Lendlease Annual Report 2024

142 Lendlease Annual Report 2024 Notes to Consolidated Financial Statements continued 24.b. Credit Risk Exposure • The maximum exposure to credit risk at balance date on financial instruments recognised in the Statement of Financial Position (excluding investments of the Group) equals the carrying amount, net of any impairment • The Group is not exposed to any significant concentrations of credit risk on either a geographic or industry specific basis • Credit risk on financial instruments is managed under a Board approved credit policy that determines acceptable counterparties. Derivative counterparties and cash deposits are limited to recognised financial intermediaries with a minimum investment grade credit rating as determined by a recognised rating agency • Refer to Note 21 ‘Loans and Receivables’ for information relating to impairment on loans and receivables • In certain circumstances, the Group will hold either financial or non financial assets as collateral to further mitigate the potential credit risk on selected transactions. During the current and prior year, the Group did not hold financial or non financial assets as collateral. At any point in time, the Group will hold other collateral such as bank guarantees and performance bonds to mitigate potential credit risk as a result of default by a counterparty or otherwise. 24.c. Interest Rate Risk Exposure The Group’s exposure to interest rate risk on its financial assets and liabilities is set out as follows: CARRYING AMOUNT June 2024 June 2023 $m $m Fixed Rate Financial assets 200 201 Financial liabilities (2,129) (2,375) (1,929) (2,174) Variable Rate Financial assets 361 783 Financial liabilities (2,551) (2,544) (2,190) (1,761) Sensitivity Analysis At 30 June 2024, it is estimated that an increase of one percentage point in interest rates would have decreased the Group’s Profit after tax by $15 million (June 2023: $2 million decrease in the Group’s Profit after tax). A one percentage point decrease in interest rates would have increased the Group’s Profit after tax by $15 million (June 2023: $2 million increase in the Group’s Profit after tax). The increase or decrease in interest income/(expense) is proportional to the increase or decrease in interest rates. Interest rate derivatives have been included in this calculation. 25. Hedging Accounting Policies The Group uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operating, financing and investing activities. Derivative financial instruments are recognised initially at fair value on the date a derivative contract is entered into and subsequently remeasured at fair value. Hedge accounting recognises the offsetting effects on profit or loss of changes in the fair value of the derivative financial instruments and the hedged item. The accounting for hedges that meet the criteria for hedge accounting are classified as either fair value hedges, cash flow hedges or investment hedges. The Group has minimal hedges designated at fair value. The Group primarily uses forward foreign exchange contracts as cash flow hedges for highly probable sale, purchase and dividend transactions. The Group also uses forward foreign exchange contracts to hedge cross border intercompany loans and transactions which mainly net off in the Income Statement. Interest rate swaps and interest rate options are used to manage the Group’s exposure to interest rates arising from borrowings. These are primarily treated as cash flow hedges and are mainly on borrowings within equity accounted investments. The Group has foreign exchange derivative contracts primarily held in GBP, USD, EUR and SGD at reporting date to hedge specific foreign currency exposures. The total gross payable exposure is $438 million (June 2023: payable $1,595 million). There are 4 foreign currency contracts that will mature in more than one year (June 2023: 12 foreign currency contracts). Section D. Risk Management continued 24. Financial Risk Management continued