boohoocom-plc-final-admission-document-5-march-2014

Inventory provisions
Provision is made for those items of inventory where the net realisable value is estimated to be lower than
cost. Net realisable value is based on both historical experience and assumptions regarding future selling
prices, and is consequently a source of estimation uncertainty. The provision is determined based on the
choice of an appropriate percentage in accordance with the ageing of stock.
3. Financial risk management
Financial risk factors
The Operating Group’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk.
The policy for each of the above risks is described in more detail below.
(a) Market risk
The Operating Group finances its operations through a mixture of retained earnings, bank and other
borrowings and ordinary and preference shares. The Operating Group’s interest rate risk arises from
long-term borrowings, which in general tend to be held at fixed rates. The interest rate exposure of financial
assets and liabilities of the Operating Group is shown in note 17.
(b) Credit risk
The Operating Group faces minimal credit risk as customers pay for their orders in full at the time of purchase.
Credit risk in relation to cash and deposits with financial institutions is considered low, given the credit ratings
of the counterparties, as set out in note 17.
(c) Liquidity risk
The Operating Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet
foreseeable needs and to invest cash safely and profitably. The maturity of borrowings is set out in note 17,
together with the level of undrawn committed facilities available.
Liquidity risk is the risk that the Operating Group will not be able to meet its financial obligations as they
fall due.
The Operating Group’s approach to managing liquidity is to use both short-term and long-term cash
forecasts to assist in monitoring cash flow requirements, as set out under the “going concern” section.
Capital risk management
The Operating Group manages its capital to ensure that the Operating Group will be able to continue as a
going concern while maximising the return to shareholders through optimising the debt and equity balance.
The capital structure of the Operating Group consists of debt, which includes the borrowings disclosed in
note 17, cash and cash equivalents and equity attributable to equity holders of the parent comprising issued
capital, share premium and retained earnings as disclosed in notes 19 and 20 and the statement of changes
in equity. In order to maintain or adjust the capital structure, the Operating Group may adjust the amount of
dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce
debt. The Operating Group’s capital is not restricted.
4. Segment information
The Operating Group’s activities consist of internet clothing retailing. The Board of Directors and the Chief
Financial Officer are together considered to be the chief operating decision maker. The business is managed
as one entity, and activities are not split into any further regional or product subdivisions in the internal
management reporting, as any such split would not provide the Operating Group’s management with
meaningful information. Consequently, all activities relate to this one segment. All non-current assets are
located in the Operating Group’s country of domicile, being the UK.
Annex I 6.2
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