Market risks

Liquidity risk

The liquidity of Deutsche EuroShop Group is continuously monitored and planned. The subsidiaries regularly have sufficient cash to be able to pay for their current commitments. Furthermore, credit lines and bank overdrafts can be utilised at short notice.

The contractually agreed future interest and principle repayments of the original financial liabilities and derivative financial instruments are as follows as at 31 December 2010:

in € thousand Carrying amount 31 Dec 2010 Cash flows 2011 Cash flows 2012 to 2015 Cash flows from 2016
Bank loans and overdrafts 1,288,156 94,021 746,917 803,806

The amounts relate to all contractual commitments existing on the balance sheet date. The majority of the trade payables and other financial liabilities reported at the end of the financial year will fall due in 2011.

Credit and default risk

There are no significant credit risks in the Group. The trade receivables reported on the reporting date were predominantly paid up to the date of preparation of the financial statements. During the reporting year, write-downs of rent receivables of €578 thousand (previous year: €563 thousand) were recognised under property operating costs.

The maximum default risk in relation to trade receivables and other assets totals €11,772 thousand (previous year: €8,424 thousand) as at the reporting date.

Currency and measurement risk

The Group companies operate exclusively in the European Economic Area and conduct the greater part of their business in euro. This does not entail currency risks.

On the basis of expert appraisals, the property portfolio has a theoretical net yield of 5.89% (previous year: 5.82%) for financial year 2010. An increase of 100 basis points in the net initial yield would result in a profit reduction of €405 million. A reduction of 100 basis points would result in a profit increase of €571 million. Changes in the value of the properties are recognised under measurement gains / losses.

Interest rate risk

A sensitivity analysis was implemented to determine the effect of potential interest rate changes. Based on the financial assets and liabilities subject to interest rate risk on the balance sheet date, this shows the effect of a change on the Group’s equity. Interest rate risks arose on the balance sheet date only for credit borrowed and the associated interest rate hedges, which are recognised in equity as cash flow hedges at present value. An increase in the market interest rate of 100 basis points would lead to an increase in equity of €17,628 thousand. The majority of the loan liabilities have fixed interest terms. On the balance sheet date, loans totalling €201,780 thousand (previous year: €195,700 thousand) were hedged using derivative financial instruments.

Capital management

The Group’s capital management is designed to maintain a strong equity base with the aim of ensuring that its ability to repay its debts and financial well-being are maintained in the future. The Group’s financial policies are also based on the annual payment of a dividend.

in € thousand 31.12.2010 31.12.2009
Equity 1,527,432 1,044,360
Equity ratio (%) 51.5 49.5
Net financial debt -1,222,372 -850,681

Equity is reported here including the share of the third-party shareholders.

Net financial debt is determined from the financial liabilities on the balance sheet date less cash and cash equivalents and other financial investments.

Continue reading: Joint Ventures

Back to: Risk management


My Annual Report