Registered number:
FOR THE YEAR ENDED 31 MAY 2023
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TANNERS WINES LIMITED
COMPANY INFORMATION
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TANNERS WINES LIMITED
CONTENTS
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TANNERS WINES LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 MAY 2023
The directors present their strategic report for the year ended 31st May 2023 for Tanners Wines Limited ("the Company").
The principal activity of the Company during the year was the wholesaling and retailing of wines, spirits, beers and mineral waters.
We aim to present a balanced and comprehensive review of the development and performance of the business during the year and its position at the year end. Our review is consistent with the size and complexity of the business and is written in the context of the risks and uncertainties we face.
Whilst the financial year to 31st May 2023 saw a decline in revenue and profits on the previous year the overall level of sales and profitability was at historically strong levels for the Company. The business was coming off the back of a record year of revenue and profits and with the economic headwinds facing many wholesale and retail businesses it was always going to be a significant challenge to achieve a similar level of profitability. Tanners has continued to demonstrate resilience through the recent turbulent years. We have navigated through Covid and Brexit as well as other supply chain disruption (for example from the closure of the Suez Canal), as well as several short harvests in key wine growing areas, either from frost and hailstone or wildfires. We have now had to contend with a level of inflation not seen for a generation and shortages of glass and other raw materials used in the bottling processes due to the Russia / Ukraine conflict. Through all of these events the team at Tanners has demonstrated resilience, flexibility and adaptability and the Board would like to thank all of them for their on-going commitment and contribution to the Company. Turnover for the year to 31st May 2023 was 6% below prior year at £24.1m (2022: £25.7m). Following the record sales in the year to 31st May 2022 we had budgeted for a decline in sales and we were close to expectations – the year ending 31st May 2023 was the second highest on record for Tanners. Web sales saw a decline following the very significant growth we saw during the pandemic but remain at a level considerably ahead of 2019. The sales mix has returned to more historic levels and Tanners enjoys a healthy blend of wholesale, retail, “private house” and en primeur revenue streams. In order to manage the significant inflationary pressures that we saw there was a need, along with our competitors and most retail businesses, to increase prices at rates above historical levels. This did lead to a small improvement in the gross profit margin but the very significant levels of cost increases in labour and overheads meant that operating margins declined from 5.5% in the prior year to 2.0%. We consider that our key financial performance indicators are those that communicate the financial performance and strength of the Company as a whole; turnover, gross profit margin and profit before tax. During the year the Company’s turnover decreased by 6% to £24.1m (2022: £25.7m). Gross profit decreased to £7.2m (2022: £7.5m) although gross profit margin improved to 29.7%. Operating profit of £0.5m (2022: £1.4m) showed a decrease of £0.9m reflecting the significant inflationary pressures as well as £0.2m of building repairs that had been deferred due to Covid. Profit after tax for the year was £351k, a decrease of £805k on the prior year. The financial position of the business remains solid with a net cash balance of £318k (2022: £1,179k) at year end. There was a cash outflow of £0.5m following a restructuring of the overall ownership of the business.
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TANNERS WINES LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2023
The business environment in which we operate in continues to be challenging and unpredictable. Over recent years we have Covid-19 and the uncertainties following the “Brexit” referendum, as well as the more recent surging energy and fuel costs and a significant weakening in consumer confidence which have all contributed to the uncertainty affecting most UK consumer-facing businesses.
The considerable risks posed by Covid-19 do appear to have allayed, with the successful roll out of the vaccine across the United Kingdom (and across the world). There does remain a risk of further variants, or indeed the threat of a different pandemic, impacting our wholesaling business in particular, although we have seen that some of this shortfall on the “Trade” side of the business is compensated for by higher sales online and through the retail branches as consumers have continued to consume our products, but at home. Brexit has been the second on-going significant source of risk and uncertainty. We increased our stock holding to try to mitigate some of the cost pressures that a weaker sterling, increased paperwork and longer lead times have had on our industry and we also imported in larger quantities to mitigate in part the considerable increased shipping costs that have impacted the UK and global economies following Covid-19, Brexit and the Suez shipping blockage. The sterling / euro exchange rate is a considerable influence on the profitability of our business and this is subject to macro-economic and political fluctuations that our hedging strategy can only partially mitigate. Over the past 12 months these risks have somewhat reduced and sterling has traded more strongly in recent weeks. We hedge out our foreign currency exposure on a rolling basis but the macro-economic backdrop remains a significant uncertainty. The third considerable risk that we have faced over the past year has been the significant increase in energy costs across the world and in particular in the United Kingdom. The impact on Tanners is both on our direct costs (we have seen an increase of more than 100% in our energy costs) but also on indirect costs from energy increases – the basic cost of living has meant we have given a higher than normal pay rise to our staff and we are seeing on-going inflationary pressures across all our costs. We have had to pass on some of these costs to our customers to mitigate the cost pressures, but as noted last year this did have a significant impact in level of profits. The rate of inflation is remaining stubbornly high and this remains a key risk to the business as margins will inevitably come under pressure as not all these inflationary pressures can be passed on to consumers. The fourth significant risk that is impacting our business is increased regulation and bureaucracy. Several of the challenges posed by Brexit have been worked through but there are on-going changes to the systems required to import goods. Since the financial year end there have been changes to the rate of duty charged on alcohol and this has generally led to higher prices; a 75cl bottle of wine at 12.5% ABV has seen an increase of 44p in duty (excluding VAT). This is an additional cost that has to be passed onto the consumer and will contribute to significantly higher prices across the drinks industry at a time of exceptional inflation. We reported last year of risks from plans such as the Scottish Deposit Return Scheme, and a similar (but different) scheme to be introduced in Wales. The immediate risks of these schemes has abated and there does appear to have been a political realisation of the significant addition to the bureaucratic burden for businesses which would result in higher prices to the customer. We continue to engage with the UK and devolved governments on the impact of constant changes to the regulatory environment around duty, deposit schemes and packaging that we face. The recent few months have highlighted further the on-going risks and uncertainties from the weather; wine and beer are ultimately agricultural products and the impact of the weather on the quality and quantity of each harvest remains high, although the significant improvements in viticultural techniques around the world has led to some partial mitigation of variances in quality. The risks of drought, wildfires and flooding, as well as the war in Ukraine impacting wheat and barley harvests, means that the whole industry exists against a constant backdrop of uncertainty. Tanners are well diversified with suppliers all around the world but we cannot be immune to price pressures from reduced yields in particular.
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TANNERS WINES LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2023
With these risks and uncertainties in mind, we are aware that any plans for the future development of the business may be subject to unforeseen events outside our control. However, the business has shown a tremendous ability to be flexible and adapt and respond to changes in market conditions and to look for opportunities as they arise.
The Company and Group finance its operations through a mixture of retained profit, bank overdraft, fixed asset under hire purchase agreement and various items such as trade debtors and trade creditors that arise directly from its operations. The Company and Group's exposure to interest rate fluctuations is managed by regular review in conjunction with the Company and Group's bankers. The exposure to exchange rate fluctuations is managed by the conservative use of forward exchange rate contracts. The control of risk and efficient working capital management are integral to the Company and Group's business and the directors regularly review and agree policies for managing such risks. Further information regarding the Group’s approach to financial risk management is included in note 31 to the financial statements.
This report was approved by the board and signed on its behalf.
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TANNERS WINES LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 MAY 2023
The directors present their report and the financial statements for the year ended 31 May 2023.
The directors are responsible for preparing the Strategic report, the Directors' report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing these financial statements, the directors are required to:
∙select suitable accounting policies for the Company's financial statements and then apply them consistently;
∙make judgments and accounting estimates that are reasonable and prudent;
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The profit for the year, after taxation, amounted to £350,755 (2022: £1,155,938).
During the year the Company paid dividends totalling £61,918 (2022: £nil).
The directors who served during the year were:
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TANNERS WINES LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2023
In accordance with section 414(C) of the Companies Act 2006 Strategic Report and Director's Report Regulations 2014, the information required by schedule 7 of the Large and Medium-Sized Companies and Groups (Accounts and Reports) Regulations has been set out in the strategic report. This includes information regarding financial risk management.
There have been no significant events affecting the Company since the year end.
The auditors, WR Partners, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
This report was approved by the board and signed on its behalf.
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TANNERS WINES LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF TANNERS WINES LIMITED
We have audited the financial statements of Tanners Wines Limited '(the company') for the year ended 31 May 2023, which comprise the Statement of comprehensive income, the Balance sheet, the Statement of changes in equity and the related notes, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council's Ethical Standard and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
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TANNERS WINES LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF TANNERS WINES LIMITED (CONTINUED)
The other information comprises the information included in the annual report other than the financial statements and our Auditors' report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Strategic report and the Directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
∙the Strategic report and the Directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic report or the Directors' report.
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TANNERS WINES LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF TANNERS WINES LIMITED (CONTINUED)
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
The audit team obtained an understanding of the legal and regulatory frameworks that are applicable to the Company and determined that the most significant are those that relate to the reporting framework (FRS102 and the Companies Act 2006), the relevant tax compliance regulations, employment law, Health and Safety Regulations and the EU General Data Protection Regulation (GDPR). We understood how the Company is complying with these frameworks by making enquiries of management and those responsible for legal and compliance procedures. We also reviewed board minutes to identify any recorded instances of irregularity or non compliance that might have a material impact on the financial statements. We assessed the susceptibility of the Company's financial statements to material misstatement, including how fraud might occur by meeting with key management to understand where they considered there was susceptibility to fraud. Based on our understanding our procedures involved enquiries of management and those charged with governance, manual journal entry testing, cashbook reviews for large and unusual items and the challenge of significant accounting estimates used in preparing the financial statements.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditors' report.
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TANNERS WINES LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF TANNERS WINES LIMITED (CONTINUED)
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an Auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.
for and on behalf of
Chartered Accountants
Statutory Auditors
Belmont House
Shrewsbury Business Park
Shropshire
SY2 6LG
Date:
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TANNERS WINES LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MAY 2023
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TANNERS WINES LIMITED
REGISTERED NUMBER: 01072469
BALANCE SHEET
AS AT 31 MAY 2023
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TANNERS WINES LIMITED
REGISTERED NUMBER: 01072469
BALANCE SHEET (CONTINUED)
AS AT 31 MAY 2023
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 14 to 34 form part of these financial statements.
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TANNERS WINES LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MAY 2023
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TANNERS WINES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
Tanners Wines Ltd, company registration number 01072469, is a private company limited by shares, incorporated and domiciled in England, with its registered office and principal place of business at 26 Wyle Cop, Shrewsbury, Shropshire, SY1 1XD.
The principal activity of the Company for this period remains the wholesaling and retailing of wines, spirits, beers and mineral waters in the United Kingdom.
2.Accounting policies
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgment in applying the Company's accounting policies (see note 3).
The following principal accounting policies have been applied:
The Company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by the FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland":
∙the requirements of Section 7 Statement of Cash Flows;
∙the requirements of Section 3 Financial Statement Presentation paragraph 3.17(d);
∙the requirements of Section 33 Related Party Disclosures paragraph 33.7.
This information is included in the consolidated financial statements of Tanners Wines (Holdings) Limited as at 31 May 2023 and these financial statements may be obtained from Companies House or its registered office, which is located at 26 Wyle Cop, Shrewsbury, SY1 1XD.
After reviewing budgets and forecasts the directors are confident that the Company can continue trading for at least the next 12 months and that therefore the going concern basis is appropriate.
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TANNERS WINES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
2.Accounting policies (continued)
Functional and presentation currency
Transactions and balances
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TANNERS WINES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
2.Accounting policies (continued)
Grants of a revenue nature are recognised in the Statement of comprehensive income in the same period as the related expenditure.
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TANNERS WINES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
2.Accounting policies (continued)
All intangible assets are considered to have a finite useful life. If a reliable estimate of the useful life cannot be made, the useful life shall not exceed ten years.
The estimated useful lives range as follows:
Subsequent capitalised additions to the website are amortised to the same end date as the original investment.
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TANNERS WINES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
2.Accounting policies (continued)
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
The estimated useful lives range as follows:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
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TANNERS WINES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
2.Accounting policies (continued)
Provisions are charged as an expense to profit or loss in the year that the Company becomes aware of the obligation, and are measured at the best estimate at the balance sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties. When payments are eventually made, they are charged to the provision carried in the Balance sheet.
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TANNERS WINES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
2.Accounting policies (continued)
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TANNERS WINES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
Significant accounting estimates and assumptions The company makes estimates and assumptions concerning the future. The resulting accounting estimates and assumptions will, by definition, seldom equal the related actual results. The estimates and assumptions that the potential of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. a) Stock provision At each reporting date, the company assesses whether stocks are impaired or if an impairment loss recognised in prior periods has reversed. A review is undertaken with the Buying Director and members of the sales team to establish slow moving lines or where there is a an indication of impairment. b) Bad debt provision The company undertakes monthly reviews of all outstanding debtor balances and employs a full-time credit controller to monitor all debtor balances. A provision for impairment of trade debtors is established when there is objective evidence that the amounts due will not be collected according to the original terms of contract. Significant areas of judgement a) Recognition of En Primeur revenue Revenue in respect of En Primeur sales is recognised when invoiced and the amount is payable by the customer. The cost of the goods to be delivered is included in cost of sales and creditors. Payment has usually been made to the supplier before the delivery of the goods. The commercial risk of the goods passes from the company to the customer once ordered and therefore the directors believe it appropriate to recognise En Primeur revenue when invoiced, rather than on shipping of the goods to the customer.
The turnover and profit before tax are attributable to the one principal activity of the Company.
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TANNERS WINES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
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TANNERS WINES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
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TANNERS WINES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
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TANNERS WINES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
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TANNERS WINES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
13.Taxation (continued)
From 1 April 2023, the main rate of Corporation Tax has increased from 19% to 25% for Company profits exceeding £250,000. As a result, deferred tax balances have been calculated at 25%.
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TANNERS WINES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
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TANNERS WINES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
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TANNERS WINES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
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TANNERS WINES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
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TANNERS WINES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
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TANNERS WINES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
At the year end the Company had entered into a number of forward contracts to purchase Euros at protected rates of exchange. Gains and losses on these forward contracts have been recognised in the profit and loss account and for the Company result in a creditor of £27,636 (2022: debtor of £17,943) disclosed as a current liability.
The loss on these foreign exchange contracts of £45,579 has been disclosed through the profit and loss account for this period.
The Company operates a defined contribution pension scheme and has in place a pension auto-enrolment scheme for all eligible staff, in line with regulations. The pension cost charge for the period represents contributions payable by the company to the schemes and amounted to £74,718 (2022: £68,407).
There were no outstanding or prepaid contributions at either the beginning or end of the financial year.
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TANNERS WINES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
The Company is wholy owned by Tanners (Shrewsbury) Limited, a company registered in England and Wales. The ultimate parent company is Tanners Wines (Holdings) Limited. The Company is included within the consolidated financial statements of the group headed by Tanners Wines (Holdings) Limited are available from companies house or its registered office, which is located at 26 Wyle Cop, Shrewsbury. SY1 1XD.
The Company's ultimate controlling party is J J Tanner by virtue of his controlling interest in the company's ultimate parent undertaking.
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TANNERS WINES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
The company has exposure to three main areas of risk - foreign exchange currency exposure, liquidity risk and customer credit exposure. To a lesser extent the company is exposed to interest rate risk.
Foreign exchange transactional currency exposure The company is exposed to currency exchange rate risk due to a significant proportion of its trade payables being denominated in non-sterling currencies. The net exposure to each currency is monitored and managed by the use of forward foreign exchange contracts with bank cash and overdraft accounts available in non-sterling currencies as part of the company's bank facilities. The forward foreign exchange contracts all mature within twelve months and are taken out to cover known or highly likely exposures to foreign currency payments. Liquidity risk The objective of the company in managing liquidity risk is to ensure that it can meet its financial obligations as and when they fall due. The company expects to meet its financial obligations through operating cash flows and the use of the bank overdraft facility. Cash flow forecasts, including currency forecasts are reviewed on a regular basis to monitor the level of headroom to the total facility. Customer credit exposure The company may offer credit terms to its customers which allow payment of the debt after delivery of the goods or services. The company is at risk to the extent that a customer may be unable to pay the debt on the specified due date. The risk is mitigated by strong on-going customer relationships, regular monitoring of any delayed payments and use of external, credit reference checking agencies. Interest rate risk The company borrows from its bankers using overdrafts and monitors the expected future direction of interest rates. Given the low level of interest rates over the past few years, the company has not entered into interest rate swaps but would consider this if management believe it is appropriate.
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