Marks and Spencer 2012 Annual Report Download - page 104

Download and view the complete annual report

Please find page 104 of the 2012 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 116

  • 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

Financial statements Marks and Spencer Group plc Annual report and financial statements 2012 102
Notes to the financial statements continued
21 Financial instruments continued
The following table presents the changes in Level 3 instruments:
2012
£m
2011
£m
Opening balance 8.7 (60.5)
Additions (see note 5) –20.3
Gains and losses recognised in the income statement 14.4 48.9
Closing balance 23.1 8.7
The gains recognised in the income statement relate to the valuation of the put option over a non-controlling interest and the
valuation of the embedded derivative in a lease contract. A discount unwind on the put option of £1.0m (last year £5.4m) has
been recorded within underlying interest charges, with the fair value movement of the put option of £15.6m (last year £54.3m)
and the fair value movement of the embedded derivative of £0.2m 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 £2,171.6m (last year £2,159.0m); the fair value of this debt was
£2,121.7m (last year £2,080.1m).
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 27) 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 nine years). 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.
22 Provisions
2012
£m
2011
£m
At start of year 44.7 51.1
Provided in the year 7.8 10.8
Released in the year (3.4) (1.7)
Utilised during the year (16.5) (15.4)
Exchange differences (0.2) (0.1)
At end of year 32.4 44.7
Analysis of provisions:
Current 8.4 22.7
Non-current 24.0 22.0
Total provisions 32.4 44.7
The provisions primarily comprise one-off strategic programme costs associated with the Focus on the UK plans as well as
onerous lease provisions relating to the 2008/09 UK restructuring.
The current element of the provision primarily relates to onerous leases, redundancies and strategic costs.
The non-current element of the provision relates to store closures, primarily onerous leases, and is expected to be utilised over
a period of ten years.