Page 89 - Restamax Plc Annual Report 2017

4 MANAGEMENT OF FINANCIAL RISKS

Risk management principles and process

The Group’s operating activities expose it to certain financial risks, such as the effects of changes in interest rates. A key
principle of the Group’s risk management is the unpredictability of the financial markets and the aim to minimise their
adverse effects on the Group’s net income. The Group’s financial management identifies and estimates the risks and,
whenever necessary, acquires the instruments to protect the Group against the risks.

The Group’s financing policy guides all of its financing transactions. The main risks on the financing market are explained below.
Interest rate risk

The Group’s interest rate risk is mainly caused by non-current loans that have been taken out with a variable interest rate. The
Group is not presently hedging against the interest rate risk. The interest rates for the loans vary between the 1- and 6-month
Euribor rates plus margins of 1.65–2.00%.

The Group’s income and operative cash flows are mostly independent of the variations in the market rates of interest. The
Group’s main exposure to interest rate risk is a result of the variable interest rates, and the risk is mainly considered to relate
to the loan portfolio. On the closing date, 100.0% of the Group’s loans had variable interest rates.

Liquidity risk

The Group aims to continuously estimate and follow up on the financing required for the operating activities, such as by
performing a monthly analysis of the utilisation rate of the restaurants, the development of sales and investment needs,
in order to ensure that the Group has sufficient liquid assets to finance its operations and pay back due loans. The CFO
analyses the need for possible additional financing.

The aim is to ensure the availability and flexibility of Group financing by using sufficient credit limit reserves, a balanced
loan maturity distribution and sufficiently long loan periods, and using several financial institutions and forms of
financing when necessary. The Group’s financing activities determine the optimum cash liquidity.

The Group’s liquidity remained good throughout 2017. At the end of the year, cash and cash equivalents amounted to
TEUR 2,570.0 (1,871.1 on 31 December 2016), in addition to which the Group had access to undrawn confirmed account
credit limits totalling some MEUR 9.3 (31 December 2016: MEUR 4.9).

During the year, the Group drew TEUR 19,135.0 of new non-current financing for its investments. The loan period for
these financing arrangements is 5–6 years. The average annual interest rate for the Group’s gross interest-bearing liabil-
ities in 2017 was approximately 2.01% (2.3% in 2016).
The most important loan covenants are reported to the creditors each quarter. If the Group violates the terms of the loan
covenant, the creditor may require faster repayment for the loans. The management regularly monitors the fulfilment of
the loan covenant terms. During the 2017 financial period, the Group has been able to fulfil all the loan covenant terms
related to specific operative cash flow objectives, equity ratio and amount of investment.

The Group’s management has not identified any significant accumulation or liquidity risk in financial assets or sources
of financing.

The following table presents the maturity analysis. Negative numbers indicate incoming cash. The numbers are undis-
counted and include interest payments, capital amortisation and repayments.

31/12/2017
EUR thousand Note Balance Cash flow Less than 1 to less 2–5 years over
sheet value 1 year than 2 5 years
years
Financial liabilities 19 46,283.6 48,391.7 12,922.6 11,140.0 22,565.5 1,763.6

31/12/2016
EUR thousand Note Balance Cash flow Less than 1 to less 2–5 years over
sheet value 1 year than 2 5 years
years
Financial liabilities 19 32,562.9 34,505.5 8,504.4 14,038.1 8,180.4 3,782.6

CONSOLIDATED FINANCIAL STATEMENTS 89