Sopra Steria - 2018 Registration document
ADDITIONAL INFORMATION Disclosures arising from specific obligations – Other risks
2.2.3. INTEREST RATE RISK
The Group may be impacted in the event of unfavourable variations in interest rates. The impact would affect borrowing costs, interest paid on investments and the Group’s future cash flows.
The Group’s debt consists of €295 million in fixed-rate and €496 million in floating-rate borrowings. The Group’s cash is invested at floating rates. At 31 December 2018, the Group’s exposure was hedged using hedging instruments, chiefly fixed-rate interest rate options. All the lines of credit are managed by the Group’s Finance Department. The Group’s aim is to protect itself against interest rate fluctuations by hedging a large part of its floating-rate debt. The Group favours security over returns when making investments, with investment terms of less than three months its preferred option. For more information, see Note 11.5.3 to the consolidated financial statements in Chapter 4 of this document (pages 159 to 161).
2.2.4. EQUITY RISK
The Group’s exposure to equity risk mainly arises from: p equity risk in connection with equity interests held: • shares held by the Group in Axway Software, a listed company, accounted for using the equity method, • shares held in CS Communication & Systèmes; p risk related to treasury shares and other shares held and managed by SSET Trust in the United Kingdomon behalf of shareholders and employees; p risk related to assets invested in pension funds.
The Group does not hold any investments in equities or any equity interests in listed companies other than the Axway Software shares, and which represented €195.1 million at 31 December 2018, and the shares in CS Communication & Systèmes, which represented €9.98 million at 31 December 2018. These non-controlling equity investments are made for strategic rather than financial reasons. Given the limited number of treasury shares it holds, these shares do not represent a significant risk factor for the Group (341,371 shares held in treasury at 31 December 2018). Furthermore, since the value of treasury shares is deducted from equity, changes in the share price have no impact on the consolidated income statement. For more information, see Note 13.1.2 to the consolidated financial statements in Chapter 4 of this document (page 167). The Group’s Finance Department takes part in the regular exchanges with the trusts that manage the assets of investment funds in the United Kingdom, and in the three-yearly negotiations. The next round of three-yearly negotiations is to be held in 2020.
2.2.5. BANK COUNTERPARTY RISK
All foreign currency and interest rate hedges are put in place with leading banks belonging to the Group’s banking syndicate, withwhichmarket transaction agreements have been signed. The Group favours short-term investments with banks that formpart of its banking syndicate. These investments are subject to approval by the Group Finance Department, and comply with internally defined prudential principles. For more information, see Note 11.5.2 to the consolidated financial statements in Chapter 4 of this document (page 159).
The Group’s exposure to financial counterparty risk arises from positions recognised as assets on its consolidated balance sheet and from cash invested with financial institutions as a result of transactions performed in the financial markets for risk management and cash management purposes.
SOPRA STERIA REGISTRATION DOCUMENT 2018
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