Page 67 - NZPM Annual Report 2020

NZPM GROUP LIMITED
Notes to the Consolidated Financial Statements for the year ended 31 March 2020

Excluding the impact of the interest rate swaps, if the Group’s year end loan had remained the same through the year and interest
rates moved by +-1% then the impact would be a $98,950 gain or loss on pre-tax profits (2019: $78,550).

32.5. Credit risk management

Credit risk arises from the financial assets of the Group which are exposed to potential counter-party default, with a maximum
exposure equal to the carrying amount of these assets. In the normal course of business the Group incurs credit risk from trade and
other receivables, derivatives and transactions with financial institutions.

The Group places its cash and short-term investments and derivatives with high credit quality financial institutions approved by
directors and in accordance with specified treasury policy limits. The Group’s treasury policy requires bank counter-parties to have a
minimum Standard & Poor’s credit rating of at least ‘A’ (2019: ‘A’).
The Group controls its credit risk from trade and other receivables by the application of credit approval, limits and monitoring
procedures. Receivable balances are monitored on an ongoing basis to ensure the Group’s bad debt exposure is not significant.
Furthermore, the Group reviews the recoverable amount of each trade debt on an individual basis at the end of the reporting period
to ensure that adequate loss allowance is made for irrecoverable debts. There are no significant concentrations of credit risk, whether
through exposure to individual customers, specific industry sectors and/or regions.
Credit risk sensitivity

The credit rating information is supplied by independent rating agencies where available and, if not available the credit management
team uses other publicly available information and the Group’s own trading records to rate its major customers and other debtors.
The Group’s credit exposures are monitored on a continuous basis.

The table below details the credit quality of the Group’s financial assets.

2020 2019
$’000 $’000
Trade and other receivables (see note 12.2) Loss allowance at lifetime ECL 369 339

For trade receivables the Group has applied the simplified approach in IFRS 9 to measure the loss allowance at lifetime ECL. The
Group determines the expected credit losses on these items by using a provision matrix, estimated based on historical credit loss
experience of debtors, adjusted as appropriate to reflect current conditions and estimates of future economic conditions. Accordingly,
the credit risk profile of these assets is presented based on their ageing status in terms of the provision matrix.

32.6. Liquidity risk management

Liquidity risk arises from financial liabilities of the Group and the Group’s subsequent ability to meet the obligation to repay these
financial liabilities as and when they arise.

Ultimate responsibility for liquidity risk management rests with the board of directors, which has established an appropriate liquidity
risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management
requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities,
by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.
Details of additional undrawn facilities that the Group has at its disposal to further reduce liquidity risk are set out below.

The tables below analyse the Group’s financial liabilities and derivatives into relevant maturity bands based on the remaining period
from balance date to the contractual maturity date. The cash flow amounts disclosed in the table represent undiscounted cash flows
liable for payment by the Group.
For interest rate swaps the cash flows have been estimated using forward interest rates applicable at the end of the reporting period.

For forward currency contracts the cash flow has been estimated by using the indicative NPV market value profit/loss at balance
date.

For bank loans, it has been assumed that the interest rates applicable at the end of the reporting period will apply through to expiry
of the term loan facility, even though the Group has the option to repay the loan prior to its expiry date. The table includes both
interest and principal cash flows.

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NZPM GROUP LIMITED ANNUAL REPORT 2020