Tesco 2001 Annual Report Download - page 7

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TESCO PLC 5
Joint ventures
Our total share of profits from joint ventures was £21m
compared to £11m last year.
Within this, our share of Tesco Personal Finance profits was
£3m (2000 – £4m loss).
Financial risks and treasury management
The treasury function has been formally authorised by the Board to
manage the financial risks that arise in relation to underlying business
needs. The Board establishes the function’s policies and operating
parameters and routinely reviews its activities, which are also subject
to regular audit. The function does not operate as a profit centre
and the undertaking of speculative transactions is not permitted.
The main financial risks faced by the Group relate to the
availability of funds to meet business needs, the risk of default
by counterparties to financial transactions (credit risk), and
fluctuations in interest and foreign exchange rates. These risks
are managed as described below. The balance sheet positions at
24 February 2001 are representative of the positions throughout
the year.
Funding and liquidity
The Group finances its operations by a combination of retained
profits, bank borrowings, commercial paper, medium term notes,
long-term debt market issues and leases.The objective is to ensure
continuity of funding. The policy is to smooth the debt maturity
profile, to arrange funding ahead of requirements and to maintain
sufficient undrawn committed bank facilities and a strong credit
rating so that maturing debt may be refinanced as it falls due.
The Group’s long-term credit ratings from Moody’s and Fitch
are AA3 and AA respectively, consistent with last year. During the
year new funding of £700m was arranged including net new
committed bank facilities of £115m and medium term notes with
the following principal values and maturity dates, £200m 2016, and
£150m 2010. At the year end net debt was £2.8bn (2000 – £2.1bn)
and the average debt maturity was seven years (2000 – seven years).
98 99 00
0.4
0.75
1.5
01
2.0
NUMBER OF TESCO
PERSONAL FINANCE
ACCOUNTS million