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81 Finsbury Food Group Annual Report & Accounts 2018


Notes to the Consolidated Financial Statements


21. Financial Risk Management (continued)


c) Credit Risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers. These trading exposures are monitored and managed at operating level and are also monitored at Group level. Whilst there is a concentration of credit risk arising from the profile of five customers accounting for 57% of total revenue, the Group deems this to be low risk due to the nature of these customers. The carrying amount of the financial assets represents the maximum credit exposure. Therefore, the maximum exposure to credit risk for the trade receivables at the period end date was £40.0 million (2017: £45.2 million) and the ageing of trade receivables at the period end date was:


2018 £000


Not past due


Past due 0-30 days Past due 31-120 days


Past due more than 120 days


35,806 3,248 869 44


39,967


2017 £000


41,553 3,236 317 57


45,163


The above numbers are net of impairment provisions. Group policy is to provide in full against all receivable balances whose full recovery is significantly in doubt. The provision is netted off the gross receivable.


The Group’s strategy is to focus on supplying UK multiple grocers and foodservice distributors, the nature of these customers is such that there is a relatively low risk of them failing to meet their contractual obligations. There 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. The balance of £0.9 million past due by more than 30 days is equivalent to less than 2 days sales (2017: £0.4 million, equivalent to less than 1 day).


d) Market Risk


i) Interest Rate Risk The Group’s interest rate risk exposure is primarily to changes in variable interest rates. The 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 12.


The profile of the Group’s loans and overdraft at the period end date were split as follows:


2018 £000


Variable rate liabilities 25,000


2017 £000


20,497


Swaps amounting to £20.0 million (2017: Nil) limit the risk associated with the variable rate liabilities. The interest rate for the forward dated swap is 0.455% (2017: Nil coverage).


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.


2018 £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. The 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. The 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. The 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 The Group currently supplies UK manufactured products to Lightbody Stretz Ltd, its 50% owned selling and distribution business trading primarily in Europe. The Group also purchases some raw materials and capital equipment in foreign currency. The consequence of this is that the Group is exposed to movement in foreign currency rates. Forward foreign exchanges contracts are used to manage the net foreign exchange exposure.


250 250


2017 £000


197 197


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