Annual report and accounts 2023 - Flipbook - Page 187
Strategic Report
Corporate Governance
Accounts
Cash flow and fair value interest rate risk
The Group’s interest rate risk arises from long-term borrowings and short-term investments. Borrowings and investments are obtained at fixed rates reducing the Group’s
exposure to cash flow interest rate risk.
For the year ended 29 January 2023, if interest rates on sterling-denominated borrowings at that date had been 1.0% higher/lower, with all other variables held constant,
there would have been an immaterial change in the post-tax profit for the year (year ended 30 January 2022: immaterial impact on post-tax profit).
Credit risk
Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to
major and direct to store customers, including outstanding receivables and committed transactions.
For banks and financial institutions where the company holds cash and cash equivalents, short-term investments and borrowing, only independently rated parties with a
minimum rating of “A” are accepted. If major customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, risk control processes
assess the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set by senior management, based
on internal or external ratings. The utilisation of credit limits is regularly monitored. Sales to direct to store customers are largely settled in cash in order to manage credit risk
from smaller, independent stores.
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit
facilities and the ability to close out market positions. Due to the dynamic nature of the underlying business, the Group maintains flexibility in funding by maintaining sufficient
cash reserves and the availability of borrowing facilities. See Note 21 for disclosures of committed facilities.
Management monitors rolling forecasts of the Group’s liquidity reserve (which comprises undrawn borrowing facilities and cash and cash equivalents) on the basis of
expected cash flows. This is carried out at a Group level and involves projecting forward cash flows and considering the level of liquid assets necessary to meet excesses of
expenditure relative to income.
The Group and Company also enters into forward commodity contracts that are not held on the balance sheet. Commitments are shown in the table below, all of which are
payable within one year.
Total contractual outflow
Group and Company
2023
£m
2022
£m
Forward commodity contracts
13.8
9.0
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