NEOPOST - 2018 Registration document

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Financial statements

Consolidated financial statements

the cash flows are then discounted. The discounting • rate, applied in the light either of the activity or the geographical area, is the weighted average cost of capital for which the tax rate has been restated and to which a specific risk premium might be added. Goodwill impairment is recognized under operating expenses. Such impairment is not reversible. Other non-current assets Other non-current assets are tested for impairment only if evidence of an impairment is noted. Goodwill impairment test 4-5-2: Goodwill is tested for impairment based on value in use. The goodwill recognized on Parcel Pending acquisition has not been tested for impairment; given the recent acquisition date, no evidence of impairment has been noted. Temando's goodwill was depreciated for an amount of 33.9million australian dollars i.e. 22.1 million euros as of

A loss of value related to any other non-current asset except goodwill can be reversed if there is any evidence that a loss of value previously recognized is likely to no longer exist or to have diminished. If this is the case, the book value of the asset is raised to the level of its recoverable amount. The increased book value following reversal of a loss of value cannot exceed the book value that would have been determined, net of depreciation, if no loss of value had been recognized on the asset in previous years. After recognition of a reversal of loss of value, the depreciation charge is adjusted for future periods so that the revised book value of the asset minus its possible residual value is spread systematically over the remaining useful life of the asset.

31 January 2018. Based on the impairment test reflecting the performance achieved in 2018 and of the lack of visibility over Temando's growth in the future, an additional depreciation of 19.8 million euros has been recorded in 2018. The goodwill of Temando is fully depreciated as at

31 January 2019.

For the main cash-generating units, the following assumptions were used (the assumptions are the same for Neopost Shipping and Temando CGU):

SME Solutions

Enterprise Digital Solutions

Neopost Shipping and Temando

Countries in Europe

United States and Canada

Australia & Asia

Average five-year EBITDA growth for SME Solutions

(2.8)%

0.3% 2.1%

-

-

Average five-year revenue growth for CSS

-

-

-

7.0%

29.8%

Average growth rate to perpetuity

0.9%

0.5% 0.5%

2.0%

2.0%

Average discount rate (before tax)

8.4%

13.5% 7.8%

7.8%

11.2%

Weighted Average Cost of Capital WACC (after tax)

6.2%

9.8% 5.5%

5.8%

7.2%

Specific risk premium

-

-

-

0.8%

0.8%

Sensitivity Three sensitivity tests were carried-out: the first one by fixing average five-year EBITDA growth assumptions, the second one by fixing the discount rate assumptions and the third one by fixing average five-year revenue growth assumptions to determine at which rates the valuation of goodwill becomes equal to the value of the discounted cash flow. By fixing average five-year EBITDA growth and average growth rate to perpetuity as defined in the CGU tests, the valuation of several cash-generating units become equal to the book value of capital employed with a weighted average cost of capital of 9.7% for SME Solutions in Europe, 8.7% for SME Solutions in Asia, 15.4% for SME Solutions in North America, 9.5% for Enterprise Digital Solutions and 13.4% for Neopost Shipping.

By fixing the average discount rates as defined in the table above and assuming a growth rate to infinity of 0% the valuation of several cash-generating units becomes equal to the book value of capital employed with an average five-year EBITDA growth rate of 1.4% for SME Solutions in Europe, (7.4)% for SME Solutions in Asia and (9.5)% for SME Solutions in North America. By fixing the average discount rates as defined in the table above and assuming a growth rate to infinity of 0%, the valuation of several cash-generating units becomes equal to the book value of capital employed with an average five-year revenue growth rate of 6.6% for Enterprise Digital Solutions and 0.8% for Neopost Shipping. In all cases, the sensitivity tests did not call into question the book value of the cash-generating units as at 31 January 2019.

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REGISTRATION DOCUMENT 2018 / NEOPOST