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Notes to the Consolidated Financial Statements


               31st March 2017


               3   FINANCIAL RISK MANAGEMENT


                   The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange
                   risk, cash flow and fair value interest rate risk), credit risk and liquidity risk.


                   Risk management is carried out by the Group’s treasury function. The Group adopts a conservative and
                   balanced treasury policy which focuses on the financial risks factors as below and seeks to minimise
                   potential adverse effects on the Group’s financial performance.


                   3.1  Financial risk factors

                       (a)  Market risk


                            (i)   Foreign exchange risk

                                 The Group’s transactions are mainly denominated in HKD, United States dollars (“USD”)
                                 and Renminbi (“RMB”). The majority of assets and liabilities are denominated in HKD,
                                 USD and RMB, and there are no significant assets and liabilities denominated in other
                                 currencies.

                                 Since HKD is pegged to USD, the Group does not have significant currency risks and it
                                 is the Group’s policy not to engage in speculative activities. The Group has not entered
                                 into any contracts to hedge its exposure for foreign exchange risk.


                                 At  31st  March  2017,  if  RMB  had  strengthened/weakened  by  10%  against  HKD
                                 with  all  other  variables  held  constant,  post-tax  profit  for  the  year  would  have  been
                                 approximately HK$6,397,000 (2016: HK$13,551,000) higher/lower, mainly as a result of
                                 the net foreign exchange differences on translation of RMB denominated cash and bank
                                 balances and other payables.

                            (ii)   Cash flow and fair value interest rate risk


                                 As  the  Group  has  no  significant  interest-bearing  assets,  other  than  short-term  bank
                                 deposits, the Group’s income and operating cash flows are substantially independent of
                                 changes in market interest rates.

                                 The  Group’s  interest  rate  risk  arises  from  bank  borrowings.  The  Group’s  bank
                                 borrowings are carried at floating rates which expose the Group to cash flow interest
                                 rate risk. The Group has not entered into any interest rate swaps to hedge its exposure
                                 to interest rate risk.













         70    ALCO HOLDINGS LIMITED  ANNUAL REPORT 2017
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