Marks and Spencer 2010 Annual Report Download - page 108

Download and view the complete annual report

Please find page 108 of the 2010 Marks and Spencer 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 126

  • 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
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126

Marks and Spencer Group plc Annual report and financial statements 2010 Financial statements 104
Notes to the financial statements continued
22 Financial instruments continued
The table below analyses the Group’s short-term investments and derivative assets by credit exposure excluding bank balances, store cash
and cash in transit.
Credit rating of counterparty4
AAAm
£m
AAA
£m
AA
£m
AA-
£m
A+
£m
A3
£m Total
Short-term investments1 – 4.8 119.8 25.3 29.9 0.5 180.3
Derivative assets2 – 105.4 53.6 – 150.8 9.8 319.6
At 28 March 2009 – 110.2 173.4 25.3 180.7 10.3 499.9
AAAm
£m
AAA
£m
AA
£m
AA-
£m
A+
£m
A3
£m Total
Short-term investments1 132.9 1.5 16.7 20.6 22.1 1.3 195.1
Derivative assets2 – 50.8 31.1 – 76.8 8.0 166.7
At 3 April 2010 132.9 52.3 47.8 20.6 98.9 9.3 361.8
1 Includes cash on deposit in M & S Scottish Limited Partnership, Marks & Spencer plc and Marks and Spencer General Insurance LP.
2 Excludes derivative asset option which is embedded within the £250m puttable callable reset medium-term notes due 2037.
3 Exposure to a counterparty approved as an exception to treasury policy.
4 Standard & Poor’s equivalent rating shown as reference to the lowest credit rating of the counterparty from either Standard & Poor’s or Moody’s.
The Group has very low retail credit risk due to transactions being principally of a high volume, low value and short maturity.
The maximum exposure to credit risk at the balance sheet date was as follows: trade receivables £89m (last year £84m), other receivables
£62m (last year £64m), cash and cash equivalents £406m (last year £423m) and derivatives £181m (last year £347m).
(c) Foreign currency risk
Transactional foreign currency exposures arise from both the export of goods from the UK to overseas subsidiaries, and from the import
of materials and goods directly sourced from overseas suppliers.
Group treasury hedge these exposures principally using forward foreign exchange contracts progressively covering up to 100% out to
18 months. Where appropriate hedge cover can be taken out longer than 18 months, with Board approval. The Group is primarily exposed
to foreign exchange risk in relation to sterling against movements in US dollar and euro.
Forward foreign exchange contracts in relation to the Group’s forecast currency requirements are designated as cash flow hedges with
fair value movements recognised directly in comprehensive income. To the extent that these hedges cover actual currency payables or
receivables, then associated fair value movements previously recognised in comprehensive income are recorded in the income statement
in conjunction with the corresponding asset or liability. As at the balance sheet date the gross notional value in sterling terms of forward
foreign exchange sell or buy contracts amounted to £865m (last year £768m) with a weighted average maturity date of five months
(last year six months).
Gains and losses in equity on forward foreign exchange contracts as at 3 April 2010 will be released to the income statement at various
dates over the following 13 months (last year 14 months) from the balance sheet date.
At the balance sheet date the Group did not hold any derivatives to hedge balance sheet and profit and loss translation exposures.
However, the translation exposures arising on the overseas net assets are hedged with foreign currency debt. As at the balance sheet date,
€231m (last year €276m) and HK$180m (last year HK$178m) currency debt was hedging overseas net assets.
The Group also hedges foreign currency intercompany loans where these exist. Forward foreign exchange contracts in relation to the
hedging of the Group’s foreign currency intercompany loans are designated as held for trading with fair value movements being recognised
in the income statement. The corresponding fair value movement of the intercompany loan balance results in an overall nil impact on the
income statement. As at the balance sheet date, the gross notional value of intercompany loan hedges was £155m (last year £108m).
After taking into account the hedging derivatives entered into by the Group, the currency and interest rate exposure of the Group’s financial
liabilities is as set out below excluding short-term payables and the Marks and Spencer Czech Republic a.s. put option:
2010 2009
Fixed
rate
£m
Floating
rate
£m
Total
£m
Fixed
rate
£m
Floating
rate
£m
Total
£m
Currency
Sterling 2,136.4 410.0 2,546.4 2,252.4 629.9 2,882.3
Euro 8.6 232.8 241.4 7.6 286.1 293.7
Hong Kong dollar –15.2 15.2 – 16.4 16.4
Other 3.3 26.5 29.8 0.3 7.9 8.2
2,148.3 684.5 2,832.8 2,260.3 940.3 3,200.6
arks pencer