Annual Report and Accounts 2010

18Financial instruments

(a) Financial instruments by category

The accounting policies for financial instruments have been applied to the line items below:

Financial assets

Loans and
receivables
£000

Assets at fair
value through
the income
statement
£000

Available-
for-sale
£000

Total
£000

At 31 December 2010

 

 

 

 

Cash and cash equivalents

29,363

29,363

Short-term deposits

247,466

247,466

Embedded derivatives

2,303

2,303

Accounts receivable (gross of impairment provision)

107,759

107,759

Total current financial assets

384,588

2,303

386,891

Available-for-sale investments – unlisted

20,329

20,329

Long-term deposits

15,000

15,000

Loans and receivables

1,934

1,934

Total non-current financial assets

16,934

20,329

37,263

Total financial assets

401,522

2,303

20,329

424,154

At 31 December 2009

Cash and cash equivalents

34,489

34,489

Short-term deposits

105,524

105,524

Short-term marketable securities

1,795

1,795

Embedded derivatives

2,480

2,480

Currency exchange contracts

457

457

Accounts receivable (gross of impairment provision)

67,642

67,642

Total current financial assets

207,655

2,937

1,795

212,387

Non-current available-for-sale investments – unlisted

9,432

9,432

Total financial assets

207,655

2,937

11,227

221,819

Financial liabilities

 

2010
£000

2009
£000

Liabilities at amortised cost at 31 December:

 

Accounts payable

4,305

2,280

Accrued and other liabilities

41,789

29,577

 

46,094

31,857

Liabilities at fair value through the income statement at 31 December:

 

Currency exchange contracts

201

Total financial liabilities

46,295

31,857

Loans and receivables

During 2010 the Group invested £2.5 million in an interest-free charitable bond with Future Business. This has been recognised in loans and receivables at its initial fair value of £1,934,000, measured using the effective interest method, which resulted in a charge of £566,000 being recognised as interest payable and similar charges.

Short-term deposits The effective interest rate on short-term deposits outstanding at the year-end was 1.78% (2009: 1.92%) and these deposits have an average maturity of 159 days (2009: 126 days).

Long-term deposits The effective interest rate on long-term deposits outstanding at the year-end was 2.53% and these deposits have an average maturity of 543 days.

(b) Credit quality of financial assets

Trade debtors

On a quarterly basis, all trade debtors more than three months overdue are considered for impairment on a line-by-line basis. Either a provision is made or the lack thereof is justified, with review by senior members of the Group’s finance team.

 

2010
£000

2009
£000

Trade debtors (gross of impairment provision):

 

Not yet due

66,012

30,255

Under 90 days overdue

27,260

18,922

Over 90 days overdue but not provided for

3,705

3,717

Fully provided for

2,091

2,395

Total

99,068

55,289

As shown above, at 31 December 2010 trade debtors less than 90 days overdue amounted to £27.3 million. Of those outstanding at 31 December 2010, £12.4 million had been collected by 25 February 2011 and £13.8 million were owed by large, established customers. Similarly, debtors more than 90 days overdue and not provided for amounted to £3.7 million of which £1.5 million had been collected by 25 February 2011 and £1.6 million was owed by large, established customers. For the remainder, discussions regarding repayment are ongoing and repayment schedules have been agreed with the customers concerned. These will be monitored on a quarterly basis in  accordance with the control outlined above. No further analysis has been provided here on the quality of these debts as they are not felt to pose a material threat to the Group’s future results.

As shown above, at 31 December 2010, trade debtors fully provided for amounted to £2.1 million (2009: £2.4 million). Of those provided for at 31 December 2010, £nil relates to trade debtors that are between three and six months overdue (2009: £0.2 million) and £2.1 million relates to trade debtors that are over six months overdue (2009: £2.2 million).

Highly liquid financial assets

As at 31 December 2010, 97% (2009: 91%) of the Group’s cash and cash equivalents, short- and long-term deposits and marketable securities were held with institutions that had either an AA rating or, in the case of UK building societies, had over £1 billion in assets.