Marks and Spencer 2015 Annual Report Download - page 115

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113
ANNUAL REPORT AND FINANCIAL STATEMENTS 2015
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
OUR BUSINESSOUR PERFORMANCE
GOVERNANCEFINANCIAL STATEMENTS
20 BORROWINGS AND OTHER FINANCIAL LIABILITIES
2015
£m
2014
£m
Current
Bank loans and overdrafts¹ 278.9 445.5
Finance lease liabilities 0.5 3.2
279.4 448.7
Non-current
Bank loans 0.1 0.2
6.250% US$500m medium-term notes 2017³ 341.9 306.3
6.125% £400m medium-term notes 2019² 428.8 422.3
6.125% £300m medium-term notes 2021² 302.5 302.1
4.75% £400m medium-term notes 2025² 420.2 392.3
7.125% US$300m medium-term notes 2037³ 204.3 182.9
Finance lease liabilities 48.1 49.0
1,745.9 1,655.1
Total 2,025.3 2,103.8
1. Bank loans and overdrafts include 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.
Finance leases
The minimum lease payments under fi nance leases fall due as shown in the table on the following page. It is the Group’s policy to lease
certain properties and equipment under fi nance leases. The average lease term for equipment is six years (last year fi ve years) and 124 years
(last year 125 years) for property. Interest rates are fi xed at the contract rate. All leases are on a fi xed repayment basis and no arrangements
have been entered into for contingent payments. The Group’s obligations under fi nance 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 fi nancial risks in line with the Board
approved treasury policies and procedures, and their delegated authorities.
The Group’s fi nancial 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 fi nancial instruments is to fi nance the
Group’s operations.
The Group treasury function also enters into derivative transactions, principally interest rate swaps, cross-currency swaps and forward
currency contracts. The purpose of these transactions is to manage the interest rate and foreign currency risks arising from the Group’s
operations and fi nancing.
It remains the Group’s policy not to hold or issue fi nancial instruments for trading purposes, except where fi nancial 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.
Financial risk management
The principal fi nancial risks faced by the Group are liquidity and funding, interest rate, foreign currency and counterparty risks. The policies
and strategies for managing these risks are summarised on the following pages.
(a) Liquidity and funding risk
The risk that the Group could be unable to settle or meet its obligations at a reasonable price as they fall due:
> The Group’s funding strategy ensures a mix of funding sources o ering su cient headroom, maturity and fl exibility and cost
e ectiveness to match the requirements of the Group.
> Marks and Spencer plc is fi nanced by a combination of retained profi ts, bank borrowings, medium-term notes and committed syndicated
bank facilities.
> Operating subsidiaries are fi nanced by a combination of retained profi ts, bank borrowings and intercompany loans.
At year end, the Group had a committed syndicated bank revolving credit facility of £1.325bn set to mature on 28 September 2018. This
facility contains only one fi nancial covenant being the ratio of earnings before interest, tax, depreciation, amortisation, rents payable
and exceptional items : to interest plus rents payable. The covenant is measured semi-annually. The Group also has a number of undrawn
uncommitted facilities available to it. At year end, these amounted to £100m (last year £80m), all of which are due to be reviewed within
a year. At the balance sheet date a sterling equivalent of £225m (last year £234m) was drawn under the committed facilities and £nil
(last year £23m) was drawn under the uncommitted facilities.
In addition to the existing borrowings, the Group has a euro medium-term note programme of £3bn, of which £1.1bn (last year £1.1bn)
was in issuance as at the balance sheet date.