Financial review
Hedging
During 2008 we benefited from favourable movements in foreign exchange rates, particularly within Central Europe. Our policy is to hedge the foreign exchange rates at which we translate our reported results but only within a financial reporting period. We economically hedged a large proportion of our 2008 overseas profits in January and May of 2008.
In January 2009 we entered into further contracts to hedge the majority of our forecast profits for Central Europe for 2009. The exchange rates in these contracts are approximately 4% more favourable than the rates used to translate 2008 profits. The table below shows the average exchange rates, including the impact of hedging, for the relevant reporting periods, closing exchange rates at the relevant period ends, together with the rates at which the Group has contracts in place for 2009.
| Hedged rate 2009 |
Average rate 2008 |
Closing rate 2008 |
Average rate 2007 |
Closing rate 2007 |
|
|---|---|---|---|---|---|
| Poland | 4.5 | 4.5 | 4.3 | 5.4 | 4.9 |
| Czech Republic | 29.1 | 32.9 | 27.9 | 39.6 | 36.0 |
| Slovakia | 33.1 | 40.9 | 31.5 | 48.5 | 45.7 |
| Hungary | 304.7 | 329.5 | 274.8 | 359.2 | 343.1 |
| Mexico | n/a | 21.3 | 20.1 | 21.8 | 21.7 |
| Romania | n/a | 4.7 | 4.2 | 4.9 | 4.9 |
| Russia | 47.5 | 45.4 | 42.5 | n/a | n/a |
The Group also hedges the interest costs on its borrowings by entering into derivative contracts. Our policy is to ensure that above 70% of the Group’s forecast interest costs for the next 12 months will be fixed.
Going concern
The directors have reviewed the budget for the year to 31 December 2009 and the forecasts for the four years to 31 December 2013 which include projected profits, cash flows, borrowings and headroom against facilities. The committed bank facilities of the Group are sufficient to fund the planned growth of our existing operations until October 2011. Taking these factors into account the directors have a reasonable expectation that the Group has adequate resources to continue in operation for the foreseeable future. For this reason they have adopted the going concern basis in preparing these financial statements.
David E S Broadbent
Finance Director