Compagnie des Alpes - 2017 Registration Document

5 FINANCIAL INFORMATION

Consolidated financial statements

Note 2

Management of capital and risks

2.1 CAPITAL MANAGEMENT The Group’s primary objective for its capital management is to maintain a good credit risk rating and healthy capital ratios, in order to safeguard the long-term financing of its business and optimise shareholder value. Accordingly, the Group monitors the performance of its net debt-to- equity ratio. In its calculation of net debt, the Group includes loans and borrowings bearing interest plus cash and cash equivalents. Shareholders’ equity includes convertible preference shares, Group share of capital and unrealised gains and losses recognised directly in shareholders’ equity. The Group manages its capital structure and makes adjustments as economic conditions change. The Group may modify dividend payments to shareholders, return part of the capital or issue new shares.

2.2 RISK MANAGEMENT Cash-flow risk and risk of changes in value due to interest-rate fluctuations The Group does not hold significant interest-bearing assets. The Group is exposed to interest-rate risk on its medium- and long-term borrowings. At 30 September 2017, the Group’s debt is entirely at a fixed rate (fixed rate or floating rate hedged), and consists mainly of bonds. As regards its floating-rate debt, the Group manages its interest-rate risk by using floating-for-fixed swaps (Note 6.11).

With current hedged positions at 30 September 2017 and the change in debt taken into account, the exposure of gross debt to interest-rate risk at 30 September 2017 and its projected change in 2017/2018 May be summarised as follows:

30/09/2017

30/09/2018

Unhedged gross debt Hedged gross debt

0.0%

17.9% 82.1%

100.0%

Hedged debt includes fixed-rate borrowings and the hedged portion of floating-rate debt. At 30 September 2016, unhedged debt represented 8.3% of Group debt. Should benchmark rates (1-month and 3-month Euribor, Eonia) increase or decrease by 1% compared to the closing rate on 30 September 2017, the impact on financial expenses over the whole of 2016/2017, taking into account the Company’s debt profile, would have been as follows:

2016/2017 Fiscal Year

Impact on net income before tax

valuation of hedging instruments

Impact on shareholders’ equity before tax

interest

(in thousands of euros)

Impact of +1% change in interest rates Impact of -1% change in interest rates

-0.11 0.02

0.06

2.00

-0.06

-0.80

Foreign exchange risk Most of the Group’s international business activities are in the euro zone (with the exception of the operations in the Czech Republic, Canada, Korea and Switzerland, which are not material in terms of the Group’s non-current assets). Investments in foreign subsidiaries are made in local currencies: the portion of balance sheet assets sensitive to variations in foreign exchange rates is 2.7%, exposed to fluctuations in local currencies against the euro. As such, the Group currently sees its exposure to foreign exchange risk as not significant. The Group established several CCS (cross currency swaps) to hedge foreign-exchange risk on the following loans to its foreign subsidiaries: z CZK98,000,000,

The Group has not carried out any foreign exchange hedging transactions for other operations outside the euro zone, for the following reasons: z intragroup forex flows are limited; z sales proceeds are denominated in the same currency as operating expenses. Credit risk The Group has no major concentration of credit risk. Most of its business is carried out with end-customers (B2C sales). These customers pay in cash, or by bank check or bank card, before the service is provided. Furthermore, the Group has implemented policies to ensure that the intermediate customers who buy its products have appropriate credit risk histories. Liquidity risk Prudent management of liquidity risk means maintaining a sufficient level of liquidity beyond recurrent needs. At 30 September 2017, the Group had €355 million in undrawn committed lines of credit. A significant portion of Group borrowings is subject to a covenant (see Note 6.11). An analysis of the liquidity risk is given in Chapter 2, Section 2.1.1.

z KRW8,000,000,000, z KRW6,300,000,000, z CAD750,000,

z CAD2,500,000. z CZK50,000,000, z CHF2,200,000.

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Compagnie des Alpes I 2017 Registration Document