TomTom 2015 Annual Report Download - page 103

CONSOLIDATED FINANCIAL STATEMENTS
TOMTOM / ANNUAL REPORT AND ACCOUNTS 2015 / 102
Under the covenants of the facility, the group is required to meet certain performance indicators with regard to its interest cover (4.0)
and leverage ratio (3.0), which are tested twice a year. Interest cover is defined as the ratio of the last twelve months (LTM) EBITDA to
LTM interest expense for the relevant test period. The leverage ratio is defined as the ratio of total consolidated net debt as at the
testing date to the consolidated LTM EBITDA in respect of the relevant period ending on that date. In case of a breach of these
covenants, the banks are contractually entitled to request early repayment of the outstanding amount.
On 31 December 2015, the group complied with the loan covenants and, based on the group's plan for 2016, management expects to be
able to comply with the loan covenants during 2016.
The outstanding borrowings of €45 million from the credit facility has a one-month maturity period from the date of draw down but
can continuously be rolled-over up to the end date of the facility agreement at management's discretion. Assuming the amount
utilised remains the same until the end of the agreement and the level of market interest as well as the required performance
indicators remain constant based on the situation as at 31 December 2015, the expected annual interest payments up to 31 March 2018
would be €0.3 million. The current portion of our borrowings relating to our Polish subsidiary has been repaid in January 2016.
INTEREST RATES
Interest rate risk arises primarily from the existing borrowings. These borrowings have a floating interest coupon based on Euribor
plus a spread that depends on leverage levels. Interest rate risk is hedged with appropriate hedging instruments whenever deemed
necessary in accordance with the Corporate Treasury Policy.
Based on the expectation of interest rate movements in the coming period and the acceptability of potential exposure, the current
policy is not to hedge the interest rate of our borrowings. Accordingly, changes in Euribor may have an impact on the group's results
for the coming year.
Market-related interest income is received on the cash balances. Our intention is to prioritise capital preservation and when possible
we invest our surplus cash using approved investment instruments, such as bank deposits and money market fund investments. All
transactions and counterparty risk limits are governed by Corporate Treasury Policy.
CAPITAL RISK
The group's financing policy aims to maintain a capital structure that enables the group to achieve its strategic objectives and daily
operational needs, and to safeguard the group's ability to continue as a going concern.
In order to maintain or adjust the capital structure, the group may issue new shares, adjust its dividend policy, return capital to
shareholders or sell assets to reduce debt, taking into account relevant interest cover and leverage covenants of external borrowings as
disclosed above.
As at 31 December 2015, the group had a net cash position of €98.3 million (31 December 2014: €103.0 million).
Further quantitative disclosures reference is made to Note 21, Note 24 and Note 27.