Overview

The Group's financial instruments comprise trade receivables and payables, borrowings and finance leases, cash and cash equivalents, and derivatives. The main financial risks faced by the Group relate to the risk of default by counterparties following financial transactions, the availability of funds for the Group to meet its obligations as they fall due and fluctuations in interest and foreign exchange rates.

The management of these risks is set out below.

Credit Risk

The Group's exposures to credit risk arise from holdings of cash and cash equivalents, trade and other receivables (excluding prepayments) and derivative assets. The carrying value of these financial assets, as set out in Note 4.7, represents the maximum credit exposure. No collateral is held as security against these assets.

Cash and Cash Equivalents

The Group's exposure to credit risk on cash and cash equivalents is managed by investing in banks and financial institutions with strong credit ratings and by regular review of counterparty risk.

Trade and Other Receivables

Trade and other receivables at the period end comprise mainly monies due from suppliers, which are considered of a good credit quality, as well as VAT receivables. The Group provides for doubtful receivables in respect of monies due from suppliers.

The Group has very low retail credit risk due to transactions being principally of a high volume, low value and short maturity. The Group has effective controls over this area. The Group has allowed for doubtful receivables in respect of consumer sales by reviewing the ageing profile and, based on prior experience, assessing the recoverability of overdue balances.

Movements in the allowance for the impairment of trade and other receivables are as follows:

Notes27 November
2016
£m
29 November
2015
£m
At the beginning of the period(1.7)(3.0)
Provision for impairment of receivables(1.1)(0.9)
Uncollectable amounts written off(0.8)(0.6)
Recovery of amounts previously provided0.82.8
At the end of the period3.8(2.8)(1.7)

The Group has adequate cash resources to manage the short-term working capital needs of the business. In the prior year the three-year £100 million revolving facility was extended by a further two years and the amount of the facility was increased to £210 million. As at 27 November 2016, £52.5 million of the facility had been utilised. The Group regularly reviews its financing arrangements. For further details of the review please refer to the Group's Viability Statement.

The Group monitors its liquidity requirements to ensure it has sufficient cash to meet operational needs. For further details see Note 4.11.

The table below analyses the Group's financial liabilities into relevant maturity groupings based on the remaining period to the contractual maturity date at the Balance Sheet date. The amounts disclosed in the table are the carrying values and undiscounted contractual cash flows.

NotesCarrying Value
£m
Contractual Cash Flows
£m
1 Year
or Less
£m
1–2
Years
£m
2–5
Years
£m
More Than
5 Years
£m
Financial Liabilities
Trade payables3.10(63.6)(63.6)(63.6)
Accruals3.10(74.8)(74.8)(74.8)
Borrowings4.2(9.3)(9.7)(1.8)(1.7)(6.2)
Obligations under finance leases4.3(163.5)(195.4)(34.8)(30.3)(75.0)(55.3)
Derivative liabilities4.6(0.7)(0.7)(0.7)
29 November 2015(311.9)(344.2)(175.7)(32.0)(81.2)(55.3)
NotesCarrying Value
£m
Contractual Cash Flows
£m
1 Year or
Less
£m
1–2
Years
£m
2–5
Years
£m
More Than
5 Years
£m
Financial Liabilities
Trade payables3.10(95.2)(95.2)(95.2)
Accruals and other payables3.10(84.2)(84.2)(84.2)
Borrowings4.2(59.0)(59.0)(52.9)(6.1)
Obligations under finance leases4.3(156.8)(183.8)(38.4)(31.7)(76.9)(36.8)
Derivative liabilities4.6(0.2)(0.2)(0.2)
27 November 2016(395.4)(422.4)(270.9)(37.8)(76.9)(36.8)

Market Risk

Currency Risk

The Group has foreign currency exposure in relation to its foreign currency trade payables and a portion of its cash and cash equivalents.

Foreign currency trade payables arise principally on purchases of plant and equipment, primarily in relation to the Euro, Polish Zloty and US Dollar. Bank accounts are maintained in these foreign currencies in order to minimise the Group's exposure to fluctuations in the currency relating to current and future purchases of plant and equipment.

The Group's exposure to currency risk is based on the following amounts:

27 November
2016
£m
29 November
2015
£m
Cash and cash equivalents – EUR0.20.4
Cash and cash equivalents – PLN2.00.4
Trade payables at period end – EUR(0.2)(0.2)
Trade payables at period end – PLN(0.1)(0.1)
Trade payables at period end – USD(0.1)(0.2)
1.80.3

The table below shows the Group's sensitivity to changes in foreign exchange rates on its financial instruments denominated in foreign currencies.

27 November 201629 November 2015
Increase/ (Decrease) in Income
£m
Increase/ (Decrease) in Equity
£m
Increase/ (Decrease) in Income
£m
Increase/ (Decrease) in Equity
£m
10% appreciation of the above foreign currencies0.2(0.1)
10% depreciation of the above foreign currencies(0.2)0.1

A movement of the euro, as indicated, against sterling at 27 November 2016 would have increased/(decreased) equity and profit or loss by the amounts detailed above. This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the end of the period. The analysis assumes that all other variables remain constant.

Interest Rate Risk

The Group is exposed to interest rate risk on its floating rate interest bearing borrowings and floating rate cash and cash equivalents. The Group's interest rate risk policy seeks to minimise finance charges and volatility by structuring the interest rate profile into a diversified portfolio of fixed rate and floating rate financial assets and liabilities. Interest rate risk on floating rate interest bearing borrowings is not significant.

At the balance sheet date, the interest rate profile of the Group's interest bearing financial instruments was:

27 November
2016
£m
29 November
2015
£m
Fixed Rate Instruments
Financial assets50.741.6
Financial liabilities(156.8)(163.4)
Variable Rate Instruments
Financial assets0.24.2
Financial liabilities(59.0)(9.2)

Sensitivity Analysis

An increase of 100 basis points (1.0%) in interest rates would impact equity and profit or loss by the amounts shown below. A rate of 100 basis points was assessed as being appropriate, considering the current short-term interest rate outlook. The calculation applies the increase to average floating rate interest bearing borrowings and cash and cash equivalents existing during the period. This analysis assumes that all other variables remain constant and considers the effect on financial instruments with variable interest rates.

27 November
2016
£m
29 November
2015
£m
Equity
Result
Income
Loss(0.6)
Pdf