Eurailscout Inspection & Analysis B.V.

Eurailscout Inspection & Analysis B.V.

Berlin

Befreiender Jahresabschluss zum Geschäftsjahr vom 01.01.2021 bis zum 31.12.2021

Eurailscout Inspection & Analysis B.V.

Utrecht/Niederlande

Contents

Director's report

Financial statements

Consolidated financial statements

Consolidated balance sheet as at 31 December 2021

Consolidated income statement for the year ended 31 December 2021

Consolidated cash flow statement for the year ended 31 December 2021

Notes to the consolidated financial statements

Company financial statements

Company balance sheet as at 31 December 2021

Company income statement for the year ended 31 December 2021

Notes to the company financial statements

Other information

Independent auditor's report

Director's report

The Management of Eurailscout Inspection & Analysis B.V. (the 'Company' or 'Group') under Chamber of Commerce registration number 30139437 hereby presents its consolidated financial statements and evaluation for the financial year ended on 31 December 2021.

General information

Eurailscout's mission is to offer the best possible and most actual insights into the condition of railway assets by delivering localised, visualised and analysed data for better safety and availability of the rail infrastructure. Eurailscout's vision is to continuously learn, develop and grow, staying at the top by developing ourselves in a close cooperation with partners and customers. The business objectives are to become best in class in:

Eurailscout's head office is in Amersfoort, the Netherlands, the research and development department, the production and the data processing centre are shared between Amersfoort and the office in Berlin. The French operations run through Eurailscout France SAS, with its office in Paris. Erdmann Software GmbH, which core activity is the development of software, is located in Görlitz, Germany. In addition Eurailscout has a permanent establishment in Italy named Eurailscout Italy S.r.l, located in Bologna from which the activities for the state of the Italian railway infrastructure can be operated.

The Group's main services are:

Legal structure

The Company is a Dutch B.V. and a joint-venture held by Strukton Rail B.V. for 50% (with ultimate parent Oranjewoud NV) and by SNCF Réseau for 50% (with ultimate parent SNCF Group).

Organisation

As part of Eurailscout's business and financial plan we further improved and professionalized our organization in 2021. In 2021 we invested EUR 7,2 million on Group level. Compared to last year this is an EUR 3,4 million increase indicating the ambition Eurailscout has to establish a good basis for the future and further improve and develop on delivering the best possible actual insights into the condition of the railway assets.

This year we contributed to our mission by refurbishing the UFM-160 which operates for the French market and investing in the UST-02. We also invested in our main ICT platform on which our data is processed to be fit for the future and to be able to process higher data volumes for our customers and in line with market developments. In parallel Eurailscout worked on software development including more automated data delivery.

We are proud that despite the challenges in 2021 regarding COVID and related measures in different countries, the developments towards longer lead times of our products, capacity problems, price increases and the damage to our SIM-09, Eurailscout was still able to achieve a good result. This, we could not have achieved without the good and hard work and flexibility of our employees and the cooperation with our customers and suppliers.

Financial information

The year 2021 shows a positive result after tax of € 1.5 million. Erdmann Software, a 50% subsidiary of Eurailscout contributed positively to the group result of 2021. Eurailscout the Netherlands and its establishment in Berlin (hereafter "ERS the Netherlands") showed a profit before tax of € 1.1 million and improved compared to last year. This is caused by € 0.8 million lower total revenues compensated by lower operational and depreciation expenses of in total € 1.9 million. The main effects in 2021 were:

Financial performance

The net turnover for 2021 decreased with 2.1% to € 26,7 million compared to last year (2020: € 27.3 million) mainly related to € 0.4 million lower revenues at Eurailscout the Netherlands as explained above and € 0.2 million lower revenues at Erdmann Software.

Operating profit (after depreciation and amortisation) increased in 2021 to + € 3.0 million (2020: € 2.0 million). The decrease in total turnover (- 3.1%) and the decrease in total expenses (- 7.3%) resulted in a positive operating profit (+49.4%). The decrease in total expenses is mainly related to lower maintenance expenses and lower personnel expenses as explained above. Erdmann has some higher cost of materials and personnel expenses related to higher salaries. The net result for the year 2021 is + € 1.5 million (2020: + € 1.3 million; restated for a correction in the share result of participation of Eurailscout France as explained in the general notes).

The increased net result of Eurailscout B.V. of + € 0.2 million compared to last year can be explained by a higher result before tax from Eurailscout the Netherlands of + € 1.2 million and some lower result before tax of Erdmann Software of - € 0.2 million which resulted in higher payable taxes of € 0.4 million. The result from participations decreased with € 0.4 million compared to last year.

In 2021, Eurailscout the Netherlands fully used the original carry forward amount of 2021 and as a consequence reversed the impairment applied in 2020 based on the expected results for 2021. In addition, the deferred tax asset has been revalued based on the change in corporate tax rate from 25% to 25,8% and expected usage of the deferred tax asset.

Capital expenditure

Capital expenditure on tangible fixed assets amounted to € 5.0 million in 2021 (2020: € 2.0 million). This mainly concerned the investments in the UST-02 and the UFM-160.

Capital expenditures on intangible assets amounted to € 2.1 million in 2021 (2020: € 1.4 million). These investments related mainly to software developments to support our business operations and to fulfil contractual obligations. A legal reserve in equity was formed for the capital expenditures.

The Company has an investment program which is being yearly updated in line with the business plan and communicated with our main stakeholders. Investments relate to new rail equipment, both new production units and measuring systems, the planned major refits being part of our fleet and software development.

Cash flow and financing

The net cash generated from operating activities was € 3.9 million in 2021 versus € 4.9 million in 2020. The decrease related to a higher operating result, a lower working capital, a lower correction of the non-cash items and a dividend that was not received in the year 2021.

The net cash used in investing activities increased in 2021 with + € 3.4 million to € 6.6 million (2020: € 3.2 million) mainly due to the large refurbishment of the UFM-160, investments on the UST-02 and the software including some divestments related to the UFM-160 refurbishment and the sale of the SIM-15 platform to ERS France. The net cash from financing activities increased by € 0.2 million to € 0.5 million (2020: € 0.3 million). The difference can be explained by some lower drawing from the bank loan and no dividend paid on Group level by Erdmann Software partly.

Capital position

The Company's solvency increased in 2021 to 53.79% (2020: 51.02% restated). As per 31 December 2021 Equity amounts € 18.9 million (2020: € 17.4 million restated), excluding minority interest of € 3.4 million (2020: € 2.8 million). The Company's liquidity decreased to 2.11 in 2021 (2020: 2,27).

Corporate governance

The Company's Supervisory Board is appointed by the shareholders of the Company. The Supervisory Board is charged with supervising the Company's Management Board, the policy pursued and the general affairs of the company and its associated companies, as well as advising the Company's Management Board. The Management Board consists of two statutory directors being a Chief Executive Officer and a Chief Financial Officer and a non-statutory director responsible for operations, ICT, Software and HR. The yearly budgets, strategic policy matters and major investments are subject to the Supervisory Board's approval. The Supervisory Board meets 4 times a year and additionally in case requested by one of the Board members to discuss a certain topic.

Risk Assessment

Like other companies, the Company has to deal with various commercial, operational, financial and compliance risks. These risks are inherent to its business operations. The Company minimizes these risks as much as possible by reviewing regularly its processes within the Managing Board and Management Team and implementing mitigating measures in our processes. These main company risks are reviewed on a yearly basis. One of our most important risk is:

Safety risk and Quality, Health and Environment (QHSE)

Safety is Eurailscout's number one focus. During operations our employees are exposed to a high risk environment in and around the rail track. Eurailscout is fully aware of this potential risk and implemented the required precautions to ensure a safe work environment and conditions for our employees. Although the fact that all care is taken to create a safe environment we are also aware that an incident or accident can occur. Therefore we discuss and when required communicate actively in different meetings on potential unsafe situations and incidents or accidents.

Prevention is given priority within the Company. The safety policy also pays attention to human behaviour as a risk factor (awareness). It aims to keep this risk to a minimum through training of our staff, the careful preparation of operations, reporting of irregularities and analyses of incidents, (near) accidents and 'toolbox' (industrial safety) meetings. Management performs on a regular basis QHSE inspections in order to improve the work environment and processes. Employees are obliged to follow a strict programme (by laws and regulations) of safety training for relevant operatives, given the risks and responsibilities of working on, along and in the track.

In 2021, Eurailscout started to centralize and professionalize the purchasing function. This has also the effect that Eurailscout will communicate their values towards its suppliers / partners as written in the corporate social responsibility policy and ask them to commit to these values related to Safety, Quality Health and Environment including the compliance to the privacy regulation and thereby increasing the awareness and responsibility in the chain.

Privacy Regulation - General Data Protection Regulation (GDPR)

Eurailscout has a Privacy Policy, a compliance officer, a register for processing personal information and prepared different documents to comply with the privacy regulation that came into effect in May 2018.

Independent assessment on QHSE and business processes

Eurailscout is periodically audited by independent and professional organizations on the main risks regarding QHSE and its business processes. The auditors review the compliance with main regulation, maturity, professionalism and consistency in processes within the organization. These independent reviews and advice support Eurailscout in its goal to further grow as a professional and learning organization.

Eurailscout has been recertified by DNV in March 2022 for ISO 9001, ISO 14001 and ISO 45001 which is valid until March 2025. Eurailscout has also been successfully audited in 2021 on the ISO 17020 by Avensus. In addition, Eurailscout will in October be audited by DNV for the CO ₂ performance ladder level 4 and in this way further contribute to a better environment like other parties in the value chain.

IL&T performs yearly audits at Eurailscout on the safety management system. IL&T is the Dutch Safety Regulator who issues permits to operate on the Dutch Railway Network. Also in 2021 Eurailscout passed the audit successfully.

In 2022, the safety certificates I and II will expire and IL&T will re-assess the safety management System process of Eurailscout in order to be certified for the following five years at the European standards Directive (EU) 2016/798 and additional requirements set by IL&T. In addition, Eurailscout prepares for the in 2022 new obligatory ECM certification, which is a certification to be issued for entities in charge of maintenance. This process will be assessed by IL&T in 2022 as well.

In addition, Eurailscout is financially audited by our external auditor RSM.

COVID and war in Ukraine

In addition to our main risks we encountered in the year 2021 and also in 2022 still some risk regarding COVID and the war in Ukraine. Like in 2020, management assessed that COVID does not create a material uncertainty about the entity's ability to continue as a going concern. COVID may have some impact, though not significant for example in relation to expected future performance, effects on future asset valuation or the entity's activities in general as we are performing a vital function to safeguard the safety on the rail network and were able to continue our work; also in 2021.

The potential identified risks for Eurailscout are as follows:

The following measures were taken to mitigate the risks:

Management has regularly direct contact with its customers and suppliers to discuss the work and services that has to be performed and/or purchases and services to be delivered given the developments, conditions and measures at a any moment in time.

The news is being followed on a regular basis as well in the Netherlands as abroad with respect to performing our operations, investment projects and/or goods/services to be delivered.

Depending on the developments, measures taken in different countries the potential risks for our employees are discussed and the appropriate decisions are in good communication with our employees taken in line with the advice of the Dutch government and/or Dutch national institute for Public Health and the Environment and similar organisations in other countries.

Most of our revenues come from our home countries in the Netherlands and France where we are able to continue the work by following the required measures. In addition we work for state-owned companies who are reliable customers in paying invoices. Working at home for our employees worked in general quite well.

Like in 2021 we expect in case of any delays due to lock-downs and/or high absenteeism or else to be able to (re)run later during the year with a minimal impact on the result of 2022. More impact we expect from the high inflation, price increases and long delivery times which is already taken into account by increasing the expenses in the forecast for 2022. In general, we do not expect COVID or the war in Ukraine to have such a large impact that it affects our cash position and going concern of Eurailscout B.V.

Available credit facilities

Eurailscout amended the € 18,5 million bank loan facility which was effective as from December 2015 into a new € 20 million bank loan facility agreement under new conditions as from 15 July 2020. The new facility agreement has been issued for a contract term of 5 years at EURIBOR + 2,15% and in order to execute our investment program being part of the business plan. Following the more strict Agreement as signed on 18 May 2021 the loan facility amount has been adjusted to € 15.5 million. In addition we agreed upon a maximum cap of € 12.5 million of the outstanding loan amount as long as Eurailscout is in a transition period which is also the case for 2022. As per end of December 2021, Eurailscout has an outstanding loan amount of € 9.5 million including the withdrawal of € 2.0 in 2021 for our investments. The outstanding facility amount as per the same date is € 3.0 million.

Repayments occur in Q2, Q3 and Q4 in equal consecutive instalments of € 500K. Quarterly financial covenants apply to the secured bank loan, which involve solvency, senior net debt to EBITDA and an interest coverage ratio. Compliance with financial covenants is quarterly reported to the bank.

As per balance sheet date Eurailscout Inspection & Analysis B.V. met the bank covenant ratios. Following the 5- year business plan and transition of Eurailscout Inspection & Analysis B.V. the bank and Eurailscout B.V. agreed upon more strict conditions on the Facility Agreement and a step-up of the bank covenant ratios as per January 2021 until 2022. The more strict conditions and the waivers given to Eurailscout B.V. are described in an Amendment Agreement which was signed on 18 May 2021.

In addition, Eurailscout entered into a Shareholders' agreement of EUR 3 million as per 20 December 2020, which is subordinated to the bank loan facility agreement. The contract term of the loan is 7 years at an interest rate of 5%. The EUR 3 million shareholders' loan is to finance the re-organisation of Eurailscout and to cover for the negative results in 2020 and 2021. Repayments and interest payments to the shareholders will only be performed after the transition period until 2022 and when the in the bank's facility agreement original covenant ratio levels are met.

Research & Development

Since Eurailscout is highly depending on technology, R&D has a major focus. As we make use of a wide range of technologies it is key to search for the right developments and partners and find how to integrate these techniques into our services. Our technology department is organised functionally per technology field of interest enabling us to build up specialized knowledge and to use this for both R&D and operational purposes.

With the SIM concept we introduced a relatively cost efficient and flexible platform for various kind of systems and measurements.

The software department works in close cooperation with other departments on new system developments and offers new solutions and insights to our customer. In 2021 as well as in 2022 a lot of effort has been put into the development of the overhead line & geometry data, integrated analysis, image recognition and working on integrated data solutions where we offer added value to our customer by combining data from various sources giving them better insight in the status of the track.

Information technology

Information Technology is for Eurailscout a very important asset. Software and hardware on our trains (on board software), in our data processing centre and managing the processes are key for a correct delivery of our services towards the customer. In addition we are working on more automatic, timely and enriched delivery of our data. This is one of our core processes and need to be adequate.

In order to show that this process is under control Eurailscout has asked Avensus to audit the process from data measurement until data delivery to the customer against ISO 17020. In 2021 Eurailscout has been successfully audited again.

Next to this, Eurailscout is working on further steps to improve this process by automating the data delivery.

To align our business and ICT strategy, we consolidated in 2020 all ICT related functions in one department, introduced new roles and techniques (machine learning, image recognition) and working towards a more intensive cooperation with the software department. In 2021 for example a lot of ICT effort has been performed in supporting the enormous data volumes coming from new data measurements to be able to come to the by the customer requested data delivery regarding new Overhead line & Geometry insights. In order to be able to meet our customer expectations, reduce technical debt and lower maintenance cost Eurailscout refurbished in 2021 the twelve year old software supporting our logistical operations. In 2022 Eurailscout will develop an application, data and infrastructure strategy to give more substance to Eurailscout's goals and objectives.

Environmental and Social Responsibility

On environment, the company policy and ambition is stated with respect to improving the environment by the most obvious elements reducing the CO ₂ emission, use of energy and fuel consumption. Eurailscout will be audited against the CO ₂ performance ladder level 4 in 2022. The office is fitted with movement-actuated lightning and energy saving lamps are used. We have signed several green energy supply contracts. To avoid unnecessary travel, more professionalised video conferencing is available and promoted. Also in 2021, we further improved the planning and the first time right percentage in production shifts. This results in less fuel consumption and CO ₂ reduction. In addition the travel expenses were also low in 2021 mainly due to COVID which has a positive effect on the CO ₂ emission.

Eurailscout is a member of the "Club of 49". This is a network of companies that actively strive to reduce the CO ₂ emission. The target of this network is to reduce CO ₂ emission by 49% in 2030. Members of the "Club of 49" exchange their knowledge and experiences and investigate how the 49% reduction target can be integrated and realized within the company and within the entire business chain. From the reference year 2010, Eurailscout has strongly reduced its CO ₂ emissions; also in 2021. Working from home due to the COVID measures has contributed to this. We are on track to achieve the target by 2030, although we see that the realization of the reduction is lower than at the beginning.

For 2022, Eurailscout expects that the organizational improvements and measures will further reduce the CO ₂ emission by 4% due to less travelling, using lower energy power units, reducing the office space through hybrid working and less usage of fuel and by increasing the operational effectiveness to avoid reruns.

Outlook 2022

The year 2022 will not be very different from the year 2021 in the sense that 2022 is still a transition year towards a more professionalized organisation. Also in 2022, high investments are planned to support this transition as part of our business and financial plan. The (after) COVID effects and the current war in Ukraine will become even more visible in 2022 putting more pressure on delivery times and prices impacting possibly our operations. The Managing Board will manage the developments closely, anticipate where possible and by continuing the open dialogue with our suppliers and customers and where needed look for stronger cooperation within the Group and our stakeholders to mitigate these effects as early and as much as possible.

The business in general has its regular challenges. In case of a failure Eurailscout is usually able to perform the measurements at a later moment in the year. We are not fully covered in case of major accidents, but due to the investments in the past years our SIM's are now able to back-up each other and even provide services of other trains in case of a failure/incident. Eurailscout is developing and investing in extended and more stabilized products, services and software in order to be able to offer more alternatives including comparable back-ups to our customers. This can only be done with a good collaboration between our customers and suppliers and this will be key for Eurailscout to focus on with an expected staffing level of 162 employees (in full time equivalents).

Main objectives in our business plan relates to:

Safety:

Besides our current safety process for example safety procedures at the work place and regarding the reporting and follow-up of incidents and accidents, following the required training and education, Eurailscout started an overall Safety Awareness programme to ensure that safety is more top of the mind and is discussed on a regular basis. The safety programme will be started again in 2022 as the physical attendance of the employees is important in these kind of trainings.

Customer satisfaction:

An improved contract management, asset management, portfolio and project management process will have a positive effect on the production as we expect to increase a first time right production, increased predictability and transparency on our activities and as a result a more satisfied customer. The effects of this improvement are already seen and will continue in 2022. In addition we are centralising and further professionalizing the purchasing function which will result in even further customer satisfaction and first time right percentages. The customer's requirements will be translated towards the suppliers immediately aligning on specifications, planning and asking for their commitment to deliver a combined effort in the value chain to make any change / improvement a success.

Employee Satisfaction:

On a regular basis we distribute a questionnaire to monitor Employee satisfaction. After COVID and the way of working partly at home and at work this is even more important to monitor. Also this year we will have diverse employee events. This year we expect to have some events physically instead of online, of course with the required prudency when needed. In 2021/2022 the appraisal scheme has been renewed in Motion with a main focus on the development of the employee as a joint effort between employee and manager. Also regular training and education is continuously encouraged.

With the improvements as set forth in the business plan to further professionalize the organization like mentioned above Eurailscout will turn into a more proactive and learning organization which creates more time to perform one's job and less pressure and overtime hours.

In addition, Eurailscout started in 2020 for the managing employees a leadership training, which also will be started again in 2022 as physical attendance is a prerequisite for these kind of trainings.

Innovation:

The specifications as requested for the new Ultrasonic and Overhead line & Geometry contracts comprised of new innovative measurements.

For 2022 we will amongst others further develop in lighter assets for ultrasonic and Overhead line & Geometry measurements and data processing & analysis.

Profitability:

Eurailscout is able to improve the results by improving its processes (first time right, intensify relationships), steering periodically on operational -, project- and departmental results. Cost awareness is top of mind in a time where inflation, price increases and long delivery times become part of the business and the negotiations with our suppliers and customers. Besides, Eurailscout will focus on added value for our customers in order to offer more value at a fair price level.

Financial statements

Consolidated financial statements

Consolidated balance sheet as at 31 December 2021

(before appropriation of result)

(in EUR 1,000)

Consolidated income statement for the year ended 31 December 2021

Consolidated cash flow statement for the year ended 31 December 2021

Movements in cash and cash equivalents can be broken down as follows:

Notes to the consolidated financial statements

1. General information

1.1. Operations

The operations of Eurailscout Inspection & Analysis B.V. ("the Company"), with corporate seat in Utrecht, and its group companies ("the Group") under the Chamber of Commerce registration number 30139437 are mainly comprised of:

Sales are made in both the domestic and foreign markets, with Europe being the most important market.

1.2. Group structure

Eurailscout Inspection & Analysis B.V. is a joint-venture held by Strukton Rail B.V. (with ultimate parent Oranjewoud N.V.) and SNCF Réseau (with ultimate parent SNCF Group).

1.3. Consolidation

The consolidation includes the financial information of Eurailscout Inspection & Analysis B.V., its group companies and other entities in which it exercises control or whose central management it conducts. Group companies are entities in which Eurailscout Inspection & Analysis B.V. exercises direct or indirect control based on a shareholding of more than one half of the voting rights, or whose financial and operating policies it otherwise has the power to govern. Potential voting rights that can directly be exercised at the balance sheet date are also taken into account.

Group companies and other entities in which Eurailscout Inspection & Analysis B.V. exercises control or whose central management it conducts are consolidated in full. Minority interests in group equity and group profit are disclosed separately.

Intercompany transactions, profits and balances among group companies and other consolidated entities are eliminated, unless these results are realised through transactions with third parties. Unrealised losses on intercompany transactions are eliminated as well, unless such a loss qualifies as an impairment. The accounting policies of group companies and other consolidated entities have been changed where necessary, in order to align them to the prevailing group accounting policies.

Since the income statement of Eurailscout Inspection & Analysis B.V. is included in the consolidated financial statements, an abridged income statement has been disclosed (in the company financial statements) in accordance with Section 402, Book 2, of the Dutch Civil Code.

The consolidated companies are listed below:

1.4. Going Concern

In general, running a business is never without a challenge. Management is aware of the business Eurailscout is operating in. The entire organization, governance, management control systems and processes are set-up to deliver our product and services to our customers.

In the past years we invested in new trains, refurbishments and new developments to support our customers in the best way. We are also in the middle of a reorganization to align our organization to the changing environment. Every year, we present a 5-year plan to the shareholders and employees and when requested also to the bank. This business plan is set-up as realistic as possible under current conditions living with COVID and anticipating on the war in Ukraine where possible. The high level of investments are challenging, but are expected to be feasible as we also showed in 2021. These investments are necessary to realize further business improvements and offer new products and services to our customers and keep up with developments in the market. Also in 2021, we were able to minimize the impact of COVID for Eurailscout. The developments around COVID and the war in Ukraine will also be monitored closely in 2022 to keep the impact on the business as low as possible.

Loan Facility Agreement and covenant ratios

In 2021, Eurailscout complied with the bank covenant ratios as agreed upon with the bank under the Loan Facility Agreement during the transition period.

1.5. Impact of COVID and war in Ukraine on our business

In addition to our main risks we encountered in the year 2021 and also in 2022 still some risk regarding COVID and the war in Ukraine. Like in 2020, management assessed that COVID does not create a material uncertainty about the entity's ability to continue as a going concern. COVID may have some impact, though not significant for example in relation to expected future performance, effects on future asset valuation or the entity's activities in general as we are performing a vital function to safeguard the safety on the rail network and were able to continue our work; also in 2021.

The potential identified risks for Eurailscout are as follows:

The following measures were taken to mitigate the risks:

Management has regularly direct contact with its customers and suppliers to discuss the work and services that has to be performed and/or purchases and services to be delivered given the developments, conditions and measures at a any moment in time.

The news is being followed on a regular basis as well in the Netherlands as abroad with respect to performing our operations, investment projects and/or goods/services to be delivered.

Depending on the developments, measures taken in different countries the potential risks for our employees are discussed and the appropriate decisions are in good communication with our employees taken in line with the advice of the Dutch government and/or Dutch national institute for Public Health and the Environment and similar organisations in other countries.

Most of our revenues come from our home countries in the Netherlands and France where we are able to continue the work by following the required measures. In addition we work for state-owned companies who are reliable customers in paying invoices. Working at home for our employees worked in general quite well.

Like in 2021 we expect in case of any delays due to lock-downs and/or high absenteeism or else to be able to (re)run later during the year with a minimal impact on the result of 2022. More impact we expect from the high inflation, price increases and long delivery times which is already taken into account by increasing the expenses in the forecast for 2022. In general, we do not expect COVID or the war in Ukraine to have such a large impact that that it affects our cash position and going concern of Eurailscout B.V.

1.6. Related-party transactions

All legal entities that can be controlled, jointly controlled or significantly influenced are considered to be a related party. Also, entities which can control the company are considered a related party. In addition, statutory directors, other key management of Eurailscout Inspection & Analysis B.V. or the ultimate parent company and close relatives are regarded as related parties.

Significant transactions with related parties are disclosed in the notes insofar as they are not transacted under normal market conditions. The nature, extent and other information is disclosed if this is required for to provide the true and fair view.

1.7. Acquisitions and disposals of group companies

Identifiable assets acquired and liabilities assumed in a business combination are recognised in the consolidated financial statements from the acquisition date, being the moment that control can be exercised in the acquired company.

The acquisition price consists of the cash consideration, or equivalent, agreed for acquiring the company plus any directly attributable expenses. If the acquisition price exceeds the net amount of the fair value of the identifiable assets and liabilities, the excess is capitalised as goodwill under intangible assets. If the acquisition price is lower than the net amount of the fair value of the identifiable assets and liabilities, the difference (i.e. negative goodwill) is disclosed under accruals and deferred income.

Entities continue to be consolidated until they are sold; they are deconsolidated from the date that control ceases and if they are classified as disposal groups held for sale.

1.8. Notes to the cash flow statement

The cash flow statement has been prepared using the indirect method. The cash items disclosed in the cash flow statement are comprised of cash and cash equivalents except for deposits with a maturity over three months. Cash flows denominated in foreign currencies have been translated at average estimated exchange rates. Exchange differences affecting cash items are shown separately in the cash flow statement. Interest paid and received, dividends received and income taxes are included in cash from operating activities. Dividends paid are recognised as cash used in financing activities. The purchase consideration paid for the acquired group company was recognised as cash used in investing activities where it was settled in cash. Any cash and cash equivalents in the acquired group company were deducted from the purchase consideration. Transactions not resulting in inflow or outflow of cash, including finance leases, are not recognised in the cash flow statement. Payments of finance lease instalments qualify as repayments of borrowings under cash used in financing activities and as interest paid under cash generated from operating activities.

1.9. Estimates

The preparation of financial statements in conformity with the relevant rules requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. If necessary for the purposes of providing the view required under Section 362(1), Book 2, of the Dutch Civil Code, the nature of these estimates and judgments, including the related assumptions, is disclosed in the notes to the financial statement items in question.

2. Accounting policies for the balance sheet

2.1. General information

The consolidated financial statements have been prepared in accordance with the statutory provisions of Part 9, Book 2, of the Dutch Civil Code and the firm pronouncements in the DASs for Annual Reporting in the Netherlands as issued by the Dutch Accounting Standards Board.

In general, assets and liabilities are stated at the amounts at which they were acquired or incurred, or current value. If not specifically stated otherwise, they are recognised at the amounts at which they were acquired or incurred. The balance sheet, income statement and cash flow statement include references to the notes.

2.2. Prior-year comparison

The accounting policies have been consistently applied to all the years presented.

2.3. Disclosure of prior period errors

This year we came across a material misstatement in the annual accounts for Eurailscout's associate "Eurailscout France SAS". Following the criteria of the level of influence Eurailscout B.V. has in this associate it has been concluded that based on the governance structure, Eurailscout B.V. has no operational influence in this associate and should therefore value Eurailscout France SAS at costs instead of net asset value. This resulted for 2020 in a € 2,152,000 lower value of the financial assets and an equal adjustment of the Equity, we also refer to note 30. The share result in the income statement 2020 has been corrected with a value of € 200,000 to € 500,000 being received dividends. Therefore the total impact on the comparative figures amounts to € 2,352,000.

2.4. Foreign currencies

2.4.1. Functional currency

Items included in the financial statements of group companies are measured using the currency of the primary economic environment in which the respective group company operates (the functional currency). The consolidated financial statements are presented in thousands of euros (€1,000), unless otherwise stated, which is the functional and presentation currency of Eurailscout Inspection & Analysis B.V.

2.4.2. Transactions, receivables and debts

Foreign currency transactions in the reporting period are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the rate of exchange prevailing at the balance sheet date. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates are recognised in the income statement.

Translation differences on non-monetary assets held at cost are recognised using the exchange rates prevailing at the dates of the transactions.

2.5. Intangible fixed assets

Intangible assets are stated at historical cost less amortisation. Allowance is made for any impairment losses expected; a loss qualifies as an impairment loss if the carrying amount of the asset (or of the cash-generating unit to which it belongs) exceeds its recoverable amount.

2.5.1. Research and development expenditure

Research expenditure is recognised in the income statement. Expenditure on development projects is capitalised as part of the production cost if it is likely from both a commercial and technical perspective that the project will be successful (i.e.: if it is likely that economic benefits will be realised) and the cost can be determined reliably. A legal reserve has been recognised within equity with regard to the recognised internal development costs for the capitalised amount. The amortisation of capitalised development costs commences at the time when the commercial production starts and takes place over the expected future useful life of the asset. Upon the start of the amortisation of the internal development costs also the legal reserve will be reduced with the same amount.

2.5.2. Concessions, licences, intellectual property and computer software

Costs of intangible assets other than those internally generated, including patents and licences, are valued at acquisition cost and amortised on a straight-line basis over their estimated future useful lives, with a maximum of 20 years.

2.6. Tangible fixed assets

Land and buildings are stated at historical cost plus expenditure that is directly attributable to the acquisition of the items, less straight-line depreciation over their estimated future useful lives. Land is not depreciated. Allowance is made for any impairment losses expected on the balance sheet date.

Other non-current assets are valued at historical cost or manufacturing price including directly attributable expenditure, less straight-line depreciation over their estimated useful lives and impairment losses. The manufacturing price is comprised of the cost of raw materials and consumables, and also includes expenditure directly attributable to an asset's manufacturing, including installation costs.

Costs for large maintenance (every 6-8 years) are recognized as tangible fixed assets. Large maintenance is performed to extend the life time of an asset. The costs of large maintenance are separately recognized as part of the tangible fixed asset and depreciated over the period of time until a new large maintenance has to be carried out.

2.7. Financial assets

2.7.1. Associates

Group companies and other associates in which the Company exercises significant influence, generally accompanying a shareholding of 20% or more of the voting rights, are stated at net asset value. Net asset value is calculated using the accounting policies applied in these financial statements. Associates with an equity deficit are carried at nil. A provision is formed if and when Eurailscout Inspection & Analysis B.V. is fully or partially liable for the debts of the associate, or has the firm intention to allow the associate to pay its debts.

Group companies and other associates in which the Company does not exercise significant influence are accounted for at actual cost or the acquisition price.

2.7.2. Loans to associates

Receivables disclosed under financial assets are recognised initially at fair value of the amount owed, which normally consists of its face value, net of any provisions considered necessary. These receivables are subsequently measured at amortised cost.

2.7.3. Other securities

The valuation principles of the other securities included under financial fixed assets are the same as the valuation principles for the securities under current assets. For this reason, reference is made to the section on Effects.

2.8. Impairment of non-current assets

At each balance sheet date, the Company tests whether there are any indications of assets being subject to impairment. If any such indications exist, the recoverable amount of the asset is determined. If this proves to be impossible, the recoverable amount of the cash generating unit to which the asset belongs is identified. An asset is subject to impairment if its carrying amount exceeds its recoverable amount; the recoverable amount is the higher of an asset's fair value less costs to sell and value in use. An impairment loss is directly expensed in the income statement.

The Company assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. If any such evidence exists, the impairment loss is determined and recognised in the income statement.

2.9. Receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost. If payment of the receivable is postponed under an extended payment deadline, fair value is measured on the basis of the discounted value of the expected revenues. Interest gains are recognised using the effective interest method. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables.

2.10. Securities

Financial instruments (assets and liabilities) held for trading are carried at fair value and changes in the fair value are directly recognised in the income statement. In the first period of recognition, attributable transaction costs are charged directly to the income statement. Purchases and sales of financial assets that belong to the category held for trading are accounted for at the transaction date.

The securities included under financial fixed assets and current assets, insofar as they relate to the trading portfolio or to equity instruments outside the trading portfolio, as well as derivatives with an underlying quoted value, are valued at fair value. All other financial instruments included in the balance sheet are valued at (amortised) cost.

Fair value is the amount for which an asset could be exchanged or a liability settled between knowledgeable, willing and independent parties in a transaction.

2.11. Cash and cash equivalents

Cash and cash equivalents include cash in hand, bank balances and deposits held at call with maturities of less than 12 months. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet. Cash and cash equivalents are stated at face value.

2.12. Equity

A legal reserve has been recognised and deducted from equity (other reserves) with regard to the recognised internal development costs for the capitalised amount at intangible fixed assets. The legal reserve is being reduced by the equal amount of amortisation of the capitalized development costs as from the start of the commercial production over the expected future useful life of the asset.

2.13. Minority interest

Minority interests in group equity are stated at the amount of the net interest in the net assets of group companies concerned.

Where the group company in question has an equity deficit, the negative value and any other losses are not allocated to the minority interest, unless the minority interest holders have a constructive obligation, and are able, to clear the losses. As soon as the group company manages to post an equity surplus, profits are allocated to the minority interest.

2.14. Provisions

2.14.1. General information

Provisions are recognised for legally enforceable or constructive obligations existing at the balance sheet date, the settlement of which is probable to require an outflow of resources whose extent can be reliably estimated. Provisions are measured on the basis of the best estimate of the amounts required to settle the obligations at the balance sheet date. Unless indicated otherwise, provisions are stated at the present value of the expenditure expected to be required to settle the obligations.

Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement shall be recognised when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement shall be treated as a separate asset.

2.14.2. Pension benefits

Dutch pension plans

For defined contribution plans, the Group pays contributions on a mandatory, contractual or voluntary basis to pension funds or insurance companies. Apart from paying contributions, the Group has no other liabilities. Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement when the contributions are due. Prepaid contributions are recognised as deferred assets if these lead to a refund or reduction of future payments. Contributions that are due but have not been paid yet are presented as liabilities.

Foreign pension plans

For foreign pension schemes which are not similar to the way the Dutch pension system is designed and operates a best estimate is made of the obligation as at the balance sheet date. The liability is determined using the Projected Unit Credit method, as used in IAS 19.

2.14.3. Irregularity provision holidays

Provisions are recognised for the outstanding number of holidays at the balance sheet date for the estimated nominal value in the period the holidays are expected to be used.

2.14.4. Deferred income tax assets and liabilities

Deferred income tax assets and liabilities are recognised to provide for temporary differences between the tax bases of assets and liabilities, and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets, deductible temporary differences and available fiscal losses are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences and fiscal losses can be utilised.

Deferred income taxes are recognised at face value.

2.14.5. Jubilee benefits

The provision for jubilee benefits is measured at the present value of expected benefits payable during employment. The calculation of the provision, takes the expected future salary increases and the likely stay into account. The present value factor is the market rate of interest of high-quality corporate bonds.

2.14.6. Reorganisation provision

This provision relates to the costs made in connection with the restructuring of activities and is recognised when a constructive or legal obligation has arisen for the legal entity.

2.15. Liabilities

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost, being the amount received taking account of any premium or discount, less transaction costs. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised as interest in the income statement over the period of the borrowings using the effective interest method.

2.16. Leases

2.16.1. Finance lease

The Company leases certain property, plant and equipment, of which it has substantially all the risks and rewards incidental to the ownership. Upon initial recognition finance lease liabilities are stated at fair value (net of transaction costs) and subsequently at amortised cost using the effective interest rate method.

2.16.2. Operating lease

Leases in which a significant portion of the risks and rewards incidental to the ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease.

3. Accounting policies for the income statement

3.1. General information

Profit or loss is determined as the difference between the realisable value of the goods delivered and services rendered, and the costs and other charges for the year. Revenues on transactions are recognised in the year in which they are realised.

3.2. Revenue recognition

3.2.1. General

Net turnover comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Company's activities. Revenue is shown net of value-added tax, rebates and discounts and after eliminating sales within the group.

3.2.2. Lease Revenues

Lease revenues are recognised when all significant risks and rewards incidental to the ownership of the goods have been transferred to the buyer.

3.2.3. Sales of services

Revenue from sales of services is recognised based on the services performed at the balance sheet date.

3.2.4. Other income

In other income results are recognized which are not directly linked to the production and services delivered out of the regular and non-incidental operations, like the one-time sale of our equipment.

3.3. Cost of consumables and services

Cost of consumables and services represents the direct and indirect expenses attributable to revenue, including raw materials and consumables, cost of work contracted out and other external expenses.

3.4. Other operating expenses

Other operating expenses comprise of costs chargeable to the year that are not directly or indirectly attributable to the cost of sales like rent of buildings, IT costs and general overhead. In addition, the operating expenses comprises also of smaller exchange rate differences arising upon the settlement or conversion of monetary items being recognised in the income statement in the period that they arise and some results coming from the previous year not directly attributable to the cost of sales.

3.5. Amortisation and depreciation

Intangible assets, are amortised and property, plant and equipment depreciated over their estimated useful lives as from the inception of their use. Land and investment property are not depreciated. Future depreciation and amortisation is adjusted if there is a change in estimated future useful life.

Gains and losses from the occasional sale of tangible fixed assets are included in other operating income.

3.6. Payroll expenses, social securities and pension charges

Payroll expenses, social securities and pension charges are taken to the income statement based on the terms of employment, where they are due to employees.

3.7. Finance income and costs

3.7.1. Interest paid and received

Interest paid and received is recognised on a time-weighted basis, taking account of the effective interest rate of the assets and liabilities concerned. When recognising interest paid, allowance is made for transaction costs on loans received as part of the calculation of effective interest.

3.8. Tax on result

Tax on result is calculated on the profit/loss before tax in the income statement, taking into account any losses carried forward from previous financial years (where not included in deferred income tax assets) and tax exempt items, and plus non-deductible expenses. Account is also taken of changes in deferred income tax assets and liabilities owing to changes in the applicable tax rates.

3.9. Result from participation

The result is the amount by which the carrying amount of the participation in which Eurailscout B.V. has significant influence using the accounting policies in these financial statements and has changed since the previous financial statements as a result of the earnings achieved by the participation concerned and attributed for the percentage of participation to Eurailscout B.V.

Dividends receivable from participations and securities not valued at net asset value are recognized as soon as the company acquired the right to it.

3.10. Minority interest

The minority interests stated at the amount of the net minority interest in the net assets of the group companies concerned. In this case it represents 50% minority interest in Erdmann Software gesellschaft mbH.

4. Intangible fixed assets

The investments under 'assets under construction' relate mainly to internal software developments to support our business operations and to fulfil contractual obligations. In 2021, a legal reserve has been created for the capitalized amount of € 2,1M with regard to the internal software projects.

5. Tangible fixed assets

Movements in property, plant and equipment can be broken down as follows:

In 2021 Eurailscout divested some parts of the UFM-160 after the refurbishment (€ -0.3 million) and sold the SIM-15 platform (€ -0.3 million) to Eurailscout France. The investments in 2021 relate mainly to the UST-02 and UFM-160.

6. Financial assets

Movements in financial assets can be broken down as follows:

6.1. Associates

The investment in associates relates to the Eurailscout France SAS. As of 7 May 2013 the Company together with SNCF-Participations incorporated Eurailscout France SAS, contributing each € 37,000 (37 shares) and € 1,000 (1 share) respectively. Eurailscout France will mainly collect and provide measuring data relating to the state of the railway's infrastructure in France.

The Company does have control in Eurailscout France SAS. Through the appointment of a strategic committee and its assigned rights, it can be derived that the SNCF group, through the strategic committee as appointed by SNCF, in fact controls Eurailscout France SAS. Based on this, it has been concluded that Eurailscout France SAS should be valued at acquisition price instead of net asset value. This is a material misstatement as indicated in the general notes and corrected in these financial statements.

6.2. Deferred income tax assets

The deferred income tax assets relate to unused tax losses and are valued at the applicable rate of the year they will expire which is in Eurailscout's case at a nominal rate of 25% in 2021. In 2021 the deferred tax asset decreased by € 107K. The tax usage consists of three elements. Namely;

7. Receivables

The fair value of the receivables approximates the book value, given the short-term character of these receivables. All receivables are due within one year.

7.1. Trade debtors

Trade receivables include no amounts that fall due in more than one year.

8. Securities

The value of the securities as per 31 December 2021 increased with € 0,8 million to € 2,5 million (2020: € 1,7 million). The securities are held by Erdmann Softwaregesellschaft mbH and are at the free disposal of the company.

9. Cash and cash equivalents

This item in the cash flow statement is comprised as follows:

Cash and cash equivalents are at the Company's free disposal except for € 238K for which a bank guarantee has been issued for one of our suppliers. The amount of cash attributable to minority interests on the balance sheet date amounts to € 1,916K (2020: €1,868K) excluding cash equivalents.

10. Equity Capital

For details to equity capital, please refer to the notes to the company financial statements.

11. Minority interest

Movements in the minority interest can be broken down as follows:

12. Provisions

Movements in provisions were as follows:

All provisions qualify as long-term (i.e. in effect for more than one year) except for the remaining reorganization provision that applies to the year 2022.

12.1. Pensions

The pension provision relates to the defined benefit obligation relating to Erdmann Softwaregesellschaft mbH, which consists mainly of the present value of the defined benefit obligation net of the fair value at the balance sheet date of plan assets. The obligations are based on actuarial calculations, in which the following assumptions are made:

The pension obligation can be broken down as follows:

13. Non-current liabilities

Repayment obligations falling due within 12 months of the end of the financial year, as set out above, are included in current liabilities. This repayment schedule is based on the current loan obligations.

The movement in non-current liabilities is as follows:

13.1. Loans

13.1.1. Secured bank loan

Eurailscout amended the € 18,5 million bank loan facility which was effective as from December 2015 into a new € 20 million bank loan facility agreement under new conditions as from 15 July 2020. The new facility agreement has been issued for a contract term of 5 years at EURIBOR + 2,15% and in order to execute our investment program being part of the business plan. Following the more strict Agreement as signed on 18 May 2021 the loan facility amount has been adjusted to € 15,5 million. In addition we agreed upon a maximum cap of € 12.5 million of the outstanding loan amount as long as Eurailscout is in a transition period which is also the case for 2022. As per end of December 2021, Eurailscout has an outstanding loan amount of € 9.5 million including the withdrawal of € 2.0 in 2021 for our investments. The outstanding facility amount as per the same date is € 3.0 million.

Repayments occur in Q2, Q3 and Q4 in equal consecutive instalments of € 500K. Quarterly financial covenants apply to the secured bank loan, which involve solvency, senior net debt to EBITDA and an interest coverage ratio. Compliance with financial covenants is quarterly tested and reported to the bank.

As per balance sheet date Eurailscout Inspection & Analysis B.V. met the bank covenant ratios. Following the 5- year business plan and transition of Eurailscout Inspection & Analysis B.V. the bank and Eurailscout B.V. agreed upon more strict conditions on the Facility Agreement and a step-up of the bank covenant ratios as per January 2021 until 2022. The more strict conditions and the waivers given to Eurailscout B.V. are described in an Amendment Agreement which was signed on 18 May 2021.

The security provided consists of:

13.1.2. Shareholders'loan

Eurailscout entered into a Shareholders' agreement of EUR 3 million as per 20 December 2020, which is subordinated to the bank loan facility agreement. The contract term of the loan is 7 years at an interest rate of 5%. The EUR 3 million shareholders' loan is to finance the re-organisation of Eurailscout and to cover for the negative results in 2020 and 2021. Repayments and interest payments to the shareholders will only be performed after the transition period until 2022 and when the in the bank's facility agreement original covenant ratio levels are met.

14. Current liabilities

Current liabilities include an amount of approximately € 0.1 million (2020: € 0.1 million), which falls due after one year. The fair value of the current liabilities approximates the book value due to its short-term character. The finance lease obligations relate to client payments in connection with the homologation of the UFM-160. The prepayments will be repaid to the client during the lease term of the contract, which is 4 years to 6 years.

15. Commitments and contingencies not included in the balance sheet

15.1. Operational leases

The obligations from operational leases at the end of the reporting period can be specified as follows:

During the year 2021 the following amounts were recognised in the income statement:

15.2. Financial obligations

Commitments for the purchase of equipment in the sum of € 4,359K (2020: € 4,945K) have not been disclosed in the balance sheet.

16. Subsequent events

Eurailscout has no subsequent events after the balance sheet date.

17. Net Turnover

All revenues relate to services rendered. Compared to previous year the net turnover decreased with 2%.

18. Salaries and wages

Cost with respect to managing and supervisory directors are included in directors' remuneration.

19. Net Finance income and expenses

20. Tax on result

The tax on result can be broken down as follows:

After loss settlement, € 4.7 million (2020: € 5.3 million) remains to be offset against future profits.

The effective tax rate deviates from the applicable tax rates of the group companies (25%-33%) due to the use of the tax asset in the Netherlands. The tax usage in 2021 was in total € 107k and resulted in an effective tax rate of 23,1% (see also paragraph 6.2 deferred income tax assets).

21. Result from participations

Result from participations, measured at net asset value, was as follows:

22. Related-party transactions

The Group provided services to the Strukton Group. The 2021 revenue amounted to € 635K (2020: € 679K). Strukton Group charged € 1.4 million for maintenance and overhead services provided. Revenues with respect to services provided to Eurailscout France SAS amounted in 2021 to € 3.8 million (2020: € 4.9 million). Eurailscout France SAS charged € 360K (2020: € 457K) to the Group for delivered services regarding the maintenance of our equipment in 2021. Erdmann Software Gesellschaft GmbH delivered services to Eurailscout France SAS amounting to € 1.1 million (2020: € 1.2 million) and to Eurailscout the Netherlands amounting to € 43K.

23. Average number of employees

During the year 2021, the average number of employees, based on full-time equivalents, was 156 of which 62 work in Production, 37 in Technology and Software, 17 is Overhead related and 40 work at Erdmann Softwaregesellschaft (2020: 157 in total). Of these employees, 51 were employed outside the Netherlands (2020: 52).

Company financial statements

Company balance sheet as at 31 December 2021

(before appropriation of result)

(in EUR 1,000)

Company income statement for the year ended 31

December 2021

(in EUR 1,000)

Notes to the company financial statements

24. General information

The company financial statements have been prepared in accordance with the statutory provisions of Part 9, Book 2, of the Dutch Civil Code and the firm pronouncements in the Dutch Accounting Standards as issued by the Dutch Accounting Standards Board.

The accounting policies for the company financial statements and the consolidated financial statements are the same. Group companies are stated at net asset value or at actual cost in accordance with Note 2.6 to the consolidated financial statements.

For the accounting policies for the company balance sheet and income statement, reference is made to the notes to the consolidated balance sheet and income statement on pages 16 to 24.

25. Intangible fixed assets

The investments under assets under construction relate mainly to internal software developments to support our business operations and to fulfil contractual obligations. In 2021, a legal reserve has been created for the capitalized amount of € 2,1M with regard to the internal software projects (see also paragraph 29. Equity Capital for the legal reserve).

26. Tangible fixed assets

Movements in property, plant and equipment can be broken down as follows:

In 2021 Eurailscout divested some parts of the UFM-160 after the refurbishment (€ -0.3 million) and sold the SIM-15 platform (€ -0.3 million) to Eurailscout France. The investments in 2021 relate mainly to the UST-02 and UFM-160.

27. Financial assets

Movements in financial assets can be broken down as follows:

27.1. List of investments

Eurailscout Inspection & Analysis B.V. has direct interests in the following associates:

27.2. Deferred income tax assets

The deferred income tax assets relate to unused tax losses and are valued at the applicable rate of the year they will expire which is in Eurailscout's case at a nominal rate of 25% in 2021. In 2021 the deferred tax asset decreased by € 107K. The tax usage consists of three elements. Namely;

28. Receivables

The fair value of the receivables approximates the book value, given the short-term character of these receivables. All receivables are due within one year.

29. Cash and cash equivalents

Cash and cash equivalents are at the Company's free disposal, except for € 238K to which a bank guarantee has been issued.

30. Equity Capital

In 2021, a legal reserve has been created for the capitalized amount of € 2,1M with regard to the internal software projects (see paragraph 24 Intangible Fixed Assets).

31. Ordinary Share capital

The authorised share capital of Eurailscout Inspection & Analysis B.V. amounts to € 10,346,000 divided into 10,346,000 ordinary shares of € 1 each. All ordinary shares have been issued.

32. Provisions

Movements in provisions were as follows:

All provisions qualify as long-term (i.e. in effect for more than one year) except for the remaining reorganization provision that applies to the year 2022.

33. Non-current liabilities

Repayment obligations falling due within 12 months of the end of the financial year, as set out above, are included in current liabilities. This repayment schedule for is based on the current loan obligations.

The movement in non-current liabilities is as follows:

33.1. Secured bank loan

Eurailscout amended the € 18,5 million bank loan facility which was effective as from December 2015 into a new € 20 million bank loan facility agreement under new conditions as from 15 July 2020. The new facility agreement has been issued for a contract term of 5 years at EURIBOR + 2,15% and in order to execute our investment program being part of the business plan. Following the more strict Agreement as signed on 18 May 2021 the loan facility amount has been adjusted to € 15,5 million. In addition we agreed upon a maximum cap of € 12.5 million of the outstanding loan amount as long as Eurailscout is in a transition period which is also the case for 2022. As per end of December 2021, Eurailscout has an outstanding loan amount of € 9.5 million including the withdrawal of € 2.0 in 2021 for our investments. The outstanding facility amount as per the same date is € 3.0 million.

Repayments occur in Q2, Q3 and Q4 in equal consecutive instalments of € 500K. Quarterly financial covenants apply to the secured bank loan, which involve solvency, senior net debt to EBITDA and an interest coverage ratio. Compliance with financial covenants is quarterly tested and reported to the bank.

As per balance sheet date Eurailscout Inspection & Analysis B.V. met the bank covenant ratios. Following the 5- year business plan and transition of Eurailscout Inspection & Analysis B.V. the bank and Eurailscout B.V. agreed upon more strict conditions on the Facility Agreement and a step-up of the bank covenant ratios as per January 2021 until 2022. The more strict conditions and the waivers given to Eurailscout B.V. are described in an Amendment Agreement which was signed on 18 May 2021.

The security provided consists of:

33.2. Shareholders' loan

Eurailscout entered into a Shareholders' agreement of EUR 3 million as per 20 December 2020, which is subordinated to the bank loan facility agreement. The contract term of the loan is 7 years at an interest rate of 5%. The EUR 3 million shareholders' loan is to finance the re-organisation of Eurailscout and to cover for the negative results in 2020 and 2021. Repayments and interest payments to the shareholders will only be performed after the transition period until 2022 and when the in the bank's facility agreement original covenant ratio levels are met.

34. Current liabilities

Current liabilities include an amount of approximately € 0.1 million (2020: € 0.1 million), which falls due after one year. The fair value of the current liabilities approximates the book value due to its short-term character. The finance lease obligations relate to client payments in connection with the homologation of the UFM-160. The prepayments will be repaid to the client during the lease term of the contract, which is 4 years to 6 years.

35. Directors' remuneration

The directors' remuneration includes periodically paid remuneration, such as salaries, holiday allowance and social premiums and remuneration to be paid after a certain term, such as pensions. The payment in kind like the availability of a lease cars is added to the Director's remuneration in 2021 for the amount of € 22K. The year 2020 is also corrected for the amount of € 19K representing the availability of the lease cars.

36. Commitments and contingencies not included in the balance sheet

36.1. Operational leases

The obligations from operational leases at the end of the reporting period can be specified as follows:

During the year 2021 the following amounts were recognised in the income statement:

36.2. Financial obligations

Commitments for the purchase of equipment in the sum of € 4,359K (2020: € 4,945K) have not been disclosed in the balance sheet.

37. Average number of employees

During the year 2021, the average number of employees, based on full-time equivalents, was 116 of which 62 work in Production, 37 in Technology and Software and 17 is Overhead related (2020: 116 in total). Of these employees, 13 were employed outside the Netherlands (2020: 13).

Other information

Profit appropriation according to the Articles of Association

According to article 23 of the Articles of Association the annual net profit is at free disposal of the annual shareholders meeting.

"23. Profits and Distributions

23.1 The allocation of profits accrued in a financial year shall be determined by the General Meeting. If the General Meeting does not adopt a resolution regarding the allocation of profits prior to or the latest immediately after the adoption of the accounts, the profit will be reserved.

23.2 The General Meeting has the authority to make distributions. If the Company is required by law to maintain reserves, this authority only applies to the extent that the equity exceeds these reserves. No resolution of the General Meeting to distribute shall have effect without the consent of the Management Board. The Management Board may withhold such consent only if it knows or reasonably should expect that after distribution, the Company will be unable to continue the payment of its due debts.

23.3 Distributions shall be payable immediately after the resolution has taken effect, unless a later date of payment has been determined in the resolution."

Independent auditor's report