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RISK FACTORS
5
LIQUIDITY AND MARKET RISKS
5.3
LIQUIDITY AND MARKET RISKS
The Group has a dedicated organisational structure which enables
it to centrally manage all market risks to which it is exposed, namely
interest rate risk, exchange rate risk, counterparty risk and liquidity risk.
Within the Finance Department, Group Treasury operates in the financial
markets as the Group’s financial risk management body. This unit is
organised in such a way as to ensure the segregation of tasks.
Every month, Group Treasury reports to the CFO & Deputy CEO on the
positions and results of its management in compliance with the principles
and policies put in place by the Group’s executive management team.
Most Group entities use the same software programs (Taïga, Kyriba
or Swaps). These tools help to secure flows and enable more reliable
reporting, in accordance with Group standards.
Type
Impact
Risk reduction measures
Risk of a failure to effectively control finance
costs (interest rate risk).
Negative impact on
financial expenses.
To reduce this risk, the Company sets up appropriate hedges using derivative financial
instruments, taking into account the prevailing market conditions. The financial instruments
used – which mainly correspond to swap contracts – are approved by the CFO & Deputy
CEO. The Company had no interest rate hedges in place at 31 December 2016.
At 31 December 2016, the Group’s external debt primarily consisted of drawdowns
on its revolving credit facility.
Risk of a failure to effectively control
foreign-currency cash flows and the
valuation of subsidiaries outside the
Eurozone (exchange rate risk), given
the geographical diversity of the Group’s
establishments and operations.
Negative impact
on equity and/or
consolidated profit
due to exchange rate
volatility.
The Group monitors offerings and contracts in foreign currencies in order to safeguard the
related operating margins. The hedges put in place when exchange rate risk is identified
mainly correspond to forward purchase or sale contracts, whose amounts and maturities are
matched with the underlying exposure.
To hedge intra-group transactions in foreign currencies, the Group uses currency swaps.
The Group’s balance sheet risk essentially relates to euro/sterling and euro/US dollar
exchange rates (or the euro/Saudi riyal rate, bearing in mind that at the date of this
Registration Document the US dollar/Saudi riyal exchange rate was pegged) as well
as the euro/Nigerian naira exchange rate.
See Note 8.6 to the consolidated financial statements for details about the Group’s financial
risk management strategy.
Risk of default by a financial counterparty.
Negative impact
on consolidated profit.
The Group undertakes counterparty review and monitoring procedures which are approved
by Management. In 2016, it notably increased the number of leading banking institutions
it uses for investments, hedges and borrowings.
Risk of inability to meet financial
commitments (liquidity risk).
Negative impact
on the cost of debt and
on the Group’s image.
Assystem has carried out a specific review of its liquidity risk and considers that it is capable
of meeting its future maturities.
Furthermore, Assystem has put in place:
•
a liquidity optimisation process based on centralised cash management with monthly
reports submitted to the CFO & Deputy CEO;
•
a pro-active debt management strategy.
At 31 December 2016, the Group had access to a €120 million revolving credit
facility (of which €80 million had been drawn down) with a sufficient maturity to finance
its operating requirements.
On 24 January 2017, the Company put in place a new financing arrangement amounting
to €280 million and breaking down as (i) an €80 million five-year term loan, and (ii) a
€200 million five-year revolving credit facility with two one-year extension options (subject
to the lenders’ agreement).
Risk of lack of control over the number
of shares to be delivered on redemption
of Odirnane bonds.
Dilutive effect
on capital.
At 31 December 2016, only 490,268 Odirnane bonds were still outstanding, i.e. 8.8%
of the original issue (see Chapter 7 of this Registration Document). On 1 February 2017,
Assystem announced that it intended to redeem in advance of maturity all of its outstanding
Odirnane bonds. All of these bonds were redeemed in cash – with no Assystem shares
allocated to the bondholders – for a total amount of €14.35 million, including accrued
coupons, which was paid between end-February and 6 March 2017.
Risk of a breach of a financial covenant
triggering early repayment of borrowings.
Negative cash impact. On 24 January 2017 Assystem entered into a new €280 million financing arrangement
with a pool of banks, comprising (i) an €80 million term loan redeemable at maturity in
January 2022 and (ii) a €200 million five-year revolving credit facility with two one-year
extension options (subject to the lenders’ agreement). Consequently, the €80 million drawn
down under the previous revolving credit facility, which was included in “Other short-term
debt and current financial liabilities” at 31 December 2016 was repaid in early 2017.
The new financing agreement contains a covenant based on the consolidated gearing
ratio (consolidated net debt at the test date/EBITDA for the past 12 months as adjusted for
acquisitions and divestments). This ratio is measured at the end of each half-year period
(with the first test taking place at 31 December 2016), and must not exceed 2.75 at end-
December and 3.0 at end-June. If the covenant is breached, a qualified majority of lenders
(representing at least two thirds of the lending commitments) may demand early repayment
of the corresponding borrowings. At 31 December 2016, the Group’s gearing ratio was
below the ceiling specified in the covenant.
ASSYSTEM
REGISTRATION DOCUMENT
2016
74