Compagnie des Alpes // 2021 Universal Registration Document

5 FINANCIAL INFORMATION

Consolidated financial statements

Note 2

Capital and risk management

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 overdrafts and medium- and long-term borrowings. At 30 September 2021, 71.3% of the Group’s debt is fixed (fixed rate or floating rate hedged) and the remaining 28.7% is exposed to rate changes. This debt consists of bank debt (65%) and market debt (35%). As regards its floating-rate debt, the Group manages its interest rate risk by using floating-for-fixed swaps (see Note 6.12).

With current hedged positions at 30 September 2021 and the projected change in debt taken into account, the exposure of gross debt to interest rate risk at 30 September 2021 and its projected change in 2021/2022 May be summarised as follows:

30/09/2021

30/09/2022

Gross debt exposed Unexposed gross debt

28.7% 71.3%

46.0% 54.0%

Unexposed debt includes fixed-rate debt and the hedged portion of the floating-rate debt. Should benchmark rates (1-month and 3-month Euribor, Eonia) increase or decrease by 1% compared to the closing rate on 30 September 2021, the impact on financial expenses over the whole of the 2020/2021 financial year, taking into account the Company’s debt profile, would have been as follows:

FY 2020/2021

Impact on net income before tax

Valuation of hedging instruments

Impact on shareholders’ equity before tax

Interest expense

(in millions of euros)

Impact of a +1% change in interest rate Impact of a -1% change in interest rate

-0.7

-

0.7

0.1

Foreign exchange risk Most of the Group’s international business activities are in the eurozone (with the exception of the operations in Canada, Switzerland and China, which are not material in terms of the Group’s non- current assets). Investments in foreign subsidiaries are made in local currencies: the percentage of statement of financial position sheet assets sensitive to fluctuations in foreign exchange rates is under 1%. As such, the Group currently sees its exposure to foreign exchange risk as not significant. The only transactions implemented as of 30 September 2021 are: l forward purchases of USD for a total amount of USD1.2 million to cover the needs of its subsidiaries. The Group has not carried out any foreign exchange hedging transactions for other operations outside the euro zone, for the following reasons: l intra-Group forex flows are limited; l sales proceeds are denominated in the same currency as operating.

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 implies maintaining a sufficient level of liquidity beyond recurring needs. A significant portion of the Group’s borrowings is subject to a covenant (see Note 6.12). An analysis of the liquidity risk is provided in Chapter 2.2. Counterparty risk All cash investments and financial instruments are set up with leading institutions and banks and in accordance with the rules regarding security and liquidity. For derivatives and transactions settled in cash, counterparties are restricted to top-notch financial institutions. The Group’s exposure to counterparty risk is therefore low.

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Compagnie des Alpes I 2021 Universal registration document