25 Financial Risk Management (continued)
Te Group’s strategy is to focus on supplying UK multiple grocers, the nature of these customers is such that there is relatively low risk of them failing to meet their contractual obligations. Tere is no impairment necessary to the value of trade receivables at the period end date over and above the specific credit note provision and bad debt provision held at the year end. Te balance of £0.2 million past due by more than 30 days is equivalent to less than 1 day sales (2013: £0.5 million, equivalent to 1 day).
Deferred consideration amounting to £3 million is due from Genius Foods Ltd on 27 February 2015, there is deemed not to be an issue over recoverability of this receivable.
d) Market Risk
i) Interest Rate Risk Te Group’s interest rate risk exposure is primarily to changes in variable interest rates. Te Group has entered into three interest rate swap arrangements in order to hedge its risks associated with any fluctuations. Details of swaps are given in Note 14.
Te profile of the Group’s loans including deferred consideration and overdraft at the period end date were split as follows:
2014 £000
Variable rate liabilities 9,406
Swaps amounting to £14,000,000 (2013: £18,000,000) limit the risk associated with the variable rate liabilities, the weighted average interest rate at 28 June 2014 is 2.5% (2013: 4.0%).
Sensitivity A 1% increase in the base rate or LIBOR would have the following impact on interest charges and associated net assets for the Group, this sensitivity relates to interest-bearing bank borrowings and interest rate swaps only and excludes possible changes in pension financing costs.
2014 £000
Profit decrease Decrease in net assets
A 1% decrease in the base rate or LIBOR would have an equal and opposite impact to those listed above. Te above movement is not equal to 1% of interest-bearing loans because of interest rate swap cover that is in place.
ii) Commodity Prices Any rises in commodity prices can adversely impact the core profitability of the business. Te Group will aim to pass on its increased costs to its customers as far as is reasonable in the circumstances whilst maintaining its tight control over overhead costs to mitigate the impact on consumers. Te Group maintains a high expertise in its buying team and will consider long-term contracts where appropriate to reduce uncertainty in commodity prices. Further information on input prices and risks is contained in the Strategic Report.
iii) Foreign Exchange Risk Te Group currently supplies UK manufactured products to Lightbody Stretz Ltd, its 50% owned selling and distribution business trading primarily in Europe. Te Group also purchases some raw materials in foreign currency. Te consequence of this is that the Group is exposed to movement in foreign currency rates. Forward foreign exchanges contracts are used to manage the foreign exchange exposure.
e) Debt and Capital Management Te Group’s objective is to maximise the return on net invested capital while maintaining its ongoing ability to operate and guaranteeing adequate returns for shareholders and benefits for other stakeholders, within a sustainable financial structure. On 21 March 2014, the Board approved an interim dividend for the six months to 28 December 2013 of 0.25p per share paid on 25 April 2014 to shareholders on the register at the close of business on 4 April 2014. A final dividend of 0.75p per share has been proposed. It is the Company's intention, to pay dividends at an affordable rate so that the Company can continue to invest in the business in order to grow profits.
160 160
2013 £000
70 70
2013 £000
8,739
54
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