Marks and Spencer 2010 Annual Report Download - page 107

Directors’ report p01 
Financial statements 
Other information p117 
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22 Financial instruments continued
(a) Liquidity/funding risk
The risk that the Group could be unable to settle or meet its obligations as they fall due at a reasonable price.
– The Group’s funding strategy ensures a mix of funding sources offering flexibility and cost effectiveness to match the requirements
of the Group.
– Operating subsidiaries are financed by a combination of retained profits, bank borrowings, medium-term notes and committed syndicated
bank facilities.
At year end, the Group had a committed syndicated bank revolving credit facility of £1.2bn set to mature on 26 March 2013. This facility
contains only one financial covenant being the ratio of earnings before interest, tax, depreciation, amortisation and rents payable; to interest
plus rents payable. The covenant is measured semi-annually. The Group also has a number of undrawn uncommitted facilities available to it.
At year end, these amounted to £105m (last year £105m), all of which are due to be reviewed within a year. At the balance sheet date
a sterling equivalent of £220m (last year £764m) was drawn under the committed facilities and £nil (last year £nil) was drawn under the
uncommitted facilities.
In addition to the existing borrowings, the Group has a euro medium-term note programme of £3bn, of which £1.6bn (last year £1.4bn) was
in issuance as at the balance sheet date.
The contractual maturity of the Group’s non-derivative financial liabilities and derivatives is as follows:
Bank loans
and
overdrafts
£m
Syndicated
bank facility
£m
Medium-term
notes
£m
Finance
lease
liabilities
£m
Partnership
liability to the
M&S UK
Pension
Scheme
£m
Total
£m
Derivative
assets
£m
Derivative
liabilities
£m
Total
£m
Timing of cash flows
Within one year (147.9) (781.2) (123.8) (18.3) (71.9) (1,143.1) 949.4 (919.8) 29.6
Between one and two years (11.2) – (123.8) (16.9) (71.9) (223.8) 70.4 (63.6) 6.8
Between two and five years – – (1,476.8) (34.4) – (1,511.2) 114.0 (83.2) 30.8
More than five years – – (1,706.2) (209.4) – (1,915.6) 1,003.8 (708.9) 294.9
(159.1) (781.2) (3,430.6) (279.0) (143.8) (4,793.7) 2,137.6 (1,775.5) 362.1
Effect of discounting and foreign
exchange – – 1,412.1 177.1 3.9 1,593.1
At 28 March 2009 (159.1) (781.2) (2,018.5) (101.9) (139.9) (3,200.6)
Timing of cash flows
Within one year (249.5) (219.8) (134.1) (17.9) (71.9) (693.2) 970.1 (941.5) 28.6
Between one and two years (17.9) –(441.7) (13.4) –(473.0) 51.1 (37.6) 13.5
Between two and five years – –(960.1) (25.1) –(985.2) 106.7 (84.4) 22.3
More than five years – –(2,115.5) (204.4) –(2,319.9) 909.5 (693.2) 216.3
(267.4) (219.8) (3,651.4) (260.8) (71.9) (4,471.3) 2,037.4 (1,756.7) 280.7
Effect of discounting and foreign
exchange – –1,467.5 171.0 –1,638.5
At 3 April 2010 (267.4) (219.8) (2,183.9) (89.8) (71.9) (2,832.8)
This table does not include trade and other payables (see note 20) due to the low associated liquidity risk.
The present value of finance lease liabilities is as follows:
2010
£m
2009
£m
Within one year (13.7) (13.7)
Later than one year and not later than five years (26.7) (36.5)
Later than five years (49.4) (51.7)
Total (89.8) (101.9)
(b) Counterparty risk
Counterparty risk exists where the Group can suffer financial loss through default or non-performance by financial institutions.
Exposures are managed through Group treasury policy which limits the value that can be placed with each approved counterparty to
minimise the risk of loss. The counterparties are limited to the approved institutions with secure long-term credit ratings A+/A1 or better
assigned by Moody’s and Standard & Poor’s respectively, unless approved on an exception basis by a Board director. Limits are reviewed
regularly by senior management. The credit risk of these financial instruments is estimated as the fair value of the assets resulting from
the contracts.