AS AT 30 JUNE 2011
88
Notes to the Financial Statements (continued)
37. Share-based payments (continued)
Employee gift ofer
In September 2009, all eligible employees of FlexiGroup were ofered 714 shares totalling $1,000 based on the share price of
$1.40. In total, 383 eligible employees took up this ofer resulting in an allocation of 273,462 shares. There were no employee
gift ofers in the year ended 30 June 2011.
c. Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period as part of employee beneft
expense were as follows:
Consolidated
2011
2010
$
$
Options, performance rights and deferred shares issued under LTIP
excluding options granted in favour of certain executives over shares
owned by the former shareholders of Flexirent Holdings Pty Limited
3,029,640
1,852,543
Options over shares owned by the former shareholders of Flexirent
Holdings Pty Limited
270,360
547,457
3,300,000
2,400,000
Issue of shares to employees
–
382,846
3,300,000
2,782,846
38. Financial risk management
Overview
The Group’s activities expose it to a variety of fnancial risks: market risk (including foreign exchange risk and interest
rate risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of
fnancial markets and seeks to minimise potential adverse efects on the fnancial performance of the Group. The Group
uses derivative fnancial instruments – interest rate swaps – to hedge certain risk exposures. Derivatives are exclusively used
for hedging purposes i.e. not as trading or other speculative instruments. The Group uses diferent methods to measure
diferent types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate and
foreign exchange risk, and ageing/credit scorecard analysis for credit risk.
Risk management is primarily carried out by the fnancial analysis, treasury and credit and risk departments.
Interest rate risk
Interest rate risk results principally from the repricing risk or diferences in the repricing characteristics of the Group’s
receivable portfolio and borrowings.
The majority of the Group’s receivables consist of fxed rate consumer and commercial instalment lease contracts. The
interest rate is fxed for the life of the contract. Lease contracts are originated with maturities ranging between one and
fve years and generally require the customer to make equal monthly payments over the life of the contract. Borrowings
used to fund the lease asset receivables are also fxed for the term of the lease. The vast majority of leases are funded within
two weeks of being settled, with the rental stream discounted at a fxed rate of interest to determine the borrowing amount.
Interest relating to the loan note issued to fund the Certegy acquisition is also fxed over the life of the loan, there being no
interest rate risk relating to this loan.
The remainder of the Group’s receivables relate to the consumer loan portfolio where the interest rates are fxed for the
term of the loan. Borrowings to fund the consumer loan portfolio are at a mix of fxed and variable rates and are reset on
a monthly basis to market rates, the profle of the debt being signifcantly shorter than has historically been the case for
the loan portfolio. The Group is subject to some interest rate risk on this portfolio which is described below. For sensitivity
measurement purposes, a +/–1% pa sensitivity in interest rates has been selected as this is considered realistic given the
current level of both short-term and long-term Australian dollar interest rates.
During the year the Group has also entered into new borrowing arrangements requiring a variable base rate. Interest rate
risk has been managed on these borrowings by entering into interest rate swaps, whereby the Group pays fxed rate and
receives foating rate.