The following table indicates the periods in which the cash
flows associated with cash flow hedging instruments are expected to
occur:
Carrying Contractual One year
amount cash flows or less
31 March 2014 GBP000 GBP000 GBP000
---------------------------- -------- ----------- --------
Interest rate swaps:
Liabilities 399 - -
Forward exchange contracts:
Liabilities 178 (21,374) (21,374)
---------------------------- -------- ----------- --------
Carrying Contractual One year
amount cash flows or less
31 March 2013 GBP000 GBP000 GBP000
---------------------------- -------- ----------- --------
Interest rate swaps:
Liabilities 546 - -
Forward exchange contracts:
Liabilities (95) (12,925) (12,925)
---------------------------- -------- ----------- --------
At 31 March 2014, the Group had an interest rate swap in place
with a notional amount of GBP2.9 million, whereby it receives a
floating rate of interest based on LIBOR and pays a fixed rate of
interest at 0.92% on the notional amount. The swap is to hedge the
exposure to changes in the interest rate. The terms of the hedge
have been negotiated to match the terms and commitments. The fair
value of the swap at the balance sheet date was a liability of
GBP4,000.
At 31 March 2014, the Group had an interest rate swap in place
with a notional amount of $5.4 million (GBP3.2 million), whereby it
receives a floating rate of interest based on LIBOR and pays a
fixed rate of interest at 0.77% on the notional amount. The swap is
to hedge the exposure to changes in the interest rate. The terms of
the hedge have been negotiated to match the terms of the
commitments. The fair value of the swap at the balance sheet date
was a liability of GBP12,000.
At 31 March 2014 the Group had an interest rate swap in place
with a notional amount of EUR7 million (GBP5.8 million), whereby it
receives a floating rate of interest based on EURIBOR and pays a
fixed rate of interest at 2.29% on the notional amount. This swap
is to hedge the exposure to changes in the interest rate. The terms
of the hedge have been negotiated to match the terms of the
commitments. The fair value of the swap at the balance sheet date
was a liability of GBP278,000.
At 31 March 2014, the Group had an interest rate cap on a
notional amount of GBP8 million, and a notional amount of $8
million (GBP4.8 million), whereby interest payable has been capped
at 1.5% on both notional amounts. The terms of the hedge have been
negotiated to match the terms of the commitments. The fair value of
the caps at the balance sheet date were liabilities of
GBP105,000.
The Group has forward currency hedging contracts outstanding at
31 March 2014 designated as hedges of expected future purchases in
US Dollars and Chinese Renminbi for which the Group has firm
commitments. The forward currency contracts are being used to hedge
the foreign currency risk of the firm commitments.
The terms of the forward currency hedging contracts have been
negotiated to match the terms of the commitments.
The cash flow hedges of the expected future purchases in 2014/15
were assessed to be highly effective and as at 31 March 2014 a net
unrealised loss of GBP178,000 with related deferred tax credit of
GBPnil was included in other comprehensive income in respect of
these hedging contracts.
e) Market risk
Financial risk management
Market risk is the risk that changes in market prices, such as
foreign exchange rates, interest rates and equity prices, will
affect the Group's income or the value of its holdings of financial
instruments.
The Group hedges a proportion, as deemed appropriate by
management, of its UK subsidiaries' sales and purchases of
inventory denominated in foreign currency by entering into foreign
exchange contracts. Such foreign exchange contracts typically have
maturities of less than one year.
The Group rarely hedges profit translation exposure, since such
hedges provide only a temporary deferral of the effects of movement
in foreign exchange rates. Similarly, the Group does not hedge its
long-term investments in overseas assets.
However, the Group holds loans that are denominated in the
functional currency of certain overseas entities.
The Group's exposure to foreign currency risk is as follows.
This is based on the carrying amount for monetary financial
instruments except derivatives when it is based on notional
amounts.
Sterling Euro US Dollar Other Total
31 March 2014 Notes GBP000 GBP000 GBP000 GBP000 GBP000
---------------------- ----- -------- ------- --------- -------- ---------
Cash and cash
equivalents 16 1,010 5,006 674 1,421 8,111
Trade receivables 15 4,939 2,284 5,896 2,959 16,078
Other receivables 1,296 51 21 70 1,438
Secured bank loans 17 (17,900) (5,485) (9,372) - (32,757)
Loan arrangement
fees 17 155 - 98 - 253
Finance leases 20 (3,176) (1,505) (6) (2) (4,689)
Asset backed loans 17 1,007 (3,572) (2,771) - (5,336)
Bank overdrafts 16 1,657 801 (3,918) (1,069) (2,529)
Trade payables 21 (11,834) (3,262) (7,433) (2,502) (25,031)
Other payables 21 (549) (238) - - (787)
Financial liabilities
at fair value
through hedging
reserve 20 (577) - - - (577)
---------------------- ----- -------- ------- --------- -------- ---------
Balance sheet
exposure (23,972) (5,920) (16,811) 877 (45,826)
---------------------- ----- -------- ------- --------- -------- ---------
Sterling Euro US Dollar Other Total
31 March 2013 Notes GBP000 GBP000 GBP000 GBP000 GBP000
Cash and cash
equivalents 16 (158) 423 1,604 432 2,301
Trade receivables 15 5,989 2,736 6,068 4,006 18,799
Other receivables 1,484 35 174 202 1,895
Secured bank
loans 17 (16,318) (5,956) (12,264) - (34,538)
Loan arrangement
fees 17 403 - 150 - 553
Finance leases 20 (34) (1,719) (24) - (1,777)
Asset backed
loans 17 (3,125) (3,219) (1,339) - (7,683)
Revolving credit
facilities 17 - - (658) - (658)
Bank overdrafts 16 1,416 18 (2,193) 423 (336)
Trade payables 21 (10,809) (3,352) (10,578) (3,552) (28,291)
Other payables 21 (584) (120) - - (704)
Financial liabilities
at fair value
through hedging
reserve 20 (451) - - - (451)
---------------------- ----- --------- -------- --------- ------- ---------
Balance sheet
exposure (22,187) (11,154) (19,060) 1,511 (50,890)
---------------------- ----- --------- -------- --------- ------- ---------
The following significant exchange rates applied during the
year:
Reporting date
Average rate spot rate
-------------- ----------------
2014 2013 2014 2013
---------- ------ ------ ------- -------
Euro 1.19 1.23 1.21 1.19
US Dollar 1.59 1.58 1.67 1.52
---------- ------ ------ ------- -------
Sensitivity analysis
A 10% weakening of the following currencies against Sterling at
31 March 2014 would have increased equity and profit or loss by the
amounts shown below. This calculation assumes that the change
occurred at the balance sheet date and had been applied to risk
exposures existing at that date. This is translational
exposure.
This analysis assumes that all other variables, in particular
other exchange rates and interest rates, remain constant. The
analysis is performed on the same basis for 31 March 2013.
Equity Profit/(loss)
-------------- ---------------
2014 2013 2014 2013
GBP000 GBP000 GBP000 GBP000
---------- ------ ------ ------- ------
Euro (285) 180 (148) 29
US Dollar 1,528 1,733 (247) (238)
---------- ------ ------ ------- ------
On the basis of the same assumptions, a 10% strengthening of the
above currencies against Sterling at 31 March 2014 would have
decreased equity and profit or loss by the following amounts:
Equity Profit/(loss)
---------------- ---------------
2014 2013 2014 2013
GBP000 GBP000 GBP000 GBP000
---------- ------- ------- ------- ------
Euro 349 (220) 181 (35)
US Dollar (1,868) (2,118) 302 291
---------- ------- ------- ------- ------
Interest rate risk
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