3.4 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 TX Group or locally within the companies. The risk officers designated by the Group management board identify, assess and manage risks with targeted measures throughout a periodic, systematic process. TX Group’s annual risk report covers risks at TX Group level as well as the risks associated with the companies under its (sole) control. The companies not under its control (SMG and JobCloud) have their own risk management systems that are independent of TX Group.
The current situation in the market environment, geopolitical tensions, the effects of interest rate rises and the impact of the looming energy crisis are key drivers of market risks. Changes in the behaviour of media consumers and advertising customers, as well as loss of market share to domestic and foreign competition, represent the greatest market-specific challenges.
Market risks
The market risks are assessed for Goldbach, 20 Minuten, Tamedia and TX Ventures on an individual basis and managed with various measures.
At Goldbach, various actions are being taken in the area of TV to address the changing ways in which younger people are consuming media. These include the launch of innovative forms of advertising such as replay ads, and the development of streaming offerings financed through advertising. The risk of a severe decline in print consumption is being mitigated through alliances with other publishers and the expansion of third-party marketing. The digitalisation of media purchasing represents a further risk. Players with their own technical distribution structures are increasing pressure. This risk is being countered through stricter control of distribution by using and investing in new technologies. Within the advertising business, international platforms continue to grow and removing third-party cookies increases the risk of losing market share. Advertising targeted to specific target groups based on a universal Swiss advertising ID should counteract this risk. Goldbach is also focusing on out-of-home advertising, where its strong footing in the domestic market represents a strategic advantage.
20 Minuten is yet to (significantly) recoup the decline in the advertising and user market caused by the pandemic despite the return of commuters. The shift in advertising expenditure from print to digital continues. At the same time, the rapid changes in media consumption among the young target group carry risks that are being addressed with the “social media first” strategy. Relevant news and entertainment formats are produced with storytelling specifically designed for, and broadcast on, social media, and adapted for the app, website and newspaper. Further measures are being taken to mitigate the effects of the removal of third-party cookies on the advertising sector. The potential damage has so far been largely limited through the introduction of a login and additional identifier.
For Tamedia, the further decrease in print subscription and advertising revenues, the decline in the print advertising market and the lack of digital revenue growth in the user market pose significant risks. Advertising offerings are being optimised with new digital formats and the input of specialists. There is a consistent focus on mobile content, improving product usability and automated guidance of customers in the registration and purchasing process, which is leading to gains in the digital user market. This is intended to mitigate the losses in the print reader market. The increase in the price of paper due to the Europe-wide shortage of used paper and high energy prices are also proving to be a significant challenge for Tamedia. The negotiation strategy for paper purchases is being modified accordingly, with the aim of improving planning ability. 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.
For TX Ventures, the risks to the majority interests are highlighted. At Zattoo, the largest client relationship makes up a significant share of the B2B revenues. As its loss represents a risk, this share should be reduced. The restructuring of the sales organisation should also ensure that significant planned growth can be achieved in B2B sales.
Apart from any market risks, there is also 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.
The impairment testing did not show any impairment was needed (see also Note 2.5).
Currency risks
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 CHF, 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 82.2 million in 2022 (previous year: CHF 91.0 million). The risks applied for the most part to transactions in euro and were hedged for paper purchases in 2023 in the amount of CHF 32.1 million (hedging in 2021 for paper purchases in 2022 amounted to CHF 37.1 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 2022 using forward exchange transactions can be found in the sections below. Details of the system for recognising these cash flow hedges can be found in the measurement principles.
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, Serbian dinars, US dollars, Danish krone and British pounds amounted to CHF –0.0 million as of the end of 2022 (previous year: CHF –0.9 million).
Interest rate risks
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.
| 2022 | 2021 | |||||||
|---|---|---|---|---|---|---|---|---|
| in CHF mn | Variable interest rate | Fixed interest rate | Variable interest rate | Fixed interest rate | ||||
| Assets | ||||||||
| Cash and cash equivalents | 316.3 | – | 436.5 | – | ||||
| Loan receivables | – | 170.8 | – | 154.3 | ||||
| Other financial receivables | 130.7 | – | – | – | ||||
| Liabilities | ||||||||
| Bank liabilities and loans | 1.5 | 1.4 | – | 4.7 | ||||
| Loan liabilities | 5.8 | – | 2.9 | 66.7 | ||||
| Impact on net income / (loss) before taxes of a change of +/– 0.1% | +/– 0.4 | +/– 0.4 | ||||||
Credit risks
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. 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 2.1 “Net working capital” for 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. The loan to General Atlantic SC B.V. is secured by a pledge of the shares held in SMG Swiss Marketplace Group AG.
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 overview below:
| in CHF mn | Not yet due/ at call |
up to 3 months |
4 to 12 months |
1 to 5 years | over 5 years | Total | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | ||||||||||||
| Financial liabilities | 0.1 | 9.4 | 22.9 | 117.5 | 35.0 | 184.9 | ||||||
| of which derivative financial instruments | – | 0.1 | 0.2 | – | – | 0.3 | ||||||
| of which leasing liabilities | – | 9.3 | 22.2 | 105.6 | 35.0 | 172.1 | ||||||
| Trade accounts payable | 75.8 | – | – | – | – | 75.8 | ||||||
| Other liabilities | 6.4 | – | – | – | – | 6.4 | ||||||
| Total | 82.4 | 9.4 | 22.9 | 117.5 | 35.0 | 267.1 | ||||||
| 2021 | ||||||||||||
| Financial liabilities | 4.1 | 5.1 | 11.7 | 102.7 | 13.2 | 136.8 | ||||||
| of which derivative financial instruments | – | 0.4 | 1.3 | – | – | 1.7 | ||||||
| of which leasing liabilities | – | 4.6 | 9.9 | 30.0 | 13.2 | 57.7 | ||||||
| Trade accounts payable | 66.0 | – | – | – | – | 66.0 | ||||||
| Other liabilities | 4.9 | – | – | – | – | 4.9 | ||||||
| Total | 75.1 | 5.1 | 11.7 | 102.7 | 13.2 | 207.8 |
Forward currency contracts
| in CHF mn | 2022 | 2021 | ||
|---|---|---|---|---|
| Contract volume | 32.1 | 37.1 | ||
| Fair value, due | 0.0 | (1.7) | ||
| due within 1 year | 0.0 | (1.7) | ||
| due within 1 to 5 years | – | – | ||
| due beyond 5 years | – | – | ||
| Details of cash flow hedges | ||||
| Cash flow hedges recognised directly in other comprehensive income / (loss) | 0.0 | (1.3) | ||
| Used for hedging as planned | 2.8 | 0.1 | ||
| Recognised directly in the income statement | – | – |
Depending on their maturity dates, the fair values of these derivative financial instruments are reported under current or non-current financial receivables or liabilities as appropriate.
Financial instruments
| Category | 2022 | 2021 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| in CHF mn | Carrying amount | Market value | Carrying amount | Market value | ||||||
| Cash and cash equivalents | 1 | 316.3 | 316.3 | 436.5 | 436.5 | |||||
| Current financial assets | 89.1 | 89.1 | 20.0 | 20.0 | ||||||
| of which securities | 4 | 88.7 | 88.7 | 20.0 | 20.0 | |||||
| of which forward exchange transactions | 3 | 0.3 | 0.3 | – | – | |||||
| Trade accounts receivable | 2 | 239.9 | 239.9 | 228.5 | 228.5 | |||||
| Current financial receivables | 2 | 39.4 | 39.4 | 123.0 | 123.0 | |||||
| Other non-current financial assets | 208.0 | 191.7 | 193.5 | 184.9 | ||||||
| of which other investments – equity instruments | 3 | 34.2 | 34.2 | 37.4 | 37.4 | |||||
| of which other investments – no equity instruments | 4 | 0.3 | 0.3 | 0.2 | 0.2 | |||||
| of which loans | 2 | 170.8 | 157.4 | 154.3 | 145.7 | |||||
| of which other non-current financial assets - no equity instruments | 2 | 2.7 | 2.7 | 1.6 | 1.6 | |||||
| Current financial liabilities | 0.7 | 0.7 | 6.1 | 6.1 | ||||||
| of which forward exchange transactions | 5 | 0.3 | 0.3 | 1.7 | 1.7 | |||||
| of which other current financial liabilities | 6 | 0.4 | 0.4 | 4.4 | 4.4 | |||||
| Trade accounts payable | 6 | 75.8 | 75.8 | 66.0 | 66.0 | |||||
| Other current liabilities | 6 | 6.4 | 6.4 | 4.9 | 4.9 | |||||
| Non-current financial liabilities | 11.3 | 11.2 | 72.3 | 72.2 | ||||||
| of which bank liabilities and loans | 6 | 8.7 | 8.6 | 69.6 | 69.5 | |||||
| of which purchase price obligations | 7 | – | – | 1.1 | 1.1 | |||||
| of which obligations to purchase own equity instruments | 7 | 0.6 | 0.6 | 0.5 | 0.5 | |||||
| of which other non-current financial liabilities | 7 | 1.9 | 1.9 | 1.2 | 1.2 | |||||
| Categorisation of financial instruments as per IFRS 9 | ||||||||||
| Cash and cash equivalents – at amortised cost | 1 | 316.3 | 316.3 | 436.5 | 436.5 | |||||
| Loans and receivables - at amortised costs | 2 | 452.8 | 439.3 | 507.5 | 498.9 | |||||
| Financial assets – at fair value with value adjustments in other comprehensive income | 3 | 34.5 | 34.5 | 37.4 | 37.4 | |||||
| Financial assets – at fair value with value adjustments in profit or loss | 4 | 89.0 | 89.0 | 20.2 | 20.2 | |||||
| Financial liabilities - at fair value with value adjustments in other comprehensive income | 5 | (0.3) | (0.3) | (1.7) | (1.7) | |||||
| Financial liabilities - at amortised costs | 6 | (91.4) | (91.3) | (144.9) | (144.9) | |||||
| Financial liabilities – at fair value with value adjustments in profit or loss | 7 | (2.5) | (2.5) | (2.7) | (2.7) | |||||
TX Group uses the following measurement hierarchy for determining the fair value of financial instruments:
-
Level 1: Listed prices on active markets for identical assets and liabilities.
-
Level 2: Fair values calculated on the basis of observable market data. Either listed prices on non-active markets or non-listed prices are used. Such market values may also be derived from prices indirectly.
-
Level 3: Fair values that are not calculated on the basis of observable market data.
The forward exchange transactions included under current financial assets are the only financial instruments that are classified as Level 2 in the fair value hierarchy. As of 31 December, these amount to CHF 0.0 million net (previous year: CHF –1.7 million) and, not therefore being material, no further disclosure is made in respect of them.
Among other things, equity instruments associated with other financial assets and any purchase prices due are classified as Level 3 in the fair value hierarchy. Investments are mainly made during the start-up phase when no observable market prices are available. A suitable alternative valuation method is therefore applied in order to determine the fair value of the investments. This can include the price paid by third parties during financing rounds, a calculation based on the discounted cash flow (DCF) method, or the market price as determined with the help of multiples. Input factors are things like contract details during the financing rounds, including the price paid by third parties, or business plans that contain the latest estimates in respect of trends for revenues and costs. As regards the most important other investment, in quantitative terms, in Joveo Inc., which is recorded in the balance sheet with a value of CHF 9.9 million as of 31 December 2022, the valuation was performed on a DCF basis during the second half of 2022. Any remaining other investments (including their sensitivity) are deemed not to be material for TX Group. The valuations of other investments are reviewed on a half-yearly basis. The change in respect of other investments in the reporting year can be seen in the table below:
| in CHF mn | 2022 | 2021 | ||
|---|---|---|---|---|
| Other investments – as of 1.1. | 37.5 | 32.9 | ||
| Additions | 10.0 | 10.2 | ||
| Disposals | (20.9) | – | ||
| Transfer to associates | – | (9.8) | ||
| Changes recognised directly in other comprehensive income / (loss) | 7.8 | 4.2 | ||
| Changes recognised in reported net income / (loss) | 0.1 | – | ||
| Other investments – as of 31.12. | 34.5 | 37.5 |
All other financial instruments valued at fair value are classified as Level 1 in the fair value hierarchy. There were no transfers between the three levels.
Accounting policies
Forward contracts and options with financial institutions are not entered into on a speculative basis, but selectively and exclusively for the purpose of mitigating the specific foreign currency and interest rate risks associated with business transactions. Foreign currency derivatives are measured according to the settlement of the hedged items as fair value hedges or as cash flow hedges, either in conjunction with the underlying transactions or separately at fair value as of the balance sheet date.
Derivative financial instruments, such as interest rate swaps, foreign currency transactions and certain derivative financial instruments embedded in basic agreements are recognised in the balance sheet at fair value, either as current or non-current financial assets or liabilities. The changes in fair value are recognised in the annual results or under other comprehensive income directly, depending on the purpose for which the respective derivative financial instrument is used.
In the case of fair value hedges, the change in fair value of the effective share (of the derivative financial instrument and the underlying transaction) is recognised immediately in the income statement. Changes in fair value of the effective share of derivative financial instruments classed as cash flow hedges and qualifying for treatment as such are recognised as other comprehensive income until the underlying transactions can be recognised in the income statement.
Changes in the fair value of derivative financial instruments that are not considered to be accounting hedges (as understood by the definition given above) or that do not qualify as such are recognised in the income statement as components of financial income or expenses. This also applies to fair value hedges and cash flow hedges as described above as soon as such financial instruments cease to qualify as accounting hedges.
Contractual obligations to purchase the Group’s own equity instruments (such as put options on non-controlling interests) result in the recognition of a financial liability, which is recognised at the present value of the exercise amount in the income statement. The fair value of the financial liability is regularly reviewed and any deviation from first-time recognition is recognised in the financial result.