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Information on financial risk management

The Audit Committee at TX Group AG monitors risk management at the company and approves the consolidated risk report. Risk management is broken down into risk spheres, which are dealt with centrally within the TX Group or locally within the sub-groups. The risk officers designated by Group Management identify, assess and manage risks with targeted measures throughout a periodic, systematic process.

Key drivers of risks are the acceleration of structural change within the media industry as a result of the COVID-19 pandemic, changes in the behaviour of media consumers and advertising customers and tougher competition through new media offerings from global providers such as Google, Amazon or Meta.

Market risks are considered for the individual companies and addressed with targeted measures.

Market risks for TX Markets include the significant increase in pressure from the competition and the rapid development of disruptive business models. This pressure in the core markets is mainly increasing on account of massive investments in general classifieds by major international players. In response to this development, the online marketplaces of TX Markets and Scout24 Schweiz are being combined to form the SMG Swiss Marketplace Group. The company is one of the biggest digital enterprises in Switzerland. There is also the risk associated with the wider economy, particularly in the job market. This is countered by retaining a flexible set-up, with specific offerings aimed at customer development and retention, and through cost management.

At Goldbach, targeted measures are being taken in the area of TV to address the changing ways that younger people are consuming media. These include the launch of innovative forms of advertising within the context of replay TV, such as replay ads, and the development of new products associated with advanced TV. The risk of a severe decline in print consumption is being mitigated through alliances and cross-media offerings. Another risk is the digitalisation of media purchasing and the associated loss of inventories. This risk is being countered through verticalisation and stricter control of distribution by using and investing in new technologies. As regards the online business, there is a risk that ad impressions will decline as a result of greater focus on net coverage and dispensing with third-party cookies. Specific coun­termeasures include the development of a measurement methodology, the creation of new advertising formats and the introduction of a convergence approach.

The COVID-19 pandemic and its consequences for public life have accelerated the migration of advertising expenditure from print to digital at 20 Minuten. At the same time, the rapid changes in media consumption among the young target group carry risks that are being addressed with a “social media first” strategy. The relevant news and entertainment formats will primarily be produced in future for placement on various social media platforms and only placed there too at first – before being adapted for apps, websites and newspapers. Other measures are being taken to mitigate the risk of “data privacy and cookieless technology” or the consequences of the advertising industry dispensing with third-party cookies. With the introduction of a login arrangement and additional identifier (PPI), however, the potential damage in relation to the Google Adserver has been greatly limited so far.

For Tamedia, the main risks are the further decline in the print advertising market, the lack of digital revenue growth in the user market and short-term dips in third-party customer business at the printing centres. In close collaboration with Goldbach Publishing, variable marketing costs have been implemented and improvements are being made to advertising offerings. The consistent focus on mobile content, improving product usability and automated guidance of customers down the sales funnel has led to gains in the digital user market that are helping to cushion losses in the print readers market. In terms of third-party customer business at printing centres, the focus is on maintaining close relationships with customers and on constantly optimising the cost structure. Over the next six to twelve months, a steep increase in the price of paper is expected due to the Europe-wide shortage of used paper and higher energy prices. After this, paper supply and demand should balance out again and prices should fall. The negotiation strategy for paper purchases is being modified accordingly.

As regards the portfolio companies of TX Ventures, there is a risk that evaluation multiples (e.g. EV/sales or EV/EBITDA) for comparable companies might tail off on the capital market, which would have a negative effect on the value of the respective company. This risk is addressed by means of conservative valuation mechanisms and continuous valuation. Business model risks such as changing markets, inadequate product-market fit and investments in early(-ier) stage ventures are being tackled through continuous market and competition analysis. The expansion of global providers is classed as another big risk. These are continuously expanding into other sectors, leaving individual companies facing a competitive environment over the medium term and with a potential negative impact on pricing. TX Ventures companies are actively tackling this risk through diversification and focusing on non-cyclical business models with highly structural drivers.

Apart from any market risks, there is also active management of risks in the areas of Human Resources, Finance, Legal and Technology. Ongoing investments are being made in security measures with a view to combating technical issues affecting IT systems and rising cybercrime. These can prove particularly worthwhile in the event of cyberattacks. TX Group has therefore entered into partnerships with leading providers to help it incorporate the very latest protection.

Interest rate risk

Interest rate risk is managed centrally. Short-term interest rate risks are generally not hedged. As of the balance sheet date, there were no hedges of long-term interest rate risks.

The risk resulting from changes in market interest rates mainly relates to current and non-current financial liabilities.

The following table provides details of the items that are subject to interest rate risks and shows the impact of a possible change in interest rates on the Group’s net income before taxes.

  2021   2020
in CHF 000   Variable interest rate   fixed interest rate   Variable interest rate   fixed interest rate
Assets                
Cash and cash equivalents   436 465     276 153  
Loan receivables     154 323     761
                 
Liabilities                
Bank liabilities and loans     4 675     2 000
Loan liabilities   2 885   66 682   2 885   14 970
                 
Impact on net income / (loss) before taxes of a change of +/- 0.1%   +/– 434       +/– 273    
Currency risk

Risks relating to exchange rate fluctuations may result in particular from the purchase of paper or investments. Currency risks are hedged centrally, by means of cash flow hedges, and thus minimised to the extent that such action is considered expedient.

At present, currency risks result mainly from purchases made in foreign currency and whose revenues are generated predominantly in Swiss Francs, as well as investments in other companies that are managed in a foreign currency. The equivalent value of purchases in foreign currency amounted to CHF 91.0 million in 2021 (previous year: CHF 74.7 million). The risks applied for the most part to transactions in euro and were hedged for paper purchases in 2022 in the amount of CHF 37.1 million (hedging in 2020 for paper purchases in 2021 amounted to CHF 29.8 million). The above purchases in foreign currency do not include those made by foreign Goldbach Group companies since the latter’s purchases are not exposed to any material currency risk on account of revenues also being accrued in euro. Nothing is done to hedge the foreign currency risk associated with investments. Details of the hedges for 2021 using forward exchange transactions can be found in Note 36. Details of the system for recognising these cash flow hedges can be found in the accounting policies.

The effects on net income before taxes of a possible change in the exchange rates of 5 per cent on the items in the balance sheet in euro, US dollars, Danish krone, Serbian dinars and Israeli shekels amount to CHF -0.9 million as at the end of 2021 (previous year: CHF -0.1 million).

Credit default risk

Trade accounts receivable are constantly monitored using standardised processes that are also supported by external debt collection partners. Standard guidelines are used to make the necessary value adjustments (see also: Measurement guideline for accounts receivable). The threat of cluster risks is minimised by the large number and broad distribution of receivables from customers across all market segments. Quantitative information on credit risk resulting from operations can be found in Note 16 “Trade accounts receivable”.

The credit risk to which cash and cash equivalents and other financial assets are exposed relates to counterparty defaults, in which case the maximum risk is the carrying amount. Cash and cash equivalents are mostly held at three big Swiss banks, of which the credit default risk is rated as low based on the current Standard & Poor’s credit ratings.

Liquidity risk

The risk of not having access to sufficient liquidity to settle liabilities is covered by a liquidity plan, which is continuously updated. The liquidity plan takes both day-to-day operations and accounts receivable and liabilities into account.

In order to optimise the available financial resources, liquidity management and long-term financing are undertaken centrally. This means that capital can be procured cost-effectively and ensures that the liquidity available matches the payment obligations.

The due dates of financial liabilities are shown in the table below.

in CHF 000   Not yet due/
at call
  up to 3
months
  4 to 12
months
  1 to 5 years   over 5 years   Total
2021                        
Financial liabilities   4 146   5 108   11 689   102 697   13 200   136 840
of which derivative financial instruments     396   1 279       1 675
of which leasing liabilities     4 629   9 865   30 039   13 200   57 734
Trade accounts payable   66 027           66 027
Other liabilities   4 895           4 895
Total   75 069   5 108   11 689   102 697   13 200   207 762
 
                         
2020                        
Financial liabilities   5 072   4 484   10 860   57 908   18 596   96 920
of which derivative financial instruments            
of which leasing liabilities     4 450   10 410   38 039   18 596   71 495
Trade accounts payable   69 073           69 073
Other liabilities   15 234           15 234
Total   89 379   4 484   10 860   57 908   18 596   181 226
Capital management

The capital defined in conjunction with capital management corresponds to reported equity.

Capital management ensures that the necessary capital for operational activities can be made available from funds earned by the Group itself and that financial liabilities can usually be settled from the Group’s own funds within a period of three to five years. The dividends paid to shareholders are adjusted as a means of managing capital. The aim is to pay dividends to shareholders in the range of 35 to 45 per cent of the free cash flow b. M&A following dividends to non-controlling interests and to report an equity ratio that is significantly higher than 50 per cent over the long term.