Carphone Warehouse 2011 Annual Report Download - page 75

Download and view the complete annual report

Please find page 75 of the 2011 Carphone Warehouse annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 86

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86

Carphone Warehouse Group plc Annual Report 2011 71
FINANCIAL STATEMENTS
Interest rate risk
The Group’s interest rate risk arises primarily on cash, cash equivalents and loans to joint ventures, all of which are at floating rates
of interest and which therefore expose the Group to cash flow interest rate risk. These floating rates are linked to LIBOR and other
interest rate bases as appropriate to the instrument and currency. Future cash flows arising from these financial instruments
depend on interest periods agreed at the time of rollover. Group policy permits the use of long-term interest rate derivatives in
managing the risks associated with movements in interest rates although the Group holds none of these products at present.
Cash and borrowings, as well as some foreign exchange products, are sensitive to movements in interest rates. This sensitivity can
be analysed through calculating the effect on the income statement of a 1% movement in the interest rate in relation to cash, cash
equivalents and loans to joint ventures. This analysis has been prepared on the assumption that the year-end positions prevail
throughout the year, and therefore may not be representative of fluctuations in levels of borrowings. A 1% movement in the interest
rate would result in a £1.6m (2010: £1.5m) movement in the income statement.
Liquidity risk
The Group manages its exposure to liquidity risk by regularly reviewing the long-term and short-term cash flow projections for the
business against facilities and other resources available to it. Regular reports are made to the Audit Committee assessing current
facilities and debt and daily reports are circulated to senior management showing the Group’s net funds. Headroom is assessed
based on historical experience as well as by assessing current business risks, including foreign exchange movements.
Credit risk
The Group’s exposure to credit risk is regularly monitored and the Group’s policy updated as appropriate. Deposits and foreign
exchange transactions are spread amongst a number of banks, all of which have credit ratings appropriate to the Group’s policies
and exposures.
Embedded derivatives
No contracts with embedded derivatives have been identified and accordingly no such derivatives have been accounted for
separately.
19 PROVISIONS
2011
£m
2010
£m
Opening balance 13.6 16.2
Charge in income statement –0.1
Released in the year (0.4) (2.7)
Closing balance 13.2 13.6
Provisions relate principally to warranties provided in relation to the Best Buy Europe Joint Venture Transaction.
20 SHARE CAPITAL
2011
million
2010
million
2011
£m
2010
£m
Allotted, called-up and fully paid ordinary shares of 0.1p each 457.1 457.1 0.5 0.5