Assystem - 2018 Register document

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RISK GOVERNANCE AND MANAGEMENT

RISK FACTORS

2.2.3 FINANCIAL RISKS The Group has a dedicated organisational structure which enables it to centrally manage all market risks to which it is exposed, namely interest rate risk, exchange rate risk, counterparty risk and liquidity risk. Within the Finance Department, Group Treasury operates in the financial markets as the Group’s financial risk management body. This unit is organised in such a way as to ensure the segregation of tasks.

Every month, Group Treasury reports to the CFO & Deputy CEO on the positions and results of its management in compliance with the principles and policies put in place by the Group’s executive management team. Most Group entities use the same software programs (Taïga, Kyriba or Swaps). These tools help to secure flows and enable more reliable reporting, in accordance with Group standards. To reduce this risk, where necessary, the Company sets up appropriate hedges using derivative financial instruments, taking into account the prevailing market conditions. The financial instruments used – which mainly correspond to swap contracts – are approved by the CFO & Deputy CEO. At 31 December 2018, as the Group’s net debt was limited compared with its consolidated operating profit figure, it was not considered necessary to set up any interest rate hedges. The Group monitors bids and contracts in foreign currencies in order to safeguard the related operating margins. The hedges put in place when exchange rate risk is identified mainly correspond to forward purchase or sale contracts, whose amounts and maturities are matched with the underlying exposure. To hedge intra-group transactions in foreign currencies, the Group uses currency swaps. The Group’s balance sheet risk essentially relates to the euro/Turkish lira, euro/ Saudi riyal and euro/pound sterling exchange rates. See Note 8.6 to the consolidated financial statements for details about the Group’s financial risk management strategy. The Group undertakes counterparty review and monitoring procedures which are approved by executive management. Assystem has carried out a specific review of its liquidity risk and considers that it is capable of meeting its future maturities. Furthermore, Assystem has put in place: • a liquidity optimisation process based on centralised cash management with monthly reports submitted to the CFO & Deputy CEO; • a pro-active debt management strategy. At 31 December 2018, the Group had access to a €150 million revolving credit facility with a sufficient maturity to finance its general corporate requirements (five- year term from 28 September 2018 with a one-year extension option subject to the lenders’ agreement). €30 million of this facility had been drawn down at 31 December 2018. In addition, in early 2018 Assystem set up a €30 million medium-term bullet loan with a final maturity date of 28 September 2022. The above-mentioned revolving credit facility and medium-term loan contain a covenant based on the Group’s consolidated gearing ratio (consolidated net debt at the test date/EBITDA for the past 12 months as adjusted for acquisitions and divestments).This ratio is measured at the end of each half-year period and must not exceed 3.75 at end-December and 3.95 at end-June. If the covenant is breached, a qualified majority of lenders (representing at least two thirds of the lending commitments) may demand early repayment of the borrowings. At 31 December 2018, the Group’s gearing ratio was well below the ceiling specified in the covenant. Risk reduction measures

Type

Impact

Risk of a failure to effectively control finance costs (interest rate risk).

Negative impact on financial expenses.

Risk of a failure to effectively control foreign-currency cash flows and the valuation of subsidiaries outside the Eurozone (exchange rate risk), given the geographical diversity of the Group’s establishments and operations.

Negative impact on equity and/or consolidated profit.

Risk of default by a financial counterparty. Risk of inability to meet financial commitments (liquidity risk).

Negative impact on consolidated profit.

Negative impact on the cost of debt and on the Group’s image.

Risk of a breach of a financial covenant triggering early repayment of borrowings.

Negative cash impact.

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ASSYSTEM

REGISTRATION DOCUMENT 2018

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