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29. FINANCIAL INSTRUMENTS (continued)
for the year ended 30 June
NOTES TO THE GROUP FINANCIAL STATEMENTS continued
(b) Cash flow interest rate risk (continued)
Interest rate sensitivity
A 1% increase in interest rates at 30 June 2010 would (decrease)/increase profit before tax and the hedging reserve by the amounts shown
below. This analysis assumes that all other variables remain constant.
Profit
before tax
Rm
2010 2009
Hedging
reserve
Rm
Profit
before tax
Rm
Hedging
reserve
Rm
(42) – (38) 19
A 1% decrease in interest rates at 30 June 2010 would have an equal but opposite effect to the amounts shown above, on the basis that
all other variables remain consistent.
Capital risk management
The group’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern in order to provide
benefits for its stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust this capital structure, the group may issue new shares, adjust the amount of dividends paid to shareholders,
return capital to shareholders or buy back existing shares.
The board of directors monitors the level of capital, which the group defines as total share capital, share premium, treasury shares and
treasury share options.
There were no changes to the group’s approach to capital management during the year.
The group is not subject to externally imposed capital requirements.
30. CONTINGENT LIABILITIES
(i) In the event of default by the current tenants, the group will be liable for lease liabilities relating to the Mmabatho staff flats and the
Taung flats. The Mmabatho staff flats current rental is R5.9 million (2009: R5.3 million) per annum, escalating at 11% per annum and
expires on 30 November 2011.
(ii) Group companies have guaranteed borrowing facilities of certain group subsidiaries in which the group has less than 100% shareholding.
The group has therefore effectively underwritten the minorities’ share of these facilities in the amount of R567 million at 30 June 2010
(June 2009: R628 million).
Contingent liabilities which the group has incurred in relation to its previous interest in associates:
(i) The group’s 73.3% held subsidiary, RRHL, together with Primedia Limited have jointly and severally guaranteed two (2009: two) operating
leases of SCE whose rental amounts to US$2.8 million (2009: US$3.2 million) annually. At 30 June 2010, the maximum exposure is
US$23.6 million (30 June 2009: US$26.6 million).
(ii) In addition, RRHL together with Primedia have jointly and severally guaranteed one operating lease of SCME whose rental amounts to
US$1.8 million (2009: US$1.8 million) annually. At 30 June 2010, the maximum exposure is US$4.9 million (30 June 2009: US$7.0 million).
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