Peachtree 2013 Annual Report Download - page 75

Credit risk
The Group’s credit risk primarily arises from trade and other receivables.
The Group has a very low operational credit risk due to the transactions
being principally of a high volume, low value and short maturity.
The Group has no significant concentration of operational credit risk,
with the exposure spread over a large number of counterparties and
customers. Continued strong credit control ensured that in the year
ended 30 September 2013 the Group did not see deterioration in days’
sales outstanding.
The credit risk on liquid funds is considered to be low, as the
Board-approved Group treasury policy limits the value that can be
invested with each approved counterparty to minimise the risk of loss.
All counterparties must meet minimum credit rating requirements.
Interest rate risk
The Group is exposed to interest rate risk on floating rate deposits and
borrowings. The US private placement loan notes, which comprise 98%
of borrowings, are at fixed interest rates and bank debt, which comprises
2% of borrowings, are at floating interest rates. At 30 September 2013,
the Group had £82.9m of cash and cash equivalents.
The Group regularly reviews forecast debt, cash and cash equivalents
and interest rates to monitor this risk. Interest rates on debt and
deposits are fixed when management decides this is appropriate.
At 30 September 2013, the Group’s principal borrowings comprised
US private placement loan notes of £432.3m (2012: £185.8m), which
have an average fixed interest rate of 3.88% and bank debt of £9.6m
(2012: £15.0m), which has an average floating interest rate of 1.44%.
Foreign currency risk
Although a substantial proportion of the Group’s revenue and profit
is earned outside the UK, operating companies generally only trade
in their own currency. The Group is therefore not subject to any
significant foreign exchange transactional exposure within these
subsidiaries. The Group’s principal exposure to foreign currency,
therefore, lies in the translation of overseas profits into sterling.
This exposure is partly hedged to the extent that these profits are offset
by interest charges in the same currency arising from the financing of
the investment cost of overseas acquisitions by borrowings in the same
currency. The Group is also exposed to a foreign exchange transaction
exposure from the conversion of surplus cash generated by its principal
overseas subsidiaries, which would be hedged where appropriate.
The Group’s US Dollar denominated borrowings are designated as
a hedge of the net investment in its subsidiaries in the US. The foreign
exchange movements on translation of the borrowings into sterling have
been recognised in the translation reserve. The Group’s other currency
exposures comprise only those exposures that give rise to net currency
gains and losses to be recognised in the income statement. Such
exposures reflect the monetary assets and liabilities of the Group that
are not denominated in the operating (or “functional”) currency of the
entity involved. At 30 September 2012 and 30 September 2013, these
exposures were immaterial to the Group.
Statement of directors’ responsibilities
The directors are responsible for preparing the Annual Report & Accounts,
the Directors’ remuneration report and the Group and parent Company
financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for
each financial year. Under that law the directors have prepared the Group
financial statements in accordance with International Financial Reporting
Standards (“IFRS”) as adopted by the European Union (“EU”) and the
parent Company financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting
Standards and applicable law). Under company law the directors must
not approve the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the Company and the
Group and of the profit or loss of the Group for that period.
In preparing these financial statements the directors are required to:
– Select suitable accounting policies and then apply them consistently;
– Make judgements and estimates that are reasonable and prudent;
– State whether IFRS as adopted by the EU, and applicable UK
Accounting Standards have been followed, subject to any material
departures disclosed and explained in the Group and parent
Company financial statements respectively; and
– Prepare the financial statements on the going concern basis, unless it
is inappropriate to presume that the Company will continue in business.
The directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Company’s transactions and
disclose with reasonable accuracy at any time the financial position
of the Company and the Group and to enable them to ensure that the
financial statements and the Directors’ remuneration report comply with
the Companies Act 2006 and, as regards the Group’s financial statements,
Article 4 of the IAS Regulation. They are also responsible for safeguarding
the assets of the Company and the Group and hence for taking reasonable
steps for the prevention and detection of fraud and other irregularities.
The directors as at the date of this report, whose names and functions
are listed in the Board of directors on page 60, confirm that, to the best
of their knowledge:
– The Group’s financial statements, which have been prepared in
accordance with IFRS as adopted by the EU, give a true and fair view
of the assets, liabilities, financial position and profit of the Group; and
– The Directors’ report and the Strategic report include a fair review
of the development and performance of the business and the position
of the Group, together with a description of the principal risks and
uncertainties that it faces.
Each of the persons who is a director as at the date of this report
confirms that:
– So far as the director is aware, there is no relevant audit information
of which the Company’s auditors are unaware; and
– The director has taken all the steps that he or she ought to have taken
as a director in order to make himself/herself aware of any relevant
audit information and to establish that the Company’s auditors are
aware of that information.
This confirmation is given and should be interpreted in accordance with
the provisions of section 418 of the Companies Act 2006.
In addition, the directors as at the date of this report consider that the
Annual Report & Accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders
to assess the Company’s performance, business model and strategy.
By Order of the Board
M J Robinson, Company Secretary
4 December 2013
73The Sage Group plc | Annual Report & Accounts 2013
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