Annual Report & Accounts 2012 - Euromoney Institutional Investor ...

Euromoney Institutional Investor PLC Annual Report and Accounts 2012
www.euromoneyplc.com
Our Performance
19 Financial instruments and risk management continued
The decrease in the loss from the sensitivity analysis is due to an increase in the working capital asset position. The fall in profit in equity from
£6,666,000 to £6,606,000 from the sensitivity analysis is due to the decrease of the value of the derivative financial liabilities.
The group is also exposed to the translation of the results of its US dollar-denominated businesses, although the group does not hedge the translation
of these results. Consequently, fluctuations in the value of sterling versus other currencies could materially affect the translation of these results in the
consolidated financial statements. The group endeavours to match foreign currency borrowings to investments in order to provide a natural hedge for
the translation of the net assets of overseas subsidiaries with the related foreign currency interest cost arising from these borrowings providing a partial
hedge against the translation of foreign currency profits.
The change in equity is due to a 10% change in sterling against US dollars in relation to the translation of external loans and loans to foreign
operations within the group where the denomination of the loan is not in the functional currency of the lender/borrower would result in a change of
£4,105,000 (2011: £6,562,000). However, the change in equity is completely offset by the change in value of the foreign operation’s net assets from
their translation into sterling.
Forward foreign exchange contracts
It is the policy of the group to enter into forward foreign exchange contracts to cover specific foreign currency payments and receipts. A series of US
dollar and Euro forward contracts are put in place to sell forward surplus US dollars and Euros so as to hedge 80% of the group’s UK based US dollar
and Euro revenues for the coming 12 months and 50% of the group’s UK based US dollar and Euro revenues for the subsequent six months. In addition,
at a group level a series of US dollar forward contracts is put in place up to 18 months forward to hedge the operation’s Canadian cost base.
Average exchange rate Foreign currency Contract value Fair value
2012 2011 2012
US$000
2011
US$000
Cash Flow Hedges
Sell USD buy GBP
Less than a year 1.589 1.705 71,875 66,800 45,236 39,174 694 (3,769)
More than a year but less
than two years 1.581 1.596 17,225 20,000 10,892 12,532 206 (331)
Sell USD buy CAD †
Less than a year 1.001 1.026 20,976 16,880 13,219 10,669 176 (201)
More than a year but less
than two years 1.011 0.991 6,307 7,400 4,015 4,516 64 (245)
EUR 000’s EUR 000’s £000 £000 £000 £000
Sell EUR buy GBP
Less than a year 1.183 1.158 34,630 34,600 29,286 29,871 1,628 55
More than a year but less
than two years 1.248 1.140 9,950 11,100 7,971 9,737 (9) 156
† Rate used for conversion from CAD to GBP is 1.5889 (2011: 1.6233).
2012
£000
2011
£000
2012
£000
2011
£000
Notes to the Consolidated Financial Statements
Company Accounts Group Accounts Our Governance
95