SOPRA_STERIA_REGISTRATION_DOCUMENT_2017

PARENT COMPANY FINANCIAL STATEMENTS Notes to the balance sheet

3.4.1. PROVISIONS FOR RETIREMENT BENEFITS Sopra Steria Group recognises provisions for its commitments to employees in accordance with the terms of voluntary and compulsory retirement under the Syntec collective bargaining agreement, as amended in 2004 following the French pension reform act of 21 August 2003. Provisions for retirement benefits are recognised on an actuarial basis as described in Note 2.9. Assumptions referring to mortality rates are based on published statistical data.

Turnover tables are based on five-year age brackets and are updated at each balance sheet date to reflect separation data for the last five years. The discount rate used to calculate the present obligation is the yield on high-quality corporate bonds (rated AA or higher) denominated in the payment currency and with a maturity close to the average estimated term of the retirement obligation concerned. The Group uses the 20-year Bloomberg rate for the eurozone as the benchmark for discounting its retirement benefit obligations. At 31 December, this rate stood at 1.77%. The total retirement benefit obligation amounted to €63.194 million.

3.5. Liabilities

3.5.1. FINANCIAL DEBT

At 1 January 2017

At 31 December 2017

Increase

Decrease

(in thousands of euros)

Syndicated loan

234,750 302,700 226,070 13,662 180,000

- -

25,829 92,100

208,921 210,600 261,048

NEU CP programme Other financial debt

35,578

600

Employee profit-sharing

- -

8,390

5,272

Bond

- -

180,000

Accrued interest on financial debt

4,550

166

4,716

TOTAL

961,732

35,744

126,919

870,557

The Other financial debt item includes: p bank overdrafts in the amount of €230.779 million relating to the management of a notional cash pooling arrangement. These amounts correspond to the debit positions of subsidiaries taking part in the cash pooling arrangement; p a €30.000 million medium-term bank loan taken out in April 2017 and repayable at maturity in April 2019. The bond issue in the original amount of €180 million has the following characteristics: p subscription date: 12 April 2013; p coupon rate: 4.25%; p redemption date: 12 July 2019. The terms and conditions to which the syndicated loan and bond issue are subject include a commitment to comply with certain financial covenants. There are two financial ratios calculated every six months using the consolidated financial statements on a 12-month rolling basis: p the leverage ratio, equal to net financial debt/pro forma EBITDA; p the interest coverage ratio, equal to pro forma EBITDA/cost of net financial debt. The leverage ratio must not exceed 3.0 at any reporting date. The interest coverage ratio must not fall below 5.0. Net financial debt is defined on a consolidated basis as all loans and related borrowings (excluding intercompany liabilities), less available cash and cash equivalents. Pro forma EBITDA is consolidated operating profit on business activity adding back depreciation, amortisation and provisions included in operating profit on business activity. It is calculated on a 12-month rolling basis and is therefore restated so as to be presented in the financial statements on a like-for-like basis over 12 months. Accordingly, pro forma EBITDA for 2017 was restated in order to present the result for entities acquired over the 12-month period.

In 2014, the Group took out a €1,200 million five-year borrowing facility with two options to extend the expiry date by one year. This facility comprises a €200 million amortising tranche, an £80 million amortising tranche and a €900 million multi-currency revolving credit line. In 2017, following the exercise of the initial one-year extension option, the expiry date was postponed to 6 July 2022, with another one-year extension option remaining to be exercised. At 31 December 2017, the outstanding amount drawn on the loan is from the two amortising tranches (€144 million and £57.6 million after contractual amortisations for the period). The €900 million multi-currency revolving credit facility is undrawn. Details on the NEU CP programme: In 2015, the Company, within the framework of the Group’s finance policy, arranged an unrated multi-currency NEU CP (previously referred to as commercial paper) programme of short-term negotiable securities that was not underwritten, the maximum amount of which was increased to €700 million. This programme has been presented in documentation available on the Banque de France’s website, which was last updated on 30 June 2017. The average amount outstanding under the NEU CP programme was €458.2 million in 2017, compared with €443.9 million in 2016 and was very active throughout 2017. The Company benefited from the fall in short-term euro rates as well as investor interest in maturities of 6 to 12 months. The outstanding amount under the NEU CP programme at 31 December 2017, is €210.6 million (€302.7 million at 31 December 2016). The NEU CPs are included in liabilities in the balance sheet under Financial debt . In December 2017, as part of its efforts to diversify its borrowings, the Company arranged an NEU MTN programme of medium-term negotiable securities that was not underwritten, with a maximum amount of €300 million. As is the case for the earlier NEU CP programme, the NEU MTN programme is presented in documentation available on the Banque de France’s website. At 31 December 2017, no NEU MTNs had been issued.

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SOPRA STERIA REGISTRATION DOCUMENT 2017