technicolor - 2019 Universal registration document

FINANCIAL STATEMENTS FINANCIAL ASSETS, FINANCING LIABILITIES & DERIVATIVE FINANCIAL INSTRUMENTS

Total

2019 (in million euros)

Transaction

Translation

(12)

(6)

(18)

Profit from continuing operations before tax and net finance costs (1)

Equity Impact (cumulative translation adjustment) (2)

82

Profit impact: (1) transaction impact calculated before hedging by applying a 10% increase in the U.S. dollar/euro exchange rate to the net U.S. dollar exposure (sales minus purchases) of affiliates – which have the euro as functional currency; translation impact calculated before hedging by applying a 10% increase in the U.S. dollar/euro exchange rate to the profits of the affiliates with the U.S. dollar as functional – currency. Equity impact: calculated by applying a 10% increase in the U.S. dollar/euro exchange rate to the unhedged net investments in foreign subsidiaries that are denominated in U.S. (2) dollar.

Financial foreign exchange risk 8.2.2.2 The Group’s policy is to centralize to the extent possible its financing and the associated currency risk, if any, at the level of the Group treasury. As a result, the majority of the Group’s subsidiaries borrow, and lend their surplus cash, to the Group treasury, which in turn satisfies liquidity needs by borrowing externally. Subsidiaries that cannot enter into transactions with the Group Treasury because of local laws or restrictions may borrow or invest with local banks in accordance with the rules established by the Group treasury. The Group’s policy is also that subsidiaries borrow or invest excess cash in their functional currency. In order to match the currencies that Technicolor’s Group Treasury Department borrows with the currencies that it lends, Technicolor may enter into currency swaps primarily (i) to convert euro borrowings into U.S. dollars and British pounds which are lent to the Group’s U.S. and U.K subsidiaries respectively and (ii) to convert U.S. dollars borrowed externally or from the Group’s U.S. subsidiaries into euros. The forward points on these currency swaps which are accounted for as interest, resulted in income of 4 million euro in 2019 and in income of 2 million euro in 2018.

Interest rate risk 8.2.2.3 Exposure to interest rate risk Technicolor is mainly exposed to interest rate risk on its deposits and indebtedness: At December 31, 2019 the portion of the Group’s financial debt • exposed to floating interest rates, after taking into account hedging operations, is as shown below: Percentage at floating rate* 64% Includes €95 million of debt with maturity of less than 1 year which the Group * considers to be at floating rate. in 2019 the Group’s deposits were entirely at floating rate; • the Group is exposed to interest rate risk which can have an impact on • net interest expense. (in million euros) 2019 1,298 Debt

Sensitivity to interest rate movements The Group believes a 100 basis point fluctuation in interest rates is reasonably possible in a given year and the table below shows the maximum annual impact of such a change. Maximum impact over one year on the net exposure as of December 31, 2019 of a variation versus current rates (1)(2)

Impact on cash net interest

Impact on equity before taxes

(in million euros)

6

Impact of interest rate variation of +1% Impact of interest rate variation of -1%

(6)

(6)

3

3

At December 31, 2019, 3-month EURIBOR and 3-month LIBOR were -0.38% and 1.91% respectively. (1) After taking into account interest rate hedging operations. (2)

Interest rate risk management At December 31, 2019, the Groupe has outstanding interest rate hedging operations the characteristics of which are given in note 8.6.1.

TECHNICOLOR UNIVERSAL REGISTRATION DOCUMENT 2019 235