Page 173 - Annual Report 2014

Notes to the Financial Statements

Year ended 31 December 2014

27 Financial Risk Management (continued)
Interest rate risk
The Group’s exposure to market risk for changes in interest rates relates primarily to the Group’s debt obligations.

The Group adopts a policy of ensuring that at least 50 percent of its exposure to changes in interest rates on bank loans is on a
fixed rate basis. Interest rate swaps, denominated in Singapore dollars, have been entered into to achieve this purpose.

At 31 December 2014, the Group had outstanding interest rate swap agreements with notional principal amounts totalling
$335.0 million (2013: $335.0 million) in cash flow hedges against borrowings. These interest rate swaps will mature over the
remaining term ranging from 0.1 year to 2.4 years (2013: 1.1 years to 3.4 years) to match the underlying hedged cash flows
arising on the borrowings consisting of semi-annual interest payments. The fixed interest payable are at interest rates ranging
from 0.86% to 2.25% per annum (2013: 0.86% to 2.25% per annum).

Sensitivity analysis
The Group’s and the Company’s borrowings are denominated in Singapore dollars. An increase/decrease in the interest rates by

100 basis points with all other variables remaining constant, will result in the Group’s and the Company’s profit before taxation
to be lower/higher by $0.1 million (2013: $0.1 million).

Foreign currency risk

The Group incurs foreign exchange risk on sales and purchases that are denominated in currencies other than Singapore Dollar.
The currency giving rise to this risk is primarily the United States Dollar.

For operations with significant expenditure denominated in foreign currencies, forward exchange contracts are entered into to
hedge the foreign currency risk on forecasted payment obligations. At 31 December 2014, the Group and the Company do not
have outstanding forward exchange contracts. The notional principal amounts for Group and the Company at 31 December 2013
was $68.6 million.

The Group’s and the Company’s exposures to United States Dollar are as follows:

Group Company

2014 2013 2014 2013

$m $m $m $m

Trade and other receivables 31.5 32.3 7.6 6.8
Cash and cash equivalents 39.4 80.2 27.1 71.1
Trade and other payables (145.1) (146.7) (63.4) (72.2)
(74.2) (34.2) (28.7)
5.7

In respect of other monetary liabilities held in foreign currencies, the Group ensures that the net exposure is kept to an
acceptable level by buying foreign currencies at spot rates where necessary to address any shortfalls.

Sensitivity analysis

At 31 December 2014, a 1% (2013: 1%) strengthening of Singapore Dollar against the United States Dollar would increase
profit before taxation by the amounts shown below. This analysis assumes that all other variables, in particular interest
rates, remain constant.

Group Company

2014 2013 2014 2013

$m $m $m $m

Profit before taxation 0.7 0.3 0.3 0.1

A 1% (2013: 1%) weakening of Singapore Dollar against the United States Dollar would have had the equal but opposite effect to
the amounts shown above, on the basis that all other variables, in particular interest rates, remain constant.

170 many lives of hubbing