ANNUAL REPORT 2016
A similar simulation of exchange rate depreciation applied to the net investment, would have
a negative impact on the equity of the Group of 369 and 529 thousand euros, respectively.
ii) Price risk
The Group is not greatly exposed to the merchandise price risk.
iii) Interest rate risk (cash flow and fair value)
With the exception of the Angola Treasury Bonds, the Group has no significant interest
bearing assets. Therefore, profit and cash flows from investment activities are substantially
independent of changes in market interest rate. Regarding the Angolan State treasury bonds,
interest is fixed, so there is also no risk.
The Group’s interest rate risk follows its liabilities, in particular long-term loans. Loans issued
with variable rates expose the Group to the cash flow risk associated to interest rates. Loans
with fixed rates expose the Group to the risk of the fair value associated to interest rates. At
the current interest rates, in financing of longer maturity periods the Group has a policy of
fixing interest rates of at least 50% of the outstanding amount.
The unpaid debt bears variable interest rate, part of which has been the object of an interest
rate swap. The interest rate swap to hedge the risk of a 7,5 million euros (commercial paper
programmes) loan has the maturity of the underlying interest and the repayment plan iden-
tical to the terms of the loan. Financing contracted at the end of the year will be subject to
settlement operations during the year 2017.
Based on simulations performed on December 31st 2016, an increase of 100 basis points in
the interest rate, maintaining other factors constant, would have a negative impact in the net
profit of 390.000 euros.
b) Credit risk
The main activity of the Group is carried out with sales paid in cash, or debit or credit card,
so the Group has no significant credit risk concentrations. Regarding the customers, the risk
is limited to the Catering business and sales of merchandise to franchisees representing less
than 4% of the consolidated sales. The Group has policies to ensure that credit sales are made
to customers with an appropriate credit history. The Group has policies that limit the amount
of credit that customers have access to.
The Group’s cash and cash equivalents include mainly deposits resulting from cash provided
by sales and its deposits in current accounts. These amounts excluded, the value of financial
investments at December 31, 2016, is not significant, with the exception of the above men-
tioned Treasury Bonds of the Republic of Angola in the amount of 17.5 million euro, subject
to country risk.
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