Faiveley Transport : 2016/17 Half-Year Financial Report

2016/17

HALF-YEAR FINANCIAL REPORT

CONTENTS

1. HALF-YEAR ACTIVITY REPORT AT 30 SEPTEMBER 2016 4

2. Preliminary note 4

3. Significant events during the first half of 2016/17 4

   Proposed combination with Wabtec Corporation 4

4. Half-year sales growth and results 4

   Order book 4

   Sales 5

   Group operating profit 6

   Net profit 6

5. Cash flow and financing 6

   Cash flow statement 6

   Financing 8

6. Description of the main risks and uncertainties for the remaining three months of the financial year 9

7. Related-party transactions 9

8. 2016 Outlook 9

9. Post-closing events AFTER 30 SEPTEMBER 2016 9

   Vesting of free shares - Share capital increase 9

   Combination with wabtec 10

   Dividend 10

   Free performance-based share allocation plan 10

10. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AT 30 SEPTEMBER 2016 11

11. Half-year consolidated financial statements 11

    Half-year consolidated income statement 11

    Half-year consolidated statement of comprehensive income 12

    Half-year consolidated statement of financial position 13

    Half-year consolidated statement of changes in equity 15

    Half-year consolidated cash flow statement 16

12. Notes to the condensed consolidated half-year financial statements 17

    Note 1: General information 18

    Note 2: Highlights 18

    Note 3: Accounting principles and methods 18

    Note 4: Changes in consolidation scope and assets held for sale 20

    Note 5: Goodwill 21

    Note 6: Intangible assets 22

    Note 7: Property, plant and equipment 23

    Note 8: Assets held for sale 24

    Note 9: Investments in equity-accounted entities 24

    Note 10: Other non-current financial assets 25

    Note 11: Inventories 25

    Note 12: Work-in-progress on projects 26

    Note 13: Current receivables 26

    Note 14: Current financial assets 27

    Note 15: Cash and cash equivalents 27

    Note 16: Group equity 27

    Note 17: Minority interests 29

    Note 18: Analysis of provisions 29

    Note 19: Borrowings and financial debt 30

    Note 20: Financial risk management 32

    Note 21: Current liabilities 35

    Note 22: Factoring 35

    Note 23: Segment reporting 36

    Note 24: Sales 37

    Note 25: Gross profit and Cost of sales 37

    Note 26: Other income and expenses from recurring operations 38

    Note 27: Restructuring costs and gains and losses on disposal of property, plant and equipment and intangible assets 38

    Note 28: Net financial income/(expense) 38

    Note 29: Income tax 39

    Note 30: Profit or loss of operations held for disposal and discontinued operations 39

    Note 31: Payroll costs and workforce 39

    Note 32: Earnings per share 39

    Note 33: Post-balance sheet events 40

    Note 34: Transactions with related parties 40

    Note 35: Dividends 41

    Note 36: Off-balance sheet commitments 41

    Note 37: Consolidation scope and method 42

    Note 38: Financial communication 43

13. Statutory Auditors' report on the 2016/17 consolidated half-year financial statements (period from 1 April to 30 September 2016) 44

14. STATEMENT OF THE PERSONS RESPONSIBLE FOR THE HALF-YEAR FINANCIAL REPORT 45

15. The French version of this half-year financial report was submitted to the Autorité des Marchés Financiers (AMF) on 23 November 2016 in accordance with Article 222-4 of its General Regulations. It has been prepared in accordance with Article L.451-1-2 of the Monetary and Financial Code and includes a Half-Year Activity Report for the period from 1 April 2016 to 30 September 2016, the Faiveley Transport Group consolidated financial statements at 30 September 2016, the Statutory Auditors' report and the statement of persons responsible for the document.

16. Half-year activity report at 30 September 2016
17. PRELIMINARY NOTE

    Readers are encouraged to read the following information on the Group's financial situation and financial performance in conjunction with the Group's consolidated half-year financial statements at 30 September 2016 and accompanying notes included in Chapter 2 of this Half-Year Financial Report at 30 September 2016, as well as the Group's consolidated financial statements at 31 March 2016 and accompanying notes included in section 3.6 of the 2015/16 Registration Document.

    In application of Regulation (EC) 1606/2002 of the European Union of 19 July 2002 on the application of international accounting standards, the consolidated financial statements of Faiveley Transport for the first half of 2016/17 and the first half of 2015/16 have been prepared in accordance with IFRS (International Financial Reporting Standards), as adopted by the European Union. Percentages may be calculated using non-whole numbers and may therefore differ from those calculated using whole numbers.

18. SIGNIFICANT EVENTS DURING THE FIRST HALF OF 2016/17 PROPOSED COMBINATION WITH WABTEC CORPORATION

    At 30 September 2016, the process for applying to the European Commission for authorisation of the Faiveley Transport / Wabtec combination was ongoing. Following the formal notification submitted on 4 April 2016, on 12 May 2016 the European Commission opened an in-depth investigation (Phase 2) regarding certain segments which could be affected by the combination. In the United States, the Department of Justice is continuing the additional information ("second request") proceedings in relation to the planned acquisition.

    In this context, authorisation from regulatory authorities is expected in the fourth quarter of 2016.

19. HALF-YEAR SALES GROWTH AND RESULTS

20. (€ millions)	HY1 2016/17	HY1 % change 2015/16
    Order book	1,792.3	1,814.7 (1.2)%
    Sales	520.5	532.8 (2.3)%
    Adjusted Group operating profit (a)	49.0	51.8 (5.4)%

    Free cash flow(b)	14.7	28.7

    as % of sales	9.4%	9.7%
    Net profit - Group share	(33.1)	23.2

21. Adjusted Group operating profit is defined as operating profit including the share of profit of equity-accounted entities, restated for restructuring costs, impairment, and costs related to the planned combination with Wabtec.

22. Indicators not defined under IFRS, definitions provided in the notes

23. ORDER BOOK

    At 30 September 2016, the Group's order book stood at €1,792.3 million, a slight fall of 1.2% (including a 2.0% organic fall) in comparison with 30 September 2015. This decline was primarily the result of the cancellation of an order of more than €35 million linked to the decision by an Asian client to abandon the modernisation of a fleet of trains, independent of the performance of Faiveley Transport.

    The Group secured some significant contracts over the period, with notably in the second quarter:

    In the Europe region: