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The Company's financial risk management is centralised in its Financial Department, which has
established the mechanisms required to control exposure to interest rate and exchange rate
fluctuations and credit and liquidity risk. The main financial risks affecting the Company are as
follows:
a) Credit risk:
In general, the Company holds its cash and cash equivalents at banks with high credit ratings.
The advertising contracting terms enable bank guarantees to be demanded prior to the launch
of advertising campaigns. Also, it should be noted that the Company does not have a
significant concentration of credit risk exposure to third parties and no significant incidents
arose in 2014.
At 31 December 2014, 1.29% of total borrowings were past-due.
In any case, the Company estimates allowances for doubtful debts based on the age of the
debt. Allowances for doubtful debts amounted to EUR 2,601 thousand at 31 December 2014
(31 December 2013: EUR 3,578 thousand) (see Note 18.4).
b) Liquidity risk:
The Company’s liquidity policy is to arrange credit lines and current financial assets that are
sufficient to support its financial needs, on the basis of expected business performance. These
are all tied to floating interest rates.
The Company, for the purpose of ensuring liquidity and enabling it to meet all the payment
obligations arising from its business activities, has the cash and cash equivalents disclosed in
its balance sheet, together with the credit and financing facilities detailed in Note 14.
c) Foreign currency risk:
Foreign currency risk relates mainly to the payments to be made in international markets to
acquire broadcasting rights, primarily from major production companies in the US,
denominated in US dollars. In order to mitigate this risk, the Company arranges financial
instruments (mainly foreign currency hedges) which reduce exchange differences on foreign
currency transactions (see Note 10).
d) Interest rate risk:
Both the Company's cash and its bank borrowings are exposed to interest rate risk, which
could have an adverse effect on financial profit or loss and cash flows. The Company's
financing is arranged at interest rates tied to Euribor. To mitigate this risk, the Company has
arranged interest rate swaps to reduce the finance costs arising from the pegging to floating
rates (see Note 10).
10.- Derivative financial instruments
The Company uses derivative financial instruments to hedge the risks to which its business
activities, operations and future cash flows are exposed. As part of these transactions, the
Company has arranged certain hedging financial instruments, the detail of which is as follows:
Foreign currency hedges
The Company uses currency derivatives to hedge significant future transactions and cash
flows. The instruments purchased are denominated in US dollars.