LISI GROUP - 2018 Financial report

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2.6.6 ISupplier-related risks
As a general rule and in viewof the nature of itsmanufacturing activities,
the Company does not rely exclusively on any one supplier or strategic
subcontractor. The Group’s main suppliers are those that provide it with
rawmaterials. Outsourcing is confined mainly to technical applications,
primarily specific heat treatment and finishing operations (surface
treatment and assembly), since most of the Group’s activities are
integrated. For 2018, the various operations outsourced by the Group’s
sites represented approximately 7.1%of consolidated sales revenue.
The volume distribution of themain suppliers is as follows:
2018 2017 2016
First supplier 4.4% 5.7% 5.1%
First five suppliers 14.2% 15.4% 15.1%
First ten suppliers 19.3% 21.0% 20.6%
2.6.7 ICurrency risks
The Group is exposed to the fluctuations of currencies such as the US
dollar against the euro, and to a lesser extent to changes in the Canadian
dollar, the British pound, the Turkish lira, the Czech crown or the Polish
zloty. To reduce this level of risk, the LISI Group hedges the currency risk
throughfinancial instrumentsforanestimatedamountcorrespondingto
its final exposure.
The detail of this currency risk hedging is described in Chapter 3,
paragraph 2.5.3.3 “Currency risks”, as well as the hedging strategy in
place.
2.6.8 IInterest rate risk
The Group has hedged most of the risk of interest rate rises on its
borrowings, by converting the variable loans to fixed-rate loans, or by
borrowing at a fixed rate in the first instance. The details of the interest
rate risk and of the instruments used to mitigate it are described in
Chapter 3, paragraph 2.5.3.1. “Interest rate risk”.
2.6.9 IGeopolitical risks
The Group is exposed to the “Brexit” risk due to its business relationships
with the United Kingdom. The geopolitical situation of this country
exposes theLISI Group to a financial risk, but also to a limitedoperational
risk. The Group has an aircraft production site in Rugby (United Kingdom)
whichmostly serves the Airbus UK customer. This sitemay encounter an
operational continuity issue if its main customer were to relocate its
operations.
The level of exposure to sales flows is estimated 15 days of inventories of
finishedproducts and ismainly focusedon theLISI AEROSPACEdivision.
As regards purchasing flows, the risk remains low compared to the total
Group supplier sales revenue volume.
The regulatory and technical impact could lead to additional costs linked
to customs and declarative formalities, particularly as regards VAT. The
operational teams have already drawn up action plans to anticipate as
much as possible the likely transition phase over the second quarter of
2019.
3 IInsurance policy
The LISI Group has several insurance policies, which mainly cover the
following risks:
3.1 IProperty damage insurance
As of January 1, 2018, this policy coveredown andothers’ installations, as
well as operating losses in the event of a claim. The deductible is stated
by claim and amounts to €0.1 million for a maximum coverage amount of
€1,651,857,642forbuildingsandequipment,€293,391,240formerchandise
and €846,353,854 for operating losses.
3.2 IThird-party liability insurance
This covers personal, physical and intangible damage that might occur
during operations, as well as damages that occur after delivery, to the
sumof €80million per claim and per annum in primary coverage.
LISI AEROSPACE signed an insurance contract covering its liability for
injury,propertydamageandconsequentialdamageandflightdisruptions
due to its delivered aerospace products. The sum insured for all
subsidiaries, per loss and per insurance year is €500million.
3.3 ICorporate officers’ liability insurance
This insurance policy covers the liability of corporate officers of all of the
Group’s subsidiaries up to €20million per year.
3.4 ICYBER insurance
This insurance policy covers all of the Group’s subsidiaries for cyber
attacks up to €10million per year.
3.5 ITransported goods insurance
This insurance policy covers goods (or machines) transported up to
€5 million per incident and/or event, including all types of damage.
3.6 IFraud insurance
The Group is covered for fraud, embezzlement of funds and/or
misappropriation of goods whether internal (Group) or external
(committed by a third party) up to €4million per event.