Ryanair 2010 Annual Report Download - page 169

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(f) Credit risk
The Company holds significant cash balances, which are invested on a short-term basis and are
classified as either cash equivalents or liquid investments. These deposits and other financial instruments
(principally certain derivatives and loans as identified above) give rise to credit risk on amounts due from
counterparties. Credit risk is managed by limiting the aggregate amount and duration of exposure to any one
counterparty through regular review of counterparties’ market-based ratings, Tier 1 capital level and credit
default swap rates and by taking into account bank counterparties’ systemic importance to the financial systems
of their home countries. The Company typically enters into deposits and derivative contracts with parties that
have at least an “A” or equivalent credit rating. The maximum exposure arising in the event of default on the
part of the counterparty is the carrying value of the relevant financial instrument. While authorised to place
funds on deposit for periods up to 18 months, the Company typically does not enter into deposits with a duration
of more than 12 months.
The Company’s revenues derive principally from airline travel on scheduled services, car hire and in-
flight and related sales. Revenue is wholly derived from European routes. No individual customer accounts for a
significant portion of total revenue.
At March 31, 2010 10.6 million (2009: 10.7 million, 2008: 10.7 million) of our total accounts
receivable balance was past due, of which 10.1 million (2009: 10.1 million, 2008: 10.1 million) was impaired
and provided for and 10.5 million (2009: 10.6 million, 2008: 10.6 million) was past due but not impaired. See
Note 8 to the consolidated financial statements.
(g) Liquidity and capital management
The Company’s cash and liquid resources comprise cash and cash equivalents, short-term investments
and restricted cash. The Company defines the capital that it manages as the Company’s long-term debt and
equity. The Company’s policy is to maintain a strong capital base so as to maintain investor, creditor and market
confidence and to maintain sufficient financial resources to mitigate against risks and unforeseen events.
The Company finances its working capital requirements through a combination of cash generated from
operations and bank loans for the acquisition of aircraft. The Company had cash and liquid resources at March
31, 2010 of 12,813.4 million (2009: 12,278.2 million; 2008: 12,169.5 million). During the year, the Company
funded 1997.8 million in purchases of property, plant and equipment. Cash generated from operations has been
the principal source for these cash requirements, supplemented primarily by aircraft-related financing structures.
The Board of Directors periodically reviews the capital structure of the Company, considering the cost
of capital and the risks associated with each class of capital. The Board approves any material adjustments to the
capital structure in terms of the relative proportions of debt and equity.
Ryanair has generally been able to generate sufficient funds from operations to meet its non-aircraft
acquisition-related working capital requirements. Management believes that the working capital available to the
Company is sufficient for its present requirements and will be sufficient to meet its anticipated requirements for
capital expenditures and other cash requirements for the 2011 fiscal year.
(h) Guarantees
Details of the Company’s guarantees and the related accounting have been disclosed in Note 23 to the
consolidated financial statements.
(i) Sensitivity analysis
(i) Interest rate risk: Based on the levels of and composition of year-end interest bearing assets
and liabilities, including derivatives, at March 31, 2010, a plus or minus one-percentage-point movement in
interest rates would result in a respective increase or decrease of 112.4 million (net of tax) in net interest income
and expense in the income statement. All of the Group’s interest rate swaps are used to swap variable rate debt
to fixed rate debt; consequently any changes in interest rates would have an equal and opposite income
statement effect for both the interest rate swaps and the debt.