WindarPhotonics AnnualReport 2018 All - Flipbook - Page 57
Foreign exchange risk (continued)
The Group’s main foreign currency risk will be the short-term risk associated with accounts receivable and payable
denominated in currencies that were not the subsidiary’s functional currency. The risk will arise on the difference
in the exchange rate between the time invoices were raised/received and the time invoices were settled/paid.
Excess foreign currency amounts generated from trading will be converted into € to avoid future currency risk.
Capital raised is also be converted into €.
The Group’s policy is, where possible, to settle liabilities denominated in their functional currency with the cash
generated from their own operations in that currency.
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange
rates relates primarily to the Group’s operating activities (when revenue or expense is denominated in a different
currency from the Group’s presentation currency) and the Group’s net investments in foreign subsidiaries
(translation risk).
The Group is aware of its non-Euro exposures but does not consider that at present a hedging program be required.
Raw materials and capital expenditure are primarily in Euro (€) and US Dollars whilst the target revenue market is
Asia, Europe and the USA. Any divergence from this would be considered by management with a view to putting
cover in place.
The Group has significant operations in the following currencies: Euro (€), Danish Kroner (DKK) and
Chinese Yuan (RMB).
Sensitivity analysis
All intercompany movements have been excluded from this sensitivity analysis. The following tables demonstrate
the sensitivity to a reasonably possible change in the exchange rates of the net assets of the subsidiaries, with
all other variables held constant. The impact on the Group’s profit before tax is due to changes in the fair value
of monetary assets and liabilities including non-designated foreign currency derivatives. The Group’s exposure
to foreign currency changes for all other currencies is not material.
The sensitivity analysis assumes that there is no or little risk in respect of the € and the Danish Kroner as the
Danish Kroner is ‘linked’ to the €. The movement in the exchange rate in the last 24 months being 0.44%
(2017: 0.24%). The sensitivity related to the RMB is estimated at +/-10%. The movement in the RMB exchange
rate in the last 24 months being 7.6% (2017: 3%).
€
2018
2017
€
€
DKK
2018
2017
€
€
RMB
2018
2017
€
€
Total
2018
€
2017
€
Net foreign
currency
financial
assets/(liabilities)
€ 170.409
DKK
RMB
Total net
exposure
170.409
158,692
-
-
(2,522,485) (947,446) 27,247
75,530
170.409
(2,522,485)
27,247
158,692
(947,446)
75,530
158,692
(2,522,485) (947,446) 27,247
75,530
(2,324,829)
(713,224)
Effect on other
Change
Effect on profit
comprehensive
Yearin ratebefore tax €income €
2018RMB
RMB
2017RMB
RMB
+10%(2,725)(2,725)
-10%
2,725
2,725
+10%(7,553)(7,553)
-10%
7,553
7,553
Windar Photonics - Annual Report and Accounts 2018
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