RWS Annual Report 2022 web - Flipbook - Page 143
Hedging
The Group applies cash flow hedge accounting on foreign exchange forward contracts taken out by Moravia IT s.r.o
to hedge its Czech Koruna expected future operating costs (Moravia is a USD functional CGU). Any changes in the
fair value of these cash flow hedges have been recognised in a separate hedge reserve in equity and recycled to the
statement of comprehensive income as these costs are settled.
The Group applies net investment hedge accounting in respect of borrowings associated with the acquisition of a single
acquisition which was USD denominated. The hedging relationship was established with the intention of reducing the
effect of currency fluctuations in the statement of comprehensive income, by recognising gains or losses through other
comprehensive income. The value of loans designated as net investment hedges are £32.2m and this is expected to be
settled over a period of 5 years.
During the year ended 30 September 2022, no ineffectiveness was recorded in the Group’s statement of comprehensive
income (2021: £Nil). All amounts recorded in the hedge reserve pertain to continuing hedging relationships as at 30
September 2022.
The Group’s cash flow hedges, which take the form of forward foreign exchange contracts, in place at the year end are
as follows:
Forward foreign currency exchange contracts
Assets
2022
£m
Assets
2021
£m
Liabilities
2022
£m
Liabilities
2021
£m
-
-
0.6
0.7
As at 30 September 2022, forward contracts are in place to sell US dollars and purchase 511.2 million Czech Koruna, at
an average contracted price of 25.06 and 18 million Euro’s at an average contracted price of 0.993.
Hedging Reserve
2022
2021
At 1 October 2021
1.2
(0.4)
Cashflow hedges - fair value movement
2.9
(1.8)
(2.5)
1.7
Cashflow hedges - realised gains/ losses transferred to statement of comprehensive income
Net investment hedge
(7.1)
1.7
At 30 September 2022
(5.5)
1.2
Capital risk
The Group considers its capital to comprise its ordinary share capital, share premium, other reserves and accumulated
retained earnings. In managing its capital, the Group’s primary objective is to ensure its continued ability to provide
a consistent return for its equity shareholders, through a combination of capital growth and distributions. The Group
has historically considered equity funding as the most appropriate form of capital for the Group, but debt financing has
been introduced where it was felt that the benefits exceed the risks and costs to equity shareholders of further equity
financings.
At 30 September 2022, there was £29.2m (2021: £47.2m) of external debt finance on the balance sheet. The Group is not
subject to externally imposed capital requirements.
In addition, the Group held cash and cash equivalents at the year end of £101.2m (2021: £92.5m).
The Group funds dividend payments to shareholders through the underlying profitability of its subsidiaries which are
contributed between the subsidiary and the ultimate parent company, RWS Holdings plc. The underlying profitability
of the Group ensures that there is sufficient profitability within these subsidiaries and contributions from these
subsidiaries to the Parent Company and that sufficient distributable reserves exist to maintain the Group's current
dividend policy.
Included within retained earnings are £184.6m relating to gain recognised on a cash-box structure utilised as part of
the Moravia acquisition. These amounts are not currently distributable.
NOTES TO THE CONSOLIDATED STATEMENTS
RWS — Annual Report 2022
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