Korian : 2019 Half-Year Report

2019 HALF-YEAR FINANCIAL REPORT

HALF-YEAR MANAGEMENT REPORT ................................................. 3

1.1 MESSAGE FROM THE CHIEF EXECUTIVE OFFICER ................................................................................... 3

1.2 ACTIVITIES OF THE KORIAN GROUP IN THE FIRST HALF OF 2019 ....................................................... 4

1.3 CONSOLIDATED FINANCIAL STATEMENTS ................................................................................................. 5

1.4 MATERIAL EVENTS SINCE 1 JULY 2019 ........................................................................................................ 8

1.5 RISK FACTORS ...................................................................................................................................................... 8

1.6 RELATED-PARTY TRANSACTIONS ................................................................................................................. 9

1.7 OUTLOOK ................................................................................................................................................................ 9

CONDENSED HALF YEAR CONSOLIDATED

FINANCIAL STATEMENTS .................................................................. 10

2.1 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AT 30 JUNE 2019 ................................... 11

2.2 STATUTORY AUDITORS' REVIEW REPORT ON THE HALF-YEAR FINANCIAL INFORMATION ......... 47

DECLARATION OF THE PERSON RESPONSIBLE FOR THE

DOCUMENT ......................................................................................... 49

CHAPTER 1

HALF-YEAR MANAGEMENT REPORT

1.1 MESSAGE FROM THE CHIEF EXECUTIVE OFFICER

"The strong performance of the first half of the year is a direct result of the investments made over the past three years to improve and develop our network and diversify our service offer-ing, develop the skills of our employees and continuously improve the quality of our opera-tions. By expanding into Spain and the Netherlands, the Group is extending its reach in Eu-rope. In parallel to this expansion we continue to grow within our existing geographies by leveraging the strength of our network and building integrate care and health platforms to serve the fragile and dependant populations in the territories where we are implemented.

These excellent results are the fruit of the unfailing the commitment of our teams, whom I would particularly like to thank and allow the Group to confirm its objectives for 2019."

Sophie Boissard

Chief Executive Officer of Korian

1.2 ACTIVITIES OF THE KORIAN GROUP IN THE FIRST HALF OF 2019

1.2.1 KEY INDICATORS

Korian, the expert in providing care and support services for seniors, generated revenue of €1,767 million in the period ended 30 June 2019, an increase of 8.2% over the period.

At 30 June 2019, the Group had the capacity for over 81,000 beds in Europe (France, Germany, Belgium, Spain, Italy and the Netherlands) and managed around 850 facilities in four business lines: long-term care nursing homes, specialised clinics, assisted living facilities and home care networks.

1.2.2 HIGHLIGHTS

CHANGES IN GOVERNANCE

European Works Council (EWC): The Korian group, which operates in six European countries, Germany, Belgium, Spain, France, Italy and the Netherlands, signed an agreement in April 2019 with 12 trade unions that are representative in the various countries creating a EWC. This agreement is a first in the care services sector for seniors and vulnerable persons.

Changes in the Group's Board of Directors

To replace Elisabeth Stheeman, whose term of office expired, the General Meeting held on

6 June 2019 appointed Jean-François Brin, a doctor with clinical experience in geriatrics, who holds a master's degree from HEC and who had an international career with the Sanofi Group. In accordance with the provisions of the new "PACTE" Act, the shareholders also approved an amendment to the articles of association providing for the appointment of a second director representing the employees. Reflecting the Group's international scope, this director will be appointed by the new European Works Council, which was created last April pursuant to an agreement entered into with the 12 trade unions that are representative in the various countries where the Group operates.

CAPITAL STRUCTURE

Following a partial reclassification of the investment of the Canadian pension fund PSP In-vestments, the distribution of the main shareholders has changed and the free float has in-creased.

The transaction, which reflects PSP's new investment policy, was oversubscribed and carried out in line with the Group's interests and involved well-known institutional investors. It also enabled Predica, the life insurance subsidiary of Crédit Agricole Assurances, and Malakoff Médéric Humanis to increase their stake.

These two major reference and long-term shareholders together now hold almost one-third of Korian's capital. At the same time, the free float increased, thereby ensuring greater liquid-ity for the stock.

In a press release, PSP Investments reaffirmed its confidence in Korian's strategy and long-term prospects.

The new distribution of shareholders is shown below:

shareholders	28 June 2019			31 December 2018
	Number of shares	% Capital	% droits de vote	Number of shares	% Capital	% droits de vote
Predica	19,821,453	24.2%	24.2%	19,001,453	23.2%	23.2%
Malakoff Médéric Humanis	6,353,892	7.8%	7.8%	5,203,892	6.3%	6.3%
Investissements PSP	5,400,000	6.6%	6.6%	11,100,000	13.5%	13.5%
Korian S.A (own ownership)	38,595	0.05%	0.05%	46,386	0.1%	0.1%
Public	50,371,623	61.4%	61.4%	46,624,694	56.9%	56.9%
Total	81,985,563	100.0%	100.0%	81,976,425	100.0%	100.0%

1.3 CONSOLIDATED FINANCIAL STATEMENTS

Korian uses EBITDAR as its benchmark indicator because it makes it possible to assess its operating performance separately from its real estate policy. EBITDAR is gross earnings from operations before rental expenses that are not within the scope of IFRS 16 "Leases".

EBITDA is EBITDAR, as defined above, less rental expenses.

The comments that follow are based on the financial statements presented before application of IFRS 16 and are provided for comparison purposes with the previous year.

Consolidated revenues totalled €1,767 million, up 8.2% over the period:

•  Organic growth, which was up +3.8% compared to +2.9% a year earlier, reflected the significant effort undertaken to renovate and modernise the Group's assets, particularly in France, and from the greater specialisation of facilities and an active management of the care mix. It was also due to the ramp-up of the 15 facilities opened over the last 18 months.

•  External growth increased by +4.4%, driven by the Group's various selective acquisi-tions in a bolt on mode to reinforce its presence in its different territories. 10 transac-tions have been completed in the first half of 2019, in addition to the 10 transactions carried out in 2018. In particular, these transactions enabled the Group to expand into Spain (acquisition of Seniors in January 2019 and of the long-term care nursing home business of Grupo 5 in July 2019) and into the Netherlands with the acquisition of Stepping Stones in June. These last two acquisitions will be included in the results for H2 2019.

Overall, the number of beds operated grew by 2,830 in the first half, bringing the total number of beds to nearly 81,000.