NEOPOST_REGISTRATION_DOCUMENT_2017

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Financial statements

Consolidated financial statements

Other non-current assets Other non-current assets are tested for impairment only if evidence of an impairment is noted. A loss of value related to any other non-current asset except goodwill can be reversed if there is any evidence that a loss of value previously recognized is likely to no longer exist or to have diminished. If this is the case, the book value of the asset is raised to the level of its recoverable amount. The increased book value following reversal of a loss of value cannot exceed the book value that would have been determined, net of depreciation, if no loss of value had been recognized on the asset in previous years. After recognition of a reversal of loss of value, the depreciation charge is adjusted for future periods so that the revised book value of the asset minus its possible residual value is spread systematically over the remaining useful life of the asset.

The value in use of each CGU is determined as follows: the Group projects future cash flows based on revenue • growth assumptions over five years. Industrial margins and net assets are reallocated to the countries where the equipment in question is installed and leasing margins and net assets are reallocated to the countries where the signatories of finance lease contracts are located; beyond this explicit time frame, the terminal value is • calculated by applying a perpetuity growth rate to the latest cash flow; the cash flows are then discounted. The discounting rate • is the weighted average cost of capital for which the tax rate has been restated and to which a specific risk premium might be added. Goodwill impairment is recognized under operating expenses. Such impairment is not reversible. Goodwill impairment test 4-5-2: Goodwill was tested for impairment based on value in use. Given the delays encountered by Temando, it has been decided to isolate this subsidiary acquired in 2015 from the Shipping CGU. The impairment test performed as at 31 July 2017, based on a revised business plan and the valuation

resulting from the repurchase of the minority interests resulted in goodwill depreciation of 22.9 million euros. The impairment test performed as at 31 January 2018 did not

reveal any additional depreciation.

For the main cash-generating units, the following assumptions were used (the same as the assumptions used for the divisions Enterprise Digital Solutions, Neopost Shipping and Temando):

SME Solutions

Enterprise Digital Solutions Neopost Shipping and Temando

Europe North America

Asia/Australia

Average five-year EBITDA growth for SME Solutions

(1.9)%

(2.9)%

(4.0)%

-

Average five-year revenue growth for CSS

-

-

-

12,0%

Average growth rate to perpetuity

0.6%

0.3%

1.4%

2.0%

Average discount rate (before tax)

8.4%

13.5%

7.8%

10.6%

Weighted Average Cost of Capital (WACC)

6.2%

9.8%

5.5%

7.2%

Specific risk premium

-

-

-

0.8%

Sensitivity Three sensitivity tests were carried-out: the first one by fixing average five-year EBITDA growth assumptions, the second one by fixing the discount rate assumptions and the third one by fixing average five-year revenue growth assumptions to determine at which rates the valuation of goodwill becomes equal to the value of the discounted cash flow. By fixing average five-year EBITDA growth and average growth rate to perpetuity as defined in the table above, the valuation of several cash-generating units become equal to the book value of capital employed with a discount rate of 11.3% for SME Solutions in Europe, 11.6% for SME Solutions in Asia,

16.6% for SME Solutions in North America, 9.4% for Enterprise Digital Solutions, 12.8% for Neopost Shipping and 14.0% for Temando. By fixing the average discount rates as defined in the table above and assuming a growth rate to infinity of 0%, the valuation of several cash-generating units becomes equal to the book value of capital employed with an average five-year EBITDA growth rate of (3.8)% for SME Solutions in Europe, (17.5)% for SME Solutions in Asia, (13.3)% for SME Solutions in North America.

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REGISTRATION DOCUMENT 2017 / NEOPOST