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33.
FINANCIAL INSTRUMENTS
(continued)
33.4 Market risk
(continued)
33.4.2 Interest rate risk
The group is exposed to interest rate risk as it borrows funds at both fixed and floating interest rates. This risk is managed by maintaining
an appropriate mix between fixed and floating borrowings and by the use of interest rate swap contracts. Investments in equity securities
accounted for as held-for-trading financial assets and trade receivables and payables are not exposed to interest rate risk.
At the reporting date the interest rate profile of the group’s interest-bearing financial instruments was:
2017
R’000
2016
R’000
Fixed rate instruments
Financial liabilities
Borrowings
(4 024 490)
(3 128 722)
Financial assets
Derivative instruments in designated hedge accounting relationships
1 652
–
Variable rate instruments
Financial assets
Cash and cash equivalents
6 348 049
5 509 505
Financial liabilities
Borrowings
(4 032 973)
(4 059 432)
Puttable non-controlling interest liabilities
(1 195 196)
(1 168 921)
The group’s exposure to interest rates on financial assets and liabilities are detailed in the various notes within the financial statements.
The variable rates are influenced by movements in the prime borrowing rates.
Sensitivity analysis
Group borrowings have been categorised by geographical location and the percentage change used for each category has been selected
based on what could reasonably be expected as a change in interest rates within that region based on historical movements in interest
rates within that particular region.
This sensitivity analysis has been prepared using the average borrowings for the financial year as the actual borrowings at June 30 are not
representative of the borrowings during the year. These analyses assume that all other variables, in particular foreign currency rates, remain
constant. The analyses are performed on the same basis as 2016. A decrease in interest rates would have an equal and opposite effect on
profit after taxation as detailed below.
2017
2016
Increase in
interest
rates
%
Decrease in
profit after
taxation
R’000
Increase in
interest
rates
%
Decrease in
profit after
taxation
R’000
Southern Africa and other Emerging Markets
0,50
11 537
0,50
6 360
United Kingdom and Europe
0,25
3 400
0,25
9 955
Australasia
0,25
8 809
0,25
7 352
23 746
23 667
FINANCIAL OVERVIEW
Notes to the consolidated financial statements
for the year ended June 30
FINANCIAL STAT MENTS
Annual integrated report 2017
Bid Corporation Limited
126