WHY THIS RISK AFFECTS US
We are subject to various financial covenants and undertakings as a consequence of our borrowing agreements.

WHAT MIGHT HAPPEN IF WE GET IT WRONG
In order to achieve our growth objectives, we require a strong financial platform. Breaching any covenant would destabilise our platform for growth and may impair our ability to secure future financing.

HOW WE MITIGATE OUR RISKS
Bakkavor reviews its projections and covenant position monthly. The Group believes it is adequately placed to manage this risk successfully despite the current uncertain economic outlook and challenging macroeconomic conditions. Mitigating actions in 2012 included successful price negotiations, cost reduction programmes and enhanced working capital policies, all of which will continue into 2013.

PROGRESS
We renegotiated our leverage covenant in early 2012, providing increased headroom and allowing management to focus on the long-term strategy of the Group. The Directors consider that the Group has the flexibility to react to further deteriorating market conditions through implementing previously agreed early settlement arrangements with our core customers and reducing our capital expenditure programme. Further actions available to management include supply chain improvements and additional cuts to discretionary spend.

WHY THIS RISK AFFECTS US
We are a relatively highly leveraged company and therefore exposed to the external risk of interest rate fluctuations and the market's view of our credit rating.

WHAT MIGHT HAPPEN IF WE GET IT WRONG
In order to achieve our growth objectives, we require a strong financial platform. An inability to repay interest or a downgrading of the Group's credit rating may impair our ability to secure future financing.

HOW WE MITIGATE OUR RISKS
These risks are actively managed by the Group's Treasury Department. The Treasury function operates within the framework of strict Board-approved policies and procedures which are explained further in Note 29 of the Group Financial Statements.

PROGRESS
Fixed interest rate swaps totalling £300 million matured in the year, leading to a reduction in interest payments. The Group continues to enter into forward contracts to reduce the Group's exposure to foreign exchange rate movements.