Download the 2009 annual report in PDF format - ANF

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INFORMATION ABOUT ANF
Risk management, risk factors and insurance
debt fi nancing and could make it more costly to implement ANF’s
growth strategy.
If ANF were to obtain additional debt to fi nance future acquisitions,
its fi nancial position would become more sensitive to changes in
interest rates through the impact such changes would have on the
borrowing costs for loans or bonds. As a result, ANF has set up
interest rate hedging mechanisms that are designed to limit this
sensitivity (see Section 3.2 “Interest rates risks” on page 53, Part II
of the Registration Document).
Risks related to the competitive environment
A change in strategy of the owners of properties neighbouring
those of ANF could affect the implementation of its strategy of
redeveloping the property complexes in Rue de la République in
Lyons and in Marseilles.
In the context of its external growth strategy, ANF may come up
against a number of international, national or local competitors,
some of which (i) may be able to acquire assets under terms and
conditions, notably regarding price, that do not correspond to ANF’s
investment criteria and objectives, and/or (ii) have greater fi nancial
resources and/or a larger asset portfolio
In the event that ANF is unable to defend its market share or gain
shares of markets it has targeted and maintain or strengthen its
strategy, its business and results may be negatively affected.
Risks related to the Company’s operations
Risks related to the regulation of leases and nonrenewal
of leases
French legislation regarding leases (see Section 2.2 “Regulations
applying to ownership of the Company’s property assets” (retail
lease law) on page 164, Part VI of the Registration Document)
places considerable restrictions on lessors. The rules applicable to
lease lengths, termination conditions, renewals and indexed rent
increases are considered to be a matter of public policy, and the
legislation restricts lessors’ fl exibility in raising rents.
Lastly, ANF may be faced with a more challenging market
environment when its existing leases expire, or may have to deal
with changes in French legislation, regulations, or jurisprudence that
impose new or tighter restrictions on rent increases. Amendments
to regulations governing lease lengths, indexed rent increases, rent
ceilings, or eviction compensation for tenants could have a negative
impact on the value of the Company’s asset portfolio, as well as
ANF’s operations, earnings and fi nancial position.
Risks related to default on rent payments
Nearly all of ANF’s revenue is generated from leasing property to
third parties, and the profi tability of this leasing business depends
ANF • 2009 ANNUAL REPORT
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Contents
on tenants’ solvency (see Note 2 “Receivables maturity schedule” of
the annex to ANF’s consolidated fi nancial statements on page 115
of the Registration Document). Tenants facing fi nancial diffi culties
may be late in making their rent payments or even default on rent
payments, which could have a negative impact on ANF’s earnings.
In this context, ANF has put in place a weekly check on sums
outstanding and follows up any unpaid debts on a case-by-case
basis.
Risks related to the cost and availability of appropriate
insurance cover
ANF has put in place a policy of covering the main risks related to its
business that can be insured. It has therefore taken out a number of
insurance policies (see Section 2.3 “Insurance cover” on page 164
of Part VI of the Registration Document).
ANF feels that the type and amount of insurance cover it has is
consistent with industry practice.
Nevertheless, ANF could be faced with the cost of its insurance
policies rising or experience losses that are not fully covered by its
insurance policies. Moreover, ANF could be faced with an insurance
shortfall or an inability to cover certain risks, as a result, for
example, of capacity limitations in the insurance market. The cost or
unavailability of appropriate cover in the event of losses could have
a negative impact on the value of the Company’s asset portfolio, as
well as ANF’s operations, earnings and fi nancial position.
Risks related to service quality and subcontractors
ANF uses subcontractors and suppliers for some of its maintenance
and renovation work. Therefore ANF’s operations, outlook or
reputation could be damaged if a subcontractor or supplier
shuts down its business, stops payments, or provides services
or products of deteriorating quality. A selection process for subcontractors
has been implemented, together with a system for
monitoring outstanding balances by supplier, with the aim of
increasing their number so that the Company does not become
dependent on a particular supplier. Moreover, ANF believes that it
can quickly fi nd new, reliable subcontractors or suppliers if any of its
existing contracts are terminated.
Risks related to the inability to fi nd tenants
ANF leases space in its owned or acquired property either directly
or through estate agents. It runs the risk that this space may remain
vacant for an extended period of time. ANF may have trouble fi nding
new tenants at suitable rent prices, meaning that the rent that the
Company charges could be affected by its ability to lease newly
vacant space as existing tenants move out. Any such extended
vacancies could affect ANF’s fi nancial position and earnings.
OTHER GENERAL INFORMATION PRO FORMA FINANCIAL INFORMATION ANNUAL FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS INFORMATION ABOUT ANF DESCRIPTION OF THE BUSINESS