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NotestotheConsolidatedFinancialStatements

(continued)

RCS GROUP CONSOLIDATED FINANCIAL STATEMENTS

2015

48

for the period ended 31 December 2015

30.

Risk management (continued)

Market risk

Market risk is the risk that changes inmarket prices, such as foreign exchange rates and interest rates, will affect the RCS Group’s income or

the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures

within acceptable parameters, while optimising the return.

Currency risk

The RCS Group transacts in the local currency, Namibian Dollar and Botswana Pula. No foreign currency risk management exists relating to

transactionsinNamibianDollarastheexchangerateisonetoonetotheSouthAfricanRand.TheRCSGroupdoesnotuseforwardexchangecontracts

to hedge its currency risk as assets held in a foreign currency, such as Botswana Pula, comprise less than 3% of the total assets of the group.

Interest rate risk

Interest rate risk is the sensitivity of the financial performance and/or the financial position of the RCS Group due to movements in the

interest rate. The RCS Group is exposed to interest rate risk as it both borrows and lends funds. The RCS Group occasionally enters into

interest rate swap contracts for the purposes of cashflowhedging. These interest rate swaps require theRCSGroup topay interest at various

fixed rates applied to notional amounts and entitle the RCS Group to receive various variable rates applied to the same notional amounts.

The swaps are used to hedge the risk that the RCS Group is exposed to as a result of the fact that a significant portion of the RCS Group’s

receivables bear interest at fixed rates (refer to note 5 for detail) whilst its borrowings bear interest at variable rates.

Profile

At the reporting date the interest rate profile of the company’s interest-bearing financial instruments was:

Interest rate

Carrying value

9 Months ended

12 Months ended

31 December

31 March

31 December 2015

31 March 2015

2015

2015

%

%

R’000

R’000

Fixed rate instruments

Card and loan receivables

25.5

25.8

1 524 984

1 585 708

Financial assets

1 524 984

1 585 708

Variable rate instruments

Card receivables

21.3

20.9

4 436 964

3 922 518

Bank balances

6.6 – 6.9

5.0 – 6.7

551 918

446 787

Other receivables (see note 12)

8.3 – 13.3

10

Financial assets

4 988 882

4 369 315

Funding

7.2 – 11.3

6.9 – 11.1

4 082 400

3 770 300

Financial liabilities

4 082 400

3 770 300

Fair value sensitivity analysis for fixed rate instruments

The RCS Group does not account for any fixed rate financial assets and liabilities at fair value through the income statement, and the RCS

Group does not designate derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting model. Therefore a

change in interest rates at the reporting date would not affect profit or loss.