Addnode Group Annual Report 2015 | Page 67

ANNUAL REPORT Notes

Cash consideration paid in 2015 included payments of contracted and previously expensed contingent consideration totalling SEK 8,425 thousand ( 26,686 thousand ) for company acquisitions carried out in previous years , and payments of SEK 67 thousand ( 870 thousand ) in connection with the acquisition of additional shares in Kartena AB .

NOTE 36 CASH AND CASH EQUIVALENTS , AND SHORT-TERM INVESTMENTS

Cash and cash equivalents in the Group and Parent Company included no holdings of short-term investments at 31 December 2015 or 31 December 2014 .

Cash and cash equivalents in blocked accounts in the Group amounted to SEK – ( 31 thousand ) at 31 December 2015 . The Parent Company had no cash and cash equivalents in blocked bank accounts at 31 December 2015 or 31 December 2014 .

NOTE 37 FINANCIAL RISKS AND RISK MANAGEMENT

FINANCIAL RISKS In the course of its operations Addnode Group is exposed to various financial risks , market risks ( including currency risks , interest rate risks and other price risks ), credit risks and liquidity risks . Management of these risks is regulated in the finance policy established by the Board of Directors . The Parent Company has overall responsibility for the Group ’ s financial risk management . The overall objective is to provide cost-efficient financing and to minimise negative effects on the Group ’ s earnings and position caused by market fluctuations or credit losses . All in all , the Group ’ s total exposure to various financial risks is deemed to be relatively limited . No changes have been made in this assessment since publication of the preceding annual report , nor have any significant changes been made in the Group ’ s targets , policies or methods for managing financial risks . If the Group ’ s risk exposure were to increase , such as through acquisitions or other events , the Board will make a new assessment of the Group ’ s risk situation as well as of its targets , policies and methods for risk management .

MARKET RISKS Currency risk Changes in exchange rates affect the Group ’ s earnings and shareholders ’ equity in various ways : – Earnings are affected when sales and purchases are made in different currencies ( transaction exposure ) – Earnings are affected when assets and liabilities are in different currencies ( translation exposure ) – Earnings are affected when the income statements of foreign subsidiaries are translated to SEK ( translation exposure )

– Shareholders ’ equity is affected when the net assets of foreign subsidiaries are translated to SEK ( translation exposure on the balance sheet )

The Group ’ s currency risk is relatively low , since Group companies mainly operate in their local markets and therefore have both revenue and costs in the same currency . The Group ’ s finance policy provides the opportunity to hedge net currency flows through external financial contracts if this is possible at a reasonable cost . A large share of the Group ’ s operations are conducted in Sweden .

Transaction exposure The most significant currencies in terms of transaction exposure are EUR and USD . Certain Group companies ’ sales in EUR and USD are offset to a certain extent by other Group companies ’ purchases in the same currencies . If the average exchange rate of EUR vs . SEK had been 10 per cent higher / lower compared with the average exchange rate in 2015 , with all other variables constant , consolidated profit after tax for 2015 would have been positively / negatively impacted by approximately SEK 6.0 m . If the average exchange rate of USD vs . SEK had been 10 per cent higher / lower compared with the average exchange rate in 2015 , with all other variables constant , consolidated profit after tax for 2015 would have been positively / negatively impacted by approximately SEK 0.6 m . The effects of changed exchange rates were largely offset by adjusted end-customer prices . This means that the sensitivity to currency movements has been historically lower than these stated amount levels .

During 2015 and most of 2014 , no transaction flows in foreign currency were hedged through forward exchange contracts ( see also Note 7 ). If the transaction volumes in foreign currency were to increase , the Board intends to make a new assessment of the need for currency hedges .

Translation exposure The average exchange rate has been used for translation of foreign subsidiaries ’ income statements . The most significant currency in this context is the euro ( EUR ). Of the consolidated profit after tax in 2015 , approximately SEK 21.7 m is attributable to Finnish and German companies . If the average exchange rate for EUR vs . SEK had been 10 per cent higher / lower compared with the average exchange rate in 2015 , with all other variables constant , consolidated profit after tax for 2015 would have been positively / negatively impacted by approximately SEK 2.2 m upon translation of the income statements of the foreign companies .

The Group ’ s cash and cash equivalents , trade receivables and trade payables are to a great extent in the respective companies ’ local currencies , which means that the translation exposure to changed exchange rates will not have any significant impact on the Group ’ s earnings . The table below shows the Group companies ’ cash and cash equivalents , trade receivables and trade payables that are denominated in a currency other than the Group company ’ s local currency , i . e ., the amount levels that are exposed to translation exposure .

Amounts in SEK m 31 / 12 / 2015 31 / 12 / 2014

If the average exchange rate of EUR had been 10 per cent higher / lower compared with the exchange rate on 31 December 2015 , consolidated profit before tax for 2015 would have been positively / negatively impacted by approximately SEK 6.4 m ( 0.3 ). The corresponding positive / negative earnings effect for a 10 per cent higher / lower exchange rate for USD would have been approximately SEK 0.4 m ( 0.9 ). The table also shows that the translation exposure for cash and cash equivalents , trade receivables and trade payables is on the whole higher at 31 December 2015 compared with at 31 December 2014 , and that the earnings effect at relatively large currency movements is not significant .

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