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116
MARKS AND SPENCER GROUP PLC
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
21 FINANCIAL INSTRUMENTS CONTINUED
(c) Foreign currency risk continued
After taking into account the hedging derivatives entered into by the Group, the currency and interest rate exposure of the Group’s fi nancial
liabilities excluding short-term payables and the liability to the Marks & Spencer UK Pension Scheme (which has no currency or interest rate
exposure) is set out below:
2015 2014
Fixed rate
£m
Floating rate
£m
Total
£m
Fixed rate
£m
Floating rate
£m
Total
£m
Currency
Sterling 1,315.4 568.2 1,883.6 1,226.5 708.6 1,935.1
Euro 5.8 105.6 111.4 6.6 139.3 145.9
Other – 30.3 30.3 – 22.8 22.8
1,321.2 704.1 2,025.3 1,233.1 870.7 2,103.8
The fl oating rate sterling and euro borrowings are linked to interest rates related to LIBOR. These rates are for periods between one and
six months.
As at the balance sheet date and excluding fi nance leases, the fi xed rate sterling borrowings are at an average rate of 5.3% (l ast year 5.3%)
and the weighted average time for which the rate is fi xed is eight years (last year nine years).
(d) Interest rate risk
The Group is exposed to interest rate risk in relation to sterling, US doll ar and euro variable rate fi nancial assets and liabilities.
The Group’s policy is to use derivative contracts where necessary to maintain a mix of fi xed and fl oating rate borrowings to manage this risk .
The structure and maturity of these derivatives correspond to the underlying borrowings and are accounted for as fair value or cash fl ow
hedges as appropriate.
At the balance sheet date, fi xed rate borrowings amounted to £1,321.2m (last year £1,233.1m) representing the public bond issues and
fi nance leases, amounting to 66% (last year 59%) of the Group’s gross borrowings.
The e ective interest rates at the balance sheet date were as follows:
2015
%
2014
%
Committed and uncommitted borrowings 0.9 1.0
Medium-term notes 5.3 5.3
Finance leases 4.1 4.3
Derivative fi nancial instruments
2015 2014
Assets
£m
Liabilities
£m
Assets
£m
Liabilities
£m
Current
Forward foreign exchange contracts – cash fl ow hedges 114.8 (7.2) 12.1 (50.9)
– held for trading 3.1 (0.4) 1.6 (0.6)
– net investment hedges – (0.1) – –
117.9 (7.7) 13.7 (51.5)
Non-current
Cross-currency swaps – cash fl ow hedges 6.3 (19.9) –(62.3)
Forward foreign exchange contracts – cash fl ow hedges 7.3 (0.1) 0.3 (0.9)
Interest rate swaps – fair value hedge 38.5 – 17.9 (12.2)
Embedded derivative (see note 5) 23.7 – 22.4 –
75.8 (20.0) 40.6 (75.4)
The Group holds a number of interest rate swaps to re-designate its sterling fi xed debt to fl oating debt. These are reported as fair value
hedges. The ine ective portion recognised in the profi t or loss that arises from fair value hedges amounts to £0.3m (last year £0.5m) as
the loss on the hedged item was £33.5m (last year £33.7m gain) and the gain on the hedging instrument was £33.8m (last year £34.2m loss).
The Group also holds a number of cross-currency swaps to re-designate its fi xed rate US doll ar debt to fi xed rate sterling debt. These are
reported as cash fl ow hedges.