Compagnies des Alpes // 2019 Universal Registration Document

5 FINANCIAL INFORMATION

Consolidated financial statements

1.25 SHARE-BASED PAYMENTS The Group has put in place equity-settled payment arrangements (bonus shares). The fair value of services rendered by employees in exchange for bonus shares is recognised in payroll costs.

The income tax expense is recognised in profit or loss unless it concerns items that were recognised directly in shareholders’ equity. In this case, it is also recognised in shareholders’ equity.

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 fi nancing 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 signi fi cant interest-bearing assets. The Group is exposed to interest rate risk on its overdrafts and medium- and long- term borrowings. At 30 September 2019, 71.7% of the Group’s debt is fi xed ( fi xed rate or fl oating rate hedged) and the remaining 28.3% of debt is exposed to rate changes. This debt consists of bank debt (30%) and market debt (70%). As regards its fl oating-rate debt, the Group manages its interest rate risk by using fl oating-for- fi xed swaps or rate cap purchases. (Note 6.12).

With current hedged positions at 30 September 2019 and the change in debt taken into account, the exposure of gross debt to interest rate risk at 30 September 2019 and its projected change in 2019/2020 May be summarised as follows:

30/09/2019

30/09/2020

Unhedged gross debt Hedged gross debt

28.3% 71.7%

25.2% 74.8%

Unexposed debt includes fi xed rate debt and the hedged portion of the variable 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 2019, the impact on fi nancial expenses over the whole of 2018/2019, taking into account the Company’s debt pro fi le, would have been as follows:

FY 2018/2019

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

-1.07 0.93

0 0

0.7

0.08

Foreign exchange risk Most of the Group’s international business activities are in the euro zone (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 portion of balance sheet assets sensitive to variations in foreign exchange rates is 1%, exposed to fl uctuations in local currencies against the euro. As such, the Group currently sees its exposure to foreign exchange risk as not signi fi cant. However, in February 2019, the Group contracted two cross currency swaps (CCS) for a total amount of CHF8,700,000 to cover the foreign exchange risk on a loan granted to its Swiss subsidiary.

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 fl ows 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.

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Compagnie des Alpes I 2019 Universal registration document

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