The information included in the notes for financial instruments is useful in estimating the extent of risks relating to both on-balance and off-balance financial instruments.

The group’s primary financial instruments, not being derivatives, serve to finance the group’s operating activities or directly arise from these activities. The group also enters into transactions in derivatives, particularly forward currency contracts and interest rate swaps, to hedge foreign exchange and interest rate risks arising from the group’s operating and financing activities. The group’s policy is not to trade in financial instruments for speculation purposes. The principal risks arising from the group’s financial instruments are foreign exchange risk, interest rate and cash flow risks, other price risk, credit risks and liquidity risks. 

The group’s policy to mitigate these risks is set out below.

The group is exposed to foreign exchange risks arising from purchase and sales transactions denominated in a currency other than the group’s presentation currency. The group’s policy is to hedge foreign exchange risks by entering into forward currency contracts by assessment of group management. Ultimo 2024 foreign exchange risk derivatives at a fair value of €+155K are present. Currency risks regarding net asset investments in foreign currencies are not being hedged.

Interest rate risk is the risk of the fair value of future cash flows from financial instruments fluctuating due to changing market interest rates. The risk of market rate fluctuations run by the group mainly relates to the group’s variable-interest long-term commitments. The interest rate risk on the bank loan is hedged via an interest rate swap with a cap at 3.48%. Refer to “Liabilities to credit institutions”. Ultimo 2024 the group has no other derivatives to cover risks for interest rate or cash flows.

Royal Ahrend chose to have a significant part of her funding as short-term, which enables the company to adjust to its financing needs in a flexible manner. The interest rate risk involved with short-term debt is not hedged.

The group trades only with creditworthy parties and has implemented procedures to check the creditworthiness of parties. The group has also drawn up guidelines for limiting the credit risk associated with each financial institution and debtor. Furthermore, the group applies strict credit control and dunning procedures. The group’s credit risk is minimal due to the above measures. No significant concentrations of credit risk exist within the group.

The group manages liquidity risk through short term monitoring and by making adjustments where necessary. A cash pool is applicable throughout the group optimising group cash positions. For details of the liquidity risk relating to interest rate swaps, please refer to the note on interest rate swaps. For details of the unconditional credit facility made available and the related covenants, please refer to the notes on liabilities to credit institutions.

Transactions between related parties are affected at arm’s length conditions. There are no specific related parties’ transactions to report.