McPHERSON’S LIMITED

 ANNUAL REPORT 2015  



  

51

WEIGHTED AVERAGE 

INTEREST RATE

1

BALANCE

$’000

% OF TOTAL 

 LOANS

2015

Bank loans – variable rate 

2.2%

30,000

33

Bonds – variable rate

2.2%

30,000

33

Interest rate swaps (notional principal amount)

4.1%

(30,000)

Net exposure to cash flow interest rate risk

30,000

33

2014

Bank overdrafts and bank loans – variable rate

2.7%

78,398

99

Interest rate swaps (notional principal amount)

4.2%

(60,000)

Net exposure to cash flow interest rate risk

18,398

23

1. Weighted average interest rates exclude the Group’s credit margin 

Group Sensitivity 

At 30 June 2015, if interest rates had changed by +/- 50 basis points from the year end rates with all other variables held constant, equity is 

estimated to have been $254,000 higher / $475,000 lower (2014: $411,000 higher / $418,000 lower) as a result of an increase / decrease in the fair 

value of the interest rate cash flow hedges.
The Group’s profit is estimated to have been $101,000 lower / $101,000 higher (2014: $104,000 lower / $104,000 higher) as a result of a change in 

interest rates of +/- 50 basis points applied to the average unhedged portion of debt throughout the year.

(C) CREDIT RISK

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations.  

Credit risk arises from cash and cash equivalents, derivative financial instruments and receivables due from customers.
The maximum exposure to credit risk at balance date is the carrying amount of the financial assets as summarised in Note 2. For derivative 

instruments, counterparties are limited to approved institutions with secure long-term credit ratings.
Credit limits are set and monitored by management with respect to individual customers and in some instances debtor insurance is taken out 

against specific customers in order to minimise the credit risk.  Credit limits are based on the customers’ financial position and prior payment 

history.
For derivative financial instruments, the Board determines the coverage required by the Group and this is reviewed on a regular basis.  The Group 

uses the major Australian banks as counterparties for most of the Group’s derivative instruments.  Derivatives entered into by foreign subsidiaries 

also use the major banks from within that country.
Refer to Notes 11 and 13 for additional information regarding receivables and credit risk exposure.

(D) LIQUIDITY RISK 

Liquidity risk is the risk that an entity will not be able to meet its financial obligations as they fall due.  The Group manages liquidity risk by 

continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

2015

$’000

2014

$’000

Financing Arrangements

The Group has access to the following undrawn borrowing facilities at the end of the reporting period: 

Unused at balance date – floating rate

Expiry within one year (bank overdraft and loans)

-

25,079

Expiring beyond one year (bank loans)

33,000

-

33,000

25,079

Refer to Note 21 for further information regarding the financing facilities available to the Group.