditions or operating performances could result in the inability to recover the net book value of such assets.

Inventories and work-in-progress

Inventories and work-in-progress are measured at the lower of cost and net estimated realisable value. Writedowns are calculated on the basis of an analysis of foreseeable trends in demand, technology and market conditions, the aim of which is to identify inventories and work-in-progress that are obsolete or surplus to requirements. If market conditions worsen to a greater degree than was forecast, additional writedowns of inventories and work-in-progress may prove necessary.

Stock-options and free shares

Share subscription and/or purchase options as well as free shares granted to certain senior executives and employees of the Group are recognised in accordance with IFRS 2.

Options are measured at the allocation date. The fair value of options is a function of the expected life, exercise price, current price of underlying shares, expected volatility and share price.

The fair value of free shares is estimated on the allocation date, specifically based on their expected life, current price of the underlying shares, expected volatility and share price and takes into account the terms and conditions attached to the share allocation.

This value is recognised as personnel cost between the date of grant and the end of the vesting period and offset under equity.

TRANSLATION METHOD

The consolidated financial statements are presented in Euro, the Group’s reporting currency.

Foreign currency-denominated transactions

Transactions not denominated in the functional currency are translated at the exchange rate on the date when the transaction was first recorded.

At the balance sheet date:

•

foreign currency-denominated monetary items are converted at the closing rate;

•

foreign currency-denominated non-monetary items valued at historical cost are converted at the foreign exchange rate on the transaction date; and

•

foreign currency-denominated non-monetary items valued at fair value are converted using the foreign exchange rate on the date fair value was determined.

Foreign currency-denominated subsidiary financial statements

Subsidiary financial statements are prepared in the currency that is most representative of their economic environment. This currency is deemed to be their functional currency pursuant to IAS 21.

Subsidiary financial statements are translated into Euros using the following exchange rates:

•

closing rate for all balance sheet items, with the exception of the components of equity which continue to be translated at historical exchange rates (translation rates used on the date the subsidiary was acquired by the Group);

•

average rate for the period for income statement and cash flow statement items.

Translation differences arising in respect of the profit or loss and shareholders’ equity are recognised directly in shareholders’ equity under the heading “Translation differences” in the case of the Group’s share, with the portion attributable to third parties being recorded in minority interests.

On the disposal of a foreign subsidiary, the translation differences relating to such disposal and recognised in shareholders’ equity after 1 April 2004 are accounted for in the income statement.

Translation exchange rates used in the consolidation


	Closing rate				Average rate
	31 March 2016		31 March 2015		31 March 2016		31 March 2015
Thai Baht	€	0.024989	€	0.028557	€	0.025891	€	0.024283
Swedish Krona	€	0.108398	€	0.107641	€	0.107066	€	0.108360
Czech Koruna	€	0.036967	€	0.036320	€	0.036849	€	0.036255
US Dollar	€	0.878349	€	0.929454	€	0.906351	€	0.788550
Australian Dollar	€	0.675356	€	0.706514	€	0.666297	€	0.690302
Hong Kong Dollar	€	0.113273	€	0.119872	€	0.116838	€	0.101700
Singapore Dollar	€	0.653424	€	0.676865	€	0.653744	€	0.613296
Taiwan Dollar	€	0.027346	€	0.029536	€	0.028219	€	0.025757
Swiss Franc	€	0.914829	€	0.955749	€	0.931474	€	0.849768
Pound Sterling	€	1.263424	€	1.374948	€	1.364940	€	1.273290
Iranian Rial	€	0.000029	€	0.000033	€	0.000031	€	0.000030
Brazilian Real	€	0.242872	€	0.286058	€	0.252340	€	0.320736
Russian Rouble	€	0.013105	€	0.016015	€	0.014114	€	0.017617
Indian Rupee	€	0.013257	€	0.014865	€	0.013842	€	0.012911
Korean Won	€	0.000772	€	0.000839	€	0.000783	€	0.000745
Chinese Yuan	€	0.136029	€	0.149903	€	0.142487	€	0.127297
Polish Zloty	€	0.234874	€	0.244774	€	0.236636	€	0.238848

BALANCE SHEET DATE

All companies are consolidated on the basis of financial statements drawn up at 31 March 2016.

INCOME STATEMENT PRESENTATION

1 - Sales revenue and cost of sales recognition

Revenue on sale of manufactured products is recognised according IAS 18, i.e. essentially when the significant risks and rewards of ownership are transferred to the customer, which generally occurs on delivery. Revenue on short-term service contracts is recognised on performance of the related service. All production costs incurred or to be incurred in respect of the sale are charged to cost of sales at the date of recognition of sales.

Revenue on construction contracts and long-term service agreements is recognised based on the percentage of completion method: the stage of completion is assessed by milestones which ascertain the completion of a physical proportion of the contract work or the performance of services provided for in the agreement, which corresponds in the most cases to invoicing. The revenue for the period is the excess of revenue measured according to the percentage of completion over the revenue recognised in prior periods.

Cost of sales on construction contracts and long-term service agreements is computed on the same basis. The cost of sales for the period is the excess of cost measured according to the percentage of completion over the cost of sales recognised in prior periods. As a consequence, adjustments to contract estimates resulting from work conditions and performance are recognised in cost of sales as soon as they occur, prorated to the stage of completion.

When the outcome of a contract cannot be estimated reliably but the contract overall is expected to be profitable, revenue is still recognised based on milestones, but margin at completion is adjusted to nil.

When it is probable that contract costs at completion will exceed total contract revenue, the expected loss at completion is recognised immediately as an expense. Bid costs are directly recorded as expenses when a contract is not secured.

With respect to construction contracts and long-term service agreements, the aggregate amount of costs incurred to date plus recognised margin less progress billings is determined on a contract-by-contract basis. If the amount is positive, it is included as an asset designated as “Construction contracts in progress, assets”. If the amount is negative, it is included as a liability designated as “Construction contracts in progress, liabilities”.

2 - Operating profit after share of profit of equity-accounted entities

This aggregate includes gross profit, research and development costs, sales, marketing and administrative costs and other operating income and expenses. It also includes the share of retirement and other benefits corresponding to the cost of services provided during the period, the cost of employee share-based payments and profit-sharing plans, as well as foreign exchange gains and losses related to operating activities. Lastly, it includes the share of profit of equity-accounted entities.

Adjusted Group operating profit is the indicator used to present a level of operational profitability that can be used to forecast recurring performance. It corresponds to operating profit after share of profit of equity-accounted entities, excluding restructuring costs, and costs relating to the Wabtec transaction.

3 - Financial income and expenses

Financial income and expenses include:

•

interest income and expense on the consolidated net debt, which consists of borrowings, other financial liabilities (including liabilities in respect of finance leases) and cash and cash equivalents;

•

dividends received from unconsolidated equity investments;

•

the effect of discounting financial provisions;

•

changes in financial instruments;

•

foreign exchange gains and losses on financial transactions.

4 - Income tax

The Group calculates its income tax in accordance with tax laws applicable in the country where profits are taxable and in accordance with IAS 12.

The current tax liability is calculated using the tax laws that have been enacted or substantively enacted by the balance sheet date in the countries where the Group’s subsidiaries and associates operate and generate taxable profits. Management periodically assesses tax positions taken in light of applicable tax regulations, where the latter are subject to interpretation, and determines, if applicable, the amounts it expects to pay to tax authorities.

Temporary differences between the book value of assets and liabilities and their tax base, tax losses carried forward and unused tax credits are identified in each taxable entity (or tax group, if applicable). The corresponding deferred tax is calculated using the tax rates that have been enacted or substantively enacted for the financial year during which assets will be realised or liabilities settled (see § Deferred tax).

Pursuant to the Conseil National de la Comptabilité (CNC) communication of 14 January 2010 relating to the accounting treatment of the component based on value added (CVAE) of the CET tax (Contribution Economique Territoriale) introduced in France by the 2010 Finance Act of 31 December 2009, following an analysis carried out by the Group and in light of its specific features, it was decided to treat the value-added based CVAE as income tax, in order to remain consistent with the classification of similar taxes in Germany and Italy (Gewerbesteuer and IRAP, respectively).

5 - Profit or loss of operations held for disposal and discontinued operations

The net of tax profit or loss from discontinued operations as defined by IFRS 5 is presented under a separate heading in the income statement. It includes the net profit or loss of such activities during the year and up to their date of disposal, as well as the net gain or loss on the disposal itself.

6 - Earnings per share

Basic earnings per share is calculated based on the profit attributable to holders of ordinary shares of the parent company, divided by the weighted average number of ordinary shares outstanding during the financial period. Since the shares of the consolidating entity held by itself are deducted from shareholders’ equity, these shares are excluded from the weighted average number of outstanding shares.

Diluted earnings per share is calculated based on the weighted average number of shares outstanding during the financial period adjusted for the number of shares that would be generated by the exercise of share subscription options or purchase options granted by the Group as per the conditions of IAS 33.45 and subsequent.

INTANGIBLE ASSETS

1 - Goodwill

On each acquisition, the Group identifies and assesses the fair value of all assets and liabilities acquired, particularly intangible assets and property, plant and equipment, brands, inventories, work-in-progress and all provisions for liabilities and charges.

The unallocated difference between the cost of securities in companies acquired and consolidated and the fair value of assets and liabilities is recorded as goodwill. Where this difference is negative, it is taken directly to the income statement. When this difference is positive, it is recognised in the balance sheet.

In case of the partial acquisition of a company, goodwill will either be recognised based on the percentage of ownership of this new entity or fully consolidated, i.e. taking account of the share attributable to minority interests.

Acquisitions of minority interests in subsidiaries that are already fully consolidated:

Prior to the application of revised IAS 27, the Group had elected to recognise additional goodwill, which corresponded to the difference between the acquisition cost of securities and the additional share in consolidated equity that these securities represented.

Since the implementation of this standard, acquisitions of minority interests are now recognised as a deduction from the Group’s share of shareholders’ equity.

Accounting treatment of put options on minority interests:

Similar to the accounting treatment used for acquisitions of minority interests, the Group elected to use the option to recognise additional goodwill as part of the accounting treatment of put options on minority interests that existed prior to 1 April 2010. Put options granted after revised IFRS 3 and IAS 27 became applicable are recognised as a deduction from equity (see below Financial Assets and Liabilities - §6).

2 - Intangible assets acquired separately or pursuant to a business combination

Intangible assets acquired separately are recorded in the balance sheet at their historical cost.

Intangible assets (primarily brands) resulting from the valuation of assets of acquired companies are recorded in the balance sheet at their fair value, determined generally on the basis of appraisals by external experts when significant in value.

Intangible assets, other than those with indefinite useful lives, are amortised on a straight-line basis over their estimated useful lives, which are as follows:


• Software		1 to 10 years

• Patents		5 to 15 years

• Development costs		3 years

3 - Internally-generated intangible assets

Research costs are expensed immediately when incurred.

Development costs on new projects are capitalised if all of the following criteria are met:

•

the project is clearly identifiable and its related costs are separately identified and reliably measured;

•

the technical feasibility of the project has been demonstrated and the Group has the intent and the financial capability to complete the project and to use or to sell the products derived from this project;

•

it is probable that the project developed will yield future economic benefits for the Group.

These costs relate to the purchase of raw materials and labour. Capitalised project development costs are amortised on a straight-line basis over 3 years.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are measured at their acquisition cost or at their fair value when new subsidiaries are acquired. Depreciation is calculated separately for every asset component that has a distinct useful life. The useful lives of the assets concerned are generally deemed to be as follows:


• Buildings		15 to 25 years

• Fixtures and fittings		10 years

• Industrial machinery and equipment		5 to 20 years

• Tools		3 to 5 years

• Vehicles		3 to 4 years

• Office equipment and furniture		3 to 10 years

Assets acquired under finance leases are recorded as assets when the lease agreement transfers substantially all the risks and rewards inherent in ownership of an asset to the Group. At each balance sheet date, a finance lease recognised as an asset gives rise to a depreciation charge (consistent with the depreciation policy applicable to other depreciable assets of the same nature). Lease agreements for which the risks and rewards of ownership are not transferred to the Group are treated as operating leases, with corresponding lease payments expensed on a straight-line basis over the lease term.

IMPAIRMENT OF ASSET VALUES

Goodwill and intangible assets with indefinite useful lives are tested for impairment each year.

Intangible assets and property, plant and equipment with finite useful lives are tested for impairment as soon as there is any indication that such assets may have become impaired. Where relevant, impairment is recognised.

Impairment testing involves comparing the recoverable amount of the asset with its net book value. The recoverable amount is the higher of fair value less costs to sell the asset and its value in use.

Tests are carried out on the basis of Cash Generating Units (CGUs) to which these assets can be allocated. A CGU is a consistent group of assets whose continuous utilisation generates cash inflows that are largely independent of cash inflows generated by other groups of assets.

The value in use of a CGU is determined based on the present value of the estimated future cash flows to arise from these assets, within the framework of economic assumptions and operating conditions anticipated by Group management. The measurement carried out is based mainly on the Group’s three-year plan. Cash flows beyond that timeframe are extrapolated by applying a stable growth rate.

The recoverable amount is the sum of the present value of the cash flows and the present value of the terminal residual value. The discount rate is determined using the sector’s weighted average cost of capital.

When this value is less than the book value of the CGU, an impairment loss, first allocated to goodwill, is recognised.

In the event of an indication of a recovery in value, this impairment loss may eventually be reversed to the extent that it does not exceed the net book value of the asset at the same date had it not been subject to a writedown. Impairment losses recorded on goodwill may not be reversed.

FINANCIAL ASSETS AND LIABILITIES

Pursuant to IAS 32 and IAS 39, financial assets and liabilities comprise operating receivables and liabilities, financial loans and liabilities, shareholdings in unconsolidated companies, marketable securities, borrowings and other financial liabilities and derivative financial instruments.

On initial recognition, a financial instrument is valued at fair value, adjusted for issue costs:

•

fair value, as defined by the applicable IAS, corresponds as a general rule to transaction value, with exceptions discussed below;

•

under the IAS, the term “issue costs” is used to mean all of the ancillary costs directly attributable to the acquisition or implementation of the financial instruments.

Specific cases where fair value differs from the value on initial recognition in the balance sheet include loans, borrowings, operating receivables and liabilities which are interest-free or at beneficial rates. In such specific cases, fair value is calculated by discounting the cash flows associated with the financial instrument, using the market rate increased by a risk premium.

At future balance sheet dates, financial assets and liabilities are recorded at either their amortised cost or fair value depending on the class of assets or liabilities to which they belong.

The accounting treatment of identified financial assets and liabilities is as follows:

1 - Operating receivables

At each balance sheet date, the Group assesses whether there is an objective indication of impairment of a receivable. If there are objective indications of impairment in respect of assets recognised at amortised cost, the book value of the asset is reduced via the use of an impairment account. The amount of the impairment is recognised in the income statement.

If the amount of the impairment reduces during a subsequent accounting period, and if such reduction can be objectively linked to an event that occurred after the recognition of the impairment, the impairment loss previously recognised is reversed to the extent that the book value of the asset does not exceed the amortised cost on the date the impairment loss is reversed. Any subsequent reversal is recognised in the income statement.

Regarding doubtful trade receivables, a provision is raised when there is an objective indication of the Group’s inability to recover all or part of the amounts due under the terms contractually laid down in respect of the transaction. Significant financial difficulties encountered by the debtor, the probability that the debtor will become bankrupt or undergo a financial restructuring or payment default are indications of the impairment of a receivable. The book value of the trade receivable is reduced via the use of a value adjustment account.

Within the framework of the factoring of trade receivables, an analysis of the risks and rewards relating to the transfer of such receivables must be conducted pursuant to IAS 39 (credit risk and interest rate risk primarily):

•

if the risks and rewards are substantially transferred, the receivables are deconsolidated from the balance sheet against cash;

•

if the risks and rewards are substantially retained, the receivables are maintained on the balance sheet with a corresponding liability being recognised, the transaction being accounted for as a borrowing guaranteed by receivables.

2 - Financial receivables and loans

These financial instruments are also recorded at their amortised cost. They are subject to valuation tests, which are realised when there is an indication that their recoverable amount is less than their book value, in accordance with the same principles as those described in paragraph “1 - operating receivables”. The impairment loss is recorded in the income statement as are any loss reversals.

3 - Shareholdings in unconsolidated companies

These financial instruments are classified as assets held for sale. They are unlisted shares for which the fair value cannot be reliably determined and therefore the book value at which they are recognised is their acquisition cost.

In the event of an objective indication of impairment of the financial asset (notably a significant and sustained drop in its value), the impairment loss is recognised in the income statement and may not be reversed in a subsequent period other than on the sale of the shareholding concerned.

4 - Cash, marketable securities and cash equivalents

Cash and marketable securities reflected in the balance sheet include cash balances, bank accounts, term deposits maturing in less than three months and securities that can be traded on official exchanges. These short-term instruments comprise money market funds and certificates of deposit. They are considered by the Group as financial assets held for trading and are valued at their fair value, with any movements in fair value recorded to the income statement.

In the case of highly liquid short-term investments (maturity not exceeding three months), it is assumed that their fair value is equal to their book value (capitalised interest included). Such items are therefore classified as cash equivalents.

5 - Borrowings and other financial liabilities

Borrowings are initially recognised net of related expenses. Their cost is amortised using the effective interest rate method. Other financial liabilities are recognised at amortised cost.

6 - Put options held by minority shareholders in Group subsidiaries

If the put options held by minority shareholders in Group subsidiaries have an impact on the transfer of risks and rewards associated with underlying securities, the put option gives rise to the recognition of a firm and immediate acquisition of the securities, with their payment being deferred.

In accordance with IAS 32, put options are recognised as financial liabilities if they have no impact on the transfer of risks and rewards. The amount reflected in the balance sheet corresponds to the present value of the exercise price of put options, measured according to the discounted future cash flow method. This liability is offset under equity.

Subsequent fair value movements are recognised:

•

in equity, for the estimated change in value of the exercise price;

•

in net financial income (expense) for the reversal of debt discounting.

DERIVATIVE FINANCIAL INSTRUMENTS

The Group uses derivative financial instruments to manage its exposure to movements in interest rates and in the exchange rates of foreign currencies. As part of its hedging policy, the Group uses interest rate swaps and contracts for forward purchases and sales of currencies. The Group may also use option contracts.

1 - Foreign exchange risk

The Group operates in foreign countries and is therefore exposed to exchange risk as a result of various foreign currency exposures. The management of exchange risk is centralised by the parent company’s Treasury Department and comprises two parts:

•

exchange risk management relating to tenders in foreign currencies (uncertain risk)

•

exchange risk management relating to commercial contracts (certain risk)

The Group’s policy is to hedge all expected future transactions in each major currency.

2 - Interest rate risk

The Group manages its interest rate cash flow risk through the use of swaps or options. From an economic point of view, the effect of these interest rate swaps or caps is to convert variable rate borrowings into fixed rate borrowings. The Group may also use structured instruments that do not qualify for hedge accounting.

A detailed description of the exchange and interest rate risks is provided in Note 21: management of financial risks.

3 - Derivative financial instruments general accounting rules

The derivative instruments used by the Group qualify for accounting purposes as hedges if the derivative is eligible for hedge accounting and if the hedging relationship is documented in accordance with the principles of IAS 39.

The derivative hedge instruments are recorded in the balance sheet at their fair value. The recognition of movements in the fair value of derivative instruments depends on the following three classifications:

•

Fair value hedges: movements in the fair value of the derivative are taken to the income statement and offset, to the extent of the effective part, the movements in fair value of the underlying asset, liability or firm commitment, also recorded in the income statement. Forward exchange transactions and exchange swaps that cover certain commercial contracts and financial assets and liabilities denominated in foreign currencies are considered as fair value hedges.

•

Hedging future flows: movements in fair value are recorded in equity for the effective part and reclassified in income when the item covered affects the latter. The ineffective part is taken directly to financial income and expense. Interest rate derivative instruments, as well as budget cash flow hedges are treated as future cash flow hedges.

•

Transaction derivatives: the movements in the fair value of the derivative are recorded in financial income and expenses.

INVENTORIES AND WORK-IN-PROGRESS

Inventories and work-in-progress include raw materials, work-in-progress and finished products. They are stated at the lower of production cost and estimated net realisable value.

Raw materials are measured using the weighted average cost method.

Work-in-progress and finished products are measured at their production cost. The cost of inventories includes direct raw material costs and, where relevant, direct labour costs as well as overheads incurred in bringing the inventories to their present location and condition.

Writedown is recognised to take account of obsolescence risks (see § above Use of estimates – inventories and work-in-progress).

NON-CURRENT ASSETS HELD FOR DISPOSAL AND DISCONTINUED OPERATIONS

IFRS requires the separate disclosure in the balance sheet of the total value of assets and liabilities of operations held for disposal without any offset. IFRS also requires the separate disclosure in the income statement of the total after tax profit realised from discontinued operations.

Non-current assets held for disposal may no longer be depreciated or amortised. They are valued at the lower of their book value and fair market value net of disposal costs.

TREASURY SHARES

Faiveley Transport parent company shares held by the subsidiaries or the parent company are deducted from consolidated equity, with any gains or losses on their disposal being directly allocated to equity.

PROVISIONS FOR LIABILITIES AND CHARGES

1 - Provisions for retirement benefits and other employee commitments

In accordance with the laws and practices of each country, Faiveley Transport Group participates in retirement benefit plans, social security plans, medical plans and employment termination indemnity schemes, with benefits based on several factors including seniority, wages and payments made into mandatory general plans.

These plans may be defined-benefit or defined-contribution plans.

•

Post-employment benefits – defined benefits

Following retirement, Group employees receive benefits (pension or allowance) funded by a number of Group companies. These defined benefit plans primarily concern the United Kingdom, Germany, France and Italy.

In the United Kingdom and Germany, the majority of these plans involve supplementary pension plans. In the United Kingdom, commitments are pre-financed by plan assets.

In France, employees are granted by law a retirement benefit for an amount that varies according to the applicable collective agreement, seniority of employment and end-of-career salary. This benefit is paid by the employer when the employee retires.

In Italy, the law provides for the payment by companies of the “Trattamento di Fine Rapporto” (Severance pay) or TFR for the benefit of employees. The TFR is funded by a 7.4% contribution paid by the employer and is accumulated so as to provide the employee with a lump sum when leaving the Company. The impact of the TFR reforms has been integrated since 31 March 2008. The provision established in the Company’s financial statements relates to rights acquired prior to 1 January 2007. For rights acquired subsequently, the employer’s commitment is limited to the payment of contributions to external funds.

Commitments for defined benefit plans are calculated based on the projected unit credit method. From the financial year beginning 1 April 2013, actuarial gains and losses are recognised under items of other comprehensive income in accordance with revised IAS 19.

•

Post-employment benefits – defined contributions

Contributions into defined contribution plans are expensed when made.

•

Other long-term benefits

Other long-term benefits primarily concern Germany (seniority bonuses and early retirement schemes) and France (seniority awards).

Actuarial differences for this type of plan are expensed when they arise.

The net expense for retirement commitments and similar benefits is broken down between cost of sales and structure costs, according to the distribution of the Company workforce.

2-Other provisions for liabilities and charges

In accordance with IAS 37, Faiveley Transport Group recognises a provision when an obligation to a third party arises that will result in a probable loss or liability that can be reasonably measured. The Group reports a contingent liability as an off-balance sheet commitment when there is only a possibility of a resulting loss or liability or when it cannot be reasonably measured.

These provisions are determined based on the best knowledge available concerning risks incurred and their probability of realisation and are allocated to specific risks. They cover, in particular:

•

probable after sales service expenditure arising from mechanical warranties;

•

probable expenditure for industrial risks covered by contractual guarantees. The measurement of the provision amount is based on such factors as the products’ technical complexities, their innovative nature, geographical proximity, etc.;

•

litigation risks;

•

losses on completion for the part exceeding the amounts due by the customers;

•

restructuring costs when the restructuring has been officially announced and is the subject of a detailed plan or whose execution has already begun.

These provisions are valued at their present value when their impact is significant and their measurement reasonably reliable.

Provisions for guarantees are calculated according to the percentage related to the type of product manufactured and experience gained of its reliability over time. The percentages vary from 1% to 6% according to the products and are applied to the total production costs of products on a project-by-project basis.

DEFERRED TAX

In accordance with IAS 12, deferred tax is calculated using the balance sheet liability method (use of tax rates adopted or virtually adopted at the balance sheet date) for all temporary differences between the accounting and tax treatments of assets and liabilities of each Group entity noted at the balance sheet date.

Deferred tax assets arising from tax losses carried forward are recognised when it is probable that the Group will realise taxable profits in the financial years during which the unused tax losses can be offset.

Deferred tax is recorded in the income statement, unless it relates to items directly posted to other items of comprehensive income, in which case it is also recognised under other items of comprehensive income.

SEGMENT REPORTING

In light of criteria defined by IFRS 8 and given the Group’s internal organisation (steering of activities by project, with projects generally comprising several products and involving the participation of several Group subsidiaries) and the structure of the market, the Group opted for a presentation similar to IAS 14, pursuant to IFRS 8, consisting of presenting information for the rail segment. In addition, it was deemed appropriate to retain an analysis by geographic region.

Segment reporting is presented in Note 24.

NOTE 4: CHANGES IN CONSOLIDATION SCOPE

NEWLY-CREATED COMPANIES

On 9 April 2015, Faiveley Transport Group and the subsidiary of SMRT, Singapore Rail Engineering (SRE), signed a joint venture agreement for the marketing and provision of maintenance, repair and overhaul (MRO) services for rolling stock in South-East Asia (excluding Thailand, Taiwan and Hong Kong). The new company, called Faiveley Rail Engineering Singapore Pte Ltd, will market and supply MRO Services for brakes, access doors, platform screen doors, heating, ventilation and air conditioning (HVAC) systems, and auxiliary power supply (APS) systems. A review of the joint venture agreement established that Faiveley Transport has joint control over this company, which is consolidated according to the equity method.

ACQUISITIONS

Acquisition of minority interests

•

In application of the terms and conditions of the agreement of 23 December 2014 between Faiveley Transport and the minority shareholders in Faiveley Transport Schweiz AG, the legal and financial transfer of 10% of shares held by minority shareholders to Faiveley Transport took place on 12 June 2015, thereby increasing Faiveley Transport’s equity investment in Faiveley Transport Schweiz AG to 90%. The legal and financial transfer of the outstanding 10% equity interest will take place in the first quarter of the 2016/2017 financial year.

•

Pursuant to the terms of an agreement with Beitel Holdings Inc dated 2 October 2015, Graham-White Manufacturing purchased 40% of the minority interests in ATR Investments LLC, raising the Group’s interest in ATR Investments LLC to 100%.

DISPOSALS AND COMPANIES NO LONGER CONSOLIDATED

Nil

MOVEMENTS IN GOODWILL DURING THE ALLOCATION PERIOD

Nil

NOTE 5: GOODWILL

Goodwill mainly arose from the acquisition of subsidiaries and the purchase of minority interests in Faiveley SA by the holding company Faiveley Transport in 2008; these two companies have since merged into the current Faiveley Transport parent company.

This goodwill was calculated in accordance with the partial goodwill method.

Faiveley Group Management monitors its business performance by entity or group of entities, which generally correspond to a major area of specialisation. Goodwill has been allocated to the companies or groups acquired, except for goodwill arising from the purchase of minority interests which is monitored as a whole at Group level.

The following tables provide details of opening and closing goodwill balances for the reported periods, their change during the period and their allocation to the various companies or groups of companies corresponding to the cash generating units or groups of cash generating units used by Faiveley Transport for in-house monitoring:

The following table provides details of goodwill as at 31 March 2016:


	Gross		Accumulated impairment		Net 31 March 2016		Net 31 March 2015
Faiveley Transport minority interests		265,778		—		265,778		265,778
Sab Wabco Group (brakes and couplers)		234,004				234,004		234,004
Graham-White Manufacturing Co. (compressed air drying and brake components)		86,275		—		86,275		91,295
Amsted Rail-Faiveley LLC/Ellcon National Inc. (brake components)		39,575		—		39,575		41,878
Faiveley Transport NSF (air conditioning)		10,057		—		10,057		10,057
Nowe GmbH (sanding systems)		3,273		—		3,273		3,273
Faiveley Transport Tours ⁽¹⁾		6,061		—		6,061		6,061
Faiveley Transport Schweiz AG (formerly Urs Dolder AG) (heating)		2,662		—		2,662		2,781
Faiveley Transport Gennevilliers (sintered brakes)		13,470		—		13,470		13,470
Schwab Verkehrstechnik AG		24,571		—		24,571		25,670
Other		2,846		—		2,846		2,845

Total		688,572				688,572		697,112

Goodwill recognised following the purchase of Espas Group.

2015/2016 change


	Net 31 March 2015		Adjustments to opening goodwill		Acquisitions		Disposals		Impairment		Other movements			Net 31 March 2016
Faiveley Transport minority interests		265,778		—		—		—		—		—			265,778
Sab Wabco Group (brakes and couplers)		234,004		—		—		—		—		—			234,004
Graham-White Manufacturing Co. (compressed air drying and brakes)		91,295		—		—		—		—		(5,020	) ⁽¹⁾		86,275
Amsted Rail-Faiveley LLC / Ellcon National Inc		41,878		—		—		—		—		(2,303	) ⁽¹⁾		39,575
Faiveley Transport NSF (air conditioning)		10,057		—		—		—		—		—			10,057
Nowe GmbH (sanding systems)		3,273		—		—		—		—		—			3,273
Faiveley Transport Tours		6,061		—		—		—		—		—			6,061
Faiveley Transport Schweiz AG (heating)		2,781		—		—		—		—		(119	) ⁽²⁾		2,662
Faiveley Transport Gennevilliers (sintered brakes)		13,470		—		—		—		—		—			13,470
Schwab Verkehrstechnik AG		25,670		—								(1,099	) ⁽²⁾		24,571
Other		2,845		—		—		—		—					2,846

Total		697,112		—		—		—		—		(8,541	)		688,572

These movements are due to the translation difference on goodwill recognised in US Dollars: Graham-White Manufacturing Co. (USD 98,224 K) and Amsted Rail-Faiveley LLC/Ellcon National Inc. (USD 45,057 K).

(2)	These movements are due to the translation difference on goodwill recognised in CHF: Faiveley Transport Schweiz AG (CHF 2,910 K) and Schwab Verkehrstechnik AG (CHF 26,859 K).

2014/2015 change


	Gross 31 March 2014		Adjustments to opening goodwill		Acquisitions		Disposals		Impairment		Other movements			Gross 31 March 2015
Faiveley Transport minority interests		265,778		—		—		—		—		—			265,778
Sab Wabco Group (brakes and couplers)		234,004		—		—		—		—		—			234,004
Graham-White Manufacturing Co. (compressed air drying and brakes)		71,239		—		—		—		—		20,056	⁽¹⁾		91,295
Amsted Rail-Faiveley LLC / Ellcon National Inc		32,678		—		—		—		—		9,200	⁽¹⁾		41,878
Faiveley Transport NSF (air conditioning)		10,057		—		—		—		—		—			10,057
Nowe GmbH (sanding systems)		3,298		—		—		—		—		(25	)⁽²⁾		3,273
Faiveley Transport Tours		6,061		—		—		—		—		—			6,061
Faiveley Transport Schweiz AG (heating)		2,386		—		—		—		—		395	⁽³⁾		2,781
Faiveley Transport Gennevilliers (sintered brakes)		13,470		—		—		—		—		—			13,470
Schwab Verkehrstechnik AG		22,027		—								3,644	⁽³⁾		25,670
Other		2,841		—		—		—		—		4			2,845

Total		663,838		—		—		—		—		33,274			697,112

(2)	Adjustment to the goodwill of Nowe GmbH following the discounting of the put option on shares held by minority interests.

(3)	These movements are due to the translation difference on goodwill recognised in CHF: Faiveley Transport Schweiz AG (CHF 2,910 K) and Schwab Verkehrstechnik AG (CHF 26,859 K).

At least once a year, at year-end, the Group carries out an impairment test on groups of cash generating units to which goodwill has been allocated. This test involves comparing their book value and their recoverable amount. Should the recoverable amount fall below the book value, impairment is recognised for the difference. No impairment was recognised in the current period nor in the previous period.

The recoverable amount of all groups of cash generating units to which goodwill has been allocated was determined based on their estimated value in use.

The value in use is measured based on future cash flow forecasts approved by Management and covering a period of 3 years. This period includes the budget prepared for the year that follows the year for which financial statements have been prepared and the following two years for the business plan. The Group benefits from very high visibility regarding future business activity. Its order book at 31 March 2016 equates to 32 months of sales for Original Equipment and about 9 months for Services.

In determining the value in use, cash flows are determined based on standard WCRs, not taking account of potential restructuring and capital expenditures that may improve asset performance.

Future cash flow forecasts estimated beyond the three-year period are extrapolated using a growth rate of 1.5% to infinity:

Future cash flows are discounted using the Weighted Average Cost of Capital (WACC) as discount rate. This rate differs depending on the geographic location of the groups of CGUs:


	France			United States			Other countries
Discount rate before tax		11.4	%		11.7	%		11.5	%

The discount rate is determined based on the following market data:


Market data	France			United States			Other countries
Risk-free rate on 10-year French government bonds		0.9	%		2.1	%		2.2	%
Beta of sector		1.22			1.22			1.22
Market risk premium		7	%		7	%		7	%

In addition to market data, the discount rate calculation also includes the standardised estimated cost of the company’s debt: 1.27%. This rate includes, proportionally to the weighting of variable rate debt in total debt, an average spread of 0.84% and a swap rate of -0.11%.

Given the Group’s business model, the key assumptions that make it possible to determine the recoverable amount are the growth rate and the discount rate. The Group considers that no reasonably likely change in key assumptions could lead the recoverable amount of the assets tested to fall below the book value. Sensitivity tests have been performed on the two items of goodwill with the largest values, as well as on the goodwill relating to Faiveley Transport Gennevilliers (sintered brakes), which has been identified as sensitive:

•

For the Faiveley Transport minority shareholders’ groups of CGUs, the recoverable amount was estimated at €1,298 million, with a net book value of €913 million.

An increase or a decrease of 1% in the 1.5% growth rate to infinity would have a positive impact of 7.3% and negative impact of 6.0 % on the recoverable amount. Therefore, the recoverable amount would be €1,392 million and €1,221 million respectively. An increase or a decrease of 1% in the 11.5% discount rate would have a negative impact of 9.3% and a positive impact of 11.5% on the recoverable amount. Therefore, the recoverable amount would be €1,177 million and €1,447 million respectively.

•

For the Sab Wabco Group of CGUs, the recoverable amount has been estimated at €668 million, for a net book value of €329 million.

An increase or a decrease of 1% in the 11.5% discount rate would have a negative impact of 9.3% and a positive impact of 11.6% respectively on the recoverable amount. Therefore, the recoverable amount would be €606 million and €745 million.

•

In the case of the Faiveley Transport Gennevilliers (sintered brakes) CGU, the recoverable amount has been estimated at €25 million based on a 10-year business plan, compared with a net book value of €19 million. An increase or a decrease of 1% in the 1.5% growth rate to infinity would have a positive impact of 6.7% and negative impact of 5.2% on the recoverable amount. Therefore, the recoverable amount would be €27 million and €24 million respectively. An increase or a decrease of 1% in the 10.8% discount rate would have a negative impact of 12.4% and a positive impact of 14.2% on the recoverable amount. Therefore, the recoverable amount would be €22 million and €29 million. The 2.5% decrease in gross margin provided for in the business plan would result in a 17% decrease in the recoverable amount (which would be €21 million). The use of a 10-year business plan to determine the recoverable amount for the Faiveley Transport Gennevilliers CGU is consistent with the former methods used by the Group in order to determine that amount.

NOTE 6: INTANGIBLE ASSETS


	Gross		Depreciation and amortisation charges		Net 31 March 2016		Net 31 March 2015
Development costs		30,191		13,323		16,868		13,901
Patents, trademarks and licences		40,665		26,206		14,459		6,716
Other intangible assets		35,508		3,270		32,238		37,697

Total		106,364		42,799		63,565		58,314

At 31 March 2016, intangible assets were broken down as follows:

•

Development costs: development costs incurred as part of technical innovation projects that comply with the IAS 38 capitalisation criteria. These costs are amortised over a period of 3 years.

•

Patents, trademarks and licences: this heading primarily includes:

•

The costs relating to software developed in-house and rolled out at the sites (primarily M3). These costs are amortised over a period of 10 years.

•

patents acquired as part of the acquisition of Carbone Lorraine’s sintered brake business (€4,000 K) and computer software amortised over a maximum of 10 years.

•

Other intangible assets: primarily includes:

•

Intangible assets identified and valued (in particular, sales agency agreements) as part of the creation of the Amsted Rail-Faiveley LLC joint venture, at a gross amount of €10.2 million (USD 11.5 million)

•

The value of the customer portfolio contributed by the acquisition of Graham-White Manufacturing Co. of a gross amount of €2.9 million (USD 3.3 million).

•

The value of the customer portfolio contributed by the acquisition of Schwab, of a gross amount of €5.7 million (CHF 6.2 million) and expertise of €0.9 million (CHF 0.9 million)

•

Costs incurred of €14.5 million corresponding to the implementation of a major IT system integration programme, whose objective is to optimise organisations, processes, tools and the sharing of technical data within Faiveley Transport Group.

2015/2016 change


	Development costs			Patents, trademarks and licences			Other intangible assets			TOTAL
Gross 31 March 2015		24,475			30,708			40,257			95,440
Restatement		—			—			—			—

Gross 31 March 2015		24,475			30,708			40,257			95,440
Changes in consolidation scope		—			—			—			—
Acquisitions		5,884	⁽¹⁾		409			7,119			13,413
Disposals		(28	)		(855	)		(26	)		(909	)
Other movements		(140	)		10,415			(11,854	)		(1,579	)

Gross 31 March 2016		30,192			40,677			35,496			106,364

Accumulated amortisation at 31 March 2015 - Published		(10,574	)		(23,992	)		(2,560	)		(37,126	)

Restatement		—			—						—

Accumulated amortisation at 1 April 2015		(10,574	)		(23,992	)		(2,560	)		(37,126	)
Changes in consolidation scope		—			—			—			—
Charges to provision		(2,805	)		(3,277	)		(885	)		(6,968	)
Reversal of provision		28			856			26			910
Other movements		28			207			150			385

Accumulated amortisation at 31 March 2016		(13,324	)		(26,206	)		(3,269	)		(42,799	)

Net amounts		16,868			14,470			32,227			63,565

(1)	Development costs capitalised over the period

NOTE 7: PROPERTY, PLANT AND EQUIPMENT


	Gross		Depreciation charges		Net 31 March 2016		Net 31 March 2015
Land		5,826		250		5,576		5,670
Buildings		78,097		58,945		19,152		19,175
Plant and machinery		168,566		133,964		34,602		32,063
Other PPE		45,483		36,725		8,758		8,127
Under construction		9,592		—		9,592		5,568

Total		307,565		229,884		77,681		70,603

2015/2016 change


	Land			Buildings			Plant and machinery			Other property, plant and equipment			Under construction			TOTAL
Gross 1 April 2015		5,920			77,760			167,906			43,259			5,568			300,414

Changes in consolidation scope		—			—			—			—			—			—
Acquisitions		—			3,229			10,521			3,292			5,798			22,840
Disposals		(3	)		(212	)		(7,156	)		(1,066	)		(4	)		(8,441	)
Other movements		(91	)		(2,680	)		(2,705	)		(3	)		(1,769	)		(7,248	)

Gross 31 March 2016		5,826			78,097			168,566			45,482			9,592			307,565

Accumulated depreciation at 1 April 2015		(250	)		(58,586	)		(135,842	)		(35,133	)		—			(229,811	)

Changes in consolidation scope		—			—			—			—						—
Charges to provision		(4	)		(1,845	)		(8,278	)		(2,607	)					(12,734	)
Reversal of provision		2			212			7,012			1,110						8,337
Other movements		0			1,274			3,144			(95	)					4,325

Accumulated depreciation at 31 March 2016		(251	)		(58,945	)		(133,964	)		(36,724	)		—			(229,883	)

Net amounts		5,575			19,152			34,603			8,758			9,592			77,681

The majority of Group sites are owned outright or through operating leases, except the property assets of Faiveley Transport Iberica, which are leased-financed.

Property, plant and equipment acquired under finance leases

The following table provides an analysis of property, plant and equipment acquired under finance leases:


	Gross		Amort. & depr.charges		Net 31 March 2016		Net 31 March 2015
Software licences		1,079		68		1,011		1,011
Land						—		—
Buildings		3,111		900		2,211		2,264
Plant and machinery						—		—

Total		4,190		968		3,222		3,275

Finance leases

Finance lease contracts relate to the property assets of Faiveley Transport Iberica and software licences. The future minimum lease payments on non-cancellable leases are shown in the table below based on their maturity dates:


	31 March 2016		31 March 2015
Less than 1 year		223		202
1 to 5 years		937		865
More than 5 years		—		233

Total future lease payments		1,160		1,300

Less financial interest		—		—

Financial liabilities attached to finance leases		1,160		1,300

The value of these financial liabilities is less than the amounts listed under non-current assets since the repayment period of these liabilities is shorter than the depreciation period of the corresponding assets.

NOTE 8: INVESTMENTS IN EQUITY-ACCOUNTED ENTITIES

Joint ventures are entities over which Faiveley Group exercises joint control.

Assumptions and judgment having led to classifying these entities as equity accounted

A review of partnership agreements with these entities demonstrated that control and decision-making powers were distributed between the partners and Faiveley Transport Group, which led to their consolidation using the equity method.

Summary of equity interests in joint ventures


	% control and interest			Gross		Impairment		31 March 2016 Net		31 March 2015 Net
- Qingdao Faiveley SRI Rail Brake Co. Ltd		50.00	%		14,492		—		14,492		15,057
- Datong Faiveley Railway Vehicle Equipment Co., Ltd.		50.00	%		681		—		681		650
- Shijiazhuang Jiaxiang Precision Machinery Co. (“SJPM”)		50.00	%		5,570		—		5,570		6,110
- Faiveley Rail Engineering Singapore Pte Ltd		50.00	%		—						—

Total equity interests in equity-accounted joint ventures									20,742		21,817

2015/2016 change in the equity value of joint ventures


	31 March 2016			31 March 2015
Net value of securities at beginning of the year		21,817			12,337
Share of profit of equity-accounted entities		5,561			6,551
Dividends		(3,761	)		(1,115	)
Other movements ⁽¹⁾		(2,875	)		4,044
Writedowns

Net value of securities at year-end		20,742			21,817

(1)	Of which translation adjustment of € (2,553) K and elimination of intra-Group margins of € (323) K for the period.

In light of the Group’s major key indicators (consolidated net profit, net profit after share of profit of equity-accounted entities, equity - Group share and total assets), no equity interest in any equity-accounted joint venture is individually material.

Risks associated with interests in joint ventures

Commitments given by the Group in respect of its joint ventures and contingent liabilities incurred by its joint ventures are presented in NOTE 37 “Off-balance sheet commitments”.

NOTE 9: OTHER NON-CURRENT FINANCIAL ASSETS

2015/2016 change


	Shareholdings in unconsolidated subsidiaries			Other financial investments			TOTAL
Gross 1 April 2015		*932*			*3,074*			*4,006*

Changes in consolidation scope		—			—			—
Acquisitions		—			395			395
Disposals		—			(606	)		(606	)
Other movements		(0	)		(194	)		(194	)

Gross 31 March 2016		932			2,669			3,601

Accumulated writedowns at 1 April 2015		*677*			25			*702*

Changes in consolidation scope		—			—			—
Charges to provision		—			—			—
Reversal of provision		—			—			—
Other movements		(0	)		—			(0	)

Accumulated writedowns at 31 March 2016		677			25			702

Net amounts		255			2,644			2,899

Maturity date of other financial investments


	1 to 5 years		More than 5 years		Gross 31 March 2016		Gross 31 March 2015
Other non-current investments		140				140		156
Loans		569		420		989		953
Guaranteed deposits and securities		1,458		44		1,502		1,221
Other financial receivables		—		38		38		744

Total		2,167		502		2,669		3,074

Financial information on unconsolidated securities


	%		Net book value of securities
(€ thousands)	interest		Gross		Impairment			Net
SUECOBRAS (Brazil) ⁽¹⁾		100		865		(666	)		197
SAB WABCO SHARAVAN Ltd. (Iran) ⁽²⁾		49		11		(11	)		—
SOFAPORT (France) ⁽¹⁾		59.50		47		—			47
FAIVELEY TRANSPORT SERVICE MAROC		100		8		—			8
FAIVELEY TRANSPORT SOUTH AFRICA ⁽²⁾		100		—		—			—

TOTAL				932		(677	)		255

(1)	Companies undergoing liquidation

(2)	Dormant companies

The unconsolidated securities had an overall net book value of € 0.3 million at 31 March 2016, which was representative of their fair value.

NOTE 10: DEFERRED TAX


	Amount at 1 April 2015			Reclassifications			Impact on income statement			Currency conversions			Items of other comprehensive income			Amount at 31 March 2016
Provisions for inventory		3,015			(655	)		(301	)		(95	)		—			1,964
Provisions for trade and other receivables		361			114			66			(14	)		—			526
Provisions for contracts		11,964			(2,025	)		1,832			(201	)		—			11,570
Provisions for restructuring		94			—			(57	)		—			—			37
Provisions for retirement benefits and seniority awards		9,566			—			(326	)		(203	)		(548	)		8,489
Other provisions for liabilities		702			3,116			(12	)		(8	)		—			3,798
Percentage of completion method (IAS 11)		1,196			106			(1,495	)		22			—			(170	)
Elimination of inventory margins (intra-Group)		1,160			—			(75	)		—			—			1,085
Restatements under IAS 32-39 (cash flow)		7,875			(6	)		(2,992	)		3			271			5,152
Leases		183			—			35			—			—			218
Property, plant and equipment and intangible assets		2,412			—			(188	)		(47	)		—			2,178
Current assets and liabilities		3,670			348			106			(186	)		—			3,938
Exchange differences		3,742			—			375			(65	)		—			4,052
Tax losses carried forward		17,388			(600	)		809			(763	)		—			16,833
Tax losses carried forward but not recognised ⁽¹⁾		(2,920	)		(500	)		153			212			—			(3,055	)
Other restatements		6,022			398			(340	)		(420	)		—			5,660

TOTAL DEFERRED TAX – ASSETS		66,429			296			(2,411	) (a)		(1,763	)		(277	)		62,274

Provisions for inventory		—			—			—			—			—			—
Provisions for trade and other receivables		23			—			(6	)		(1	)		—			16
Provisions for contracts		—			—			—			—			—			—
Provisions for retirement benefits and seniority awards		—			—			—			—			—			—
Other provisions and restatements		5,781			76			3,215			(200	)		—			8,871
Regulated provisions		1,661			—			(3	)		—			—			1,657
Percentage of completion method (IAS 11)		16,395			96			(820	)		(406	)		—			15,266
Capitalisation of development costs		4,149			27			837			(6	)		—			5,007
Restatements under IAS 32-39 (cash flow)		6,541			—			(2,104	)		(65	)		—			4,371
Valuation difference		7,270			—			2,004			(430	)		—			8,844
Property, plant and equipment and intangible assets		2,907			—			(45	)		(128	)		—			2,734
Current assets		6			97			(78	)		(9	)		—			16
Exchange differences		5,427			—			(1,796	)		(0	)		—			3,631
Leases		694			—			12			—			—			706

TOTAL DEFERRED TAX – LIABILITIES		50,854			296			1,216	(b)		(1,244	)		—			51,120

Impact on income statement (a)-(b)								(3,627	)

(1)	Amount of deferred tax assets corresponding to tax losses not recognised due to the risk of non-recovery.

NOTE 11: INVENTORIES


	Gross		Writedowns		Net 31 March 2016		Net 31 March 2015
Raw materials		120,140		16,580		103,560		105,304
Work-in-progress		21,390		1,102		20,288		24,517
Finished products		31,501		4,182		27,319		28,190
Merchandise		10,950		895		10,055		9,654

Total		183,981		22,759		161,222		167,665

2015/2016 movements in provisions


	Provisions at 1 April 2015		Changes in consolidation scope		Charges to provision		Reversals provisions used			Reversals provisions unused			Other movements⁽¹⁾			Provisions at 31 March 2016
Raw materials		18,820		—		5,214		(6,196	)		(705	)		(553	)		16,579
Work-in-progress		1,163		—		573		(562	)		(73	)		1			1,102
Finished products		4,886		—		413		(879	)		(227	)		(10	)		4,183
Merchandise		1,016		—		455		(563	)		34			(47	)		895

Total		25,885		—		6,655		(8,200	)		(971	)		(609	)		22,759

(1)	Translation adjustment for the period and reclassifications.

During the 2015/2016 financial year, old inventories and inventories that had become totally obsolete were scrapped. Provisions of 83 % of the gross value of these inventories had previously been raised. The impact on the income statement for the period was a loss of € 1.7 million.

NOTE 12: WORK-IN-PROGRESS ON PROJECTS

At 31 March 2016, net work-in-progress on projects was valued at € 123.4 million, compared with € 121.7 million in the previous year. This primarily includes engineering costs on long-term contracts. At each balance sheet date, the Group assesses the recoverable amount. In the event of a loss-making contract, a writedown is recognised as a reduction of contracts in progress.

Gross work-in-progress on projects was € 145.2 million at 31 March 2016, compared with € 139.9 million at 31 March 2015.

Provisions for losses on completion, presented as a reduction of work-in-progress on projects, totalled € 21.9 million at 31 March 2016 as against € 18.4 million at 31 March 2015.

NOTE 13: CURRENT RECEIVABLES

TRADE RECEIVABLES


	Gross			Writedowns		Net 31 March 2016			Net 31 March 2015
Trade receivables		316,653			5,178		311,475			321,846
Assignment of receivables (factoring and ad hoc assignments)		(95,669	)		—		(95,669	)		(97,716	)

Total		220,984			5,178		215,806			224,130

Movements in provisions for doubtful trade receivables


Financial years ended:	Opening balance of provision	Changes in consolidation scope	Charges to provision	Reversals provisions used			Reversals provisions unused			Other movements			Closing balance of provision
31 March 2016	4,652		1,624		(0	)		(950	)		(147	)	5,178
31 March 2015	4,496		1,813		(1,432	)		(601	)		377		4,652

Trade receivables at year-end

Receivables due

Total

Less

Between

More

balance

Receivables

Total

than 60

60 and

120 and

than 240

sheet

not yet due

due

days

120 days

240 days

days

Gross value

220,984

169,673

51,310

28,698

9,386

4,180

9,046

Writedowns

(5,178

)

(1,107

)

(4,071

)

(280

)

(279

)

(149

)

(3,437

)

Net value

215,806

168,566

47,239

28,417

9,107

4,030

5,610

Receivables remaining unpaid beyond the contractual due date represent, in most cases, amounts confirmed by customers but in respect of which payment is subject to the retentions identified when work was inspected.

OTHER CURRENT ASSETS


	Gross		Writedowns		Net 31 March 2016		Net 31 March 2015
Supplier credit notes pending		630		—		630		373
Social security and tax receivables		15,085		—		15,085		13,113
Prepaid expenses		10,147		—		10,147		5,605
Accrued income		2,623		—		2,623		1,733
Other receivables		9,417		—		9,417		3,894

Total		37,902		—		37,902		24,718

NOTE 14: CURRENT FINANCIAL ASSETS


	31 March 2016		31 March 2015
Guaranteed deposits and securities ⁽¹⁾		8,034		5,854
Other financial receivables		65		65
Current accounts		1,002		923
Fair value of derivatives - assets		24,810		36,006

Total		33,911		42,849

(1)

Under factoring programmes, in order to guarantee the repayment of amounts for which the Group may become liable, a non-interest bearing escrow account has been established representing 10% of factored receivables outstanding. This rate may potentially be adjusted in the event of an increase in disallowed receivables (credit notes, disputes, non-payment or discounts). The outstanding guarantees totalled € 5,438 K at 31 March 2016 and € 5,575 K at 31 March 2015.

NOTE 15: CASH AND CASH EQUIVALENTS


	31 March 2016			31 March 2015
Short-term investments		15,021			14,824
Cash		221,048			222,021
Bank overdrafts		(12	)		(1,396	)
Invoices factored and not guaranteed		(2,143	)		(777	)

Total		233,914			234,672

The Group does not hold a share portfolio but invests excess cash balances. At 31 March 2016, it had money market funds and certificates of deposits of € 0.5 million and fixed-term deposits of € 14.5 million. These investments meet the criteria specified by IAS 7, which allows them to be classified as cash equivalents.

NOTE 16: ASSETS HELD FOR SALE

Assets held for sale primarily include a building belonging to the Leipzig company, with a net value of € 1,658 K, together with a second building owned by Faiveley Transport North America Inc. which has been transferred to this category, with a net value of € 5,210 K.

NOTE 17: GROUP EQUITY

SHARE CAPITAL

At 31 March 2016, the Company’s share capital totalled € 14,614,152 divided into 14,614,152 shares of € 1 each, fully paid up. Shares registered in the name of the same shareholder for at least two years have double voting rights.

The Group manages its capital by ensuring that it maintains financial ratios within the limits defined by its credit agreements (see NOTE 19).

Composition of the share capital


Shares	Par value		1 April 2015		New shares issued		Voting rights granted			31 March 2016
Ordinary		1		6,893,152		—		59,234			6,952,386
Redeemed		—		—		—		—			—
With preferred dividends		—		—		—		—			—
With double voting rights		1		7,721,000		—		(59,234	)		7,661,766

Total		1		14,614,152		—		—			14,614,152

Treasury shares

Faiveley Transport held 155,390 treasury shares as at 31 March 2016.

Translation differences

Translation differences comprise mainly the gains and losses resulting from the translation of the equity of subsidiaries the functional currency of which is not the Euro.

The translation differences presented in the consolidated statement of comprehensive income primarily reflect the movement in the US dollar (€ 5.8 million), the Pound Sterling (€ 4.1 million) and the Chinese Yuan (€ 3.8 million) against the Euro over the financial year ended 31 March 2016.

Reserves and net profit


	31 March 2016			31 March 2015
Legal reserve		1,461			1,461
Distributable reserves		—			—
Reserves for derivative instruments		(25	)		(271	)

Other reserves		485,248			435,439
Net profit - Group share		51,290			55,645

Total reserves and net profit - Group share		537,973			492,274

SHARE-BASED PAYMENTS

Share purchase or subscription option plans

•

Plan features


	Share subscription			Share purchase
Allocation	option plan			option plan
Date of Management Board meeting		16/07/2008			23/11/2009
Exercise price in € (*)		40.78			54.91
Date from which options can be exercised		16/07/2010			22/11/2013
Expiry date		16/07/2015			22/11/2017

Number of options remaining to be exercised at 31 March 2015		8,447			116,000

Options granted during the period
Options cancelled during the period					(7,000	)
Options exercised during the period		(8,447	)		(35,000	)

Number of options remaining to be exercised at 31 March 2016		—			74,000

(*)	The exercise price is equal to the average price of the 20 trading days preceding the date of the Management Board meeting that decided to grant the options, less a discount of 5%.

The exercise of the 35,000 subscription options of the plan dated 23/11/2009 automatically resulted in a € 35,000 increase in the share capital of Faiveley Transport S.A. through the issue of 35,000 new shares.

On 23/07/2015, the Management Board decided to cancel 22,500 treasury shares and reduce the share capital by € 22,500 to return it to the amount at which it stood prior to the exercise of the subscription options.

On 05/02/2016, the Management Board decided to cancel 7,000 treasury shares and reduce the share capital by € 7,000 to return it to the amount at which it stood prior to the exercise of the subscription options.

On 26/11/2015, the Management Board decided to cancel 5,500 treasury shares and reduce the share capital by € 5,500 to return it to the amount at which it stood prior to the exercise of the subscription options.

•

Summary and valuation of plans


	Share subscription		Share purchase
Allocation	option plan		option plan
Date of Management Board	16/07/2008		23/11/2009
Initial fair value of the plan (€ millions)				2.8
Charge for the financial year (€ millions)		—		—

Free performance-based share allocation plans and free share plans

New plans allocated during the 2015/2016 financial year:

•

Free performance-based share allocation plan of 10 August 2015

On 10 August 2015, the Management Board decided to allocate free shares subject to performance criteria pursuant to the authorisation granted at the Extraordinary General Meeting of 12 September 2014. This involved allocating a total of 5,400 shares to 3 beneficiaries. This allocation is subject to the beneficiary remaining employed by the Group and to performance conditions identical to those of the free performance-based share allocation plan of 2 July 2014 (see Notes to the consolidated financial statements, Note 16, included in the 2014/15 Registration Document).

•

Free performance-based share allocation plan of 1 October 2015

On 1 October 2015, the Management Board decided to allocate free performance-based shares to certain employees pursuant to the authorisation granted at the Extraordinary General Meeting of 18 September 2015. This involved allocating a total of 140,275 shares to 356 beneficiaries. The delivery of these free shares is subject to the beneficiaries remaining employed by the Group and to performance criteria applicable over a one-year period. For reasons of confidentiality, the levels expected in relation to performance criteria are not disclosed, but are based on:

•

a profit from recurring operations target for the 2015/2016 financial year

•

a cash flow generation target for the 2015/2016 financial year

•

two specific targets as part of the rollout of the Group’s strategic plan.

•

Free performance-based share allocation plan of 27 January 2016

On 27 January 2016, the Management Board decided to allocate free shares subject to performance criteria pursuant to the authorisation granted at the Extraordinary General Meeting of 18 September 2015. This involved allocating a total of 4,500 shares to 3 beneficiaries. This allocation is subject to the beneficiary remaining employed by the Group and to performance conditions identical to those of the free performance-based share allocation plan of 1 October 2015 (see above).

•

Plan features

Allocation

Free performance-based shares

Free shares

Date of authorisation by the AGM

12/09/2013

12/09/2014

18/09/2015

14/09/2011

14/09/2012

Date of Management Board

02/07/2014

27/03/2015

10/08/2015

01/10/2015

27/01/2016

05/03/2012

15/01/2013

Date ownership of free shares transferred to French tax residents

02/07/2016

27/03/2017

10/08/2017

01/10/2016

27/01/2017

05/03/2014

15/01/2015

Date ownership of free shares transferred to non-French tax residents

02/07/2018

27/03/2019

N/A

01/10/2016

27/01/2017

05/03/2016

15/01/2017

Vesting date of free shares

02/07/2018

27/03/2019

10/08/2019

01/10/2017

27/01/2018

05/03/2016

15/01/2017

Total number of shares allocated at 31 March 2015

132,406

4,000

—

25,042

30,640

Number of shares allocated during the period

5,400

140,275

4,500

Number of shares cancelled during the period

(7,360

)

—

(1,000

)

—

(260

)

(136

)

Total number of shares vested during the period under this plan

—

(24,782

)

—

Total number of shares allocated at 31 March 2016

125,046

4,000

5,400

139,275

4,500

—

30,504

Terms and conditions of share allocation under the plan

Determination
of % of shares
vested at
02/07/2016

Determination
of % of shares
vested at
27/03/2017

Determination
of % of shares
vested at
10/08/2017

Determination
of % of shares
vested at
01/10/2016

Determination
of % of
shares vested
at 27/01/2017

Allocation
subject to

personal
investment
by
beneficiaries,
with two free
shares
granted for
every share
bought

Allocation
subject to
personal
investment
by
beneficiaries,
with two free
shares
granted for
every share
bought

•

Plan valuation

Allocation

Free performance-based shares

Free shares

Date of Management Board

02/07/2014

27/03/2015

10/08/2015

01/10/2015

27/01/2016

05/03/2012

15/01/2013

Initial fair value of the plan (€ millions)

2.9

0.1

0.3

8.8

0.3

2.3

1.8

Charge for the financial year (€ millions)

2.3

0.1

4.5

0.2

0.3

0.4

NOTE 18: MINORITY INTERESTS

SUMMARY OF MINORITY INTERESTS INCLUDED IN EQUITY


	31 March 2016		31 March 2015
Shanghai Faiveley Railway Technology		8,098		9,972
Amsted Rail - Faiveley LLC		22,677		20,987
Other minority interests		1,333		757

Total		32,108		31,716

In light of the Group’s major key indicators (consolidated net profit, net profit after share of profit of equity-accounted entities, equity - Group share and total assets), no minority interest is individually material.

NOTE 19: ANALYSIS OF PROVISIONS

NON-CURRENT PROVISIONS


	Amount at 1 April 2015		Changes in consolidation scope		Charges to provision		Reversals provisions used			Items of other Comprehensive Income			Reversals provisions unused			Other movements (1)			Amount at 31 March 2016
Provisions for retirement commitments and employee benefits		45,809		—		2,223		(4,071	)		(1,085	)		0			(681	)		42,195
Provisions for liabilities		2,275		—		103		(1,133	)		—			(200	)		(104	)		941

Total		48,084		—		2,325		(5,204	)		(1,085	)		(200	)		(785	)		43,136

(1)	Including exchange differences of €(747) K

Actuarial gains and losses generated over the financial year result from changes in the actuarial assumptions used in the valuation of commitments, differences between market conditions actually observed and those originally assumed, as well as experience. These actuarial gains are recognised under items of other comprehensive income and are net of tax.

PROVISIONS FOR RETIREMENT COMMITMENTS AND EMPLOYEE BENEFITS

Summary of provisions

The provisions as at 31 March 2016, of those countries with the most significant commitments are shown in the following table:

31 March 2016

31 March 2015

(€ millions)

France

Germany

United
Kingdom

Other
countries

Total

Post-employment benefits

11.3

16.3

6.0

39.7

43.3

Provisions for other long-term benefits

0.5

1.0

—

1.0

2.5

2.5

Total

11.8

17.3

6.0

7.1

42.2

45.8

Information regarding the actuarial liability:

•

Movements in actuarial liability by geographic region


	31 March 2016															31 March 2015
	France			Germany			United Kingdom			Other countries			Total			Total
Actuarial liability at beginning of period		12.2			17.7			71.3			14.2			115.4			90.1
Cost of services provided		1.0			0.0			0.1			0.3			1.4			1.0
Interest on actuarial liability		0.2			0.2			2.2			0.2			2.8			3.4
Employee contributions		—			—			0.0			0.2			0.3			0.2
Benefits paid		(0.4	)		(1.0	)		(2.1	)		(0.2	)		(3.8	)		(3.8	)
Settlement of liability		—			—			—			—			—			—
Scheme amendments		—			—			—			—			—			—
Acquisitions/Transfers/Companies joining the Group		—			—			—			0.3			0.3			—
Actuarial (gains)/losses		(1.6	)		(0.6	)		(3.5	)		0.6			(5.1	)		15.0
of which experience (gains)/losses		(0.2	)		(0.4	)		(0.2	)		(0.3	)		(1.1	)		(0.3	)
Exchange differences		—			—			(5.6	)		(0.5	)		(6.1	)		9.8
Other		—			—			—			—			—			—

Actuarial liability at end of period		11.3			16.3			62.5			15.0			105.1			115.4

of which:
Funded schemes		—			—			62.5			11.9			74.4			82.1
Unfunded schemes		11.3			16.3			—			3.1			30.8			33.3

•

Movements in plan assets by geographic region:


	31 March 2016													31 March 2015
	France		Germany		United Kingdom			Other countries			Total			Total
Fair value of assets at beginning of period		—		—		63.6			8.6			72.2			55.5
Employer contributions		—		—		2.1			0.3			2.4			2.7
Employee contributions		—		—		0.0			0.2			0.3			0.1
Benefits paid		—		—		(2.1	)		(0.0	)		(2.2	)		(2.1	)
Settlement of liability		—		—		—			—			—			—
Expected financial income		—		—		2.0			0.1			2.1			2.4
Actuarial gains/(losses)		—		—		(4.0	)		(0.0	)		(4.0	)		4.7
of which experience gains/(losses)		—		—		(4.0	)		(0.0	)		*(4.0*	)		4.7
Acquisitions/Transfers/Companies joining the Group		—		—		—			0.3			0.3			—
Exchange differences		—		—		(5.0	)		(0.5	)		(5.5	)		8.9

Fair value of assets at end of period		—		—		56.7			9.0			65.7			72.2

The actual return on investments was a negative € 1.9 million in the year to 31 March 2016 (compared with a positive return of € 7.1 million to end March 2015). The implicit return on investments is estimated at € 2.1 million in 2016.

•

Provision for retirement commitments:

31 March 2016

31 March 2015

France

Germany

United
Kingdom

Other
countries

Total

Actuarial liability

11.3

16.3

62.5

15.0

105.2

115.5

Fair value of plan assets

—

56.7

9.0

65.7

72.2

Financial cover

11.3

16.3

5.9

6.0

39.5

43.2

Impact of capping of assets

—

0.2

—

0.2

0.1

Net provision

11.3

16.3

6.0

39.7

43.3

of which provisions for commitments

11.3

16.3

6.0

39.7

43.3

of which surplus plan assets

0.2

0.2

0.1

•

Past data relating to financial cover and actuarial experience differences for the current and the previous four financial years


	31 March 2016			31 March 2015			31 March 2014			31 March 2013			31 March 2012
	Total			Total			Total			Total			Total
Present value of the commitment		105.1			115.4			89.8			82.3			77.9
Fair value of plan assets		65.7			72.2			55.5			48.4			44.7

Funding shortfall		39.4			43.1			34.3			33.9			33.2

Experience gains/(losses) in relation to liabilities		(1.1	)		(0.3	)		(0.3	)		2.5			(0.1	)
Experience gains/(losses) in relation to assets		(4.0	)		4.7			(0.9	)		3.8			0.5
Experience gains/(losses) in relation to liabilities, as % of commitment		-1	%		0	%		0	%		3	%		0	%
Experience gains/(losses) in relation to assets, as % of plan assets		-6	%		7	%		-2	%		8	%		1	%

Income statement items:

•

Breakdown of net pension cost


	31 March 2016													31 March 2015
					United			Other
	France		Germany		Kingdom			countries			Total			Total
Cost of services provided		1.0		0.0		0.1			0.3			1.4			1.0
Interest on actuarial liability		0.2		0.2		2.2			0.2			2.8			3.4
Financial income		—		—		(2.0	)		(0.1	)		(2.1	)		(2.4	)
Reduction/liquidation/transfer of the plan		—		—		—			—			—			—
Impact of capping of assets		—		—		0.2			—			0.2			—
Other		—		—		—			—			—			—

Net charge		1.1		0.2		0.5			0.4			2.2			2.0

In addition, charges for the year in respect of defined contribution schemes totalled € 24.7 million at 31 March 2016, compared with €23.9 million for the year to 31 March 2015.

Actuarial assumptions:

The actuarial assumptions used to measure commitments take into account the demographic and financial conditions specific to each country or Group company.

Discount rates are determined by reference to the yields on AAA bonds with similar durations to those of the commitments as at the valuation date (Bloomberg Corporate AA 15 years for France and Germany and Iboxx 15+ for the UK).

The assumptions used for those countries with the most significant commitments are shown in the following table:


	31 March 2016									31 March 2015
							United									United
	France			Germany			Kingdom			France			Germany			Kingdom
Discount rate		1.45	%		1.45	%		3.45	%		1.30	%		1.30	%		3.20	%
Inflation rate		2.00	%		2.00	%		2.90	%		2.00	%		2.00	%		2.95	%
Average rate of salary increases		[2% - 2.5	%]		2.22	%		3.30	%		2.50	%		2.22	%		3.30	%

The sensitivity of commitments at 31/03/2016 and the cost of services rendered for the next year to a 25 basis point change in the discount rate are summarised as follows:


	0.25% increase in			0.25% decrease in
(€ millions)	discount rate			discount rate
Effect on the value of commitments		(4.0	)		4.3
Effect on the cost of services provided		(0.1	)		0.1

The sensitivity of commitments at 31/03/2016 and the cost of services rendered for the next year to a 25 basis point change in the salary increase rate are summarised as follows:


	0.25% increase in		0.25% decrease in
(€ millions)	salary rate		salary rate
Effect on the value of commitments		0.6		(0.5	)
Effect on the cost of services provided		0.1		(0.1	)

Currently the investment portfolio contains no Group securities.

The structure of the investment portfolio is as follows:


	31 March 2016	31 March 2015
Shares	7.0%	9.4%
Bonds	38.2%	43.7%
Other assets	54.8%	46.9%

Total	100.0%	100.0%

Plan assets are primarily comprised of financial assets which are actively traded on organised financial markets.

CURRENT PROVISIONS


	Amount at 1 April 2015		Changes in consolidation scope		Charges to provision		ReversaIs provisions used			ReversaIs provisions unused			Items of other Comprehensive Income		Other movements			Amount at 31 March 2016
Provisions for risks, warranty and penalties		96,100		—		59,867		(38,046	)		(13,618	)		—		(5,336	)		98,966
Provisions for losses on completion		2,405		—		—		—			—			—		(496	)		1,909

*Total contract provisions*		*98,505*		—		*59,867*		*(38,046*	)		*(13,618*	)		—		*(5,832*	)		*100,875*

Provisions for restructuring		386		—		5,893		(1,220	)		(11	)		—		—			5,048
Provisions for other risks		2,919		—		5,341		(551	)		(1,195	)		—		(51	)		6,463
*Total other provisions*		*3,305*		—		*11,234*		*(1,770*	)		*(1,206*	)		—		*(51*	)		*11,511*

Total		101,810		—		71,101		(39,817	)		(14,824	)		—		(5,884	) ⁽¹⁾		112,386

(1)	Including exchange differences of € (2,885) K and reclassifications of € (3,103) K.

Current provisions primarily relate to provisions for liabilities, guarantees and after-sales service granted to our customers and litigations and claims on completed contracts. The methods underlying the recognition of these provisions are specified in Note 3 – “Provisions for liabilities and charges”.

Provisions for losses on completion are shown here for the amount not allocated as a reduction of work-in-progress on projects. Provisions for losses on completion, presented as a reduction of work-in-progress on projects, totalled € 21.9 million at 31 March 2016 as against € 18.4 million at 31 March 2015.

Note 28 sets out the restructuring costs incurred during the financial year.

NOTE 20: BORROWINGS AND FINANCIAL DEBT

In respect of all its sources of financing, Faiveley Transport Group must now comply with the following three financial conditions (as defined in the various financing agreements):

•

Leverage ratio “Consolidated Net Debt/Consolidated EBITDA”, which must be below 3.

•

Gearing ratio “Consolidated Net Debt/Equity”, which must be below 1.5

•

“Consolidated EBITDA/Cost of Consolidated Net Financial Debt”, which must exceed 3.5.

Non-compliance with one of these covenants may result in the debt becoming immediately repayable.

At 31 March 2016, ratios were as follows for the various sources of financing:


At 31 March 2016	Syndicated credit	US private placement	SCHULDSCHEIN loan
“Consolidated Net Debt/Consolidated EBITDA” ratio	1.32	1.42	1.38
“Net Financial Debt/Equity” ratio	n/a	0.23	0.23
“Consolidated EBITDA/Cost of Consolidated Net Financial Debt” ratio	11.98	11.42	11.42

ANALYSIS AND MATURITY OF NON-CURRENT AND CURRENT FINANCIAL DEBT


	31 March 2016
	Current		Non-current portion
	portion		Non-current portion						31 March
	Under 1 year		1 to 5 years		Over 5 years		TOTAL		2015
Borrowings		38,781		210,297		149,682		398,760		427,468
Leases		209		951		—		1,160		1,301
Employee profit sharing		65						65		65
Various other financial liabilities		3						3		6
Guarantees and deposits received		56						56		56
Credit current accounts		75						75		96
Bank overdrafts		12						12		1,396
Short-term facilities (credit balance)		—						—		—
Invoices factored and not guaranteed		2,143						2,143		777

*Total excluding fair value of derivatives*		*41,344*		*211,248*		*149,682*		402,274		*431,165*

Fair value of derivatives - liabilities		14,705		1,633				16,338		19,975

Total		56,049		212,881		149,682		418,612		451,140

BREAKDOWN OF NON-CURRENT AND CURRENT FINANCIAL DEBT BY CURRENCY


	TOTAL		TOTAL
	31 March 2016		31 March 2015
Euro		344,208		380,831
US Dollar		65,740		69,550
Hong Kong Dollar		200		68
Brazilian Real		51		72
Chinese Yuan		8,341		241
Indian Rupee		59		35
Czech Koruna		13		4
Korean Won		—		339
Russian Rouble		—		—

Total		418,612		451,140

BREAKDOWN OF NON-CURRENT AND CURRENT FINANCIAL DEBT BY INTEREST RATE:

Before implementing hedge instruments:


	At		At
	31 March		31 March
	2016		2015
Fixed rate financial debt		138,104		137,209
Variable rate financial debt		264,170		293,956

Total Financial Debt ⁽¹⁾		402,274		431,165

(1)	Excluding fair market value of derivatives – liabilities

After implementing hedge instruments:


	At		At
	31 March		31 March
	2016		2015
Fixed rate financial debt		273,104		317,209
Variable rate financial debt		129,170		113,956

Total Financial Debt ⁽¹⁾		402,274		431,165

⁽¹⁾	Excluding fair market value of derivatives – liabilities

CALCULATION OF NET FINANCIAL DEBT:


	At			At
	31 March 2016			31 March 2015
Non-current financial debt		360,930			396,510
Current financial debt		39,189			32,482
Bank overdrafts		12			1,396
Invoices factored and not guaranteed		2,143			777

Total Financial Debt (a)		402,274			431,165

Receivables from investments		—			—
Loans		1,054			1,018
Guaranteed deposits and securities paid		7,077			7,075
Other financial receivables		2,611			875
Current accounts		1,002			923

Total net financial receivables (b)		11,744			9,891

Cash (c)		236,069			236,845

NET FINANCIAL DEBT (a-b-c)		154,461			184,429

Equity		688,860			657,450
*Net debt / equity ratio*		*22.4*	%		*28.1*	%

In economic terms, net debt should be reduced by the value of treasury shares held for sale as part of the share purchase/subscription option and free share allocation plans.

The liquidation value of these shares was € 4.1 million at 31 March 2016, given the exercise prices granted for share purchase/subscription options and the average share price prevailing during the month preceding the balance sheet date for shares not allocated to these plans.

For accounting purposes, the value of treasury shares held is deducted from equity under IFRS; this amounted to € 9.4 million at 31 March 2016 and € 13.5 million at 31 March 2015.

NOTE 21: FINANCIAL RISK MANAGEMENT

The Faiveley Transport Group’s treasury policy is based on overall financial risk management principles and provides specific strategies for areas such as foreign exchange risk, interest rate risk, raw materials risk, credit risk and liquidity risk.

Within this framework, the Group also uses derivative instruments, mainly forward purchases and sales of currencies, exchange rate and interest rate swaps, interest rate options and raw material swaps. The aim of these instruments is to manage the exchange, interest rate and raw material risks associated with the Group’s activities and financing.

The Group’s policy is not to invest in derivative instruments for speculative purposes.

The Supervisory Board of Faiveley Transport examines risk management principles as well as policies covering certain specific fields such as exchange risk, interest rate risk, raw materials risk, credit risk and liquidity risk. These policies are summarised below.

The market values of interest rate and foreign exchange derivative instruments have been determined based on period-end market prices. They have been appraised by an independent expert.

FINANCIAL INSTRUMENTS FOR THE YEAR ENDED 31 MARCH 2016

Main valuation methods used for financial assets and liabilities:

•

since most of Faiveley Transport’s financial debt bears a variable rate, its fair value (rounded to the nearest credit spread) is equal to nominal values supplemented by interest not yet due;

•

due to their short maturity profile, the fair value of trade and other receivables, other current assets, current financial debt, cash and cash equivalents and short-term investments is deemed identical to their book value.


			Breakdown by category of instrument										*Fair value classification of* *instruments ⁽¹⁾*
			Non		Loans,		Fair value
			financial		receivables		through		Assets
			assets and		and		profit and		available				*Level*		*Level*		*Level*
At 31 March 2016	Book value		liabilities		liabilities		loss		for sale		Fair value		1		2		3
Shareholdings in unconsolidated subsidiaries		255		—		—		—		255		255		—		—		255
Equity interests in equity-accounted entities		20,742		20,742								20,742
Other long-term financial investments		2,644		—		2,644		—		—		2,644		—		—		—

*Non-current assets*		*23,641*		*20,742*		*2,644*		—		*255*		*23,641*		—		—		*255*

Trade receivables		215,806		5,326		210,480		—		—		215,806		—		—		—
Other current assets		37,902		12,770		25,132		—		—		37,902		—		—		—
Current financial assets		9,101				9,101		—		—		9,101		—		—		—
Fair value of derivatives - Assets		24,810		—		—		24,810		—		24,810		—		24,810		—
Short- term investments		15,021		—		—		15,021		—		15,021		15,021		—		—
Cash		221,048		—				221,048		—		221,048		—		—		—

*Current assets*		*523,688*		*18,096*		244,713		260,879		—		*523,688*		*15,021*		*24,810*		—

Total assets		547,329		38,838		247,357		260,879		255		547,329		15,021		24,810		255

Non-current borrowings and financial debt		360,930		—		360,930		—		—		360,930		—		—		—

*Non- current liabilities*		*360,930*		—		*360,930*		—		—		*360,930*		—		—		—

Current borrowings and financial debt		41,344		—		41,344		—		—		41,344		—		—		—
Fair value of derivatives - Liabilities		16,340		—		—		16,340		—		16,340		—		15,213		1,127	⁽²⁾
Current liabilities		269,575		18,737		250,838		—		—		269,575		—		—		—

*Current liabilities*		*327,259*		*18,737*		*292,182*		*16,340*		—		*327,259*		—		*15,213*		*1,127*
Total liabilities		688,189		18,737		653,112		16,340		—		688,189		—		15,213		1,127

(1)	Revised IFRS 7 requires that fair value measurements be classified on three levels. The levels of fair value hierarchy reflect the significance of data used for the measurements:

Level 1: prices (unadjusted) of identical assets or liabilities listed on active markets;

Level 2: data other than listed prices covered by Level 1, that can be noted for the asset or liability concerned, either directly (i.e. prices) or indirectly (i.e. data derived from prices);

Level 3: data relating to the asset or liability, not based on observable market data (unobservable data).

(2)	This amount corresponds to the financial commitment accounted for as part of the recognition of put options held by minority shareholders in Faiveley Transport Schweiz AG (formerly called Urs Dolder AG) at 31 March 2016.

FINANCIAL INSTRUMENTS FOR THE YEAR ENDED 31 MARCH 2015


			Breakdown by category of instrument										Fair value classification of *instruments ⁽¹⁾*
			Non		Loans,		Fair value
			financial		receivables		through		Assets
			assets and		and		profit and		available				*Level*		*Level*		*Level*
At 31 March 2015	Book value		liabilities		liabilities		loss		for sale		Fair value		1		2		3
Shareholdings in unconsolidated subsidiaries		255		—		—		—		255		255		—		—		255
Equity interests in equity- accounted entities		21,817		21,817								21,817
Other long- term financial investments		4,077		—		4,077		—		—		4,077		—		—		—

*Non-current assets*		*26,149*		*21,817*		*4,077*		—		*255*		*26,149*		—		—		*255*

Trade receivables		224,130		8,395		215,735		—		—		224,130		—		—		—
Other current assets		24,718		7,338		17,380		—		—		24,718		—		—		—
Current financial assets		6,843				6,843		—		—		6,843		—		—		—
Fair value of derivatives - Assets		36,006		—		—		36,006		—		36,006		—		36,006		—
Short- term investments		14,824		—		—		14,824		—		14,824		14,824		—		—
Cash		222,021		—				222,021		—		222,021		—		—		—

*Current assets*		*528,542*		*15,733*		*239,958*		*272,851*		—		*528,542*		*14,824*		*36,006*		—

Total assets		554,691		37,550		244,035		272,851		255		554,691		14,824		36,006		255

Non- current borrowings and financial debt		396,510		—		396,510		—		—		396,510		—		—		—

*Non- current liabilities*		*396,510*		—		*396,510*		—		—		*396,510*		—		—		—

Current borrowings and financial debt		34,655		—		34,655		—		—		34,655		—		—		—
Fair value of derivatives - Liabilities		19,975		—		—		19,975		—		19,975		—		17,845		2,130	⁽²⁾
Current liabilities		303,935		12,881		291,054		—		—		303,935		—		—		—

*Current liabilities*		*358,565*		*12,881*		*325,709*		*19,975*		—		*358,565*		—		*17,845*		*2,130*
Total liabilities		755,075		12,881		722,219		19,975		—		755,075		—		17,845		2,130

(1)	Revised IFRS 7 requires that fair value measurements be classified on three levels. The levels of fair value hierarchy reflect the significance of data used for the measurements:

Level 1: prices (unadjusted) of identical assets or liabilities listed on active markets;

Level 2: data other than listed prices covered by Level 1, that can be noted for the asset or liability concerned, either directly (i.e. prices) or indirectly (i.e. data derived from prices);

Level 3: data relating to the asset or liability, not based on observable market data (unobservable data).

(2)	This amount corresponds to the financial commitment accounted for as part of the recognition of put options held by minority shareholders in Faiveley Transport Schweiz AG (formerly called Urs Dolder AG) at 31 March 2015.

MARKET RISKS

Foreign exchange risk

The Group operates in foreign countries and is therefore exposed to exchange risk as a result of various foreign currency exposures.

The main currencies concerned are the US Dollar, the Hong Kong Dollar, the Czech Koruna, the Swedish Krona, the Pound Sterling and the Chinese Yuan.

The management of the exchange risk of commercial contracts is centralised by the Group Treasury Department and comprises two parts: the certain and the uncertain risk.

•

Exchange risk management relating to tenders in foreign currencies (uncertain risk):

Faiveley Transport Group is required to submit tenders denominated in foreign currencies. The Group’s hedging policy is not to use hedge instruments during the offer phase, unless specifically authorised by Management. The aim is to manage the exchange risk through normal commercially available means. If necessary, the Group Treasury Department would mainly use exchange options.

•

Exchange risk management relating to commercial contracts (certain risk):

Commercial contracts in foreign currencies (most often successful tenders) are hedged by the Group Treasury Department from contractual commitment. The instruments used primarily include forward purchases and exchange rate swaps. Treasury may also use options.

•

Exchange risk management relating to other transactions:

The Group’s policy is to systematically hedge the full value of future transactions expected in every major currency. The minimum trigger threshold for a foreign exchange hedge is € 250 K.

Various cash flows are hedged for a minimum of 80% of the annual budget.

In addition to commercial contracts, all financial positions and management fees deemed significant are hedged.

•

Group exposure resulting from commercial contracts at 31 March 2016


Amounts in currency thousands	Trade receivables [a]		Trade payables [b]			Commitments [c]			Net position before hedging [d] = [a]-[b]-[c]			Hedge instruments [ e ]			Net unhedged position [f] = [d]-[e]


Australian Dollar		549		—			2,947			3,496			3,487			9
Canadian Dollar		—		—			(7,730	)		(7,730	)		(7,729	)		(1	)
Swiss Franc		—		(151	)		(2,266	)		(2,416	)		(2,412	)		(4	)
Chinese Yuan		32,731		(8,094	)		(47,662	)		(23,025	)		(28,416	)		5,392
Czech Koruna		—		(57,971	)		(505,931	)		(563,902	)		(559,963	)		(3,939	)
Pound Sterling		626		(268	)		(2,003	)		(1,646	)		(1,623	)		(23	)
Hong Kong Dollar		16,983		(36,328	)		57,510			38,165			37,327			838
Norwegian Krone		—		—			1,360			1,360			1,360			(0	)
Polish Zloty		564		—			1,986			2,550			2,549			1
Russian Rouble		—		—			42,169			42,169			42,169			(0	)
Swedish Krona		8,974		(37,159	)		(32,451	)		(60,636	)		(61,390	)		754
Singapore Dollar		992		(554	)		68,468			68,906			68,906			0
US Dollar		7,909		(8,057	)		(5,026	)		(5,174	)		1,961			(7,135	)

•

Forward sales hedging financial and commercial transactions at 31 March 2016


	€ K		Currency thousands		Fair value


Norwegian Krone		289		2,720		—
Swedish Krona		19,900		185,174		(180,521	)
Czech Koruna		8,562		231,462		13,273
Australian Dollar		22,615		34,027		(1,509,613	)
Hong Kong Dollar		150,381		1,306,793		3,822,338
Singapore Dollar		46,077		70,516		—
US Dollar		335,828		370,164		11,393,168
Swiss Franc		458		495		5,084
Pound Sterling		19,038		14,544		668,330
Indian Rupee		14,663		1,230,968		551,559
Russian Rouble		1,399		106,756		—
Chinese Yuan		51,989		394,720		1,825,372
Polish Zloty		849		3,661		(7,054	)

TOTAL		672,048				16,581,936

•

Forward purchases hedging financial and commercial transactions at 31 March 2016


	€ K		Currency thousands		Fair value


Norwegian Krone		144		1,360		—
Swedish Krona		57,356		535,774		771,309
Czech Koruna		36,954		998,563		175,652
Australian Dollar		10,987		17,076		561,447
Hong Kong Dollar		186,359		1,632,356		(2,684,497	)
Singapore Dollar		1,051		1,608		—
US Dollar		174,408		194,835		(3,584,402	)
Swiss Franc		2,972		3,194		(45,721	)
Canadian Dollar		5,244		7,729		—
Pound Sterling		58,766		45,387		(1,486,931	)
Indian Rupee		26,206		1,979,170		25,871
Russian Rouble		846		64,587		—
Korean Won		2,600		3,326,604		55,336
Chinese Yuan		106,532		783,748		11,269
Polish Zloty		3,236		13,988		39,738

TOTAL		673,661				(6,160,929	)

•

Sensitivity analysis

The following table shows a breakdown of the impact of a change of +/-10% in the US dollar and CNY spot exchange rates (the main currencies to which the Group is exposed after hedging) against all currencies compared with the closing rate on 31 March 2016.

the effect on pre-tax profit only applies to financial assets and liabilities recognised in the balance sheet, which are denominated in a currency other than the functional currency of their controlling entity and which are not hedged against.


	Impact on income statement
Sensitivity at 31 March 2016	USD						CNY
*(€ millions)*	+10%			-10%			+10%		-10%
Trade receivables / payables		(0.62	)		0.57			0.02		(0.02	)
Cash		0.09			(0.09	)		0.04		(0.03	)
Loans / borrowings		—			—			—		—

Net impact		(0.53	)		0.48			0.06		(0.05	)

Interest rate risks

The syndicated debt, excluding the revolving facility, is indexed on Euribor variable rates. The “SSD Schuldschein” private placement includes several maturities, some of which are indexed on a variable rate, others bearing a fixed rate. This debt may be hedged in accordance with the Group’s interest rate risk policy. All revolving facilities, drawn or undrawn, bear a variable rate and are not subject to interest hedges. The same applies to the US private placement bond issue, which bears a fixed rate.

To manage its risk, the Treasury Department has implemented a hedging strategy using interest rate swaps, tunnels, caps and options.

The exposure of interest rates on loans in Euros is hedged for between 70% and 74%, depending on interest rate fluctuations for the period 2016/2017.

The US dollar denominated debt comprising the “US Private Placement” bond issue exclusively bears fixed rates.

The estimated cost of the Euro-denominated syndicated debt and “Schuldschein” loan is 1.58% for the 2016/2017 period, hedges and spreads included. The estimated cost of the US-denominated debt is estimated at 4.85%. The total cost of the Group’s debt for 2016/2017 is therefore estimated at 2.15%.

Considering the amortisation profile of the syndicated facility, the “Schuldschein” loan and interest rate hedges, the net exposure of the Euro-denominated debt at 31 March 2016 was as follows:


	Financial liabilities				Hedge instruments				Net hedged variable rate exposure
Euro-denominated debt	Fixed rate		Variable rate		Fixed rate		Variable rate		Fixed rate		Variable rate
Under 1 year		—		30,000		30,000		—		30,000		—
1 to 2 years		—		30,000		30,000		—		30,000		—
2 to 3 years		8,500		55,000		50,000		—		58,500		5,000
More than 3 years		59,000		142,500		50000		—		109,000		92,500

Total €		67,500		257,500		160,000		—		227,500		97,500	⁽¹⁾

(1)	Sensitivity analysis of net exposure (€ 97 .5 million): A 100 basis points increase in both the reference “Euribor 1 months” and “Euribor 6 months” interest rates would result in a full-year increase of € 1 .0 million in the interest expense.

Given the amortisation profile of the syndicated credit, the US private placement and interest rate hedges, the net exposure of the US dollar-denominated debt at 31 March 2016 was as follows:


	Financial liabilities				Hedge instruments				Net hedged variable rate exposure
USD-denominated debt	Fixed rate		Variable rate		Fixed rate		Variable rate		Fixed rate		Variable rate
Under 1 year		—		—		—		—		—		—
1 to 2 years		3,600		—		—		—		3,600		—
2 to 3 years		3,600		—		—		—		3,600		—
More than 3 years		67,800		—		—		—		67,800		—

Total USD		75,000		—		—		—		75,000		—

The following table summarises the interest rate risk exposure for the 2016/2017 period:


Amount of debt (€ K)	Currency	Maximum exposure			Estimated cost of debt
325,000	EUR		30	%		1.58	%
75, 000	USD		0	%		4.85	%

•

Instruments recognised in equity


	On EUR loans				On USD loans
	Nominal (€K)		Fair value (€K)		Nominal (currency K)		Fair value (currency K)		Nominal (€K)		Fair value (€K)
Swap		135,000		-747		—		—		—		—
Tunnel		—		—		—		—		—		—
Cap		30,000		-39		—		—		—		—

Total		165,000		-786		—		—		—		—

•

Sensitivity analysis

The Group has implemented a diversified interest rate risk management policy aimed at limiting the impact of potential interest rate increases on its cash flow. As at 31 March 2016, the servicing of projected debt, net of hedges put in place, would limit the impact of a 1% increase in interest rates on debt and hedges to € 0.8 million.

The positive impact on equity is € 0.8 million with a 0.5% interest rate increase.

Raw material risk

The Faiveley Transport Group is exposed to changes in the cost of raw materials such as steel, aluminium and copper, as well as to increases in transportation costs. The table below shows the amounts of each raw material bought annually through purchase of components:


(€ millions)	Aluminium		Ferrous		Rubber		Copper
2015/2016 amount		18.6		43.2		12.6		4.7

The Group has already anticipated these effects, through both its procurement policy and the preparation of its commercial offers. Certain contracts relating to projects include price indexation clauses which enable the Group to pass on a part of the increases in raw material costs.

Derivative financial instruments

•

Fair value of derivative instruments

The fair value of derivative instruments for hedging exchange, interest rate and raw materials risks reflected in the balance sheet was as follows:

At 31 March 2016

Financial
instruments
Assets

Financial
instruments
Liabilities

Unrealised
gains/
(losses)
Equity

Interest rate hedges⁽¹⁾

793

1,564

(731

)

Raw material hedges⁽¹⁾

—

Foreign exchange hedges

24,005

13,649

(482

)

- fair value hedges

9,501

6,683

—

- cash flow hedges

673

1,158

(482

)

- not eligible for hedge accounting

13,831

5,808

—

Total

24,810

15,213

(1,201

)

(1)

Cash flow hedges.

Financial

Unrealised

At 31 March 2015

instruments

gains/ (losses)

Assets

Liabilities

Equity

Interest rate hedges⁽¹⁾

—

849

(566

)

Raw material hedges⁽¹⁾

—

Foreign exchange hedges

35,965

16,998

112

- fair value hedges

17,685

10,190

—

- cash flow hedges

363

263

112

- not eligible for hedge accounting

17,917

6,545

—

Total

36,006

17,847

(413

)

(1)

Cash flow hedges.

•

Movement in equity reserve (excl. deferred tax):


	Amount 1 April 2015			Movement in the year			Amounts reclassified to the income statement			Amount 31 March 2016
Interest rate hedges		(566	)		(577	)		412			(731	)
Foreign exchange hedges		112			(299	)		(295	)		(482	)
Raw material hedges		41			(29	)		—			12
TOTAL		(413	)		(905	)		117			(1,201	)

•

Future release of amounts recorded in equity at 31 March 2016:

The amount of € (482) K recorded in equity in respect of exchange rate derivatives will be transferred to the income statement in the year ending 31 March 2017.

The amount of € (731) K recorded in equity in respect of interest rate derivatives will be released to the income statement between 1 April 2016 and 31 March 2019 according to the maturity of the flows hedged.

The amount of € (12) K recorded in equity in relation to raw material derivatives will be transferred to the income statement in the year ending 31 March 2017.

CREDIT RISK

Owing to its commercial activities, Faiveley Transport Group is exposed to credit risk, in particular the risk of default on the part of its customers.

The Group only enters into commercial relationships with third parties whose financial position is known to be healthy. The Group’s policy is to verify the financial health of those customers wishing to obtain credit.

In the case of derivative instruments and cash transactions, counterparties are limited to the high-quality financial institutions that currently finance the Group.

Faiveley Transport Group makes use of factoring arrangements in France, Germany, Spain, Italy and China. In addition, at the request of major customers, the Group participates in two reverse factoring programmes in Canada, Germany, the UK and the US.

Factoring enables the Group to sell, without recourse, part of its receivables to various factoring companies and banks. This selling without recourse has enabled the Group to improve trade receivables recovery and to transfer the risk of default or bankruptcy on the part of customers or other debtors to the factors.

At 31 March 2016, receivables sold without recourse totalled € 98.8 million, including € 22.3 million for reverse factoring programmes implemented at the request of customers.

The amount of receivables factored and not guaranteed was € 2.1 million.

As regards the risk associated with financial assets, the Group’s maximum exposure is equal to their book value.

LIQUIDITY RISK

Prudent liquidity risk management requires the Group to retain a sufficient level of cash and securities that can be traded in a market, to have adequate financial resources due to the implementation of appropriate credit facilities and to be in a position to unwind positions in the market.

The Group has carried out a specific review of its liquidity risk and considers that it is in a position to meet its maturities.

At 31 March 2016, the Group had € 125 million in undrawn confirmed credit facilities.

At 31 March 2016, the Group complied with all financial conditions required by all credit agreements.

The Group considers that the cash flows generated by its operating activities, cash and funds available via existing credit lines will be sufficient to cover the expenditure and investment necessary for its operations, to service its debt and to pay dividends. Conversely, the Group may have to borrow to finance potential acquisitions.

Available cash and cash equivalents


	31 March 2016		31 March 2015
Available credit lines (a)		168,859		197,502
Parent company cash (b)		50,744		12290
Subsidiaries cash and cash equivalents (c)		183,182		223,778

Available cash and cash equivalents (1) = (a+b+c)		402,785		433,570

Borrowings due in less than one year (d)		39,189		32,482
Available credit lines maturing in less than one year and bank overdrafts (e)		81,760		80,138

Net cash and cash equivalents available over the next year (d)		281,836		320,950

Cash and cash equivalents include unused factoring cash of € 67 million (net of non-guaranteed receivables factored).

The decrease in available cash and cash equivalents was primarily due to the voluntary waiver of a confirmed but undrawn € 25 million credit facility, which was decided by the Group during the first half-year.

Financial debt of less than one year is detailed in Note 20 (excluding bank overdraft, fair value of derivatives and invoices factored and not guaranteed).

Available credit facilities represent credit facilities granted by the banks and available immediately to the subsidiaries or the parent company.

Maturity dates of financial liabilities at 31 March 2016


			Maturity dates of financial liabilities
At 31 March 2016	Book value		Under 1 year		1 to 5 years		Over 5 years		Non-financial liabilities
Liability financial instruments:
Borrowings		396,943		36,964		210,297		149,682
Interest on liabilities		1,817		1,817		—		—		—
Leases		1,160		209		951		—		—
Employee profit sharing		65		65		—		—		—
Other financial liabilities		3		3		—		—		—
Guarantees and deposits received		56		56				—		—
Credit current accounts		75		75		—		—		—
Bank overdrafts		12		12		—		—		—

Fair value of derivatives – liabilities		16,338		14,705		1,633		—		—
Invoices factored and not guaranteed		2,143		2,143		—		—		—

*Financial liabilities*		*418,612*		*56,049*		*212,881*		*149,682*		—

Operating liabilities		269,575		250,838						18,737

*Total*		688,187		306,887		212,881		149,682		18,737


• Future cash flow:

At 31 March 2016	Value		Under 1 year		1 to 2 years		2 to 3 years		Over 3 years
Borrowings		398,760		38,781		32,831		66,311		260,837
Leases		1,160		209		281		216		454
Employee profit sharing		65		65
Other financial liabilities		3		3
Guarantees and deposits received		56		56
Credit current accounts		75		75

• Forecast undiscounted future cash flow of interest and interest rate hedges:



At 31 March 2016	Value		Under 1 year		1 to 2 years		2 to 3 years		Over 3 years
Interest on liabilities		36,879		7,208		6,898		6,676		16,097
Cash flow from liability financial instruments		991		400		264		189		138

Maturity dates of financial liabilities at 31 March 2015


At 31 March 2015	Book value		Under 1 year		1 to 5 years		Over 5 years		Non-financial liabilities
Liability financial instruments:
Borrowings		425,560		30,155		242,682		152,723
Interest on liabilities		1,908		1,908		0		0		—
Leases		1,301		196		874		231		—
Employee profit sharing		65		65		0		0		—
Other financial liabilities		6		6		0		0		—
Guarantees and deposits received		56		56				0		—
Credit current accounts		96		96		0		0		—
Bank overdrafts		1,396		1,396		0		0		—
Fair value of derivatives – liabilities		19,975		19,975		0		0		—

Invoices factored and not guaranteed		777		777		0		0		—

*Financial liabilities*		*451,140*		*54,630*		*243,556*		*152,954*		—

Operating liabilities		291,054		278,173						12,881

*Total*		742,194		332,803		243,556		152,954		12,881


• Future cash flow:


At 31 March 2015	Value		Under 1 year		1 to 2 years		2 to 3 years		Over 3 years
Borrowings		427,468		32,063		30,330		34,284		330,791
Leases		1,301		196		226		209		670
Employee profit sharing		65		65
Other financial liabilities		6		6
Guarantees and deposits received		56		56
Credit current accounts		96		96


• Forecast future cash flow of interest and interest rate hedges:


At 31 March 2015	Value		Under 1 year		1 to 2 years		2 to 3 years		Over 3 years
Interest on liabilities		47,424		7,890		7,643		7,512		24,379
Cash flow from liability financial instruments		1,913		899		541		282		191

CONTRIBUTION TO NET FINANCIAL INCOME/(EXPENSE)


						Revaluation					Disposals		Exchange gain or loss and other			Net financial income/ (expense)
At 31 March 2016	Interest			Dividends		Income		Losses			Disposals		Exchange gain or loss and other			Net financial income/ (expense)
Loans and receivables		1,122
Payables at amortised cost		(11,509	)											(11,198	)		(21,585	)
Instruments measured at fair value through profit and loss		597					7,466		(4,902	)		13		12,622			15,796
Assets available for sale		—			—		—		—			—		—			—
Other		(1,556	)		26									158			(1,372	)

Total		(11,346	)		26		7,466		(4,902	)		13		1,582			(7,161	)


						Revaluation					Disposals		Exchange gain or loss and other			Net financial income/ (expense)
At 31 March 2015	Interest			Dividends		Income		Losses			Disposals		Exchange gain or loss and other			Net financial income/ (expense)
Loans and receivables		1,007												15,635			4,070
Payables at amortised cost		(12,573	)											15,635			4,070
Instruments measured at fair value through profit and loss		(1,551	)				12,460		—			474		(26,997	)		(15,614	)
Assets available for sale		—			—		—		—			—		—			—
Other		(2,347	)		24												(2,323	)

Total		(15,464	)		24		12,460		—			474		(11,362	)		(13,868	)

NOTE 22: CURRENT LIABILITIES


	31 March 2016		31 March 2015
Trade payables		171,640		209,619
Tax and social security liabilities		72,338		68,187
Accrued credit notes		1,375		1,458
Deferred income		593		168
Accrued expenses		18,144		12,713
Non-current assets suppliers		650		441
Dividends payable		—		55
Other operating liabilities		4,835		11,295

Total		269,575		303,935

At 31 March 2016, “Trade payables” included € 42.9 million of credit work-in-progress on projects (compared with € 32.7 million at 31 March 2015).

The increase in “Trade Payables” was due to the billing of lawyers’ services relating to the planned merger with Wabtec.

The decrease in “Other operating liabilities” is primarily due to the exposure of project portfolios to the exchange risk, which decreased due to the significant movements in exchange rates over the financial year. This exchange risk is hedged by the financial instruments presented under “Current financial assets” and “Short-term financial borrowings and liabilities” (under “Fair market value of derivatives – liabilities”).

NOTE 23: FACTORING

In order to diversify the Group’s sources of financing and reduce the credit risk, several subsidiaries factor their receivables. At 31 March 2016, the assignment of receivables to the various factors resulted in a € 95,669 K reduction in “Trade receivables”. These transactions include factoring contracts without recourse as requested by two Group customers, totalling € 22,337 K.

In addition, available and uncalled cash with the factoring companies amounted to € 67,416 K and is included in cash and cash equivalents. Conversely, the portion of receivables factored and not guaranteed was recorded as financial debt under “Current borrowings and financial liabilities” for an amount of € 2,143 K. The risk incurred by the Group in respect of receivables factored and not guaranteed relates to the non-collection of these receivables.

NOTE 24: SEGMENT REPORTING

The Group opted for a presentation similar to IAS 14, pursuant to IFRS 8, consisting of presenting information for the rail operating segment.

INCOME STATEMENT


	31 March 2016			31 March 2015
Continuing activities:
Sales		1,105,184			1,048,423
Operating profit after share of profit of equity-accounted entities		84,352			95,279
Net financial expense		(7,162	)		(13,867	)
Income tax		(21,189	)		(28,535	)
Share of profit of other equity-accounted entities		—			—

Net profit from continuing operations		56,001			52,877

Consolidated net profit		56,001			52,877

Depreciation and amortisation for the period		19,702			17,446

Balance sheet


	31 March 2016		31 March 2015
Property, plant and equipment and intangible assets, net		829,817		796,715
Non-current financial assets		23,641		22,977
Deferred tax assets		62,274		53,079

*Sub-total non-current assets*		*915,732*		*872,771*

Inventories and receivables (excluding tax)		502,776		472,900
Other current assets		89,831		67,999
Cash		236,069		228,753
Assets held for sale		7,527

*Sub-total current assets*		*836,203*		*769,652*

Total assets		1,751,935		1,642,424

*Equity*		*688,860*		*602,756*

Employee benefits and other non-current provisions		43,136		41,525
Deferred tax liabilities		51,120		36,434
Non-current financial debt		360,930		396,352

*Sub-total non-current liabilities*		455,186		474,311

Current provisions		112,387		92,997
Current financial debt		57,682		65,618

Advances, prepayments and non-financial liabilities (excluding tax)		428,272		396,281
Other current liabilities		9,548		10,460

*Sub-total current liabilities*		*607,889*		*565,356*

Total equity and liabilities		1,751,935		1,642,424

Acquisitions of property, plant and equipment and intangible assets (excluding goodwill) for the period		36,253		9,416
Workforce		5,635		5,359

INFORMATION BY GEOGRAPHIC REGION

Main contribution figures by geographic region of origin:

2015/2016 FY


	France		Europe (excl. France)		Americas		Asia/Pacific		Total Rail business
Sales		228,971		456,850		197,816		221,547		1,105,184

Closing balance of property, plant and equipment and intangible assets (excluding goodwill)		55,432		41,815		30,725		13,274		141,246

Acquisition of property, plant and equipment and intangible assets (excluding goodwill)		15,504		10,625		4,515		5,609		36,253

Amortisation and depreciation of property, plant and equipment and intangible assets (excluding goodwill)		8,156		6,802		2,603		2,141		19,702

2014/2015 FY


	France		Europe (excl. France)		Americas		Asia/Pacific		Total
Sales		241,779		463,920		158,654		184,070		1,048,423

Closing balance of property, plant and equipment and intangible assets (excluding goodwill)		48,118		38,487		31,353		10,959		128,917

Acquisition of property, plant and equipment and intangible assets (excluding goodwill)		10,666		7,516		1,826		3,559		23,568

Amortisation and depreciation of property, plant and equipment and intangible assets (excluding goodwill)		7,275		6,226		2,152		1,794		17,446

PRINCIPAL CUSTOMERS

During the 2015/16 financial year, the Group achieved 30.7% of its sales with the three largest European manufacturers (Alstom, Bombardier and Siemens) and 51.7 % with its top ten customers (including Hitachi, Indian Railways, Stadler, SNCF, Trenitalia, General Electric and CAF). Two customers each accounted for more than 10% of the Group consolidated revenue, constituting a combined 27.0% of Group Sales. The largest of these constituted 13.6% of consolidated revenue.

NOTE 25: SALES


	31 March 2016		31 March 2015
Sales of products and services associated with contracts > 1 year		1,053,043		1,009,231
Sales of products and services associated with contracts < 1 year		52,141		39,192

Total ⁽¹⁾		1,105,184		1,048,423

(1)	Of which sales related to the “Services” division: €494.5 million at 31 March 2016 and €436.0 million at 31 March 2015.

Sales by product are as follows:


	31 March 2016		31 March 2015
Energy & Confort		200 999		213 143
Access & Mobility		149 561		142 288
Brakes & Safety		260 086		256 972
Services		494 539		436 018

Total		1 105 185		1 048 423

NOTE 26: GROSS PROFIT AND COST OF SALES

Gross profit is defined as sales less cost of sales.

Gross profit for the financial year totalled €281.1 million, representing 25.3% of sales compared with 24.3% in 2014/2015 (restated figures).

Cost of sales can be analysed as follows:


	31 March 2016			31 March 2015
Direct labour		(102,876	)		(96,228	)
Raw materials and components		(405,454	)		(418,498	)
Structure costs		(81,462	)		(77,815	)
Procurement costs		(57,895	)		(51,110	)
Engineering costs		(53,338	)		(56,332	)
Other direct costs		(63,665	)		(55,534	)
Change in projects in progress		(3,661	)		1,187
Net change in project provisions (charge/reversal)		(51,966	)		(37,944	)
Net change in provisions for losses on completion		(3,746	)		(1,789	)

Total cost of sales		(824,062	)		(794,062	)

NOTE 27: OTHER INCOME AND EXPENSES FROM RECURRING OPERATIONS


	31 March 2016			31 March 2015
Royalties		1,850			1,982
Doubtful debts		—			—
Reversal of provisions for other liabilities		1,395			3,882
Insurance compensation		3			17
Other operating income		1,040			918

Total other income		4,288			6,798

Royalties		0			0
Doubtful debts		(952	)		(1,146	)
Charges to provisions for other liabilities		(444	)		(2,338	)
Inventory writedowns		(4,465	)		(6,555	)
Employee profit sharing		(683	)		(884	)
Costs related to the combination with Wabtec Corporation		(17,308	)		—
Other expenses		(1,592	)		(7,161	)

Total other expenses		(25,445	)		(18,084	)

Net total		(21,157	)		(11,286	)

The costs relating to the merger with Wabtec Corporation, which are considered as non-recurring, primarily consist of advisors’ (€6 million) and lawyers’ (€7.5 million) fees, as well as of the additional cost of the latest performance share plan relating to the impact of the transaction.

NOTE 28: RESTRUCTURING COSTS AND GAINS AND LOSSES ON DISPOSAL OF PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS

RESTRUCTURING COSTS

Restructuring costs for the period totalled € 6.8 million, compared with € 1.6 million in the previous financial year. Over the period, these restructuring costs primarily related to FT Witten for € 5.0 million and Shanghai Faiveley Railway Technology for € 0.9 million.

DISPOSAL OF NON-CURRENT ASSETS


	31 March 2016			31 March 2015
Sales price of assets sold		67			148
Net book value of assets sold		(105	)		(214	)

Total		(38	)		(66	)

NOTE 29: NET FINANCIAL INCOME/(EXPENSE)


	31 March 2016			31 March 2015
Gross cost of financial debt		(10,679	)		(12,226	)
Income from cash and cash equivalents		789			1,255

Net cost of financial debt		(9,890	)		(10,971	)

Financial instrument income		20,089			1,101
Income linked to exchange differences		19,115			31,776
Proceeds from sale of marketable securities		12			21
Reversal of financial provisions		—			2
Dividends received		26			24
Other financial income		333			173

Other financial income		39,575			33,097

Financial instrument charges		(4,902	)		(14,319	)
Charges linked to exchange differences		(29,716	)		(19,013	)
Interest charges on retirement commitments		(628	)		(1,262	)
Net book value of financial assets sold					—
Charges on bank guarantees		(915	)		(1,055	)
Reversal of discounting the value of put options held by minority shareholders		—			(18	)
Other financial expenses		(686	)		(327	)

Other financial expenses		(36,847	)		(35,994	)

NET FINANCIAL EXPENSE		(7,162	)		(13,868	)

The net financial expense for the year was primarily due to:

•

The net cost of financial debt for the year, i.e. €9.9 million compared with €11 million in the previous year. This decrease was primarily due to the positive effect of the decrease in floating interest-rate indices, and to better interest-rate hedges with lower costs.

•

A foreign exchange gain of €4.5 million, which is partly explained by the unrealised forward points of the financial instruments used to hedge projects.

•

A positive interest amount on pension commitments, resulting from the increase in the discount rate.

NOTE 30: INCOME TAX

ANALYSIS BY TYPE


	31 March 2016			31 March 2015
Current tax – continuing operations		(17,562	)		(23,109	)
Deferred tax – continuing operations		(3,627	)		(5,426	)

Total income tax – continuing operations		(21,189	)		(28,535	)

Tax on discontinued operations		—			—

TOTAL TAX		(21,189	)		(28,535	)

The income tax charge was €21.2 million, compared with €28.5 million for the year to 31 March 2015. The effective tax rate was 29.6%, compared with 38.1% for the year to 31 March 2015. This change was mainly due to transaction costs related to the combination with Wabtec and a favourable country mix.

EFFECTIVE TAX RATE


	31 March 2016			31 March 2015
Profit before tax from continuing operations		77,191			81,412

- Of which share of profit of joint ventures		5,561			6,551

Profit before tax and share of profit of joint ventures from continuing operations		71,630			74,859

Statutory tax rate of the parent company		38.0	%		38.0	%

Theoretical tax credit/(charge)		(27,219	)		(28,447	)

Impact of:
Permanent differences		(1,150	)		(1,703	)
Difference in tax rates of other countries		7,535			3,705
Impact of other taxes (CVAE in France, IRAP in Italy and withholding taxes)		(3,667	)		(3,034	)
Deferred tax adjustments related to changes in tax rates		(33	)		(1,620	)
Use of previous tax losses not capitalised		—			—
Change in valuation allowance of deferred tax assets on tax losses carried forward		(0	)		1,591
Change in deferred tax assets not recognised		—			1,788
Less tax credits		—
Current tax adjustments in respect of earlier periods		1,219			(1,070	)

Other		2,127			252

Tax charge		(21,189	)		(28,536	)

Effective tax rate		29.6	%		38.1	%

NOTE 31: PROFIT OR LOSS OF OPERATIONS HELD FOR DISPOSAL AND DISCONTINUED OPERATIONS

Nil

NOTE 32: PAYROLL COSTS AND WORKFORCE


	31 March 2016		31 March 2015
Salaries		237,458		214,093
Social security charges		60,624		55,981
Retirement and other post-employment benefits		16,311		13,803
Charges associated with share-based payments		7,632		2172

TOTAL PAYROLL COSTS		322,025		286,049

TOTAL WORKFORCE		5,635		5,431

NOTE 33: EARNINGS PER SHARE

The table below shows the reconciliation between earnings per share and diluted earnings per share:


	31 March 2016			31 March 2015
Net profit - Group share used in the calculation of basic and diluted earnings per share (€ K)		51,290			55,645

Average number of shares (a)		14,614,152			14,614,152
Average number of treasury shares (b)		(205,692	)		(282,158	)
Average number of outstanding shares (a - b = c)		14,408,460			14,331,994
Average number of dilutive instruments (d)		264,899			85,928
Diluted average number of shares (c + d)		14,673,359			14,417,922

Basic earnings per share		3.56			3.88
Diluted earnings per share		3.50			3.86

NOTE 34: POST-BALANCE SHEET EVENTS

•

The process for applying to the European Commission for authorisation is ongoing. Following the formal notification submitted on 4 April 2016, on 12 May 2016 the European Commission opened an in-depth investigation (Phase 2) regarding certain segments which could be affected by the combination.

•

In the United States, the Department of Justice is continuing the additional information (“second request”) proceedings in relation to the planned acquisition.

•

In application of the terms and conditions of the agreement of 23 December 2014 between Faiveley Transport and the minority shareholders in Faiveley Transport Schweiz AG, the legal and financial transfer of 10% of the share capital held by minority shareholders to Faiveley Transport took place in April 2016. As a result of this transaction, Faiveley Transport Group controls 100% of Faiveley Transport Schweiz AG.

NOTE 35: TRANSACTIONS WITH RELATED PARTIES

The aim of this note is to present the material transactions entered into between the Group and its related parties as defined by IAS 24.

The parties related to the Faiveley Transport Group are the consolidated companies (including the companies that are proportionally consolidated and those consolidated using the equity method), the entities and individuals that control Faiveley Transport and the Group’s senior management.

Transactions entered into between the Faiveley Transport Group and its related parties are at arm’s length terms.

TRANSACTIONS WITH RELATED COMPANIES

A list of consolidated companies is provided in Note 38.

Transactions carried out and balances outstanding with fully consolidated companies at the balance sheet date are fully eliminated on consolidation.

Only the following are included in the notes below:

•

data relating to such intra-Group transactions, when they involve joint ventures (equity accounted) concerning the portion not eliminated on consolidation;

•

material transactions with other Group companies.

Transactions with consolidated companies

•

Transactions with joint ventures not eliminated on consolidation:

Joint ventures are equity consolidated:

•

Qingdao Faiveley SRI Rail Brake Co. Ltd

•

Datong Faiveley Railway Vehicle Equipment Co., Ltd

•

Shijiazhuang Jiaxiang Precision Machinery Co. Ltd

•

Faiveley Rail Engineering Singapore Pte Ltd

The consolidated financial statements include transactions carried out by the Group with its joint ventures as part of its normal business activities.

These transactions are normally carried out at arm’s length.


(€ thousands)	31 March 2016			31 March 2015
Sales		18,142			32,610
Operating receivables		8,297			13,925
Operating liabilities		(1,479	)		(2,206	)

With the companies that control Faiveley Transport

•

With FAMILLE FAIVELEY PARTICIPATIONS

•

Contract of assistance:

The strategic support and service agreement with Famille Faiveley Participations specifies all the services provided by Famille Faiveley Participations, particularly in terms of strategic consultancy and the Faiveley Transport Group development policy.

Under the terms of the contract of assistance and the rebilling of rent and services provided, Faiveley Transport recognised the following amounts as expenses and income for the financial year:


(€)	Expenses for Faiveley Transport		Income for Faiveley Transport
Contract of assistance, provision of services		386,342

Rebilling of rent and services		—		3,170

•

Fraction of financial investments, receivables, debts, expenses and income pertaining to these related companies:


(€ thousands)	31 March 2016			31 March 2015
Trade receivables		1			1
Borrowings and other financial liabilities
Trade payables		(116	)		(114	)
Rebilling		3			3
Provision of services		(386	)		(381	)
Financial income
Financial expenses

SENIOR MANAGEMENT AND NON-EXECUTIVE OFFICERS’ REMUNERATION

The Group considers that, within the meaning of IAS 24, the Group’s senior management comprise mainly the members of the Management Board, the Supervisory Board and the Executive Committee.

The Remuneration Committee determines the remuneration to be allocated to members of the Management Board; it is responsible for assessing and determining the variable portion of the remuneration of the members of the Management Board, which is based on performance targets and the financial statements audited by the Statutory Auditors.

The following table provides details, in aggregate and for each category, of the components of remuneration of senior management:


(€)	2015/2016		2014/2015
Short-term benefits ⁽¹⁾		6 566 665		5 135 691
Termination benefits ⁽⁴⁾		—		688 000
Post-employment benefits ⁽²⁾		42 728		(26 128	)
Share-based remuneration ⁽³⁾		—		—
Other long-term benefits		188		(655	)
Directors’ fees ⁽⁵⁾		211 012		226 059

Total		6 820 593		6 022 967

(1)	This category comprises fixed and variable remuneration (including employers’ costs), profit sharing and incentive payments, supplementary contributions and benefits in kind paid during the year.

(2)	Movements in retirement provisions.

(3)	Charge recognised in the income statement.

(4)	In the year to 31 March 2015, termination benefits concerned Thierry Barel.

(5)	Amount paid after deduction of withholding taxes.

AGREEMENTS ENTERED INTO WITH SENIOR MANAGEMENT

•

With Stéphane RAMBAUD-MEASSON

Pursuant to the provisions of Articles L.225-90-1 and R.225-60-1 of the Commercial Code, the Supervisory Board at the meeting of 27 May 2014, on the proposal of the Remuneration Committee, set the terms and conditions of the termination benefits of Stéphane Rambaud-Measson, Chairman of the Management Board and Chief Executive Officer of Faiveley Transport Group since 7 April 2014.

Stéphane Rambaud-Measson will be entitled to special compensation not exceeding eighteen (18) months of fixed and variable remuneration, in the event of his dismissal, except in the event of serious or gross misconduct. The calculation being based on the average monthly amount of gross fixed and variable remuneration received by Stéphane Rambaud-Measson during the twelve (12) months prior to departure. This base will be affected by a coefficient equal to the average share of variable remuneration received during the 3 years prior to departure.

The Supervisory Board at the meeting of 27 May 2014 authorised, on the proposal of the Remuneration Committee, an adjustment related to the termination of Stéphane Rambaud-Measson’s employment contract, consisting of the taking out unemployment insurance (insured risk of € 15,000 per month for 12 months).

AGREEMENTS ENTERED INTO WITH COMPANIES THAT HAVE CONTROL OVER FAIVELEY TRANSPORT, AND CERTAIN CORPORATE OFFICERS

•

With Famille Faiveley Participations, Financière Faiveley, Erwan Faiveley, and François Faiveley:

At its meeting of 27 July 2015, the Supervisory Board reviewed the planned bid from Wabtec Corporation, in which Wabtec Corporation irrevocably undertakes to:

(i) purchase the shares that make up the Controlling Block (the shares in the Company held by Financière Faiveley, Famille Faiveley Participations, Erwan Faiveley and François Faiveley), and

(ii) launch a mandatory public tender offer for the shares in the Company that it does not hold following the sale of the Controlling Block, in accordance with the provisions of Article L. 433-3 of the French Monetary and Financial Code, and of Articles 234-1 et seq. of the French Financial Markets Authority’s General Regulations.

The Board reviewed the documents enclosed with the bid letter, which had been previously discussed, including a draft Tender Offer Agreement (the “TOA”). In exchange for the bid letter from Wabtec Corporation received by the Company and the shareholders of the Controlling Block, the latter must sign an exclusivity agreement with Wabtec Corporation.

After assessing the terms of the exclusivity undertaking, and noting that the TOA determines the main terms and conditions of the bid, and sets out certain principles of conduct to be followed by the parties as part of the bid, the Board decided to authorise the signing of the exclusivity undertaking by the Chairman of the Executive Board, under the terms presented to it, together with any other documents relating to the transactions described in that undertaking, in accordance with the provisions of Articles L. 225-86 et seq. of the French Commercial Code regarding regulated agreements.

The Supervisory Board also approved the terms of the draft TOA, subject to the employee representative body information and consultation process, and authorised the Company to sign it, where applicable, at the end of the employee representative body information and consultation process.

The Company signed the TOA on 6 October 2015, following the employee representative body information and consultation process. The exclusivity undertaking expired on the same date.

NOTE 36: DIVIDENDS

Approval was granted at the General Meeting of 18 September 2015 for the payment of a dividend (including treasury shares) in respect of the 2014/2015 financial year totalling € 13,152,736.80:

•

€12,976,581.60 in respect of the € 0.90 dividend per share paid on 5 October 2015 to 14,418,424 shares for the 2014/2015 financial year.

•

€176,155.20 in unpaid dividends, corresponding to the 195,728 treasury shares held by Faiveley Transport at the time of the ex-dividend date, i.e. 2 October 2015.

Number of
shares

Treasury
shares

Number of
shares to
which
dividends have
been paid

Dividends
approved

Ordinary shares

6,978,642

195,728

6,782,914

6,104,623

Shares with double voting rights

7,635,510

6,871,959

14,614,152

195,728

14,418,424

12,976,582

⁽¹⁾

(1)	Including € 5,683,871 to Financière Faiveley and € 1,043,359 to François Faiveley Participation (FFP).

This dividend was paid on 5 October 2015.

Given the current proposed combination between Faiveley Transport and Wabtec Corporation, Faiveley Transport has undertaken not to pay any dividend other than that decided by the Shareholders’ General Meeting of 18 September 2015.

NOTE 37: OFF-BALANCE SHEET COMMITMENTS

LEASES

•

Operating leases

The operating leases entered into by the Faiveley Transport Group relate mainly to various buildings and furnishings.

The income and expenses recognised in respect of operating leases over the last two financial years break down as follows:


	2015/2016			2014/2015			2013/2014
Operating lease expenses		(13,916	)		(12,018	)		(11,148	)
Sub-letting income		588			525			511

Total		(13,328	)		(11,493	)		(10,637	)

The future minimum payments to be made in respect of operating leases that are non-cancellable and had not expired as at 31 March 2016 are as follows:


	Less than 1 year		1 to 5 years		More than 5 years
Total future lease payments		11,423		35,457		21,757

OTHER COMMITMENTS GIVEN


	31 March 2016		31 March 2015
Deposits, securities and bank guarantees given to customers		251,524		234,024
- of which given by joint ventures		—		—
Guarantees and securities given by the parent company to customers and banks *		518,726		496,694
- of which on behalf of joint ventures		10,604		14,036
Borrowings guaranteed by pledges:		—		—
- Mortgages of buildings		—		—

*	amount restated for parent company securities included in bank deposits, securities and guarantees given.

The off-balance sheet commitments above entitled “Deposits, securities and bank guarantees” is related to guarantees or securities provided to the banks essentially in favour of customers with whom commercial contracts have been signed. These guarantees are generally issued for defined periods and for defined amounts. These are principally guarantees for the repayment of deposits and guarantees for the satisfactory completion of contracts. Bank counter-guarantees may be issued for the benefit of banks supplying credit lines, and guarantees may also be issued for the benefit of certain subsidiaries of the Group.

The off-balance sheet commitments above entitled “Guarantees and securities given by the parent company” are guarantees agreed by the parent company Faiveley Transport in favour of customers who have signed commercial contracts with subsidiaries of the Group. As for bank guarantees, these are issued for defined periods and for defined amounts and essentially relate to guarantees for the repayment of deposits and guarantees for the satisfactory completion of contracts.

COMMITMENTS RECEIVED

Other guarantees from suppliers: € 2,480 K

NOTE 38: CONSOLIDATION SCOPE AND METHOD

Faiveley Transport is the Group’s holding company.

The following companies, over which Faiveley Transport exercises direct or indirect control, are fully consolidated.

LIST OF CONSOLIDATED COMPANIES AND CONSOLIDATION METHOD

ENTITY

COUNTRY

% control

% interest

Parent company:

FAIVELEY TRANSPORT

Full consolidation:

FAIVELEY TRANSPORT LEIPZIG GmbH & Co. KG ⁽¹⁾

Germany

100.00

FAIVELEY TRANSPORT WITTEN GmbH ⁽¹⁾

Germany

100.00

FAIVELEY TRANSPORT VERWALTUNGS GmbH ⁽¹⁾

Germany

100.00

FAIVELEY TRANSPORT HOLDING GmbH & Co. KG⁽¹⁾

Germany

100.00


FAIVELEY TRANSPORT NOWE GmbH ⁽¹⁾	Germany	100.00	100.00
FAIVELEY TRANSPORT AUSTRALIA Ltd.	Australia	100.00	100.00
FAIVELEY TRANSPORT BELGIUM NV	Belgium	100.00	100.00
FAIVELEY TRANSPORT DO BRASIL Ltda.	Brazil	100.00	100.00
FAIVELEY TRANSPORT CANADA Ltd.	Canada	100.00	100.00
FAIVELEY TRANSPORT CHILE Ltda.	Chile	100.00	99.99
FAIVELEY TRANSPORT SYSTEMS TECHNOLOGY (Beijing) Co. Ltd.	China	100.00	100.00
FAIVELEY TRANSPORT FAR EAST Ltd.	China	100.00	100.00
SHANGHAI FAIVELEY RAILWAY TECHNOLOGY Co. Ltd.	China	51.00	51.00
FAIVELEY TRANSPORT METRO TECHNOLOGY SHANGHAI Ltd.	China	100.00	100.00
FAIVELEY TRANSPORT RAILWAY TRADING (Shanghai) Co. Ltd.	China	100.00	100.00
FAIVELEY TRANSPORT ASIA PACIFIC Co. Ltd.	China	100.00	100.00
FAIVELEY TRANSPORT KOREA Ltd.	Korea	100.00	100.00
FAIVELEY TRANSPORT IBERICA S.A.	Spain	100.00	100.00
FAIVELEY TRANSPORT USA Inc.	United States	100.00	100.00
FAIVELEY TRANSPORT NORTH AMERICA Inc.	United States	100.00	100.00
ELLCON DRIVE LLC.	United States	100.00	100.00
AMSTED RAIL - FAIVELEY LLC	United States	67.50	67.50
GRAHAM-WHITE MANUFACTURING Co.	United States	100.00	100.00
OMNI GROUP CORPORATION	United States	100.00	100.00
ADVANCED GLOBAL ENGINEERING LLC.	United States	100.00	55.00
ATR INVESTMENTS LLC.	United States	100.00	100.00
FAIVELEY TRANSPORT AMIENS	France	100.00	100.00
FAIVELEY TRANSPORT NSF	France	100.00	100.00
FAIVELEY TRANSPORT TOURS	France	100.00	100.00
FAIVELEY TRANSPORT GENNEVILLIERS	France	100.00	100.00
FAIVELEY TRANSPORT BIRKENHEAD Ltd.	United Kingdom	100.00	100.00
FAIVELEY TRANSPORT TAMWORTH Ltd.	United Kingdom	100.00	100.00
SAB WABCO Ltd.	United Kingdom	100.00	100.00
SAB WABCO DAVID & METCALF Ltd.	United Kingdom	100.00	100.00
SAB WABCO DAVID & METCALF PRODUCTS Ltd.	United Kingdom	100.00	100.00
SAB WABCO INVESTMENTS Ltd.	United Kingdom	100.00	100.00
SAB WABCO PRODUCTS Ltd.	United Kingdom	100.00	100.00
SAB WABCO UK Ltd.	United Kingdom	100.00	100.00
FAIVELEY TRANSPORT RAIL TECHNOLOGIES INDIA Ltd.	India	100.00	100.00
FAIVELEY TRANSPORT F.M.P.R.	Iran	51.00	51.00
FAIVELEY TRANSPORT ITALIA Spa	Italy	100.00	98.70
FAIVELEY TRANSPORT POLSKA z.o.o.	Poland	100.00	100.00
FAIVELEY TRANSPORT PLZEN s.r.o.	Czech Republic	100.00	100.00
FAIVELEY TRANSPORT TREMOSNICE s.r.o.	Czech Republic	100.00	100.00
FAIVELEY TRANSPORT CZECH a.s. ⁽²⁾	Czech Republic	100.00	100.00
o.o.o FAIVELEY TRANSPORT	Russia	100.00	98.00
FAIVELEY TRANSPORT METRO TECHNOLOGY SINGAPORE Ltd.	Singapore	100.00	100.00
FAIVELEY TRANSPORT MALMÖ AB	Sweden	100.00	100.00
FAIVELEY TRANSPORT NORDIC AB	Sweden	100.00	100.00
FAIVELEY TRANSPORT SCHWEIZ AG	Switzerland	90.00	90.00
SCHWAB VERKEHRSTECHNIK AG	Switzerland	100.00	100.00
FAIVELEY TRANSPORT METRO TECHNOLOGY THAILAND Ltd.	Thailand	100.00	100.00
FAIVELEY TRANSPORT METRO TECHNOLOGY TAIWAN Ltd.	Taiwan	100.00	100.00

Equity-accounted joint ventures

QINGDAO FAIVELEY SRI RAIL BRAKE Co. Ltd.	China	50.00	50.00
DATONG FAIVELEY RAILWAY VEHICLE EQUIPMENT Co., Ltd	China	50.00	50.00
SHIJIAZHUANG JIAXIANG PRECISION MACHINERY Co. Ltd.	China	50.00	50.00
FAIVELEY RAIL ENGINEERING SINGAPORE PTE LTD,	Singapore	50.00	50.00

Other equity-accounted entities:

Nil	—	—	—
Partnerships qualifying as joint arrangements:

Nil	—	—	—

(1)

Faiveley Transport Leipzig GmbH & Co. KG, Faiveley Transport Witten GmbH, Faiveley Transport Verwaltungs GmbH, Faiveley Transport Holding GmbH & Co. KG and Nowe GmbH, as subsidiaries of the Faiveley Transport Group responsible for the preparation of the consolidated financial statements, made use of the provisions of paragraph 264b and 264.3 of the German Commercial Code as regards the closing of accounts for the year ended 31 March 2016 and the related annual report, given that the financial statements and annual report will not be published.

(2)	Change of Faiveley Transport Lekov company name

NOTE 39: STATUTORY AUDITORS’ FEES

Fees payable to the Statutory Auditors and members of their network as part of assignments relating to the financial statements at 31 March 2016 and 31 March 2015 were as follows:


	ECA				PWC
	2015/2016		2014/2015		2015/2016		2014/2015
Audit:
Statutory Audit, certification, review of individual and consolidated financial statements:

Issuer		153		154		252		251
Subsidiaries		107		106		722		634
Other assignments directly related to the audit assignment		0		—		4		0

*Sub-total audit fees*		*260*		*260*		*978*		*885*

Other services
Legal, tax, corporate		—		—		4		—
Other		—		—		9		6
Sub-total other services		—		—		13		6

TOTAL		260		260		991		891

NOTE 40: FINANCIAL COMMUNICATION

These consolidated financial statements are available in English.

Faiveley Transport

Immeuble Le Delage – Hall Parc – Bât 6A

3, rue du 19 Mars 1962

92230 Gennevilliers – France

Tel: +33 (0)1 48 13 65 00

Fax: +33 (0)1 48 13 65 54

www.faiveleytransport.com

CONSOLIDATED

FINANCIAL

STATEMENTS

2014/15

LOGO

Contents



Contents		2

1.	Consolidated financial statements at 31 March 2015	3

1.1.	Consolidated financial statements	3
	Consolidated income statement	3
	Consolidated statement of comprehensive income	4
	Consolidated statement of financial position	5
	Consolidated statement of changes in equity	7
	Consolidated cash flow statement	8

1.2.	Notes to the consolidated financial statements	9
	Note 1: General information	9
	Note 2: Highlights	9
	Note 3: Accounting principles and methods	9
	Note 4: Changes in consolidation scope	23
	Note 5: Goodwill	24
	Note 6: Intangible assets	27
	Note 7: Property, plant and equipment	28
	Note 8: Investments in equity-accounted entities	29
	Note 9: Other non-current financial assets	30
	Note 10: Deferred tax	31
	Note 11: Inventories	31
	Note 12: Work-in-progress on projects	32
	Note 13: Current receivables	32
	Note 14: Current financial assets	33
	Note 15: Cash and cash equivalents	33
	Note 16: Group equity	33
	Note 17: Minority interests	36
	Note 18: Analysis of provisions	37
	Note 19: Borrowings and financial debt	40
	Note 20: Financial risk management	43
	Note 21: Current liabilities	53
	Note 22: Factoring	53
	Note 23: Segment reporting	54
	Note 24: Sales	55
	Note 25: Gross profit and Cost of sales	56
	Note 26: Other income and expenses from recurring operations	56
	Note 27: Restructuring costs and gains and losses on disposal of property, plant and equipment and intangible assets	57
	Note 28: Net financial income/(expense)	57
	Note 29: Income tax	58
	Note 30: Profit or loss of operations held for disposal and discontinued operations	58
	Note 31: Payroll costs and workforce	59
	Note 32: Earnings per share	59
	Note 33: Post-balance sheet events	59
	Note 34: Transactions with related parties	59
	Note 35: Dividends	62
	Note 36: Off-balance sheet commitments	63
	Note 37: Consolidation scope and method	64
	Note 38: Statutory Auditors’ fees	65
	Note 39: Financial communication	65

1. Consolidated financial statements at 31 March 2015

1.1.

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENT


(€ thousands)	Notes		31 March 2015			31 March 2014
NET SALES		NOTE 24		1 048 423			957 165

Cost of sales		NOTE 25		(794 062	)		(730 197	)

GROSS PROFIT				254 361			226 968

Administrative costs				(88 997	)		(78 435	)
Sales and marketing costs				(46 667	)		(43 436	)
Research and development costs				(17 019	)		(13 586	)
Other operating income		NOTE 26		6 797			4 620
Other operating expenses		NOTE 26		(18 084	)		(11 513	)
Restructuring costs		NOTE 27		(1 597	)		(1 267	)
Gain/(loss) on disposal of property, plant and equipment and intangible		NOTE 27		(66	)		(53	)

OPERATING PROFIT				88 728			83 298

Share of profit of joint ventures		NOTE 8		6 551			4 368

OPERATING PROFIT AFTER SHARE OF PROFIT OF EQUITY - ACCOUNTED ENTITIES				95 279			87 666

Amortisation and depreciation charges included in operating profit				17 446			15 985

*Operating profit before amortisation and depreciation charges*				*112 725*			*103 651*

Net cost of financial debt				(10 970	)		(9 344	)
Other financial income				33 097			14 364
Other financial expenses				(35 994	)		(16 113	)

NET FINANCIAL EXPENSE		NOTE 28		(13 867	)		(11 093	)

PROFIT BEFORE TAX				81 412			76 573

Income tax		NOTE 29		(28 535	)		(26 432	)

NET PROFIT FROM CONTINUING OPERATIONS				52 877			50 141

Profit of discontinued operations		NOTE 30		0			0

CONSOLIDATED NET PROFIT				52 877			50 141

*attributable to:*
Minority interests				(2 769	)		31

Net profit - Group share				55 645			50 110

*Earnings per share, in €:*		NOTE 32
Basic earnings per share				3.88			3.50
Diluted earnings per share				3.86			3.44
*Earnings per share, in € – Continuing operations:*
Basic earnings per share				3.88			3.50
Diluted earnings per share				3.86			3.44

The attached notes 1 to 39 form an integral part of the consolidated financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME


(€ thousands)	Notes		31 March 2015			31 March 2014
Net profit for the period				52 877			50 141

Translation difference		NOTE 16		42 334			(15 575	)
Financial assets available for sale
Gains (losses) on financial hedge instruments		NOTE 20		1 057			1 827
Other items that can be reclassified				126			(226	)
Taxes on items that can be reclassified				(364	)		(593	)

Items that can be reclassified to profit or loss				43 153			(14 567	)

of which Share of joint ventures in items that can be reclassified				4 401			(878	)
Actuarial gains and losses on post-employment benefits		NOTE 18		(10 313	)		(369	)
Taxes on items that cannot be reclassified				2037			23

Items that cannot be reclassified to profit or loss				(8 276	)		(346	)

of which Share of joint ventures in items that cannot be reclassified				—			—

Items of other comprehensive income, after tax				34 877			(14 913	)

of which Share of joint ventures				4 401			(878	)

Total comprehensive income				87 754			35 228

Attributable to:
- Parent Company shareholders				83 239			37 490
- minority interests				4 515			(2 261	)

The attached notes 1 to 39 form an integral part of the consolidated financial statements.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION


ASSETS (€ thousands)	Notes		31 March 2015 Net		31 March 2014 Net
Goodwill		NOTE 5		697 112		663 838

Intangible assets		NOTE 6		58 314		50 501

Property, plant and equipment		NOTE 7
Land				5 670		5 766
Buildings				19 175		22 523
Plant and machinery				32 063		30 086
Other property, plant and equipment				13 695		9 632

Equity interests in equity-accounted entities		NOTE 8
Shareholdings in equity-accounted joint ventures				21 817		12 337
Shareholdings in other equity-accounted entities

Other non-current financial assets		NOTE 9
Shareholdings in unconsolidated subsidiaries				255		254
Other long-term financial investments				3 049		2 449

Deferred tax assets		NOTE 10		66 429		51 738

TOTAL NON-CURRENT ASSETS (I)				917 579		849 124

Inventories		NOTE 11		167 665		146 361
Work-in-progress on projects		NOTE 12		121 703		112 514
Advances and prepayments paid on orders				2 625		2 308
Trade receivables		NOTE 13		224 130		194 574
Other current assets		NOTE 13		24 718		32 809
Taxation receivable				17 796		13 191
Current financial assets		NOTE 14		42 849		7 907
Short-term investments		NOTE 15		14 824		69 793
Cash		NOTE 15		222 021		169 419
Assets held for sale		NOTE 7		7 123		—

TOTAL CURRENT ASSETS (II)				845 454		748 876

TOTAL ASSETS (I + II)				1 763 033		1 598 000

The attached notes 1 to 39 form an integral part of the consolidated financial statements.


EQUITY AND LIABILITIES (€ thousands)	Notes		31 March 2015			31 March 2014
SHAREHOLDERS’ EQUITY		NOTE 16

Share capital				14 614			14 614
Share premium				94 297			90 249
Translation adjustment				24 549			(10 501	)
Consolidated reserves				436 629			405 522
Net profit for the period				55 645			50 110

*TOTAL EQUITY – GROUP SHARE*				*625 734*			*549 994*

MINORITY INTERESTS		NOTE 17

Share of reserves				34 781			27 895
Share of net profit				(3 063	)		(242	)

*TOTAL MINORITY INTERESTS*				*31 716*			*27 653*

TOTAL CONSOLIDATED EQUITY (I)				657 450			577 647

Non-current provisions		NOTE 18		48 084			38 235
Deferred tax liabilities		NOTE 10		50 854			34 030
Non-current borrowings and financial debt		NOTE 19		396 510			407 983

TOTAL NON-CURRENT LIABILITIES (II)				495 448			480 248

Current provisions		NOTE 18		101 810			94 373
Current borrowings and financial debt		NOTE 19		54 630			50 899
Advances and prepayments received on orders				140 243			122 586
Current liabilities		NOTE 21		303 935			258 551
Tax payable				9 515			13 696

TOTAL CURRENT LIABILITIES (III)				610 134			540 105

TOTAL EQUITY AND LIABILITIES (I + II + III)				1 763 033			1 598 000

The attached notes 1 to 39 form an integral part of the consolidated financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(€ thousands)

Share
capital

Share
premium

Reserves

Translation
adjustment

Profit for
the period

Total
Group
share

Minority
interests

TOTAL

At 31 March 2013

14 232

88 633

356 979

2 782

59 277

521 903

32 789

554 692

Allocation of 2012/2013 net profit

59 277

(59 277

)

Dividends paid

(13 542

)

(13 542

)

(2 880

)

(16 422

)

Issue of shares (stock options)

853

882

Treasury shares ⁽¹⁾

339

(125

)

(281

)

(67

)

(67

)

Shares delivered to Group employees

889

904

Stock option plans reserved for employees (value of services provided by staff)

2 767

2 767

Other movements

(198

)

(198

)

(185

)

Changes in consolidation scope

(142

)

(142

)

(150

)

Net profit for the period

50 110

50 110

50 141

Items of other comprehensive income

662

(13 283

)

(12 621

)

(2 292

)

(14 913

)

Total income and expenses recognised in Comprehensive Income

662

(13 283

)

50 110

37 489

(2 261

)

35 228

At 31 March 2014 ⁽¹⁾

14 614

90 250

405 522

(10 501

)

50 110

549 995

27 653

577 648

Allocation of 2013/2014 net profit

50 110

(50 110

)

Dividends paid

(11 454

)

(11 454

)

(256

)

(11 710

)

Treasury shares

4 048

(3 231

)

817

Stock option plans reserved for employees (value of services provided by staff)

2 162

2 162

Other movements

1 220

1 220

Other changes in consolidation scope

(243

)

(243

)

(196

)

(439

)

Net profit for the period

55 645

55 645

(2 770

)

52 875

Items of other comprehensive income

(7 457

)

35 049

27 592

7 285

34 877

Total income and expenses recognised in Comprehensive Income

(7 457

)

35 049

55 645

83 237

4 515

87 752

At 31 March 2015

14 614

94 298

436 629

24 549

55 645

625 734

31 716

657 450

(1)

Reclassification of treasury shares at 31 March 2014 from “consolidated reserves” to “share capital” for EUR 281 thousands.

The attached notes 1 to 39 form an integral part of the consolidated financial statements.

CONSOLIDATED CASH FLOW STATEMENT


CASH FLOW STATEMENT (€ thousands)	Notes		31 March 2015			31 March 2014
Net profit - Group share				55 645			50 110
Net profit - Minority interests				(2 769	)		31
Adjustments for non-cash items:
- Depreciation and amortisation charges				17 446			15 985
- Cost of performance-based shares				2 162			2 767
- Gains and losses on derivative instruments and revaluation of monetary assets and liabilities				3 392			(1 167	)
- Movement in provisions for current assets and liabilities and charges				6 125			10 404
- Net loss/(gain) on asset disposals				45			53
- Grant income				(248	)		(439	)
- Share of profit of equity-accounted entities		NOTE 8		(6 551	)		(4 368	)
- Dividends received from equity-accounted joint ventures				3 214			1 255

Net cost of financial debt				10 970			9 343
Income tax charge (including deferred tax)				28 535			26 432

Change in current assets and liabilities				*4 414*			*(38 052*	)
Decrease (+) increase (-) in inventories				(13 071	)		(16 610	)
Decrease (+) increase (-) in trade and other receivables				(9 379	)		(27 338	)
Increase (+) decrease (-) in trade and other payables				29 094			9 067
Increase (+) decrease (-) in income tax				(2 230	)		(3 171	)

Income tax paid				(25 799	)		(30 800	)
Net financial interest paid				(9 830	)		(8 894	)

Cash flow from operating activities				86 751			32 660

Purchase of intangible assets				(9 446	)		(7 395	)
Purchase of property, plant and equipment				(14 298	)		(11 145	)
Proceeds from capital grants				88			189
Proceeds from disposal of PPE and intangible assets				169			432
Purchase of non-current financial assets				(237	)		(574	)
Proceeds from sale of non-current financial assets				544			3 044

Cash and cash equivalents of acquired subsidiaries				(1 880	)		(27 410	)
							—

Cash flow from investment activities				(25 060	)		(42 859	)

Buyback of treasury shares				817			1 717
Dividends paid to parent company shareholders				(11 248	)		(13 542	)
Dividends paid to minority interests				(256	)		(2 880	)
Proceeds from new borrowings				16			135 383
Repayment of borrowings				(36 710	)		(41 151	)

Cash flow from financing activities				(47 381	)		79 527

Net foreign exchange difference				(17 574	)		3 674

Net increase/(decrease) in total cash and cash equivalents				(3 265	)		73 001

Cash and cash equivalents at beginning of the year				237 935			164 931

Cash and cash equivalents at end of the year		NOTE 10		234 675			237 934

1.2. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: GENERAL INFORMATION

Faiveley Transport is a French public limited company (société anonyme) with a Management Board and a Supervisory Board. At 31 March 2015, its registered office was located at:

Immeuble le Delage, Hall Parc, Bâtiment 6A

3 rue du 19 mars 1962

92230 - GENNEVILLIERS

The consolidated financial statements are prepared by the Management Board and submitted for approval to the shareholders at the General Meeting.

The 2013/14 consolidated financial statements have been submitted for approval at the Shareholders’ General Meeting of 12 September 2014.

The financial statements for 2014/2015 were approved by the Management Board at its meeting on 27 May 2015. They were presented to and reviewed by the Supervisory Board at its meeting of 27 May 2015.

The financial statements have been prepared on the basis that the Faiveley Transport Group operates as a going concern.

The consolidated financial statements as approved by the Management Board on its meeting of 27 May 2015 have been prepared in accordance with IFRS (International Financial Reporting Standards) as adopted by the European Union. Minor presentation adjustments have been made to these financial statements in order to present consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the International Accounting Standards Board and to allow a US filing in the context of the acquisition of Faiveley Transport by Wabtec Corporation.

The Group’s functional and presentation currency is the Euro. Figures are expressed in thousands of Euros unless indicated otherwise.

NOTE 2: HIGHLIGHTS

SIGNIFICANT EVENTS

On 7 April 2014, the Supervisory Board of Faiveley Transport appointed Stéphane Rambaud-Measson Chairman of the Management Board and CEO of Faiveley Transport. He had joined the Group on 17 March 2014 as Group Executive Vice President.

On 28 January 2015, Faiveley Transport refinanced its syndicated loan and part of its bilateral revolving facilities, replacing them with a new syndicated loan. This new facility comprises a five-year, amortisable loan of € 225 million and a multi-currency revolving facility of € 125 million. This refinancing enables the Group to increase its financial flexibility, improve its borrowing terms and extend the average maturity of financing while expanding its banking pool.

NOTE 3: ACCOUNTING PRINCIPLES AND METHODS

BASIS OF PREPARATION

New standards of mandatory application

•

Amendments to IAS 36 – Recoverable amount disclosures for non-financial assets

•

Amendments to IAS 39 – Novation of derivatives and continuation of hedge accounting

•

Amendment to IAS 32 – Offsetting financial assets and financial liabilities

Levies (IFRIC 21) – Levies charged by public authorities on entities that operate in a specific market

These mandatory texts applicable from 1 April 2014 had no significant impact on the Group’s financial statements.

New standards and interpretations issued by the IASB and whose application is not yet mandatory

•

Employee benefits: employee contributions (amendments to IAS19R)

•

Annual improvements to IFRS 2010-2012, IFRS 2011-2013

The impact of these new texts on the consolidated financial statements is currently being analysed by the Group.

New standards and interpretations whose application is not yet mandatory

•

Classification and measurement of financial assets (IFRS 9);

•

Regulatory deferral accounts (IFRS 14);

•

Revenue from contracts with customers (IFRS 15)

•

Investment entities: Application of the consolidation exemption, (Amendments to IFRS 10, IFRS 12 and IAS 28 )

•

Disclosure initiative (amendments to IAS 1 “Presentation of financial statements”)

•

Equity method in separate financial statements (amendments to IAS 27)

•

Sale or contribution of assets between an investor and its associate or joint venture (amendments to IAS 28 and IFRS 10)

•

Recognition of acquisitions of interests in joint operations (amendments to IFRS 11)

•

Clarification of acceptable methods of depreciation and amortisation (amendments to IAS 16 – Property, plant and equipment and IAS 38 – Intangible assets)

•

Annual improvements to IFRS 2012-2014

The impact of these new texts on the consolidated financial statements is currently being analysed by the Group.

CONSOLIDATION SCOPE AND METHODS

Pursuant to IFRS 10, companies over which the Group directly or indirectly exercises exclusive control are consolidated using the full consolidation method.

Other associate companies over which the Faiveley Transport Group exercises significant influence over financial and operational policies are accounted for using the equity method. Significant influence is presumed when the Group holds more than 20% of the voting rights of a company.

Intra-Group balances and transactions are eliminated for all consolidated companies.

Faiveley Transport Group companies that are consolidated are listed in Note 37. Note 9 lists companies that are not consolidated due to their insignificant impact on the Faiveley Transport Group’s financial statements.

USE OF ESTIMATES

The main accounting methods whose application necessitates the use of estimates relate to the following items:

Recognition of the margin on long-term building and service contracts and related provisions (see § below – presentation of income statement – 1)

Measurement of deferred tax assets

Measurement of assets and liabilities in respect of retirement and other benefits (see § below – Provisions for liabilities and charges – 1)

Measurement of property, plant and equipment and intangible assets (see § below – Amortisation and depreciation of non-current assets)

Inventories and work-in-progress

Stock-options and free shares

Share subscription and/or purchase options as well as free shares granted to certain senior executives and employees of the Group are recognised in accordance with IFRS 2.

Options are measured at the allocation date. The fair value of options is a function of the expected life, exercise price, current price of underlying shares, expected volatility and share price.

This value is recognised as personnel cost between the date of grant and the end of the vesting period and offset under equity.

TRANSLATION METHOD

The consolidated financial statements are presented in Euro, the Group’s reporting currency.

Foreign currency-denominated transactions

Transactions not denominated in the functional currency are translated at the exchange rate on the date when the transaction was first recorded.

At the balance sheet date:

•

foreign currency-denominated monetary items are converted at the closing rate;

•

foreign currency-denominated non-monetary items valued at historical cost are converted at the foreign exchange rate on the transaction date; and

•

foreign currency-denominated non-monetary items valued at fair value are converted using the foreign exchange rate on the date fair value was determined.

Foreign currency-denominated subsidiary financial statements

Subsidiary financial statements are prepared in the currency that is most representative of their economic environment. This currency is deemed to be their functional currency pursuant to IAS 21.

Subsidiary financial statements are translated into Euros using the following exchange rates:

•

average rate for the period for income statement and cash flow statement items.

On the disposal of a foreign subsidiary, the translation differences relating to such disposal and recognised in shareholders’ equity after 1 April 2004 are accounted for in the income statement.

Translation exchange rates used in the consolidation


	Closing rate				Average rate
	31 March 2015		31 March 2014		31 March 2015		31 March 2014
Thai Baht	€	0.028557	€	0.022367	€	0.024283	€	0.023715
Swedish Krona	€	0.107641	€	0.111753	€	0.108360	€	0.114393
Czech Koruna	€	0.036320	€	0.036440	€	0.036255	€	0.037798
US Dollar	€	0.929454	€	0.725268	€	0.788550	€	0.745995
Australian Dollar	€	0.706514	€	0.669299	€	0.690302	€	0.694002
Hong Kong Dollar	€	0.119872	€	0.093482	€	0.101700	€	0.096161
Singapore Dollar	€	0.676865	€	0.575838	€	0.613296	€	0.592516
Taiwan Dollar	€	0.029536	€	0.023893	€	0.025757	€	0.024966
Swiss Franc	€	0.955749	€	0.820075	€	0.849768	€	0.813206
Pound Sterling	€	1.374948	€	1.207438	€	1.273290	€	1.185853
Iranian Rial	€	0.000033	€	0.000029	€	0.000030	€	0.000035
Brazilian Real	€	0.286058	€	0.319734	€	0.320736	€	0.331311
Russian Rouble	€	0.016015	€	0.020500	€	0.017617	€	0.022570
Indian Rupee	€	0.014865	€	0.012110	€	0.012911	€	0.012324
Korean Won	€	0.000839	€	0.000682	€	0.000745	€	0.000684
Chinese Yuan	€	0.149903	€	0.116613	€	0.127297	€	0.121946
Polish Zloty	€	0.244774	€	0.239699	€	0.238848	€	0.237865

BALANCE SHEET DATE

All companies are consolidated on the basis of financial statements drawn up at 31 March 2015.

INCOME STATEMENT PRESENTATION

1 - Sales revenue and cost of sales recognition

2 - Operating profit after share of profit of equity-accounted entities

Operating profit after share of profit of equity-accounted entities is the indicator used by the Group to present a level of operational profitability that can be used to forecast recurring performance.

3 - Financial income and expenses

Financial income and expenses include:

•

interest income and expense on the consolidated net debt, which consists of borrowings, other financial liabilities (including liabilities in respect of finance leases) and cash and cash equivalents;

•

dividends received from unconsolidated equity investments;

•

the effect of discounting financial provisions;

•

changes in financial instruments;

•

foreign exchange gains and losses on financial transactions.

4 - Income tax

The Group calculates its income tax in accordance with tax laws applicable in the country where profits are taxable and in accordance with IAS 12.

5 - Profit or loss of operations held for disposal and discontinued operations

6 - Earnings per share

INTANGIBLE ASSETS

1 - Goodwill

Acquisitions of minority interests in subsidiaries that are already fully consolidated:

Since the implementation of this standard, acquisitions of minority interests are now recognised as a deduction from the Group’s share of shareholders’ equity.

Accounting treatment of put options on minority interests:

2 - Intangible assets acquired separately or pursuant to a business combination

Intangible assets acquired separately are recorded in the balance sheet at their historical cost.

Intangible assets, other than those with indefinite useful lives, are amortised on a straight-line basis over their estimated useful lives, which are as follows:


• Software		1 to 10 years

• Patents		5 to 15 years

• Development costs		3 years

3 - Internally-generated intangible assets

Research costs are expensed immediately when incurred.

Development costs on new projects are capitalised if all of the following criteria are met:

•

the project is clearly identifiable and its related costs are separately identified and reliably measured;

•

it is probable that the project developed will yield future economic benefits for the Group.

These costs relate to the purchase of raw materials and labour. Capitalised project development costs are amortised on a straight-line basis over 3 years.

PROPERTY, PLANT AND EQUIPMENT


• Buildings		15 to 25 years

• Fixtures and fittings		10 years

• Industrial machinery and equipment		5 to 20 years

• Tools		3 to 5 years

• Vehicles		3 to 4 years

• Office equipment and furniture		3 to 10 years

Assets acquired under finance leases are recorded as assets when the lease agreement transfers substantially all the risks and rewards inherent to ownership of an asset to the Group. At each balance sheet date, a finance lease recognised as an asset gives rise to a depreciation charge (consistent with the depreciation policy applicable to other depreciable assets of the same nature). Lease agreements for which the risks and rewards of ownership are not transferred to the Group are treated as operating leases, with corresponding lease payments expensed on a straight-line basis over the lease term.

IMPAIRMENT OF ASSET VALUES

Goodwill and intangible assets with indefinite useful lives are tested for impairment each year.

Impairment testing involves comparing the recoverable amount of the asset with its net book value. Recoverable amount is the higher of fair value less costs to sell the assets and its value in use.

When this value is less than the book value of the CGU, an impairment loss, first allocated to goodwill, is recognised.

FINANCIAL ASSETS AND LIABILITIES

On initial recognition, a financial instrument is valued at fair value, adjusted for issue costs:

•

fair value, as defined by the applicable IAS, corresponds as a general rule to transaction value, with exceptions discussed below;

•

under the IAS, the term “issue costs” is used to mean all of the ancillary costs directly attributable to the acquisition or implementation of the financial instruments.

At future balance sheet dates, financial assets and liabilities are recorded at either their amortised cost or fair value depending on the class of assets or liabilities to which they belong.

The accounting treatment of identified financial assets and liabilities is as follows:

1 - Operating receivables

•

if the risks and rewards are substantially transferred, the receivables are deconsolidated from the balance sheet against cash;

•

2 - Financial receivables and loans

3 - Shareholdings in unconsolidated companies

4 - Cash, marketable securities and cash equivalents

5 - Borrowings and other financial liabilities

Borrowings are initially recognised net of related expenses. Their cost is amortised using the effective interest rate method. Other financial liabilities are recognised at amortised cost.

6 - Put options held by minority shareholders in Group subsidiaries

Subsequent fair value movements are recognised:

•

in equity, for the estimated change in value of the exercise price;

•

in net financial income (expense) for the reversal of debt discounting.

DERIVATIVE FINANCIAL INSTRUMENTS

1 - Foreign exchange risk

The Group operates in foreign countries and is therefore exposed to exchange risk as a result of its exposure to a number of currencies. The management of exchange risk is centralised by the parent company’s Treasury Department and comprises two parts:

•

exchange risk management relating to tenders in foreign currencies (uncertain risk)

•

exchange risk management relating to commercial contracts (certain risk)

The Group’s policy is to hedge all expected future transactions in each major currency.

2 - Interest rate risk

The Group manages its interest rate cash flow risk through the use of variable rate against fixed rate swaps or options. From an economic point of view, the effect of these interest rate swaps or caps is to convert variable rate borrowings into fixed rate borrowings. The Group may also use structured instruments that do not qualify for hedge accounting.

A detailed description of the exchange and interest rate risks is provided in Note 20: management of financial risks.

3 - Derivative financial instruments general accounting rules

•

Transaction derivatives: the movements in the fair value of the derivative are recorded in financial income and expenses.

INVENTORIES AND WORK-IN-PROGRESS

Inventories and work-in-progress include raw materials, work-in-progress and finished products. They are stated at the lower of production cost and estimated net realisable value.

Raw materials are measured using the weighted average cost method.

Writedown is recognised to take account of obsolescence (see § above Use of estimates – inventories and work-in-progress).

NON-CURRENT ASSETS HELD FOR DISPOSAL AND DISCONTINUED OPERATIONS

Non-current assets held for disposal may no longer be depreciated or amortised. They are valued at the lower of their book value and fair market value net of disposal costs.

TREASURY SHARES

PROVISIONS FOR LIABILITIES AND CHARGES

1 - Provisions for retirement benefits and other employee commitments

These plans may be defined-benefit or defined-contribution plans.

•

Post-employment benefits – defined benefits

In the United Kingdom and Germany, the majority of these plans involve supplementary pension plans. In the United Kingdom, commitments are pre-financed by plan assets.

•

Post-employment benefits – defined contributions

Contributions into defined contribution plans are expensed when made.

•

Other long-term benefits

Other long-term benefits primarily concern Germany (seniority bonuses and early retirement schemes) and France (seniority awards).

Actuarial differences for this type of plan are expensed when they arise.

The net expense for retirement commitments and similar benefits is broken down between cost of sales and structure costs, according to the distribution of the Company workforce.

2 - Other provisions for liabilities and charges

In accordance with IAS 37, the Faiveley Transport Group recognises a provision when an obligation to a third party arises that will result in a probable loss or liability that can be reasonably measured. The Group reports a contingent liability as an off-balance sheet commitment when there is only a possibility of a resulting loss or liability or when it cannot be reasonably measured.

These provisions are determined based on the best knowledge available concerning risks incurred and their probability of realisation and are allocated to specific risks. They cover, in particular:

•

probable after sales service expenditure arising from mechanical warranties;

•

litigation risks;

•

losses on completion for the part exceeding the amounts due by the customers;

•

restructuring costs when the restructuring has been officially announced and is subject of a detailed plan or whose execution has already begun.

These provisions are valued at their present value when their impact is significant and their measurement reasonably reliable.

DEFERRED TAX

Deferred tax assets arising from tax losses carried forward are recognised when it is probable that the Group will realise sufficient taxable profits in the next financial year to offset against the tax loss incurred.

SEGMENT REPORTING

Segment reporting is presented in Note 23.

NOTE 4: CHANGES IN CONSOLIDATION SCOPE

NEWLY-CREATED COMPANIES

Nil

ACQUISITIONS

Acquisition of minority interests

On 22 October 2014, a signed agreement was entered into allowing Faiveley Transport to acquire the 25% minority interests in NOWE GmbH, after the minority shareholders in that subsidiary exercised their put option. Faiveley Group’s percentages of control and interest in NOWE GmbH increased to 100% following this acquisition. Since the purchase price of these minority interests (€1,880 K) was equal to the value of the financial debt recognised for the put option, this transaction had no impact on Group equity.

Summary of acquisitions during the last three financial years

Companies acquired

Main business

Acquisition
date

% interest

Acquisition
cost

2014/2015

2013/2014

Schwab Verkehrstechnik AG

Design and manufacture of

couplers and buffers

17 May 2013

100%

CHF 37,000 K

2012/2013

Nil

DISPOSALS AND COMPANIES NO LONGER CONSOLIDATED

Faiveley Transport Acquisition AB (the “Merged Entity” hereafter) has been merged into Faiveley Transport Malmö AB (the “Merging Entity” hereafter) with retrospective effect from 1 April 2014. Since the Merged Entity was held by the Merging Entity prior to the merger, the shares in the Merging Entity were transferred to the former shareholders of the Merged Entity following this reverse merger. This transaction had no impact on either the consolidated income statement or consolidated equity.

MOVEMENTS IN GOODWILL DURING THE ALLOCATION PERIOD

Nil

NOTE 5: GOODWILL

This goodwill was measured in accordance with the partial goodwill method.

The following table provides details of goodwill as at 31 March 2015:


	Gross		Accumulated impairment		Net 31 March 2015		Net 31 March 2014
Faiveley Transport minority interests		265 778		—		265 778		265 778
Sab Wabco Group (brakes and couplers)		234 004				234 004		234 004
Graham-White Manufacturing Co. (compressed air drying and brake components)		91 295		—		91 295		71 239
Amsted Rail-Faiveley LLC/Faiveley Transport North America Inc. (brake components)		41 878		—		41 878		32 678
Faiveley Transport NSF (air conditioning)		10 057		—		10 057		10 057
Faiveley Transport Nowe GmbH (sanding systems)		3 273		—		3 273		3 298
Faiveley Transport Tours ⁽¹⁾		6 061		—		6 061		6 061
Faiveley Transport Schweiz AG (formerly Urs Dolder AG) (heating)		2 781		—		2 781		2 386
Faiveley Transport Gennevilliers (sintered brakes)		13 470		—		13 470		13 470
Schwab Verkehrstechnik AG		25 670		—		25 670		22 027
Other		2 845		—		2 845		2 841

Total		697 112				697 112		663 838

(1)	Goodwill recognised following the purchase of Espas Group.

2014/2015 change


	Gross 31 March 2014		Adjustments to opening goodwill		Acquisitions		Disposals		Impairment test		Other movements			Gross 31 March 2015
Faiveley Transport minority interests		265 778		—		—		—		—		—			265 778
Sab Wabco Group (brakes and couplers)		234 004		—		—		—		—		—			234 004
Graham-White Manufacturing Co. (compressed air drying and brake components)		71 239		—		—		—		—		20 056	⁽¹⁾		91 295
Amsted Rail-Faiveley LLC/Faiveley Transport North America Inc. (brake components)		32 678		—		—		—		—		9 200	⁽¹⁾		41 878
Faiveley Transport NSF (air conditioning)		10 057		—		—		—		—		—			10 057
Faiveley Transport Nowe GmbH (sanding systems)		3 298		—		—		—		—		(25	)⁽²⁾		3 273
Faiveley Transport Tours ⁽¹⁾		6 061		—		—		—		—		—			6 061
Faiveley Transport Schweiz AG (formerly Urs Dolder AG) (heating)		2 386		—		—		—		—		395	⁽³⁾		2 781
Faiveley Transport Gennevilliers (sintered brakes)		13 470		—		—		—		—		—			13 470
Schwab Verkehrstechnik AG		22 027		—								3 644	⁽³⁾		25 670
Other		2 841		—		—		—		—		4			2 845

Total		663 838		—		—		—		—		33 274			697 112

(1)	These movements are due to the translation difference on goodwill recognised in US Dollars: Graham-White Manufacturing Co. (USD 98,224 K) and Amsted Rail-Faiveley LLC/Faiveley Transport North America Inc. (USD 45,057 K).

(2)	Adjustment to the goodwill of Nowe GmbH following the discounting of the put option on shares held by minority interests.

(3)	These movements are due to the translation difference on goodwill recognised in CHF: Faiveley Transport Schweiz AG (CHF 2,910 K) and Schwab Verkehrstechnik AG (CHF 26,859 K).

2013/2014 change


	Gross 31 March 2013		Adjustments to opening goodwill		Acquisitions		Disposals		Impairment test		Other movements			Gross 31 March 2014
Faiveley Transport minority interests		265 778		—		—		—		—		—			265 778
Sab Wabco Group (brakes and couplers)		234 004		—		—		—		—		—			234 004
Graham-White Manufacturing Co. (compressed air drying and brake components)		76 708		—		—		—		—		(5 469	) ⁽¹⁾		71 239
Amsted Rail-Faiveley LLC/Faiveley Transport North America Inc. (brake components)		35 187		—		—		—		—		(2 509	) ⁽¹⁾		32 678
Faiveley Transport NSF (air conditioning)		10 057		—		—		—		—		—			10 057
Faiveley Transport Nowe GmbH (sanding systems)		4 763		—		—		—		—		(1 465	) ⁽²⁾		3 298
Faiveley Transport Tours ⁽¹⁾		6 061		—		—		—		—		—			6 061
Faiveley Transport Schweiz AG (formerly
Urs Dolder AG) (heating)		2 264		—		—		—		—		122			2 386
Faiveley Transport Gennevilliers (sintered brakes)		13 470		—		—		—		—		—			13 470
Schwab Verkehrstechnik AG		—		—		21 567						460			22 027
Other		2 841		—		—		—		—					2 841

Total		651 133		—		21 567		—		—		(8 861	)		663 838

(1)	These movements are due to the translation difference on goodwill recognised in US Dollars: Graham-White Manufacturing Co. (USD 98,224 K) and Amsted Rail-Faiveley LLC/Faiveley Transport North America Inc. (USD 45,057 K).

(2)	Adjustment to the goodwill of Nowe GmbH following the discounting of the put option on shares held by minority interests.

The recoverable amount of all groups of cash generating units to which goodwill has been allocated was determined based on their estimated value in use.

The value in use is measured based on future cash flow forecasts approved by Management and covering a period of 3 years. This period includes the budget prepared for the year that follows the year for which financial statements have been prepared and the following two years for the business plan. The Group benefits from very high visibility regarding future business activity. Its order book at 31 March 2015 equates to 29 months of sales for Original Equipment and about 10 months for Services.

In determining the value in use, cash flows are determined based on standard WCRs, not taking account of potential restructuring and capital expenditures that may improve asset performance.

Future cash flow forecasts estimated beyond the three-year period are extrapolated using a growth rate corresponding to the expected growth rates of the markets in which the Group operates, i.e.:

•

2.5% for the two years that follow the last year of the plan,

•

1.5% for the following years and to infinity.

Future cash flows are discounted using the Weighted Average Cost of Capital (WACC) as discount rate. This rate differs depending on the geographic location of the groups of CGUs:


	France			United States			Other countries
Discount rate before tax		11.7	%		12.7	%		13.1	%

The discount rate is determined based on the following market data:


Market data	France			United States			Other countries
Risk-free rate on 10-year French government bonds		1.5	%		2.5	%		2.8	%
Beta of sector		1.22			1.22			1.22
Market risk premium		7	%		7	%		7	%

In addition to market data, Company parameters taken into account in the calculation of the discount rate include:

•

estimated cost of debt: 1.5%. This rate includes, proportionally to the weighting of variable rate debt in total debt, an average spread of 0.85% and a swap rate of 0.23%.

•

equity/debt ratio at the balance sheet date.

Given the Group’s business model, the key assumptions that make it possible to determine the recoverable amount are the growth rate and the discount rate. The Group considers that no reasonably likely change in key assumptions could lead the recoverable amount to fall below the book value. Sensitivity tests have been carried out on the two most significant goodwill items:

•

For the Faiveley Transport CGU minority shareholders, the recoverable amount is estimated at €1,048 million, with a net book value of €824 million.

An increase or a decrease of 1% in the 1.5% growth rate to infinity would have a positive impact of 6.2% and negative impact of 5.2% on the recoverable amount. Therefore, the recoverable amount would be €1,114 million and €993 million respectively. An increase or a decrease of 1% in the 12.5% discount rate would have a negative impact of 7.2% and a positive impact of 8.9% on the recoverable amount. Therefore, the recoverable amount would be €973 million and €1,141 million respectively.

•

For the Sab Wabco Group of CGUs, the recoverable amount has been estimated at €584 million, for a net book value of €265 million.

An increase or a decrease of 1% in the 1.5% growth rate to infinity would have a positive impact of 5.8% and negative impact of 4.9% on the recoverable amount. Therefore, the recoverable amount would be €618 million and €555 million respectively.

An increase and a decrease of 1% in the 12.5% discount rate would have a negative impact of 7.3% and a positive impact of 9% on the recoverable amount. Therefore, the recoverable amount would be €541 million and €636 million.

NOTE 6: INTANGIBLE ASSETS


	Gross		Amortisation		Net		Net
			charges		31 March 2015		31 March 2014
Development costs		24 475		10 574		13 901		11 271
Patents, trademarks and licences		30 707		23 992		6 716		4 686
Business goodwill		15		—		15		15
Other intangible assets		40 242		2 560		37 682		34 529
Total		95 439		37 126		58 314		50 501

At 31 March 2015, intangible assets were broken down as follows:

•

Development costs: they include development costs incurred as part of technical innovation projects that comply with the IAS 38 capitalisation criteria. These costs are amortised over a period of 3 years.

•

Patents, trademarks and licences: this heading primarily includes patents acquired as part of the acquisition of Carbone Lorraine’s sintered brake business (€4,000 K) and computer software amortised over a maximum of 10 years.

•

Other intangible assets primarily include:

•

Intangible assets identified and measured (in particular, sales agency agreements) as part of the creation of the Amsted Rail-Faiveley LLC joint venture, for a gross amount of €10.7 million (USD 11.5 million)

•

The value of the customer portfolio contributed by the acquisition of Graham-White Manufacturing Co. for €3.1 million (USD 3.3 million).

•

The value of the customer portfolio contributed by the acquisition of Schwab, for a gross amount of €5.9 million (CHF 6.2 million) and expertise of €0.9 million (CHF 0.9 million)

•

Costs incurred of € 18.7 million corresponding to the implementation of a major IT system integration programme, whose objective is to optimise organisations, processes, tools and the sharing of technical data within the Faiveley Transport Group.

2014/2015 change


	Development costs			Patents, trademarks and licences			Business good will			Other intangible assets			TOTAL
Gross 31 March 2014		19 034			25 918			15			35 874			80 841
Changes in consolidation scope		—			—			—			—			—
Acquisitions		5 168	⁽¹⁾		919			—			3 359			9 446
Disposals		—			(26	)		—			(0	)		(26	)
Other movements		273			3 897			(0	)		1 010			5 179

Gross 31 March 2015		24 475			30 708			15			40 242			95 440

Accumulated amortisation at 1 April 2014		(7 763	)		(21 232	)		—			(1 345	)		(30 340	)
Changes in consolidation scope		—			—			—			—			—
Charges to provision		(2 757	)		(2 273	)		—			(794	)		(5 823	)
Reversal of provision		—			25			—			—			25
Other movements		(54	)		(512	)		—			(421	)		(988	)
Accumulated amortisation at 31 March 2015		(10 574	)		(23 992	)		—			(2 560	)		(37 126	)

Net amounts		13 901			6 716			15			37 682			58 314

(1)	Development costs capitalised over the period

NOTE 7: PROPERTY, PLANT AND EQUIPMENT


	Gross		Depreciation charges		Net 31 March 2015		Net 31 March 2014
	Gross		Depreciation charges		Net 31 March 2015		Net 31 March 2014
Land		5 920		250		5 670		5 767
Buildings		77 760		58 585		19 175		22 524
Plant and machinery		167 906		135 843		32 063		30 087
Other PPE		43 260		35 133		8 127		7 201
Under construction		5 568		—		5 568		2 428

Total		300 414		229 811		70 603		68 007

2014/2015 change


	Land			Buildings			Plant and machinery			Other property, plant and equipment			Under construction		TOTAL
Gross 1 April 2014		6 011			81 142			157 311			39 742			2 428		286 634

Changes in consolidation scope		—			—			—			—			—		—
Acquisitions		—			1 462			6 961			2 994			2 706		14 122
Disposals		—			(149	)		(5 800	)		(1 196	)		—		(7 145	)
Other movements		(91	)		(4 695	) ⁽¹⁾		9 434			1 719			434		6 802
Gross 31 March 2015		5 920			77 760			167 906			43 259			5 568		300 414

Accumulated depreciation at 1 April 2014		(244	)		(58 618	)		(127 224	)		(32 541	)		—		(218 627	)

Changes in consolidation scope		—			—			—			—					—
Charges to provision		(4	)		(1 838	)		(7 480	)		(2 301	)				(11 623	)
Reversal of provision		—			71			5 729			1 131					6 930
Other movements		(2	)		1 800	⁽¹⁾		(6 866	)		(1 422	)				(6 491	)

Accumulated depreciation at 31 March 2015		(250	)		(58 586	)		(135 842	)		(35 133	)		—		(229 811	)

Net amounts		5 671			19 175			32 065			8 126			5 568		70 603

(1)	A building of the Leipzig company was reclassified as an asset held for sale with a gross value of € 4,177 K and depreciation of € 3,530 K. A second building owned by Ellcon National was also reclassified as an asset held for sale with a gross value of € 5,241 K and depreciation of € 572 K.

The majority of Group sites are owned outright or through operating leases, except the property assets of Faiveley Transport Iberica, which are leased-financed.

Property, plant and equipment acquired under finance leases

The following table provides an analysis of property, plant and equipment acquired under finance leases:


	Gross		Depreciation charges		Net 31 March 2015		Net 31 March 2014


Software licences		1,079		68		1,011		1,028
Land						—		—
Buildings		3,106		842		2,264		2,438
Plant and machinery						—		—

Total		4,185		910		3,275		3,466

Finance leases

Finance lease contracts relate to the property assets of Faiveley Transport Iberica and software licences. The future minimum lease payments on non-cancellable leases are shown in the table below:


	31 March 2015		31 March 2014
	31 March 2015		31 March 2014
Less than 1 year		202		206
1 to 5 years		865		859
More than 5 years		233		462

Total future lease payments		1,300		1,527

Less financial interest		—		(46	)

Financial liabilities attached to finance leases		1,300		1,481

NOTE 8: INVESTMENTS IN EQUITY-ACCOUNTED ENTITIES

Joint ventures are entities over which Faiveley Group exercises joint control.

Assumptions and judgment having led to classifying these entities as equity accounted

Summary of equity interests in joint ventures


	% control and interest			Gross		Provisions		31 March 2015 Net		31 March 2014 Net
- Qingdao Faiveley SRI Rail Brake Co. Ltd		50,00	%		15 057		—		15 057		7 583
- Datong Faiveley Railway Vehicle Equipment Co., Ltd.		50,00	%		650		—		650		466
- Shijiazhuang Jiaxiang Precision Machinery Co. (“SJPM”)		50,00	%		6 110		—		6 110		4 288

Total equity interests in equity-accounted joint ventures									21 817		12 337

2014/15 change in the equity value of joint ventures


	31 March 2015			31 March 2014
Net value of securities at beginning of the year		12 337			12 571
Share of profit of equity-accounted entities		6 551			4 368	⁽²⁾
Dividends paid		(1 115	)		(3 725	)
Other movements (1)		4 044			(879	)
Writedowns					—

Net value of securities at year-end		21 817			12 337

(1)	Translation adjustment of €4,400 K for the period and elimination of intra-group margins of €356 K.

(2)	Of which share of profit for the year to 31 March 2014: €3,085 K for Qingdao, €1,246 K for SJPM and €(22) K for Datong.

Risks associated with interests in joint ventures

Commitments given by the Group in respect of its joint ventures and contingent liabilities incurred by its joint ventures are presented in NOTE 36 “Off-balance sheet commitments”.

NOTE 9: OTHER NON-CURRENT FINANCIAL ASSETS

2014/2015 change


	Shareholdings in unconsolidated subsidiaries			Other financial investments			TOTAL
Gross 31 March 2014		*932*			*2 476*			*3 408*
Changes in consolidation scope		—			—			—
Acquisitions		—			236			236
Disposals		—			(50	)		(50	)
Other movements		(0	)		411			411

Gross 31 March 2015		932			3 074			4 006

Accumulated writedowns at 1 April 2014		*677*			25			*702*

Changes in consolidation scope		—			—			—
Charges to provision		—			—			—
Reversal of provision		—			—			—
Other movements		—			—			—

Accumulated writedowns at 31 March 2015		677			25			702

Net amounts		255			3 049			3 304

Maturity date of other financial investments


	1 to 5 years		More than 5 years		TOTAL 31 March 2015		TOTAL 31 March 2014
Other non-current investments		156				156		128
Loans		495		458		953		914
Guaranteed deposits and securities		1,105		116		1,221		978
Other financial receivables		247		497		744		456

Total		2,003		1,071		3,074		2,476

“Financial information on unconsolidated securities”


	%		Net book value of securities
(€ thousands)	interest		Gross		Impairment			Net		Equity		Net profit
SUECOBRAS (Brazil) ⁽¹⁾		100		865		(666	)		197		68		(21	)
SAB WABCO SHARAVAN Ltd. (Iran) ⁽²⁾		49		11		(11	)		—		—		—
SOFAPORT (France) ⁽¹⁾		59,50		47		—			47		23		(1	)
FAIVELEY TRANSPORT SERVICE MAROC		100		8		—			8		8		65
FAIVELEY TRANSPORT SOUTH AFRICA ⁽²⁾		100		—		—			—

TOTAL				932		(677	)		255

⁽¹⁾	Companies undergoing liquidation

(2)	Dormant companies

NOTE 10: DEFERRED TAX


	Amount at 1 April 2014			Reclassifications			Impact on income statement			Currency conversions			Items of other comprehensive income			Amount at 31 March 2015
Provisions for inventory		2 237			(169	)		733			214			—			3 015
Provisions for trade and other receivables		337			(28	)		34			18			—			361
Provisions for contracts		13 175			(258	)		(1 682	)		729			—			11 964
Provisions for restructuring		119			—			(25	)		—			—			94
Provisions for retirement benefits and seniority awards		5 695			144			615			229			2 883			9 566
Other provisions for liabilities		1 780			(1	)		(1 201	)		124			—			702
Percentage of completion method (IAS 11)		595			—			557			45			—			1 196
Elimination of inventory margins (intra-Group)		816			—			340			4			—			1 160
Restatements under IAS 32-39 (cash flow)		3 149			118			5 036			(64	)		(364	)		7 875
Leases		148			—			35			—			—			183
Property, plant and equipment and intangible assets		2 223			313			(305	)		181			0			2 412
Current assets and liabilities		3 178			770			(687	)		409			0			3 670
Exchange differences		1 630			(166	)		2 133			144			—			3 742
Tax losses carried forward		14 140			629			491			2 128			—			17 388
Tax losses carried forward but not recognised ⁽¹⁾		(4 197	)		100			1 517			(340	)		—			(2 920	)
Other restatements		6 711			(1 452	)		424			339			—			6 022

TOTAL DEFERRED TAX – ASSETS		51 737			(0	)		8 014	(a)		4 159			2 519			66 429

Provisions for inventory		220			(145	)		(82	)		7			—			—
Provisions for trade and other receivables		56			(28	)		(8	)		4			—			23
Provisions for contracts		3 115			(199	)		(2 917	)		—			—			—
Provisions for retirement benefits and seniority awards		19			(19	)		0			(0	)		—			—
Other provisions and restatements		4 821			36			275			649			—			5 781
Regulated provisions		1 671			—			(11	)		—			—			1 661
Percentage of completion method (IAS 11)		7 433			1 267			6 844			851			—			16 395
Capitalisation of development costs		3 850			(420	)		716			4			—			4 149
Restatements under IAS 32-39 (cash flow)		2 061			133			4 279			67			—			6 541
Valuation difference		4 063			—			1 887			1 320			—			7 270
Property, plant and equipment and intangible		2 908			(216	)		(261	)		477			—			2 907
Current assets		478			(417	)		(58	)		2			—			6
Exchange differences		2 602			8			2 816			2			—			5 427
Leases		733			—			(39	)		—			—			694

TOTAL DEFERRED TAX – LIABILITIES		34 030			(0	)		13 441	(b)		3 382			—			50 854

Impact on income statement (a)-(b)								(5 427	)

(1)	Amount of deferred tax assets corresponding to tax losses not recognised due to the risk of non-recovery.

NOTE 11: INVENTORIES


	Gross		Provisions		Net 31 March 2015		Net 31 March 2014
Raw materials		124 124		18 820		105 304		91 654
Work-in-progress		25 680		1 163		24 517		22 806
Finished products		33 076		4 886		28 190		26 981
Merchandise		10 670		1 016		9 654		4 920

Total		193 550		25 885		167 665		146 361

2014/2015 movements in provisions


	Provisions at 31 March 2014		Changes in consolidation scope		Charges to provision		Reversals provisions used			Reversals provisions unuse d			Other movements ⁽¹⁾			Provisions at 31 March 2015
Raw materials		14 882		—		5 214		(3 024	)		(631	)		2 379			18 820
Work-in-progress		2 326		—		342		(341	)		(8	)		(1 156	)		1 163
Finished products		2 253		—		3 076		(854	)		(44	)		455			4 886

Merchandise		967		—		271		(191	)		(52	)		21			1 016

Total		20 428		—		8 903		(4 411	)		(735	)		1 699			25 885

(1)	Translation adjustment for the period and reclassifications.

During the 2014/2015 financial year, old inventories and inventories that had become totally obsolete were scrapped. Provisions of 84% of the value of these inventories had previously been raised. The impact on the income statement for the period was a loss of € 0.7 million.

NOTE 12: WORK-IN-PROGRESS ON PROJECTS

At 31 March 2015, net work-in-progress on projects was valued at € 121.7 million, compared with € 112.5 million in the previous year as restated. This primarily includes engineering costs on long-term contracts. At each balance sheet date, the Group assesses its recoverable amount. In the event of a loss-making contract, writedown is recognised as a reduction of contracts in progress.

Gross work-in-progress on projects was € 139.9 million at 31 March 2015, compared with € 126.4 million at 31 March 2014 (restated amount).

Provisions for losses on completion, presented as a reduction of work-in-progress on projects, totalled € 18.2 million at 31 March 2015 as against € 13.9 million at 31 March 2014 as restated.

NOTE 13: CURRENT RECEIVABLES

TRADE RECEIVABLES


	Gross			Provisions		Net 31 March 2015			Net 31 March 2014
Trade receivables		326 498			4 652		321 846			275 098
Assignment of receivables (factoring and ad hoc assignments)		(97 716	)		—		(97 716	)		(80 524	)

Total		228 782			4 652		224 130			194 574

Movements in provisions for doubtful trade receivables


Financial years ended:	Opening balance of provision		Restatements IFRS 10, 11			Changes in consolidation scope		Charges to provision		Reversals provisions used			Reversals provisions unused			Other movements			Closing balance of provision
31 March 2015		4 496							1 813		(1 432	)		(601	)		377			4 652
31 March 2014		4 982		(16	)		51		1 768		(1 228	)		(979	)		(82	)		4 496

Trade receivables at year-end


										Receivables due
	Total balance sheet			Receivables not yet due			Total due			Less than 60 days		Between 60 and 120 days			Between 120 and 240 days			More than 240 days
Gross value		228,782			183,515			45,267			26,069		7,924			4,994			6,280
Writedowns		(4,652	)		(1,641	)		(3,011	)		—		(214	)		(165	)		(2,632	)

Net value		224,130			181,874			42,256			26,069		7,710			4,829			3,648

OTHER CURRENT ASSETS


	Gross		Provisions		Net 31 March 2015		Net 31 March 2014
Suppliers - accrued credit notes		373		—		373		946
Social security and tax receivables		13 113		—		13 113		15 906
Prepaid expenses		5 605		—		5 605		6 323
Accrued income		1 733		—		1 733		476
Other receivables		4 003		109		3 894		9 158

Total		24 827		109		24 718		32 809

NOTE 14: CURRENT FINANCIAL ASSETS


	31 March 2015		31 March 2014
Guaranteed deposits and securities (1)		5,854		3,901
Other financial receivables		65		268
Current accounts		923		758
Fair value of derivatives - assets		36,006		2,979

Total		42,849		7,906

(1)

Under one of the factoring programs, in order to guarantee the repayment of amounts for which the Group may become liable, a non-interest bearing escrow account was created representing 10% of transferred receivables outstanding. This rate may potentially be adjusted in the event of an increase in disallowed receivables (credit notes, disputes, non-payment or discounts). The outstanding guarantees at 31 March 2015 were €5,575 K compared with €3,722 K at 31 March 2014.

NOTE 15: CASH AND CASH EQUIVALENTS


	31 March 2015			31 March 2014
Short-term investments		14 824			69 795
Cash		222 021			169 419
Bank overdrafts		(1 396	)		(1 042	)
Invoices factored and not guaranteed		(777	)		(237	)

Total		234 672			237 935

The Group does not hold a share portfolio but deposits excess cash balances. At 31 March 2015, it had money market funds and certificates of deposits of €1.8 million and fixed-term deposits of €13.0 million. These deposits meet the criteria specified by IAS 7, which enables them to be classified as cash equivalents.

NOTE 16: GROUP EQUITY

SHARE CAPITAL

At 31 March 2015, the Company’s share capital totalled €14,614,152 divided into 14,614,152 shares of €1 each, fully paid up. Shares registered in the name of the same shareholder for at least two years have double voting rights.

The Group manages its capital by ensuring that it maintains financial ratios within the limits defined by its credit agreements (see NOTE 19).

Composition of the share capital


Shares	Par value		31 March 2014		New shares issued		Voting rights granted			31 March 2015
Ordinary		1		6,682,517		—		210,635			6,893,152
Redeemed		—		—		—		—			—
With preferred dividends		—		—		—		—			—
With double voting rights		1		7,931,635		—		(210,635	)		7,721,000

Total		1		14,614,152		—		—			14,614,152

Treasury shares

At 31 March 2015, Faiveley Transport held 233,874 treasury shares, including 10,255 through its liquidity contract.

Translation differences

Translation differences comprise mainly the gains and losses resulting from the translation of the equity of subsidiaries whose functional currency is other than the Euro.

The translation differences presented in the consolidated statement of comprehensive income primarily reflect the movement in the US dollar (€ 15.4 million) and the Chinese Yuan (€ 7.5 million) against the Euro over the financial year ended 31 March 2015.

Reserves and net profit


	31 March 2015			31 March 2014
Legal reserve		1 461			1 461
Distributable reserves		—			(1 886	)
Reserves for derivative instruments		(271	)		(963	)
Other reserves		435 439			407 191
Net profit - Group share		55 645			50 110

Total reserves and net profit - Group share		492 274			455 632

SHARE-BASED PAYMENTS

Share purchase or subscription option plans

•

Plan features

Allocation

Share purchase option plan

Share
subscription
option plan

Date of Management Board meeting

19/02/2008

16/07/2008

23/11/2009

Exercise price

in € (*)

32.31

40.78

54.91

Date from which options can be exercised

19/02/2010

16/07/2010

22/11/2013

Expiry date

18/02/2015

16/07/2015

22/11/2017

Number of options remaining to be exercised at 31 March 2014

5,960

22,600

116,000

Options granted during the period

Options cancelled during the period

Options exercised during the period

(5,960

)

(14,153

)

Number of options remaining to be exercised at 31 March 2015

—

8,447

116,000

(*)	The exercise price is equal to the average price of the 20 trading days preceding the date of the Management Board meeting at which it was decided to grant the options, less a discount of 5%.

•

Summary and valuation of plans

Allocation

Share purchase option plan

Share
subscription
option plan

Date of Management Board meeting

19/02/2008

16/07/2008

23/11/2009

Initial fair value of the plan (€ millions)

2.8

Charge for the financial year (€ millions)

—

Free performance-based share allocation plans and free share plans

•

Free performance-based share allocation plan of 2 July 2014

On 2 July 2014, the Management Board decided to allocate free shares subject to performance criteria pursuant to the authorisation granted at the Extraordinary General Meeting of 12 September 2013. This involves allocating a total of 135,106 shares, i.e. approximately 0.92% of the share capital, to 226 beneficiaries.

These allocations are subject to the beneficiaries remaining employed by the Group and to performance criteria applicable over a two-year period. For reasons of confidentiality, the levels expected in relation to performance criteria are not disclosed, but are based on:

•

A cumulative profit from recurring operations target for the 2014/2015 and 2015/2016 financial years,

•

A cumulative cash flow generation target set for the 2014/2015 and 2015/2016 financial years,

•

A target for the rollout of the Faiveley Worldwide Excellence (FWE) programme

If the performance criteria are completely fulfilled or are exceeded, the beneficiaries will receive the full number of shares that have been allocated to them.

If the performance criteria are partially fulfilled but exceed a minimum threshold, the beneficiaries will receive a percentage of the number of shares that have been allocated to them, prorated on the percentage of achievement of the targets set. If the minimum threshold is not reached, no shares will be allocated.

•

Free performance-based share allocation plan of 25 November 2014

On 25 November 2014, the Management Board decided to allocate free shares subject to performance criteria pursuant to the authorisation granted at the Extraordinary General Meeting of 12 September 2014. This involves

allocating a total of 1,000 shares to a single beneficiary. This allocation is subject to the beneficiary remaining employed by the Group and to performance conditions identical to those of the free performance-based share allocation plan of 2 July 2014 (see § above).

•

Free performance-based share allocation plan of 27 March 2015

On 27 March 2015, the Management Board decided to allocate free shares subject to performance criteria pursuant to the authorisation granted at the Extraordinary General Meeting of 12 September 2014. This involves allocating a total of 4,000 shares to two beneficiaries. This allocation is subject to the beneficiary remaining employed by the Group and to performance conditions identical to those of the free performance-based share allocation plan of 2 July 2014 (see § above).

•

Plan features

Allocation

Free performance-based shares

Free shares

Date of authorisation by the AGM

14/09/2012

12/09/2013

12/09/2014

14/09/2011

14/09/2012

Date of Management Board meeting

24/10/2012

02/07/2014

25/11/2014

27/03/2015

05/03/2012

15/01/2013

Date ownership of free shares transferred to French tax residents

24/10/2014

02/07/2016

n/a

27/03/2017

05/03/2014

15/01/2015

Date ownership of free shares transferred to non-French tax residents

24/10/2014

02/07/2018

25/11/2018

27/03/2019

05/03/2016

15/01/2017

Vesting date of free shares

24/10/2016

02/07/2018

25/11/2018

27/03/2019

05/03/2016

15/01/2017

Total number of shares allocated at 31 March 2014

7,500

—

27,014

⁽¹⁾

68,142

Number of shares allocated during the period

135,106

1,000

4,000

Number of shares cancelled during the period

(4,624

)

(2,700

)

(1,000

)

(1,972

)

(2,848

)

Total number of shares vested during the period under this plan

(2,876

)

—

(34,654

)

Total number of shares allocated at 31 March 2015

—

132,406

—

4,000

25,042

30,640

Terms and conditions of share allocation under the plan

Determination of
% of shares
vested at
24/10/2014

Determination
of % of shares
vested at
02/07/2016

Determination
of % of shares
vested at
25/11/2016

Determination of
% of shares
vested at
27/03/2017

Allocation subject to

personal investment

by beneficiaries,

with two free shares
granted for every
share bought

Allocation subject to
personal investment
by beneficiaries,
with two free shares
granted for every
share bought

(1)	The amount published at 31M arch 2014 corresponded to the total number of shares lapsed since inception, instead of consisting solely of the number of shares lapsed during the 2013-2014 financial year. (No significant impact on the valuation of the 05/03/2012 plan published at 31M arch 2014).

•

Plan valuation

Allocation

Free performance-based shares

Free shares

Date of Management Board meeting

24/10/2012

02/07/2014

25/11/2014

27/03/2015

05/03/2012

15/01/2013

Initial fair value of the plan (€ millions)

0.2

2.9

0.0

0.1

2.3

1.8

Charge for the financial year (€ millions)

—

1.3

0.9

NOTE 17: MINORITY INTERESTS

SUMMARY OF MINORITY INTERESTS INCLUDED IN EQUITY


	31 March 2015		31 March 2014
Shanghai Faiveley Railway Technology		9,972		12,619
Amsted Rail - Faiveley LLC		20,987		14,169
Other minority interests		757		865

Total		31,716		27,653

NOTE 18: ANALYSIS OF PROVISIONS

NON-CURRENT PROVISIONS


	Amount at 1 April 2014		Changes in consolidation scope		Charges to provision		Reversals used			Items of other comprehensive income		Reversals unused			Other movements (1)		Amount at 31 March 2015
Provisions for retirement commitments and employee benefits		36 538		—		2 467		(2 134	)		10 313		(2 515	)		1 140		45 809
Provisions for charges		1 697		—		1 354		(587	)		—		(500	)		311		2 275

Total		38 235		—		3 822		(2 721	)		10 313		(3 015	)		1 451		48 084

(1)	Including exchange differences of € 1 572 K and reclassifications of € (338) K

Actuarial losses generated over the financial year result from changes in the actuarial assumptions used in the valuation of commitments, differences between market conditions actually observed and those originally assumed, as well as experience. These actuarial gains are recognised under items of other comprehensive income and are net of tax.

PROVISIONS FOR RETIREMENT COMMITMENTS AND EMPLOYEE BENEFITS

Summary of provisions

The provisions as at 31 March 2015, of those countries with the most significant commitments are shown in the following table:

31 March 2015

31 March 2014

(€ millions)

France

Germany

United
Kingdom

Other
countries

Total

Post-employment benefits

12.2

17.8

7.8

5.5

43.3

34.4

Provisions for other long-term benefits

0.5

1.0

—

1.0

2.5

2.1

Total

12.7

18.7

7.8

6.6

45.8

36.5

Information regarding the actuarial liability:

•

Movements in actuarial liability by geographic region


	31 March 2015															31 March 2014
							United			Other
	France			Germany			Kingdom			countries			Total			Total
Actuarial liability at beginning of period		9.3			15.1			54.9			10.6			89.8			82.3
Cost of services provided		0.6			0.0			0.1			0.3			1.0			0.9
Interest on actuarial liability		0.3			0.4			2.4			0.3			3.4			3.1
Employee contributions		—			—			0.0			0.1			0.2			0.1
Benefits paid		(0.5	)		(1.0	)		(2.0	)		(0.3	)		(3.8	)		(4.4	)
Settlement of liability		—			—			—			—			—			—
Scheme amendments		—			—			—			—			—			—
Acquisitions/Transfers/Companies joining the Group		—			—			—			—			—			6.7
Actuarial (gains)/losses		2.5			3.2			7.6			1.7			15.0			(0.1	)
of which experience (gains)/losses		(0.1	)		(0.3	)		—			0.2			(0.3	)		0.3
Exchange differences		—			—			8.3			1.5			9.8			1.2
Other		—			—			—			—			—			—

Actuarial liability at end of period		12.2			17.7			71.3			14.2			115.4			89.8

of which:																	—
Funded schemes		—			—			71.3			10.8			82.1			62.2
Unfunded schemes		12.2			17.7			—			3.3			33.3			27.5

•

Movements in plan assets by geographic region:


	31 March 2015													31 March 2014
	France		Germany		United Kingdom			Other countries			Total			Total
Fair value of assets at beginning of period		—		—		49.2			6.3			55.5			48.4
Employer contributions		—		—		2.5			0.2			2.7			1.8
Employee contributions		—		—		—			0.1			0.1			0.1
Benefits paid		—		—		(2.0	)		(0.1	)		(2.1	)		(2.7	)
Settlement of liability		—		—		—			—			—			—
Expected financial income		—		—		2.2			0.2			2.4			2.2
Actuarial gains/(losses)		—		—		4.2			0.6			4.7			(0.9	)
of which experience gains/(losses)		—		—		4.2			0.6			4.7			(0.4	)
Acquisitions/Transfers/Companies joining the Group		—		—		—			—			—			5.8
Exchange differences		—		—		7.6			1.3			8.9			0.9
Fair value of assets at end of period		—		—		63.6			8.6			72.2			55.5

The actual return on investments was € 7.1 million in the year to 31 March 2015 (compared with € 1.2 million to end March 2014). The implicit return on investments is estimated at € 2.2 million in 2015.

•

Provision for retirement commitments:

31 March 2015

31 March 2014

France

Germany

United
Kingdom

Other
countries

Total

Actuarial liability

12.2

17.7

71.3

14.2

115.5

89.8

Fair value of plan assets

—

63.6

8.6

72.2

55.5

Financial cover

12.2

17.7

7.7

5.6

43.2

34.3

Impact of capping of assets

—

0.1

—

0.1

0.1

Net provision

12.2

17.7

7.8

5.6

43.3

34.4

of which provisions for commitments

12.2

17.7

7.8

5.6

43.3

34.4

of which surplus plan assets

0.1

0.1

0.1

•

Past data relating to financial cover and actuarial experience differences for the current and the previous four financial years


	31 March			31 March			31 March			31 March			31 March
	2015			2014			2013			2012			2011
	Total			Total			Total			Total			Total
Present value of the commitment		115.4			89.8			82.3			77.9			70.3
Fair value of plan assets		72.2			55.5			48.4			44.7			39.8
Funding shortfall		43.1			34.3			33.9			33.2			30.5
Experience gains/(losses) in relation to liabilities		(0.3	)		(0.3	)		2.5			(0.1	)		1.8
Experience gains/(losses) in relation to assets		4.7			(0.9	)		3.8			0.5			(0.1	)
Experience gains/(losses) in relation to liabilities, as % of commitment		0	%		0	%		3	%		0	%		3	%
Experience gains/(losses) in relation to assets, as % of plan assets		7	%		-2	%		8	%		1	%		0	%

Income statement items:

•

Breakdown of net pension cost


	31 March 2015													31 March 2014
	France		Germany		United Kingdom			Other countries			Total			Total
Cost of services provided		0.6		0.0		0.1			0.3			1.0			0.9
Interest on actuarial liability		0.3		0.4		2.4			0.3			3.4			3.1
Financial income		—		—		(2.2	)		(0.2	)		(2.4	)		(2.1	)
Reduction/liquidation/transfer of the plan		—		—		—			—			—			—
Impact of capping of assets		—		—		—			—			—			—
Other		—		—		—			—			—			—
Net charge		0.9		0.4		0.3			0.3			2.0			1.9

In addition, charges for the year in respect of defined contribution schemes totalled € 23.9 million, compared with € 22.3 million for the year to 31 March 2014.

Actuarial assumptions:

The actuarial assumptions used to measure commitments take into account the demographic and financial conditions specific to each country or Group company.

Discount rates are determined by reference to the yields on AAA bonds with similar durations to those of the commitments as at the measurement date (Bloomberg Corporate AA 15 years for France and Germany and Iboxx 15+ for the UK).

The assumptions used for those countries with the most significant commitments are shown in the following table:


	31 March 2015			31 March 2014
			United			United
	France	Germany	Kingdom	France	Germany	Kingdom
Discount rate	1.30%	1.30%	3.20%	2.85%	2.85%	4.30%
Inflation rate	2.00%	2.00%	2.95%	2.00%	2.00%	3.30%
Average salary increase rate	2.50%	2.22%	3.30%	2.50%	2.22%	3.65%

The sensitivity of commitments at 31/03/2015 and the cost of services rendered for the next year to a 25 basis point change in the discount rate are summarised as follows:


	0.25% increase in	0.25% decrease in
(€ millions)	discount rate	discount rate
Effect on the value of commitments	(4.4)	4.7
Effect on the cost of services provided	(0.1)	0.1

The sensitivity of commitments at 31 March 2014 and the cost of services rendered for the next year to a 25 basis point change in the salary increase rate are summarised as follows:


	0.25% increase in	0.25% decrease in
(€ millions)	salary rate	salary rate
Effect on the value of commitments	0.5	(0.5)
Effect on the cost of services provided	0.1	(0.1)

Currently the investment portfolio contains no Group securities.

The structure of the investment portfolio is as follows:


	31 March 2015	31 March 2014
Shares	9.4%	10.1%
Bonds	43.7%	42.3%
Other assets	46.9%	47.6%
Total	100.0%	100.0%

Plan assets are primarily comprised of financial assets which are actively traded on organised financial markets.

CURRENT PROVISIONS


	Amount at 1 April 2014		Changes in consolidation scope		Charges to provision		Reversals provisions used			Reversals provisions unused			Items of other comprehensive income		Other movements			Amount at 31 March 2015
Provisions for liabilities, warranties and penalties		86 083		—		50 496		(32 533	)		(12 550	)		—		4 604			96 100
Provisions for losses on completion		2 715		—		—		—			—			—		(310	)		2 405

*Total contract provisions*		*88 798*		—		*50 496*		*(32 533*	)		*(12 550*	)		—		*4 294*			*98 505*

Provisions for restructuring		407		—		397		(408	)		(10	)		—		—			386
Provisions for other risks		5 168		—		1 014		(310	)		(3 382	)		—		429			2 919

*Total other provisions*		*5 575*		—		*1 412*		*(718*	)		*(3 392*	)		—		*429*			*3 305*

Total		94 373		—		51 908		(33 251	)		(15 942	)		—		4 723	⁽¹⁾		101 810

(1)	Including exchange differences of €5,005 K and reclassifications of €(309) K.

Provisions for losses on completion are shown here for the amount not allocated as a reduction of work-in-progress on projects.

Provisions for losses on completion, presented as a reduction of work-in-progress on projects, totalled €18.2 million at 31 March 2015 as against €13.9 million at 31 March 2014 as restated.

NOTE 19: BORROWINGS AND FINANCIAL DEBT

In respect of all its sources of financing and following the renegotiation of the syndicated loan, Faiveley Transport Group must now comply with the following four financial conditions:

•

Leverage ratio “Consolidated Net Debt/Consolidated EBITDA”, which must be less than 3.

•

Gearing ratio “Consolidated Net Debt/Equity”, which must be less than 1.5

•

Total bank guarantees, which must not exceed 22% of the order book.

•

“Consolidated EBITDA/Cost of Consolidated Net Financial Debt”, which must exceed 3.5.

Non-compliance with one of these covenants may result in the debt becoming immediately repayable.

The calculation of banking ratios for the “USPP” and “Schuldschein” loans is based on accounting standards applicable at the balance sheet date. The calculation of banking ratios for the Syndicated Credit is based on accounting standards applicable at the date the contract was signed.

At 31 Mars 2015, ratios were as follows for the various sources of financing:


At 31 March 2015	Banque Postale loan			Syndicated credit		US private placement		SCHULDSCHEIN loan
“Consolidated Net Debt/Consolidated EBITDA” ratio		1.59			1.49		1.68		1.58
“Net Financial Debt/Consolidated Equity” ratio		0.26			n/a		0.28		0.26
Bank guarantees / order book		12.4	%		n/a		n/a		n/a
“Consolidated EBITDA/Cost of Consolidated Net Financial Debt” ratio		10.02			10.65		10.05		10.05

ANALYSIS AND MATURITY OF NON-CURRENT AND CURRENT FINANCIAL DEBT


	31 March 2015
	Current portion		Non-current portion				TOTAL		31 March
	Under 1 year		1 to 5 years		Over 5 years		TOTAL		2014
Borrowings		32,063		242,682		152,723		427,468		444,558
Leases		196		874		231		1,301		1,477
Employee profit sharing		65						65		65
Various other financial debt		6						6		1
Guarantees and deposits received		56						56		87
Credit current accounts		96						96		92
Bank overdrafts		1,396						1,396		1,042
Short-term facilities (credit balance)		—						—		—
Invoices factored and not guaranteed		777						777		237

*Total excluding fair value of derivatives*		*34,655*		*243,556*		*152,954*		*431,165*		*447,559*

Fair value of derivatives – liabilities		19,975						19,975		11,322

Total		54,630		243,556		152,954		451,140		458,881

BREAKDOWN OF NON-CURRENT AND CURRENT FINANCIAL DEBT BY CURRENCY


	TOTAL 31 March 2015		TOTAL 31 March 2014
Euro		380,831		380,722
US Dollar		69,550		76,382
Hong Kong Dollar		68		490
Brazilian Real		72		92
Chinese Yuan		241		1,124
Indian Rupee		35		67
Czech Koruna		4		4
Korean Won		339
Russian Rouble		—		—

Total		451,140		458,881

BREAKDOWN OF NON-CURRENT AND CURRENT FINANCIAL DEBT BY INTEREST RATE:

Before implementing hedge instruments:


	At 31 March 2015		At 31 March 2014
Fixed rate financial debt		137,209		123,373
Variable rate financial debt		293,956		324,186

Total Financial Debt ⁽¹⁾		431,165		447,559

(1)	Excluding fair market value of derivatives – liabilities

After implementing hedge instruments:


	At 31 March 2015		At 31 March 2014
Fixed rate financial debt		317,209		253,373
Variable rate financial debt		113,956		194,186

Total Financial Debt ⁽¹⁾		431,165		447,559

(1)	Excluding fair market value of derivatives – liabilities

CALCULATION OF NET FINANCIAL DEBT:


	At 31 March 2015			At 31 March 2014
Non-current financial debt		396 510			407 983
Current financial debt		32 482			38 297
Bank overdrafts		1 396			1 042
Invoices factored and not guaranteed		777			237

Total Financial Debt (a)		431 165			447 559

Receivables from investments
Loans		1 018			1 182
Guaranteed deposits and securities paid		7 075			4 879
Other financial receivables		875			561
Current accounts		923			758

Total net financial receivables (b)		9 891			7 380

Cash (c)		236 845			239 212

NET FINANCIAL DEBT (a-b-c)		184 429			200 967

Equity		657 450			577 647
*Net debt / equity ratio*		*28.1*	%		*34.8*	%

In economic terms, net debt should be reduced by the value of treasury shares held for sale as part of the share purchase/subscription option and free share allocation plans.

The liquidation value of these shares was €10.9 million at 31 March 2015, given the exercise prices granted for share purchase/subscription options and the year-end share price for shares not allocated to these plans.

For accounting purposes, the value of treasury shares held is deducted from equity under IFRS; this amounted to €13.5 million at 31 March 2015 and €14.7 million at 31 March 2014.

NOTE 20: FINANCIAL RISK MANAGEMENT

The Faiveley Transport Group’s cash policy is based on overall financial risk management principles and provides specific strategies for areas such as foreign exchange risk, interest rate risk, raw materials risk, credit risk and liquidity risk.

The Group’s policy is not to enter into derivative instruments for speculative purposes.

The market values of interest rate and foreign exchange derivative instruments have been determined based on year-end market prices. They have been appraised by an independent expert.

FINANCIAL INSTRUMENTS FOR THE YEAR ENDED 31 MARCH 2015

Main valuation methods used for financial assets and liabilities:

•

since most of Faiveley Transport’s financial debt bears a variable rate, its fair value (rounded to the nearest credit spread) is equal to nominal values supplemented by interest not yet due;

•

due to their short maturity profile, the fair value of trade and other receivables, other current financial assets, current financial debt, cash and cash equivalents and short-term investments is deemed identical to their book value.


			Analysis by category of instrument									*Fair value classification of* *instruments ⁽¹⁾*
			Non			Fair value
			financial	Loans,		through		Assets
			assets and	receivables		profit and		available				*Level*		*Level*		*Level*
At 30 March 2015	Book value		liabilities	and liabilities		loss		for sale		Fair value		1		2		3
Shareholdings in unconsolidated subsidiaries		255	—		—		—		255		255		—		—		255
Equity interests in equity- accounted entities		21,817	21,817								21,817
Other long- term financial investments		4,077	—		4,077		—		—		4,077		—		—		—

*Non- current assets*		*26,149*	*21,817*		*4,077*		—		*255*		*26,149*		—		—		*255*

Trade receivables		224,130	8,395		215,735		—		—		224,130		—		—		—
Other current assets		24,718	7,338		17,380		—		—		24,718		—		—		—
Current financial assets		6,843			6,843		—		—		6,843		—		—		—
Fair value of derivatives - Assets		36,006	—		—		36,006		—		36,006		—		36,006		—
Short- term investments		14,824	—		—		14,824		—		14,824		14,824		—		—
Cash		222,021	—				222,021		—		222,021		—		—		—

*Current assets*		*528,542*	*15,733*		*239,958*		*272,851*		—		*528,542*		*14,824*		*36,006*		—

Total assets		554,691	37,550		244,035		272,851		255		554,691		14,824		36,006		255

Non- current borrowings and financial debt		396,510	—		396,510		—		—		396,510		—		—		—

*Non- current liabilities*		*396,510*	—		*396,510*		—		—		*396,510*		—		—		—

Current borrowings and financial debt		34,655	—		34,655		—		—		34,655		—		—		—

Fair value of derivatives - Liabilities		19,975	—		—		19,975		—		19,975		—		17,845		2,130	⁽²⁾
Current liabilities		303,935	12,881		291,054		—		—		303,935		—		—		—

*Current liabilities*		*358,565*	*12,881*		*325,709*		*19,975*		—		*358,565*		—		*17,845*		*2130*
Total liabilities		755,075	12,881		722,219		19,975		—		755,075		—		17,845		2,130

(1)	Revised IFRS 7 requires that fair value measurements be classified on three levels. The levels of fair value hierarchy reflect the significance of data used for the measurements:

Level 1: prices (unadjusted) of identical assets or liabilities listed on active markets;

Level 2: data other than listed prices covered by Level 1, that can be noted for the asset or liability concerned, either directly (i.e. prices) or indirectly (i.e. data derived from prices);

Level 3: data relating to the asset or liability, not based on observable market data (unobservable data).

(2)	This amount corresponds to the financial commitment accounted for as part of the recognition of put options held by minority shareholders in Faiveley Transport Schweiz AG (formerly called Urs Dolder AG) at 31March 2015.

FINANCIAL INSTRUMENTS FOR THE YEAR ENDED 31 MARCH 2014


			Analysis by category of instrument										Fair value classification of instruments ⁽¹⁾
			Non financial assets and		Loans, receivables		Fair value through profit and		Assets available				*Level*		*Level*		*Level*
At 31 March 2014	Book value		liabilities		and liabilities		loss		for sale		Fair value		1		2		3
Shareholdings in unconsolidated subsidiaries		253		—		—		—		253		253		—		—		253
Equity interests in equity-accounted entities		12 337		12 337								12 337						—
Other long-term financial investments		2 450		—		2 450		—		—		2 450		—		—		—

*Non- current assets*		*15 040*		*12 337*		*2 450*		—		*253*		*15 040*		—		—		*253*

Trade receivables		199 070		10 836		188 234		—		—		199 070		—		—		—
Other current assets		32 809		6 786		26 023		—		—		32 809		—		—		—
Current financial assets		4 927				4 927		—		—		4 927		—		—		—
Fair value of derivatives - Assets		2 979		—		—		2 979		—		2 979		—		2 979		—
Short- term investments		69 795		—		—		69 795		—		69 795		69 795		—		—
Cash		169 419		—				169 419		—		169 419		—		—		—

*Current assets*		*478 999*		*17 622*		*219 184*		*242 193*		—		*478 999*		*69 795*		*2 979*		—

Total assets		494 039		29 959		221 634		242 193		253		494 039		69 795		2 979		253

Non- current borrowings and financial debt		407 983		—		407 983		—		—		407 983		—		—		—

*Non- current liabilities*		*407 983*		—		*407 983*		—		—		*407 983*		—		—		—

Current borrowings and financial debt		39 576		—		39 576		—		—		39 576		—		—		—
Fair value of derivatives - Liabilities		11322		—		—		11322		—		11322		—		7 746		3 576	⁽²⁾
Current liabilities		258 552		13 592		244 960		—		—		258 552		—		—		—

*Current liabilities*		*309 450*		*13 592*		*284 536*		*11 322*		—		*309 450*		—		*7 746*		*3 576*

Total liabilities		717 433		13 592		692 519		11 322		—		717 433		—		7 746		3 576

(1)	Revised IFRS 7 requires that fair value measurements be classified on three levels. The levels of fair value hierarchy reflect the significance of data used for the measurements:

Level 1: prices (unadjusted) of identical assets or liabilities listed on active markets;

Level 2: data other than listed prices covered by Level 1, that can be noted for the asset or liability concerned, either directly (i.e. prices) or indirectly (i.e. data derived from prices);

Level 3: data relating to the asset or liability, not based on observable market data (unobservable data).

(2)	This amount corresponds to the financial commitment accounted for as part of the recognition of put options held by minority shareholders in Nowe GmbH and Faiveley Transport Schweiz AG (formerly called Urs Dolder AG) at 31 March 2014.

MARKET RISKS

Foreign exchange risk

The Group operates in foreign countries and is therefore exposed to exchange risk as a result of its exposure to a number of currencies.

The major currencies concerned are the US Dollar, the Hong-Kong Dollar, the Czech Koruna, the Swedish Krona, the Pound Sterling and the Chinese Yuan.

The management of exchange risk on commercial contracts is centralised by the parent company’s Treasury Department and comprises two parts: certain and uncertain risk.

•

Exchange risk management relating to tenders in foreign currencies (uncertain risk):

Faiveley Transport Group is required to submit tenders denominated in foreign currencies. The Group’s hedging policy is not to use hedge instruments during the offer phase, unless when specifically decided by Management. The aim is to manage the exchange risk through normal commercially available means. If necessary, the Group Treasury Department uses mainly exchange options.

•

Exchange risk management relating to commercial contracts (certain risk):

•

Exchange risk management relating to other transactions:

The Group’s policy is to hedge all expected future transactions in each major currency. The minimum trigger threshold for a foreign exchange hedge is € 250 K.

Various flows are hedged against, at a minimum of 80%, based on the annual budget.

In addition to commercial contracts, all financial positions and management fees deemed the most significant are systematically hedged against.

•

Group exposure resulting from commercial contracts at 31 March 2015


Amounts in currency thousands	Trade receivables [a]		Trade payables [b]			Commitments [c]			Net position before hedging [d] = [a]-[b]-[c]			Hedge instruments [e]			Net unhedged position [f] = [d]-[e]
Australian Dollar		6,622		—			(552	)		6,070			6,141			(71	)
Canadian Dollar		—		—			(7,783	)		(7,783	)		(7,783	)		—
Swiss Franc		—		—			(522	)		(522	)		(522	)		(0	)
Chinese Yuan		87,190		(10,687	)		65,094			141,597			141,226			371
Czech Koruna		2,680		(64,558	)		(778,925	)		(840,803	)		(840,579	)		(224	)
Pound Sterling		796		(175	)		1,545			2,165			1,915			250
Hong Kong Dollar		33,573		(153,744	)		(206,438	)		(326,609	)		(311,262	)		(15,347	)
Norwegian Krone		2,719		—			4,757			7,476			7,477			(1	)
Polish Zloty		—		—			3,114			3,114			3,114			(0	)
Russian Rouble		—		(2,315	)		67,433			65,118			65,195			(77	)
Swedish Krona		2,695		(24,260	)		(74,270	)		(95,835	)		(98,316	)		2,480
Singapore Dollar		4,006		(790	)		2,176			5,392			5,392			0
US Dollar		1,720		(4,030	)		119,772			117,462			117,480			(18	)

•

Forward sales hedging financial and commercial transactions at 31 March 2015


	€ thousands		Currency thousands		Fair value
Norwegian Krone		859		7,477		—
Swedish Krona		18,614		173,927		(101,607	)
Czech Koruna		12,151		334,422		(94,130	)
Australian Dollar		22,949		32,644		(22,500	)
Hong Kong Dollar		138,090		1,184,054		(3,794,465	)
Singapore Dollar		17,156		25,346		525,286
US Dollar		323,887		354,735		(5,397,442	)
Swiss Franc		680		820		(105,510	)
Pound Sterling		28,011		20,536		(142,730	)
Indian Rupee		833		58,155		(34,964	)
Russian Rouble		2,459		153,876		(4,902	)
Chinese Yuan		31,291		219,828		(1,669,511	)
Polish Zloty		1,010		4,280		(36,733	)

TOTAL		597,990				(10,879,208	)

•

Forward purchases hedging financial and commercial transactions at 31 March 2015


	€ thousands		Currency thousands		Fair value
Swedish Krona		63,082		586,891		(23,413	)
Czech Koruna		52,778		1,455,241		415,728
Australian Dollar		6,843		9,754		26,810
Hong Kong Dollar		170,115		1,448,170		3,396,058
Singapore Dollar		9,024		13,332		—
US Dollar		124,740		153,962		18,544,922
Swiss Franc		738		819		46,862
Canadian Dollar		5,665		7,783		—
Pound Sterling		56,355		40,763		(391,617	)
Indian Rupee		10,899		969,650		2,529,455
Russian Rouble		1,599		106,752		(39,061	)
Korean Won		3,403		4,503,800		(338,669	)
Chinese Yuan		135,767		954,624		6,186,624
Polish Zloty		2,593		10,854		55,810

TOTAL		643,601				30,409,509

•

Sensitivity analysis

The following table presents, at 31 March 2015, the sensitivity to a 10% positive or negative change in the Euro against other currencies:

•

the effect on equity results from the valuation of the efficient portion of derivative instruments qualifying as cash flow hedges.


	Movement in € exchange rate			Effect on profit from ordinary activities (before tax)			Effect on equity reserves
US Dollar		10	%		(3,029	)		(168	)
		-10	%		2,479			168

Chinese Yuan		10	%		1,336			(148	)
		-10	%		(1,093	)		148

Pound Sterling		10	%		1,442			(748	)
		-10	%		(1,180	)		748

Australian Dollar		10	%		510			—
		-10	%		(417	)		—

Hong Kong Dollar		10	%		65			(278	)
		-10	%		(53	)		278

Singapore Dollar		10	%		122			—
		-10	%		(100	)		—

Brazilian Real		10	%		299			—
		-10	%		(245	)		—

Swedish Krona		10	%		15			500
		-10	%		(12	)		(500	)

Czech Koruna		10	%		128			—
		-10	%		(105	)		—

Swiss Franc		10	%		(203	)		—
		-10	%		166			—

Russian Rouble		10	%		77			29
		-10	%		(63	)		(29	)

Interest rate risks

The syndicated debt, excluding the revolving facility, is indexed on Euribor variable rates. The “SSD Schuldschein” private placement includes several maturities, some of which are indexed on a variable rate, others bearing a fixed rate. This debt may be hedged in accordance with the Group’s interest rate risk policy. None of the revolving facilities, all bearing a variable rate, whether drawn or undrawn, nor the US private placement-type fixed-rate bond issue are subject to interest rate hedging.

To manage its risk, the Treasury department has implemented a hedging strategy using interest rate swaps and options.

The exposure of interest rates on loans in Euros is hedged for between 77% and 98% of the drawn debt, depending on fluctuations for the 2015/2016 period.

The US dollar denominated debt comprising the “US Private Placement” bond issue exclusively bears fixed rates.

The estimated cost of the Euro-denominated syndicated debt and “Schuldschein” loan is 1.71% for the 2015/2016 period, hedges and spreads included. The estimated cost of the US-denominated debt is estimated at 4.91%. The total cost of the Group’s debt for 2015/2016 is therefore estimated at 2.24%.

Considering the amortisation profile of the syndicated facility and interest rate hedges, the net exposure at 31 March 2015 was as follows:


	Financial liabilities				Hedge instruments				Net hedged variable rate exposure
Euro-denominated debt	Fixed rate		Variable rate		Fixed rate		Variable rate		Fixed rate		Variable rate
Under 1 year		—		30,000		30,000		—		30,000		—
1 to 2 years		—		30,000		30,000		—		30,000		—
2 to 3 years		—		30,000		30,000		—		30,000		—
More than 3 years		67,500		197,500		50000		—		117,500		147,500

Total EUR		67,500		287,500		140,000		—		207,500		147 500	(1)

(1)	Sensitivity analysis of net exposure (€ 147 .5 million): A 100 basis points increase in both the reference “Euribor 3 months” and “Euribor 6 months” interest rates would result in a full-year increase of € 1 .5 million in interest expense.

Given the amortisation profile of the syndicated credit, the US private placement and interest rate hedges, the net exposure of the US dollar-denominated debt at 31 March 2015 was as follows:


	Financial liabilities				Hedge instruments				Net hedged variable rate exposure
USD-denominated debt	Fixed rate		Variable rate		Fixed rate		Variable rate		Fixed rate		Variable rate
Under 1 year		—		—		—		—		—		—
1 to 2 years		—		—		—		—		—		—
2 to 3 years		3,600		—		—		—		3,600		—
More than 3 years		71,400		—		—		—		71,400		—

Total USD		75,000		—		—		—		75,000		—

The following table summarises the interest rate risk exposure for the 2015/2016 period:


Debt (€ K)		Currency		Maximum exposure			Estimated cost of debt
	355,000		EUR		23	%		1.71	%
	75,000		USD		0	%		4.83	%

•

Instruments recognised in equity


	On EUR loans					On USD loans
	Nominal (€ thousands)		Fair value (€ thousands)			Nominal (currency thousands)		Fair value (currency thousands)		Nominal (€ thousands)		Fair value (€ thousands)
Swap		180,000		(782	)		—		—		—		—
Tunnel		—		—			—		—		—		—
Cap		30,000		(92	)		—		—		—		—

Total		210,000		(874	)		—		—		—		—

•

Sensitivity analysis

The Group has implemented a diversified interest rate risk management policy aimed at limiting the impact of potential interest rate increases on its cash flow. As at 31 March 2015, the servicing of projected debt, net of hedges put in place, would limit the impact of a 1% increase in interest rates on debt and hedges to € 1.0 million.

The positive impact on equity is € 1.5 million with a 0.5% interest rate increase.

Raw material risk

The Faiveley Transport Group is exposed to increases in the cost of raw materials such as steel, aluminium and copper, as well as to increases in transportation costs. The table below shows the amounts of each raw material bought annually through purchase of components:


(€ millions)	Aluminium		Cast iron		Steel		Stainless steel		Rubber		Copper
2014/2015 amounts		24		11		34		9		17		5

Derivative financial instruments

•

Fair value of derivative instruments

The fair value of derivative instruments for hedging exchange, interest rate and raw materials risks reflected in the balance sheet was as follows:

Unrealised

Financial

capital

instruments

gains/(losses)

At 31 March 2015

Assets

Liabilities

taken to equity

Interest rate hedges⁽¹⁾

—

849

(566

)

Raw material hedges⁽¹⁾

—

Foreign exchange hedges

35,965

16,998

112

- fair value hedges

17,685

10,190

—

- cash flow hedges

363

263

112

- not eligible for hedge accounting

17,917

6,545

—

Total

36,006

17,847

(413

)

(1)

Cash flow hedges.

Unrealised

Financial

capital

instruments

gains/(losses)

At 31 March 2014

Assets

Liabilities

taken to equity

Interest rate hedges(1)

—

1,512

(1,392

)

Raw material hedges⁽¹⁾

—

(35

)

Foreign exchange hedges

2,979

6,201

(33

)

- fair value hedges

2,284

2,822

—

- cash flow hedges

(33

)

- not eligible for hedge accounting

675

3,346

—

Total

2,979

7,748

(1,460

)

(1)

Cash flow hedges.

•

Movement in equity reserve (excl. deferred tax):


	Amount at 1 April 2014			Movement in the year		Amounts reclassified to the income statement			Amount at 31 March 2015
Interest rate hedges		(1,402	)		1,009		(173	)		(566	)
Foreign exchange hedges		(33	)		177		(32	)		112
Raw material hedges		(35	)		76		—			41

TOTAL		(1,470	)		1,262		(205	)		(413	)

•

Horizon for release of amounts recorded in equity at 31 March 2015:

The amount of €112 K recorded in equity in respect of exchange rate derivatives will be recycled to the income statement in the year ending 31 March 2016.

The amount of (€566) K recorded in equity in respect of interest rate derivatives will be released to the income statement between 1 April 2014 and 31 March 2019 according to the maturity of the flows hedged.

The amount of €41 K taken to equity in relation to raw materials will be transferred to the income statement for the year to 31 March 2016.

CREDIT RISK

Owing to its commercial activities, Faiveley Transport Group is exposed to credit risk, in particular the risk of default on the part of its customers.

In the case of derivative instruments and cash transactions, counterparties are limited to the high-quality financial institutions that currently finance the Group.

At 31 March 2015, receivables sold without recourse totalled €96.9 million, including €7.9 million for reverse factoring programmes implemented at the request of customers.

The amount of receivables sold and not guaranteed was €0.8 million.

As regards the risk associated with financial assets, the Group’s maximum exposure is equal to their book value.

LIQUIDITY RISK

At 31 March 2015, the Group had €150 million in undrawn confirmed credit facilities.

At 31 March 2015, the Group complied with all financial conditions required by all credit agreements.

Available cash and cash equivalents


	31 March		31 March
	2015		2014
Available credit lines (a)		197,502		194,935
Parent company cash (b)		12,290		71,914
Subsidiaries cash and cash equivalents (c)		223,778		171,386

Available cash and cash equivalents (1) = (a+b+c)		433,570		438,235

Borrowings due in less than one year (d)		32,482		38,297
Available credit lines maturing in less than one year and bank overdrafts (e)		80,138		107,744

Net cash and cash equivalents available over the next year (d-e)		320,950		292,194

Cash and cash equivalents include unused factoring cash of € 75 million (net of non-guaranteed receivables factored).

Available cash was virtually stable over the period. However, the refinancing of the syndicated credit and part of the bilateral revolving improved the level of cash available within one year.

Financial debt of less than one year is detailed in Note 19 (excluding bank overdraft, fair value of derivatives and invoices factored and not guaranteed).

Available credit facilities represent credit facilities granted by the banks and available immediately to the subsidiaries or the parent company. At 31 March 2015, € 1.4 million was used in respect of a bank overdraft.

Maturity dates of financial liabilities at 31 March 2015


									Non-financial
At 31 March 2015	Book value		Under 1 year		1 to 5 years		Over 5 years		liabilities
Liability financial instruments:
Borrowings		425,560		30,155		242,682		152,723
Interest on liabilities		1,908		1,908		—		—		—
Leases		1,301		196		874		231		—
Employee profit sharing		65		65		—		—		—
Various other financial liabilities		6		6		—		—		—
Guarantees and deposits received		56		56				—		—
Credit current accounts		96		96		—		—		—
Bank overdrafts		1,396		1,396		—		—		—

Fair value of derivatives – liabilities		19,975		19,975		—		—		—
Invoices factored and not guaranteed		777		777		—		—		—

*Financial liabilities*		*451,140*		*54,630*		*243,556*		*152,954*		—

Operating liabilities		291,054		278,173						12,881

*Total*		742,194		332,803		243,556		152,954		12,881

•

Future cash flow:


At 31 March 2015	Value		Under 1 year		1 to 2 years		2 to 3 years		Over 3 years
Borrowings		427,468		32,063		30,330		34,284		330,791
Leases		1,301		196		226		209		670
Employee profit sharing		65		65
Various other financial liabilities		6		6
Guarantees and deposits received		56		56
Credit current accounts		96		96

•

Forecast undiscounted future cash flow of interest and interest rate hedges


At 31 March 2015	Value		Under 1 year		1 to 2 years		2 to 3 years		Over 3 years
Interest on liabilities		47,424		7,890		7,643		7,512		24,379
Cash flow from liability financial instruments		1,913		899		541		282		191

Maturity dates of financial liabilities at 31 March 2014


									Non-financial
At 31 March 2014 restated	Book value		Under 1 year		1 to 5 years		Over 5 years		liabilities
Liability financial instruments:
Borrowings		442,933		36,270		225,056		181,607
Interest on liabilities		1,625		1,625		0		0		—
Leases		1,477		188		827		462		—
Employee profit sharing		65		65		0		0		—
Various other financial liabilities		1		1		0		0		—
Guarantees and deposits received		87		56		31		0		—
Credit current accounts		92		92		0		0		—
Bank overdrafts		1,042		1,042		0		0		—
Fair value of derivatives – liabilities		11,322		11,322		0		0		—
Invoices factored and not guaranteed		237		237		0		0		—

*Financial liabilities*		*458,881*		*50,898*		*225,914*		*182,069*		—

Operating liabilities		258,552		244,960						13,592

*Total*		724,565		300,507		225,914		182,069		16,075

•

Future cash flow:


At 31 March 2014	Value		Under 1 year		1 to 2 years		2 to 3 years		Over 3 years
Borrowings		444,559		37,099		35,482		186,647		185,331
Leases		1,478		189		209		202		878
Employee profit sharing		65		65		—		—		—
Various other financial liabilities		1		1		—		—		—
Guarantees and deposits received		87		56		31		—		—
Credit current accounts		92		92		—		—		—

•

Forecast future cash flow of interest and interest rate hedges:


At 31 March 2014	Value		Under 1 year		1 to 2 years		2 to 3 years		Over 3 years
Interest on liabilities		53,300		8,700		8,700		7,100		28,800
Cash flow from liability financial instruments		1,550		1,200		350		—		—

CONTRIBUTION TO NET FINANCIAL INCOME/(EXPENSE)


						Revaluation						Exchange gain or loss and other			Net financial
At 31 March 2015	Interest			Dividends		Income		Losses		Disposals		Exchange gain or loss and other			income/ (expense)
Loans and receivables		1,007											15,635			4,070
Payables at amortised cost		(12,573	)
Instruments measured at fair value through profit or loss		(1,551	)				12,460		—		474		(26,997	)		(15,614	)
Assets available for sale		—			—		—		—		—		—			—
Other		(2,347	)		24											(2,323	)

Total		(15,464	)		24		12,460		—		474		(11,362	)		(13,868	)


At 31 March 2014 restated	Interest			Dividends		Revaluation					Disposals		Exchange gain or loss and other			Net financial income/ (expense)
						Income		Losses
						Income		Losses
Loans and receivables		1,081												(2,072	)		(12,191	)
Payables at amortised cost		(11,200	)
Instruments measured at fair value through profit or loss		1,207					2,245		(2,657	)		392		1,832			3,019
Assets available for sale		—			—		—		—			—		—			—
Other		(1,933	)		17												(1,916	)

Total		(10,845	)		17		2,245		(2,657	)		392		(245	)		(11,093	)

NOTE 21: CURRENT LIABILITIES


	31 March 2015		31 March 2014
Trade payables		209 619		180 494
Tax and social security liabilities		68 187		59 879
Accrued credit notes		1 458		959
Deferred income		168		2 008
Accrued expenses		12 713		11 584
Non-current assets suppliers		441		610
Dividends payable		55		55
Other operating liabilities		11 295		2 963

Total		303 935		258 552

At 31 March 2015, “Trade payables” included € 32.7 million of credit work-in-progress on projects (compared with € 23.8 million at 31 March 2014).

The increase in “Other operating liabilities” is primarily due to the exposure of project portfolios to the exchange risk, which increased due to the significant movements in exchange rates over the financial year. This exchange risk is hedged by the financial instruments presented under “Current financial assets” and “Short-term financial borrowings and liabilities” (under “Fair market value of derivatives – liabilities”).

NOTE 22: FACTORING

In order to diversify the Group’s sources of financing and reduce the credit risk, several subsidiaries factor their receivables. At 31 March 2015, the assignment of receivables to the various factors resulted in a € 97,716 K reduction in “Trade receivables”. These transactions include factoring contracts without recourse as requested by two Group customers, totalling € 7,937 K. In addition, available and uncalled cash with the factoring companies amounted to € 75,028 K and is included in cash and cash equivalents. Conversely, the portion of receivables sold and not guaranteed was recorded as financial debt under “Current borrowings and financial liabilities” for an amount of € 777 K. The risk incurred by the Group in respect of receivables sold and not guaranteed relates to the non-collection of these receivables.

NOTE 23: SEGMENT REPORTING

The Group opted for a presentation similar to IAS 14, pursuant to IFRS 8, consisting of presenting information for the rail operating segment.

INCOME STATEMENT


	31 March 2015			31 March 2014
Continuing activities:
Sales		1 048 423			957 165
Operating profit after share of profit of equity-accounted entities		95 279			87 666
Net financial expense		(13 867	)		(11 093	)
Income tax		(28 535	)		(26 432	)
Share of profit of other equity-accounted entities		—			—

Net profit from continuing operations		52 877			50 141

Consolidated net profit		52 877			50 141

Depreciation and amortisation for the period		17 446			15 985

Balance sheet


	31 March 2015		31 March 2014
Property, plant and equipment and intangible assets, net		826 029		782 448
Non-current financial assets		25 121		14 938
Deferred tax assets		66 429		51 738

*Sub-total non-current assets*		*917 579*		*849 124*

Inventories and receivables (excluding tax)		516 123		455 757
Other current assets		85 363		53 907
Cash		236 845		239 212
Assets held for sale		7 123		0

*Sub-total current assets*		*845 454*		*748 876*

Total assets		1 763 033		1 598 000

*Equity*		*657 452*		*577 647*

Employee benefits and other non-current provisions		48 084		38 235
Deferred tax liabilities		50 854		34 030
Non-current financial debt		396 510		407 983

*Sub-total non-current liabilities*		*495 448*		*480 248*

Current provisions		101 810		94 373
Current financial debt		54 630		50 899
Advances, prepayments and non-financial liabilities (excluding tax)		444 178		381 137

Other current liabilities		9 515		13 696

*Sub-total current liabilities*		*610 133*		*540 105*

Total equity and liabilities		1 763 033		1 598 000

Acquisitions of property, plant and equipment and intangible assets (excluding goodwill) for the period		23 568		18 561
Workforce		5 431		5 264

INFORMATION BY GEOGRAPHIC REGION

Main contribution figures by geographic region of origin:

2014/2015 FY


	France		Europe (excl. France)		Americas		Asia/Pacific		Total
Sales		241,779		463,920		158,654		184,070		1,048,423
Closing balance of property, plant and equipment and intangible assets (excluding goodwill)		48,118		38,487		31,353		10,959		128,917
Acquisition of property, plant and equipment and intangible assets (excluding goodwill)		10,666		7,516		1,826		3,559		23,568
Amortisation and depreciation of property, plant and equipment and intangible assets (excluding goodwill)		7,275		6,226		2,152		1,794		17,446

2013/2014 FY


	France		Europe (excl. France)		Americas		Asia/Pacific		Total Restated
Sales		242,422		446,212		123,973		144,558		957,165
Closing balance of property, plant and equipment and intangible assets (excluding goodwill)		44,784		37,104		29,305		7,315		118,508
Acquisition of property, plant and equipment and intangible assets (excluding goodwill)		9,601		6,135		1,222		1,603		18,561
Amortisation and depreciation of property, plant and equipment and intangible assets (excluding goodwill)		5,913		5,569		2,817		1,686		15,985

MAIN CUSTOMERS

During the 2014/2015 financial year, the Group achieved 30.3% of its sales with the three largest European manufacturers (Alstom, Bombardier and Siemens) and 52.3% with its top ten customers (including Ansaldo, Stadler, SNCF, Trenitalia, Indian Railways, Rotem and CNR). Two customers each accounted for more than 10% of the Group consolidated revenue, constituting a combined 26.4% of Group sales. The largest of these constituted 13.5% of consolidated revenue.

NOTE 24: SALES


	31 March 2015		31 March 2014
Sales of products and services associated with contracts > 1 year		1 009 231		929 329
Sales of products and services associated with contracts < 1 year		39 192		27 836

Total ⁽¹⁾		1 048 423		957 165

(1)	Of which sales related to the “Services” division: € 436.0 million at 31 March 2015 and € 394 million at 31 March 2014.

Sales by product are as follows:


	31 March 2015		31 March 2014
Energy & Confort		213 143		218 692
Access & Mobility		142 288		142 895
Brakes & Safety		256 972		201 693
Services		436 018		393 886

Total		1 048 423		957 165

NOTE 25: GROSS PROFIT AND COST OF SALES

Gross profit is defined as sales less cost of sales.

Gross profit for the financial year totalled €254.4 million, representing 24.3% of sales compared with 23.7% in 2013/14 (restated figures).

The cost of sales breaks down as follows:


	31 March 2015			31 March 2014
Direct labour		(96 228	)		(84 052	)
Raw materials and components		(418 498	)		(385 468	)
Structure costs		(77 815	)		(73 886	)
Procurement costs		(51 110	)		(48 967	)
Engineering costs		(56 332	)		(55 135	)
Other direct costs		(55 534	)		(48 722	)
Change in projects in progress		1 187			6 890
Net change in project provisions (charge/reversal)		(37 944	)		(41 815	)
Net change in provisions for losses on completion		(1 789	)		958

Total cost of sales		(794 062	)		(730 197	)

NOTE 26: OTHER INCOME AND EXPENSES FROM RECURRING OPERATIONS


	31 March 2015			31 March 2014
Royalties		1 982			2 119
Reversal of provisions for other liabilities		3 882	⁽¹⁾		1 518
Insurance compensation		17			—
Other operating income		918			984

Total other income		6 798			4 621

Royalties		0			—
Doubtful debts		(1 146	)		(877	)
Charges to provisions for other liabilities		(2 338	)		(1 707	)
Inventory writedowns		(6 555	)		(5 148	)
Employee profit sharing		(884	)		(944	)
Other operating expenses		(7 161	)⁽²⁾		(2 837	)

Total other expenses		(18 084	)		(11 513	)

Net total		(11 286	)		(6 892	)

(1)	Of which €3.3 million of reversal of provision for environmental risk at the Graham-White Manufacturing Co. entity.

(2)

Of which:

•

Individual redundancy costs of €3.7 million (of which €1.1 million at the Faiveley Transport entity, €0.8 million at FT Leipzig and €0.7 million at FT Witten)

•

Adjustments of €2.0 million to supplier service invoices

NOTE 27: RESTRUCTURING COSTS AND GAINS AND LOSSES ON DISPOSAL OF PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS

RESTRUCTURING COSTS

Restructuring costs for the period totalled € 1.6 million, compared with € 1.3 million in the previous financial year. Over the period, these restructuring costs primarily related to FT Iberica for € 0.9 million and FT Do Brasil for € 0.3 million.

DISPOSAL OF NON-CURRENT ASSETS


	31 March 2015			31 March 2014
Sales price of assets sold		148			432
Net book value of assets sold		(214	)		(485	)

Total		(66	)		(53	)

NOTE 28: NET FINANCIAL INCOME/(EXPENSE)


	31 March 2015			31 March 2014
Gross cost of financial debt		(12 226	)		(10 513	)
Income from cash and cash equivalents		1 255			1 170

Net cost of financial debt		(10 971	)		(9 343	)

Financial instrument income		1 101			5 488
Income linked to exchange differences		31 776			8 558
Proceeds from sale of marketable securities		21
Reversal of financial provisions		2
Income from vendor loan		—
Dividends received		24			17
Other financial income		173			298

Other financial income		33 097			14 361

Financial instrument charges		(14 319	)		(4 072	)
Charges linked to exchange differences		(19 013	)		(9 400	)
Interest charges on retirement commitments		(1 262	)		(1 010	)
Net book value of financial assets sold		—			(2	)
Charges on bank guarantees		(1 055	)		(912	)
Reversal of discounting the value of put options held by minority shareholders		(18	)		(11	)
Other financial expenses		(327	)		(704	)

Other financial expenses		(35 994	)		(16 111	)

NET FINANCIAL EXPENSE		(13 868	)		(11 093	)

The net financial expense for the year was primarily due to:

•

the net cost of financial debt for the year, i.e. € 11.0 million compared with € 9.3 million in the previous year. This increase is primarily due to the cost of the additional long-term “Schuldschein” financing taken in March 2014, which was not totally offset by the favourable impact of lower interest rates and improved interest rate hedging.

•

a €0.5 million unfavourable impact of realised and unrealised exchange differences.

•

other financial income and expense items, comprising bank guarantees, interest on pension commitments, the effect of the reversal of discounting the value of put options held by minority shareholders and other financial income and expenses, resulting in a net loss of €2.4 million.

NOTE 29: INCOME TAX

ANALYSIS BY TYPE


	31 March 2015			31 March 2014
Current tax - continuing operations		(23 109	)		(28 463	)
Deferred tax - continuing operations		(5 426	)		2 031

Total income tax - continuing operations		(28 535	)		(26 432	)

Tax on discontinued operations		—

TOTAL TAX		(28 535	)		(26 432	)

The income tax charge was €28.5 million, compared with €26.4 million for the year to 31 March 2014. As a percentage, the effective tax rate was 38.1%, compared with 36.6% for the year to 31 March 2014. This increase was primarily due to an unfavourable country mix.

EFFECTIVE TAX RATE


	31 March 2015			31 March 2014
Profit before tax from continuing operations		81 412			76 573

- Of which share of profit of joint ventures		6 551			4 368

Profit before tax and share of profit of joint ventures from continuing operations		74 859			72 205

Statutory tax rate of the parent company		38.0	%		38.0	%

Theoretical tax credit/(charge)		(28 447	)		(27 438	)

Impact of:
Permanent differences		(1 703	)		(514	)
Difference in tax rates of other countries		3 705			5 047
Impact of other taxes (CVAE in France, IRAP in Italy and withholding taxes)		(3 034	)		(4 913	)
Deferred tax adjustments related to changes in tax rates		(1 620	)		88
Use of previous tax losses not capitalised		—			630
Change in valuation allowance of deferred tax assets on tax losses carried forward		1 591			100
Change in deferred tax assets not recognised		1 788			(69	)
Less tax credits					—
Current tax adjustments in respect of earlier periods		(1 070	)		792
Other		252			(155	)

Tax charge		(28 536	)		(26 432	)

Effective tax rate		38.1	%		36.6	%

NOTE 30: PROFIT OR LOSS OF OPERATIONS HELD FOR DISPOSAL AND DISCONTINUED OPERATIONS

Nil

NOTE 31: PAYROLL COSTS AND WORKFORCE

At 31 March 2014 restated and 31 March 2015, the workforce of joint ventures was excluded from the total workforce as a result of the application of IFRS 10, 11 and 12.


	31 March 2015		31 March 2014
Salaries		214 093		204 758
Social security charges		55 981		53 671
Retirement and other post-employment benefits		13 803		10 242
Charges associated with share-based payments		2 172		0

TOTAL PAYROLL COSTS		286 049		268 671

TOTAL WORKFORCE		5 431		5 264

NOTE 32: EARNINGS PER SHARE

The table below shows the reconciliation between earnings per share and diluted earnings per share:


	31 March 2015			31 March 2014
Net profit - Group share used in the calculation of basic and diluted earnings per share (€ K)		55 645			50 110
Average number of shares (a)		14 614 152			14 614 152
Average number of treasury shares (b)		(282 158	)		(292 258	)
Average number of outstanding shares (a - b = c)		14 331 994			14 321 894
Average number of dilutive instruments (d)		85 928			244 698
Diluted average number of shares (c + d)		14 417 922			14 566 592
Basic earnings per share		3.88			3.50
Diluted earnings per share		3.86			3.44

NOTE 33: POST-BALANCE SHEET EVENTS

In application of the terms and conditions of the agreement of 23 December 2014 between Faiveley Transport and the minority shareholders in Faiveley Transport Schweiz AG, the legal and financial transfer of 10% of shares held by minority shareholders to Faiveley Transport will take place in the first quarter of the 2015/2016 financial year. The remaining 10% equity interest will be transferred in the first quarter of the 2016/2017 financial year.

On 9 April 2015, Faiveley Transport Group and the subsidiary of SMRT, Singapore Rail Engineering (SRE), signed a joint venture agreement for the marketing and provision of maintenance, repair and overhaul services (MRO) for rolling stock in South-East Asia (excluding Thailand, Taiwan and Hong Kong). The new company, called Faiveley Rail Engineering Singapore Pte Ltd, will market and supply MRO Services for brakes, access doors, platform screen doors, heating, ventilation and air conditioning (HVAC) systems, and auxiliary power supply (APS) systems.

NOTE 34: TRANSACTIONS WITH RELATED PARTIES

The aim of this note is to present the material transactions entered into between the Group and its related parties as defined by IAS 24.

Transactions entered into between the Faiveley Transport Group and its related parties are at arm’s length terms.

TRANSACTIONS WITH RELATED COMPANIES

A list of consolidated companies is provided in Note 36.

Transactions carried out and balances outstanding with fully consolidated companies at the balance sheet date are fully eliminated on consolidation.

Only the following are included in the notes below:

•

data relating to such intra-Group transactions, when they involve joint ventures (equity accounted) concerning the portion not eliminated on consolidation;

•

material transactions with other Group companies.

Transactions with consolidated companies

•

Transactions with joint ventures not eliminated on consolidation:

Joint ventures are equity consolidated:

•

Qingdao Faiveley SRI Rail Brake Co. Ltd

•

Datong Faiveley Railway Vehicle Equipment Co., Ltd

•

Shijiazhuang Jiaxiang Precision Machinery Co. Ltd

The consolidated financial statements include transactions carried out by the Group with its joint ventures as part of its normal business activities.

These transactions are normally carried out at arm’s length terms.


(€ thousands)	31 March 2015			31 March 2014
Sales		32 610			17 973
Operating receivables		13 925			13 626
Operating liabilities		(2 206	)		(1 396	)

With the companies that control Faiveley Transport

•

With FAMILLE FAIVELEY PARTICIPATIONS

•

Contract of assistance:

Under the terms of the contract of assistance and the rebilling of rent and services provided, Faiveley Transport recognised the following amounts as expenses and income for the financial year:


(€)	Faiveley Transport expenses		Faiveley Transport income
Contract of assistance, provision of services		380,876

Rebilling of rent and utility expenses		—		3,170

•

Fraction of financial investments, receivables, debts, expenses and income pertaining to these related companies:


(€ thousands)	31 March 2015			31 March 2014
Trade receivables		1			1
Borrowings and various financial liabilities
Trade payables		(114	)		(114	)

Rebilling		3			3
Provision of services		(381	)		(380	)

Financial income
Financial expenses

SENIOR MANAGEMENT AND NON-EXECUTIVE OFFICERS’ REMUNERATION

The Group considers that, within the meaning of IAS 24, the Group’s senior management comprise mainly the members of the Management Board, the Supervisory Board and the Executive Committee.

The following table provides details, in aggregate and for each category, of the components of remuneration of senior management:


(€)	2014/2015			2013/2014
Short-term benefits ⁽¹⁾		5,135,691			4,868,053
Termination benefits ⁽⁴⁾		688,000			457,000
Post-employment benefits ⁽²⁾		(26,128	)		9,768
Share-based remuneration ⁽³⁾					—
Other long-term benefits		(655	)		(299	)
Directors’ fees ⁽⁵⁾		226,059			252,573

Total		6,022,967			5,587,095

(1)	This category comprises fixed and variable remuneration (including employers’ costs), profit sharing and incentive payments, supplementary contributions and benefits in kind paid during the year.

(2)	Movements in retirement provisions.

(3)	Charge recognised in the income statement.

(4)	In the year to 31 March 2015, termination benefits concerned Thierry Barel. In the year to 31 March 2014, termination benefits concerned Helen Potter for €175 K and François Feugier for €282 K.

(5)	Amount paid after deduction of withholding taxes.

AGREEMENTS ENTERED INTO WITH SENIOR MANAGEMENT

•

With Stéphane RAMBAUD-MEASSON

This base will be affected by a coefficient equal to the average share of variable remuneration received during the 3 years prior to departure.

•

With Thierry BAREL

Pursuant to the provisions of Articles L.225-90-1 and R.225-60-1 of the Commercial Code, the Supervisory Board at the meeting of 27 May 2014, on the proposal of the Remuneration Committee, set the amount of the termination benefits of Thierry Barel, Chairman of the Management Board and Chief Executive Officer of Faiveley Transport from 1 April 2011 until his removal on 7 April 2014.

Thierry Barel received special compensation of € 688,000, based on the application of the performance conditions provided for in the event of the termination of his term of office.

NOTE 35: DIVIDENDS

Approval was granted at the General Meeting of 12 September 2014 for the payment of a dividend (including treasury shares) in respect of the 2013/2014 financial year totalling € 11,691,321.60:

•

€11,454,135.20 in respect of the € 0.80 dividend per share paid on 3 October 2014 to 14,317,669 shares for the 2013/2014 financial year.

•

€237,186.40 in unpaid dividends, corresponding to the 296,483 treasury shares held by Faiveley Transport at the time of the dividend distribution on 2 October 2014.

Number of
shares

Treasury
shares

Number of
shares to
which
dividends have
been paid

Dividends
approved

Ordinary shares

6,603,041

296,483

6,306,558

5,045,246

Shares with double voting rights

8,011,111

6,408,889

14,614,152

296,483

14,317,669

11,454,135

⁽¹⁾

⁽¹⁾	Including €5,052,330 to Financière Faiveley and €927,430 to François Faiveley Participations (FFP)

In respect of the 2014/2015 financial year, the General Meeting will be asked to approve the payment to shareholders of a dividend of €13,152,736.00, being €0.90 per share. This distribution will be taken from the account “Retained Earnings”. The dividend will be payable from 5 October 2015. This dividend was not recognised as a liability at 31 March 2015.

NOTE 36: OFF-BALANCE SHEET COMMITMENTS

LEASES

•

Operating leases

The operating leases entered into by the Faiveley Transport Group relate mainly to various buildings and furnishings.

The income and expenses recognised in respect of operating leases over the last three financial years break down as follows:


	2014/2015			2013/2014			2012/2013
Operating lease expenses		(12,018	)		(11,148	)		(11,482	)
Sub-letting income		525			511			538

Total		(11,493	)		(10,637	)		(10,944	)

The future minimum payments to be made in respect of operating leases that are non-cancellable and had not expired as at 31 March 2015 are as follows:


	Less than 1 year		1 to 5 years		More than 5 years
Total future lease payments		9,933		34,544		10,555

OTHER COMMITMENTS GIVEN


	31 March 2015		31 March 2014
Deposits, securities and bank guarantees given to customers		234 024		224 557
- of which given by joint ventures		—		—

Guarantees and securities given by the parent company to customers and banks		540 694		403 402

- of which on behalf of joint ventures		14 036		5 757

Borrowings guaranteed by pledges:		—
- mortgages of buildings		—

COMMITMENTS RECEIVED

Other guarantees from suppliers: € 2,669 K

NOTE 37: CONSOLIDATION SCOPE AND METHOD

Faiveley Transport is the Group’s holding company.

The following companies, over which Faiveley Transport exercises direct or indirect control, are fully consolidated.

LIST OF CONSOLIDATED COMPANIES AND CONSOLIDATION METHOD


ENTITY	COUNTRY	% control	% interest
*Parent company:*

FAIVELEY TRANSPORT
*Full consolidation:*

FAIVELEY TRANSPORT LEIPZIG GmbH & Co. KG	Germany	100.00	100.00
FAIVELEY TRANSPORT WITTEN GmbH	Germany	100.00	100.00
FAIVELEY TRANSPORT VERWALTUNGS GmbH⁾	Germany	100.00	100.00
FAIVELEY TRANSPORT HOLDING GmbH & Co. KG	Germany	100.00	100.00
FAIVELEY TRANSPORT NOWE GmbH	Germany	100.00	100.00
FAIVELEY TRANSPORT AUSTRALIA Ltd.	Australia	100.00	100.00
FAIVELEY TRANSPORT BELGIUM NV	Belgium	100.00	100.00
FAIVELEY TRANSPORT DO BRASIL Ltda.	Brazil	100.00	100.00
FAIVELEY TRANSPORT CANADA Ltd.	Canada	100.00	100.00
FAIVELEY TRANSPORT CHILE Ltda.	Chile	100.00	99.99
FAIVELEY TRANSPORT SYSTEMS TECHNOLOGY (Beijing) Co. Ltd.	China	100.00	100.00
FAIVELEY TRANSPORT FAR EAST Ltd.	China	100.00	100.00
SHANGHAI FAIVELEY RAILWAY TECHNOLOGY Co. Ltd.	China	51.00	51.00
FAIVELEY TRANSPORT METRO TECHNOLOGY SHANGHAI Ltd.	China	100.00	100.00
FAIVELEY TRANSPORT RAILWAY TRADING (Shanghai) Co. Ltd.	China	100.00	100.00
FAIVELEY TRANSPORT ASIA PACIFIC Co. Ltd.	China	100.00	100.00
FAIVELEY TRANSPORT KOREA Ltd.	Korea	100.00	100.00
FAIVELEY TRANSPORT IBERICA S.A.	Spain	100.00	100.00
FAIVELEY TRANSPORT USA Inc.	United States	100.00	100.00
FAIVELEY TRANSPORT NORTH AMERICA Inc.	United States	100.00	100.00
ELLCON DRIVE LLC.	United States	100.00	100.00
AMSTED RAIL - FAIVELEY LLC	United States	67.50	67.50
GRAHAM-WHITE MANUFACTURING Co.	United States	100.00	100.00
OMNI GROUP CORPORATION	United States	100.00	100.00
ADVANCED GLOBAL ENGINEERING LLC.	United States	100.00	55.00
ATR INVESTMENTS LLC.	United States	100.00	60.00
FAIVELEY TRANSPORT AMIENS	France	100.00	100.00
FAIVELEY TRANSPORT NSF	France	100.00	100.00
FAIVELEY TRANSPORT TOURS	France	100.00	100.00
FAIVELEY TRANSPORT GENNEVILLIERS	France	100.00	100.00
FAIVELEY TRANSPORT BIRKENHEAD Ltd.	United Kingdom	100.00	100.00
FAIVELEY TRANSPORT TAMWORTH Ltd.	United Kingdom	100.00	100.00
SAB WABCO Ltd.	United Kingdom	100.00	100.00
SAB WABCO DAVID & METCALF Ltd.	United Kingdom	100.00	100.00
SAB WABCO DAVID & METCALF PRODUCTS Ltd.	United Kingdom	100.00	100.00
SAB WABCO INVESTMENTS Ltd.	United Kingdom	100.00	100.00
SAB WABCO PRODUCTS Ltd.	United Kingdom	100.00	100.00
SAB WABCO UK Ltd.	United Kingdom	100.00	100.00
FAIVELEY TRANSPORT RAIL TECHNOLOGIES INDIA Ltd.	India	100.00	100.00
F.M.R.P.	Iran	51.00	51.00
FAIVELEY TRANSPORT ITALIA Spa	Italy	100.00	98.70
FAIVELEY TRANSPORT POLSKA z.o.o.	Poland	100.00	100.00


FAIVELEY TRANSPORT PLZEN s.r.o.	Czech Republic	100.00	100.00
FAIVELEY TRANSPORT TREMOSNICE s.r.o.	Czech Republic	100.00	100.00
FAIVELEY TRANSPORT LEKOV a.s	Czech Republic	100.00	100.00
o.o.o FAIVELEY TRANSPORT	Russia	100.00	98.00
FAIVELEY TRANSPORT METRO TECHNOLOGY SINGAPORE Ltd.	Singapore	100.00	100.00
FAIVELEY TRANSPORT MALMÖ AB	Sweden	100.00	100.00
FAIVELEY TRANSPORT NORDIC AB	Sweden	100.00	100.00
FAIVELEY TRANSPORT SCHWEIZ AG	Switzerland	80.00	80.00
SCHWAB VERKEHRSTECHNIK AG	Switzerland	100.00	100.00
FAIVELEY TRANSPORT METRO TECHNOLOGY THAILAND Ltd.	Thailand	100.00	100.00
FAIVELEY TRANSPORT METRO TECHNOLOGY TAIWAN Ltd.	Taiwan	100.00	100.00
Equity-accounted joint ventures

QINGDAO FAIVELEY SRI RAIL BRAKE Co. Ltd.	China	50.00	50.00
DATONG FAIVELEY RAILWAY VEHICLE EQUIPMENT Co., Ltd	China	50.00	50.00
SHIJIAZHUANG JIAXIANG PRECISION MACHINERY Co. Ltd.	China	50.00	50.00
Other equity-accounted entities:

Nil	—	—	—
Partnerships qualifying as joint arrangements:

Nil	—	—	—

NOTE 38: STATUTORY AUDITORS’ FEES

Fees payable to the Statutory Auditors and members of their network as part of assignments relating to the financial statements at 31 March 2015 and 31 March 2014 were as follows:


	ECA				PWC
	2014/2015		2013/2014		2014/2015		2013/2014
Audit:
Statutory Auditors, certification, review of individual and consolidated financial statements:
Issuer		154		152		251		244
Subsidiaries		106		106		634		711

Other assignments directly related to the audit assignment				3

*Sub-total audit fees*		*260*		*261*		*885*		*954*

Other services:
Legal, tax, corporate		0		—		0		36
Other		0		—		6		19

Sub-total other services		0		—		6		55

TOTAL		260		261		891		1,009

NOTE 39: FINANCIAL COMMUNICATION

These consolidated financial statements are available in English.

Faiveley Transport

Immeuble Le Delage – Hall Parc – Bât 6A

3, rue du 19 mars 1962

92230 Gennevilliers – France

Tel: +33 (0)1 48 13 65 00

Fax: +33 (0)1 48 13 65 54