Marks and Spencer 2011 Annual Report Download - page 104

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Marks and Spencer Group plc Annual report and financial statements 2011
102
Notes to the financial statements continued
23 Financial instruments continued
The following table presents the changes in Level 3 instruments:
2011
£m
2010
£m
Opening balance (60.5) (53.3)
Additions (see note 5) 20.3 –
Gains and losses recognised in the income statement 48.9 (7.2)
Closing balance 8.7 (60.5)
The gains recognised in the income statement in 2010/11 relate to the valuation of the put option over a non-controlling interest.
A discount unwind of £5.4m has been recorded within underlying interest charges, with the fair value movement of £54.3m treated
as adjustment to reported profit (see note 5).
Fair value of financial instruments
With the exception of the Group’s fixed rate bond debt, there were no material differences between the carrying value of non-derivative
financial assets and financial liabilities and their fair values as at the balance sheet date.
The carrying value of the Group’s fixed rate bond debt was £2,159.0m (last year £2,183.9m); the fair value of this debt was £2,080.1m
(last year £2,107.7m).
Capital policy
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to provide optimal
returns for shareholders and to maintain an efficient capital structure to reduce the cost of capital.
In doing so the Group’s strategy is to maintain a capital structure commensurate with an investment grade credit rating and to retain
appropriate levels of liquidity headroom to ensure financial stability and flexibility. To achieve this strategy the Group regularly monitors
key credit metrics such as the gearing ratio, cash flow to net debt (see note 29) and fixed charge cover to maintain this position.
In addition the Group ensures a combination of appropriate committed short-term liquidity headroom with a diverse and balanced long-
term debt maturity profile. As at the balance sheet date the Group’s average debt maturity profile was nine years (last year
During the year the Group maintained an investment grade credit rating of Baa3 (stable) with Moody’s and BBB- (stable) with
Standard & Poor’s.
In order to maintain or realign the capital structure, the Group may adjust the number of dividends paid to shareholders, return capital
to shareholders, issue new shares or sell assets to reduce debt.
24 Provisions
2011
£m
2010
£m
At start of year 51.1 103.8
Provided in the year 10.8 5.1
Released in the year (1.7) (14.2)
Utilised during the year (15.4) (43.4)
Exchange differences (0.1) (0.2)
At end of year 44.7 51.1
Analysis of provisions:
Current 22.7 25.6
Non-current 22.0 25.5
Total provisions 44.7 51.1
The provisions are primarily comprised of one-off costs related to the strategic restructure in the UK in 2008/09, including
onerous leases.
The current element of the provision primarily relates to costs relating to the property exit costs and redundancies.
The non-current element of the provision relates to store closures, primarily onerous leases, and are expected to be utilised over a
period of ten years.
ten years).