Financial Instrument Risk

The Group is exposed to various risks in relation to financial instruments. The Group’s financial assets and liabilities by category are summarised in note 21. The main types of risks are foreign exchange risk, interest rate risk, credit risk and liquidity risk.

The Group’s risk management is coordinated at its headquarters, in close cooperation with the Board, and focuses on actively securing the Group’s short to medium-term cash flows by minimising the exposure to financial markets.

The Group does not actively engage in the trading of financial assets for speculative purposes nor does it write options.

Foreign Currency Sensitivity

The Group is exposed to translation and transaction foreign currency exchange risk. Several other currencies in addition to the presentation currency of Sterling are used, including Romanian Lei (RON), Euro (EUR) and US Dollars (USD).

The Group experiences currency exchange differences arising upon retranslation of monetary items (primarily short-term inter-company balances and borrowings), which are recognised as an expense in the period the difference occurs. The Group endeavours to match the cash inflows and outflows in the various currencies; the Group typically invoices its clients in their local currency, and pays its local expenses in local currency as a means to mitigate this risk.

Foreign currency denominated financial assets and liabilities which expose the Group to currency risk are disclosed below. The amounts shown are translated into GBP at the closing rate:



June 30, 2018	Long Term GBP £‘000		Long Term EUR £‘000		Long Term USD £‘000		Short Term GBP £‘000		Short Term EUR £‘000		Short Term USD £‘000		Short Term RON £‘000		Short Term Others £‘000		TOTAL £‘000
Financial assets	—		—		—		37,853		5,485		10,485		8,603		4,974		67,400
Financial liabilities	(277	)	(20	)	(7,251	)	(37,408	)	(2,428	)	(14,406	)	(11,926	)	(3,479	)	(77,195	)
Total	(277	)	(20	)	(7,251	)	445		3,057		(3,921	)	(3,323	)	1,495		(9,795	)

The Group is also exposed to exchange differences arising from the translation of its subsidiaries' financial statements into the Group's presentation currency of Sterling with the corresponding exchange differences taken directly to equity.

The following tables illustrate the sensitivity of profit and equity in regards to the Group’s financial assets and financial liabilities and the RON/Sterling exchange rate. The RON exposure impacts the majority of the Group’s cost base. Therefore as the Sterling strengthens, subject to any prevailing hedge arrangements, the Group benefits from a cost improvement and vice versa.

During the year ended 30 June 2018, the Sterling/RON volatility ranged from the RON strengthening against Sterling by 3% to weakening by 5%.



	GBP/RON:+3% Profit impact £’000
June 30, 2018	(330	)



	GBP/RON: -5% Profit impact £’000
June 30, 2018	521



	GBP/RON: +3% Total equity £’000
June 30, 2018	(283	)

During the year ended 30 June 2017, the Sterling/RON volatility ranged from the RON strengthening against Sterling by 4% to weakening by 5%.



	GBP/RON: +4% Profit impact £’000
June 30, 2017	(330	)



	GBP/RON: -5% Profit impact £’000
June 30, 2017	483



	GBP/RON: +4% total equity £’000
June 30, 2017	(672	)

Interest Rate Sensitivity

At 30 June 2018, the Group is exposed to changes in market interest rates through bank borrowings on its Revolving Credit Facility at variable interest rates.

Credit Risk Analysis

Credit risk is the risk that a counterparty fails to discharge an obligation to the Group. The Group is exposed to this risk for various financial instruments, including trade receivables. The Group’s maximum exposure to credit risk is limited to the carrying amount of financial assets recognised at 30 June, as summarised below:



	2018 £’000		2017 £’000
Cash and cash equivalents	£	15,048	£	23,571
Trade and other receivables	52,352		41,494
Total	£	67,400	£	65,065

The Group monitors defaults of clients and other counterparties, identified either individually, or by group, and incorporates this information into its credit risk controls. Where available at reasonable cost, external credit ratings and/or reports on clients and other counterparties are obtained and used.

Management considers that all financial assets that are not impaired or past due at the end of the applicable reporting period are of good credit quality. Some of the unimpaired trade receivables are generally past due as of the end of the applicable reporting period. Information on financial assets past due but not impaired are as follows:



	2018 £’000		2017 £’000
Not more than 3 months	£	830	£	2,735
More than 3 months but not more than 6 months	586		61
More than 6 months but not more than 1 year	—		—
More than 1 year	—		—
Total	£	1,416	£	2,796

In respect of trade and other receivables, the Group is not exposed to any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics.

The Group’s trade receivables are from a large number of clients in various industries and geographical areas. Based on historical information about client default rates, management consider the credit quality of trade receivables that are not past due or impaired to be good.

The credit risk for cash and cash equivalents is considered negligible, since the counterparties are reputable banks with high quality external credit ratings.

Liquidity Risk Analysis

The Group manages its liquidity needs by monitoring scheduled debt servicing payments for long-term financial liabilities as well as forecast cash inflows and outflows due in day-to-day business. The data used for analysing these cash flows is consistent with that used in the contractual maturity analysis below. Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week basis, as well as on a longer-term basis. Net cash requirements are compared to available borrowing facilities in order to determine headroom or any shortfalls. This analysis shows that available borrowing facilities are expected to be sufficient over the lookout period.

The Group’s objective is to maintain cash and marketable securities to meet its liquidity requirements for 30‑day periods at a minimum. This objective was met for all of the reporting periods presented.

The Group considers expected cash flows from financial assets in assessing and managing liquidity risk, in particular its cash resources and trade receivables. The Group’s existing cash resources and trade receivables exceed the current cash outflow requirements. Cash flows from trade and other receivables are all contractually due within six months.

As at 30 June 2018, the Group’s non-derivative financial liabilities had contractual maturities (including interest payments where applicable) as summarised below:



	Current 0 - 6 months £’000		Current 6 - 12 months £’000		Non-Current 1 - 5 years £’000		Non-Current +5 years £’000
Bank loans	£	19,726	£	—	£	—	£	—
Finance lease obligations	23		21		20		—
Trade and other payables	40,243		—		—		—
Deferred consideration	3,031		1,515		—		—
Contingent consideration	3,984		1,196		7,967		—
Other liabilities	—		—		277		—
Total	£	67,007	£	2,732	£	8,264	£	—

There were no forward foreign currency options in place at 30 June 2018.

As at 30 June 2017, the Group’s non-derivative financial liabilities had contractual maturities (including interest payments where applicable) as summarised below:



	Current 0 - 6 months £’000		Current 6 - 12 months £’000		Non-Current 1 - 5 years £’000		Non-Current +5 years £’000
Bank loans	£	29,314	£	—	£	—	£	—
Finance lease obligations	63		25		63		—
Trade and other payables	24,358		—		—		—
Deferred consideration	—		—		—		—
Contingent consideration	—		—		—		—
Other liabilities	—		—		253		—
Total	£	53,735	£	25	£	316	£	—