NEOPOST_REGISTRATION_DOCUMENT_2017

5

Financial statements

Parent company statements of financial position

Liquidity risk 13-1 The Group’s cash requirement and the debt servicing account form a significant proportion of its cash flow. The Group believes that its cash flow (defined in the consolidated cash flow statement in part 5 of this document) will enable it to service its debt, given the current level of business. However, this ability will depend on the Group’s future performance, which is partly related to the economic cycle, which the Group cannot control. No guarantee can therefore be given regarding the Group’s ability to cover its financial needs. With the exception of the Neopost S.A. 2.50% bond issue, which is not subject to any covenant, the various debts (bonds, private placements and revolving credit facilities) are subject to financial covenants. Failure to comply with these covenants may lead to early repayment of the debt. Neopost complies with all covenants at 31 January 2018.

For each consolidated position that is managed, Neopost implements a hedging strategy at the same time as it sets the reference exchange rate to be defended. The hedging strategy involves a combination of definite or optional forward currency purchases or sales, along with open positions protected by stop losses. These stop losses are predetermined exchange rates that trigger transactions when they are hit. As a result, the hedging strategy enables Neopost to defend a reference exchange rate for the entire position in the event of adverse exchange rate movements. Neopost uses the services of an independent consultancy based in Paris. This company assists Neopost in the Group’s exchange rate risk hedging policy and values its portfolios, thus ensuring continuity of methodology and providing an opinion independent of any financial institution. Neopost S.A., as the centralizing company, grants foreign exchange contracts at guaranteed exchange rates to subsidiaries exposed to exchange rate risks, and reverses the resulting positions in the market. Year-end position The tables below show Neopost S.A.’s year-end hedging positions.

13-2 Risk management policy

Exchange rate risk hedging

Neopost has a policy of centralizing its exchange risk, enabling the Group to monitor its overall exchange rate risk exposure and to gain full control over the market instruments used in hedging operations.

FINANCIAL YEAR 2017 – ASSETS AND LIABILITIES HEDGING: HEDGING POSITIONS COVERING FINANCIAL ASSETS OR LIABILITIES ON NEOPOST S.A.’S BALANCE SHEET AT 31 JANUARY 2018 AND EXPECTED TO BE REALIZED NO LATER THAN APRIL 2018

(Notional value)

USD GBP CAD NOK JPY SEK CHF DKK CZK SGD AUD PLN

Neopost S.A. financial assets Foreign exchange contract assets

6.0

0.5

0.2

0.8 11.0

1.3

1.0

0.7

0.4

0.1 1.6 0.0

41.0

8.7

5.4

8.4 1,642.8

5.9 16.2 11.1

6.6 (0.2)

3.2 1.5 4.8 1.5

Total assets

47.0 9.2 5.6 9.2 1,653.8 7.2 17.2 11.8 7.0 (0.1)

Neopost S.A. financial liabilities Foreign exchange contract liabilities

2.4

0.1

0.0

0.0

0.1

0.0

0.0

0.0

0.1

-

0.2

-

23.3

9.7

5.6

1.3 194.0

4.1 11.2

7.8 146.4

3.8 1.4 0.4

Total liabilities

25.7 9.8 5.6 1.3 194.1 4.1 11.2 7.8 146.5 3.8 1.6 0.4

Net exposure before hedging 21.3 (0.6)

-

7.9 1,459.7 3.1 6.0 4.0 (139.5) (3.9)

3.2 1.1

Neopost S.A. hedging NET EXPOSURE AFTER HEDGING

(23.2)

-

1.4

- (901.6)

(0.8)

10.9

- 122.1 (0.6)

-

-

(1.9) (0.6)

1.4 7.9 558.1 2.3 16.9 4.0 (17.4) (4.5)

3.2 1.1

Neopost uses notably symmetrical options tunnels. These instruments are unlikely to be exercised in a reciprocal manner in terms of the spot exchange rate or expiry date. As a result, for each tunnel only one of the two options is reported in the table above. The value of the commitment in these symmetrical options was 2.0 million United States dollars sold and 100.0 miilion Japanese yen sold.

Neopost also makes use of asymmetrical options tunnels. The asymmetrical part of this kind of transaction is presented in the table above with a view to reflecting the Group’s commitment as closely as possible. By currency the asymmetrical part is as follows: 2.0 million United States dollars sold and 50.0 million Japanese yen sold.

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REGISTRATION DOCUMENT 2017 / NEOPOST