Annual report and financial statements 2011 - Analist.nl

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100 Notes to the financial statements continued 23 Financial instruments continued The floating rate sterling and euro borrowings are linked to interest rates related to LIBOR. These rates are for periods between one and three months. As at the balance sheet date and excluding finance leases, the fixed rate sterling borrowings are at an average rate of 5.9% (last year 5.9%) and the weighted average time for which the rate is fixed is nine years (last year ten years). (d) Interest rate risk The Group is exposed to interest rate risk in relation to the sterling, US dollar, euro and Hong Kong dollar variable rate financial assets and liabilities. The Group’s policy is to use derivative contracts where necessary to maintain a mix of fixed and floating rate borrowings to manage this risk. The structure and maturity of these derivatives correspond to the underlying borrowings and are accounted for as fair value or cash flow hedges as appropriate. At the balance sheet date fixed rate borrowings amounted to £2,037.2m (last year £2,076.4m) representing the public bond issues and finance leases, amounting to 81% (last year 76%) of the Group’s gross borrowings. The effective interest rates at the balance sheet date were as follows: Committed and uncommitted borrowings – 0.6 Medium-term notes 5.9 5.9 Finance leases 4.6 4.7 2011 % 2010 % Derivative financial instruments Assets £m 2011 2010 Current Options – held for trading 14.4 (14.4) 14.3 (14.3) Commodity swap – cash flow hedge – – – (2.1) Forward foreign exchange contracts – cash flow hedges 2.8 (29.9) 30.1 (5.0) – held for trading 1.2 (2.4) 3.7 (1.4) – net investment hedges – (2.7) – – Interest rate swaps – held for trading – (1.3) – (4.3) 18.4 (50.7) 48.1 (27.1) Non-current Cross currency swaps – cash flow hedges – (37.5) 132.8 – Forward foreign exchange contracts – cash flow hedges 0.7 – 0.1 – Interest rate swaps – fair value hedge 0.8 – – Embedded derivative (see note 5) 20.3 – – – 21.8 (37.5) 132.9 – During the year the cross currency swaps held to redesignate the Group’s fixed rate US dollar debt to fixed rate sterling debt were reset to market values, transferring the asset value of the swaps to the Marks & Spencer UK Pension Scheme as part of the funding plan. The attributes of the new derivatives match the characteristics of the underlying debt hedged with rates of 6.2197% (2017 bond) and 6.88% (2037 bond). The amounts reported as options held for trading in derivative assets and liabilities represent the fair value of the call option with the puttable callable reset notes, mirrored by the fair value of the sold option to have this call assigned. The Group has entered into a number of interest rate swaps to redesignate sterling fixed debt to floating debt. These swaps are accounted for as fair value hedges. The ineffective portion recognised in the profit or loss that arises from fair value hedges amounts to £nil (last year £0.4m loss) as the loss on the hedged item was £0.9m (last year £1.5m gain) and the gain on the hedging instrument was £0.9m (last year £1.9m loss). There was no ineffectiveness on cash flow hedging or net investment hedging. Liabilities £m Assets £m Liabilities £m Marks and Spencer Group plc Annual report and financial statements 2011
101 23 Financial instruments continued Sensitivity analysis The table below illustrates the estimated impact on the income statement and equity as a result of market movements in foreign exchange and interest rates in relation to all of the Group’s financial instruments. The Group considers that a 2% +/– movement in interest rates and a 20% weakening or strengthening in sterling represent reasonable possible changes. However, this analysis is for illustrative purposes only. The impact in the income statement due to changes in interest rates reflects the effect on the Group’s floating rate debt as at the balance sheet date. The impact in equity reflects the fair value movement in relation to the Group’s cross currency swaps. The impact in the income statement from foreign exchange movements reflects the change in the fair value of the Group’s transactional foreign exchange cash flow hedges and the net investment hedges at the balance sheet date. The equity impact shown for foreign exchange sensitivity relates to derivative and non-derivative financial instruments hedging net investments. This value is expected to be fully offset by the retranslation of the hedged foreign currency net assets leaving a net equity impact of zero. The table excludes financial instruments that expose the Group to interest rate and foreign exchange risk where such risk is fully hedged with another financial instrument. Also excluded are trade receivables and payables as these are either sterling denominated or the foreign exchange risk is hedged. 2% decrease in interest rates £m 2% increase in interest rates £m 20% weakening in sterling £m 20% strengthening in sterling £m At 3 April 2010 Impact on income statement: gain/(loss) 2.5 (8.3) (15.9) 10.6 Impact on other comprehensive income: gain/(loss) 33.0 (24.7) 29.2 (19.5) At 2 April 2011 Impact on income statement: gain/(loss) 0.5 2.2 (2.8) 2.4 Impact on other comprehensive income: (loss)/gain (6.7) 6.4 44.3 (29.5) Fair value hierarchy The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: –Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities; –Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and –Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data. Unlisted equity investments are included in Level 3. The fair value of embedded derivatives is determined using the present value of the estimated future cash flows based on financial forecasts. The nature of the valuation techniques and the judgement around the inputs mean that a change in assumptions could result in significant change in the fair value of the instrument. As at the end of the reporting period, the Group held the following financial instruments measured at fair value: Level 1 £m 2011 2010 Assets measured at fair value Financial assets at fair value through profit and loss – Trading derivatives – 15.6 – 15.6 – 18.0 – 18.0 Derivatives used for hedging – 4.3 – 4.3 – 163.0 – 163.0 Embedded derivatives (note 5) – – 20.3 20.3 Available-for-sale financial assets – equity securities – – 3.0 3.0 – – 3.0 3.0 Level 2 £m Level 3 £m Total £m Level 1 £m Level 2 £m Level 3 £m Total £m Strategy Performance & Marketplace Operating review Financial review Governance Liabilities measured at fair value Financial liabilities at fair value through profit and loss – Trading derivatives – (18.1) – (18.1) – (19.6) – (19.6) Derivative used for hedging – (70.1) – (70.1) – (7.5) – (7.5) Put option over non-controlling interest – – (14.6) (14.6) – – (63.5) (63.5) There were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements in the current or prior years. Financial statements & other information To find out more visit marksandspencer.com/annualreport2011 Financial statements
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Annual report and financial stateme
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What’s in this report? P04 Read a
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How we’re governed Group Board Th
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05 Overview Investment in our UK bu
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07 Overview Total investment in our
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09 Overview Do Your Thing In April
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11 Overview Underlying Group profit
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13 Overview Consumer confidence ind
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Our campaigns highlight how we adap
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Lingerie and Beauty Value lingerie
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Fun fashion Our Autograph striped s
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We are never complacent and we cont
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Terribly Clever In September we lau
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Try it - then buy it In November we
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27 Overview Myleene’s Makeovers
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Made to measure Shoppers in our Sky
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31 Overview Autograph Leaves collec
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33 Overview Keeping up to date We
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35 Overview Summary of results Grou
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37 Overview Capital expenditure Yea
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39 Overview Progress has begun on s
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41 Overview What is our approach to
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43 Overview Ensuring the Board is r
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Accountability 45 Overview We belie
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47 Overview Risk description Mitiga
Page 51 and 52: Governance report Our Pensions 49 O
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Page 55 and 56: 53 Chairman’s introduction PART 1
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Page 65 and 66: 63 Chairman’s introduction PART 2
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Page 71 and 72: 69 Overview A special resolution wi
Page 73 and 74: 71 Overview treatment regardless of
Page 75 and 76: Independent auditors’ report to t
Page 77 and 78: 75 Consolidated statement of financ
Page 79 and 80: 77 Consolidated cash flow informati
Page 81 and 82: 79 1 Accounting policies continued
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Page 85 and 86: 83 3 Expense analysis Underlying £
Page 87 and 88: 85 7 Income tax expense A. Tax char
Page 89 and 90: 87 10 Employees A. Aggregate remune
Page 91 and 92: 89 11 Retirement benefits continued
Page 93 and 94: 91 12 Marks & Spencer UK Pension Sc
Page 95 and 96: 93 14 Intangible assets Goodwill £
Page 97 and 98: 95 16 Investment property Cost At s
Page 99 and 100: 97 22 Borrowings and other financia
Page 101: 99 23 Financial instruments continu
Page 105 and 106: 103 25 Deferred tax Deferred tax is
Page 107 and 108: 105 29 Analysis of net debt A. Reco
Page 109 and 110: 107 Company statement of financial
Page 111 and 112: 109 C5 Investments continued B. Pri
Page 113 and 114: Shareholder information 111 Overvie
Page 115 and 116: Index A Page Accountability 45 Acco
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