SOLOCAL_Registration Document_2017

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RISK FACTORS 2.1 Risks Related to our Business and Strategy

SoLocal Group has reviewed the risks that could have a significantly invited to take into consideration the risk factors described in this unfavorable effect on its business, financial position or results (or its chapter before taking any decision to invest.

ability to achieve its goal). We consider that there are no other significant risks apart from the following risks factors, supplemented by other information and the Consolidated Financial Statements provided in this Reference Document. Investors are

The description of the organisation of internal control and risk management put in place by the Group is included in the Board of Directors’ report. This report appears in section 6.2 of this document.

RISKS RELATED TO OUR BUSINESS AND STRATEGY 2.1

We recently announced a plan to significantly reduce our workforce, and the implementation of this plan may be disruptive to our business and sales figures, may cost more than we anticipate and may not deliver the cost savings we expect. The redesign of our operational organization under the SoLocal 2020 Plan will involve the reduction of our workforce by 1,000 positions at the Group level over the 2018-2019 period, including around 800 positions in 2018, out of a total of 4,627 employees (as of 31 December 2017), and the implementation of an employment protection plan (plan de sauvegarde de l’emploi). As a result, the Group has recently initiated a process of informing and consulting employee representative bodies as well as the negotiation process with trade unions concerning, in particular, accompanying measures, which should be completed no later than end of June 2018. The aim is to reach an agreement on high-quality individual support measures to be offered to each employee concerned by the restructuring plan. At this stage, the plan would include a phase of voluntary departures aimed at limiting the number of redundancies. The plan would be implemented with the utmost respect, providing all employees with the opportunity to be heard, and offering personalized and responsible support. The overall cost of the plan is expected to be approximately €180 million and will be fully or partially provisioned as of 2018 in our financial statements. We expect that the disbursements associated therewith between 2018 and 2020 would be financed by available cash and the positive cash flow generated over the period. The restructuring plan should allow the Group to continue to operate with significantly reduced fixed costs, to become more agile and to return to profitable growth from 2019. The reduction in costs is estimated at around €120 million from 2020, compared to the 2017 cost base, and should restore the Group’s ability to generate cash flow. The negotiation, consultation and implementation of the project may result in strikes, work stoppages or slowdowns or other staff actions that could materially disrupt our activity and may generate negative publicity that would impact our reputation and brand. Any such developments may have a material adverse effect on our results and financial condition, particularly in the short term. In addition, following completion of the above-mentioned consultative process, the negotiated plan must be submitted for an opinion from the Group’s works council (Comité d’Entreprise) and the approval of the Labor Administration. Because of the uncertainties inherent in the negotiation, approval and implementation processes, we can provide no assurance that we have correctly estimated the total costs relating to the restructuring plan or that the outcome of the implementation of the plan will be in line with our strategic

expectations. The cost of the plan may ultimately be higher than the €180 million amount we have estimated. The implementation of the restructuring plan may give rise to litigation or administrative proceedings, the cost of which cannot, as at the date hereof, be assessed or provisioned and may be significant. Whether or not the cost of the plan exceeds our estimates, we must ensure that our available cash and surplus cash flow generated through 2020 will be sufficient to finance the restructuring plan. Finally, the restructuring plan may fail to deliver the anticipated €120 million in cost savings or deliver those savings on the timetable we expect, thereby hampering our efforts to achieve profitable growth for our business. We may not be able to successfully implement our strategic plan and to achieve our guidance and mid-term financial objectives. In recent years, the Group has been confronted with delicate negotiations, particularly in the context of the 2014 and 2017 financial restructuring processes and a decrease in its turnover and profitability, which may have led to an inability to meet the estimates and financial objectives, the publication of warnings on results and an inability to achieve its strategic plan. These difficulties, combined with unsustainable debt levels, led in particular to two debt restructurings in 2014 and 2017, the latter having enabled the Group to reduce its debt by two thirds. We have recently announced our new strategic plan, SoLocal 2020, which includes, among other strategic objectives, financial guidance for 2018 and mid-term financial objectives for 2019 and 2020. As indicated in our financial communication, the implementation of SoLocal 2020 is essential to addressing the continuing erosion of SoLocal’s sales and market share, which is the consequence of the challenges the Group faces in a highly competitive market, and its high fixed costs that hinder its investment capabilities. We can however give no assurances that we will be able to achieve the objectives included in our SoLocal 2020 plan, including our financial guidance and financial objectives. In particular, the implementation of the Group’s strategy, in particular SoLocal 2020, is subject to numerous risks, including the Group’s constantly developing competitive environment, growing pressure on prices, rapidly evolving technologies and a deterioration in the Group’s working capital requirement. The implementation of our new operational organization under SoLocal 2020 and the accompanying restructuring plan may result in delays and disruptions affecting our ability to run our operations. In addition, our success will depend on the receptiveness of existing and prospective clients to our new Digital Services offerings, many of which involve new and untested products with limited or no track records.

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2017 Registration Document SOLOCAL