Carrefour - 2017 Registration Document

5 CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2017 Notes to the Consolidated Financial Statements CARREFOUR | 2017 REGISTRATION DOCUMENT 283 Off-balance sheet commitments related to leases correspond to minimum operating lease payments to made on the non-cancellable lease term. At December 31, 2017, 728 hypermarket properties and 467 supermarket properties were owned outright out of a total integrated store base of 1,258 hypermarkets and 1,440 supermarkets. Rent on store properties not owned by the Group totalled 1,086 million euros in 2017 (Note 5.2.2). Of total future minimum rentals due under operating and finance leases, 27% are due within one year, 45% in one to five years and 28% beyond five years. and amount for each of the property leases in progress at the period-end – amounted to 3,712 million euros at December 31, 2017, or 2,928 million euros after discounting (Note 6.5). Future minimum rentals under operating leases – determined based on the Group’s maximum commitment in terms of both duration The Group also owns various shopping malls built mainly on the same sites as its hypermarkets and supermarkets and leased to third parties, as well as a number of store premises leased to franchisees. Rental revenues from these retail units in 2017 amounted to 228 million euros. Future minimum rentals receivable from these retail units – determined based on the tenants’ maximum commitment in terms of both duration and amount for each of the leases in progress at the period-end – amounted to 671 million euros at December 31, 2017, or 546 million euros after discounting. Subsequent events Note 14 “Carrefour 2022” transformation plan On January 23, 2018, the Carrefour group unveiled its transformation plan based on four pillars: Deploy a streamlined and open organisation; ● Achieve productivity and competitiveness gains; ● Create a leading omni-channel universe; ● Overhaul the offering to promote food quality. ● In the first pillar, the Group’s headquarters around the globe will be scaled back in order to improve teams’ operational efficiency and responsiveness: In the Île-de-France region, the corporate headquarters in ● Boulogne will be closed and a project to build a new 30,000 square-metre headquarters in Essonne will be abandoned; A strictly voluntary redundancy plan will be offered to ● 2,400 employees at the headquarters in France, out of a total workforce of 10,500; In Belgium, the measures announced on January 25, 2018 to ● reduce expenditure and operating costs and to increase operational efficiency could have an impact on jobs. Any implementation of these measures, which could impact up to 1,233 employees, will be launched following the information and consultation procedure in progress with trade unions. A provision will be accrued for the cost of these measures in 2018 when the conditions for recognising such a provision are met. The second pillar aims to regain room for manoeuvre to improve the Group’s efficiency and competitiveness in the interest of its customers. This will involve a significant reduction in its cost base and a more effective, targeted investment policy focused on its growth drivers. As well as a 2 billion-euro cost reduction plan, the roll-out of this pillar will eliminate certain loss centres. Struggling stores will exit the Group’s scope of consolidation. These include the network of 273 ex-Dia stores which have experienced great difficulties. A search for buyers has been or will be launched. In the absence of buyers, the stores will be closed. The property and equipment of the stores concerned have therefore been written down in the Consolidated Financial Statements for the year ended December 31, 2017 (Note 5.3). Strategic partnership in China On January 23, 2018, Carrefour announced that it had signed a preliminary agreement with Tencent and Yonghui regarding a potential investment in Carrefour China. The planned transaction, which is subject to the finalisation of further due diligence and the agreement of the parties on the definitive terms of the complete legal documentation, would allow Carrefour to remain Carrefour China’s largest shareholder and to continue to control the company. The potential investment would leverage Carrefour’s retail knowledge with Tencent’s technological excellence and Yonghui’s operational know-how and in particular its deep knowledge of fresh products. Also on January 23, 2018, Carrefour and Tencent announced that they had signed a preliminary agreement regarding strategic business cooperation in China in order to bring together Carrefour’s retail knowledge with Tencent’s digital expertise and innovation capabilities. Thanks to this partnership, Carrefour would improve its online visibility, increase the traffic of its offline and online retail activities, and benefit from Tencent’s advanced digital and technological expertise to develop new smart retail initiatives.