Significant accounting policies are described in note 2.3 and 4.
35.1 CAPITAL RISK MANAGEMENT
Capital comprises equity attributable to the equity holders of the parent adjusted for effects from transactions with non-controlling interests.
The primary objective of Hudson’s capital management is to ensure that it maintains an adequate credit rating and sustainable capital ratios in order to support its business and maximize shareholder value.
Hudson manages its financing structure and makes adjustments to it in light of its strategy and the long-term opportunities and costs of each financing source. To maintain or adjust the financing structure, Hudson may adjust dividend payments to shareholders, return capital to shareholders, issue new shares or issue equity-linked instruments or equity-like instruments.
Furthermore, Hudson monitors the financing structure using a combination of ratios, including a gearing ratio, cash flow considerations and profitability ratios. As for the gearing ratio Hudson includes within net debt, interest bearing loans and borrowings, less cash and cash equivalents, excluding discontinued operations.
35.1.1 Gearing ratio
The following ratio compares owner’s equity to borrowed funds:
IN MILLIONS OF USD |
DEC 31, 2017 | DEC 31, 2016 | ||||||
| Cash and cash equivalents | (137.4) | (187.6) | ||||||
| Financial debt, short-term | 80.7 | 1.5 | ||||||
| Financial debt, long-term | 520.4 | 475.2 | ||||||
| Net debt | 463.7 | 289.1 | ||||||
| Equity attributable to equity holders of the parent | 493.7 | 658.2 | ||||||
| ADJUSTED FOR | ||||||||
| Effects from transactions with non-controlling interests 1 | 0.8 | 0.4 | ||||||
| Total capital 2 | 494.5 | 658.6 | ||||||
| Total net debt and capital | 958.2 | 947.7 | ||||||
| Gearing ratio | 48.4% | 30.5% | ||||||
| 1 | Represents the excess paid (received) above fair value of non-controlling interests on shares acquired (sold) as long as there is no change in control (IFRS 10.23) |
| 2 | Includes all capital and reserves that are managed as capital |
Hudson did not hold collateral of any kind at the reporting dates.
35.2 CATEGORIES OF FINANCIAL INSTRUMENTS
| AT DECEMBER 31, 2017 | FINANCIAL ASSETS |
|||||||||||||||||||
IN MILLIONS OF USD |
Loans and receivables | at FVTPL 1 | SUBTOTAL | NON-FINANCIAL ASSETS 2 | TOTAL | |||||||||||||||
| Cash and cash equivalents | 137.4 | – | 137.4 | – | 137.4 | |||||||||||||||
| Trade receivables | 4.6 | – | 4.6 | – | 4.6 | |||||||||||||||
| Other accounts receivable | 43.3 | – | 43.3 | 16.1 | 59.4 | |||||||||||||||
| Other non-current assets | 24.9 | – | 24.9 | – | 24.9 | |||||||||||||||
| Total | 210.2 | – | 210.2 | |||||||||||||||||
| FINANCIAL LIABILITIES | ||||||||||||||||||||
IN MILLIONS OF USD |
at amortized cost | at FVTPL 1 | SUBTOTAL | NON-FINANCIAL LIABILITIES 2 | TOTAL | |||||||||||||||
| Trade payables | 97.1 | – | 97.1 | – | 97.1 | |||||||||||||||
| Financial debt short-term | 80.7 | – | 80.7 | – | 80.7 | |||||||||||||||
| Other liabilities | 94.0 | – | 94.0 | 38.1 | 132.1 | |||||||||||||||
| Financial debt long-term | 520.4 | – | 520.4 | – | 520.4 | |||||||||||||||
| Other non-current liabilities | – | – | – | – | – | |||||||||||||||
| Total | 792.2 | – | 792.2 | |||||||||||||||||
| AT DECEMBER 31, 2016 | FINANCIAL ASSETS | |||||||||||||||||||
IN MILLIONS OF USD |
Loans and receivables | at FVTPL 1 | SUBTOTAL | NON-FINANCIAL ASSETS 2 | TOTAL | |||||||||||||||
| Cash and cash equivalents | 187.6 | – | 187.6 | – | 187.6 | |||||||||||||||
| Trade receivables | 8.2 | – | 8.2 | – | 8.2 | |||||||||||||||
| Other accounts receivable | 26.2 | – | 26.2 | 21.1 | 47.3 | |||||||||||||||
| Other non-current assets | 24.4 | – | 24.4 | 6.7 | 31.1 | |||||||||||||||
| Total | 246.4 | – | 246.4 | |||||||||||||||||
| FINANCIAL LIABILITIES | ||||||||||||||||||||
IN MILLIONS OF USD |
at amortized cost | at FVTPL 1 | SUBTOTAL | NON-FINANCIAL LIABILITIES 2 | TOTAL | |||||||||||||||
| Trade payables | 91.3 | – | 91.3 | – | 91.3 | |||||||||||||||
| Financial debt short-term | 1.5 | – | 1.5 | – | 1.5 | |||||||||||||||
| Other liabilities | 143.7 | – | 143.7 | 24.2 | 167.9 | |||||||||||||||
| Financial debt long-term | 475.2 | – | 475.2 | – | 475.2 | |||||||||||||||
| Other non-current liabilities | 1.1 | – | 1.1 | – | 1.1 | |||||||||||||||
| Total | 712.8 | – | 712.8 | |||||||||||||||||
| 1 | Financial assets and financial liabilities at fair value through profit and loss |
| 2 | Non-financial assets or non-financial liabilities comprise prepaid expenses and deferred income, which will not generate a cash outflow or inflow as well as other tax positions |
35.2.1 Net income by IAS 39 valuation category
Financial Assets at December 31, 2017
IN MILLIONS OF USD |
LOANS AND RECEIVABLES | AT FVTPL | TOTAL | |||||||||
| Interest income | 1.8 | – | 1.8 | |||||||||
| Other finance income | 0.1 | – | 0.1 | |||||||||
| From interest | 1.9 | – | 1.9 | |||||||||
| Foreign exchange gain (loss) 1 | 1.1 | – | 1.1 | |||||||||
| Impairments / allowances 2 | 0.3 | – | 0.3 | |||||||||
| Total – from subsequent valuation | 1.4 | – | 1.4 | |||||||||
| Net (expense) / income | 3.3 | – | 3.3 | |||||||||
Financial Liabilities at December 31, 2017
IN MILLIONS OF USD |
AT AMORTIZED COST | AT FVTPL | TOTAL | |||||||||
| Interest expenses | (29.4 | ) | – | (29.4 | ) | |||||||
| Other finance expenses | (0.5 | ) | – | (0.5 | ) | |||||||
| From interest | (29.9 | ) | – | (29.9 | ) | |||||||
| Foreign exchange gain (loss) 1 | 0.2 | – | 0.2 | |||||||||
| Total – from subsequent valuation | 0.2 | – | 0.2 | |||||||||
| Net (expense) / income | (29.7 | ) | – | (29.7 | ) | |||||||
| 1 | This position includes the foreign exchange gain (loss) recognized on third party and intercompany financial assets and liabilities through combined statement of comprehensive income |
| 2 | This position includes the income from the released impairments and allowances and recoveries during the period less the increase of impairments and allowances |
Financial Assets at December 31, 2016
IN MILLIONS OF USD |
LOANS AND RECEIVABLES |
AT FVTPL | TOTAL | |||||||||
| Interest income | 1.6 | - | 1.6 | |||||||||
| Other finance income | 0.5 | - | 0.5 | |||||||||
| From interest | 2.1 | - | 2.1 | |||||||||
| Foreign exchange gain (loss) 1 | (0.3 | ) | - | (0.3 | ) | |||||||
| Impairments/allowances 2 | (1.5 | ) | - | (1.5 | ) | |||||||
| Total – from subsequent valuation | (1.8 | ) | - | (1.8 | ) | |||||||
| Net (expense) / income | 0.3 | - | 0.3 | |||||||||
Financial Liabilities at December 31, 2016
IN MILLIONS OF USD |
AT AMORTIZED COST | AT FVTPL | TOTAL | |||||||||
| Interest expenses | (29.1 | ) | - | (29.1 | ) | |||||||
| Other finance expenses | (0.5 | ) | - | (0.5 | ) | |||||||
| From interest | (29.6 | ) | - | (29.6 | ) | |||||||
| Foreign exchange gain (loss) 1 | (0.1 | ) | - | (0.1 | ) | |||||||
| Total – from subsequent valuation | (0.1 | ) | - | (0.1 | ) | |||||||
| Net expense | (29.7 | ) | - | (29.7 | ) | |||||||
| 1 | This position includes the foreign exchange gain (loss) recognized on third party and intercompany financial assets and liabilities through combined statement of comprehensive income |
| 2 | This position includes the income from the released impairments and allowances and recoveries during the period less the increase of impairments and allowances |
35.3 FINANCIAL RISK MANAGEMENT OBJECTIVES
As a retailer, Hudson has activities which need to be financed in different currencies and are consequently affected by fluctuations of foreign exchange and interest rates. Hudson’s treasury manages the financing of the operations through centralized credit facilities to ensure an adequate allocation of these resources and simultaneously minimize the potential currency financial risk impacts.
Hudson continuously monitors the market risk, such as risks related to foreign currency, interest rate, credit, liquidity and capital. Hudson seeks to minimize the currency exposure and interest rates risk using appropriate transaction structures or alternatively, using derivative financial instruments to hedge the exposure to these risks. The treasury policy forbids entering or trading financial instruments for speculative purposes.
35.4 MARKET RISK
Hudson’s financial assets and liabilities are mainly exposed to market risk in foreign currency exchange and interest rates. Hudson’s objective is to minimize the statement of comprehensive income impact and to reduce fluctuations in cash flows through structuring the respective transactions to minimize market risks. In cases, where the associated risk cannot be hedged appropriately through a transaction structure, and the evaluation of market risks indicates a material exposure, Hudson may use financial instruments to hedge the respective exposure.
Hudson may enter into a variety of financial instruments to manage its exposure to foreign currency risk, including forward foreign exchange contracts, currency swaps and over the counter plain vanilla options.
During the current financial year Hudson has not utilized foreign currency forward contracts and options for hedging purposes.
35.5 FOREIGN CURRENCY RISK MANAGEMENT
Hudson manages the cash flow surplus or deficits in foreign currency of the operations through FX-transactions in the respective local currency. Major imbalances in foreign currencies at Group level may be hedged through foreign exchange forwards contracts.
35.5.1 Foreign currency sensitivity analysis
Among various methodologies to analyze and manage risk, Hudson utilizes a system based on sensitivity analysis. This tool enables Group treasury to identify the level of risk of each entity. Sensitivity analysis provides an approximate quantification of the exposure in the event that certain specified parameters were to be met under a specific set of assumptions.
Foreign Currency Exposure
IN MILLIONS OF USD |
USD 1 | EURO | CAD | CHF | TOTAL | |||||||||||||||
| DECEMBER 31, 2017 | ||||||||||||||||||||
| Monetary assets | 0.6 | – | 3.7 | – | 4.3 | |||||||||||||||
| Monetary liabilities | 6.3 | 0.1 | – | 0.2 | 6.6 | |||||||||||||||
| Net currency exposure | (5.7 | ) | (0.1 | ) | 3.7 | (0.2 | ) | (2.3 | ) | |||||||||||
| DECEMBER 31, 2016 | ||||||||||||||||||||
| Monetary assets | 0.1 | 10.3 | – | – | 10.4 | |||||||||||||||
| Monetary liabilities | 18.6 | 0.2 | – | 0.9 | 19.7 | |||||||||||||||
| Net currency exposure | (18.5 | ) | 10.1 | – | (0.9 | ) | (9.3 | ) | ||||||||||||
| 1 | USD held by Canadian subsidiaries |
The sensitivity analysis includes all monetary assets and liabilities held by each Group company irrespective of whether the positions are third party or intercompany.
The foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure of Hudson entities at December 31 of the respective year. The values and risk disclosed here are the hedged and not hedged positions assuming a 5 % appreciation of the USD against all other currencies.
A positive result indicates a profit, before tax in the statement of comprehensive income or in the hedging and revaluation reserves when the EUR strengthens against the relevant currency.
IN MILLIONS OF USD |
DEC 31, 2017 | DEC 31, 2016 | ||||||
| Effect on the Statement of Comprehensive Income – profit (loss) of USD | (0.3 | ) | (0.9 | ) | ||||
| Effect on the Statement of Comprehensive Income – profit (loss) of CAD | 0.2 | – | ||||||
| Effect on the Statement of Comprehensive Income – profit (loss) of EUR | – | 0.5 | ||||||
35.6 INTEREST RATE RISK MANAGEMENT
35.6.1 Allocation of financial assets and liabilities to interest classes
| IN % | IN MILLIONS OF USD | |||||||||||||||||||||||||||
AT DECEMBER 31, 2017 |
Average variable interest rate | Average fixed interest rate | Variable interest rate | Fixed interest rate | Total interest bearing | Non-interest bearing | TOTAL | |||||||||||||||||||||
| Cash and cash equivalents | 0.1 | % | 6.6 | – | 6.6 | 130.8 | 137.4 | |||||||||||||||||||||
| Trade receivables | – | – | – | 4.6 | 4.6 | |||||||||||||||||||||||
| Other accounts receivable | – | – | – | 43.3 | 43.3 | |||||||||||||||||||||||
| Other non-current assets | 7.3 | % | 19.2 | – | 19.2 | 5.7 | 24.9 | |||||||||||||||||||||
| Financial assets | 25.8 | – | 25.8 | 184.4 | 210.2 | |||||||||||||||||||||||
| Trade payables | – | – | – | 97.1 | 97.1 | |||||||||||||||||||||||
| Financial debt, short-term | – | – | – | 80.7 | 80.7 | |||||||||||||||||||||||
| Other liabilities | – | – | – | 94.0 | 94.0 | |||||||||||||||||||||||
| Financial debt, long-term | 5.7 | % | – | 520.4 | 520.4 | – | 520.4 | |||||||||||||||||||||
| Other non-current liabilities | – | – | – | – | – | |||||||||||||||||||||||
| Financial liabilities | – | 520.4 | 520.4 | 271.8 | 792.2 | |||||||||||||||||||||||
| Net financial liabilities | (25.8 | ) | 520.4 | 494.6 | 87.4 | 582.0 | ||||||||||||||||||||||
| IN % | IN MILLIONS OF USD | |||||||||||||||||||||||||||
AT DECEMBER 31, 2016 |
Average variable interest rate | Average fixed interest rate | Variable interest rate | Fixed interest rate | Total interest bearing | Non-interest bearing | TOTAL | |||||||||||||||||||||
| Cash and cash equivalents | 0.1 | % | 184.8 | – | 184.8 | 2.8 | 187.6 | |||||||||||||||||||||
| Trade receivables | – | – | – | 8.2 | 8.2 | |||||||||||||||||||||||
| Other accounts receivable | – | – | – | 26.2 | 26.2 | |||||||||||||||||||||||
| Other non-current assets | 7.0 | % | 22.5 | – | 22.5 | 1.9 | 24.4 | |||||||||||||||||||||
| Financial assets | 207.3 | – | 207.3 | 39.1 | 246.4 | |||||||||||||||||||||||
| Trade payables | – | – | – | 91.3 | 91.3 | |||||||||||||||||||||||
| Financial debt, short-term | – | – | – | 1.5 | 1.5 | |||||||||||||||||||||||
| Other liabilities | – | – | – | 143.7 | 143.7 | |||||||||||||||||||||||
| Financial debt, long-term | 5.9 | % | – | 475.2 | 475.2 | – | 475.2 | |||||||||||||||||||||
| Other non-current liabilities | – | – | – | 1.1 | 1.1 | |||||||||||||||||||||||
| Financial liabilities | – | 475.2 | 475.2 | 237.6 | 712.8 | |||||||||||||||||||||||
| Net financial liabilities | (207.3 | ) | 475.2 | 267.9 | 198.5 | 466.4 | ||||||||||||||||||||||
35.7 CREDIT RISK MANAGEMENT
Credit risk refers to the risk that counterparty may default on its contractual obligations resulting in financial loss to Hudson.
Almost all Hudson sales are retail sales made against cash or internationally recognized credit / debit cards. The remaining credit risk is in relation to taxes, refunds from suppliers and guarantee deposits.
The credit risk on cash deposits or derivative financial instruments relates to banks or financial institutions. Hudson monitors the credit ranking of these institutions and does not expect defaults from non-performance of these counterparties.
The main banks where Hudson keeps net assets positions hold a credit rating of A – or higher.
35.7.1 Maximum credit risk
The carrying amount of financial assets recorded in the financial statements, after deduction of any allowances for losses, represents Hudson’s maximum exposure to credit risk.
35.8 LIQUIDITY RISK MANAGEMENT
Hudson evaluates this risk as the ability to settle its financial liabilities on time and at a reasonable price. Beside its capability to generate cash through its operations, Hudson, jointly with Dufry, mitigates liquidity risk by keeping unused credit facilities with financial institutions (see note 29).
35.8.1 Remaining maturities for non-derivative financial assets and liabilities
The following tables have been drawn up based on the undiscounted cash flows of financial assets and liabilities (based on the earliest date on which Hudson can receive or be required to pay).
The following tables include principal and interest cash flows.
AT DECEMBER 31, 2017 IN MILLIONS OF USD |
1 – 6 MONTHS | 6 – 12 MONTHS | 1 – 2 YEARS | MORE THAN 2 YEARS | TOTAL | |||||||||||||||
| Cash and cash equivalents | 137.5 | – | – | – | 137.5 | |||||||||||||||
| Trade receivables | 4.6 | – | – | – | 4.6 | |||||||||||||||
| Other accounts receivable | 43.3 | – | – | – | 43.3 | |||||||||||||||
| Other non-current assets | 0.8 | 0.8 | 3.0 | 24.9 | 29.5 | |||||||||||||||
| Total cash inflows | 186.2 | 0.8 | 3.0 | 24.9 | 214.9 | |||||||||||||||
| Trade payables | 97.1 | – | – | – | 97.1 | |||||||||||||||
| Financial debt, short-term | 13.1 | 67.6 | – | – | 80.7 | |||||||||||||||
| Other liabilities | 94.0 | – | – | – | 94.0 | |||||||||||||||
| Financial debt, long-term | 14.9 | 17.9 | 29.8 | 609.6 | 672.2 | |||||||||||||||
| Other non-current liabilities | – | – | – | – | – | |||||||||||||||
| Total cash outflows | 219.1 | 85.5 | 29.8 | 609.6 | 944.0 | |||||||||||||||
AT DECEMBER 31, 2016 IN MILLIONS OF USD |
1 – 6 MONTHS | 6 – 12 MONTHS | 1 – 2 YEARS | MORE THAN 2 YEARS | TOTAL | |||||||||||||||
| Cash and cash equivalents | 187.8 | – | – | – | 187.8 | |||||||||||||||
| Trade receivables | 8.2 | – | – | – | 8.2 | |||||||||||||||
| Other accounts receivable | 26.2 | – | – | – | 26.2 | |||||||||||||||
| Other non-current assets | – | – | – | 29.1 | 29.1 | |||||||||||||||
| Total cash inflows | 222.2 | – | – | 29.1 | 251.3 | |||||||||||||||
| Trade payables | 91.3 | – | – | – | 91.3 | |||||||||||||||
| Financial debt, short-term | 1.5 | – | – | – | 1.5 | |||||||||||||||
| Other liabilities | 143.7 | – | – | – | 143.7 | |||||||||||||||
| Financial debt, long-term | 14.1 | 14.1 | 28.2 | 582.2 | 638.6 | |||||||||||||||
| Other non-current liabilities | – | – | – | 1.1 | 1.1 | |||||||||||||||
| Total cash outflows | 250.6 | 14.1 | 28.2 | 583.3 | 876.2 | |||||||||||||||