Annual Report 2022

NOTESTOTHE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2022 134 The United Laboratories International Holdings Limited Annual Report 2022 38. FINANCIAL INSTRUMENTS (Continued) Financial risk management objectives and policies Foreign currency sensitivity analysis The following table details the Group’s sensitivity to a 5% (2021: 5%) increase and decrease in RMB against the relevant foreign currencies. 5% is the sensitivity rate used which represents management’s assessment of the reasonably possible change in foreign currency exchange rate. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and foreign currency forward contracts, and adjusts their translation at the end of the reporting period for a 5% change in foreign currency rates. A positive (negative) number below indicates an increase (decrease) in post-tax profit for both years where RMB strengthens 5% against the relevant foreign currencies. For a 5% weakening of RMB against the relevant foreign currencies, there would be an equal and opposite impact on the profit for both years. 2022 2021 RMB’000 RMB’000 USD (42,820) (21,286) Euro (1,174) 3,011 HK$ 74,349 57,351 Fair value and cash flow interest rate risks The Group has significant borrowings which bear interest rate risk. Floating rate borrowings, bank deposits and bank balances expose the Group to cash flow interest rate risk. Borrowings and leases liabilities at fixed rates expose the Group to fair value interest rate risk. The Group cash flow interest rate risk is mainly concentrated on the fluctuation of interest rates on the Group’s Hong Kong dollar denominated borrowings. During the current year, the Group has not hedged its cash flow and fair value interest rate risk. The Group manages its interest rate exposures by assessing the potential impact arising from any interest rate movements based on interest rate level and outlook. The management will review the proportion of borrowings in fixed and floating rates and ensure they are within reasonable range.