Carrefour - 2017 Registration Document

MANAGEMENT’S DISCUSSION AND ANALYSIS AS OF DECEMBER 31, 2017 Other information 2017 REGISTRATION DOCUMENT | CARREFOUR 4. 182 Significant events of the period 4.4.2 New Group management team The Board of Directors appointed Alexandre Bompard to replace Georges Plassat as Chairman of the Board of Directors and Chief Executive Officer of the Carrefour group, effective July 18, 2017. On September 22, 2017 Alexandre Bompard announced the appointment of a Group Executive Committee effective on October 2, 2018. The new management team comprises managers from the Group and individuals from other horizons bringing complementary expertise. The first task of the new management team has consisted in redefining the Group’s strategy. The Group’s ambition is to become the leader of the food transition for all and regain momentum. The transformation plan announced on January 23, 2018 aims at revamping the Carrefour model, by simplifying its organisation and by opening up to partnerships, improving operational efficiency, investing in growth formats, building an efficient omni-channel model and developing the fresh and organic products offering, notably under the Carrefour brand. IPO of the Group’s Brazil operations In June 2017, the Group announced that Atacadão SA, the parent company of the Carrefour group’s operations in Brazil (Grupo Carrefour Brasil) filed a prospectus with the Brazilian Securities Commission (CVM) with the aim of listing the shares of Grupo Carrefour Brasil on the Novo Mercado segment of the São Paulo stock exchange. The IPO took place on July 20, 2017 and consisted of a primary offering of 205,882,353 shares issued by Grupo Carrefour Brasil and a secondary offering of 34,461,489 and 56,800,000 Grupo Carrefour Brasil shares sold by Carrefour and Península, respectively. Carrefour also granted a secondary over-allotment option to the Brazilian banks participating in the offering that led to the placement of an additional 34,369,876 Carrefour-owned shares to cover over-allotment. Based on the IPO price, set at 15 Brazilian reals per share, the primary offering amounted to 3.1 billion Brazilian reals (0.8 billion euros), thereby valuing, at the launch of the IPO and following a capital increase, Grupo Carrefour Brasil’s equity at 29.7 billion Brazilian reals (8.1 billion euros). After the completion of the IPO and the exercise by Península of its call option to purchase 71,003,063 Grupo Carrefour Brasil shares from Carrefour, Carrefour holds a 71.8% interest in Grupo Carrefour Brasil, while Península holds 11.5% and Grupo Carrefour Brasil’s free float is 16.7%. The accounting impact of the transaction is presented in Note 3.2.1 to the Consolidated Financial Statements. Absorption of Carmila by Cardety On March 2, 2017, Carmila and Cardety, two property companies over which the Group has significant influence, announced a draft merger agreement under which Carmila would be absorbed by Cardety, whose shares are listed on Euronext Paris. The merger took place on June 12, 2017. Post completion, Carrefour held 42.45% of the new entity, which has been named Carmila. As part of its development plan, the merged entity carried out a capital increase for 628.6 million euros in July 2017, subscribed by Carrefour in an amount of 50 million euros. Carrefour now owns 35.76% of the shares and voting rights of Carmila. The accounting impact of the business combination is presented in Note 3.2.1 to the Consolidated Financial Statements. Acquisition of hypermarkets in Spain On February 29, 2016, the Carrefour group announced it had signed an agreement with the Eroski group to acquire 36 compact hypermarkets with a total sales area of 235,000 square metres, as well as eight shopping malls and 22 service stations adjacent to the stores. The conditions precedent have been met for the acquisition of 31 stores. The accounting impact of the transaction is presented in Note 3.2.1 to the Consolidated Financial Statements. The acquisition has enabled Carrefour to expand its store network to 27 new towns and cities, and strengthen its position in the food market. In this way, the Group is furthering its ongoing multi-format and omni-channel development for the benefit of its customers. Impairment of goodwill allocated to Italian operations In defining its transformation plan, the Group reviewed the financial trajectories of its various regions and adjusted certain assumptions underlying financial projections for its operations in Italy. Although profitability in the region has gradually improved over the past few years, certain commercial dynamics observed in 2017 prompted the Group to adjust its forecast in terms of margins and free cash flow (change in cash from operating activities less operational investments) as reflected in the financial trajectory defined by the Group’s Executive Management. The results of the impairment tests carried out on this basis (Note 6.3 to the Consolidated Financial Statements) led the Group to recognise a 700 million-euro impairment loss against goodwill allocated to its Italian operations. This impairment loss is included in non-recurring expenses and has no impact on cash flow (Note 5.3 to the Consolidated Financial Statements).