94


Finsbury Food Group Annual Report and Accounts 2020


Notes to the Consolidated Financial Statements/Continued


23. 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 controlled by assessing the credit quality of the customer, taking into account its financial position, past experience and other factors and 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 more than 50% 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 £45.2 million (2019: £40.0 million) and the ageing of trade receivables at the period end date was:


2020 £000


Not past due


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


Past due more than 120 days


32,668 2,157 890 292


36,007


2019 £000


39,666 4,407 626 508


45,207


The above numbers are net of impairment provisions. The Group provides for impairment of financial assets including receivables from customers based on known events, and some collective provisions are made for losses yet to be identified, based on historical data. The majority of the provision comprises of specific amounts.


Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there may be no reasonable expectation of recovery may include the failure of the debtor to engage in a payment plan negotiations, and failure to make contractual payments significantly after due date.


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 £1.2 million past due by more than 30 days is equivalent to less than 2 days sales (2019: £1.1 million, equivalent to less than 2 days). We have worked with our customers during the pandemic and the significant disruption that it has brought to the economic environment to ensure cash is preserved and we trade successfully through these unprecedented challenges with fluctuations in demand, changes to consumer behaviour and sales channel closures.


Based on the above and analysis performed there is no deemed impact of applying Expected credit loss (ECL) methodology under IFRS 9 as in the prior year.


Gross trade receivables are assessed regularly by each subsidiary entity locally with reference to appropriate considerations such as the current position of the relationship with the customer, days past due and the geographical location of each customer. Expected losses are determined based on the historical experience of write-offs compared to the level of trade receivables. The nature of the Group’s customer base has meant historic write-offs are trivial, hence no material impact of applying IFRS 9 ECL methodologies. If this impact was deemed significant the historical loss expectations would be amended for current and forward-looking information such as national economic outlooks accordingly to form the basis of any provision.


Details of the Company’s credit risk are not disclosed because the Financial Statements of the Group disclose such details on a consolidated basis.


d) Market Risk The Covid-19 pandemic has resulted in significant changes to the Retail and Foodservice sectors. Consumers have changed their shopping behaviour within Retail with both positive and negative implications for Finsbury’s products. Foodservice channels were closed almost overnight, recovery is slow with Foodservice volumes at less than half pre-outbreak levels and this suppressed demand is to continue to remain suppressed until a solution for Covid-19 is found. The pandemic has impacted significantly on commercial, operational and financial performance.


An internal crisis team formed and met daily to oversee the impact of the pandemic. The priority is and was to ensure the safety of all employees and to make rapid changes to the way the business operates by establishing safe ways of working based on social distancing and home working. Financially the business moved to manage cash while ensuring no adverse consequential impact to our customer and supplier base.


i) Interest Rate Risk The Group’s interest rate risk exposure is primarily to changes in variable interest rates. The Group has entered into two interest rate swap arrangements in order to hedge its risks associated with any fluctuations. Details of swaps are given in Note 13.


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


2020 £000


Variable rate liabilities (36,656)


2019 £009


(47,972)


Swaps amounting to £25.0 million (2019: £25.0 million) limit the risk associated with the variable rate liabilities. The interest rates for the forward dated swaps are fixed at 0.455% for £20.0 million and 1.002% for £5.0 million.


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