89
FLEXIGROUP LIMITED FINANCIAL REPORT 2011
At the end of the reporting period, the Group had the following variable rate borrowings and interest rate swap contracts
outstanding:
30 June 2011
30 June 2010
Weighted
Weighted
average
Balance
average
Balance
interest rate %
$’000 interest rate %
$’000
Borrowings
7.14% 253,741
8.69%
122,878
Interest rate swaps (notional principle amount)
5.07%
(174,954)
–
–
78,787
122,878
Based on the fnancial instruments held at 30 June 2011, if interest rates had changed by, –/+ 1% from the year-end rates with
all other variables held constant, the annualised impact on the consolidated entity’s after-tax profts and equity would have
been $64,000 lower/$48,000 higher (2010: $12,000 lower/higher).
Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures,
primarily with respect to the New Zealand dollar. The Group also has an operation in Ireland, on which the foreign exchange
impact is immaterial.
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in
a currency that is not the entity’s functional currency and net investments in foreign operations. The Group manages its
exposures to the New Zealand dollar by ensuring that its assets and liabilities in New Zealand are predominantly in
New Zealand dollars.
For sensitivity measurement purposes, a +/–10% sensitivity in foreign exchange rates to the Australian dollar has been
selected as this is considered realistic given the current levels of exchange rates, the recent levels of volatility and market
expectations for future movements in exchange rates.
Based on the fnancial instruments held at 30 June 2011, had the Australian dollar weakened/strengthened by 10% against the
New Zealand dollar compared to year-end rates, with other variables held constant, the consolidated entity’s after-tax profts
for the year and equity would have been $3,091,000 higher/$2,790,000 lower (2010: $1,592,000 higher/$1,302,000 lower),
as a result of exposure to exchange rate fuctuations of foreign currency operations. All foreign exchange risk is due to the
translation of the New Zealand and Ireland operations on consolidation.
Interest rate risk
Foreign exchange risk
Carrying
–1%
1%
–10%
+10%
amount Proft/Equity Proft/Equity Proft/Equity Proft/Equity
Consolidated entity at 30 June 2011
$’000
$’000
$’000
$’000
$’000
Financial assets
Cash and cash equivalents
55,994
(392)
392
373
(305)
Loans and receivables
– Fixed interest rate
712,834
–
–
3,921
(3,208)
Loss reserve
35,262
(247)
247
118
(96)
Financial liabilities
Payables
29,686
–
–
(59)
48
Borrowings
– Fixed interest rate
371,641
–
–
(723)
592
– Floating interest rate
253,741
1,776
(1,776)
(539)
179
Derivatives used for hedging
228
(1,201)
1,185
–
–
Total increase/(decrease)
(64)
48
3,091
(2,790)