Our results

Financial instruments and principles of financial risk management

Accounting policy applied

Derivative financial instruments are recognized initially at fair value as at the contract execution date, and then they are restated to the current fair value. The method of recognizing the resulting profit or loss depends on whether the derivative instrument has been classified as a hedging instrument or not. If it has, the method of recognizing profit or loss also depends on the nature of the hedged item. The Group selects certain derivative instruments to hedge particular risks associated with recognized liabilities or highly probable planned transactions (cash flow hedges).

When entering into transactions, the Group records the connection between the hedging instruments and hedged items as well as the objectives of risk management and the strategy for executing various hedging transactions. The Group also records, both as at the date of initiating a hedge and on an ongoing basis, its assessment of whether the derivative instruments used in hedging transactions are highly effective in compensating changes to fair values or cash flows of the hedged items.

The total value of the hedging derivative instruments is included in non-current assets or long-term liabilities if the period remaining to the maturity of the hedged item is longer than 12 months or in current assets or short-term liabilities if the period remaining to the maturity of the hedged item does not exceed 12 months. Derivative instruments held for sale are classified as current assets or short-term liabilities.

The effective portion of changes to the fair value of derivative instruments selected for and qualifying as cash flow hedges is recognized in other comprehensive income. Profit or loss from the ineffective portion is recorded directly in the result. Amounts collected in equity are reclassified to the financial result in the periods in which the hedged item contributed to the result.

Offsetting financial instruments

Financial assets and liabilities are offset, and the net amount is recorded in the statement of financial position, if there is a legally enforceable right to offset the recognized amounts and if there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously. The legally enforceable right cannot depend on the occurrence of a specific future event and must be enforceable in the regular course of conducting business activity and also in the event of a failure to make payment, insolvency or bankruptcy on the part of the entity and all the business partners.

Categories and classes of financial instruments

Data in ths. PLN

Financial assets by categories and classesNoteAs at 31/12/2017 (audited)As at 31/12/2016 (audited)
Hedging financial instruments   
Derivative instruments1312,047235
Available-for-sale financial assets   
Shares in unlisted companies137,2868,501
Loans and receivables   
Trade receivables16688,806616,000
Receivables from sale of non-financial non-current assets16111-
Loans granted131,069796
Bank deposits13253,805-
Other13-9
Cash and cash equivalents17516,776755,919
Total 1,479,9001,381,460

Data in ths. PLN

Financial liabilities by categories and classesNoteAs at 31/12/2017 (audited)As at 31/12/2016 (audited)
Financial liabilities measured at fair value through profit or loss   
Liabilities related to put option for non-controlling interest23-118,704
Hedging financial instruments (1)   
Derivative instruments232721,227
Loans and borrowings21494,171204,711
Financial liabilities measured at amortized cost   
Loans and borrowings211,068,1591,266,697
Trade payables25447,186377,215
Liabilities related to purchase of non-current assets2579,04646,402
Financial liabilities excluded from the scope of IAS 3922139,095200,490
Total 2,227,9292,215,446

(1) In the period from 1 January 2017 to 31 December 2017, the Group applied cash flow hedging accounting. The purpose of the hedging activity is to mitigate the impact of the FX risk within the EUR/PLN currency pair on the future cash flows. The hedged item is a highly probable cash flow denominated in EUR.

Impairment losses to revalue shares in unlisted companies and trade receivables have been described in Notes 13 and 16 of this Consolidated Financial Statements respectively.

The Parent Company established the following hedging instruments:

  • investment loans denominated in EUR. The hedged cash flows will be realized until August 2031. As at 31 December 2017, the nominal amount of the hedging instrument was EUR 118,480 thousand, which is an equivalent of PLN 494,171 thousand,
  • forward foreign exchange contracts. The hedged cash flows will be realized until December 2019. As at 31 December 2017, the value of the assets on the valuation of hedging instrument was PLN 10,545 thousand.

The item also includes measurement of hedging instruments in a subsidiary in the form of:

  • forward interest rate swaps (IRS) hedging cash flows related to future repayments of lease liabilities at variable interest rates. The hedged cash flows will be realized until May 2018. As at 31 December 2017, the value of liabilities related to hedging instrument measurement was PLN 272 thousand,
  • forward foreign exchange contracts on the EUR/PLN currency pair, hedging future cash flows. The hedged cash flows will be realized until November 2018. As at 31 December 2017, the value of the assets on the valuation of hedging instrument was PLN 1,502 thousand.

Fair value hierarchy

As at 31 December 2017 and 31 December 2016, the financial instruments measured at fair value were financial derivatives. The maturity date for these instruments falls after the date ending the reporting period. In terms of measurement procedures, they qualify to level 2 and 3 of the fair value hierarchy.

Data in ths. PLN

 As at 31/12/2017 (audited)As at 31/12/2016 (audited)
 Level 2Level 2Level 3
Assets   
Derivative instruments – forward foreign exchange contracts12,047235-
Liabilities   
Derivative instruments – forward foreign exchange contracts and IRS2721,227-
Liabilities related to put option for non-controlling interest--118,704

Measurement methods for financial instruments carried at fair value

a) Forward foreign exchange contracts

The fair value of forward foreign exchange contracts is determined on the basis of discounted future cash flows from concluded transactions calculated based on the difference between the forward price and the transaction price. A forward price is calculated based on NBP fixing and the interest rate curve derived from FX swap transactions.

b) IRS contracts

The fair value of interest rate swaps is determined on the basis of discounted future cash flows from concluded transactions based on the difference between the forward price and the transaction price. The fair value is calculated and discounted by the bank according to WIBOR 1M.

c) Other financial instruments

For the category of financial instruments which are not carried at fair value as at the balance sheet date, the Group does not disclose fair value because the fair values of these financial instruments as at 31 December 2017 and 31 December 2016 were not materially different from their values presented in the statement of financial position. Similarly, the Group does not disclose fair values for shares and ownership interests in companies unlisted on active markets classified to the category of financial assets available for sale. The Group is not able to determine the fair value in any reliable way in the case of owned interests in companies unlisted on active markets. As at the balance sheet date, these are measured at the purchase price reduced by impairment losses.

Changes to the measurement of financial instruments for Level 3 of the fair value hierarchy

Data in ths. PLN

 Year ended 31/12/2017 (audited)Year ended 31/12/2016 (audited)
Balance at the beginning of the reporting period(118,704)(155,198)
Gains / (losses) on revaluation4,69436,494
Settlement of put option for non-controlling interest (1)114,010-
Balance at the end of the reporting period-(118,704)

(1) The reduction follows from the realization of put option by a minority shareholder. Details are given in Note 23 of these Consolidated Financial Statements.

In the financial year ended 31 December 2017 and 31 December 2016, there were no transfers between levels 2 and 3 of the fair value hierarchy.

Revenues, costs, profits and losses in the consolidated statement of comprehensive income by categories of financial instruments

Data in ths. PLN

Year ended 31/12/2017 (audited)Hedging financial instrumentsAvailable-for-sale financial assetsLoans and receivablesFinancial liabilities measured at fair value through profit or lossFinancial liabilities measured at amortized costFinancial liabilities excluded from the scope of IAS 39Total
Dividends and profit-sharing-257----257
Interest income / (expense)(1,225)-14,068-(28,699)(6,095)(21,951)
Foreign exchange differences723-(16,060)-6,5675,736(3,034)
Impairment losses / revaluation108-(6,261)4,694--(1,459)
Commission on bank loans----(1,660)(4)(1,664)
Profit / (loss) on the sale of investments-(225)----(225)
Effect of settlement of cash flow hedging accounting (1)7,951-----7,951
Gross profit / (loss)7,55732(8,253)4,694(23,792)(363)(20,125)
Revaluation27,865-----27,865
Other comprehensive income27,865-----27,865

(1) In the financial year ended 31 December 2017, the effect of settling cash flow hedging accounting was presented in the following items of the statement of comprehensive income:- revenue from sales of services and finished products in the amount of PLN 8,867 thousand,- financial expenses - interest on financial lease liabilities in the amount of PLN 916 thousand.

Data in ths. PLN

Year ended 31/12/2016 (audited)Hedging financial instrumentsAvailable-for-sale financial assetsLoans and receivablesFinancial liabilities measured at fair value through profit or lossFinancial liabilities measured at amortized costFinancial liabilities excluded from the scope of IAS 39Total
Dividends and profit-sharing-434----434
Interest income / (expense)(765)-2,902-(21,688)(8,556)(28,107)
Foreign exchange differences(10)-(150)-2,158(3,478)(1,480)
Impairment losses / revaluation94-(77,247)36,494--(40,659)
Commission on bank loans----(1,398)-(1,398)
Profit / (loss) on the sale of investments-85----85
Effect of settlement of cash flow hedging accounting (1)(131)-----(131)
Gross profit / (loss)(812)519(74,495)36,494(20,928)(12,034)(71,256)
Revaluation(3,920)-----(3,920)
Other comprehensive income(3,920)-----(3,920)

(1) In the financial year ended 31 December 2016, the effect of settling cash flow hedging accounting was presented in the following items of the statement of comprehensive income:- revenue from sales of services and finished products in the amount of PLN 896 thousand,- financial expenses - interest on financial lease liabilities in the amount of PLN 1,027 thousand.

Offsetting financial assets

Data in ths. PLN

As at 31/12/2017 (audited)Gross value of recognized
financial assets
Gross value of recognized financial
liabilities offset in the balance sheet
Net value of financial assets presented
in the balance sheet
Associated values not offset in the balance sheet
– received cash collateral
  Net value
Trade receivables688,806-688,806(5,354)683,452
Total688,806-688,806(5,354)683,452

Data in ths. PLN

As at 31/12/2016 (audited)Gross value of recognized
financial assets
Gross value of recognized financial
liabilities offset in the balance sheet
Net value of financial assets
presented in the balance sheet
Associated values not offset in the balance sheet
– received cash collateral
  Net value
FX forwards930(695)235-235
Trade receivables616,000-616,000(20,289)595,711
Total616,930(695)616,235(20,289)595,946

Offsetting financial liabilities

Data in ths. PLN

As at 31/12/2017 (audited)Gross value of recognized financial liabilitiesGross value of recognized financial assets offset in the balance sheetNet value of financial liabilities presented in the balance sheetAssociated values not offset in the balance sheet – provided cash collateral  Net value
Trade payables447,186-447,186(1,474)445,712
Total447,186-447,186(1,474)445,712

Data in ths. PLN

As at 31/12/2016 (audited)Gross value of recognized financial liabilitiesGross value of recognized financial assets offset in the balance sheetNet value of financial liabilities presented in the balance sheetAssociated values not offset in the balance sheet – provided cash collateralNet value
FX forwards357(172)185-185
Trade payables377,215-377,215(1,415)375,800
Total377,572(172)377,400(1,415)375,985
   

Objectives and principles of financial risk management

In the years covered by these Consolidated Financial Statements, the Group was exposed to the following types of financial risk:

Market risk

The Group is exposed to market risks associated with changes of the exchange rates and interest rates. The objective of the market risk management process is to limit undesirable impact of changes of market risk factors on the cash flows andMarket risk results in the short- and medium-term. The Group manages the market risk following from the aforementioned factors on the basis of internal procedures which define the rules of measurement of individual exposures, parameters and time horizon. The principles of market risk management are implemented through assigned organizational units under the supervision of the Parent Company’s Management Board. Market risk management is executed based on developed strategies, with partial utilization of derivative instruments. Derivative instruments are used only to limit the risk of change of the balance sheet value and the risk of cash flow changes. Transactions are concluded only with reliable partners, admitted to participation as a result of application of internal procedures and execution of appropriate documentation.

Foreign exchange risk management

As at 31 December 2017, the Group was exposed to foreign exchange risk concerning for the most part trade receivables, loan liabilities and lease liabilities denominated in foreign currencies.

As a result of valuation of receivables and liabilities denominated in foreign currencies conducted as at the balance sheet date, and also as a result of ongoing settlements in foreign currencies, there arise positive and negative foreign exchange differences. Their values fluctuate during the year, which is caused by changes in exchange rates. In a long-term perspective, the valuation risk matches the risk of change of cash flows, therefore the Group’s cash flows are subject to hedging operations.

For the EUR / PLN exchange rate, there is partial natural hedging due to the fact that sales revenues in EUR are partly balanced out by costs in the same currency. The FX risk management transactions used by the Group are aimed at hedging the net free position exposed to change of the value in PLN. To achieve this, the Group used forward transactions on the EUR / PLN currency pair in 2016-2017.

Items in foreign currencies

Data in ths. PLN

As at 31/12/2017 (audited)Total value of items in PLNEUR / PLNCHF / PLNCZK / PLN
  in a foreign currencyin PLNin a foreign currencyin PLNin a foreign currencyin PLN
ASSETS    
Trade receivables212,82333,589140,0974911,752434,88770,974
Other current financial assets1,0692561,069----
Cash and cash equivalents163,12321,79690,9081761442,11872,154
EQUITY AND LIABILITIES    
Long term liabilities    
Long-term bank loans and borrowings538,732117,535490,226--297,22048,506
Long-term finance lease liabilities37,6357,87432,843--29,3614,792
liabilities    
Short-term bank loans and borrowings56,25413,43856,047--1,265207
Short-term finance lease liabilities37,3728,27034,493--17,6392,878
Trade and other payables187,83721,56689,9528643,082580,89994,803
Net currency item(480,814)(113,042)(471,486)(356)(1,269)(49,379)(8,058)

Data in ths. PLN

As at 31/12/2016 (audited)Total value of items in PLNEUR / PLNCHF / PLNCZK / PLN
  in a foreign currencyin PLNin a foreign currencyin PLNin a foreign currencyin PLN
ASSETS    
Trade receivables213,63231,631139,9352941,210442,80572,487
Other current financial assets796180796----
Cash and cash equivalents107,80718,94983,8311560146,09623,916
EQUITY AND LIABILITIES    
Long-term liabilities    
Long-term bank loans and borrowings297,23856,190248,583--297,22048,655
Long-term finance lease liabilities77,13416,15071,448--34,7335,686
Short-term liabilities    
Short-term bank loans and borrowings28,9256,53628,917--508
Short-term finance lease liabilities41,4238,40337,177--25,9444,246
Trade and other payables153,54112,09253,4938133,348590,71396,700
Other short-term financial liabilities118,70427,000118,704----
Net currency item(394,730)(75,611)(333,760)(504)(2,078)(359,759)(58,892)
        

Sensitivity to FX risk

The Group is exposed mainly to the foreign exchange risk regarding the following currency pairs: EUR/PLN, CHF/PLN, CZK/PLN, in connection with its operating and financing activity. Deviations in exchange rates have been calculated on the basis of average volatility of particular currency exchange rates. Sensitivity of financial Instruments to foreign exchange risk has been calculated as the difference between the carrying amount of the financial Instruments (excluding derivatives such as forward contracts) and their potential value while assuming changes to foreign exchange rates. The tables below present the Group’s exposure to the foreign exchange risk in 2017 and 2016.

The tables below present the Group’s exposure to the foreign exchange risk as at 31 December 2017 and 31 December 2016.

Data in ths. PLN

As at 31/12/2017 (audited)Value of the item in PLNFX risk
  EUR / PLNCHF / PLNCZK / PLN
  impact on the resultimpact on other comprehensive incomeimpact on the resultimpact on other comprehensive income
  +5%-5%+5%-5%+5%-5%+5%-5%
ASSETS     
Trade receivables212,8237,005(7,005)--88(88)3,548(3,548)
Other current financial assets1,06953(53)------
Cash and cash equivalents163,1234,545(4,545)--3(3)3,608(3,608)
EQUITY AND LIABILITIES     
Long-term liabilities     
Long-term bank loans and borrowings538,732(34)34(22,665)22,665--(2,425)2,425
Long-term finance lease liabilities37,635(1,642)1,642----(240)240
Short-term liabilities     
Short-term bank loans and borrowings56,254--(2,802)2,802--(10)10
Short-term finance lease liabilities37,372(1,725)1,725----(144)144
Trade and other payables187,837(4,497)4,497----(4,740)4,740
Total gross effect 3,705(3,705)(25,467)25,46791(91)(403)403

Data in ths. PLN

As at 31/12/2016 (audited)Value of the item in PLNFX risk
  EUR / PLNCHF / PLNCZK / PLN
  impact on the resultimpact on other comprehensive incomeimpact on the resultimpact on the resultimpact on other comprehensive income
  +9%-9%+9%-9%+18%-18%+10%-10%+10%-10%
ASSETS      
Trade receivables213,63212,594(12,594)--218(218)--7,249(7,249)
Other current financial assets79672(72)--------
Cash and cash equivalents107,8077,545(7,545)--11(11)--2,392(2,392)
EQUITY AND LIABILITIES      
Long-term liabilities      
Long-term bank loans and borrowings297,238(22,373)22,373(17,531)17,531----(4,865)4,865
Long-term finance lease liabilities77,134(6,430)6,430------(569)569
Short-term liabilities      
Short-term bank loans and borrowings28,925(1,706)1,706(897)897----(1)1
Short-term finance lease liabilities41,423(3,346)3,346------(425)425
Trade and other payables153,541(4,814)4,814--(603)603(158)158(9,512)9,512
Total gross effect(18,458)18,458(18,428)18,428(374)374(158)158(5,731)5,731

FX forward transactions

To manage the foreign exchange risk in 2017 and 2016, FX forward transactions were applied on the EUR / PLN currency pair (sale of foreign currency).

List of unrealized FX forward contracts

Balance as at 31 December 2017 (audited)

Data in ths. PLN

CompanyTransaction typeTransaction dateContract settlement dateCurrency pairAmount in the base currencyAmount in the volatile currencyFair value 
BZ WBKforward06/2016 – 10/201701/2018 – 10/2019EUR / PLN2,55011,507697
mBANKforward11/2016 – 12/201701/2018 – 12/2019EUR / PLN12,90056,9462,092
Pekaoforward06/2016 – 10/201701/2018 – 10/2019EUR / PLN15,05066,9803,355
PKO BPforward05/2016 – 12/201701/2018 – 12/2019EUR / PLN20,90093,5774,806
RCBforward10/2016 – 11/201601/2018 – 11/2018EUR / PLN1,0004,484286
Credit Agricoleforward01/2017 – 12/201707/2018 – 12/2019EUR / PLN4,60020,523811
Total57,000254,01712,047
   

As at 31 December 2016 (audited)

Data in ths. PLN

CompanyTransaction typeTransaction dateContract settlement dateCurrency pairAmount in the base currencyAmount in the volatile currencyFair value
BZ WBKforward06/2016 – 12/201605/2017 – 10/2018EUR / PLN4,00018,199160
mBANKforward02/2016 – 12/201601/2017 – 12/2018EUR / PLN17,90080,026(27)
Pekaoforward04/2016 – 12/201601/2017 – 12/2018EUR / PLN12,10054,569(26)
PKO BPforward01/2016 – 11/201601/2017 – 11/2018EUR / PLN21,10094,98924
RCBforward10/2016 – 12/201609/2017 – 11/2018EUR / PLN1,5006,723(67)
Credit Agricoleforward07/2016 – 09/201607/2017 – 08/2017EUR / PLN3001,330(14)
Total56,900255,83650
 

Interest rate risk management

As at 31 December 2017, the Group is exposed to the risk of volatility of interest rate cash flows following from bank loans and leasing agreements based on variable interest rates. Interest on leasing agreements was accrued according to the reference rates increased by the financing party’s margin. The reference rate for agreements denominated in EUR is EURIBOR 3M and 6M and for agreements signed in PLN – WIBOR 1M and 3M. Interest on loan agreements were accrued according to the WIBOR 1M, 3M and 6M, EURIBOR 3M and PRIBOR 3M reference rates plus the banks’ margins. The interest rate risk in loan and leasing agreements is executed through revaluation of lease installments in monthly, quarterly and semi-annual periods, depending on the agreement.

In 2017 and 2016 the Group used interest rate risk management transactions (IRS) to hedge against fluctuations of interest rates for some of the financial leasing liabilities.

The cash held by the Group as at 31 December 2017 was mainly in the form of fixed rate bank deposits which were concluded with time horizons depending on the Group’s liquidity needs. In future periods, as a result of changes in the deposit interest rates, the cash position may be exposed to interest rate risk.

To present the effects of the hedging transactions in accordance with their economic content the Group (in the subsidiary PKP CARGO CONNECT Sp. z o.o.) used hedge accounting. In the interest rate risk management process the Group uses IRS instruments (interest rate swaps). These transactions hedge variable interest rates on lease liabilities. As a result of carrying out a test of hedging effectiveness the valuation for the following instruments (IRS) was recorded in the Group’s equity.

As at 31 December 2017 (audited)

Data in ths. PLN

CompanyTransaction typeTransaction dateTransaction expiry dateNotional amountGroup paysGroup receivesFair value
CITI HandlowyIRS2013-04-092018-05-0174,7763.33%WIBOR 1M+ margin(272)

As at 31 December 2016 (audited)

Data in ths. PLN

CompanyTransaction typeTransaction dateTransaction expiry dateNotional amountGroup paysGroup receivesFair value
CITI HandlowyIRS2013-04-092018-05-0174,7763.33%WIBOR 1M + margin(1,042)
     

Financial instruments by interest rate type

Data in ths. PLN

Financial assetsAs at 31/12/2017 (audited)As at 31/12/2016 (audited)
 Interest rateTotalInterest rateTotal
 fixed interest ratevariable interest rate fixed interest ratevariable interest rate 
Loans granted8192501,069663133796
Bank deposits253,805-253,805---
Cash and cash equivalents516,776-516,776755,919-755,919
Total771,400250771,650756,582133756,715

Data in ths. PLN

Financial liabilitiesAs at 31/12/2017 (audited)As at 31/12/2016 (audited)
 Interest rateTotalInterest rateTotal
 fixed interest ratevariable interest rate fixed interest ratevariable interest rate 
Derivative instruments – IRS contracts272-2721,042-1,042
Bank loans and borrowings52,9411,509,3891,562,33073,8371,397,5711,471,408
Liabilities related to purchase of non-current assets586-58622,896-22,896
Financial lease liabilities45,89493,201139,09567,931132,559200,490
Total99,6931,602,5901,702,283165,7061,530,1301,695,836

Interest rate fluctuation sensitivity

The sensitivity analyses presented below are based on the level of exposure of financial instruments to interest rate risk as at the balance sheet date. In the case of liabilities with variable interest rates, for the needs of the analysis it is assumed that the amount of outstanding liabilities as at the balance sheet date will be unpaid for the whole year. The Group identifies the exposure to interest rate risk mainly for WIBOR, EURIBOR and PRIBOR. Interest rate deviations are calculated on the basis of observations of average interest rate fluctuations. The sensitivity analysis presented below does not comprise the interest accrued as at the balance sheet date. The analysis results are presented in gross terms (before tax).

Data in ths. PLN

As at 31/12/2017 (audited)  Value of the item in PLNInterest rate risk
  WIBOREURIBORPRIBOR
  impact on the resultimpact on the resultimpact on the result
  + 50 pp- 50 pp+ 50 pp- 50 pp+ 70 pp- 70 pp
ASSETS    
Other current financial assets2501(1)----
EQUITY AND LIABILITIES    
Long-term liabilities    
Long-term bank loans and borrowings 1,275,832(3,957)3,957(2,270)2,270(343)343
Long-term finance lease liabilities56,119(249)249(13)13--
Short-term liabilities    
Short-term bank loans and borrowings 232,697(949)949----
Short-term finance lease liabilities37,082(46)46----
Total gross effect (5,200)5,200(2,283)2,283(343)343

Data in ths. PLN

As at 31/12/2016 (audited)  Value of the item in PLNInterest rate risk
  WIBOREURIBORPRIBOR
  impact on the resultimpact on the resultimpact on the result
  + 100 pp- 100 pp+ 70 pp- 70 pp+ 70 pp- 70 pp
ASSETS    
Other current financial assets1331(1)----
EQUITY AND LIABILITIES    
Long-term liabilities    
Long-term bank loans and borrowings 1,219,825(9,764)9,764(1,364)1,364(341)341
Long-term finance lease liabilities91,326(604)604(216)216--
Short-term liabilities    
Short-term bank loans and borrowings 177,877(1,679)1,679(69)69--
Short-term finance lease liabilities41,422(186)186(160)160--
Total gross effect (12,232)12,232(1,809)1,809(341)341
 

Credit risk management

The table below presents the items of the consolidated statement of financial position exposed to credit risk by financial instrument class:

Data in ths. PLN

 Classes of financial instrumentsAs at 31/12/2017 (audited)As at 31/12/2016 (audited)
Trade receivables688,806616,000
Cash and cash equivalents516,776755,919
Deposits253,805-
Other financial assets1,069796
Total1,460,4561,372,715

Conducting its commercial activity the Group sells services to business entities with a deferred payment date, which may lead to the risk of counterparties defaulting with meeting the deadlines for payment of the amounts due for the provided Credit risk managementservices. To minimize the credit risk, the Group manages the risk through a prevailing client creditworthiness assessment procedure. This assessment is carried out for all clients who use a deferred payment date. As part of its internal policy, the Group makes application of the deferred term of payment conditional on acceptability of the counterparty’s condition and positive history of cooperation.

Concentration of risk associated with trade receivables is limited due to the large number of business partners with commercial credit dispersed among different sectors of economy. The structure of the Group’s trade receivables is as follows:

Data in ths. PLN

Structure of trade receivablesAs at 31/12/2017 (audited)As at 31/12/2016 (audited)
Group of entities related to the biggest external counterparty8.8%7.7%
PKP Group related parties0.7%0.9%
Others State Treasury related parties 22.3%25.5%
Other entities68.2%65.9%
Total100.0%100.0%

In addition, to reduce the risk of problems with recovery of trade receivables, the Group insures its receivables and accepts from its customers securities in the form of, among others: receivables insurance, bank / insurance guarantees, assignment of contracts, blockage on bank accounts, and promissory notes. As at 31 December 2017, 11.85% of the trade receivables were secured. The credit risk associated with cash and bank deposits is perceived as low. All entities in which the Group invests free cash operate in the financial sector. These include domestic banks, foreign banks and branches of foreign banks of high level credit rating.

Liquidity risk management

Liquidity risk management

The Group may be exposed to liquidity risk following from the ratio of current assets to short-term liabilities. To ensure an additional source of funds required to secure its short-term liquidity the Group had current account overdraft facilities. Additionally, to secure its long-term liquidity, the Group used investment loans and leasing (financing of capital expenditures). As at 31 December 2017, the Group had in aggregate unused credit facilities in the amount of PLN 169,523 thousand.

Maturity of the Group’s financial liabilities as at the balance sheet date by maturity date based on contractual undiscounted payments (together with interest payable in the future):

Data in ths. PLN

As at 31/12/2017 (audited)Under 3 monthsFrom 3 to 12 monthsFrom 1 year to 5 years Over 5 yearsTotal
Interest-bearing bank loans and borrowings (1)76,899198,024842,537544,6271,662,087
Trade payables445,827341,325-447,186
Liabilities related to purchase of non-current assets79,00842--79,050
Financial lease liabilities15,08936,86693,6234,991150,569
Derivative instruments20468--272
Total617,027235,034937,485549,6182,339,164

(1) Liabilities related to loans in the case of which the contractual terms were breached are presented as due and payable within 3 months.

 

Data in ths. PLN

As at 31/12/2016 (audited)Under 3 monthsFrom 3 to 12 monthsFrom 1 year to 5 years Over 5 yearsTotal
Interest-bearing bank loans and borrowings57,504165,757848,494519,7451,591,500
Trade payables375,5963591,260-377,215
Liabilities related to purchase of non-current assets33,29013,018586-46,894
Financial lease liabilities14,31950,855113,17039,348217,692
Derivative instruments-1851,042-1,227
Liabilities related to put option for non-controlling interest-118,704--118,704
Total480,709348,878964,552559,0932,353,232

Equity management

In accordance with the adopted policy and assumptions following from the facility agreements concluded by the Group companies, the Group accepts the maximum level of debt up to 60% of total assets (hence equity may not be lower than 40% of total assets). The debt level is monitored by the Group as at the end of each quarter. The main objective of equity management in the Group is to ensure the ability to continue operations, create value for shareholders and benefits for other stakeholders. In accordance with the adopted policy and assumptions following from the facility agreements concluded, the Company accepts the maximum level of debt up to 60% of total assets (hence equity may not be lower than 40% of total assets). The debt level is monitored by the Group as at the end of each quarter. The assumed capital structure can be ensured through: issue of new shares, sale of assets, return of capital to the shareholders or adjustment of the dividend amount.

Total debt to total assets at the end of the year is as follows:

Data in ths. PLN

 As at 31/12/2017 (audited)As at 31/12/2016 (audited)
Total debt (1)3,306,7813,247,928
Total assets6,641,5596,508,206
Debt to total assets50%50%

(1) Debt is understood as long- and short-term liabilities.

Equity management is effected on the Group level and is aimed at ensuring the Group’s capability to continue operations.