Q-Park closes the year 2013 with a revenue of EUR 742.2 million (2012: EUR 739.9 million), an operational result before depreciation of EUR 185.2 million (2012: EUR 183.7 million) and a direct result after taxes of EUR 63.8 million (2012: EUR 59.0 million). The direct result shows a stable and positive development in comparison to the previous year, which is partly due to the efficiency drive and strict cost control.
As a result of a downward revaluation of the investment property, the indirect result after taxes amounted to EUR -210.3 million (2012: EUR -152.8 million), resulting in a net result of EUR -146.5 million (2012: EUR -93.8 million).
The like-for-like parking revenues growth, included in the revenue, amounted to 2.6% at a weighted average inflation of 1.6%. This means that a like-for-like of more than 1.5 times inflation was achieved.
We have worked hard to renegotiate or terminate projects with a negative margin. As a consequence, several projects in France, Great Britain and Denmark have been terminated. We have also been able to renegotiate two large contracts in the Netherlands and in Belgium. The focus on projects with a negative margin is also high on the agenda for 2014.
The investment property revaluation result amounts to EUR -292.0 million (2012: EUR -3.1 million). The revaluation result is mainly due to revised cash flow projections and modified parameters (discount rate, exit yield). The weighted average discount rate for the whole group remained stable at 8.0%, the exit yield (weighted average) increased from 8.3% to 8.5%.
The majority of the revaluation result of EUR -292.0 million arises from the cluster Mid (EUR -170.8 million). The remaining downward revaluation comes from the other clusters, where EUR -57.6 million is attributable to the cluster South.
In 2013 Q-Park merged its ten country organisations into four cluster organisations. They are managed by the responsible cluster management teams each comprising a managing director and a financial director. The country management teams are managed by, report to and are evaluated by the cluster management teams. In response to this, as from 2013, Q-Park has defined its cash generating units at cluster level instead of country level. The impairment test for 2013 did not lead to impairments.
Q-Park operates in multiple jurisdictions with complex legal and tax regulatory environments. In certain of these jurisdictions, Q-Park has taken corporate income tax positions that we believe are supportable and are able to withstand challenges from the tax authorities. A number of these positions concern transfer pricing matters and the interpretation of income tax laws applied to complex transactions.
Q-Park periodically reassesses its tax positions. Changes to the recognition of these positions in the annual accounts, their valuation, and disclosure of information regarding tax positions are implemented based on any changes in the facts, circumstances, information available and applicable tax laws. Considering all available information and the history of resolving income tax uncertainties, we believe that the tax position is correctly stated.
Tax on profits
The tax on profits for the comprehensive income amounted to EUR 61.4 million (income). For 2012 the tax on profits amounted to EUR -7.8 million (charge). This includes a charge of EUR -19.8 million for the direct result (2012: EUR -21.3 million), an income of EUR 88.8 million for the indirect result (2012: EUR 13.9 million) and an amount of EUR -7.6 million that was charged directly to the shareholders' equity (2012: EUR -0.4 million).
Even in 2013, Q-Park benefited from the further, globally competitive reduction in statutory tax rates for corporate income tax. Sweden has reduced the rate by more than 4 percentage points, which has a positive impact on the current taxes. Furthermore, in 2014 rates will be reduced in Great Britain, Denmark, Norway and Finland, varying from 1 to 4.5 percentage points. For 2013 this had a visible positive influence on the deferred taxes.
Partly due to our presence in various European jurisdictions and a wide range of cross-border transactions between group companies, transfer pricing is one of the most important tax considerations. In recent years this has been reinforced due to greater focus by governments on the business objectivity of the transfer prices, more and stricter national anti-abuse provisions and, in 2013 in particular, by developments within the European Union and the OECD concerning the application of differences in tax systems, more commonly known as Base Erosion and Profit Shifting (BEPS).
Q-Park continually monitors its transfer pricing policy, also with a view to future developments. We adjust our policy where necessary in order to act within the prevailing legislation and our own guidelines.
In 2013 the transfer prices for internal and external group financing were adjusted in line with market trends. Moreover, an updated Transfer Pricing Report was published. New market-based transfer prices have been defined following the Opco-Propco split.
As a result of the worldwide trend to finance government shortages from indirect, local and other forms of taxation, we have also seen the tax burden on Q-Park increase. For example, between 2010 and 2013 the average standard VAT rate within the Q-Park Group has increased from 21.5% to 22.3%. This is higher than the rise in the average tariff within the European Union in the same period, from 20.5% to 21.5%. At the same time, the tax burden has also increased by more efficient and more intensive collection, for example through e-filing.
Because Q-Park applies hedge accounting with respect to financial derivatives, an effectiveness test is conducted each quarter to check the relationship between the derivatives and the underlying loan portfolio. The so-called 'ineffective' part of the movements in fair market value of the derivatives must be recognised in the net result. The other movements in value are recognised directly in the shareholders' equity. In 2013, the part of the movement in fair value of the interest rate derivatives recognised directly in the shareholders' equity amounted to EUR 51.0 million before taxes (2012: EUR -14.5 million). For 2013 the ineffective part amounted to EUR 2.1 million, in 2012 the ineffective part amounted to EUR -0.8 million.
In 2013, the cash flow from operating activities amounted to EUR 77.2 million (2012: EUR 82.4 million), where the movement compared to 2012 is mainly due to movements in the working capital.
In 2013, the cash flow from investment activities amounted to EUR -50.9 million (2012: EUR -78.7 million). The amount spent on maintenance and expansion investments in the financial year amounted to EUR -71.5 million (2012: EUR -96.0 million), receipts from divestments amounted to EUR 20.6 million (2012: EUR 17.3 million).
The cash flow from financing activities amounted to EUR 3.0 million, compared to EUR 28.6 million in 2012. A substantial part of the loans have been repaid, EUR -44.5million, and EUR 295.8 million has been refinanced. The new loans concern a Credit Linked Note (CLN) refinanced by two institutional parties, which means that the refinancing risk of this part of the bank debt is guaranteed for the coming five years through the private market. In 2013, the cash flow from financing activities was supplemented by EUR 115.0 million in receipts arising from sale-and-leaseback transactions (2012: EUR 35.1 million).
The relevant bank ratios remained well within the covenants agreed with the banks, with an interest coverage ratio of 2.2 (target: > 2.0) and a 'net debt : EBITDA' ratio of 7.5 (target: < 8.0, and adjusted annually to be < 7.0 in 2015). The decrease in this ratio to under 8.0 has resulted in a lower spread on the interest. The gearing ratio (net debt : shareholders' equity) amounted to 1.0 (target: < 1.25).
The total invested in investment property amounted to EUR 5.2 billion, a movement of -2.7% compared to 2012. The movement is primarily due to the divestments of EUR -139.2 million and the downward revaluation result of EUR -292.0 million, and new lease obligations amounting to EUR 313.2 million. The increase in lease obligations can be explained by the expansion of the number of lease contracts, mainly in the Netherlands, Germany and Great Britain.
The shareholders' equity has decreased by EUR 164.5 million. This decrease is attributable to the recognition of the total comprehensive income after taxes over 2013 of EUR -130.3 million and the dividend distribution over the 2012 financial year of EUR -34.2 million.
The total bank debt amounted to EUR 1,510.8 million (2012: EUR 1,585.3 million). The movement is mainly due to the refinancing of the former CLN financing for EUR 280.0 million for a five-year period. In addition, a significant part of the bilateral loans were repaid with the funds received from the sale-and-leaseback transactions. At the close of 2013, 87.8% (2012: 72.8%) of the total consolidated interest-bearing liabilities was insensitive to interest rate fluctuations.
The net debt (bank debt after deduction of cash and cash equivalents) amounted to EUR 1,410.3 million (2012: EUR 1,514.1 million).
- The first phase of the revised Treasury Management System was implemented in October.
- The cash management system with an overlay bank structure will be implemented in early 2014.
As part of this centralisation, various bilateral loans with local banks have been repaid and replaced by intercompany loans under more favourable conditions. In combination with the refinancing of EUR 280.0 million mentioned before, the average interest rate on bank loans has dropped from 5.87% to 5.26%.
In addition, the total number of international bank accounts has been further reduced and that improves the efficiency of our payment systems.
As a result of intensive collaboration among the various business disciplines, an integrated business/ICT strategy has been drawn up for the coming years. Internally, we refer to this as ‘Route du Soleil’. In addition to firm objectives such as online presence, making maximum use of digital developments and updating the back office to work with real-time systems, centralisation and standardisation for the operational effect and for realising cost savings are also specific objectives. Key components of this, such as centralising the network contract and data centre, were realised in 2013. In order to further improve and stabilise service to the entire organisation we have now outsourced application support for all back office systems to a large international ICT services provider.