REGISTRATION DOCUMENT AND FINANCIAL REPORT - Iliad

20. FINANCIAL INFORMATION CONCERNING THE COMPANY’S ASSETS AND LIABILITIES,
FINANCIAL POSITION AND PROFITS AND LOSSES
20.1 CONSOLIDATED FINANCIAL STATEMENTS FOR 2007, 2006 AND 2005
Obligations under finance leases and equipment leasing arrangements amounted to €28 million at December 31,
2007 compared with €8.7 million at December 31, 2006. The majority of the financing arrangements entered into
by Iliad in 2007 related to the roll-out of the Group’s FTTH network. At December 31, 2007, the Group had
€12.6 million in obligations under real estate finance leases entered into with Genefim (a subsidiary of Société
Générale) to acquire Optical Nodes (ONs), corresponding to the Free premises where all optical fiber
connections are made for a given geographic area. At the same date, the Group’s obligations under FTTH
equipment leasing contracts entered into with Cisco Capital represented over €7.1 million.
The Group’s cash investments are at variable rates. At December 31, 2007, the Group did not have any interest
rate hedges. In addition, the Group has no significant financial assets (such as bonds, treasury bills, other money
market securities, loans or advances) and no off-balance sheet commitments (such as repos or forward rate
agreements) that expose it to interest rate risk.
The tables below show the Group’s net interest rate exposure (at December 31, 2007) and an analysis of
sensitivity to interest rate fluctuations.
(in € thousands)
Within 1
year
Between 1
and 5
years
Beyond 5
years
Financial liabilities ............................................................... 26,271 315,420 7,985
Financial assets .................................................................. 0 0 1,939
Net position before hedging ...................................................... 26,271 315,420 6,046
Off-balance sheet items .......................................................... 0 0 0
Net position after hedging ........................................................ 26,271 315,420 6,046
Net position to be rolled over within one year (in € thousands) ........................................ 26,271
Change in interest rate ................................................................................ 1%
Average remaining life (in months) ................................................................... 12
Sensitivity (in € thousands) ........................................................................... 263
Equity risk
The Group does not hold any equities in its investment portfolio apart from a non-material stake in Mandrake
Soft. It does, however, own treasury shares but in view of the very low number held any change in the Iliad share
price would have only a minimal impact on the Group’s earnings and equity.
Liquidity risk
The Group has historically financed its growth principally with internal resources, with limited recourse to
borrowing to finance specific projects.
On June 29, 2006, the Company issued €330.6 million worth of OCEANE convertible/exchangeable bonds.
At December 31, 2007, the Group’s net cash position stood at €223.1 million, compared with €276.3 million at
December 31, 2006.
In view of the ratios set out below, the Group is not subject to any liquidity risk as a result of acceleration clauses
in loans entered into by Group companies or as a result of the breach of any financial covenants.
Certain of the Group’s credit agreements contain covenants corresponding to financial ratios, particularly the
confirmed syndicated line of credit representing a maximum of €220 million. As of December 31, 2007, the
Group had never breached any of these covenants.
Applicable financial
ratio
Consequence of
breach
Actual ratios at
December 31, 2007
€220 million credit line Leverage ratio < 2.5 Default Leverage ratio: 0.258
(Borrower – Iliad) Interest cover ratio > 5.1 Interest cover ratio: 126.743
Iliad – Registration Document 2007 - 149