117
CORDLIFE GROUP LIMITED
| ANNUAL REPORT 2015
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
36.
FINANCIAL RISK MANAGEMENT
The Group and the Company is exposed to financial risks arising from its operations and the use of financial
instruments. The key financial risks include credit risk, interest rate risk, liquidity risk and market price risk.
There has been no other change to the Group’s exposure to these financial risks or the manner in which it
manages and measures the risks as summarised below:
Credit risk
Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default
on its obligations. The Group’s exposure to credit risk arises primarily from trade and other receivables. For
other financial assets (including cash and cash equivalents and fixed deposits), the Group minimises credit
risk by dealing with high credit rating counterparties. Other receivables that are neither past due nor impaired
are with credit-worthy debtors with good payment record with the Group. The Group’s maximum exposure
to credit risk is represented by the carrying amount of these financial assets.
Trade receivables comprise amounts due from parents and therefore the individuals cannot be subject to the
types of credit assessments that could be otherwise undertaken if dealing with a corporate entity. To mitigate
credit risk, receivable balances are monitored on a regular basis with the result that the Group’s exposure to
bad debts to date has not been significant. The nature of the cord blood banking business whereby the child’s
umbilical cord stem cells are stored with the Group reduces the likelihood of default in payment.
As at 30 June 2015, the Group has a loan of $61,960,000 (2014: $Nil) due from one external party. Details
are disclosed in Note 18 to the financial statements.
There are no other significant concentrations of credit risk within the Group. Information regarding financial
assets which are impaired, and financial assets which are past due but not impaired is disclosed in Note 17.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of the Group’s financial instruments will
fluctuate because of changes in market interest rates. The Group’s exposure to interest rate risk arises primarily
from the Group’s interest-bearing borrowings whose interest rates are subject to re-pricing every quarter
after July 2014.
Fixed deposits of varying maturity periods are placed with reputable banks and financial institutions and
generate interest income at a fixed rate during the tenure of the fixed deposits and are not subject to changes
in interest rate fluctuation.
Sensitivity analysis for interest rate risk
At the end of the reporting period, if interest rates had been 75 (2014: 75) basis points lower/higher with
all other variables held constant, the Group’s profit net of tax would have been $74,000 (2014: $80,000)
higher/lower, arising mainly as a result of lower/higher interest expense on floating rate interest-bearing
borrowings.
