TomTom 2005 Annual Report Download - page 44

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44
Treasury฀Policy
TomTom’s฀treasury฀function฀strives฀to฀achieve฀a฀
reasonable฀return฀on฀excess฀cash฀resources.฀The฀main฀
goal฀is฀to฀get฀a฀reasonable฀return฀on฀the฀cash฀balances฀
relative฀to฀market฀rate฀returns.
TomTom฀will฀apply฀these฀guidelines,฀among฀others,฀to฀
select฀investment฀opportunities฀for฀its฀excess฀cash฀
balances.฀All฀investments฀have฀at฀least฀an฀AA
-
฀credit฀risk฀
rating฀by฀an฀acknowledged฀institute.฀A฀maximum฀term฀of฀
three฀years฀is฀used,฀and฀with฀a฀potentially฀lower฀overall฀
return,฀early฀unwinding฀is฀allowed฀for฀each฀investment.
The฀treasury฀function฀also฀controls฀risks฀for฀TomTom฀
relating฀to฀changes฀in฀foreign฀currency฀exchange฀rates฀
(relative฀to฀the฀euro)฀by฀effective฀and฀efficient฀
management฀of฀foreign฀exchange฀exposures฀related฀to฀
revenue,฀procurement฀and฀cash฀balances.฀The฀main฀goal฀
is฀to฀make฀the฀cost฀of฀working฀with฀foreign฀currencies฀
more฀predictable฀and฀to฀reduce฀the฀cost฀of฀the฀tools฀that฀
are฀used.฀The฀goal฀is฀not฀to฀reduce฀the฀cost฀of฀foreign฀
currencies฀by฀achieving฀lower฀exchange฀rates฀than฀
market฀averages฀or฀market฀expectations.฀
TomTom฀manages฀its฀transaction฀risks฀relating฀to฀future฀
forecast฀cash฀flows฀by฀entering฀into฀financial฀instruments฀
which฀make฀the฀future฀cash฀flows฀more฀predictable.฀
TomTom฀seeks฀to฀protect฀its฀cost฀of฀sales฀line฀from฀
sudden฀movements฀in฀the฀US฀dollar฀relative฀to฀the฀euro฀
and฀it฀also฀does฀the฀same฀for฀pound฀sterling-
denominated฀revenues฀arising฀in฀the฀UK.฀TomTom฀does฀
not฀hedge฀translation฀risk฀i.e.:฀the฀risk฀which฀arises฀on฀
the฀translation฀of฀non-euro฀denominated฀income฀
statements฀and฀balance฀sheets฀of฀subsidiaries.฀TomTom฀
will฀only฀use฀simple฀hedging฀instruments,฀mainly฀forward฀
contracts฀and฀to฀a฀far฀lesser฀extent฀plain฀options.฀TomTom฀
does฀not฀currently฀apply฀hedge฀accounting.฀
Liquidity฀and฀capital฀resources
TomTom’s฀cash฀balances฀increased฀to฀

178฀million฀at฀
the฀end฀of฀the฀year฀from฀

40฀million฀at฀the฀start฀of฀the฀
year.฀Despite฀the฀substantial฀growth฀of฀the฀company฀in฀
the฀year฀we฀continued฀to฀be฀cash฀generative฀in฀2005฀with฀

43฀million฀of฀net฀cash฀generated฀from฀operating฀
activities.฀During฀the฀year฀we฀raised฀

117฀million฀of฀new฀
funds฀from฀the฀company’s฀IPO฀and฀we฀completed฀two฀
acquisitions฀which฀made฀up฀

15฀million฀of฀the฀cash฀flow฀
used฀in฀investing฀activities.
Cash฀Flow฀ 2004฀ 2005
(in฀
฀millions)
Net฀cash฀flow฀from฀operating฀activities฀ 36.2฀ 43.1
Cash฀flow฀used฀in฀investing฀activities฀ -2.9฀ -21.4
Cash฀flow฀from฀financing฀activities฀ 0฀ 116.5
Net฀increase฀in฀cash฀and฀cash฀equivalents฀ 33.3฀ 138.2
Cash฀and฀cash฀equivalents฀at฀end฀of฀period฀฀40.2฀ 178.4
Balance฀Sheet฀ 2004฀ 2005
(in฀
฀millions)
Non-current฀assets฀ 3.0฀ 21.0
Current฀assets฀ 87.9฀ 442.6
Total฀assets฀ 90.9฀ 463.6
฀ ฀
Capital฀and฀reserves฀ 37.8฀ 306.4
Provisions฀ 0.4฀ 21.0
Long฀term฀liabilities฀ 1.3฀ 1.0
Current฀liabilities฀ 51.4฀ 135.2
Total฀equity฀and฀liabilities฀ 90.9฀ 463.6
The฀balance฀sheet฀strengthened฀considerably฀in฀the฀year.฀
Net฀assets฀at฀the฀start฀of฀the฀year฀were฀

38฀million;฀by฀
the฀end฀of฀the฀year฀they฀had฀increased฀to฀

306฀million,฀
mainly฀as฀a฀result฀of฀the฀net฀profit฀of฀

143฀million฀for฀the฀
year฀and฀the฀IPO฀capital฀raising฀of฀

117฀million.