COMPAGNIE D'ENTREPRISES CFE SA INTERIM REPORT
AS OF JUNE 30, 2020
REPORT OF THE BOARD OF DIRECTORS
The Board of Directors of CFE examined and approved the H1 2020 financial statements at the meeting of August 24, 2020.
1. Key figures in the first half of 2020
In million € | 1st semester 2020 | 1st semester 2019 | Variation |
Revenue | 1,491.2 | 1,847.7 | -19.3% |
Self-financing capacity (EBITDA) (*) | 159.8 | 207.0 | -22.8% |
% of revenue | 10.7% | 11.2% | |
Operating income on activities (*) | 2.6 | 50.5 | -94.8% |
% of revenue | 0.2% | 2.7% | |
Operating income (EBIT) (*) | 19.3 | 61.2 | -68.5% |
% of revenue | 1,.3% | 3.3% | |
Net income share of the group | 8.4 | 42.7 | -80.3% |
% of revenue | 0.6% | 2.3% | |
Net income share of the group per share | 0.33 | 1.69 | -80.5% |
(in EUR) | |||
In million € | 30 June 2020 | 31 December 2019 | Variation |
Equity share of the Group | 1,742.4 | 1,748.7 | -0.4% |
Net financial debt (*) | 803.0 | 798,1 | +0.6% |
Order book (*) | 5,636.6 | 5,182.9 | +8.8% |
- The definitions are included in the 'Consolidated financial statements' section of the interim report
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GENERAL INTRODUCTION
Revenue in the first half of 2020 amounted to € 1,491.2 million, down by 19.3% compared with the first half of 2019. The drop in activity was observed at both DEME and Contracting, which were affected by the consequences of the health crisis.
EBITDA, which takes into account the capital gain on the sale of the stake in the Merkur wind farm (€ 63.9 million), amounted to € 159.8 million. This represents 10.7% of the revenue.
The operating income, which includes the positive contribution of the results of equity-consolidated investments, amounted to € 19.3 million compared with € 61.2 million in the first half of 2019. The decrease in operating income is largely due to both the direct and indirect effects of the pandemic.
CFE nevertheless succeeded in generating a positive net result in the first half of 2020. This once again demonstrates the relevance of its strategy based on the development and diversification of the activities within the three operational divisions.
Equity, share of the group, stood at € 1,742.4 million on 30 June 2020, which is stable compared with 31 Decem- ber 2019.
The net financial debt amounted to € 803 million on 30 June 2020, close to that of 31 December 2019. While the debt is down in DEME, it has risen in Real Estate (BPI) following the acquisition of several building plots in Belgium, Luxembourg and Poland.
The cash position of the CFE group was further strengthened during the first half of 2020: it stood at € 805.3 million compared to € 612.2 million on 31 December 2019. CFE has also set up new confirmed credit lines.
- 183 million was available on 30 June 2020 on the group's confirmed credit lines. All the financial covenants have been fully complied with on June 30 2020.
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2. Analysis by division of the activity, results and order book
Dredging, Environmental, Offshore and Infra division
Thanks to its long-term diversification strategy, DEME reported positive results, despite the Covid-19 pandemic, the decrease in oil prices and the accident with the Orion.
KEY FIGURES (*)
In million € | 1st semester 2020 | 1st semester 2019 | Variation |
Revenue | 1,047.9 | 1,349.3 | -22.3% |
EBITDA | 153.8 | 199.1 | -22.8% |
Operating income | 21.9 | 58.5 | -62.6% |
Net income share of the | 15.5 | 44.3 | -65.0% |
group | |||
In million € | 30 June 2020 | 31 December 2019 | Variation |
Order book | 4.300,0 | 3,750.0 | +14.7% |
Net financial debt | 665,4 | 708.5 | -6.1% |
- Excluding amounts restated in accordance with the recognition of DEME's identifiable assets and liabilities at fair value following the acquisition of an additional 50 % of DEME's shares on 24 December 2013.
REVENUE
DEME's revenue amounted to € 1,047.9 million in the first half of 2020, down by € 301.4 million compared with the first half of 2019. About half of this drop is attributable to the health crisis and its collateral effects on the oil and gas sector. An impact of the same magnitude is expected in the second half of the year.
The consequences of the pandemic are multiple but, in particular, it has led to difficulties with crew and staff changes, delays in the progress of project sites due to reduced productivity, as well as the postponement of certain projects in the tendering phase. Right from the start of the crisis, DEME has resolutely placed the well-being and safety of its workers at the forefront and has therefore spared no effort to ensure crew and staff changes worldwide.
In the first half of 2020, the Dredging division, which was the most affected by the effects of the pandemic, generated revenue of € 429.0 million compared with € 572.1 million in the first half of 2019.
The main dredging projects in execution are located in Europe (Belgium, Germany, Russia and Poland), Africa and India. The utilization rate of the hopper dredging fleet was good, while the activity level of the cutters was low in the first half of 2020.
DEME Offshore's revenue amounted to € 434.6 million in the first half of 2020 (€ 582.9 million in the first half of 2019). This decrease is essentially due to a low level of procurement compared with the first half of 2019. Work on the EPCI foundations contract for the Moray East wind farm in Scotland is progressing at a steady pace, as DEME succeeded in hiring substitute vessels in record time to replace the Orion. Two electrical substations and 20 jacket foundations had already been installed by mid-August 2020.
DEME Offshore also finished installing the turbines on the East Anglia ONE wind farm and is continuing the installation of wind turbines on the SeaMade (Belgium) and Borssele 1&2 (Netherlands) farms, after having successfully completed the installation of the foundations. The utilization rate of DEME Offshore's fleet remains at a high level.
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At DIMCO (Infra division), whose activity progressed by approximately 10% compared with the first half of 2019, the three Dutch projects (Terneuzen lock, RijnlandRoute and the Blankenburg connection) continued despite the health crisis but with slightly lower productivity due to the implementation of social distancing measures. In Denmark, DEME and its partners are preparing to start the construction of the Fehmarnbelt link.
EVOLUTION OF ACTIVITY BY BUSINESS AREA
In % | 1st semester 2020 | 1se semester 2019 |
Capital dredging | 28% | 32% |
Maintenance dredging | 13% | 10% |
Offshore | 41% | 43% |
Infra / marine civil works | 10% | 7% |
Environment | 6% | 6% |
Others | 2% | 2% |
Total | 100% | 100% |
EVOLUTION OF ACTIVITY BY GEOGRAPHICAL AREA
In % | 1st semester 2020 | 1st semester 2019 |
Europe (EU) | 73% | 66% |
Europe (non-EU) | 3% | 2% |
Africa | 7% | 10% |
Americas | 3% | 4% |
Asia-Pacific | 9% | 9% |
Middle East | 1% | 5% |
Indian subcontinent | 4% | 4% |
Total | 100% | 100% |
EBITDA AND OPERATING INCOME
EBITDA stood at € 153.8 million in the first half of 2020, or 14.7% of the revenue.
DEME's long-term diversification strategy is clearly bearing fruit, especially within the Concessions division. In 2019, the process of selling the 12.5% stake in Merkur Offshore GmbH was launched. The sale, which took place on 12 May 2020, generated a capital gain of € 63.9 million. This offsets the impact of the Covid-19 pan- demic, the oil crisis and the Orion accident, estimated at a total of approximately € -60 million in the first half of 2020. For the full year 2020, DEME estimates that the impact of these three elements on operating profit will be around € -100 million.
The effects of the health crisis would have been even greater if DEME's management had not immediately taken all the necessary measures to reduce its overheads costs.
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The operating income amounted to € 21.9 million, or 2.1% of the revenue. In addition to the effects of the pan- demic, margins remain under pressure in the Dredging division due to difficult market conditions.
ORDER BOOK
The order book increased to a record level € 4.3 billion on 30 June 2020, compared with € 3.75 billion on 31 December 2019.
The breakdown of the order book between the operating divisions is as follows:
• | Dredging | € 1.8 billion |
• | Offshore | € 1.2 billion |
• | Infra | € 1.0 billion |
• | Environment | € 0.2 billion |
• | Others | € 0.1 billion |
During the first half of the year, DEME received three major orders:
- the Fehmarnbelt link. This is a contract worth € 700 million for DEME, and involves the design and construction of the world's longest underwater road and rail tunnel that will link Denmark to Germany. Construction will begin on 1 January 2021;
- the Oosterweel Link tunnel. This contract, worth € 140 million for DEME, involves the construction of a 1,800 m long tunnel under the Scheldt in Antwerp. The preparatory works are planned for autumn 2020, while the actual works will begin after the summer of 2021;
- the Sea Channel project in northern Russia, in the estuary of the Ob River. This dredging contract concerns 60 million m³. The works will be carried out during the summers of 2020, 2021 and 2022.
On 20 August 2020, DEME Offshore was awarded the EPCI contract to design, manufacture and install the 650 km inter-array cables for the Dogger Bank A and Dogger Bank B wind farms located more than 130 km off the coast of North East England. The project will start in 2021 with the production of the submarine cables. This contract will be included in the order book in the third quarter of 2020.
DEME has the status of preferred bidder for the Hai Long 2, Hai Long 3 and Zhong Neng wind farms located off the coast of Taiwan. These projects, with a value of more than € 1.0 billion (DEME share), will not enter the order book until all the preconditions for the start of the works have been met.
INVESTMENTS
The investments of the first half of 2020 stand at € 128.4 million compared with € 252.9 million during the first half of 2019. They consist mainly of advance payments for vessels under construction.
The "River Thames" and "River Meuse", trailing suction hopper dredgers with a capacity of 2,500 and 8,300 m³ respectively, joined the DEME fleet in the second quarter of 2020.
Green Jade
On 25 June 2020, the Taiwanese joint venture DEME CSBC Wind Engineering (CDWE) approved the order for the construction of an offshore wind turbine installation vessel. The ship, called Green Jade, will be built by CSBC in Taiwan for delivery in 2022. The 216.5-metre long ship will be equipped with a crane with a hoisting capacity of 4,000 tons, DP3 technology, and will be able to accommodate 160 crew members.
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Orion
A serious accident occurred on 2 May 2020 on board the offshore installation vessel Orion during crane load tests. The crane will have to be dismantled and replaced, rendering the vessel unavailable for many months: the Orion is not expected to be operational until the end of 2021.
Spartacus
The recapitalisation of the Royal IHC shipyard took place in the second quarter of 2020. This operation, which has the support of the Dutch state, should enable Royal IHC to complete the construction of the megacutter Spartacus. Delivery is due end of 2020.
NET FINANCIAL DEBT
Despite the additional costs and lower revenues related to the pandemic, DEME managed to generate significant operating cash flows in the first half of 2020 and significantly strengthened its free cash position (€ 672.4 million on 30 June 2020).
DEME's net financial debt amounted to € 665.4 million on 30 June 2020, down 6.1% and 17.4% respectively compared with 31 December 2019 and 30 June 2019. The postponement of the payment of the balance of the Orion acquisition price contributed to this decrease, as did the improvement of the working capital requirement (thanks in particular to the receipt of advance payments).
During the first half of the year, DEME successfully reactivated its commercial paper programme. The outstanding debt stood at € 125 million on 30 June 2020.
DEME was in compliance with all of its financial covenants on 30 June 2020.
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Contracting division
KEY FIGURES
In million € | 1st semester 2020 | 1st semester 2019 | Variation | |||
Revenue | 423.2 | 501.4 | -15.6% | |||
Operating income | -5.6 | 1.4 | n.s. | |||
Net Income share of the | -7.6 | -2.9 | n.s. | |||
group | ||||||
In million € | 30 June 2020 | 31 December 2019 | Variation | |||
Order book | 1,298.3 | -6.3% | ||||
1,385.5 | ||||||
Net cash position | 88.0 | 106.1 | -17.1% | |||
REVENUE
In million € | 1st semester 2020 | 1st semester 2019 | Variation |
Construction | 300.3 | 383.6 | -21.7% |
Buildings, Belgium | 215.9 | 289.8 | -25.5% |
Buildings, International | 84.4 | 93.8 | -10.0% |
Multitechnics (VMA) | 78.1 | 79.8 | -2.1% |
Rail & Utilities (Mobix) | 44.8 | 38.0 | +17.9% |
Total Contracting | 423.2 | 501.4 | -15.6% |
The revenue of CFE Contracting amounted to € 423.2 million.
While activities in Poland were only slightly affected by the Covid-19 pandemic, it had a significant impact in Belgium and Luxembourg. In view of the lockdown measures, most of the construction sites were shut down from 18 March to early May 2020 and then gradually restarted. However, since June, most construction sites have returned to their pre-crisis productivity levels despite the implementation of social distancing measures. CFE Contracting estimates that the impact of the health crisis on its activity in the first half of 2020 amounts to approximately € 70 million, more than three-quarters of which is attributable to the Construction division in Belgium, which was the hardest hit. The effect on the whole of 2020 is estimated at approximately € 100 million.
OPERATING INCOME
The operating income amounted to € -5.6 million, compared with € +1.4 million in the first half of 2019.
The impact of the health crisis on the operating income for the first half of 2020 is estimated at € -20 million. This is mainly due to the under-coverage of overheads resulting from the reduction and postponement of activity, lower productivity and additional costs at the construction sites (rental contracts that continued to run during the lockdown, fitting out premises, reinforced cleaning services, purchase of protective equipment, security guards, etc.). These were partly offset in the first half 2020 by the temporary unemployment measures introduced by the Belgian and Luxembourg governments amounting to slightly more than € 5 million.
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Relatively unaffected by the corona crisis, CFE Polska performed very well in the first half of the year, as did the Multitechnics cluster (VMA). Conversely, the other Construction division entities reported lower results than in the first half of 2019, mainly due to the effects of the Covid-19 pandemic.
ORDER BOOK
In million € | 30 June 2020 | 31 December 2019 | Variation |
Construction | 921.3 | 1,016.8 | -9.4% |
Buildings, Belgium | 782.6 | 833.5 | -6.1% |
Buildings, International | 138.7 | 183.3 | -24.3% |
Multitechnics (VMA) | 186.9 | 188.5 | -0.8% |
Rail & Utilities (Mobix) | 190.1 | 180.2 | +5.5% |
Total Contracting | 1,298.3 | 1,385.5 | -6.3% |
The order book fell 6.3% to € 1,298.3 million on 30 June 2020.
While the order book for the Multitechnics (VMA) and Rail & Utilities (MOBIX) clusters remained at high levels, the decrease was significant in Construction, mainly in Flanders and Poland. Market conditions have deteriorated in recent months: the reduction in the amount of business put out to tender by both private and public customers has further increased the pressure on prices. Increased project selectiveness is more important than ever.
Among the most significant commercial successes of the first half of 2020 are:
- the order for the new courthouse in Namur awarded to BPC Wallonie and its partners. This involves the construction of a 35,000 m² building that will house the services of FPS Justice and the Federal Police. Work will start in September 2020 for a period of three years;
- the contract for the construction of timber-framed residential buildings and detached houses located in Mertert (Luxembourg) for BPI;
- the contract for the construction of residential buildings in Vilvoorde (Flanders) for the developer Matexi.
NET CASH POSITION
The Contracting division's net cash position amounted to € 88 million, down € 18.1 million compared with
31 December 2019, but significantly improved (+ € 34.1 million) compared with 30 June 2019. The working capital requirement increased slightly in the first half of 2020.
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Real Estate division
KEY FIGURES
In million € | 1st semester 2020 | 1st semester 2019 | Variation |
Revenue | 33.4 | 24.0 | +39.2% |
Operating income | 5.7 | 5.7 | 0.0% |
Net income share of the group | 3.2 | 4.5 | -28.9% |
EVOLUTION OF CAPITAL EMPLOYED (*)
The capital employed stood at € 177 million on 30 June 2020, an increase of € 34 million compared with 31 December 2019.
The stock of unsold units post completion is 5.6 % of the capital employed.
BPI's real estate portfolio currently has 557,000 m² under development (545,000 m2 on 31 December 2019), of which 129,000 m² is under construction (103,000 m² on 31 December 2019).
BREAKDOWN BY STAGE OF PROJECT DEVELOPMENT
In million € | 30 June 2020 | 31 December 2019 |
Unsold units post completion | 10 | 4 |
Properties under construction | 52 | 58 |
Properties in development | 115 | 81 |
Total capital employed | 177 | 143 |
(*) Capital employed is the sum of the equity and net financial debt of the real estate division.
BREAKDOWN BY COUNTRY | ||
In million € | 30 June 2020 | 31 December 2019 |
Belgium | 120 | 97 |
Luxembourg | 35 | 21 |
Poland | 22 | 25 |
Total | 177 | 143 |
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NEW DEVELOPMENTS
In the first half of 2020, BPI acquired six new projects:
- the Brouck'R project located in the heart of Brussels. BPI will redevelop the site as a co-development mixed project, including housing, offices, shops, a four-star hotel and student accommodation (40,000 m² in total);
- the Serenity Valley project located in Auderghem (Brussels) will be a mixed redevelopment comprising 144 apartments and an office building of approximately 6,500 m²;
- the Pure project, also located in Auderghem, will be rebuilt as a high-end residential building with 26 spacious apartments;
- an office building located in the European district of Brussels. The ambition of BPI and its co- development partner is to renovate and rebuild this building to ensure it complies with the environmental and functional standards required by future occupants;
- a building plot and a fully let building composed of industrial halls and office spaces located in Bertrange, one of the most sought-after residential areas in Luxembourg. BPI eventually plans to demolish the building and to build residential units;
- the Wagrowska project located south-east of the city of Poznan (Poland). BPI will develop around 270 apartments and shops, covering a total surface area of almost 14,000 m².
Planning permission for the Key West, Brouck'R, Serenity Valley and Pure projects is currently under review and is expected to be obtained in early 2021.
REAL ESTATE DEVELOPMENTS AND HEALTH CRISIS
The health crisis has disrupted BPI's activities on three levels:
- a halt to the marketing of projects during the lockdown in Belgium and Luxembourg;
- delays in construction site progress;
- delays in obtaining building permits, particularly in Brussels.
However, the first two points have had a limited impact on BPI, given that the pace of marketing of current programmes has generally returned to pre-crisis levels, and delays in project delivery dates will remain limited overall.
NET FINANCIAL DEBT
The net financial debt slightly exceeds € 100 million. The increase in debt is explained by the acquisitions made during the half year.
BPI activated its "Medium Term Notes" programme for the first time and set up financing for several projects in both Belgium and Luxembourg.
NET RESULT SHARE OF THE GROUP
BPI's net income amounted to € 3.2 million compared with € 4.5 million on 30 June 2019. Despite the devaluation of the PLN against the euro in March 2020 and the postponement of the delivery of two Polish residential programmes to the second half of the year, the net income of the real estate division remains largely positive thanks, among other things, to the margin on pre-sold residential units in Luxembourg and Belgium and the profit recognised on the delivery of the Vilda Park project in Poland, which was almost entirely pre-sold.
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Holding, non-transferred activities and inter division eliminations
KEY FIGURES
In million € | 1st semester 2020 | 1st semester 2019 | Variation |
Revenue | 10.3 | 12.9 | -20.2% |
Inter-divisions eliminations | -23.6 | -39.9 | n.s. |
Total | -13.3 | -27.0 | n.s. |
Operating income | 0.0 | -1.8 | n.s. |
Net income share of the group | -0.6 | -1.5 | n.s. |
OPERATING INCOME
The Holding segment's net income (group share) was minus € 0.6 million compared with minus € 1.5 million on 30 June 2019.
RENT-A-PORT
Through its subsidiary Infra Asia Investment, Rent-A-Port is continuing the development of its five port concessions in the north of Vietnam, in the provinces of Haiphong and Quang Ninh. The Covid-19 pandemic did not have a significant impact in Vietnam. Development work on the industrial sites was able to continue without too much disruption. However, the closure of the borders followed by quarantine measures prevented many potential investors and customers from travelling to Vietnam, resulting in delays in finalising contracts for the sale of industrial land. These sales were limited to 10 hectares in the first half of 2020, which was insufficient to cover overheads costs and interest charges. As a result, Rent-A-Port reported a loss of € 1.3 million on 30 June 2020 (loss of € 1.4 million in the first half of 2019), 50% of which was accounted for in the CFE consolidated figures.
GREEN OFFSHORE
The contribution of Green Offshore to the net income of the Holding segment was € 2.9 million on 30 June 2020, compared with € 0.7 million in the first half of 2019. Green Offshore, which is equally owned by CFE and Ackermans & van Haaren, has a minority interest in the SeaMade and Rentel offshore wind farms. While the first one is under construction, the second one has been fully operational for more than a year.
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3. Social responsibility and commitment to sustainability
Sustainability is at the heart of CFE group's strategy. The analysis of the 17 sustainable development goals established by the United Nations has made it possible for DEME, CFE Contracting and BPI to identify their own priority goals. These goals are structured around five major pillars, namely: "build for the future", "be a great place to work", "offer innovative solutions", "drive the energy transition towards climate neutrality" and "create sustainable shareholder value".
The coronavirus crisis has confirmed the relevance of the priority goals defined. In particular, the acceleration of digitisation and the focus on operational excellence are fully in line with our "offer innovative solutions" and "build for the future" approaches.
Continuing along the same vein, solidarity has also been addressed. More than ever, CFE is taking its social responsibilities and confirms that it is "a great place to work". The CFE group has therefore given its support to the "Medical Equipment for Belgium" organisation. This has facilitated access to essential medical equipment for Belgian hospitals. In addition, all of the group's management teams made a statement by donating 20% of their remuneration for May and June to charity.
CFE has also demonstrated during this first half year that it is truly "a great place to work" by giving priority to its employees. For the second time in a row (and third time in four years), DEME was awarded the title of "Belgium's most attractive employer" at the Randstad Awards 2020 (Diversity and Opportunity -Excel). In addition, as a result of Covid-19, an internal campaign on resilience and mental and physical health for all employees was implemented (Diversity & Opportunity - Excel). CFE Contracting also took the opportunity to launch a "digital awareness" programme for every employee and also trained its managers in remote team management. Training courses in well-being and positive thinking were also deployed. As part of its "Employer branding" campaign, CFE Contracting highlighted its characteristic "Framily" (family & friends). The human scale of the subsidiaries and the solidity of the group, as well as the numerous synergies between the subsidiaries allow every employee to benefit from the best of both worlds.
To meet their ambition to "build for the future", CFE Contracting and BPI combined their know-how to create the Wood Shapers joint venture in early 2020. Mastery of materials (especially wood) and construction methods for an optimised structure and an integrated vision of projects lie at the heart of Wood Shapers' sustainable approach. The emblematic Wooden project in Luxembourg thus offers a flying start for this new subsidiary.
Innovation and the preservation of natural capital are at the heart of DEME's activities. Thus, DEME has become part of the Blue Cluster (Natural Capital - Explore). This partnership has already produced promising results. In particular, the first phase of the Coastbusters project concluded very positively in April 2020. Coastbusters is an innovative and sustainable alternative to seawalls to combat rising sea levels and protect coastlines from erosion using natural reefs.
Of course, the climate and the environment have not been forgotten. DEME is more active than ever in offshore wind farm projects (Climate & Energy - Explore). Of particular note are the Borssele 1&2, SeaMade, Moray East and Triton Knoll projects. DEME also participates in the "Emissieloos Netwerk Infra" initiative with the aim of enabling construction with zero-emission construction machinery as of 2026 (Climate & Energy - Excel). As for CFE Contracting, it is contributing to its "drive the energy transition towards climate neutrality" objective by optimising the transport of materials to its sites. Three pilot projects use logistics consolidation centres (in Brussels, Antwerp and Luxembourg). This approach makes it possible to significantly limit the number of trucks on the roads, to use alternative supply routes such as river transport, but also to solve the problems of on-site storage and to make planning more reliable.
4. Outlook
Barring an unfavourable evolution of the pandemic or exceptional factors, CFE anticipates the following for the full year 2020:
- a 15 to 20% fall in revenue for DEME. However, the net income should be positive and up compared with that of 30 June 2020;
- a decrease in revenue of approximately 10% for Contracting. The net income should also be positive;
- BPI's net income at least equal to that of 2019.
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5. Impact of the health crisis on certain Risk Factors
The health crisis has had an impact on the following risk factors:
5.1 Operational risks
Among the operational risks related to the execution of projects presented in the 2019 annual report (page 82 and following), the pandemic mainly had an impact on meeting contractual deadlines. The shutdown of certain construction sites in countries that applied lockdown rules, the fall in productivity due to the implementation of social distancing rules, difficulties in mobilising the teams and supply chain disruptions are all factors that have led to delays in the progress of most construction sites. Negotiations are currently underway with customers to adapt the delivery schedules.
In real estate development, the lockdown in Belgium, which lasted from mid-March to early May, led to delays of at least six months in issuing building permits.
5.2 Economic situation
The COVID-19 pandemic has had a strong impact on the global economy and has caused a decline of the prices of oil and gas. Many of the projects under consideration, particularly but not exclusively related to the oil and gas sector, could be either postponed or cancelled depending on the development of the pandemic. On the other hand, the major recovery and public investment plans that should soon be launched present real opportunities for the group.
5.3 Management and the workforce
Restrictions on the free movement of people (closed borders, quarantine, suspension of air travel, etc.) are causing a disruption on projects. It should be stressed that the situation has improved in Europe since June 2020 but remains extremely complicated for dredging projects outside Europe.
5.4 Market risks
In spite of the crisis and the tension it is causing on the markets, the group has significantly increased its liquidity reserves and has not experienced any difficulty in setting up new credit lines, on terms similar to those in force before the crisis. In addition, all financial covenants have been complied with on 30 June 2020.
In terms of credit risk, CFE has not observed any increase in doubtful receivables to date. Monitoring is in place in the various entities to assess the situation on an ongoing basis.
On the other hand, in terms of exchange rate risk, the devaluation of most currencies in relation to the euro has affected the financial results because, despite the implementation of hedges, the exchange rate risk can never be fully covered.
6. Corporate Governance
The Ordinary General Meeting of 7 May 2020 approved the reappointment of Pas de Mots SRL, represented by Mrs Leen Geirnaerdt, for a period of four years, ending after the annual general meeting of May 2024. Pas de Mots SRL meets the independence criteria defined in article 3.5 of the Belgian Corporate Governance Code 2020.
The Ordinary General Meeting also approved the reappointment of Mr Christian Labeyrie and Mr Philippe Delusinne for a term of four years, ending after annual general meeting of May 2024. Mr Christian Labeyrie does not meet the independence criteria defined in article 3.5 of the Belgian Corporate Governance Code 2020; Mr Philippe Delusinne meets these criteria until 5 May 2021.
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Interim Report
As of June 30, 2020
Interim condensed and consolidated financial statements and notes
DEFINITIONS
Working capital requirement | Inventories + trade receivables and other operating receivables + other current assets + non-current assets |
held for sale - other current provisions - trade payables and other operating liabilities - tax payables - | |
other current liabilities | |
Capital employed | Equity of real estate segment + net financial debt of real estate segment |
Net financial debt (NFD) | Non-current bonds + non-current financial liabilities + current bonds + current financial liabilities - cash |
and cash equivalents | |
Income from operating activities | Turnover + revenue from auxiliary activities + purchases + wages, salaries and social charges + other |
operational charges and depreciation and goodwill depreciation | |
Operating income (EBIT) | Income from operating activities + earnings from associates and joint-ventures |
EBITDA | Income from operating activities + amortisation and depreciation + other non-cash items |
Return on equity (ROE) | Net income, share of the group / equity, share of the group |
Order book | Revenue to be generated by the projects for which the contract has been signed and has come into effect |
(after notice to proceed has been given or conditions precedent have been fulfilled) and for which project | |
financing is in place. |
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CONSOLIDATED STATEMENT OF INCOME | ||||||
For the period from January 1st to June 30th | ||||||
Notes | 2020 | 2019 | ||||
(in € thousands) | ||||||
Revenue | 1,491,229 | 1,847,714 | ||||
Revenue from auxiliary activities | 6 | 112,750 | 48,376 | |||
Purchases | (901,428) | (1,083,566) | ||||
Remuneration and social security payments | (343,226) | (347,962) | ||||
Other operating expenses | (200,602) | (256,755) | ||||
Depreciation and amortisation | (156,168) | (157,265) | ||||
Income from operating activities | 2,555 | 50,542 | ||||
Earnings from associates and joint ventures | 11 | 16,786 | 10,614 | |||
Operating income | 19,341 | 61,156 | ||||
Cost of gross financial debt | 7 | (3,164) | (1,044) | |||
Other financial expenses & income | 7 | (6,425) | (4,185) | |||
Net financial income/expense | (9,589) | (5,229) | ||||
Pre-tax income | 9,752 | 55,927 | ||||
Income tax expense | 9 | (2,557) | (14,297) | |||
Net income for the period | 7,195 | 41,630 | ||||
Attributable to owners of non-controlling interests | 8 | 1,235 | 1,106 | |||
Net income share of the group | 8,430 | 42,736 | ||||
Net income of the group per share (€) (basic and diluted) | 0.33 | 1.69 | ||||
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | ||||||
For the period from January 1st to June 30th | ||||||
Notes | 2020 | 2019 | ||||
(in € thousands) | ||||||
Net income share of the group | 8,430 | 42,736 | ||||
Net income for the period | 7,195 | 41,630 | ||||
Changes in fair value related to hedging instruments | (6,228) | (39,120) | ||||
Currency translation differences | (9,059) | 276 | ||||
Deferred taxes | 555 | 9,615 | ||||
Other elements of the comprehensive income to be reclassified to | (14,732) | (29,229) | ||||
profit or loss in subsequent periods | ||||||
Re-measurement on defined benefit and contribution plans | 0 | 0 | ||||
Deferred taxes | 0 | 0 | ||||
Other elements of the comprehensive income not to be reclassified | 0 | 0 | ||||
to profit or loss in subsequent periods | ||||||
Other elements of the comprehensive income | (14,732) | (29,229) | ||||
Comprehensive income: | (7,537) | 12,401 | ||||
- Attributable to owners of the parent | (6,216) | 13,474 | ||||
- Attributable to owners of non-controlling interests | (1,321) | (1,073) | ||||
Net income attributable to owners of the parent per share (€) (basic | (0.25) | 0.53 | ||||
and diluted) | ||||||
Page 3
CONSOLIDATED STATEMENT OF FINANCIAL POSITION | |||
(in € thousands) | Notes | June 2020 | December 2019 |
Intangible assets | |
Goodwill | |
Property, plant and equipment | 10 |
Investments in associates and joint ventures | 11 |
Other non-current financial assets | |
Derivative instruments - Non-current assets | 16 |
Other non-current assets | |
Deferred tax assets | |
Total non-current assets | |
Inventories | 12 |
Trade and other operating receivables | 13 |
Other operating current assets | |
Other non-operating current assets | |
Derivative instruments - Current assets | 16 |
Current financial assets | |
Assets held for sale | 5 |
Cash and cash equivalents | 17 |
Total current assets | |
Total assets | |
Share capital | |
Share premium | |
Retained earnings | |
Defined benefit and contribution pension plans | |
Hedging reserves | 16 |
Currency translation differences | |
Equity attributable to owners of the parent | |
Non-controlling interests | |
Equity | |
Retirement benefit obligations and employee benefits | |
Provisions | 14 |
Other non-current liabilities | |
Non-current bonds | 17 |
Non-current financial liabilities | 17 |
Derivative instruments - Non-current assets | 16 |
Deferred tax liabilities | |
Total non-current liabilities | |
Current provisions | 14 |
Trade and other operating payables | |
Income tax payable | |
Current bonds | 17 |
Current financial liabilities | 17 |
Derivative instruments - Current assets | 16 |
Other operating current liabilities
Other non-operating current liabilities
Total current liabilities
Total equity and liabilities
92,750 | 90,261 |
177,127 | 177,127 |
2,594,936 | 2,615,164 |
180,343 | 167,653 |
90,826 | 83,913 |
1,055 | 0 |
18,425 | 16,630 |
125,065 | 100,420 |
3,280,527 | 3,251,168 |
202,408 | 162,612 |
967,486 | 996,436 |
83,688 | 72,681 |
4,804 | 6,267 |
3,902 | 751 |
2,900 | 0 |
- 10,511
805,325612,206
2,070,513 | 1,861,464 |
5,351,040 | 5,112,632 |
41,330 | 41,330 |
800,008 | 800,008 |
1,004,159 | 995,786 |
(37,089) | (37,089) |
(46,591) | (40,892) |
(19,387) | (10,440) |
1,742,430 | 1,748,703 |
12,709 | 11,607 |
1,755,139 | 1,760,310 |
70,831 | 70,269 |
14,302 | 12,414 |
14,278 | 10,651 |
29,741 | 29,689 |
1,063,408 | 1,110,212 |
10,550 | 8,986 |
102,145 | 104,907 |
1,305,255 | 1,347,128 |
46,734 | 46,223 |
1,181,285 | 1,221,466 |
61,247 | 44,078 |
0 | 0 |
515,198 | 270,366 |
12,415 | 9,356 |
198,954 | 155,601 |
274,813 | 258,104 |
2,290,646 | 2,005,194 |
5,351,040 | 5,112,632 |
Page 4
CONSOLIDATED STATEMENT OF CASH FLOWS | |||||
For the period from January 1st to June 30th | |||||
Notes | 2020 | 2019 | |||
(in € thousands) | |||||
Operating activities | |||||
Income from operating activities | 2,555 | 50,542 | |||
Depreciation and amortisation of (in)tangible assets and investment | 156,168 | 157,265 | |||
property | |||||
Net provision expense | 1,202 | (614) | |||
Impairment on assets and other non-cash items | (151) | (238) | |||
Income/(losses) from sales of property, plant & equipment and | (64,605) | (6,403) | |||
financial assets | |||||
Dividends received from associates and joint ventures | 14,779 | 4,541 | |||
Cash flow from operating activities before changes in working | 109,948 | 205,093 | |||
capital | |||||
Decrease/(increase) in trade receivables and other current and non- | (999) | 57,890 | |||
current receivables | |||||
Decrease/(increase) in inventories | (46,700) | 5,525 | |||
Increase/(decrease) in trade payables and other current and non- | 18,123 | (113,286) | |||
current payables | |||||
Income tax paid/received | (12,117) | (22,390) | |||
Cash flow from operating activities | 68,255 | 132,832 | |||
Investing activities | |||||
Sales of non-current assets | 3,886 | 11,793 | |||
Purchases of non-current assets | (134,206) | (262,228) | |||
Acquisition of subsidiaries net of cash acquired | 0 | 0 | |||
Variation of the investment percentage in associates and joint | 0 | 0 | |||
ventures | |||||
Capital increase of equity-accounted companies | 15 | (5,088) | (16,303) | ||
Sale of subsidiaries | 5 | 88,898 | 0 | ||
Reimbursement of borrowings (new borrowings) given to associates | (3,463) | 8,076 | |||
and joint ventures | |||||
Cash flow from investing activities | (49,973) | (258,662) | |||
Financing activities | |||||
Interest paid | (7,217) | (15,780) | |||
Interest received | 4,156 | 7,245 | |||
Other financial expenses & income | (5,486) | (5,172) | |||
Borrowings | 17.3 | 327,826 | 506,217 | ||
Reimbursements of borrowings | 17.3 | (139,650) | (48,767) | ||
Dividends paid | 0 | (60,755) | |||
Cash flow from financing activities | 179,629 | 382,988 | |||
Net increase/(decrease) in cash position | 197,911 | 257,158 | |||
Cash and cash equivalents at start of the year | 612,206 | 388,346 | |||
Exchange rate effects | (4,792) | 593 | |||
Cash and cash equivalents at end of period | 805,325 | 646,097 | |||
Purchases and sales of subsidiaries net of cash acquired do not include entities that are not a business combination (Real Estate segment). They are not considered as investment operations and are directly reflected in cash flows from operating activities.
Page 5
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the period ended June 30, 2020
(in € thousands) | Share capital | Share premium | Retained earnings | Defined benefit or contribution pension plans | Hedging reserves | Currency translation differences | Equity attributable | to owners of the | parent | Non-controlling interests | Total |
December 2019 | 41,330 | 800,008 | 995,786 | (37,089) | (40,892) | (10,440) | 1,748,703 | 11,607 | 1,760,310 | ||||||||||||||||||||||||||
Comprehensive income | 8,430 | (5,699) | (8,947) | (6,216) | (1,321) | (7,537) | |||||||||||||||||||||||||||||
for the period | |||||||||||||||||||||||||||||||||||
Dividends paid to | 0 | 0 | |||||||||||||||||||||||||||||||||
shareholders | |||||||||||||||||||||||||||||||||||
Dividends from non- | 0 | 50 | 50 | ||||||||||||||||||||||||||||||||
controlling interests | |||||||||||||||||||||||||||||||||||
Change in consolidation | |||||||||||||||||||||||||||||||||||
scope and other | (57) | (57) | 2,373 | 2,316 | |||||||||||||||||||||||||||||||
movements | |||||||||||||||||||||||||||||||||||
June 2020 | 41,330 | 800,008 | 1,004,159 | (37,089) | (46,591) | (19,387) | 1,742,430 | 12,709 | 1,755,139 | ||||||||||||||||||||||||||
For the period ended June 30, 2019 | |||||||||||||||||||||||||||||||||||
(in € thousands) | Share capital | Share premium | Retained earnings | Defined benefit or contribution pension plans | Hedging reserves | Currency translation differences | Equity attributable | to owners of the | parent | Non-controlling interests | Total | ||||||||||||||||||||||||
December 2018 | 41,330 | 800,008 | 923,768 | (25,521) | (7,153) | (11,554) | 1,720,878 | 13,973 | 1,734,851 | ||||||||||||||||||||||||||
IFRS 16 amended | 0 | 0 | |||||||||||||||||||||||||||||||||
December 2018 (*) | 41,330 | 800,008 | 923,768 | (25,521) | (7,153) | (11,554) | 1,720,878 | 13,973 | 1,734,851 | ||||||||||||||||||||||||||
Comprehensive income | 42,736 | (29,518) | 256 | 13,474 | (1,073) | 12,401 | |||||||||||||||||||||||||||||
for the period | |||||||||||||||||||||||||||||||||||
Dividends paid to | (60,755) | (60,755) | (60,755) | ||||||||||||||||||||||||||||||||
shareholders | |||||||||||||||||||||||||||||||||||
Dividends from non- | (531) | (531) | |||||||||||||||||||||||||||||||||
controlling interests | |||||||||||||||||||||||||||||||||||
Change in consolidation | |||||||||||||||||||||||||||||||||||
scope and other | 847 | 847 | |||||||||||||||||||||||||||||||||
movements | |||||||||||||||||||||||||||||||||||
June 2019 | 41,330 | 800,008 | 905,749 | (25,521) | (36,671) | (11,298) | 1,673,597 | 13,216 | 1,686,813 | ||||||||||||||||||||||||||
(*) Amounts restated in accordance with changes in accounting method linked to the application of accounting standard IFRS 16 Leases.
Page 6
SHARE CAPITAL AND RESERVES
The share capital on June 30, 2020 was divided into 25,314,482 ordinary shares. These shares are without nominal value. The owners of ordinary shares have the right to receive dividends and have one vote per share in Shareholders' General Meetings.
In the evolving context of the COVID-19 pandemic, the General Shareholders Meeting decided on May 7, 2020, as proposed by the Board of Directors of CFE, not to pay out a dividend in respect of the 2019 financial year.
Basic earnings per share are the same as diluted earnings per share due to the absence of any potential dilution in terms of ordinary shares in issue.
Earnings per share are calculated as follows:
EARNINGS PER SHARE FOR THE PERIOD ENDED JUNE 30 | 2020 | 2019 | ||
(in € thousands) | ||||
Net income attributable to shareholders | 8,430 | 42,736 | ||
Comprehensive income attributable to owners of the parent | (6,216) | 13,474 | ||
Number of ordinary shares at the balance sheet date | 25,314,482 | 25,314,482 | ||
Net income share of the group per share (€) | 0.33 | 1.69 | ||
Comprehensive income attributable to owners of the parent per share (€) | (0.25) | 0.53 | ||
Page 7
NOTES TO THE INTERIM CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED JUNE 30, 2020
- GENERAL POLICIES
- CONSOLIDATION METHODS
- SCOPE OF CONSOLIDATION
- INTRAGROUP TRANSACTIONS
- TRANSLATION OF THE FINANCIAL STATEMENTS OF FOREIGN COMPANIES AND ESTABLISHMENTS
- FOREIGN CURRENCY TRANSACTIONS
- VALUATION RULES AND METHODS
- RECOURSE TO ESTIMATES
- ADDITIONAL INFORMATION REGARDING THE CONTEXT OF THE COVID-19 HEALTH CRISIS
- APPLICATION OF ACCOUNTING RULES
- ASSESSMENT OF THE COVID-19 IMPACT ON THE FINANCIAL SITUATION OF THE CFE GROUP AT JUNE 30, 2020
4. SEGMENT REPORTING
- CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
- CONSOLIDATED STATEMENT OF FINANCIAL POSITION
- CONSOLIDATED STATEMENT OF CASH FLOWS
- OTHER INFORMATION
- GEOGRAPHICAL INFORMATION
- ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES
- REVENUE FROM AUXILIARY ACTIVITIES
- NET FINANCIAL INCOME/EXPENSE
- NON-CONTROLLING INTERESTS
- INCOME TAX
- PROPERTY, PLANT AND EQUIPMENT
- ASSOCIATES AND JOINT ARRANGEMENTS
- INVENTORIES
- TRADE RECEIVABLES AND OTHER OPERATING RECEIVABLES
- PROVISIONS OTHER THAN THOSE RELATING TO RETIREMENT BENEFIT OBLIGATIONS AND NON-CURRENT EMPLOYEE BENEFITS
- CONTINGENT ASSETS AND LIABILITIES
- DERIVATIVE FINANCIAL INSTRUMENTS
- NET FINANCIAL DEBT
- NET FINANCIAL DEBT
- DEBT MATURITY SCHEDULE
- CASH FLOWS RELATING TO FINANCIAL LIABILITIES
- CREDIT FACILITIES AND COMMERCIAL PAPERS
- FINANCIAL COVENANTS
- FINANCIAL RISK MANAGEMENT
- INTEREST RATE RISK
- DISTRIBUTION OF THE LONG TERM FINANCIAL DEBTS BY CURRENCY
- CARRYING AMOUNTS AND FAIR VALUE BY ACCOUNTING CATEGORY
- LEASES (IN ACCORDANCE WITH IFRS 16 STANDARD)
- OTHER COMMITMENTS GIVEN
- OTHER COMMITMENTS RECEIVED
- LITIGATION
- RELATED PARTIES
- SUBSEQUENT EVENTS
- IMPACT OF FOREIGN CURRENCIES
- SEASONAL NATURE OF THE BUSINESS
ALTERNATIVE PERFORMANCE MEASURES RECONCILIATION
AUDITOR'S REPORT
Page 8
Introduction
The Board of Directors authorized the publication of the CFE group's consolidated financial statements on August 28, 2020.
MAIN TRANSACTIONS FOR THE FIRST SIX MONTHS OF 2020 AND OF 2019 WITH EFFECT ON THE SCOPE OF THE CFE GROUP
TRANSACTIONS FOR THE FIRST SIX MONTHS OF 2020
1. Dredging, environment, offshore and infra segment - "DEME"
During the first semester of 2020, the main changes in the consolidation scope with effect on the DEME segment of the CFE group are the following:
- DEME acquired a 100% stake in the newly created company Dredging International Argentina SA. This company has been fully consolidated.
- DEME acquired a stake of 37.45% and of 19.47% in the companies Blue Site SA and Feluy M2M SA respectively. These companies have been integrated under the equity method.
- DEME increased its stake in the company CBD SAS from 50% to 100%. This company, which was integrated under the equity method, is now fully consolidated.
- DEME increased its stake in the company International Seaport Dredging PVT LTD from 89.61% to 93.64%. This company remains fully consolidated.
- DEME increased its stake in the company DIAP Thailand Co LTD from 49% to 98%. This company, which was integrated under the equity method, is now fully consolidated.
- DEME decreased its stake in the company Terranova NV from 43.73% to 24.96%. This company remains integrated under the equity method.
- DEME disposed of its entire stake (12.5%) in the company Merkur Offshore GmbH. This company was shown as an asset held for sale at December 31, 2019.
2. Contracting segment
During the first semester of 2020, the main changes in the consolidation scope with effect on the Contracting segment of the CFE group are the following:
- The company VMA Vanderhoydoncks NV was absorbed by VMA NV, a 100% subsidiary of CFE Contracting, with retroactive effect to January 1, 2020.
- The company Bâtiments et Ponts Construction SA (BPC SA), a 100% subsidiary of CFE Contracting, transferred on April 1, 2020, with retroactive effect to January 1, 2020, the divisions BPC Hainaut, BPC Liège and BPC Namur to the company Thiran SA, also a 100% subsidiary of CFE Contracting. Following this demerger without the demerged company being wound up, the company Thiran SA was renamed BPC Wallonie SA.
- The company Algemeen Bouw-en Betonbedrijf NV (ABEB NV), a 100% subsidiary of CFE Contracting, was liquidated. This company was fully consolidated.
3. Real estate segment
During the first semester of 2020, the main changes in the consolidation scope with effect on the Real Estate segment of the CFE group are the following:
- The company BPI Real Estate Belgium SA (BPI) acquired during the first semester of 2020:
- a 100% stake in the newly created company BPI Serenity Valley SA;
- a 100% stake in the newly created company Samaya Development SA.
The acquired entities listed above have been fully consolidated.
- a 50% stake in the newly created company Arlon 53 SA;
- a 50% stake in the company Mobius I SA.
The acquired entities listed above have been integrated under the equity method.
Page 9
- The company BPI Real Estate Poland Sp. z o.o. increased its stake in the company BPI Wolare Sp. z o.o. from 90% to 100%. This company remains fully consolidated.
- The company BPI Project VII Sp. z o.o. has been established. This company is 100% owned by BPI Real Estate Poland Sp. z o.o., and has been fully consolidated.
- The company BPI Real Estate Luxembourg SA reduced its stake in the company Gravity SA from 100% to 50%. This company, which was fully consolidated, is now integrated under the equity method.
- The company Pourpelt SA has been established. This company is 100% owned by BPI Real Estate Luxembourg SA, and has been fully consolidated.
- The companies Bedford Finance SRL and Bayside Finance SRL, 40% subsidiaries of BPI, liquidated their stakes in the companies VM Property I SA and VM Property II SA, 100% owned and integrated under the equity method.
TRANSACTIONS FOR THE FIRST SIX MONTHS OF 2019
1. Dredging, environment, offshore and infra segment - "DEME"
During the first semester of 2019, DEME acquired:
- a 100% stake in the newly created company Bonny River Shipping SA;
- a 100% stake in the newly created company DEME Offshore US Inc;
- a 100% stake in the newly created company DEME Offshore US LLC.
The acquired entities listed above have been fully consolidated.
During the first semester of 2019, the DEME group also acquired:
- a 50% stake in the company DBM-Bontrup BV;
- a 50% stake in the company BNS JV Ltd;
- a 49.99% stake in the company CSBC-DEME Wind Engineering CO, Ltd (CDWE Taiwan).
The acquired entities listed above have been integrated under the equity method.
In the first semester of 2019, DEME disposed of all its stakes in the following entities:
- 100% of the company MDCC Insurance Broker NV. This company was fully consolidated;
- 100% of the company Offshore Manpower Singapore PTE Ltd. This company was fully consolidated;
- 51.10% of the company B-WIND Polska Sp. z o.o. This company was integrated under the equity method;
- 51.10% of the company C-WIND Polska Sp. z o.o. This company was integrated under the equity method.
2. Contracting segment
On March 29, 2019, the company P-Multitech BVBA was absorbed by VMA NV, 100% owned by the CFE group, with retroactive effect to January 1, 2019.
On March 29, 2019, the companies be.Maintenance SA, Etablissements Druart SA, Nizet Entreprises SA and Vanderhoydoncks NV, subsidiaries of CFE Contracting, were renamed VMA be.Maintenance SA, VMA Druart SA, VMA Nizet SA and VMA Vanderhoydoncks NV respectively.
On May 15, 2019, the company CFE Bouw Vlaanderen NV, a subsidiary of CFE Contracting, was renamed MBG NV.
On May 16, 2019, the companies Engema SA, Engetec SA, José Coghe-Werbrouck NV, Louis Stevens NV and Remacom NV, subsidiaries of CFE Contracting, were renamed Mobix Engema SA, Mobix Engetec SA, Mobix Coghe NV, Mobix Stevens NV and Mobix Remacom NV respectively.
On May 28, 2019, the company "CFE Bâtiment Brabant Wallonie (CFE BBW)" was renamed "Bâtiments et Ponts construction (BPC)".
3. Real estate segment
On January 24, 2019, BPI Real Estate Poland Sp. z o.o. increased its stake in the company ACE 12 Sp. z o.o. from 90% to 100%. This company was already fully consolidated.
On February 19, 2019, that same entity ACE 12 Sp. z.o.o., a subsidiary of BPI Real Estate Poland Sp. z.o.o., was renamed BPI Vilda Park Sp. z.o.o.
4. Holding and non-transferred activities
On February 14, 2019, the CFE group increased its stake in Rent-A-Port NV from 45% to 50%.
The company remains integrated under the equity method. On February 28, 2019, the company Liveway Ltd, 50% owned by the CFE group, was liquidated. This company was integrated under the equity method.
Page 10
ACCOUNTING PRINCIPLES AND EVALUATION METHOD
1. GENERAL POLICIES
IFRS AS ADOPTED BY THE EUROPEAN UNION
The accounting principles used at June 30, 2020 are the same as that those used for the consolidated financial statements at December 31, 2019. We refer to Note 3.2. of this report.
STANDARDS AND INTERPRETATIONS APPLICABLE FOR THE ANNUAL PERIOD BEGINNING ON OR AFTER JANUARY 1, 2020
- Amendments to IAS 1 and IAS 8 Definition of Material
- Amendments to IFRS 3 Business Combinations: Definition of a business
- Amendments to IFRS 9, IAS 39 and IFRS 7 Interest Rate Benchmark Reform
- Amendments to references to the Conceptual Framework in IFRS standards
STANDARDS AND INTERPRETATIONS PUBLISHED, BUT NOT YET APPLICABLE FOR THE ANNUAL PERIOD BEGINNING ON OR AFTER JANUARY 1, 2020
The group did not apply early any of the following new standards and interpretations, application of which was not mandatory on June 30, 2020.
- IFRS 17 Insurance Contracts (applicable for annual periods beginning on or after January 1, 2023, but not yet endorsed by the EU)
- Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current (applicable for annual periods beginning on or after January 1, 2023, but not yet endorsed by the EU)
- Amendments to IAS 16 Property, Plant and Equipment: Proceeds before Intended Use (applicable for annual periods beginning on or after January 1, 2022, but not yet endorsed by the EU)
- Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets: Onerous Contracts - Cost of Fulfilling a Contract (applicable for annual periods beginning on or after January 1, 2022, but not yet endorsed by the EU)
- Amendments to IFRS 3 Business Combinations: Reference to the Conceptual Framework (applicable for annual periods beginning on or after January 1, 2022, but not yet endorsed by the EU)
- Amendment to IFRS 16 Leases: COVID-19-Related Rent Concessions (applicable for annual periods beginning on or after June 1, 2020, but not yet endorsed by the EU)
- Annual Improvements to IFRS Standards 2018-2020 Cycle (applicable for annual periods beginning on or after January 1, 2022, but not yet endorsed by the EU)
The assessment of the potential impact of those standards and interpretations on the group's consolidated financial statements is still in progress. They are not expected to have a material impact on the financial statements of the CFE group.
Page 11
2. CONSOLIDATION METHODS
2.1. SCOPE OF CONSOLIDATION
Companies in which the Group holds, directly or indirectly, the majority of voting rights enabling control to be exercised, are fully consolidated.
Companies over which the Group exercises joint control with another entity are consolidated under the equity method. This applies in particular to Rent-A-Port, Green Offshore and some entities of DEME and BPI.
Changes in the scope of consolidation | ||
Number of entities | June 2020 | December 2019 |
Full consolidation | 204 | 200 |
Equity method | 138 | 142 |
Total | 342 | 342 |
2.2. INTRAGROUP TRANSACTIONS
Reciprocal operations and transactions relating to assets and liabilities and income and expenses between companies that are consolidated or accounted for under the equity method are eliminated in the consolidated financial statements. This is done:
- for the full amount if the transaction is between two controlled subsidiaries;
- applying the percentage owned of a company accounted for under the equity method with respect to internal profits or losses between a fully consolidated company and a company accounted for under the equity method.
2.3. TRANSLATION OF THE FINANCIAL STATEMENTS OF FOREIGN COMPANIES AND ESTABLISHMENTS
In most cases, the functional currency of companies and establishments is their local currency.
The financial statements of foreign companies of which the functional currency is different from that used in preparing the Group's consolidated financial statements are translated at the closing rate for balance-sheet items and at the average rate for the period for income-statement items. Any resulting translation differences are recognized under translation differences in consolidated reserves. Goodwill relating to foreign entities is considered as comprising part of the assets and liabilities acquired and is therefore translated at the exchange rate in force at the balance sheet date.
2.4. FOREIGN CURRENCY TRANSACTIONS
Transactions in foreign currency are translated into euros at the exchange rate on the transaction date. At the balance sheet date, financial assets and monetary liabilities denominated in foreign currencies are translated at the closing rate. Resulting exchange gains and losses are recognized under foreign exchange gains and losses and are shown under other financial income and other financial expenses in the income statement.
Foreign exchange gains and losses arising on loans denominated in foreign currency or on foreign exchange derivatives used to hedge stakes in foreign subsidiaries are recorded in currency translation differences in the other elements of the comprehensive income and are accumulated in a separate equity reserve..
Page 12
3. VALUATION RULES AND METHODS
3.1. RECOURSE TO ESTIMATES
The preparation of financial statements under IFRSs standards requires estimates to be used and assumptions to be made that affect the amounts shown in those financial statements, particularly as regards valuations made for impairment tests.
3.2. ADDITIONAL INFORMATION REGARDING THE CONTEXT OF THE COVID-19 HEALTH CRISIS
3.2.1. APPLICATION OF ACCOUNTING RULES
In the context of the COVID-19 health crisis, the following specifications are made for the preparation of the financial statements at June 30, 2020:
-
Measurement of income or losses on construction contracts using the percentage of completion method
In accordance with IFRS 15, the revenue of contracts is measured according to the estimated revenue at completion and according to the percentage of completion at the closing date.
The identified additional costs are incorporated in the estimated revenue at completion. On the basis of the contractual conditions that are defined contract by contract, any compensation granted or, conversely, penalties charged for delays are also incorporated in the estimated revenue at completion in line with the valuation rules of the CFE group. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognized as an expense immediately.
The labour costs or costs materials not allocated to the contracts are excluded from the percentage of completion measurement and are directly recognized as an expense for the period. - Estimates used in impairment tests
At June 30, 2020, the market capitalization of the CFE group amounted to €1,537 million. As this fair value is lower than the net carrying amount of CFE's equity, which is €1,755 million, this is an impairment indicator.
Consequently, an impairment test was carried out on DEME, the main cash generating unit (CGU) of the CFE group. The management of DEME performed an update of the group's strategic plan. This is a provisional analysis that will be finetuned when the financial statements are prepared at the end of the financial year. The impact of the delay in the delivery of the vessel 'Orion' and the downturn of the oil and gas market are also taken into account.
The parameters of the model applied to cash flow projections have not changed in relation to 2019: 7.9% discount rate, 1.5% growth rate (terminal value).
The impairment test closes with a recoverable amount that is higher than the carrying amount of the cash generating unit DEME. Consequently, no impairment loss was recognized at June 30, 2020. - Trade receivables
In line with the valuation rules of the CFE group, the analysis of the bankruptcy risk of customers was performed on a case-by-case basis. No general or statistical provision was recognized at June 30, 2020. The in-depth review of trade receivables did not give rise to the recognition of significant additional impairment losses. - Recognition of deferred tax assets
In line with the valuation rules of the CFE group, a deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. The recovery of deferred tax assets was given special attention at June 30, 2020.
Page 13
3.2.2. ASSESSMENT OF THE COVID-19 IMPACT ON THE FINANCIAL SITUATION OF THE CFE GROUP AT JUNE 30, 2020
Throughout the CFE group, the implementation of social distancing measures and the conditions in which the operating activities could be carried on are different according to the business segment concerned.
In the dredging, environment, offshore and infra segment, the operating activities were considerably slowed down but could still be continued, barring exceptions. Consequently, DEME's financial statements are impacted by a decrease in activity and by additional expenses linked to the health crisis. The estimated impact of the COVID-19 pandemic on the revenue and EBIT of the first semester of 2020 is €150 million and €60 million respectively. This estimate of €60 million includes mainly:
- the impact of the lower productivity on project margins (also including the impact of the unavailability of the Orion vessel);
- the under-coverage of costs connected with the fleet and overheads;
- additional costs directly attributable to COVID-19; partly offset by:
- cost-savingmeasures adopted by the company and support received from the public authorities.
The construction activities of the Contracting segment in Belgium and Luxembourg were suspended between March 18 and the beginning of May. On the other hand, work on the construction sites in Poland could continue. The activities of VMA and Mobix were partially delayed during that same period. The impact on the revenue of CFE Contracting in the first semester is estimated at €70 million. The impact of this total or partial suspension of works on the EBIT is estimated at €20 million. The following elements are taken into account:
- the additional direct costs allocated to the projects;
- the under-coverage of overheads resulting from the postponement of activity;
- the labour costs not allocated to the projects;
- the cost of machinery and equipment not allocated to the projects;
partly offset by:
- temporary unemployment measures introduced by the Belgian and Luxembourg governments amounting to slightly more than €5 million.
The real estate segment is impacted by delays in the planning application procedures, particularly in Brussels. For the projects under development, in the absence of planning permission, the expenses incurred are not capitalized. There is no material impact on the pre-tax income. Furthermore, a limited number of deeds of sale could be formalized during the second quarter of 2020, which defers the margin recognition on those sales to the second semester of 2020.
Page 14
4. SEGMENT REPORTING
Segment reporting is presented in respect of the group's operating segments. Segment profits, losses, assets and liabilities include items that can be attributed directly to a segment or allocated on a reasonable basis.
The CFE group consists of four operating segments:
- Dredging, environment, offshore and infra - "DEME"
The Dredging, Environment, Offshore and Infra segment - through its subsidiary DEME - is active in dredging (capital dredging and maintenance dredging), installation of offshore wind turbines and foundations, laying of submarine power cables, protection of marine pipelines, treatment of polluted sludge and sediments, and in marine engineering.
- Contracting
The Contracting segment encompasses the Construction, Multitechnics and Rail & utilities activities.
Construction activity is concentrated in Belgium, Luxembourg and Poland. CFE Contracting specializes in building and refurbishing office buildings, residential properties, hotels, schools, universities, car parks, shopping and leisure centres, hospitals and industrial buildings.
The Multitechnics, Rail & Utilities activities operate mainly in Belgium through two clusters:
- the VMA cluster comprising tertiary electricity, HVAC (heating, ventilation and air conditioning), electromechanical facilities, telecom networks, automation for the automotive, pharmaceutical and agri-food industries, the automated management of technical facilities in buildings, electromechanical work for road and rail infrastructures (tunnels, etc.), and the long-term maintenance of technical facilities and ESCO (energy performance improvement of buildings) type projects;
- the MOBIX cluster comprising railway (track laying and installation of catenaries) and signalling works, energy transportation and public lighting.
- Real estate development
The Real estate development segment develops real estate projects in Belgium, Luxembourg and Poland.
- Holding and non-transferred activities
Besides the usual holding activities, this segment includes:
- participations in Rent-A-Port, Green Offshore and in two Design Build Finance and Maintenance contracts in Belgium;
- contracting activities not transferred to CFE Contracting SA and DEME NV, including several engineering projects in Belgium and building projects in Africa (except Tunisia) and in Central Europe (except Poland).
Page 15
4.1. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period ended June 30, 2020 | DEME | Restate | Contracting | Real estate | Holding and | Eliminatio | Consolidated |
ments | development | non- | ns between | total | |||
(in € thousands) | DEME | transferred | segments | ||||
activities | |||||||
Revenue | 1,047,888 | 423,171 | 33,433 | 10,315 | (23,578) | 1,491,229 | |
Income from operating activities | 9,588 | (2,294) | (5,734) | 2,576 | (1,719) | 138 | 2,555 |
Earnings from associates and joint ventures | 12,266 | (364) | 102 | 3,160 | 1,622 | 16,786 | |
Operating income (EBIT) | 21,854 | (2,658) | (5,632) | 5,736 | (97) | 138 | 19,341 |
% Revenue | 2.09% | (1.33%) | 17.16% | 1.30% | |||
Net financial income/expense | (6,974) | (673) | (1,455) | (487) | (9,589) | ||
Taxes | (627) | 619 | (1,330) | (1,090) | (116) | (13) | (2,557) |
Net income share of the group | 15,488 | (2,039) | (7,635) | 3,191 | (700) | 125 | 8,430 |
% Revenue | 1.48% | (1.80%) | 9.54% | 0.57% | |||
Non-cash items | 144,217 | 2,294 | 11,570 | 53 | (915) | 157,219 | |
EBITDA | 153,805 | 5,836 | 2,629 | (2,634) | 138 | 159,774 | |
% Revenue | 14.68% | 1.38% | 7.86% | 10.71% |
For the period ended June 30, 2019 | DEME | Restate | Contracting | Real estate | Holding and | Eliminatio | Consolidated |
ments | development | non- | ns between | total | |||
(in € thousands) | DEME | transferred | segments | ||||
activities | |||||||
Revenue | 1,349,272 | 501,384 | 24,042 | 12,932 | (39,916) | 1,847,714 | |
Income from operating activities | 52,694 | (2,294) | 1,397 | 526 | (1,886) | 105 | 50,542 |
Earnings from associates and joint ventures | 5,847 | (343) | (15) | 5,137 | (12) | 10,614 | |
Operating income (EBIT) | 58,541 | (2,637) | 1,382 | 5,663 | (1,898) | 105 | 61,156 |
% Revenue | 4.34% | 0.28% | 23.55% | 3.31% | |||
Net financial income/expense | (4,753) | 416 | (525) | (769) | 402 | 0 | (5,229) |
Taxes | (10,549) | 497 | (3,751) | (424) | (35) | (35) | (14,297) |
Net income share of the group | 44,324 | (1,724) | (2,894) | 4,491 | (1,531) | 70 | 42,736 |
% Revenue | 3.29% | (0.58%) | 18.68% | 2.31% | |||
Non-cash items | 146,398 | 2,294 | 9,967 | (139) | (2,109) | 0 | 156,411 |
EBITDA | 199,092 | 11,364 | 387 | (3,995) | 105 | 206,953 | |
% Revenue | 14.76% | 2.27% | 1.61% | 11.20% |
Page 16
4.2. CONSOLIDATED STATEMENT OF FINANCIAL POSITION
For the period ended June 30, 2020 | DEME | Contracting Real estate | Holding and | Eliminations | Consolidated |
development | non- | between | total | ||
(in € thousands) | transferred | segments | |||
activities | |||||
ASSETS
Goodwill
Property, plant and equipment Non-current loans to consolidated group companies Other non-current financial assets
Other non-current assets Inventories
Cash and cash equivalents Internal cash position - cash pooling - assets
Other current assets
Total assets
EQUITY AND LIABILITIES Equity
Non-current borrowings from consolidated group companies Non-current bonds Non-current financial liabilities Other non-current liabilities Current bonds
Current financial liabilities Internal cash position - cash pooling - liabilities
Other current liabilities Total liabilities
Total equity and liabilities
155,567 | 21,560 | 0 | 0 | 0 | 177,127 |
2,511,879 | 79,413 | 1,597 | 2,047 | 0 | 2,594,936 |
0 | 0 | 0 | 20,000 | (20,000) | 0 |
35,783 | 0 | 37,080 | 17,963 | 0 | 90,826 |
305,009 | 15,530 | 55,466 | 1,287,520 | (1,245,887) | 417,638 |
12,210 | 16,923 | 169,819 | 5,081 | (1,625) | 202,408 |
672,426 | 68,043 | 6,307 | 58,549 | 0 | 805,325 |
0 | 57,350 | 5,493 | 2,265 | (65,108) | 0 |
679,361 | 304,977 | 45,826 | 40,148 | (7,532) | 1,062,780 |
4,372,235 | 563,796 | 321,588 | 1,433,573 | (1,340,152) | 5,351,040 |
1,677,724 | 65,226 | 75,912 | 1,183,790 | (1,247,513) | 1,755,139 |
0 | 0 | 20,000 | 0 | (20,000) | 0 |
0 | 0 | 29,741 | 0 | 0 | 29,741 |
839,346 | 27,664 | 50,531 | 145,867 | 0 | 1,063,408 |
174,748 | 15,981 | 19,614 | 1,763 | 0 | 212,106 |
0 | 0 | 0 | 0 | 0 | 0 |
498,493 | 6,343 | 10,200 | 162 | 0 | 515,198 |
0 | 3,340 | 2,197 | 59,571 | (65,108) | 0 |
1,181,924 | 445,242 | 113,393 | 42,420 | (7,531) | 1,775,448 |
2,694,511 | 498,570 | 245,676 | 249,783 | (92,639) | 3,595,901 |
4,372,235 | 563,796 | 321,588 | 1,433,573 | (1,340,152) | 5,351,040 |
For the period ended December 31, | DEME | Contracting Real estate | Holding and | Eliminations | Consolidated |
2019 | development | non- | between | total | |
transferred | segments | ||||
(in € thousands) | activities | ||||
ASSETS
Goodwill
Property, plant and equipment Non-current loans to consolidated group companies Other non-current financial assets
Other non-current assets Inventories
Cash and cash equivalents Internal cash position - cash pooling - assets
Other current assets
Total assets
EQUITY AND LIABILITIES Equity
Non-current borrowings from consolidated group companies Non-current bonds Non-current financial liabilities Other non-current liabilities Current bonds
Current financial liabilities Internal cash position - cash pooling - liabilities
Other current liabilities Total liabilities
Total equity and liabilities
155,567 | 21,560 | 0 | 0 | 0 | 177,127 |
2,529,919 | 81,173 | 1,742 | 2,330 | 0 | 2,615,164 |
0 | 0 | 0 | 23,600 | (23,600) | 0 |
36,178 | 0 | 29,874 | 17,861 | 0 | 83,913 |
266,417 | 15,656 | 51,029 | 1,287,700 | (1,245,838) | 374,964 |
13,152 | 15,720 | 130,837 | 4,528 | (1,625) | 162,612 |
475,135 | 67,550 | 6,411 | 63,110 | 0 | 612,206 |
0 | 75,684 | 11,167 | 2,327 | (89,178) | 0 |
724,124 | 306,630 | 23,703 | 37,824 | (5,635) | 1,086,646 |
4,200,492 | 583,973 | 254,763 | 1,439,280 | (1,365,876) | 5,112,632 |
1,675,537 | 83,670 | 76,296 | 1,172,271 | (1,247,464) | 1,760,310 |
0 | 1,800 | 21,800 | 0 | (23,600) | 0 |
0 | 0 | 29,689 | 0 | 0 | 29,689 |
947,798 | 23,174 | 13,378 | 125,862 | 0 | 1,110,212 |
175,248 | 15,880 | 14,514 | 1,585 | 0 | 207,227 |
0 | 0 | 0 | 0 | 0 | 0 |
235,791 | 9,857 | 14,382 | 10,336 | 0 | 270,366 |
0 | 2,327 | 4,698 | 82,153 | (89,178) | 0 |
1,166,118 | 447,265 | 80,006 | 47,073 | (5,634) | 1,734,828 |
2,524,955 | 500,303 | 178,467 | 267,009 | (118,412) | 3,352,322 |
4,200,492 | 583,973 | 254,763 | 1,439,280 | (1,365,876) | 5,112,632 |
Page 18
4.3. CONSOLIDATED STATEMENT OF CASH FLOWS
For the period ended June 30, 2020 | DEME | Contracting | Real estate | Holding and non- | Consolidated total |
development | transferred activities & | ||||
(in € thousands) | eliminations | ||||
Cash flow from operating activities before change in working capital
Net cash flow from (used in) operating activities
Cash flow from (used in) investing activities
Cash flow from (used in) financing activities
Net increase/(decrease) in cash position
For the period ended June 30, 2019
(in € thousands)
94,798 | 4,900 | 11,857 | (1,607) | 109,948 |
102,660 | 245 | (29,935) | (4,715) | 68,255 |
(44,198) | (2,494) | (59) | (3,222) | (49,973) |
141,729 | 4,375 | 30,148 | 3,377 | 179,629 |
200,191 | 2,126 | 154 | (4,560) | 197,911 |
DEME | Contracting | Real estate | Holding and non- | Consolidated total |
development | transferred activities & | |||
eliminations | ||||
Cash flow from operating activities before change in working capital
Net cash flow from (used in) operating activities
Cash flow from (used in) investing activities
Cash flow from (used in) financing activities
Net increase/(decrease) in cash position
194,498 | 11,017 | 3,480 | (3,902) | 205,093 |
147,047 | (15,365) | 2,310 | (1,160) | 132,832 |
(240,061) | (7,673) | (214) | (10,714) | (258,662) |
372,863 | 9,685 | 3,448 | (3,008) | 382,988 |
279,849 | (13,353) | 5,544 | (14,882) | 257,158 |
Cash flows from financing activities include cash pooling loans from other segments. A positive amount means a use of pooled cash. This item is also influenced by external financing, especially and primarily in the segments DEME, Real Estate, Holding and non-transferred activities. The DEME segment is not part of the CFE cash pooling arrangement.
Page 19
4.4. OTHER INFORMATION | ||||||
For the period ended June 30, | DEME | Contracting | Real estate | Holding and non- | Consolidated total | |
2020 | development | transferred | ||||
activities | ||||||
(in € thousands) | ||||||
Amortisation | (146,511) | (8,891) | (393) | (373) | (156,168) | |
Investments | 133,828 | 10,206 | 198 | 98 | 144,330 | |
For the period ended June 30, | DEME | Contracting | Real estate | Holding and non- | Consolidated total | |
2019 | development | transferred | ||||
activities | ||||||
(in € thousands) | ||||||
Amortisation | (148,692) | (7,905) | (384) | (284) | (157,265) | |
Investments | 230,807 | 13,294 | 472 | 90 | 244,663 | |
The investments include the acquisitions as part of the group's investing activities and the acquisitions made as part of the operating activities of the Real Estate segment. Acquisitions through business combinations are not included in these amounts.
BREAKDOWN OF REVENUE IN THE DEME SEGMENT | ||
June 2020 | June 2019 | |
(in € thousands) | ||
Dredging | 428,981 | 572,126 |
Offshore | 434,617 | 582,939 |
Environment | 59,280 | 76,709 |
Infra | 101,123 | 89,730 |
Others | 23,887 | 27,768 |
Total DEME | 1,047,888 | 1,349,272 |
BREAKDOWN OF REVENUE IN THE CONTRACTING SEGMENT | ||
June 2020 | June 2019 | |
(in € thousands) | ||
Construction | 300,339 | 383,528 |
Multitechnics | 78,078 | 79,813 |
Rail & Utilities | 44,754 | 38,043 |
Total Contracting | 423,171 | 501,384 |
4.5. GEOGRAPHICAL INFORMATION
REVENUE OF CFE GROUP | ||
June 2020 | June 2019 | |
(in € thousands) | ||
Belgium | 555,300 | 770,358 |
Other Europe | 683,927 | 645,873 |
Middle East | 5,806 | 61,945 |
Other Asia | 119,210 | 161,019 |
Oceania | 18,458 | 16,466 |
Africa | 74,943 | 136,178 |
Americas | 33,585 | 55,875 |
Consolidated total | 1,491,229 | 1,847,714 |
Page 20
5. ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES
ASSETS HELD FOR SALE AT JUNE 30, 2020
On May 12, 2020, DEME sold its 12.5% stake in the company Merkur Offshore GmbH to APG and The renewables infrastructures Group Limited "TRIG" for €88.9 million. The net carrying amount of the consolidated assets in the financial statements of the CFE group, namely €10.5 million, were shown as assets held for sale at December 31, 2019.
At June 30, 2020, a gain on disposal of €63.9 million is reported in the financial statements of the CFE group.
ACQUISITIONS FOR THE PERIOD ENDED JUNE 30, 2020
No transactions having a material impact took place during the first six months of 2020.
DISPOSALS FOR THE PERIOD ENDED JUNE 30, 2020
No transactions having a material impact took place during the first six months of 2020.
In the Real Estate segment, the acquisitions and disposals carried out do not qualify as business combinations; therefore the total price paid is allocated to the land and buildings held in stock. The main acquisitions and disposals which occur in the Real Estate segment are described here above in the preamble.
Page 21
COMPREHENSIVE INCOME
6. REVENUE FROM AUXILIARY ACTIVITIES
Revenue from auxiliary activities amounted to €112,750 thousand (June 2019: €48,376 thousand) and primarily includes the capital gain on disposal of DEME shares in the Merkur offshore wind farm (+ €63,935 thousand) as well as rental income, other reimbursements and rebilling of various expenses worth €47,981 thousand (June 2019: €41,858 thousand) of which DEME accounts for €23,292 thousand. At June 30, 2020, capital gains on disposals of tangible and intangible assets amounted to €834 thousand (June 2019: €6,518 thousand).
7. | NET FINANCIAL INCOME/EXPENSE | ||||
As of June 30 | |||||
2020 | 2019 | ||||
(in € thousands) | |||||
Cost of financial debt | (3,164) | (1,044) | |||
Derivative instruments - fair value adjustments through profit and loss | 0 | 0 | |||
Derivative instruments used as hedging instruments | 0 | 0 | |||
Assets measured at fair value | 0 | 0 | |||
Available-for-sale financial instruments | 0 | 0 | |||
Assets and liabilities at amortized cost - interest income | 4,156 | 7,242 | |||
Assets and liabilities at amortized cost - interest expense | (7,320) | (8,286) | |||
Other financial income and expense | (6,425) | (4,185) | |||
Realized / unrealized translation gains/(losses) | (4,061) | (1,656) | |||
Dividends received from non-consolidated companies | 0 | 5 | |||
Defined benefit plan financial cost | 0 | 0 | |||
Impairment of financial assets | 0 | 0 | |||
Others | (2,364) | (2,534) | |||
Net financial income/expense | (9,589) | (5,229) | |||
The change in realized (unrealized) exchange gains/(losses) and other as of June 30, 2020 is mainly explained by the devaluation of most currencies against the euro at DEME and the devaluation of the zloty against the euro at BPI and CFE Contracting.
8. NON-CONTROLLING INTERESTS
As of June 30, 2020, the share of non-controlling interests in the income statement amounted to €1,235 thousand (June 2019: €1,106 thousand) and is entirely related to DEME.
9. INCOME TAX
The tax expenses amounted to €2,557 thousand for the first half of 2020, compared to €14,297 thousand for the first half of 2019. The effective tax rate amounted to -36.4%, compared to 31.55% as of June 30, 2019. The effective tax rate is defined as the income tax expense over the pre-tax income from which the earnings from associates and joint ventures are deducted.
At June 30, 2020, the effective tax rate was strongly influenced by the capital gain on the disposal of Merkur Offshore GmbH by DEME, which is not subject to income tax, and by the recognition of deferred tax assets on losses carried forward where it is probable that a future taxable profit will be available for the use of the fiscal losses carried forward. The deferred tax assets increase by €11.8 thousand as a result of the recognition of those deferred taxes on some of the tax losses.
Page 22
FINANCIAL POSITION
10. PROPERTY, PLANT AND EQUIPMENT
For the period ended June 30, 2020 | Land and | Fixtures and | Furniture, | Under | Total |
(in € thousands) | buildings | equipment | fittings and | construction | |
vehicles | |||||
Acquisition costs | |||||
Balance at the end of the previous period | 229,873 | 4,070,355 | 102,912 | 540,374 | 4,943,514 |
Effects of changes in foreign exchange rates | (1,117) | (2,544) | (622) | (2) | (4,285) |
Effects of changes in consolidation scope | 1,983 | 364 | 0 | 0 | 2,347 |
Acquisitions | 7,225 | 45,042 | 9,282 | 79,782 | 141,331 |
Transfers between asset items | 102 | 90,800 | (78) | (91,384) | (560) |
Disposals | (5,279) | (19,740) | (4,451) | (509) | (29,979) |
Balance at the end of the period | 232,787 | 4,184,277 | 107,043 | 528,261 | 5,052,368 |
Amortisation and impairment | |||||
Balance at the end of the previous period | (72,676) | (2,192,432) | (63,242) | 0 | (2,328,350) |
Effects of changes in foreign exchange rates | 330 | 1,769 | 368 | 0 | 2,467 |
Effects of changes in consolidation scope | 0 | (177) | 0 | 0 | (177) |
Amortisation | (9,622) | (136,887) | (8,801) | 0 | (155,310) |
Transfers between asset items | (34) | 3 | 244 | 0 | 213 |
Disposals | 1,637 | 18,853 | 3,235 | 0 | 23,725 |
Balance at the end of the period | (80,365) | (2,308,871) | (68,196) | 0 | (2,457,432) |
Net carrying amount | |||||
At January 1, 2020 | 157,197 | 1,877,923 | 39,670 | 540,374 | 2,615,164 |
At June 30, 2020 | 152,422 | 1,875,406 | 38,847 | 528,261 | 2,594,936 |
The net carrying amount of property, plant and equipment amounted to €2,594,936 thousand as of June 30, 2020 (December 31, 2019: €2,615,164 thousand).
As of June 30, 2020, acquisitions of property, plant and equipment amounted to €141,331 thousand, and are mainly related to DEME (€131,330 thousand).
Of the ten vessels ordered in 2015, 2016 and 2018, worth a total of over one billion euros, the trailing suction hopper dredgers 'Minerva' and 'Scheldt River', and the vessels 'Gulliver' (in joint venture), 'Apollo', 'Living Stone' and 'Bonny River' were delivered in 2017, 2018 and 2019. The vessels 'Meuse River' and 'River Thames' joined DEME's fleet in the first half of 2020. As of June 30, 2020, a residual amount of €157.8 million will be invested in vessels under construction over the next few years, primarily the 'Orion' and the 'Spartacus'.
The net carrying amount of property, plant and equipment used as collateral for certain loans totalled €55,686 thousand (December 2019: €55,686 thousand).
The net carrying amount of right-of-use assets was €158,156 thousand as of June 30, 2020 (December 2019: €163,529 thousand). Those assets primarily include the concessions and buildings of the DEME group, the vehicle fleet of the group, the registered offices of the subsidiaries Mobix Stevens NV, Mobix Engema SA, VMA Druart SA, CFE SA, BPI Real Estate Belgium SA and Arthur Vandendorpe NV; the equipment of Benelmat SA, Mobix Coghe NV and Mobix Remacom NV.
Depreciation of property, plant and equipment during the first semester of 2020 amounted to €155,310 thousand (June 2019: €156,691 thousand).
Page 23
For the period ended June 30, 2019 | Land and | Fixtures and | Furniture, | Under | Total |
(in € thousands) | buildings | equipment | fittings and | construction | |
vehicles | |||||
Acquisition costs | |||||
Balance at the end of the previous period | 144,300 | 3,914,871 | 68,409 | 431,022 | 4,558,602 |
Right-of-use assets, January 1, 2019 | 72,371 | 5,311 | 21,081 | 0 | 98,763 |
Effects of changes in foreign exchange rates | (495) | 746 | (39) | 1 | 213 |
Effects of changes in consolidation scope | 0 | 0 | 0 | 0 | 0 |
Acquisitions | 2,915 | 91,143 | 9,552 | 140,786 | 244,396 |
Transfers between asset items | 32 | 125,230 | 79 | (119,303) | 6,038 |
Disposals | (215) | (80,096) | (4,065) | 0 | (84,376) |
Balance at the end of the period | 218,908 | 4,057,205 | 95,017 | 452,506 | 4,823,636 |
Amortisation and impairment | |||||
Balance at the end of the previous period | (59,027) | (2,053,942) | (55,397) | 0 | (2,168,366) |
Effects of changes in foreign exchange rates | (27) | (1,007) | (18) | 0 | (1,052) |
Effects of changes in consolidation scope | 0 | 0 | 0 | 0 | 0 |
Amortisation | (8,407) | (140,901) | (7,383) | 0 | (156,691) |
Transfers between asset items | (1) | 428 | (104) | (6,229) | (5,906) |
Disposals | 99 | 68,876 | 3,667 | 6,229 | 78,871 |
Balance at the end of the period | (67,363) | (2,126,546) | (59,235) | 0 | (2,253,144) |
Net carrying amount | |||||
At January 1, 2019 | 85,273 | 1,860,929 | 13,012 | 431,022 | 2,390,236 |
At June 30, 2019 | 151,545 | 1,930,659 | 35,782 | 452,506 | 2,570,492 |
11. ASSOCIATES AND JOINT ARRANGEMENTS
As of June 30, 2020, investments in associates and joint arrangements amounted to €180,343 thousand (December 2019: €167,653 thousand). This increase is explained by the acquisition of 50% of the shares in the company Mobius I SA (+ €9,683 thousand) in the Real Estate segment.
CFE group share in the net result of associates and joint ventures amounted to €16,786 thousand (June 2019: €10,614 thousand) and mainly derives from DEME activities, offshore wind farms and real estate development activities.
12. INVENTORIES
As of June 30, 2020, inventories amounted to €202,408 thousand (December 2019: €162,612 thousand) and broke down as follows:
(in € thousands) | June 2020 | December 2019 |
Raw materials and auxiliary products | 44,056 | 42,609 |
Impairment on inventories of raw materials and auxiliary products | (154) | (166) |
Finished products and properties held for sale | 159,054 | 120,648 |
Impairment on inventories of finished products | (548) | (479) |
Inventories | 202,408 | 162,612 |
The increase in finished products and properties held for sale (+ €38,406 thousand) is primarily attributable to the acquisition by BPI Real Estate Belgium and BPI Real Estate Luxembourg of land for development (+ €32,687 thousand).
Page 24
13. TRADE RECEIVABLES AND OTHER OPERATING RECEIVABLES
As of June 30, 2020, trade receivables and other operating receivables amounted to €967,486 thousand (December 2019: €996,436 thousand). The decrease during the first half of 2020 is primarily attributable to the activities of the DEME group.
Regarding the risk on trade receivables, the group defined procedures in order to limit the risk. It should be noted that an important part of the consolidated sales is realized with public or semi-public customers. In addition, CFE considers that the concentration of the counterparty risk for customers is limited due to the large number of customers. It should also be noted that the CFE group continues its efforts to collect the outstanding receivables from the Chadian government.
14. PROVISIONS OTHER THAN THOSE RELATING TO RETIREMENT BENEFIT OBLIGATIONS AND NON-CURRENT EMPLOYEE BENEFITS
As of June 30, 2020, these provisions amounted to €61,036 thousand, which represents an increase of €2,399 thousand compared to December 2019 (€58,637 thousand).
After-sales | Other current | Provisions for | Other non- | Total | |
service | liabilities | equity method | current | ||
liabilities | |||||
(in € thousands) | |||||
Balance at the end of the previous period | 15,166 | 31,057 | 9,430 | 2,984 | 58,637 |
Effects of changes in foreign exchange rates | (77) | (143) | 0 | 0 | (220) |
Discounting effect | 0 | 0 | 0 | 0 | 0 |
Transfers between items | 0 | (283) | 2,019 | (207) | 1,529 |
Additions to provisions | 919 | 8,153 | 0 | 258 | 9,330 |
Used provisions | (1,495) | (6,563) | 0 | (182) | (8,240) |
Provisions reversed unused | 0 | 0 | 0 | 0 | 0 |
Balance at the end of the period | 14,513 | 32,221 | 11,449 | 2,853 | 61,036 |
of which current: €46,734 thousand non-current: €14,302 thousand
The provision for after-sales service decreased by €653 thousand to €14,513 thousand as of June 30, 2020.
The provisions for other current risks increased by €1,164 thousand to €32,221 thousand as of June 30, 2020.
These provisions include:
- provisions for current litigation (€6,235 thousand), provisions for social risks (€399 thousand) and provisions for other current risks (€8,572 thousand). As regards other current risks, given that negotiations with customers are ongoing, we cannot provide more information about the assumptions made, nor about when the outflow of funds is likely to happen;
- provisions for losses on completion (€17,015 thousand) are recognized when the expected economic benefits of certain contracts are lower than the inevitable costs attendant on compliance with obligations under those contracts. Provisions for losses on completion are used up when the related contracts are performed.
When the CFE group's share in the losses of companies consolidated under the equity method exceeds the carrying amount of the investment, the latter amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred obligations in respect of the associate. The amount of those commitments is accounted for in the non-current provisions, as the Group considers having the obligation to support those entities and their projects.
Provisions for other non-current liabilities include the provisions for liabilities not directly related to site operations in progress.
Page 25
15. CONTINGENT ASSETS AND LIABILITIES
Based on available information at the date on which the financial statements were approved by the Board of Directors, we are not aware of any contingent assets or liabilities, with the exception of contingent assets or liabilities related to construction contracts (for example, the group's claims against customers or claims by subcontractors) that can be described as normal in the dredging and construction sector and which are treated by applying the percentage-of-completion method during the recognition of revenue.
In 2018, DEME was involved in a lawsuit against Rijkwaterstaat in the Netherlands related to the execution of the Juliana Canal project. Based on the information currently available, DEME is unable to estimate the financial consequences of this litigation.
CFE also takes care that all its entities take the necessary organizational measures to ensure that the current laws and regulations are observed, including the compliance rules. DEME is fully cooperating in a judicial investigation into the circumstances surrounding the award of a contract that has in the meantime been executed in Russia. In the present circumstances, the financial impact for DEME cannot be reliably estimated.
16. DERIVATIVE FINANCIAL INSTRUMENTS
The CFE group uses derivative financial instruments primarily to reduce exposure to adverse fluctuations in interest rates, foreign exchange rates, prices of commodities and other market risks. The company does not hold or issue any financial instruments for trading purposes. However, derivatives which do not qualify as hedging instruments are disclosed as instruments held for trading.
The change in fair value of hedging instruments in the consolidated equity of the CFE group amounts to €-5.7 million. This change is the consequence of the decrease of medium and long-term interest rates in the euro zone, and mainly concerns IRS hedging instruments from SPVs BAAK, SeaMade and Rentel, entities consolidated under the equity method.
As of June 30, 2020, derivative financial instruments have been estimated at their fair value.
Page 26
17. NET FINANCIAL DEBT | ||||||
17.1. NET FINANCIAL DEBT | ||||||
June 2020 | December 2019 | |||||
(in € thousands) | Non-current | Current | Total | Non-current | Current | Total |
Bank loans and other financial debt | 814,688 | 204,986 | 1,019,674 | 899,236 | 207,098 | 1,106,334 |
Bonds | 29,741 | 0 | 29,741 | 29,689 | 0 | 29,689 |
Drawings on credit facilities | 136,200 | 0 | 136,200 | 98,000 | 0 | 98,000 |
Lease debts | 112,520 | 29,440 | 141,960 | 112,976 | 36,374 | 149,350 |
Total long-term financial debt | 1,093,149 | 234,426 | 1,327,575 | 1,139,901 | 243,472 | 1,383,373 |
Short-term financial debt | 0 | 280,772 | 280,772 | 0 | 26,894 | 26,894 |
Cash equivalents | 0 | (15,476) | (15,476) | 0 | (31,105) | (31,105) |
Cash | 0 | (789,849) | (789,849) | 0 | (581,101) | (581,101) |
Net short-term financial debt/(cash) | 0 | (524,553) | (524,553) | 0 | (585,312) | (585,312) |
Total net financial debt | 1,093,149 | (290,127) | 803,022 | 1,139,901 | (341,840) | 798,061 |
Derivative instruments used as interest- | 10,548 | 4,431 | 14,979 | 8,369 | 3,567 | 11,936 |
rate hedges | ||||||
The bank loans and other financial debts (€1,019,674 thousand) mainly relate to the corporate credit lines and project financing granted to DEME which are allocated to the financing of vessels.
The only bond still outstanding is that of BPI. This bond was issued on December 19, 2017 and is worth €30 million. It pays a coupon of 3.75% and matures on December 19, 2022.
The lease debts (€141,960 thousand) mainly concern the liabilities relating to the contracts that fall within the scope of IFRS 16 Leases. The share of the DEME group amounts to €106,112 thousand and primarily concerns their concessions, while the Contracting, Real Estate and Holding & non- transferred activities segments account for €35,848 thousand.
Page 27
17.2. DEBT MATURITY SCHEDULE
Less than 1 | Between 1 | Between 2 | Between 3 | Between 5 | More than | ||||
and 10 | June 2020 | ||||||||
year | and 2 years | and 3 years | and 5 years | 10 years | |||||
(in € thousands) | years | ||||||||
Bank loans and other financial debt | 204,986 | 205,467 | 206,070 | 256,542 | 146,609 | 0 | 1,019,674 | ||
Bonds | 0 | 0 | 29,741 | 0 | 0 | 0 | 29,741 | ||
Drawings on credit facilities | 0 | 13,200 | 95,000 | 28,000 | 0 | 0 | 136,200 | ||
Lease debts | 29,440 | 23,512 | 19,652 | 30,926 | 19,167 | 19,263 | 141,960 | ||
Total long-term financial debt | 234,426 | 242,179 | 350,463 | 315,468 | 165,776 | 19,263 | 1,327,575 | ||
Short-term financial debt | 280,772 | 0 | 0 | 0 | 0 | 0 | 280,772 | ||
Cash equivalents | (15,476) | 0 | 0 | 0 | 0 | 0 | (15,476) | ||
Cash | (789,849) | 0 | 0 | 0 | 0 | 0 | (789,849) | ||
Net short-term financial debt | (524,553) | 0 | 0 | 0 | 0 | 0 | (524,553) | ||
Total net financial debt | (290,127) | 242,179 | 350,463 | 315,468 | 165,776 | 19,263 | 803,022 | ||
17.3. CASH FLOWS RELATING TO FINANCIAL LIABILITIES
As of June 30, 2020, CFE Group's financial liabilities amounted to €1,608,347 thousand, or an increase by €198,080 thousand compared to December 31, 2019. This increased debt is primarily accounted for by the issuance of €125 million worth of commercial paper by DEME together with the use of their bank credit lines (revolving credit facilities) to the amount of €125 million.
Non-cash movements | ||||||
December | Cash flow | Change in | Other | Total non-cash | June | |
2019 | consolidation | changes | movements | 2020 | ||
(in € thousands) | scope | |||||
Non-current financial liabilities | ||||||
Bonds | 29,689 | 0 | 0 | 52 | 52 | 29,741 |
Other non-current financial liabilities | 1,110,212 | (61,463) | 1,980 | 12,679 | 14,659 | 1,063,408 |
Current financial liabilities | ||||||
Bonds | 0 | 0 | 0 | 0 | 0 | 0 |
Other current financial liabilities | 270,366 | 249,639 | 0 | (4,807) | (4,807) | 515,198 |
Total | 1,410,267 | 188,176 | 1,980 | 7,924 | 9,904 | 1,608,347 |
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17.4. CREDIT FACILITIES AND COMMERCIAL PAPERS
As of June 30, 2020, CFE SA has confirmed long-term bank credit facilities of €274 million, of which €105 million was drawn as of June 30, 2020. CFE SA also has the possibility of issuing commercial paper and "Medium Term Notes" up to an amount of €50 million. This form of financing was drawn on to an amount of €35 million as of June 30, 2020.
As of June 30, 2020, BPI Real Estate Belgium SA has confirmed long-term bank credit facilities of €40 million, of which €26.2 million was drawn as of June 30, 2020. BPI Real Estate Belgium SA also has the possibility of issuing commercial paper up to an amount of €40 million. This form of financing was drawn on to an amount of €18.3 million as of June 30, 2020.
DEME has confirmed bank credit facilities (revolving credit facilities) of €100 million. DEME also has the possibility of issuing commercial paper up to an amount of €125 million. As of June 30, 2020, those two sources of funding have been fully used.
17.5. FINANCIAL COVENANTS
Bilateral loans are subject to specific covenants that take into account factors such as financial debt and the ratio of debt to equity or non-current assets, as well as EBITDA. The group complied with all these financial covenants as at June 30, 2020.
Page 29
18. FINANCIAL RISK MANAGEMENT
18.1. INTEREST RATE RISK
The policy and the risk management procedures defined by the group are the same as those described in the 2019 annual report.
The impact of the risk coverage with regard to changes in interest rates on financial debts, excluding lease debts, can be summarized as follows:
Effective average interest rate beforeconsidering derivative products | |||||||||||||||||||
Fixed rate | Floating rate | Total | |||||||||||||||||
Type of debts | Amounts | Quota | Rate | Amounts | Quota | Rate | Amounts | Quota | Rate | ||||||||||
Bank loans and other | 54,700 | 57.92% | 1.16% | 964,974 | 88.43% | 0.74% | 1,019,674 | 86.00% | 0.76% | ||||||||||
financial debts | |||||||||||||||||||
Bonds | 29,741 | 31.49% | 3.75% | 0 | 0.00% | 0.00% | 29,741 | 2.51% | 3.75% | ||||||||||
Drawings on credit | 10,000 | 10.59% | 1.40% | 126,200 | 11.57% | 1.02% | 136,200 | 11.49% | 1.05% | ||||||||||
facilities | |||||||||||||||||||
Total | 94,441 | 100% | 2.00% | 1,091,174 | 100% | 0.77% | 1,185,615 | 100% | 0.87% | ||||||||||
Effective average interest rate afterconsidering floating derivative products | |||||||||||||||||||
Fixed rate | Floating rate | Floating rate capped + inflation | Total | ||||||||||||||||
Type of debts | Amounts | Quota | Rate | Amounts | Quota | Rate | Amounts | Quota | Rate | Amounts | Quota | Rate | |||||||
Bank loans and | 950,224 | 90.67% | 1.17% | 69,450 | 50.45% | 1.09% | 0 | 0.00% | 0.00% | 1.17% | |||||||||
other financial | 1,019,674 | 86.00% | |||||||||||||||||
debts | |||||||||||||||||||
Bonds | 29,741 | 2.84% | 3.75% | 0 | 0.00% | 0.00% | 0 | 0.00% | 0.00% | 29,741 | 2.51% | 3.75% | |||||||
Drawings on credit | 68,000 | 6.49% | 1.48% | 68,200 | 49.55% | 1.06% | 0 | 0.00% | 0.00% | 136,200 | 11.49% | 1.27% | |||||||
facilities | |||||||||||||||||||
Total | 1,047,965 | 100% | 1.27% | 137,650 | 100% | 1.08% | 0 | 0.00% | 0.00% | 1,185,615 | 100% | 1.24% |
18.2. DISTRIBUTION OF THE LONG TERM FINANCIAL DEBTS BY CURRENCY
The outstanding debts (excluding lease liabilities which are mostly in euros) by currency are as follows:
(in € thousands) | June 2020 | December 2019 |
Euro | 1,185,615 | 1,234,023 |
US Dollar | 0 | 0 |
Other currencies | 0 | 0 |
Total long term debts | 1,185,615 | 1,234,023 |
Page 30
18.3. CARRYING AMOUNTS AND FAIR VALUE BY ACCOUNTING CATEGORY
For the period ended June 30, 2020 | FAMMFV / | FAMMFV / | Assets/liabilit | Total of | Fair value | Fair value |
(in € thousands) | FLFVPL (3) - | FLFVPL (3) | ies at | net | measurement | of the class |
Derivatives not | - Derivatives | amortised | carrying | of financial | ||
designated as | designated as | cost | amount | assets by | ||
hedging | hedging | level | ||||
instruments | instruments | |||||
Non-current financial assets | 702 | 353 | 90,826 | 91,881 | 91,881 | |
Investments (1) | 0 | 0 | 6,733 | 6,733 | Level 2 | 6,733 |
Financial loans and receivables (1) | 0 | 0 | 84,093 | 84,093 | Level 2 | 84,093 |
Derivatives | 702 | 353 | 0 | 1,055 | Level 2 | 1,055 |
Current financial assets | 3,252 | 650 | 1,772,811 | 1,776,713 | 1,776,713 | |
Trade and other receivables | 3,252 | 650 | 0 | 3,902 | Level 2 | 3,902 |
Derivatives | 0 | 0 | 967,486 | 967,486 | Level 2 | 967,486 |
Cash equivalents (2) | 0 | 0 | 15,476 | 15,476 | Level 1 | 15,476 |
Cash at bank and in hand (2) | 0 | 0 | 789,849 | 789,849 | Level 1 | 789,849 |
Total assets | 3,954 | 1,003 | 1,863,637 | 1,868,594 | 1,868,594 | |
Non-current financial debts | 2 | 10,548 | 1,093,149 | 1,103,699 | 1,111,172 | |
Bonds | 0 | 0 | 29,741 | 29,741 | Level 1 | 29,741 |
Financial debts | 0 | 0 | 1,063,408 | 1,063,408 | Level 2 | 1,070,881 |
Derivatives | 2 | 10,548 | 0 | 10,550 | Level 2 | 10,550 |
Current financial liabilities | 891 | 11,524 | 1,696,483 | 1,708,898 | 1,710,947 | |
Trade payables and other operating debts | 0 | 0 | 1,181,285 | 1,181,285 | Level 2 | 1,181,285 |
Bonds | 0 | 0 | 0 | 0 | Level 1 | 0 |
Financial debts | 0 | 0 | 515,198 | 515,198 | Level 2 | 517,247 |
Derivatives | 891 | 11,524 | 0 | 12,415 | Level 2 | 12,415 |
Total liabilities | 893 | 22,072 | 2,789,632 | 2,812,597 | 2,822,119 |
For the period ended December 31, 2019 | FAMMFV / | FAMMFV / | Assets/liabilit | Total of | Fair value | Fair value |
(in € thousands) | FLFVPL (3) - | FLFVPL (3) | ies at | net | measurement | of the class |
Derivatives not | - Derivatives | amortised | carrying | of financial | ||
designated as | designated as | cost | amount | assets by | ||
hedging | hedging | level | ||||
instruments | instruments | |||||
Non-current financial assets | 0 | 0 | 83,913 | 83,913 | 83,913 | |
Investments (1) | 0 | 0 | 6,697 | 6,697 | Level 2 | 6,697 |
Financial loans and receivables (1) | 0 | 0 | 77,216 | 77,216 | Level 2 | 77,216 |
Derivatives | 0 | 0 | 0 | 0 | Level 2 | 0 |
Current financial assets | 751 | 0 | 1,608,642 | 1,609,393 | 1,609,393 | |
Trade and other receivables | 0 | 0 | 996,436 | 996,436 | Level 2 | 996,436 |
Derivatives | 751 | 0 | 0 | 751 | Level 2 | 751 |
Cash equivalents (2) | 0 | 0 | 31,105 | 31,105 | Level 1 | 31,105 |
Cash at bank and in hand (2) | 0 | 0 | 581,101 | 581,101 | Level 1 | 581,101 |
Total assets | 751 | 0 | 1,692,555 | 1,693,306 | 1,693,306 | |
Non-current financial debts | 616 | 8,370 | 1,139,901 | 1,148,887 | 1,158,307 | |
Bonds | 0 | 0 | 29,689 | 29,689 | Level 1 | 29,689 |
Financial debts | 0 | 0 | 1,110,212 | 1,110,212 | Level 2 | 1,119,632 |
Derivatives | 616 | 8,370 | 0 | 8,986 | Level 2 | 8,986 |
Current financial liabilities | 3,220 | 6,136 | 1,491,832 | 1,501,188 | 1,503,619 | |
Trade payables and other operating debts | 0 | 0 | 1,221,466 | 1,221,466 | Level 2 | 1,221,466 |
Bonds | 0 | 0 | 0 | 0 | Level 1 | 0 |
Financial debts | 0 | 0 | 270,366 | 270,366 | Level 2 | 272,797 |
Derivatives | 3,220 | 6,136 | 0 | 9,356 | Level 2 | 9,356 |
Total liabilities | 3,836 | 14,506 | 2,631,733 | 2,650,075 | 2,661,926 |
Page 31
- Included in items "Other non-current financial assets" and "Other non-current assets".
- Included in item "Cash and cash equivalents".
-
FAMMFV: Financial assets mandatorily measured at fair value through profit and loss
FLFVPL: Financial liabilities measured at fair value through profit and loss
The fair value of financial instruments can be classified into three levels (1 to 3) based on the degree to which the inputs to the fair value measurements are observable:
- Fair value measurements of level 1 are based on quoted prices (unadjusted) in active markets for identical assets or liabilities;
- Fair value measurements of level 2 are based on inputs, other than quoted prices included within level 1, that are observable for the asset or liability, either directly (through prices) or indirectly (through input derived from prices);
- Fair value measurements of level 3 are based on valuation techniques comprising inputs which are unobservable for the asset or liability.
The fair value of financial instruments has been determined using the following methods:
- For short-term financial instruments, such as trade receivables and payables, the fair value is considered not to be significantly different from the carrying amount measured at amortized cost;
- For floating rate liabilities, the fair value is considered not to be significantly different from the carrying amount measured at amortized cost;
- For derivative financial instruments (foreign currency, interest rate or forecasted cash flows), the fair value is determined using valuation models discounting future cash flows based on future interest rate curves, foreign currency curves or other forward prices;
- For the other derivative instruments, the fair value is determined by discounting future estimated cash flows;
- For the quoted bonds issued by BPI, the fair value is based on the quoted price at reporting date;
- For fixed rate liabilities, the fair value is based on the discounted cash flows based on the market interest rates at the closing date.
19. LEASES (IN ACCORDANCE WITH IFRS 16 STANDARD)
As of June 30, 2020, the impact of IFRS 16 Leases on the consolidated statement of comprehensive income, the consolidated statement of financial position and the consolidated statement of cash flows of the CFE group can be summarized as follows:
As of June 30 | 2020 | 2019 |
(in € thousands) | ||
Impact on the consolidated statement of comprehensive income | ||
Reversal of lease expenses | +14,575 | +12.122 |
Depreciation expenses and impairment of right-of-use assets | (14,061) | (11.660) |
EBIT | +514 | +462 |
EBITDA | +14,575 | +12.122 |
Financial result - Financial interests relating to lease liability | (907) | (1.008) |
Impact on net result for the period | (393) | (546) |
Impact on the consolidated statement of financial position | ||
Right-of-use assets | 98,193 | 97.395 |
of which right-of-use assets newly held during the first semester | 12,054 | 11.554 |
Lease debt | 99,497 | 97.940 |
Impact on the consolidated statements of cash flows | ||
Cash flow from operating activities - reversal of lease expenses | +14,575 | +12.122 |
Cash flow from financing activities - principal | (13,668) | (11.114) |
Cash flow from financing activities - interest | (907) | (1.008) |
Page 32
20. OTHER COMMITMENTS GIVEN
Total commitments given by the CFE group as of June 30, 2020, other than real security interests, totalled €1,359,722 thousand (December 2019: €1,348,770 thousand). These commitments break down as follows:
(in € thousands) | June 2020 | December 2019 |
Performance guarantees and performance bonds (a) | 1,157,422 | 1,181,738 |
Bid bonds (b) | 40,067 | 15,702 |
Repayment of advance payments (c) | 840 | 840 |
Retentions (d) | 19,272 | 19,415 |
Deferred payments to subcontractors and suppliers (e) | 37,303 | 39,005 |
Other commitments given - including €52,799 thousand of corporate guarantees at DEME | 104,818 | 92,070 |
Total | 1,359,722 | 1,348,770 |
- Guarantees given in relation to the performance of works contracts. If the construction entity fails to perform, the bank (or insurance company) undertakes to compensate the customer to the extent of the guarantee.
- Guarantees provided as part of tenders relating to works contracts.
- Guarantees provided by a bank to a customer guaranteeing the repayment of advance payments in relation to contracts (mainly at DEME).
- Security provided by a bank to a client to replace the use of retention money.
- Guarantee covering the settlement of a debt to a supplier or subcontractor.
21. OTHER COMMITMENTS RECEIVED
(in € thousands) | June 2020 | December 2019 |
Performance guarantees and performance bonds | 449,920 | 603,641 |
Other commitments received | 2,456 | 3,321 |
Total | 452,376 | 606,962 |
22. LITIGATION
The CFE group is exposed to a number of claims that may be regarded as normal in the dredging and construction industries. In most cases, the CFE group seeks to conclude a transaction agreement with the counterparty, and this substantially reduces the number of legal proceedings.
The CFE Group tries to recover outstanding receivables from its customers. However, it is not possible to estimate these potential assets.
Page 33
23. RELATED PARTIES
- Ackermans & van Haaren (AvH) owns 15,656,484 shares of CFE as of June 30, 2020 and is the main shareholder of the CFE group with a stake of 61.85%.
- Loans were granted to some members of the executive committee of CFE Contracting and BPI Real Estate Belgium in the framework of the stock option plans granted to these members.
- Dredging Environmental & Marine Engineering NV and CFE SA concluded a service contract with Ackermans & van Haaren NV on November 26, 2001 and on June 11, 2018 respectively. The remuneration due by Dredging Environmental & Marine Engineering NV, a 100% subsidiary of CFE SA, and CFE SA in accordance with that agreement amounted to €1,228 thousand and €672 thousand per year respectively.
- There were no transactions with the companies Trorema SRL, Frédéric Claes SA, 8822 SRL, D2C Partners SAS, Renaud Bentégeat Conseil SASU, Artist Valley SA, Almacon SRL, MSQ SRL, Codimmo SRL, Lesire Real Estate SRL and Smilestone SRL, without prejudice to the invoicing of these companies relating to the provision of services.
- As of June 30, 2020, the CFE group has joint control over Rent-A-Port NV, Green Offshore NV and their subsidiaries.
- Transactions with related parties concerned mainly transactions with companies in which CFE has a significant influence or a joint control. These transactions are concluded at arm's length.
- In the first half of 2020, there were no major changes in the nature of transactions with related parties compared to December 31, 2019. Commercial and financing transactions between the group and associates or joint ventures consolidated under the equity method are as follows:
(in € thousands) | June 2020 | December 2019 |
Assets with related parties | 143,449 | 194,553 |
Non-current financial assets | 88,543 | 92,177 |
Trade and other receivables | 44,674 | 95,353 |
Other current assets | 10,232 | 7,023 |
Liabilities with related parties | 35,369 | 46,829 |
Other non-current liabilities | 5,312 | 1,303 |
Trade and other operating payables | 30,057 | 45,526 |
(in € thousands) | June 2020 | June 2019 |
Revenues and expenses with related parties | 176,878 | 158,474 |
Revenue and income from auxiliary activities | 186,106 | 172,226 |
Purchases and other operating expenses | (12,171) | (19,833) |
Net financial income/expense | 2,943 | 6,081 |
Page 34
24. SUBSEQUENT EVENTS
None.
25. IMPACT OF FOREIGN CURRENCIES
The international activities of the CFE group for the Contracting and Real Estate segments are mainly within the Euro zone and Poland. Consequently, the exposure of those segments to exchange risk and the impact on the financial statements are limited. DEME, however, carries on a large part of its business internationally. These activities are mainly in US dollars or in currencies that are closely tied to the US dollar. DEME uses financial instruments to hedge exchange rate risk.
26. SEASONAL NATURE OF THE BUSINESS
The construction activity is seasonal and susceptible to the climatic conditions of winter.
Revenue and income achieved in the first half year cannot be extrapolated over the full year. The seasonal nature of the business is reflected in a higher use of cash in the first half year.
No adjustments were made to take account of the impact of seasonal factors on the group's financial statements for the first half year.
Income and expenses of the group from normal business operations which are subject to a seasonal, cyclical or occasional nature were recognized following the same valuation rules as at year-end. They were neither anticipated nor deferred in the interim financial statements.
Page 35
ALTERNATIVE PERFORMANCE MEASURES RECONCILIATION
CFE Group uses performance measures in order to assess the group's financial performance, as presented below. The definitions of those performance measures are presented in the "Glossary" section of this report.
The net financial debt and EBITDA have been computed using the consolidated statement of income and the consolidated statement of financial position:
Net financial debt | ||
June 2020 | December 2019 | |
(in € thousands) | ||
Non-current bonds | 29,741 | 29,689 |
Non-current financial liabilities | 1,063,408 | 1,110,212 |
Current bonds | 0 | 0 |
Current financial liabilities | 515,198 | 270,366 |
Financial liabilities | 1,608,347 | 1,410,267 |
Cash and cash equivalents | (805,325) | (612,206) |
Cash and cash equivalents | (805,325) | (612,206) |
Consolidated net financial debt | 803,022 | 798,061 |
EBITDA | ||
June 2020 | June 2019 | |
(in € thousands) | ||
Income from operating activities | 2,555 | 50,542 |
Depreciation on (in)tangible assets and investment property | 156,168 | 157,265 |
Net depreciation on provisions | 1,202 | (614) |
Impairment on assets and other non-cash items | (151) | (238) |
Non-cash items | 157,219 | 156,411 |
Consolidated EBITDA | 159,774 | 206,953 |
The capital employed from the real estate segment has been computed using the consolidated statement of financial position per segment :
Capital employed | ||
June 2020 | December 2019 | |
(in € thousands) | ||
Capital employed from Real estate segment | 75,912 | 76,296 |
Non-current borrowings from consolidated group companies | 20,000 | 21,800 |
Non-current bonds | 29,741 | 29,689 |
Non-current financial liabilities | 50,531 | 13,378 |
Current bonds | 0 | 0 |
Current financial liabilities | 10,200 | 14,382 |
Internal cash position - cash pooling - liabilities (*) | 2,197 | 4,698 |
Financial liabilities | 112,669 | 83,947 |
Non-current loans to consolidated group companies (*) | 0 | 0 |
Cash and cash equivalents | (6,307) | (6,411) |
Internal cash position - cash pooling - assets (*) | (5,493) | (11,167) |
Cash and cash equivalents | (11,800) | (17,578) |
Consolidated net financial debt | 100,869 | 66,369 |
Capital employed | 176,781 | 142,665 |
(*) These account positions relate to cash positions with group entities belonging to other group segments (mainly CFE SA).
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STATEMENT ON THE TRUE AND FAIR NATURE OF THE FINANCIAL STATEMENTS AND THE TRUE AND FAIR NATURE OF THE PRESENTATION IN THE MANAGEMENT REPORT
(Article 12(2)(3) of the Belgian Royal Decree of 14/11/2007 on the obligations of issuers of financial instruments listed for trading on a regulated market)
We certify, in the name and on behalf of Compagnie d'Entreprises CFE SA and on that company's responsibility, that, to our knowledge,
- the financial statements, prepared in accordance with the applicable accounting standards, give a true and fair view of the assets, financial position and results of Compagnie d'Entreprises CFE SA and of the companies included in its scope of consolidation;
- the management report contains a true and fair presentation of the business, results and position of Compagnie d'Entreprises CFE SA and of the companies included in its scope of consolidation, along with a description of the main risks and uncertainties to which they are exposed.
Signatures
Name: | MSQ SRL, represented by Fabien De Jonge | Piet Dejonghe |
Title: | Administrative and Financial Director | Managing Director |
Date: August 24, 2020
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GENERAL INFORMATION ABOUT THE COMPANY
Company name: Compagnie d'Entreprises CFE
Head office: avenue Herrmann-Debroux40-42, 1160 Brussels
Telephone: + 32 2 661 12 11
Legal form: public limited company (société anonyme)
Incorporated under Belgian law
Date of incorporation: June 21, 1880
Duration: indefinite
Accounting period: from January 1 to December 31
Trade Register entry: RPM Brussels 0400 464 795 - VAT 400.464.795
Place where legal documentation can be consulted: head office
Corporate purpose (Article 2 of the Articles of Association)
"The purpose of the company is to study and execute any work or construction within each and every of its specialist areas, in particular electricity and the environment, in Belgium or abroad, singly or jointly with other natural or legal persons, for its own account or on behalf of third parties belonging to the public or private sector.
It may also perform services related to these activities, directly or indirectly operate them or license them out or carry out any purchase, sale, rent or lease operation whatsoever in respect of such undertakings.
It may directly or indirectly acquire, hold or sell equity interests in any company or undertaking existing now or in the future by way of acquisition, merger, spin-off or any other means.
It may carry out any commercial, industrial, administrative or financial operations or operations involving movable or immovable property that are directly or indirectly related to its purpose, even partially, or that could facilitate or develop that purpose, either for itself or for its subsidiaries.
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AUDITOR'S REPORT
In the context of our appointment as the company's statutory auditor, we report to you on the consolidated interim financial information. This consolidated interim financial information comprises the consolidated condensed statement of financial position as at 30 June 2020, the consolidated condensed income statement, the consolidated condensed statement of comprehensive income, the consolidated condensed statement of changes in equity and the consolidated condensed statement of cash flows for the period of six months then ended, as well as selective notes 1 to 26.
Report on the consolidated interim financial information
We have reviewed the consolidated interim financial information of Compagnie d'Entreprises CFE NV/SA ("the company") and its subsidiaries (jointly "the group"), prepared in accordance with International Accounting Standard (IAS) 34, "Interim Financial Reporting" as adopted by the European Union.
The consolidated condensed statement of financial position shows total assets of 5 351 040 (000) EUR and the consolidated condensed income statement shows a consolidated profit (group share) for the period then ended of 8 430 (000) EUR.
The board of directors of the company is responsible for the preparation and fair presentation of the consolidated interim financial information in accordance with IAS 34, "Interim Financial Reporting" as adopted by the European Union. Our responsibility is to express a conclusion on this consolidated interim financial information based on our review.
Scope of review
We conducted our review of the consolidated interim financial information in accordance with International Standard on Review Engagements (ISRE) 2410, "Review of interim financial information performed by the independent auditor of the entity". A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit performed in accordance with the International Standards on Auditing (ISA) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on the consolidated interim financial information.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the consolidated interim financial information of Compagnie d'Entreprises CFE NV/SA has not been prepared, in all material respects, in accordance with IAS 34, 'Interim Financial Reporting" as adopted by the European Union.
Zaventem, 24 August 2020
The statutory auditor
Deloitte Bedrijfsrevisoren/Réviseurs d'Entreprises CVBA/SCRL
Represented by Rik Neckebroeck
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CFE - Compagnie d'Entreprises SA published this content on 28 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 August 2020 08:27:07 UTC
