Carphone Warehouse 2009 Annual Report Download - page 81

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Financial Statements
The effect of foreign exchange derivatives on borrowings at the year end was as follows:
2009 2008
Swiss Swiss
Sterling Euro Franc Other Total Sterling Euro Franc Other Total
By instrument £m £m £m £m £m £m £m £m £m £m
Borrowings before derivatives 458 – – – 458 321 230 381 1 933
Derivatives (44) 45 – (1) – (302) 203 66 33 –
Total 414 45 – (1) 458 19 433 447 34 933
Interest rate risk:
The Group’s interest rate risk arises primarily from cash, cash equivalents and borrowings, all of which are at oating rates of
interest and thus expose the Group to cash ow interest rate risk. These oating rates are linked to LIBOR and other interest rate
bases as appropriate to the instrument and currency. Future cash ows arising from these nancial instruments depend on
interest periods agreed at the time of rollover. Group policy permits the use of long-term interest rate derivatives in managing the
risks associated with movements in interest rates although the Group holds none of these products at present.
Since all cash, cash equivalents and borrowings are at oating rates of interest, no further disclosure on the effect of interest rate
derivative products has been provided.
Cash and borrowings, as well as some foreign exchange products, are sensitive to movements in interest rates and such
movements have been analysed in the chart below by calculating the effect on the income statement and equity of 1%
movements in the interest rate for the currencies in which most Group cash and borrowings are denominated. Funding to joint
ventures and associates has been offset against gross borrowings in calculating these sensitivities. This analysis has been
prepared on the assumption that the year-end positions prevail throughout the year, and therefore may not be representative of
uctuations in levels of borrowings.
2009 2008
Income Income
statement Equity statement Equity
movement movement movement movement
£m £m £m £m
1% movement in the Sterling interest rate 2 – – –
1% movement in the Euro interest rate – – 4 –
Liquidity risk:
The Group manages its exposure to liquidity risk by regularly reviewing the long- and short-term cash ow projections for the
business against facilities and other resources available to it. Regular reports are made to the Audit Committee assessing
current facilities and debt and, in the shorter-term, weekly reports are circulated to senior management showing variances
against the Group’s cash ow budget. Headroom is assessed based on historical experience as well as by assessing current
business risks, including foreign exchange movements. Existing facilities do not expire for more than three years; it is Group
policy to renance debt maturities signicantly ahead of maturity dates.
The table below analyses the Group’s nancial liabilities into relevant maturity groupings. The amounts disclosed in the table are
the contractual undiscounted cash ows assuming interest rates remain constant and that borrowings are paid in full in the year
of maturity.
2009
More than
Less than 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years 5 years Total
£m £m £m £m £m £m £m
Borrowings (49) (13) (15) (442) – – (519)
Derivative nancial instruments – payable (344) – – – – – (344)
Derivative nancial instruments – receivable 344 – – – – – 344
Trade and other payables (305) – – – – – (305)
2008
More than
Less than 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years 5 years Total
£m £m £m £m £m £m £m
Borrowings (79) (41) (317) (27) (262) (388) (1,114)
Derivative nancial instruments – payable (302) – – – – – (302)
Derivative nancial instruments – receivable 302 – – – – – 302
Trade and other payables (1,087) (1) – – – – (1,088)