Given a residual exposure on some non-hedged assets, a 10% appreciation of the above-mentioned foreign currencies against the euro would have a positive impact on pre-tax earnings of €51 million.
Detail of exchange rate derivatives related to operational flows
Transactions in exchange rate derivatives carried out by the Group, intended in particular to hedge its operational flows, break down as follows at 31 December 2023:
| (in € millions) | non-inclus | non-inclus | non-inclus | non-inclus | non-inclus |
|---|---|---|---|---|---|
| Currency | COP (*)/EUR | CHF/USD | CAD/EUR | GBP/EUR | PLN (**)/EUR |
| Fair value | 1 | 1 | (1) | (1) | - |
| Notional | 23 | 25 | 42 | 57 | 12 |
| Average maturity (months) | 2 | 5 | 8 | 9 | 3 |
| Buy/Sell | Buy | Buy | Buy/Sell | Buy/Sell | Sell |
(*) Colombian peso.
(**) Polish złoty.
VINCI is exposed to credit risk in the event of default by its customers and to counterparty risk in respect of its investments of cash (mainly credit balances at banks, negotiable debt securities, term deposits and marketable securities), subscription to derivatives, commitments received (sureties and guarantees received), unused authorised credit facilities, and financial receivables.
The Group has set up procedures to manage and limit credit risk and counterparty risk.
Approximately one third of consolidated revenue is generated with public sector or quasi-public sector customers. Moreover, VINCI considers that the concentration of credit risk connected with trade receivables is limited because of the large number of customers and the fact that they are geographically dispersed. No customer accounts for more than 10% of VINCI’s revenue. In export markets, the risk of non-payment is covered, as far as possible, by appropriate insurance policies (Coface, documentary credits and other insurance). Information on the breakdown of trade receivables is presented in Note H.19.2, “Current operating assets and liabilities”.
Financial instruments (cash investments and derivatives) are set up with financial institutions that meet VINCI’s credit rating criteria.
The Group has also set up a system of counterparty limits to manage its counterparty risk, along with maximum control ratios of a given instrument. Maximum risk amounts by counterparty are defined taking account of their credit ratings. The limits are regularly monitored and updated on the basis of a consolidated quarterly reporting system.
The Group Finance Department also distributes instructions to subsidiaries laying down the authorised limits by counterparty, the list of authorised UCITS (French subsidiaries) and the selection criteria for money market funds (foreign subsidiaries).
The measurement of the fair value of derivative financial instruments carried by the Group includes a “counterparty risk” component for derivatives carried as assets and a “credit risk” component for derivatives carried as liabilities. Credit risk is measured using standard mathematical models for market participants. At 31 December 2023, adjustments recognised with respect to counterparty risk and own credit risk were not material.
At 31 December 2023 and in accordance with IAS 32, the Group’s financial assets and liabilities (including derivative financial instruments) are not netted on the balance sheet, except where the Group has netting agreements. In the event of default by the Group or the financial institutions with which it has contracted, these agreements provide for netting between the fair values of assets and liabilities arising from derivative financial instruments presented in the consolidated balance sheet.
The table below sets out the Group’s net exposure arising from these netting agreements:
| non-inclus | 31/12/2023 | 31/12/2022 | ||||
|---|---|---|---|---|---|---|
| (in € millions) | Fair value of derivatives recognised on the balance sheet (*) | Impact of netting | Total | Fair value of derivatives recognised on the balance sheet(*) | Impact of netting | Total |
| Derivative financial instruments - assets | 230 | (122) | 107 | 498 | (185) | 313 |
| Derivative financial instruments - liabilities | (1,749) | 122 | (1,627) | (2,393) | 185 | (2,208) |
| Net derivative instruments | (1,519) | - | (1,519) | (1,896) | - | (1,896) |
(*) Gross amounts as stated on the Group’s consolidated balance sheet.
