colas group · colas sa (the company) is a french public société anonyme incorporated in france...

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44 Consolidated balance sheet

45 Consolidated income statement

46 Statement of recognized income and expense

47 Consolidated statement of changes in equity

48 Consolidated cash flow statement

49 Notes to the consolidated financial statements

Consolidated financial statementsColas Group

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Consolidated financial statements - Colas Group

in millions of euros Notes 2007 2006

Property, plant and equipment 3.1 2,161 1,809Intangible assets 3.2 89 79Goodwill 3.2 447 222Investments in associates 3.3 339 288Other financial assets 3.4 164 146Deferred tax assets 3.5 85 69Non-current assets 3,285 2,613Inventories 4.1 346 292Trade receivables 4.1 3,076 2,645Current tax assets 4.1 23 18Other receivables and prepayments 4.1 572 491Cash and cash equivalents 4.2 673 704Financial instruments 17 3 4Net current assets 4,693 4,154TOTAL ASSETS 7,978 6,767

Share capital and paid-in capital 5 362 323Retained earnings 1,153 960Translation reserve 5 (25) 8Net income for the year 474 396Capital and reserves 1,964 1,687Minority interests 41 27Equity 2,005 1,714Long-term debt 6 149 137Provisions 7.1 590 523Deferred tax liabilities 8 74 60Non-current liabilities 813 720Advance payments 237 165Current portion of long-term debt 6 45 32Current tax liabilities 96 69Trade payables 2,626 2,387Provisions 7.2 198 144Other payables 9 1,823 1,406Bank overdrafts and short-term loans 129 126Financial instruments 17 6 4Current liabilities 5,160 4,333TOTAL EQUITY AND LIABILITIES 7,978 6,767

CONSOLIDATED BALANCE SHEET AT DECEMBER 31

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CONSOLIDATED INCOME STATEMENT

in millions of euros Notes 2007 2006

Revenue 10 11,673 10,717Raw materials and consumables used (5,506) (5,127)Staff costs (2,701) (2,476)External services (2,510) (2,298)Taxes, other than income tax (161) (150)Depreciation, amortization and depletion (412) (368)Reversal (allocations) of provisions (150) (135)Change in inventories 5 13Other operating incomes 11 474 413Other operating expenses 11 (74) (65)Profit from operations (current) 638 524Extraordinary items 11 (3) 4Profit from operations 635 528Financial income 21 14Financial expenses (32) (29)Interest income (expense) 12.1 (11) (15)Other financial income (costs) 12.2 4 3Provision for income taxes 13 (209) (168)Income from associates 62 54Profit for the year 481 402Of which: minority interest 7 6OF WHICH: EQUITY HOLDERS OF THE PARENT 474 396Earnings per share (in euros): basic 14 14.56 12.24Earnings per share (in euros): diluted 14 14.56 12.24

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in millions of euros 2007 2006

Published profit for the year 481 4022006: restatement of profit relating to net actuarial gains or losses(1) 0Profit for the year 481 402Exchange differences (33) (36)Fair value restatements for financial instruments (2) 6Actuarial gains (losses) regarding employee benefits(2) 12 5Reevaluation reserves and other variations 1Deferred taxes based on these items (4) (3)Net income recognized directly in equity (27) (27)TOTAL RECOGNIZED INCOME AND EXPENSE 454 375Minority interest 7 6Equity holders of the parent 447 369

(1) Restatement of actuarial gains and losses recognized as income or loss in 2006 (none).

(2) Actuarial gains (losses) recognized directly in equity, according to option allowed for in revised IAS 19.

STATEMENT OF RECOGNIZED INCOME AND EXPENSE

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in millions of euros Share capital Retained Translation Net income Capital Minorityand paid-in earnings reserve for the year and interests

capital reserves

At January 1, 2006 291 809 44 307 1,451 27Changes in accounting policies(1) (10) (10)At January 1, 2006 pro forma 291 799 44 307 1,441 27Exchange differences (36) (36)Acquisitions of subsidiaries 0 (3)Increase 32 32Profit for the period 396 396 6Prior year profit allocation 307 (307) 0Dividends paid (155) (155) (3)Other variations(2) 9 9At December 31, 2006 pro forma 323 960 8 396 1,687 27Exchange differences (33) (33)Acquisitions of subsidiaries 0 10Increase 39 39Profit for the period 474 474 7Prior year profit allocation 396 (396) 0Dividends paid (207) (207) (3)Other variations(2) 4 4AT DECEMBER 31, 2007 362 1,153 (25) 474 1,964 41

(1) Retrospective application of revised IAS 19 option which allows for direct recognition in equity for actuarial gains or losses regarding employee benefits (definedbenefits plans).

(2) Details of other operations

31/12/07 31/12/06

Incidence of acquisition of subsidiaries on financial instruments (2)Fair value restatement on financial instruments (2) 6Actuarial gains (losses) regarding employee benefits 12 5Reevaluation reserves and other variations 1Deferred taxes based on these items (4) (3)Total income (expenses) recognized directly in equity 4 9

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY


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in millions of euros 2007 2006

Profit for the year (including minority interests) 481 402Adjustments for:– Income from associates (62) (54)– Dividends received from associates 34 28– Dividends received from unconsolidated companies (4) (4)– Depreciation, amortization and depletion on non-current assets 454 422– Capital gains on disposal of assets (27) (35)

Sub-total 876 759Interest income (expense) 11 15Income tax 212 168Cash from operations 1,099 942Income tax paid (197) (163)Changes in current assets and liabilities 96 (39)Cash flows from operating activities (a) 998 740Purchase of tangible and intangible assets (696) (584)Proceeds from sales of properties, plant and equipment 69 57Net debt on tangible and intangible assets 22 25

Sub-total (605) (502)Acquisitions and disposals of subsidiaries:– Acquisitions of subsidiaries (383) (72)– Disposals of subsidiaries 45 18– Net debt on acquisitions of subsidiaries 29 (10)– Cash acquired 118 2

Sub-total (191) (62)Other investing activities:– Dividends received from unconsolidated companies 4 4– Changes in other financial assets (41) (33)

Sub-total (37) (29)Cash flows from investing activities (b) (833) (593)Change in equity (Group share) 39 39Change in minority interestsDividends paid to parent company shareholders (207) (155)Dividends paid to minority interests (3) (3)Net variation from borrowings (8) 8Interest income (expense) (11) (15)Other financing activities (1)Cash flows from financing activities (c) (191) (126)Exchange differences and other non-cash variations (d) (6) (4)Other non-cash variations (e) (2)NET CHANGE IN CASH AND CASH EQUIVALENTS (a+b+c+d) (34) 17Net cash at beginning of year 578 561NET CASH AT END OF YEAR (see note 19) 544 578

CONSOLIDATED CASH FLOW STATEMENT

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Contents

Notes

General information about the company

1 Basis of preparation of the financial statements

2 Significant accounting principles and policies

3 Non-current assets

3.1 Property, plant and equipment

3.2 Intangible assets and goodwill

3.3 Investments in associates

3.4 Other non-current financial assets

3.5 Tax assets

4 Current assets

4.1 Inventories, trade and other receivables

4.2 Cash and cash equivalents

5 Equity

6 Current and non-current financial debts

7 Provisions

7.1 Non-current provisions

7.2 Current provisions

8 Deferred tax liabilities

9 Other current liabilities

10 Revenue

11 Other operating income and expense

12 Finance income and expense

12.1 Interest income and expense

12.2 Other financial income and expense

13 Income tax

14 Earnings and dividends per share

15 Segment reporting

15.1 Information about geographical segments

15.2 Business segment information

16 Income statement by function

17 Financial instruments

18 Commitments and contingencies

19 Changes in net financial position

20 Workforce and employee benefits

21 Related parties’ disclosures

22 Fees of independent auditors

23 Main exchange rates used for translation

24 Scope of consolidation

24.1 Changes in scope of consolidation

24.2 Impact and accounting of year’s acquisitions

24.3 List of main consolidated companies

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

In millions of euros (M€) unless otherwise stated.


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GENERAL INFORMATION ABOUT THE COMPANY

The financial statements for the year ended December 31, 2007were approved by the Board of Directors and authorized forissue on February 21, 2008.Colas SA (the Company) is a French public société anonymeincorporated in France (RCS Nanterre B552 025 314).These financial statements are presented in euros because thatis the currency of the primary economic environment in whichthe Group operates.

Nature of the Group’s operations

The Group’s business activity includes:

• Roads (79% of total revenue)This highly diversified sector covers about 115.000 projects everyyear, including the construction and maintenance of transportinfrastructure (highways, secondary roads, airports, ports,platforms for railways and reserved-lane transport), industrialand commercial platforms, city streets and urban developmentplans (pedestrian zones, city squares), leisure facilities (athletictracks, automobile circuits, bike paths, tennis courts) andenvironmental protection (retention ponds, landscaping), etc.Colas can also rely on its upstream network of industrial activitiesinvolving the production of aggregates (quarries) and roadmaterials (asphalt concrete, binders and emulsions).In the Paris region and in Reunion Island, the Group operates in the construction of new buildings and the demolition anddeconstruction of old buildings.

• Road-related activities (21% of total revenue)The Safety and Signaling sector includes the manufacture,installation and maintenance of safety equipment (guardrails,traffic directing equipment) and signals (road marking, trafficlights).The Pipes and Mains sector comprises the installation andmaintenance of both large diameter pipelines to transport fluids(oil, natural gas) and smaller diameter mains (water, drynetworks, electricity, heating, telecommunications), along withhorizontal and deep drilling and medium-sized tunneling.The Waterproofing sector includes waterproofing, cladding androofing projects, roadways (mastic asphalt), waterproofingmembranes, sky domes and fume/smoke removal systems.

The Railway sector comprises the construction and maintenanceof railways (conventional tracks, high-speed lines, trams,subways) along with rail freight.

Company risk factors

The main risks for the Group‘s activities are: – weather conditions which have direct impact on the way inwhich projects unfold worldwide and in particular, in countrieswith harsh climates;– the cost of raw materials depending on oil prices (bitumen,fuel, heating fuel) and other raw materials such as steel oraluminum which are used in the safety and waterproofingactivities. This risk is reduced by the fact that a large share ofcontracts benefit from price variation clauses and by the factthat many contracts cover small-scale projects that arecompleted in a short amount of time;– the level of investment backed by the public sector and by theprivate industrial and commercial sectors;– the impact of variations in exchange rates, especially the USdollar, even if the said risks are limited by the fact that 60% ofrevenue is accounted for in euros and by the fact that operationscarried out on a local scale make it possible to post income andexpenses in identical currency.

Key events

On May 30, 2007, in the scope of its target to develop in therailway sector, the Group acquired 100% of Spie Rail. On thisoccasion, Spie Rail’s corporate name has been changed to ColasRail.The effects and accounting treatment of the said acquisition aredisclosed in note 24.2.

NOTE 1 – BASIS OF PREPARATION OF THEFINANCIAL STATEMENTS

The financial statements have been prepared in accordance withInternational Financial Reporting Standards (IFRSs).The financial statements have been prepared on the historicalcost basis, except for the revaluation of certain financialinstruments.

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The Group:– applied all standards IFRSs and IFRIC interpretations that wereissued as of December 31, 2007 and adopted by the EuropeanUnion.New standards and interpretations implemented in 2007:

– IFRS 7 standard regarding disclosures on financialinstruments,– IFRIC 7, 8, 9 and 10 have been implemented withoutsignificant effect on financial statements;

– applied IFRIC 12, adopted by the European Union.

CHANGE OF ACCOUNTING POLICYThe Group decided to implement the revised IAS 19 standard,which allows direct recognition in equity for actuarial gains andlosses regarding employee benefits (defined benefit plans).Previously, the Group applied the “corridor” method stipulatingthat cumulative unrecognized amounts exceeding 10% of thepresent value of the defined benefit obligation are recognized asincome or expense over the expected average remaining workinglives of the employees.Consequently, the 2006 Financial Statements’ opening balanceshave been restated in order to allow for comparison with 2007figures and the statement of recognized income and expenseis disclosed in the following income statement.

BASIS OF CONSOLIDATIONThe consolidated financial statements incorporate the financialstatements of the Company and entities controlled by theCompany (its subsidiaries) as of December 31 of each year.Control on these subsidiaries is achieved where the Company hasthe power to govern the financial and operating policies of thecontrolled company so as to obtain benefits from its activities.On acquisition, the assets and liabilities and contingent liabilitiesof a subsidiary are measured at their fair value at the date ofacquisition. Any excess of the cost of acquisition over the fairvalues of the identifiable net assets acquired is recognized asgoodwill.Any deficiency of the cost of acquisition below the fair values ofthe identifiable net assets acquired (i.e., discount on acquisitionor badwill) is credited to profit and loss in the period of acquisition.Subsidiaries are consolidated as of the date on which the Grouptakes control of the said and up to the date on which the saidcontrol is no longer exercised.Where necessary, adjustments are made to the financialstatements of subsidiaries to bring the accounting policies usedinto line with those used by the Group.All intra-group transactions, balances, income and expensesare eliminated on consolidation.

1. Interest in joint ventures

A joint venture is a contractual arrangement whereby two ormore parties undertake an economic activity which is subjectto joint control.The assets, liabilities, income and expenses of joint ventures areincorporated in these financial statements using the proportionateconsolidation method.

2. Investments in associates

An associate is a non-controlled entity over which the Group is ina position to exercise significant influence, but not control or jointcontrol, through participation in the financial and operating policydecisions of the investee.The results, assets and liabilities of associates are incorporated in these financial statements using the equity method.

3. Transactions in foreign currencies

Transactions in currencies other than the euro are recorded atrates of exchange prevailing on the dates of the transactions.At each balance sheet date, monetary assets and liabilities thatare denominated in foreign currencies are retranslated at ratesprevailing on the balance sheet date.Exchange differences arising are recorded in the incomestatement, except for borrowings in foreign currencies, which arehedging investments in a foreign entity.

4. Translation of financial statements of foreign entities

On consolidation, assets and liabilities of the Group’s internationalentities are translated at exchange rates prevailing on thebalance sheet date. Income and expense items are translated ataverage exchange rates for the period. The list of main currencyrates used is disclosed in note 23.Exchange differences, if any, are classified as equity andtransferred to the Group’s translation reserve. Such translation differences are recognized as income or expense in the period in which the operation is disposed of.

NOTE 2 – SIGNIFICANT ACCOUNTING PRINCIPLESAND POLICIES

NON-CURRENT ASSETS

1. Property, plant and equipment

Property, plant and equipment acquired separately are stated at cost less accumulated depreciation and any recognizedimpairment loss.Tangible assets acquired through business combinations arestated at fair value.


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Depreciation is charged so as to write off the cost of assets overtheir estimated useful lives, using the straight-line method, onthe following basis:

Office buildings 20 to 40 yearsIndustrial buildings 10 to 20 yearsPlant and equipment 5 to 15 yearsCars, trucks, office equipment 3 to 10 years

Land is not depreciated, except for aggregate quarries for whichdepletion is provided using the units-of-production method upto a presumed maximum of forty years.

Borrowing costs

According to the IAS 23 benchmark treatment, borrowing costsare recognized as an expense in the period in which they areincurred.

Finance leases

Assets acquired under finance lease contracts are recognized asassets and depreciated as if they were purchased by the entity.The finance lease liability is accounted for in the balance sheet.

Investment property

The Group has not identified any investment property amongits fixed assets.

2. Intangible assets

Intangible assets are identifiable non-monetary assets. Theyare separable and can be independently rented, sold, exchangedor transferred. They arise from contractual or legal rights, evenif the rights are not separable. They are without physicalsubstance.Intangible assets acquired separately from a business are statedat cost.Intangible assets acquired as part of a business combinationare capitalized separately from goodwill only if their fair valuecan be measured reliably on initial recognition.Start up and research costs are expensed as incurred.Development costs can be recognized as assets only if the costsincurred can be reasonably recovered. Every cost recognized asan asset is amortized on the basis of the expected life of thesales related to the project.

Intangible assets are mainly comprised of software, patents andquarry rights. They are amortized on the straight line basis overtheir useful life.

3. Goodwill

Goodwill represents the excess of cost of acquisition over thefair value of identifiable assets and liabilities of a subsidiary orjoint venture at the date of acquisition.Goodwill is stated at cost less:– accumulated amortization recognized before the first timeapplication of the IFRSs;– impairment depreciation recognized since January 1, 2004.Impairment depreciation is recognized when events or changesin the economic circumstances show that the carrying value ofthe assets will not be recoverable.For identification of such depreciation, an impairment test isperformed at least once a year.The test consists in the determination of the value in use of theCash-Generating Unit (CGU) to which the goodwill belongs. Thevalue in use is determined by the Discounted Cash Flow method(DCF), which consists of the discount of future cash flow applyingthe average weighted capital costs, including the economic riskpremium. Cash flows are determined based on forecastsprepared by management according to yearly budget proceduresfor the coming year and the three-year plan for the two followingyears.

4. Other financial assets

Non-consolidated investments and other investments

These mainly comprise shares of unlisted companies, whichare not available for sale. They are recognized at acquisitioncost less an allowance for depreciation when considerednecessary (there are no significant differences between costand fair value for these shares).

Loans

Loans are stated at present value if their interest rates are farfrom the normal market conditions (example: non-interest bearingloans pursuant to legal obligations governing participation of employers to construction investments in France).

Financial receivables

The twenty-five year road rehabilitation and maintenance PFI(Private Finance Initiative) contract of the City of Portsmouth isstated according to the financial asset model, as recommendedunder IFRIC 12.

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Works completed are recognized on the basis of the stage ofcompletion, according to IAS 11.Financial assets are initially recognized at the fair value of workscompleted and then stated at cost, according to IAS 39.Financial assets represent the amount of works completed, pluscumulative interest, determined according to the effectiveinterest rate method and after deduction of payments receivedfrom the client.

Other financial assets

Other financial assets are stated at nominal value less anypossible allowance for depreciation.

CURRENT ASSETS

1. Inventories

Inventories are measured at the lowest value between costs ornet realisable value.Inventory costs include all purchase costs and costs ofconversion.Costs of purchase include purchase price, import duties andother non recoverable taxes, transport and handling costs.Costs of conversion include costs that are directly or indirectlyincurred in converting raw materials into finished goods.For carried forward valuation, costs are assigned by using the“first-in, first-out” or “weighted average cost” formulas, accordingto the type of inventories.Net realisable value is the estimated selling price less estimatedcosts of completion and estimated costs necessary to completethe sale.

2. Trade receivables

Trade receivables, which generally have 30-90 day terms, arerecognized and carried at original invoice amount less allowancefor any uncollectible amounts.Trade receivables include “receivables to invoice” related to theworks recognized by clients and which have not yet been invoiced.

3. Cash and cash equivalents

Cash and cash equivalents in the balance sheet comprise cashat bank and in hand and short-term deposits with originalmaturity of three months or less. Marketable securities arestated at cost less accumulated depreciation, if their netrealizable value is lower than their carrying value.

For the purpose of the cash flow statement, cash consists ofcash and cash equivalents as defined above, net of outstandingbank overdrafts.

EQUITYThe bought back shares are deducted from the equity attributableto equity holders of the parent. If Group companies hold their ownshares, a complementary interest percentage is determined atthe Group level.

PROVISIONS

1. Non-current provisions

These are provisions not linked to the normal operating cycle.They essentially comprise:

Employee benefits

PensionsThe Group commitments with regard to pensions payable toemployees on retirement are, generally, covered by the regularpayment of contributions to retirement plans or pension funds(defined contribution plans). Some defined benefit plans exist in the United Kingdom, Ireland and Canada. These defined benefitplans concern a limited number of employees because the Group decided, several years ago, to close these plans to newsubscribers.

Retirement indemnitiesThe cost is determined using the Projected Unit Credit method.Actuarial gains and losses are from now on recognized in equity(see “Change of Accounting Policy”).

Length-of-service awardsProvisions are booked in respect of length-of-service awards,which Colas Group companies grant on an ongoing andsystematic basis. An individual projection method is used tocalculate these amounts, taking into consideration the averagerate of employee revenue and average life expectancy, accordingto appropriate tables.

Provisions for litigation and legal matters

Litigation and claims regarding works contractsThe amount of these provisions is determined based on theamount of customer’s claim or on costs of repairs of damagesas determined by official experts.


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Provisions for tax, social welfare or administration auditAmounts claimed by authorities are recognized in the incomestatement when accepted and are provisioned when contested.

Provisions for warranties (long-term)

These represent the valuation of the works to be performedwhen the term of the warranty exceeds the term of the operatingcycle (one or two years), such as the 10-year warranty for specificbuilding works.

Provisions for quarry reclamation (long-term)

Reclamation cost after exploiting a quarry is calculated basedon a detailed valuation (cost of labor, equipment, materials, thecorresponding share of overhead required, etc.). Only the part ofthe provision regarding costs due after twelve months followingthe balance sheet date is classified in non-current provisions.

2. Current provisions

These are provisions linked to the normal operating cycle. Therelated expenses are generally paid within twelve months of thebalance sheet date.

They comprise mainly:

Provisions for warranties (one or two years maximum)Provisions for additional works related to contractual warrantiesare made in respect of individual estimates for each contract.

Provisions for closing down sitesThis covers costs of cleaning up a site and removing equipment.These costs are measured individually based on the size of thesite and distance from our operating units.

Provisions for losses on completionThese relate to projects, which are not completed at balancesheet date. The measurement may include claims approved by clients and is determined contract by contract, withoutcompensation.

Provisions for quarry reclamation (short-term)This covers reclamation costs after exploiting a quarry, for theportion within twelve months after balance sheet date.

In compliance with IAS 37 on provisions, information regardingthe most significant provisions is disclosed only to the extentthat this disclosure will not harm the Group.

DEFERRED TAXES AND LONG-TERM LIABILITIESDeferred tax liabilities are the amounts of income taxes payablein future periods in respect of taxable temporary differences.All deferred tax liabilities are stated as deferred taxes, includingconsolidation adjustments.Deferred tax liabilities are recognized for all taxable temporarydifferences associated with investments in subsidiaries, branchesand associates and interests in joint ventures, except to theextent that the parent company is able to control the timing ofthe reversal of the temporary differences and it is probable thatthe temporary differences will not reverse in the foreseeablefuture (no disposal in foreseeable future).If disposal of investments or distribution of dividends is probablein the foreseeable future or if the company is not controlled(associate), deferred tax liability is recognized.

FINANCIAL INSTRUMENTSSeveral Group companies use financial hedging instruments toreduce the impact of exchange and interest rate fluctuations ontheir profit and loss accounts. The use of these instruments isdescribed hereafter.

1. Nature of the risks for the Group

Risk management for foreign exchange rates

The level of risk is low because subsidiaries generate only asmall proportion of their revenue from export. Revenue fromforeign countries is chiefly generated by subsidiaries that issueinvoices and book their expenses in local currency.Occasionally, some currency contracts are hedged for exchangerisks.Generally, Group investments in foreign companies (subsidiaries,branches, joint ventures) are not hedged because thesecompanies are not held to be sold.Currency swap is mainly used to optimize Group cash byconverting – without any foreign exchange risks – excess cashin one currency lent to subsidiaries in their own local currencyto substitute bank lines.

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Risk management for interest rates

The Group’s profit and loss is not very sensitive to interest ratechanges. On an average basis, the share of variable rate debtsis equal to available cash under variable rates.Some financial assets or liabilities can occasionally be hedged.

2. Group principles and rules for financial hedging

instruments

Financial hedging instruments are only conventional instrumentssuch as:– forward currency trade, currency swap, currency options,according to a hedging policy against foreign exchange risks;– interest rate swap, future rate agreements, purchase of capsand tunnels and rate options, according to a hedging policyagainst interest rate risks.The above instruments are characterized by the fact that they areonly used for hedging, only undertaken with first rank Frenchbanks and foreign banks and present no cash risk in the eventof turnaround.The Group follows the use of these instruments, the choice oftrade off and generally speaking, the exposure to exchange risksand interest rate risks with detailed, specific follow-up reportingto the management of the companies involved.

• Cash flow hedge

Cash flow hedge consists of hedging cash flow arising fromhedged instruments or forecasted transactions.When derivative instruments hedge cash flow arising from firmcommitments or expected transactions, portions of profit andloss that are determined to be an effective hedge are recognizeddirectly in equity.The ineffective portion of the hedging instruments is reportedimmediately in profit and loss. Other residual profit or lossarising from the hedging instruments is also reportedimmediately in profit and loss.When the hedging instrument comes to maturity, it is sold,cancelled or used. Cumulative profit or losses are kept in equityup to the maturity date. After the transaction conclusion, relatedcumulative profit and loss, which was recognized in equity, isreported in profit and loss.

• Fair value hedge

Fair value hedges have the purpose of limiting the exposure tochanges in the fair value of a recognized asset or liability.When a derivative financial instrument covers exposure tochanges in the fair value of receivables or debts occur, profit orloss arising from remeasuring the hedging instrument at fairvalue is recognized directly in net profit and loss.The gain or loss on the hedged item attributable to the hedgedrisk adjusts the carrying amount of the hedged item and isrecognized directly in net profit or loss.Fair value of hedged items, according to the type of risk hedged,corresponds to the carrying amount, translated into euros atthe exchange rate prevailing on the balance sheet date.

3. Accounting policies for financial instruments

The Group applies accounting methods as defined by IAS 39,i.e.:

Criteria for recognition of financial assets or liabilities

Hedging accounting is applied when derivative financialinstruments compensate, partially or totally, for fair value orcash flow hedge changes of a hedged item. Effectiveness ofhedges is regularly measured, at least quarterly.Nevertheless, in specific cases (non-significant notional amounts,short hedging maturities, limited impact on profits or losses)financial instruments are voluntarily not recognized as hedgingtransactions, in order to simplify the Group administrativeprocedures. In these cases, variations of fair value of hedginginstruments are recognized directly in net profit and loss.

Basis of valuation of financial assets and liabilities

Financial assets and liabilities are stated at cost or amortized cost.

Accounting of financial instruments stated at fair value

The Group uses very few financial instruments: derivativefinancial instruments are stated at fair value, which is marketvalue for instruments listed on the Stock Exchange. For unlistedinstruments (not yet described), fair value is determined withvaluation methods, like options valuation models and the valuein use method (discounted cash flows). These models are basedon assumptions regarding market figures.


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Accounting of profit and loss generated by financial instruments

Financial assets and liabilities are initially stated at cost oramortized cost. They are then stated at fair value. Unrealizedprofit and losses are recognized according to the nature ofhedged item.At balance sheet date, interest swap fair value is the amountexpected to be received or paid by the Group to close downtransactions. Fair value is measured on the basis of presentinterest rates and credit risks. Fair value of forward currencytrades is market value at balance sheet date, i.e., present valueof quotations or forward market rates.

INCOME STATEMENT

1. Ordinary activity income

Income from operations is recognized when it is probable thatfuture economic benefits will flow to the company and they canbe measured reliably.Ordinary activity income comprises:

Revenue

This represents the cumulative amounts of sales of goods,construction contracts and rendering of services.

Construction contracts and rendering of services

Revenue from construction contracts is recognized based onthe “percentage of completion” method.The percentage of completion is determined on the basis ofworks completed; expected loss on completion is directlyrecognized as an expense in the current period.

Other ordinary activity income

This consists of royalties received from the use of licenses andpatents: income is recognized when the company’s right toreceive payment is established.

2. Government grants

These are recognized as income when there is a reasonableassurance that they will be received and the company will complywith the conditions stipulated therein.

When the Government grant is a compensation for expenses,it is recognized as income over the period which bears the relatedcosts.Government grants related to assets are presented on thebalance sheet as a deduction of the related asset.

3. Share in net profit of unconsolidated joint ventures

This mainly comprises the share of the Group in the net resultsposted by the companies or partnerships producing asphaltmixes or binders operated in conjunction with other associates.

4. Results of operating activities

Results of operating activities come mainly from activitiesgenerating income and all other activities which are not investingor financing activities.Goodwill depreciation is included in results of operating activities.

5. Other non-current results

These concern a very small amount of income or expense,unusual, abnormal and uncommon – with very significantamounts – disclosed separately in the income statement toimprove the understanding of the current operational performance.The nature of these items is described in note 11.

6. Interest income (expense)

Net financial expenses include financial expense and incomeand borrowing costs.

7. Income tax

Deferred taxes are determined in accordance with the balancesheet liability method, for all the taxable or deductible temporarydifferences, at balance sheet date.Taxable or deductible temporary differences include everydifference between the tax base of an asset or liability and itscarrying amounts on the balance sheet, except for goodwill.When, for a company, the net tax balance is an asset, that assetis recognized only to the extent that it is probable that taxableprofit will be available against these deductible temporarydifferences.Deferred tax assets or liabilities are measured on the basis oftax rates expected to be applied during the year of the reversal,based on tax rates which have been enacted or substantiallyenacted by the balance sheet date.

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CASH FLOW STATEMENTThe cash flow statement is prepared based on the indirectmethod.According to this method, net income is adjusted for the effectof non-cash transactions or the gap between operating cashinput or output, past or future, and investing and financing activitycash flows.Net Group cash, which is analyzed in the cash flow statement,is defined as the net balance of:– cash-at-bank, cash-on-hand and short-term deposit;– outstanding bank overdrafts.Cash generated from operations includes variations in provisionson current assets. It includes in particular net profit fromconsolidated companies and income from associates, net ofdividends received from them.The classification applied for interest and dividends disclosesthem in cash flow from financing activities. Interest paid duringthe year corresponds to interest disclosed in the incomestatement.

OTHER INFORMATION

1. Comparability of consolidated financial statements

Following changes in accounting policies regarding the revisedIAS 19 (direct recognition in equity for employee benefit actuarialgains or losses), the 2006 Financial Statements’ openingbalances have been restated to facilitate comparison with 2007figures and a statement of recognized income and expenses isdisclosed following the Income Statement.

Changes in scope of consolidation did not have any significantimpact on the consolidated financial statements for 2007; theyare comparable to the previous years’ financial statements.

2. Events after balance sheet date

None.

3. New standards and interpretations not yet applied

New standards, standard amendments or interpretations arenot yet compulsory in 2007.As a result, the following standards and interpretations havenot been applied for the preparation of these consolidatedfinancial statements:– revised IAS 1 for presentation of financial statements(implementation for January 1, 2009);– revised IAS 23 “Borrowing Costs” requires capitalization ofborrowing costs (implementation for January 1, 2009);– IFRS 8 “Operating Segments” will replace IAS 14 “SegmentReporting” (implementation for January 1, 2009);– IFRIC 11 regarding share-based payment within a group(implementation at January 1, 2008);– IFRIC 13 regarding customer loyalty programs (implementationat July 1, 2008);– IFRIC 14 as IAS 19 “Employee Benefits” Interpretation: limit ona defined benefit asset, minimum funding requirements andtheir interaction.None of these new standards or interpretations would havesignificant impact on Group Financial Statements.


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NOTE 3 – NON-CURRENT ASSETS

3.1 – PROPERTY, PLANT AND EQUIPMENT

Land and Plant and Assets in Totalbuildings equipment course of

constructionCost or valuationAt January 1, 2006 931 3,052 51 4,034Exchange differences (18) (74) (92)Transfers and other 9 34 (50) (7)Acquisitions of subsidiaries 7 97 1 105Additions 65 419 72 556Disposals (10) (172) (182)At December 31, 2006 984 3,356 74 4,414Exchange differences (14) (53) (1) (68)Transfers and other 30 47 (75) 2Acquisitions of subsidiaries 48 182 5 235Additions 75 507 97 679Disposals (11) (213) (224)AT DECEMBER 31, 2007 1,112 3,826 100 5,038

Depreciation and impairmentAt January 1, 2006 (318) (2,094) (2,412)Exchange differences 3 48 51Transfers and other 6 6Acquisitions of subsidiaries 2 (52) (50)Net charge for the year (38) (323) (361)Disposals 5 156 161At December 31, 2006 (346) (2,259) (2,605)Exchange differences 3 34 37Transfers and other 4 (4)Acquisitions of subsidiaries (12) (91) (103)Net charge for the year (43) (356) (399)Disposals 5 188 193AT DECEMBER 31, 2007 (389) (2,488) (2,877)

Carrying amountAt January 1, 2006 613 958 51 1,622Including financial leases 11 52 63At December 31, 2006 638 1,097 74 1,809Including financial leases 7 51 58AT DECEMBER 31, 2007 723 1,338 100 2,161Including financial leases 9 43 52

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3.2 – INTANGIBLE ASSETS AND GOODWILL

Concessions, patents Other Total intangible Goodwilland other rights(1) assets

Cost or valuationAt January 1, 2006 81 26 107 212Exchange differences (1) (1) (2) (4)Transfers 9 (8) 1Acquisitions of subsidiaries 21Additions 4 15 19 9Disposals (1) (1)At December 31, 2006 92 32 124 238Exchange differences (2) (2) (6)Transfers 1 (1) (4)Acquisitions of subsidiaries 9 11 20 231Additions 3 4 7 10Disposals (3) (2) (5) (5)AT DECEMBER 31, 2007 102 42 144 464

Depreciation and impairmentAt January 1, 2006 (31) (11) (42) (7)Exchange differencesTransfers (1) 1Acquisitions of subsidiaries 2 2Disposals 2 2Net charge for the year (5) (2) (7) (9)At December 31, 2006 (33) (12) (45) (16)Exchange differences 1 1TransfersAcquisitions of subsidiaries (1) (1) (2)Disposals 1 2 3Net charge for the year (6) (6) (12) (1)AT DECEMBER 31, 2007 (39) (16) (55) (17)

Carrying amountAt January 1, 2006 50 15 65 205At December 31, 2006 59 20 79 222AT DECEMBER 31, 2007 63 26 89 447

(1) Concessions, patents and other rights: mainly mining rights and to a lesser extent patents and software.


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Impairment of intangible assets with indefinite useful life and goodwill

Impairment losses are recorded if the carrying amount of an asset or its Cash Generating Unit (CGU) is over its value in use.For one CGU, if an indication shows impairment loss, an impairment test is realized, based on the method described under note 1.Detail of goodwill split by CGU and the main assumptions are as follows:

Cash Generating Units Intangible assets with Goodwill Discount indefinite useful life rates

CGU France 17 350 6.38%CGU Europe (excluding France) 9 49 6.38%CGU North America 39 7.86%CGU Rest of the world 1 9 7.86%TOTAL 27 447

3.3 – INVESTMENTS IN ASSOCIATES

Share in Goodwill Depreciation Carrying equity of goodwill amount

At January 1, 2006 260 6 (2) 264Exchange differencesTransfersAcquisitions of subsidiaries (2) (1) (3)Issue of share capital 1 1Net consolidated profit 54 54Dividends paid (28) (28)ImpairmentAt December 31, 2006 285 5 (2) 288Exchange differences 1 1TransfersAcquisitions of subsidiaries 2 2Issue of share capital 20 20Net consolidated profit 62 62Dividends paid (34) (34)ImpairmentAT DECEMBER 31, 2007 334 7 (2) 339

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Main associated companies

Share in Goodwill Depreciation Carrying equity of goodwill amount

Cofiroute(1) 288 288Tipco Asphalt(2) 21 4 (2) 23Mak Mecsek 19 19Other 6 3 9TOTAL 334 7 (2) 339

(1) Although Colas holds a stake of less than 20% (16.7%), Cofiroute is consolidated using the equity method, because Colas SA exercises significant influencethrough the Board of Directors (Director: H. Le Bouc).

(2) Bangkok Stock Exchange (Thailand) listed company.Fair value based on the stock price at December 31, 2007: 28 million euros.Fair value based on the 2007 average stock price: 30 million euros.

Share of the Group in the assets, liabilities and profit and loss of the main associates

Cofiroute Tipco Asphalt Mak Mecsek Other Total16.7% 30.7% 30.0%

Non-current assets 892 20 6 918Current assets 113 29 19 6 167Total assets 1,005 49 19 12 1,085Equity 288 21 19 6 334Non-current liabilities 612 9 2 623Current liabilities 105 19 4 128Total liabilities 1,005 49 19 12 1,085Revenue 173 69 10 252Net consolidated profit 58 2 2 62


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3.4 – OTHER NON-CURRENT FINANCIAL ASSETS

Non-consolidated Other long-term Total gross Allowance Carryinginvestments investments value amount

At January 1, 2006 51 76 127 (27) 100Exchange differencesTransfers 1 1 1Changes in scope of consolidation (39) 3 (36) (5) (41)Acquisitions and other additions 72 50 122 122Disposals (25) (7) (32) (32)Net charge for the year (4) (4)At December 31, 2006 59 123 182 (36) 146Exchange differences (6) (6) (6)TransfersChanges in scope of consolidation (1) 4 3 (2) 1Acquisitions and other additions 39 33 72 72Disposals (48) (11) (59) (59)Net charge for the year 10 10AT DECEMBER 31, 2007 49 143 192 (28) 164

Details of main non-consolidated investments

Gross Allo- 31/12/07 31/12/06wance Net Net

Binder and asphalt concrete companies 15 (2) 13 13Quarry companies 4 4 4Dormant companies 7 (6) 1 1Non-controlled companies 5 (1) 4 5AKA Rt 4 4 4Companies acquired at the end of the year(1) 6 6 12Other investments(2) 8 (2) 6 3TOTAL 49 (11) 38 42

(1) These companies, acquired at the end of the year, will be consolidated in 2008.

(2) None of these investments are significant.

Details of other financial assets

Gross Allo- 31/12/07 31/12/06wance Net Net

Loans(1) 39 (15) 24 23Deposits 34 (2) 32 25Financial receivables(2) 70 70 56TOTAL 143 (17) 126 104

(1) Loans: mainly twenty-year non-interest bearing loans, pursuant toemployers’ legal obligations governing construction investments in France.These loans are stated at their net present value.

(2) Financial receivables: the asset represents the Group receivables fromthe city of Portsmouth, in compensation of the works completed in theframework of the road rehabilitation and maintenance contract.

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3.5 – TAX ASSETS

Deferred Other Totaltaxes long-term

tax assetsAt January 1, 2006 64 64Exchange differences (1) (1)TransfersAcquisitions of subsidiariesNet variations 6 6At December 31, 2006 69 69Exchange differences (2) (2)Transfers (1) (1)Acquisitions of subsidiaries 12 12Net variations 7 7AT DECEMBER 31, 2007 85 85

The unrecognized tax assets (which are probably not reversiblein the foreseeable future) amount to 23 million euros onDecember 31, 2007 (21 million euros on December 31, 2006).

Main deferred tax bases

31/12/07 31/12/06AssetsEmployee benefits 55 50Tax losses 8 9Financial instruments 4 1LiabilitiesRegulatory provisions (26) (22)Fixed assets (finance leases) (22) (18)Tax on dividends (4) (4)Financial instruments (5) (5)Other temporary differences 2 (5)NET DEFERRED TAX ASSETS (LIABILITIES) 12 6

Deferred tax assets are mainly reversible after five years.

NOTE 4 – CURRENT ASSETS

4.1 – INVENTORIES, TRADE AND OTHER RECEIVABLES

31/12/2007 31/12/2006Gross Allowance Net Gross Allowance Net

Inventories 357 (11) 346 302 (10) 292Raw materials, supplies and finished goodsTrade receivables 3,153 (77) 3,076 2,715 (70) 2,645Invoiced and to invoice(1)

Trade receivables 23 23 18 18Staff, social welfare bodies, State 310 310 271 271Group receivables and other receivables 240 (8) 232 207 (12) 195Prepayments 30 30 25 25Other receivables 580 (8) 572 503 (12) 491

(1) Maturity of trade receivables is as follows:

Receivables less than 6 months 1 year Totalnot matured 6 months to 1 year and +

Trade receivables (gross) 2,278 640 122 113 3,153Allowance (2) (6) (13) (56) (77)Trade receivables (net) 2,276 634 109 57 3,076

Credit risk: the Group considers that its exposition to credit risk regarding non-matured receivables is limited as regards the typeof customers (States, public administrations, public and private companies, individuals).


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4.2 – CASH AND CASH EQUIVALENTS

31/12/2007 31/12/2006Gross Allowance Net Gross Allowance Net

Cash-on-hand 333 333 242 242Bouygues Relais cash management company 301 301 432 432Marketable securities 39 39 30 30TOTAL 673 673 704 704

The net realizable value of marketable securities is greater than their carrying amounts.Short-term investments are deposited in French and foreign banks.They are divided up as follows:

Euro USD GBP Other TotalCash-on-hand 140 23 15 155 333Bouygues Relais cash management company 301 301Marketable securities 37 2 39TOTAL 478 23 15 157 673December 31, 2006 574 13 16 101 704

Cash and cash equivalents have an original maturity of twelve months or less or can easily be converted into cash.Cash and cash equivalents disclosed in the cash flow statement consist of the following items:

31/12/07 31/12/06Cash and cash equivalents 673 704Bank overdraft and short-term loans (129) (126)TOTAL 544 578

NOTE 5 – EQUITY

Composition of share capital

Colas SA’s share capital on December 31, 2007 amounts to 48,775,027.50 euros.It is comprised of 32,516,685 shares at 1.50 euros each, ranking pari passu (although nominative shares owned for a period of morethan two years by the same shareholder grant double voting rights).

Year variations

Number Amounts of shares in euros

At January 1, 2007 32,373,450 48,560,175.00Part of dividend paid in shares 143,235 214,852.50AT DECEMBER 31, 2007 32,516,685 48,775,027.50

Main shareholders

Bouygues SA 31,358,573 96.44%Other Shareholders 1,158,112 3.56%

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Capital management

Colas’ General Management targets to maintain a level of capitaland reserves allowing the Group:– to keep a reasonable ratio of net debt/equity;– to pay regular dividends to Shareholders.Among the performance indicators used, some can bedetermined by reference to capital and reserves, but their useis neither preponderant nor systematic.In addition, it must be underlined that capital and reserves arenot submitted to any statutory restriction.

Stock options

None.

Translation reserve

The translation reserve was established at January 1, 2004 withthe first time application of IFRS.Main translation differences at December 31, 2007 relate tocompanies located in the following countries:

31/12/07 31/12/06United States (40) (12)Canada 10 2Great Britain (2) 2Other countries 7 16TOTAL TRANSLATION RESERVE (25) 8

NOTE 6 – CURRENT AND NON-CURRENT FINANCIAL DEBTS

Bank loans and borrowing maturities

Current Non-currentLess than 1 to 2 2 to 3 3 to 4 4 to 5 5 years Total Total

1 year years years years years and + 2007 20062008 2009 2010 2011 2012 2013 and +

Bank loans (medium-long-term) 24 13 6 3 58 104 93Finance leases 12 11 7 2 2 34 34Other financial debts (long-term) 2 1 1 1 6 11 10

Sub-total 45 38 25 14 6 66 149 137Short-term borrowingsand overdrafts 129AT DECEMBER 31, 2007 174 38 25 14 6 66 149 137At December 31, 2006 158 20 33 26 10 48 137Short-term portionof long-term debt 45 32

Confirmed/drawn credit lines

Confirmed credit lines – Maturity Drawn credit lines – MaturityLess than 1 to Beyond Total Less than 1 to Beyond Total

1 year 5 years 1 year 5 yearsCredit lines 390 774 76 1,240 34 84 76 194Letters of creditTOTAL 390 774 76 1,240 34 84 76 194


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Cash risks at December 31, 2007

At December 31, 2007, cash totaled 544 million euros, in additionto 1,046 million euros of confirmed medium-term bank creditlines undrawn to date. The Group is not exposed to any cash risks.Colas Group companies’ confirmed bank loan contracts containno significant financial clauses likely to lead to early terminationand/or early repayment.

Breakdown of financial debt by type of interest rate

The breakdown of current and non-current financial debt afteraccounting for all interest rate hedging instruments that have notyet reached maturity as of the balance sheet date is as follows:Fixed rate debt(1): 55% (2006: 70%)Floating rate debt: 45% (2006: 30%)(1) Loans with rate fixed for more than one year.

Breakdown of financial debt by type of currency

Euro USD GBP Other TotalLong-term 12/2007 44 1 67 37 149Short-term 12/2007 35 5 7 127 174

Long-term 12/2006 47 13 54 23 137Short-term 12/2006 28 1 4 125 158

NOTE 7 – PROVISIONS

7.1 – Non-current provisions

Employee Litigation Customer Quarry Other Totalbenefits and legal warranties reclamation

matters (LT) (LT)At January 1, 2006 193 130 61 61 26 471Change in accounting policy(1) 15 15Exchange differences (1) (1)Transfers 1 2 3Acquisitions of subsidiaries (2) (2)Actuarial gains/losses in equity (5) (5)Allocation for the year 24 60 26 13 7 130Provisions used (10) (26) (6) (4) (9) (55)Provisions reversed (17) (8) (3) (5) (33)At December 31, 2006 215 148 73 69 18 523Exchange differences (2) (2)Transfers 1 1 (3) (1) (2)Acquisitions of subsidiaries 16 6 2 8 32Actuarial gains/losses in equity (12) (12)Allocation for the year 25 64 35 14 7 145Provisions used (16) (25) (11) (4) (3) (59)Provisions reversed (2) (20) (11) (2) (35)AT DECEMBER 31, 2007 225 173 89 76 27 590

(1) Retrospective application of revised IAS 19 (actuarial gains or losses relating to defined contribution plans).

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Detail of main provisions

31/12/07 31/12/06Length-of-service awards 59 56Retirement indemnities 135 126Pensions 31 33Employee benefits 225 215Litigation with clients 83 57Litigation with employees 11 10Litigation with welfare bodies 38 34Litigation with tax authorities 15 17Litigation with other bodies 10 16Other litigations 16 14Litigation and legal matters 173 148Decennial warranties 50 47Civil engineering warranties 31 25Performance warranties 8 1Warranties 89 73

7.2 – CURRENT PROVISIONS

Losses on Works risks Customer Quarry Other Totalcompletion and costs warranties reclamation

of closing (ST) (ST)down sites

At January 1, 2006 33 30 31 10 19 123Exchange differences (1) (1)Transfers (1) (1) (1) (3)Acquisitions of subsidiaries (1) (1)Allocation for the year 28 21 24 4 13 90Provisions used (23) (7) (14) (2) (4) (50)Provisions reversed (3) (5) (3) (1) (2) (14)At December 31, 2006 35 37 36 11 25 144Exchange differences (1) (1) (2)Transfers 2 3 (2) 3Acquisitions of subsidiaries 13 4 1 2 4 24Allocation for the year 41 29 35 4 17 126Provisions used (31) (15) (17) (3) (13) (79)Provisions reversed (5) (5) (5) (1) (2) (18)AT DECEMBER 31, 2007 53 51 49 16 29 198


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NOTE 8 – DEFERRED TAX LIABILITIES

31/12/07 31/12/06Deferred tax liabilities 74 60Other long-term tax liabilitiesTOTAL NON-CURRENT TAXES 74 60

NOTE 9 – OTHER CURRENT LIABILITIES

31/12/07 31/12/06Staff, social welfare, States 951 824Deferred incomes 45 35Other non-financial debts 827 547TOTAL OTHER DEBTS 1,823 1,406

NOTE 10 – REVENUE

2007 2006Revenue 1,657 1,551Rendering of services 335 257Construction contracts 9,681 8,908Other income from ordinary activities 0 1TOTAL INCOME FROM ORDINARY ACTIVITIES 11,673 10,717

Information regarding construction contracts

Works to be invoiced 360 279Retentions for warranties 51 23Works invoiced in advance (307) (216)Payments received in advance (85) (63)

NOTE 11 – OTHER OPERATING INCOME AND EXPENSE

2007 2006Share in net profit of unconsolidated joint ventures 31 32Non-current asset disposals 41 35Other current income(1) 402 346Other operating income 474 413Other operating expense (74) (65)Other non-current income and losses(2) (3) 4

(1) Mainly expenses invoiced back to associates in joint ventures.

(2) Fines arising from competition litigations.

NOTE 12 – FINANCE INCOME AND EXPENSE

12.1 – INTEREST INCOME AND EXPENSE

2007 2006Interest income from cash 18 12Income from short-term deposits 3 2Interest income 21 14Interest expense on cash (16) (13)Interest on finance leases (2) (2)Interest on financial debt (14) (14)Interest expenses (32) (29)INTEREST INCOME AND EXPENSES (11) (15)

12.2 – OTHER FINANCIAL INCOME AND EXPENSE

2007 2006Dividends received from unconsolidated investments 5 4Net charge on financial provisions 20 (1)Capital gains or losses on disposal of financial assets (9) –Other income and expenses (12) –OTHER NET FINANCIAL INCOME AND EXPENSES 4 3

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NOTE 13 – INCOME TAX

Breakdown of net tax expenses

2007 2006Current income tax (208) (165)Deferred income tax 5 1Tax adjustments or exemptions (2) (2)Withholding taxes on dividends (7) (2)

(212) (168)Tax provisions allocations/reversals 3NET TAX EXPENSES (209) (168)

Reconciliation between theoretical tax

and actual tax expenses

Differences between theoretical tax expenses, determined atthe French statutory tax rate and effective income tax are asfollows:

2007 2006Theoretical income tax determined at statutory tax rate (216) (178)Impact of different tax rates of subsidiaries operating in other jurisdictions 14 14Recognition of tax assets not previously recognized – –Unrecognized tax losses(1) (1) 3Income taxes which are not linked to income (6) (4)Impact of expenses that are not deductible and incomes that are not taxable in determining taxable profit – (3)INCOME TAX REPORTED IN INCOME STATEMENT (209) (168)

(1) Not reversible in a foreseeable future.

NOTE 14 – EARNINGS AND DIVIDENDS PER SHARE

Basic earnings per share are determined by dividing net profitfor the year (Group share) by the total number of sharesoutstanding at December 31, 2007, less the number of boughtback shares expected to be written off.

2007 2006Net profit (Group share) in euros 473,596,000 396,253,000Number of issued shares 32,516,685 32,373,450BASIC EARNINGS PER SHARE (in euros) 14.56 12.24

Diluted earnings per share is determined by dividing net profitfor the year (Group share) by the total number of sharesoutstanding at December 31, 2007, plus the number ofoutstanding stock options.Because there are no outstanding stock options, diluted earningsper share are identical to basic earnings per share.

DILUTED EARNINGS PER SHARE (in euros) 14.56 12.24

Per share TotalDividends decided and paid in 2007 6.40€ 207,190,080.00 €Dividends submitted to approval of General Meeting on April 16, 2008 8.50€ 276,391,822.50 €(not recognized as liabilities at December 31, 2007)


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NOTE 15 – SEGMENT REPORTING

15.1 – INFORMATION ABOUT GEOGRAPHICAL SEGMENTSGroup operating businesses are organized by main geographical areas. Primary segment reporting is disclosed under those criteria.Segmental figures are prepared after reallocation of parent Company results and according to the location of the companies.

Year 2007

France Europe North Rest of Consolidated(excl. France) America the world

BALANCE SHEETNon-current assets 1,962 675 507 141 3,285Current assets 2,722 1,090 401 480 4,693Total assets 4,684 1,765 908 621 7,978Non-current liabilities 539 182 57 35 813Current liabilities 3,231 1,094 391 444 5,160Total liabilities 3,770 1,276 448 479 5,973NET ASSETS 914 489 460 142 2,005

INCOME STATEMENTIncome from ordinary activities 6,976 1,950 2,090 657 11,673Of which export 45Operating profit 283 77 202 73 635Financial income and expense – – – – (7)Income from associates 60 – – 2 62Income tax – – – – (209)NET PROFIT FOR THE PERIOD – – – – 481

Capital expenditures 747 149 121 62 1,079Depreciation (255) (56) (75) (26) (412)

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Year 2006


BALANCE SHEETNon-current assets 1,575 445 488 105 2,613Current assets 2,689 759 355 351 4,154Total assets 4,264 1,204 843 456 6,767Non-current liabilities 454 160 81 25 720Current liabilities 2,968 690 355 320 4,333Total liabilities 3,422 850 436 345 5,053NET ASSETS 842 354 407 111 1,714

INCOME STATEMENTIncome from ordinary activities 6,295 1,848 2,059 515 10,717Of which export 30 30Operating profit 254 77 148 49 528Financial income and expense – – – – (12)Income from associates 52 – – 2 54Income tax – – – – (168)NET PROFIT FOR THE PERIOD – – – – 402

Capital expenditures 359 113 158 26 656Depreciation (224) (53) (72) (19) (368)

15.2 – BUSINESS SEGMENT INFORMATION

Revenue

Year 2007


Roads – works and sales of construction materials 5,284 1,434 1,924 542 9,184 79%Civil engineering, pipes and mains 427 308 142 24 901 8%Waterproofing 497 20 0 0 517 4%Safety and signaling 253 17 19 2 291 3%Building 300 45 5 54 404 3%Railways 215 126 0 35 376 3%TOTAL 6,976 1,950 2,090 657 11,673

Year 2006


Roads – works and sales of construction materials 4,886 1,407 1,878 464 8,635 80%Civil engineering, pipes and mains 366 309 160 18 853 8%Waterproofing 425 16 0 0 441 4%Safety and signaling 246 16 16 1 279 3%Building 229 45 5 32 311 3%Railways 143 55 0 0 198 2%TOTAL 6,295 1,848 2,059 515 10,717


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NOTE 16 – INCOME STATEMENT BY FUNCTION

In addition to the income statement presented by nature, the income statement hereunder is disclosed by function:

2007 2006Revenue 11,673 10,717Cost of sales (10,043) (9,284)Gross profit 1,630 1,433Research and development costs (67) (61)Administrative expenses (925) (848)Current operating profit 638 524Extraordinary items (3) 4Profit from operations 635 528Net financial debt costs (11) (15)Other financial income and expense 4 3Income tax (209) (168)Income from associates 62 54PROFIT AFTER TAX 481 402Of which: minority interest 7 6Of which: equity holders of the parent 474 396

NOTE 17 – FINANCIAL INSTRUMENTS

We have disclosed hereafter the total of notional amounts outstanding at December 31, 2007 for each type of financial instrument,with breakdown by maturity for interest transactions and by currency for currency trade.

Hedging of interest rate risks

Interest rate swap Maturity Total Total2008 2009 to 2012 Beyond 31/12/07 31/12/06

On financial assets – – – – –On financial liabilities – – 164 164 55

To ensure that the city of Portsmouth, England is able to pay a fixed monthly fee for the duration of the twenty-five years of theroad rehabilitation and maintenance contract, an interest rate swap has been set up. This swap is a floating rate receiver, fixedrate payer. Its par value is perfectly in line with the draw down and repayment schedule of the non-recourse loan, in order to backthe debt fixed cost onto the monthly fee received. At December 31, 2007 that swap amounted to 62.4 million euros (45.8 million GBP).STVR, a concession company in which Colas Rail holds a majority share, contracted a long-term interest rate swap in 2003 to financethe construction and operation of the city of Caen’s tramway. This redeemable floating rate receiver, fixed rate payer swap whose term is November 2018 is accounted for in equity for its market value. At December 31, 2007, that swap amounted to 101.6 million euros.

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Hedging for exchange risks

Group companies generate only a small proportion of theirrevenue from exports.Revenue from foreign countries is chiefly generated bysubsidiaries that issue invoices and book their expenses in localcurrency. Occasionally, some currency contracts are hedged forexchange risks.

HUF RON Other 31/12/07 31/12/06Forward purchases 235 81 21 337 147Forward sales 1 – 1 2 1Currency swap – – – – –Currency options 27 – – 27 –

Some works contracts, completed in Hungary and invoiced ineuros, have been hedged for exchange risks.

Fair value of hedging financial instruments

At December 31, 2007, the net present market value of hedgingfinancial instruments amounted to (0.6) million euros. Thisamount mainly comprises the net present value of interest rateswap for Group debt hedging and the present value of forwardtransactions for exchange risk hedging, regarding operatingtransactions.

Breakdown of the market value by nature of hedging is asfollows:

– transactions regarding fair value hedge (3.3) M€

– transactions regarding cash flow hedge 4.4 M€

– trading transactions (0.5) M€

The impact of the market value of the interest rate swap set up forthe contract with the city of Portsmouth, England i.e., (3.3) millioneuros, is fully compensated by the market value of the embeddedderivative instrument regarding the fixed fee paid by the client,i.e., (3.3) million euros.In case of +1% transfer in the interest rate yield curve (andrespectively -1%), the market value of hedging financial instrumentswould amount to 11.5 million euros (respectively (14.3) millioneuros).An average unfavorable change of 1% against all other currencieswould result in a decrease in the market value of hedgingfinancial instruments to (4) million euros.Measurement has been made by an independent serviceprovider, according to market practices.

NOTE 18 – COMMITMENTS AND CONTINGENCIES

Mutual commitments

Maturity less than from 1 more than Total Total1 year to 5 years 5 years 31/12/07 31/12/06

Commitments givenOperating leases(1) 19 44 46 109 88Firm asset purchase commitments(2) 44 13 5 62 75Total 63 57 51 171 163Commitments receivedOperating leases(1) 19 44 46 109 88Firm asset purchase commitments(2) 44 13 5 62 75TOTAL 63 57 51 171 163

(1) Minimum lease payments up to contracts renewal date (or first cancel date) pertain to operating lease contracts for operating businesses (land building,equipment, etc.).

(2) Mainly equipment orders.


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Other commitments

Maturity less than from 1 more than Total Total1 year to 5 years 5 years 31/12/07 31/12/06

Commitments givenEndorsements and warranties 29 32 6 67 36Commitments receivedContractual commitments – – – – –Assets given as securitiesMortgages and securities 1 5 1 7 8

The Group grants, in respect of its operating activities, decennial or performance warranties, which are not measured or disclosed.If the said could cause outflow of resources, provisions are recognized.In 2007, the company issued guarantees under section 17 of Ireland’s Companies (Amendment) Act, 1986 on behalf of Colas Teoranta,Road Maintenance Services Ltd, Colas Building Products Ltd, Cold Chon (Galway) Ltd, Road Binders Ltd and Chemoran Ltd.

Commitments under finance leases

Maturity less than from 1 more than Total1 year to 5 years 5 years

Minimum lease payments 18 33 2 53Finance charge (1) (1) – (2)Present value of minimum lease payments 17 32 2 51At December 31, 2006 19 34 1 54

NOTE 19 – CHANGES IN NET FINANCIAL POSITION

31/12/06 2007 31/12/07variations

Cash and cash equivalents 704 (31) 673Bank overdrafts and short-term loans (126) (3) (129)Net cash 578 (34) 544Long-term financial debts 137 12 149Long-term financial debts (current portion) 32 13 45Financial instruments 3 3Gross debt 169 28 197NET FINANCIAL POSITION 409 (62) 347

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NOTE 20 – WORKFORCE AND EMPLOYEE BENEFITS

Average Group workforce

2007 2006Managers and engineers 7,008 6,529Foremen, technicians, supervisors and office staff 14,424 13,445Workers 45,292 42,304TOTAL AVERAGE GROUP WORKFORCE 66,724 62,278

Employee benefits

Defined contribution plans 2007 2006Amounts recognized as expense 697 652

These expenses comprise contributions to:– social security, welfare;– retirement pension funds (State and supplementary);– unemployment insurance schemes.

Defined benefit plans Retirement indemnities Pensions2007 2006 2007 2006

Current service costs 1 5 (4) 0Interest costs 6 5 5 5Expected return on plan assets (5) (4)Past service costs 2 2 (1)NET EXPENSES 9 12 (4) 0Present value of obligations 167 160 276 108Fair value of plan assets (249) (79)Unrecognized past service costs (32) (34) 4 4NET RECOGNIZED LIABILITIES 135 126 31 33

Variations of balance sheet net liabilities Retirement indemnities Pensions2007 2006 2007 2006

At January 1 126 118 33 21Change in accounting policy 5 10Exchange differences (1)TransfersAcquisitions of subsidiaries 9 (2) 6Actuarial gains/losses in equity (9) (7) (3) 2Net expenses 9 12 (4)AT DECEMBER 31 135 126 31 33


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Main actuarial assumptions for determination of retirement indemnities 2007 2006Discount rates (OAT TEC10) 4.35% 3.83%Survival tables Insee InseeAverage retirement age for managers and executives 62 years 62 yearsAverage retirement age for other employees and workers 60 years 60 years

Equity compensation benefits

In 2007, options giving subscription rights for new Bouygues shares have been granted by Bouygues SA to certain Colas SA and Groupsubsidiary employees. The amount of these benefits is not significant.

NOTE 21 – RELATED PARTIES’ DISCLOSURES

Expense Income Receivables Debts2007 2006 2007 2006 2007 2006 2007 2006

Bouygues Group companies 49 35 73 57 320 448 33 9Joint ventures 23 19 55 50 16 14 15 17Associates 1 1 86 98 8 6 2 9Other related parties 0.2 0.2 –Key managers 10 8.9 8 7Non-executive Directors 0.2 0.1 –TOTAL 83 64 214 205 344 468 58 42Maturity < 1 year 344 468 55 38Maturity > 1 year – – 3 4

Identity of related parties

Bouygues Group companies: Bouygues SA and its subsidiaries.Joint ventures: Carrières Roy and other non-significant joint ventures.Associates: Cofiroute, Tipco Asphalt and other non-significant associates.Other related parties: Colas Foundation.

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Compensation of key management of the Group

Key managers are members of the Executive Committee at December 31, 2007. It comprises the Chief Executive Officer and sevensalaried members (including two salaried Directors).

2007 2006Direct compensation 6.8 7.7Post-employment benefits 0.9 0.4Termination benefits 2.3 0.8Equity compensation benefits – –TOTAL 10.0 8.9

Direct compensation: this amounts to 6.8 million euros, of which 3.3 million euros is for variable compensation established inrelation to targets and 40,000 euros for Directors’ fees.

Post-employment benefits:Chief Executive Officer: this provides a supplementary pension plan amounting to 0.92% of reference salary for each year of servicein the scheme. The supplementary pension scheme has been externalized to an insurance company.Other key managers: company’s contribution regarding pensions defined contribution plan (4% of employee’ global wages)

Termination benefits: this regards retirement indemnities.

Equity compensation benefits: the number of Bouygues shares attributed in 2007 (stock options) is 150,000 with a subscriptionprice of 63.44 euros. The minimum subscription date is June 5, 2011. The amount of this benefit is not material.Directors’ fees paid to Directors amounted to 160,000 euros.

NOTE 22 – FEES OF INDEPENDENT AUDITORS

We have disclosed hereunder the fees charged by the Auditors who carry out the legal audit of Colas SA’s accounts.

Mazars & Guerard KPMG2007 2006 2007 2006

Colas SA legal auditorsColas SA 0.2 0.2 0.2 0.2Subsidiaries 0.8 0.7 0.8 0.8Secondary assignments 0.3

Sub-total 1.0 0.9 1.3 1.0Other assignments: law, tax, welfareTOTAL COLAS SA LEGAL AUDITORS 1.0 0.9 1.3 1.0


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NOTE 23 – MAIN EXCHANGE RATES USED FOR TRANSLATION

1 local monetary unit = x euros.

Country Currency Closing Averagerate rate

EuropeCroatia Croatian Kuna 7.3308 7.3339Denmark Danish Kroner 7.4583 7.4512Great Britain British Pound 0.7333 0.6872Hungary Forint 253.73 251.37Poland Zloty 3.5935 3.7749Czech Republic Czech Republic Koruny 26.628 27.732Romania New Leu 3.6077 3.3409Switzerland Swiss Franc 1.6547 1.6458North AmericaUnited States US Dollar 1.4721 1.3797Canada Canadian Dollar 1.4449 1.4662OtherMorocco Dirham 11.352 11.229Thailand Baht 43.800 44.164

NOTE 24 – SCOPE OF CONSOLIDATION

24.1 – CHANGES IN SCOPE OF CONSOLIDATION

Number of consolidated companies

2007 2006Full consolidation 549 497Proportional consolidation 87 70Equity method 11 8TOTAL 647 575

Main new investments

France: Colas Rail, Texrod, Rambaud, Lamblin, Carrières Bernadets, Bonnefoy Palmier, Mendribil, Monti, Nordgalva, Serin, Nicol Environnement, Carrières Jeannin, Société Routière de l’Est.International: Cesta Varazdin (Croatia), Colas Rail System Ltd (UK), Carrières de Haut-le-Wastia (Belgium).

Disposal of companies

France: Entreprise Lafon, Eurojoint.International: Spedalso (Denmark).

Complementary investments

Highway Resources, AB1 Shipping (Singapore).

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24.2 – IMPACT AND ACCOUNTING OF YEAR’S ACQUISITIONSWe have disclosed hereafter the changes in scope of consolidation before acquisition and after allocation of identifiable assets andliabilities to different balance sheet items.Details are given for Colas Rail, which is the most significant acquisition for the year; no other acquisitions are significant on anindividual basis (70 business units concerned).

Amounts before acquisition Goodwill allocation Fair valueof items

acquiredColas Rail Other Total Colas Rail Other Total

Plant and equipment 21 84 105 5 21 131Intangible assets 1 3 4 7(1) 7 18Goodwill 28 2 30 145 56 231Associated companies 0 2 2Financial assets 8 13 21 25(2) 46Deferred tax assets 10 2 12 12Current assets 345 118 463 463TOTAL ASSETS 413 222 635 182 86 903Equity 88 25 113 178 81 372Deferred tax liabilities 1 1 4 5 10Other non-current liabilities 28 33 61 61Current liabilities 297 163 460 460TOTAL EQUITY AND LIABILITIES 413 222 635 182 86 903

(1) Order book valuation at acquisition date.

(2) Fair value of ETF shares (company sold in July 2007 for an amount of 33 million euros).

Investment price in consolidated companies acquired during the year amounts to 372 million euros (of which 3 million euros in acquisition costs), added to 11 million euros for non-consolidated companies acquired, i.e., an overall investment in shares of 383 million euros.


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24.3 – LIST OF MAIN CONSOLIDATED COMPANIESThe following companies are fully consolidated except in case of specific disclosure (PC: Proportional Consolidation, EM: EquityMethod).

Companies Head office % of stake2007 2006

France

Colas Centre-Ouest Nantes 99.9 99.9Colas Île-de-France – Normandie Magny-les-Hameaux 99.9 99.9Colas Nord-Picardie Villeneuve-d’Ascq 99.9 99.9Colas Est Colmar 99.9 99.9Colas Rhône-Alpes Lyon 99.9 99.9Colas Midi-Méditerranée Aix-en-Provence 99.9 99.9Colas Sud-Ouest Mérignac 99.9 99.9Somaro Chatou 99.9 99.9Spac Clichy 99.9 99.9Sacer Atlantique Nantes 99.9 99.9Sacer Paris-Nord-Est Magny-les-Hameaux 99.9 99.9Sacer Sud-Est Lyon 99.9 99.9Screg Ouest Nantes 99.9 99.9Screg Île-de-France – Normandie Voisins-le-Bretonneux 99.9 99.9Screg Nord-Picardie Villeneuve-d’Ascq 99.9 99.9Screg Est Nancy 99.9 99.9Screg Sud-Est Lyon 99.9 99.9Screg Sud-Ouest Mérignac 99.9 99.9Smac Boulogne-Billancourt 99.9 99.9Seco-Rail Chatou 99.9 99.9Colas Rail Cergy-Pontoise 99.9 –GTOI Le Port, Reunion Island 99.9 99.9Colas Martinique Le Lamentin, Martinique 99.9 99.9Colas Guadeloupe Baie-Mahault, Guadeloupe 99.9 99.9SBEG Cayenne, French Guiana 99.9 99.9Carrières Roy (PC) Saint-Varent 49.9 49.9Cofiroute (EM) Sèvres 16.7 16.7

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Companies Head office % of stake2007 2006

French overseas territories

Colas Mayotte Mamoudzou, Mayotte 100.0 100.0Colas de Nouvelle-Calédonie Noumea, New Caledonia 99.9 99.9Europe (excluding France)

Colas Bauchemie Gmbh Bremen, Germany 100.0 100.0Colas Gmbh Gratkorn, Austria 100.0 100.0Colas Belgium Brussels, Belgium 99.9 99.9Cesta Varazdin Varazdin, Croatia 70.22 –Colas Danmark A/S Virum, Denmark 100.0 100.0Colas Ltd Rowfant, Great Britain 100.0 100.0Colas Hungaria Budapest, Hungary 100.0 100.0Colas Polska Sroda Wlkp, Poland 100.0 100.0Colas CZ Prague, Czech Republic 100.0 100.0Colas Teoranta Dublin, Ireland 100.0 100.0Colas Romania Bucarest, Romania 100.0 100.0Colas SA Lausanne, Switzerland 99.2 99.2North America

ColasCanada Inc. Montreal, Quebec, Canada 100.0 100.0Colas Inc. Morristown, New Jersey, United States 100.0 100.0Africa – Indian Ocean

Colas Benin Cotonou, Benin 100.0 100.0Colas Djibouti Djibouti, Republic of Djibouti 100.0 100.0Routière Colas du Gabon Libreville, Gabon 89.9 89.9Colas Madagascar Antananarivo, Madagascar 100.0 100.0AJ Maurel Construction Petite Rivière, Mauritius Island 100.0 100.0Colas du Maroc Casablanca, Morocco 99.9 99.9Grands Travaux Routiers Rabat, Morocco 69.7 69.7Asia

Wasco Jakarta, Indonesia 55.0 55.0Raycol Asphalt Co. Ltd (IP) Rayong, Thailand 50.0 50.0Thaï Slurry Seal Co. Ltd Bangkok, Thailand 50.0 50.0Tipco Asphalt (ME) Bangkok, Thailand 30.8 30.8Hincol (IP) Mumbai, India 30.0 30.0


colas group · colas sa (the company) is a french public société anonyme incorporated in france...

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