RWS AR 23 Final Single pages - Flipbook - Page 146
Notes to the Consolidated Financial Statements (continued)
Foreign currency risk
The Group’s policy is, where possible, to allow Group entities to settle liabilities denominated in the functional currency,
with cash generated in that currency from their own operations. Transaction exposures arise from non-local currency
sales and purchases with gains and losses on transactions arising from 昀氀uctuations in exchange rates being recognised
in the statement of comprehensive income. Where we have a material or recurring exposure, the policy is to seek to
mitigate the risk using forward foreign exchange contracts.
Approximately 65% (2022: 65%) of Group external sales in the reporting period were denominated in US Dollars, while a
further 21% were denominated in Euros (2022: 21%). Similarly, the Group’s cost base was 39% in US Dollars (2022: 39%)
and 22% in Euros (2022: 21%).
The Group has a number of intercompany loans designated as quasi equity at inception. This designation is made
where loan transactions between Group companies represent, in substance, long term investments in that subsidiary
rather than intercompany loan transactions. These loans are often denominated in a currency other than the functional
currency of at least one of the counterparties. Foreign currency translation on these loans is recognised in Other
Comprehensive Income in the Statement of Comprehensive Income until the underlying investment is disposed of at
which point they are recognised in Pro昀椀t or Loss in the Statement of Comprehensive Income.
Assets and liabilities of Group entities located overseas are principally denominated in their respective currencies and
are therefore not materially exposed to currency risk. On translation to Sterling, gains or losses arising are recognised
directly in equity.
Moravia IT s.r.o. as discussed below designates its forward foreign exchange contracts as cash 昀氀ow hedges in
accordance with IFRS 9 to hedge its operating costs.
The carrying amounts of the Group’s material foreign currency denominated monetary assets and liabilities at the
reporting date are as follows:
Assets
2023
£m
Euros
US Dollars
Assets
2022
£m
Liabilities
2023
£m
Liabilities
2022
£m
47.3
46.7
21.4
19.4
154.8
156.1
67.0
54.0
202.1
202.8
88.4
73.4
Foreign currency sensitivity analysis
The following table details the Group’s sensitivity to a 120% increase and decrease in Sterling against the major
currencies listed in the table above. The sensitivity analysis includes only the outstanding denominated monetary items
and adjusts their translation at the end of the period for a 20% change in the Sterling exchange rate. A positive number
below indicates an increase in pro昀椀t where Sterling weakens against the relevant currency. For a 20% strengthening of
Sterling against the relevant currency, there would be an equal and opposite impact on pro昀椀t, and the balances would
be negative.
The sensitivities below are based on the exchange rates at the reporting date used to convert the assets or liabilities
to Sterling.
Pro昀椀t and loss impact
2023
£m
Euros
US Dollars
Pro昀椀t and loss impact
2022
£m
4.3
4.5
14.6
17.0
18.9
21.5
If the exchange rate on uncovered exposures were to move signi昀椀cantly between the year end and the date of payment
or receipt, there could be an impact on the Group’s pro昀椀t. As all 昀椀nancial assets and liabilities are short-term in nature,
this risk is not considered to be material.
146
RWS Holdings plc — Annual Report 2023 NOTES TO THE CONSOLIDATED STATEMENTS
