Published: November 01, 2010
Keolis is the number one private operator of public transport in France, and holds a key position in Europe, with a strong presence in the United Kingdom, the Benelux countries and Scandinavia. The company manages networks of buses and coaches, metros, trams and trains, on behalf of local communities, after invitation to tender. Keolis’s role is to design and manage high-performance, reliable transport solutions, adapted to the local area and environmentally aware. Operationally decentralised, the company has 45,000 salaried employees, achieved a turnover of EUR 3.4bn in 2009, and operates in 12 countries, three of which, Australia, Canada and the United States, are new this year. France remains dominant, accounting for over 55% of revenue, yet foreign countries are making steady progress and have the same rates of profitability. The company’s investors complement one another: on one side, we have SNCF, the main industrial shareholder, and on the other the financial companies, Axa Private Equity and la Caisse du depot et placement du Québec. All believe in regular and profitable growth: since 2001, our business has increased by over 12% each year.
Certain roles are indeed centralised, and among them is finance. However, in accounting and financial control, there is a level between the subsidiary companies and the holding company: shared service centres, several in France and, in general, one in each country where the company operates. The financial core is organised into three departments: accounting, which produces consolidated accounts and reporting, and sets the group’s shared standards; cash management; finance and accounts, of which I am in charge.
The remit of this department includes group finance. One of our important steps was the negotiation of a new credit agreement in 2007 on beneficial terms, particularly because the effects of the subprime mortgage crisis weren’t yet apparent. We also deal with the financing of assets, as the group isn’t always just an operator, it sometimes provides the buses or trains which it manages. In addition we are responsible for project financing, which is necessary when we tender with partners for joint public-private contracts. Finally, we negotiate guarantees whether they are put in place at the time of invitation to tender or in the context of contractual monitoring of operational performance.
We carried out a reorganisation fo the banking pool in 2005, which led to cutting down from 16 banks to three.
There is a cash pool in each country, operated by local banks, and a worldwide cash pool, but without bank overlay, because we decided that that method was not profitable. As far as cash flow in France is concerned, we carried out a reorganisation of the banking pool in 2005, which led to cutting down from 16 banks to three. On the technical side, we are using XRT-Sage solutions with Universe for fund management and XBE/online banking for a centralised platform that deals with the payments of 150 operational units in France. For banking communication, the substitution of Etebac 3 and Etebac 5 and the transition to Sepa will happen in 2011, at the same time as the updating of existing software. A priori, the retained solution will be Ebics, but we have yet to decide on the version including the transmission of personal signatures, corresponding to Etebac 5.
The group has put up a real fight for cash, signalling a net change in the control of operational liquidity management. This meant it was necessary to put in place the same methods for measuring cash generation and consumption in each subsidiary, to develop a cash culture in the group, whilst at the same time permanently heightening managers’ awareness of the optimisation of working capital, both for the business negotiation phase and the duration of contracts, and increasing their interest in performance in this area. In addition, we pay close attention to this issue in our development, and as a result we choose the contracts that swallow as little cash as possible. We try to show financial creativity in business set-ups that allow us to have use of assets – buses, trains, etc – without ownership. One of the difficulties in this area is the compatibility of these set-ups with the standard IFRS standards, which are very demanding. [[[PAGE]]]
Indeed, we have protected ourselves against fluctuations in the price of oil and electricity, knowing that, in most cases, we generally pass on price changes to our customers; we cover a residual risk due to a temporary indexation discrepancy. With regards to actual hedging, Keolis has a very structured organisation: rules and precise reporting, a hedging committee that meets every two months and is chaired by Michel Lamboley, the group’s director general, and attended by the director of internal auditing. The strategy, which aims to protect Keolis’s profit and loss statement from variations in energy prices, is validated by the audit committee. The risk from oil prices is covered by recourse to synthetic insurance in euros and by mutual agreement. In this area, our choice of hedging has been dictated by our good understanding of IFRS standards. I will add that we accept paying the contango that characterises the forward oil market – this structural cost is even budgeted – as an inevitable price to pay for income smoothing. When it comes to electricity, one of the difficulties is the fact that in France, forward markets do not have the required depth, particularly in terms of liquidity and visibility, to meet our hedging needs. In addition, I am acutely aware of the ongoing project undertaken by the European Commission on the supervision of the derivatives market, without distinction in the treatment of non-financial businesses. The proposed constraints, particularly the standardisation of products and margin calls, will be highly penalising.
I have three immediate colleagues: Emmanuel Furaut, group treasurer, keeps an eye on cash flows. His delicate job consists of bringing together the two ways of getting to grips with cash: by bank cash flow and by accounting cash flow statement. Julien Wolff is responsible for structured financing and William Fetta is in charge of financing the buses and coaches in France.
Experience of financial management came about purely by chance. After studying at EM Lyon I started out at Yellow Pages as a salesman before moving on to become organisational manager. When the treasurer resigned, it was suggested that I take the job. I then became treasurer at Bic, where I gained international experience, then at BSN Glasspack, under leveraged buy-out at that point, where I increased my knowledge of the financial sector. I arrived at Keolis in 2005 at the time when the company, which included the British capital investment group 3i alongside SNCF as a shareholder, was securing its leveraged buy-out financing.
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