UNBOUNCE - EXAMPLE PAGE-REPORT-ENTERPRISE DOCUMENT-KINGSPAN - Flipbook - Page 160
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2021 (continued)
19 Financial Risk Management and Financial Instruments (continued)
Translation risk
This exists due to the fact that the Group has operations whose functional currency is not the Euro, the Group’s presentational currency.
Changes in the exchange rate between the reporting currencies of these operations and the Euro, have an impact on the Group’s
consolidated reported result. For 2021, the impact of changing currency rates versus Euro compared to the average 2020 rates was
positive €123.1m (2020: negative €129.7m). The key drivers of the change year on year are the movements in GBP and USD. In common
with many other international groups, the Group does not currently seek to externally hedge its translation exposure.
Sensitivity analysis for primary currency risk
A 10% volatility of the EUR against GBP and USD in respect of transaction risk in the reporting entities functional currency would impact
reported after tax profit by €8.0m (2020: €1.5m) and equity by €8.0m (2020: €1.5m).
US Dollar Loan Notes
2011 Private Placement
In 2011, the Group issued a private placement of US$200m fixed interest 10 year bullet repayment loan notes maturing in August 2021.
In order to align the Group’s debt profile with its risk management strategy, the Group entered into a number of hedging transactions in
order to mitigate the associated foreign exchange and interest rate exposures. The Group entered into US dollar fixed / GBP floating cross
currency interest rate swaps for US$118.6m of the private placement. The benchmark interest rate and credit spread have been separately
identified and designated for hedge accounting purposes. The Group also entered into US dollar interest rate swaps for US$40m of the
private placement. The fixed rate and maturity date on the swaps matched the fixed rate on the private placement for all instruments.
The instruments were designated as hedging instruments at inception and continued to qualify as effective hedges under IFRS 9 up to the
maturity date in August 2021 at which time they were fully settled.
Interest rate risk
The Group has an exposure to movements in interest rates on its debt portfolio, and on its cash and cash equivalent balances and
derivatives. The Group policy is to ensure that at least 40% of its debt is fixed rate.
In respect of interest bearing loans and borrowings, the following table indicates the effective average interest rates at the year-end and
the periods over which they mature. Interest on interest bearing loans and borrowings classified as floating rate is repriced at intervals of
less than one year. The table further analyses interest bearing loans and borrowings by currency and fixed/floating mix. In previous years
the tables were prepared for both before and after hedging transactions, however this is unnecessary for 31 December 2021 as there were
no derivatives in place.
As at 31 December 2021
Bank loans
Loan notes
Euro
USD
Other
€m
At fixed
interest rate
€m
At floating
interest rate
€m
Under 5
years
€m
Over
5 years
€m
18.0
1,377.1
12.5
1,377.1
5.5
-
17.2
505.0
0.8
872.1
1,395.1
1,389.6
5.5
522.2
872.9
Total
€m
At fixed
interest rate
€m
At floating
interest rate
€m
1,202.4
182.4
10.3
1,202.4
176.9
10.3
5.5
-
1,395.1
1,389.6
5.5
Weighted average
effective interest rate
Total
3.0%
1.7%
The weighted average maturity of debt is 6.3 years as at 31 December 2021 (2020: 6.3 years).
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