Annual report & review 2006 - Shopic.com

Finance review
Taxation
The effective tax rate for the year ended 31 December
2006 is 25.1 per cent compared to 23.4 per cent in the
prior year. This increase relates to tax arising on the
disposal of own stores in Great Britain which is incurred at
a rate of 30 per cent.
Financial risk management
The Group’s operations expose it to a variety of financial
risks that include foreign exchange risk, credit risk,
liquidity and interest rate risk. The Group has in place a
risk management programme that seeks to manage the
financial exposures of the Group and a treasury policy
that has been approved by the Board. The policies are
implemented by the Group’s finance department and
includes specific guidelines to manage interest rate
risk, credit risk and the circumstances where it would be
appropriate to use financial instruments to manage these
risks.
In order to ensure stability of interest outflows the Group
has a policy of maintaining 50 per cent of its term debt
at fixed interest rates for a one-year period. The Group
actively maintains adequate medium-term committed
facilities to ensure the Group has sufficient available
funds for operations and planned expansion.
The Group is exposed to foreign exchange risk in the
normal course of business for purchases outside the
euro-zone. The Group’s policy on mitigating the effect
of this currency exposure is to hedge transactions by
entering into forward foreign exchange contracts. The
Group also has substantial net assets denominated in
sterling and has a policy of maintaining balance sheet
hedges, through sterling debt and cross-currency
swaps, designed to hedge up to 50 per cent of this net
investment. The exchange rate between the euro and
sterling was relatively stable during the year and did not
have a material impact on the Group’s results.
The Group is highly focused on risk management.
Accordingly insurance is held for all significant insurable
risks and against major catastrophes. For any such events
the Group generally bears an initial cost before external
cover begins.
Corporate governance
The board of Musgrave Group plc is committed to a
culture of effective corporate governance which the
Board defines as the system by which the Musgrave
Group through living its values is directed and managed.
It influences how the objectives of the Group are set
and achieved, how risk is monitored and assessed,
and how performance is optimised. Good corporate
governance structures encourage the Group to create
value for stakeholders and provide accountability and
control systems commensurate with the risks incurred.
The Board and its executive, audit, remuneration and
shareholder committees are committed to continuing
to develop a culture of effective corporate governance
across the Group.
Summary
The Group has performed well in 2006 delivering profit
growth, continuing strong cash generation, further
dividend growth and a stronger balance sheet and is well
positioned to continue to grow its businesses.
Tim Kenny
Group Finance Director
Table 3 Key financial indicators
2006 2005
Restated
2004
Restated
EBITDA: Interest Cover (times) 8.7 6.3 5.4
Net Debt: Shareholders’ Funds (%) 60.3 134.4 174.2
Return on Average Capital Employed (%)* 23.9 23.5 25.7
* Excluding pension deficit
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Musgrave Group Plc Annual Report & Review 2006