WORLDLINE_REGISTRATION_DOCUMENT_2017

F

Risk Factors [GRI 102-15] and [GRI 102-11] Risks related to the Group’s business and industry [GRI 102-10]

The Group operates in multiple tax jurisdictions and is subject to uncertainty relating to the cross-border application of tax rules. As an international group doing business in many countries, the Group is subject to multiple tax laws and must, accordingly, ensure that its global operations at once comply with the various regulatory requirements while all the while achieving their commercial, financial and tax objectives. Because tax laws and regulations in effect in the various countries where the Group does business do not always provide clear or definitive guidelines, the Group’s structure (including the Reorganization Transactions - as this term is defined in Section E.8.1.1.), the conduct of its business and the relevant tax regime are based on the Group’s interpretation of applicable tax laws and regulations. More generally, any violation of tax laws and regulations in the countries where the Group or its subsidiaries are located or do business could lead to tax assessments or the payment of late fees, interest, fines and penalties. This could have a negative impact on the Group’s effective tax rate, cash flow and results of operations. Furthermore, the Group records deferred tax assets on its balance sheet to account for future tax savings resulting from differences between the tax values and accounting values of its assets and liabilities or tax loss carry forwards of its entities. The effective use of these assets in future years depends on tax laws and regulations, the outcome of current or future audits and litigation and the expected future results of operations of the entities in question. Changes in assumptions underlying carrying values could result in impairment of the Group’s goodwill. As of December 31, 2017, € 933.8 million of goodwill was recorded on the Group’s balance sheet. Goodwill represents the excess of the amounts the Group paid to acquire subsidiaries and other businesses over the fair value of their net assets at the date of acquisition. Goodwill has been allocated at the level of the Group operating segments set forth in the Appendices to the consolidated financial statements. Goodwill is tested for impairment at least annually, or more frequently when changes in the circumstances indicate that the carrying amount may not be recoverable. The recoverable amounts of the Cash Generating Units are determined on the basis of value in use calculations, which depend on certain key assumptions, including assumptions regarding growth rates, discount rates, and weighted average costs of capital during the period. If management’s estimates change, the estimate of the recoverable amount of goodwill could fall significantly and result in impairment. While impairment does not affect reported cash flows, the decrease of the estimated recoverable amount and the related non-cash charge in the income statement could have a material adverse effect on the Group’s results of operations. Although no goodwill impairments were recorded in 2016 or 2017, no assurance can be given as to the absence of significant impairment charges in the future (see Note 12 to the consolidated financial statements).

The Group could enter markets where it has minimal prior ● experience; The Group may encounter difficulties entering new markets ● due to, among other things, customer acceptance and business knowledge of these new markets; The Group may have difficulty managing geographically ● separated organizations, cultures, systems and facilities; The Group may encounter challenging general economic ● and political conditions; and The Group may experience decreases in earnings as a result ● of non-cash impairment charges relating to the goodwill recorded upon acquisitions. The process of integrating operations could cause an interruption of, or loss of momentum in, the activities of one or more of the Group’s consolidated businesses and the possible loss of key personnel. The diversion of the management’s attention and any delays with the delivery of the Group’s services or difficulties encountered in connection with acquisitions and the integration of the two companies’ operations could have an adverse effect on the Group’s business, results of operations, financial condition or prospects. The Group depends upon a limited number of suppliers for certain components of its products and on the performance of certain key services by third parties. The Group utilizes a limited number of third party suppliers and service providers to supply certain of the IT hardware, software and other components, including chips, used in the development and operation of the Group’s services and products. For example, the Group relies on a single supplier for an important component used in all current models of its merchant Terminals range. The Group relies upon these suppliers to produce and deliver products on a timely basis and at an acceptable cost or to otherwise meet the Group’s product demands. Additionally, the Group depends upon various financial institutions for clearing services in connection with its Commercial Acquiring business (namely, the transmission and processing of authorization requests and processing of clearing and settlement instructions). Disruptions to the business, financial stability or operations, including due to strikes, labor disputes or other disruptions to the workforce, of these suppliers and service providers, or to their ability to produce the products and provide the services the Group requires in accordance with the Group’s and its customers’ requirements, could significantly affect the Group’s ability to fulfill customer demand on a timely basis which could materially harm its net revenue and results of operations. If these suppliers and service providers were unable to continue providing their services, the Group could encounter difficulty finding alternative suppliers. Even if the Group were able to secure alternative suppliers in a timely manner, the Group’s costs could increase significantly. Any of these events could adversely affect the Group’s results of operations.

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Worldline 2017 Registration Document