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Notes to the Consolidated Financial Statements

31st March 2018

3 FINANCIAL RISK MANAGEMENT (CONTINUED)

3.1 Financial risk factors (Continued)

(a) Market risk (Continued)

(i) Foreign exchange risk (Continued)

At 31st March 2018, if GBP had strengthened/weakened by 10% against HKD with all
other variables held constant, post-tax loss (2017: profit) for the year would have been
approximately HK$952,000 lower/higher (2017: HK$103,000 higher/lower), mainly as a
result of the foreign exchange differences on translation of GBP denominated cash and
bank balances.

(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.

As at 31st March 2018, the Group’s borrowings at variable rates were denominated in
HKD and USD.

At 31st March 2018, if interest rates on all borrowings had been 100 basis points
higher/lower with all other variables held constant, post-tax loss (2017: profit) for the
year would have been HK$1,117,000 higher/lower (2017: HK$1,746,000 lower/higher),
mainly as a result of higher/lower interest expense on floating rate borrowings.

At 31st March 2018, if interest rates on all interest-bearing bank and cash deposits
had been 100 basis points higher/lower with all other variables held constant, post-
tax loss (2017: profit) for the year would have been HK$2,317,000 lower/higher (2017:
HK$7,864,000 higher/lower) due to interest income earned on market interest rate.

The total bank loans held by the Group as at 31st March 2018 and 2017 were all with
floating rates.

80 ALCO HOLDINGS LIMITED ANNUAL REPORT 2018