VINCI - 2005 annual report

26.3.3 Analysis of other foreign currency positions
The basic aim of VINCI’s currency risk management policy is to hedge
the transaction exposure connected to its subsidiaries’ ordinary operations.
These risks are monitored through a foreign currency position detailing
cash flows by currency and maturity. However, VINCI does not systematically
hedge the currency risk connected with its foreign investments
(translation exposure).
CONSOLIDATED FINANCIAL STATEMENTS
The table below shows VINCI’s and its main subsidiaries’ exposure
to transaction risk at 31 December 2005. This information does not
include the Belgian subsidiary DEME, of which 22.7% is owned indirectly
via CFE.
USD Other currencies GBP Other currencies Total
(in € millions) linked to the USD
Exposure before hedging (1) 20.7 2.8 43.0 (75.1) (8.6)
Hedges (7.9) (2.5) (12.6) 96.9 73.9
Net currency position 12.8 0.2 30.4 21.8 65.3
(1) actual positions in foreign currency + forecast future flows related to firm commitments.
26.3.4 Detail of currency derivatives
Transactions to hedge currency risk, designed to cover commercial and financial transactions, break down as follows:
31/12/2005 31/12/2004
USD GBP Other Notional Fair Notional Fair
(in € millions) currencies amount value amount value
Cross-currency swap 0.0 7.3 0.7
Forward foreign exchange transaction 7.9 4.0 1.6 13.4 (0.3) 26.9 2.3
Currency options 2.5 2.5 0.0
Fair-value hedge 10.4 4.0 1.6 15.9 (0.3) 34.3 3.0
Cross-currency swap 0.0 26.6 0.8
Forward foreign exchange transaction 56.3 8.7 3.9 68.8 (1.1) 9.0 0.2
Currency options 0.0 0.1 0.0
Cash flow hedge 56.3 8.7 3.9 68.8 (1.1) 35.7 1.0
Cross-currency swap 32.2 32.2 (2.5) 36.7 7.2
Forward foreign exchange transaction 42.9 15.2 58.1 2.9 15.3 2.3
Currency options 0.0 6.1 (0.3)
Transactions not considered as hedges
for accounting purposes 75.1 0.0 15.2 90.4 0.4 58.0 9.2
Total foreign currency derivatives 141.8 12.6 20.7 175.1 (1.0) 128.0 13.2
26.4 COUNTERPARTY RISK
VINCI is exposed to counterparty risk mainly in respect of cash, negotiable
securities, marketable securities, financial receivables and derivatives.
The notional amounts and market values are given in Notes 26.1, 26.2
and 26.3.
VINCI considers that the counterparty risk connected to trade receivables
is extremely limited because of the large number of customers, their
diversity and the large proportion that are public-sector customers.
The Group’s cash surpluses invested in cash management financial assets
amount to €4.3 billion at 31 December 2005. Of this total, the amount
managed directly by the holding company amounts to €3.5 billion, of
which 84% invested in marketable securities and mutual funds (invested
mainly in monetary securities). The Group’s policy is to invest its cash
surpluses in monetary instruments negotiated exclusively with previously
authorised leading counterparties rated investment grade securities. This
policy also applies to derivatives.
VINCI’s investments are governed by its investment limits, determined on
the basis of its counterparties’ rating. VINCI considers that the risk of default
by these counterparties is low. The Group has not entered into any collateralisation
agreement with its bank counterparties.
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