The business generates positive cash flow and the school system model with payment in advance which means that the business shows negative working capital. The Group’s operating assets include accounts receivable, prepaid expenses and accrued income. Bad debt losses may arise if the customer is unable to pay. The Group’s receivables are almost exclusively from central government, municipalities and authorities, where the risk of insolvency is minor. As a result, AcadeMedia’s credit risk is considered low. The municipalities currently pay school vouchers in advance on a monthly basis. There is a risk that the municipalities will change this payment model, which would adversely affect AcadeMedia’s working capital. However, this would severely affect small independent providers and could make it impossible for small preschools to maintain liquidity. Consequently AcadeMedia considers that this risk is limited.
Liquidity risk is the risk that AcadeMedia cannot fulfil its payment obligations relating to financial liabilities. Refinancing risk is the risk that refinancing for loans cannot be arranged, or cannot be arranged on acceptable terms. Liquidity and refinancing risks are managed centrally. Refinancing risk is managed via credit facilities within the scope of existing loan agreements, by financing the property portfolio in Norway long term via Husbanken and by ensuring that the Group uses several banks. Liquidity risk is managed by ensuring that the Company always has an available liquidity reserve and by maintaining continuous forecasting of cash flows. To facilitate liquidity planning and liquidity control, the Group operates cash pools.
AcadeMedia’s interest rate risk arises in the Group’s long-term borrowing, including its property loans from Husbanken (the Norwegian State Housing Bank). At the end of the financial year, 100 percent of the borrowing was at a variable (six-month) interest rate. The effect of an increase in the variable interest rate of one percent on the Group’s interest expense is SEK 25 million (30).
AcadeMedia conducts operations in Norway and Germany, and is therefore exposed to currency risk, largely in NOK but also EUR, partly transaction exposure and partly translation exposure. Transaction exposure is limited, in that both revenue and costs are in all material respects denominated in the local currency. Translation exposure arises when the Group’s net assets in foreign currencies are translated to SEK, and when earnings are translated to SEK. Currency exposure in net assets is managed by financing such assets wholly or partly via loans in the local currency. On 30 June 2020, net assets in foreign currency totalled NOK 567 million and EUR 19 million.