Financial targets
The aim is for the operating margin to exceed 10 percent. The dividend policy stipulates that the share dividend shall correspond to not less than 50 percent of consolidated earnings after tax excluding capital gains. That notwithstanding, the company’s financial position and capital requirements for further expansion, which are deemed to be fulfilled at an equity/assets ratio of approximately 40 percent, shall be taken into consideration.
Expansion goals
The goal is to increase revenue by 100 percent over a rolling five-year period. The expansion shall be achieved while maintaining profitability and shall take place through organic growth as well as via acquisitions. Eurocon has demonstrated positive operating results every year since it was founded, and this is a tradition we have every intention of upholding.
Financial policy
The Eurocon Group is exposed to financial risks through its activities. Financial risks refer to fluctuations in the company’s earnings and cashflow as a result of changes in exchange rates, interest rates and credit risks. The division of responsibilities is regulated by the Board’s rules of procedure and CEO instructions. In 2015, the Board established a new financial policy to which the company adheres. The overriding aim is to maintain cost-effective financing as well as to minimise negative effects on the Group’s earnings due to fluctuations on the financial markets. Overall, the financial risks within the Group are seen as relatively low.
Financing risk
The Group’s financing risk lies in the fact that the company cannot take out new or refinance existing loans on acceptable terms. A procedure is in place to continually ensure that the Group has appropriate credit facilities. Eurocon’s policy is for the company to be able to be indebted over time, but that the net loan liability cannot exceed 40 percent of equity. The average capital tie-up period should not be less than 2 years. Furthermore, the unused credit facilities and liquid assets should jointly correspond to at least 100 percent of the loans due for payment within the next 12-month period.
Interest rate risk
Interest rate risk refers to the risk that changes in interest rates will negatively affect the Group’s net interest and cash flow. Eurocon’s interest rate risk exposure occurs mainly from outstanding external receivables, since there are currently no external interest-bearing loans, except for vehicle leasing. Interest rate risks are minimised by fixing interest rates on loans for 1-5 years, as well as by spreading the loans so that the proportion of loans with loan maturity date within the next 12-month period shall not exceed 60 percent of the total loan stock.
Currency risk
Currency risk is the risk that changes in the exchange rate will negatively impact the Group’s income statement, balance sheet and cash flow. Eurocon’s currency risk derives from transaction exposure.
Transaction exposure is the net value of operational and financial inflows and outflows in currencies. Currency risks related to changes in anticipated and contractual payment flows are relatively limited within Eurocon, since sales and costs primarily occur/arise in the local currency. According to the applicable policy, inflows and outflows in foreign currencies can only be hedged when the amount and timing of the transaction can be determined with a high degree of certainty and when the anticipated flow is expected to exceed EUR 100,000.
Liquidity risk
Liquidity risk, i.e. the risk of not being able to meet the Group’s immediate capital requirements, is reduced by holding sufficient liquid assets as well as granted but unutilised credit facilities that can be used without reservation. According to the applicable policy, the company should have liquid assets and unutilised credit facilities amounting to at least 8 percent of annual turnover at any time.
Credit risk
Financial credit risk
Eurocon’s financial transactions give rise to credit risks vis-à-vis financial counterparties. By choosing creditworthy counterparties, and by limiting each counterparty’s involvement, the risk of a counterparty not being able to fulfil its obligations is reduced.
Customer credit risk
This credit risk comprises outstanding receivables and non-invoiced consulting assignments, i.e. the credit that is issued to Eurocon’s customers. This risk is limited, owing to the fact that Eurocon has a well thought-out credit policy – a regulatory framework for how the company’s credit management should be carried out in order to avoid unnecessary risk-taking. For example, there are rules relating to advance payment as well as how to avoid customers with solvency difficulties. All new customers are subjected to a credit check and projects are invoiced on a rolling basis to minimise accumulated credit risk. Eurocon’s ten largest customers, which account for 80 percent of the Group’s sales, are all major – and usually international – companies. Since business is mainly carried out in Sweden, the political risk (country risk) is low. Political risk refers, for example, to a country’s ability to transfer currency or the possibility of regulations affecting an individual transaction.