Marks and Spencer 2013 Annual Report Download - page 103

Financial statements Marks and Spencer Group plc Annual report and financial statements 2013 101
Overview Strategic review Financial review Governance Financial statements and other information
20 Borrowings and other financial liabilities
2013
£m
2012
£m
Current
Bank loans and overdrafts1151.8 38.4
5.875% £267m medium-term notes 20122–280.6
5.625% £400m medium term notes 20142400.2 –
Finance lease liabilities 6.7 8.7
558.7 327.7
Non-current
Bank loans 0.3 0.3
5.625% £400m medium term notes 20142–399.9
6.250% US$500m medium-term notes 20173335.7 317.8
6.125% £400m medium-term notes 20192436.9 428.5
6.125% £300m medium-term notes 20212301.6 301.6
4.75% £400m medium term notes 20252401.4 –
7.125% US$300m medium-term notes 20373200.7 189.9
6.875% £250m puttable callable reset medium-term notes 20372–253.3
Finance lease liabilities 50.7 56.8
1,727.3 1,948.1
Total 2,286.0 2,275.8
1. Bank loans and overdrafts includes a £5.0m (last year £5.0m) loan from the Hedge End Park Limited joint venture (see note 28).
2. These notes are issued under Marks and Spencer plc’s £3bn European medium-term note programme and all pay interest annually.
3. Interest on these bonds is payable semi-annually.
On 12 December 2012, the Group issued £400m of 12.5 year medium-term notes at a coupon rate of 4.75%.
In December 2007, the Group issued £250m of 6.875% 30 year Puttable Callable Reset medium-term notes (PCR notes). These
included a coupon rate reset after five years based on a fixed underlying 25 year interest rate. On this basis the rate was reset at
9%. In light of continued low long-term market interest rates and the successful bond issuance in December 2012, the Group
bought back and cancelled these bonds in January 2013 for £330.0m. This resulted in a one-off finance charge of £75.3m
representing the difference between the cost of the buy back and the carrying value of the PCR notes, offset by associated
unamortised bond costs and fees (see note 5).
Finance leases
The minimum lease payments under finance leases fall due as shown in the table on the following page. It is the Group’s policy to
lease certain of its properties and equipment under finance leases. The average lease term for equipment is five years (last year five
years) and 125 years (last year 125 years) for property. Interest rates are fixed at the contract rate. All leases are on a fixed
repayment basis and no arrangements have been entered into for contingent payments. The Group’s obligations under finance
leases are secured by the lessors’ charges over the leased assets.
21 Financial instruments
Treasury policy
The Group operates a centralised treasury function to manage the Group’s funding requirements and financial risks in line with the
Board approved treasury policies and procedures, and their delegated authorities.
The Group’s financial instruments, other than derivatives, comprise borrowings, cash and liquid resources and various items, such
as trade receivables and trade payables that arise directly from its operations. The main purpose of these financial instruments is to
finance the Group’s operations.
The Group treasury function also enters into derivative transactions, principally interest rate and currency swaps and forward
currency contracts. The purpose of these transactions is to manage the interest rate and currency risks arising from the Group’s
operations and financing.
It remains the Group’s policy not to hold or issue financial instruments for trading purposes, except where financial constraints
necessitate the need to liquidate any outstanding investments. The treasury function is managed as a cost centre and does not
engage in speculative trading.