Page 209 - Sigmaroc Annual-Report 2023

2.26. Leases
The Group leases certain plant and equipment. Leases of plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as Right- of-use assets and lease liability under IFRS 16.
Right-of-use assets are measured at cost, comprising the initial amount of the lease liability adjusted for any lease prepayments, plus initial direct costs, less any lease incentives received. Right-of-use assets are depreciated using the straight-line method from the start of the lease to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term.
Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of finance charges, are included in long-term and short-term borrowings and are measured at the present value of future lease payments, discounted at the Groups incremental borrowing rate and adjusted for time value of money. The interest element of the finance cost is charged to the Income Statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The lease liabilities are shown in Note 24.
The Group elects to apply the exemptions, permitted by IFRS 16, for lease assets and liabilities regarding short- term and low-value leases. Charges recognised in the consolidated income statement in respect of these leases are not significant to the Group.
2.27. Prior year restatement
The statement of financial position has been restated for the finalisation of provisional fair values of the assets and liabilities recognised in respect of the JQG and Goijens acquisitions in 2022, following a PPA review during the IFRS 3 hindsight period. See note 17 for further details.
3. FINANCIAL RISK MANAGEMENT
3.1. Financial Risk Factors
The Group and Company’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Group and Company’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group and Company’s financial performance.
Risk management is carried out by the UK based management team under policies approved by the Board of Directors.
a) Market Risk
The Group is exposed to market risk, primarily relating to interest rate, foreign exchange and commodity prices. The Group has not sensitised the figures for fluctuations in interest rates, foreign exchange or commodity prices as the Directors are of the opinion that these fluctuations would not have a significant impact on the Financial Statements at the present time. The Group has a strong focus on operational gearing, allowing it to be flexible during economically disruptive events however the Directors will continue to assess the effect of movements in market risks on the Group’s financial operations and initiate suitable risk management measures where necessary.
b) Credit Risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises from cash
and cash equivalents, derivative financial instruments and, principally, from the Group’s receivables from customers.
Management monitors the exposure to credit risk on an ongoing basis and have credit insurance at a number of its subsidiaries. The Nordkalk entities don’t hold credit insurance as they have a stable customer base with minimal credit losses. No credit limits were exceeded during the period, and management does not expect any losses from non-performance by these counterparties.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:
31 December 2023 £’000
102,432
31 December 2023 £’000
19,892
31 December 2022 £’000
209
Trade and other receivables
Cash and cash equivalents
91,064 68,623
159,687
55,872
158,304
Credit risk associated with cash balances is managed and limited by transacting with financial institutions with high- quality credit ratings.
Trade and other receivables
The Group’s exposure to credit risk stems mainly from the individual characteristics of each customer. However, management also considers the factors that could influence the credit risk of its customer base, including the default risk of the industry and country in which customers operate.
The Group has established a credit policy under which each new customer is analysed individually for creditworthiness, before the Group’s standard payment and delivery terms and conditions are offered to the customer. The Group’s review includes external ratings, when available, and in some cases bank references.
Most of the Group’s customers have been trading with the Group for years, and no major credit losses have occurred with these customers. Credit risk is monitored by grouping customers according to their credit characteristics, including whether they are individuals or legal entities and whether they are wholesale, retail or end-user customers, as well as by geographic location, industry and the existence of previous financial difficulties.
The maximum exposure to credit risk for trade and other receivables by reportable segment, was:
31 December 2022 £’000
North West West North East
21,505 13,387 56,172 91,064
21,822
60,718
102,432