Sopra Steria - 2019 Universal registration document

8 ADDITIONAL INFORMATION

Disclosures arising from specific obligations – Other risks

LIQUIDITY RISK 1.2.1.

Risk description

Risk management

The Group aims to ensure that it has ample access to liquidity to meet its commitments and its investment needs. To this end, the Group borrows from banks, but also raises funds from capital markets, and is thus exposed to liquidity risk in the event of insufficient lines of credit.

As the majority of the Group’s financing is carried by Sopra Steria Group, the implementation of financial policy is largely centralised. At 31 December 2019, the Group had €1.6 billion in credit lines, €950 million of which was not drawn down. The bank facilities renegotiated in 2016 were extended until 2023. In 2019, the Group also issued €250 million in bonds maturing in 2026 and 2027. Detailed information about credit facilities and their use is provided in Note 12.5.1 to the 2019 consolidated financial statements in Chapter 5 of this Universal Registration Document (pages 199 to 201). Action taken to improve the management of the client payment cycle started to deliver benefits in 2018 and 2019, leading to an increase in the conversion rate of its earnings into cash flow.

FOREIGN EXCHANGE RISK 1.2.2.

Risk description

Risk management

Foreign exchange risk is defined as the impact on the Group’s financial indicators of fluctuations in exchange rates relating to its business activities. The Group is exposed to transactional foreign exchange risk as well as translation foreign exchange risk. Due to the fact that the Group’s business activities are carried out in an international context, its entities may be exposed to the following types of foreign exchange risk: foreign exchange risk relating to operations, which p corresponds to changes in rates affecting transactions recorded in operating profit (currency flows relating to revenue or the cost of sales, etc.); “financial” foreign exchange risk arising from p financial liabilities (or financial assets) denominated in foreign currencies, with changes in their value affecting financial income and expenses; foreign exchange risk related to investments in p subsidiaries outside France, which arises on the translation of the subsidiary’s accounts into the consolidating entity’s presentation currency (impact on equity).

The Group Finance Department provides hedging on a centralised basis for such risks via futures or options entered into either on organised markets or over the counter with top-tier counterparties that are members of the banking syndicate, which provide financing to the Group. Management of foreign exchange risk is centralised with the main entities. In India, hedges are arranged locally under the supervision and control of the Group’s Finance Department. Exposure to the rupee is also being reduced through a policy of gradually repatriating cash held in India. For more information, see Note 12.5.4 to the 2019 consolidated financial statements in Chapter 5 of this Universal Registration Document (pages 204 to 206).

INTEREST RATE RISK 1.2.3.

Risk description

Risk management

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 €346 million in fixed-rate and €366 million in floating-rate borrowings. The Group’s cash is invested at floating rates At 31 December 2019, the exposure of €366 million was hedged for an amount of 325 M€ for a period between 1 to 5 years , using hedging instruments mainly via 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 12.5.3 to the 2019 consolidated financial statements in Chapter 5 of this Universal Registration Document (pages 201 to 204).

273

SOPRA STERIA UNIVERSAL REGISTRATION DOCUMENT 2019