Market risks

Liquidity risk

The liquidity of Deutsche EuroShop Group is continuously monitored and planned. The subsidiaries regularly have sufficient cash to be able to pay for their current commitments. Furthermore, credit lines and bank overdrafts can be utilised at short notice.

The contractually agreed future interest and principle repayments of the original financial liabilities and derivative financial instruments are as follows as at 31 December 2011:

in € thousand Carrying amount 31 Dec 2011 Cash flows 2012 Cash flows 2013 to 2016 Cash flows from 2017
Bank loans and overdrafts 1,472,149 161,311 786,134 937,875

The amounts relate to all contractual commitments existing on the balance sheet date. The majority of the trade payables and other financial liabilities reported at the end of the financial year will fall due in 2012.

Credit and default risk

There are no significant credit risks in the Group. The trade receivables reported on the reporting date were predominantly paid up to the date of preparation of the financial statements. During the reporting year, write-downs of rent receivables of € 441 thousand (previous year: € 578 thousand) were recognised under property operating costs.

The maximum default risk in relation to trade receivables and other assets totals € 12,298 thousand (previous year: € 12,344 thousand) as at the reporting date.

Currency and measurement risk

The Group companies operate exclusively in the European Economic Area and conduct the greater part of their business in euro. This does not entail currency risks.

On the basis of expert appraisals, the property portfolio has a theoretical net yield of 5.92% (previous year: 5.89%) for financial year 2011. A 25 bp change in a material parameter affecting the market value of properties would have the following impact on measurement gains/losses before taxes:

in € thousand Basis -0.25 % +0.25 %
Rate of rent increases 1.70 % -106.3 + 111.7
Discount rate 6.68 % +98.1 -93.3
Net initial yield 5.92 % + 138.0 -126.8
Cost ratio 11.80 % +9.0 -9.0

Interest rate risk

A sensitivity analysis was implemented to determine the effect of potential interest rate changes. Based on the financial assets and liabilities subject to interest rate risk on the balance sheet date, this shows the effect of a change on the Group‘s equity. Interest rate risks arose on the balance sheet date only for credit borrowed and the associated interest rate hedges, which are recognised in equity as cash flow hedges at present value. An increase in the market interest rate of 100 basis points would lead to an increase in equity of € 18,320 thousand (previous year: € 17,628 thousand). The majority of the loan liabilities have fixed interest terms. On the reporting date, loans totalling € 198,651 thousand (previous year: € 201,780 thousand) were hedged using derivative financial instruments.

Capital management

The Group‘s capital management is designed to maintain a strong equity base with the aim of ensuring that its ability to repay its debts and financial well-being are maintained in the future. The Group‘s financial policies are also based on the annual payment of a dividend.

in € thousand 31.12,2011 31.12,2010
Equity 1,473.1 19 1,441,517
Equity ratio (%) 45.7 48.6
Net financial debt -1,407,741 -1,222,372

Equity is reported here including the share of the third-party shareholders.

Net financial debt is determined from the financial liabilities on the balance sheet date less cash and cash equivalents and other financial investments.

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