Derichebourg // 2020-2021 Universal Registration Document

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Risk factors and internal control Risk factors

Change ( vs. prev. yr)

Risks

Risk management systems

Legal and damage risks

23. Risk of a disagreement with a joint venture partner that could lead to a deadlock or to commitments given by the Group that exceed its share in the Company. 24. Risk of non-insurability under the “property damage” policy of the metal waste recycling activity in an adverse insurance market.

As the Group wholly controls the vast majority of its subsidiaries, such cases are few in number. The potential risks of such situations are regularly reviewed. In a context of general withdrawal of insurers from the waste sector for “property damage” policies, the Group has set up a captive reinsurance company to compensate for the withdrawal of insurers from this business sector. In addition, for several years, the Group has focused on controlling the risk of fire, both in terms of investment and prevention. It has not recorded any significant claims over the past three years. Although these “corrective measures” could have an impact on the amount of synergies drawn from the transaction, the Group believes that it would have no difficulty in finding buyers for the sites concerned at the market price. Details of the commitments which the Group proposed to the European Commission are provided in section 1.2.5. The Group has a good track record of acquisitions that have had a positive impact in recent years (Bartin, Lyrsa, etc.). It therefore remains confident in the economic climate and in its ability to consolidate Ecore. Given its very good level of business activity during the 2021 fiscal year, (and the same is true for Ecore, which operates in the same sector), the Group’s leverage ratio after the acquisition should remain entirely sustainable at around 2x. In addition, the financing put in place for this acquisition is long-term (seven years, repayable at maturity). Regular training as part of the implementation of the provisions of the Sapin 2 law. Initiatives to raise awareness (for accountants, transfer order signatories, etc.) of these risks, limiting the number of people authorized to work on payment flows. Support from in-house design offices in response to concentrated public tenders (Poly Environnement, Propreté Key Accounts, and Energie-Eclairage Public).

Risks related to the Ecore acquisition

25. The position of the European Commission, the competent authority for merger control, is not yet known. Depending on its decisions, the Group may have to agree to “corrective measures” for the transaction to be authorized.

A significant amount of intangible assets (goodwill) will appear in the Group’s balance sheet after the acquisition (around €500 million, before any allocation of part of the goodwill). We will have to conduct annual impairment tests on goodwill, and more often in the event of any indication of impairment loss. A sustained downturn in economic conditions, Ecore consolidation difficulties, or the failure to realize anticipated synergies could be factors that will have a negative impact on the implementation of these impairment tests. The Group’s net debt will be higher after the acquisition of Ecore (€781.3 million according to the pro forma balance sheet at March 31, 2021). In this situation, the Group will devote a significant portion of its free cash flow to debt reduction. It may wish to limit the amount of dividends it will pay to its shareholders, or may not pursue external growth opportunities.

Risks related to the consequences of inappropriate behavior

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26. Reputational risk and risk of being banned from participating in public tender processes following a criminal conviction. 27. Risk of fraud (impersonation fraud, factoring fraud, etc.).

28. Reputational risk and risk of being banned for a period from participating in public tender processes following an irregularity in a tender process. For service activities, the Group may be called upon to offer services that are in addition to those already offered and this may present costing and performance risks. 29. Because of its number of employees, or the visibility of its activities, the Group may find itself involuntarily represented on social networks or other media, in connection with transactions initiated by internal or external persons who do not share the decisions made.

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Image risk

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These events can be of high intensity, but generally of fairly short duration. Having a long-term lead shareholder should help us navigate such periods more easily.

DERICHEBOURG 2020/2021 Universal Registration Document 45