Peachtree 2012 Annual Report Download - page 110

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Net debt and capital structure continued
13 Financial instruments continued
Interest rate risk
The Group is exposed to interest rate risk on floating rate deposits and borrowings. The US private placement loan notes, which comprises 93% of borrowings,
are at fixed interest rates and bank debt, which comprises 7% of borrowings, are at floating interest rates. At 30 September 2012, the Group had £61.6m
(2011: £182.8m) of cash and cash equivalents.
The Group regularly reviews forecast debt, cash and cash equivalents and interest rates to monitor this risk. Interest rates on debt and deposits are fixed when
management decides this is appropriate. At 30 September 2012, the Group’s principal borrowings comprised US private placement loan notes of £185.8m
(2011: £192.6m), which have an average fixed interest rate of 4.58% and bank debt of £15.0m (2011: £nil), which has an average floating interest rate of 1.73%.
Foreign currency risk
Foreign exchange rate risk is the risk that the fair value of future cash flows will fluctuate because of the changes in foreign exchange rates. The Group’s foreign
currency exposures are principally to the US Dollar and Euro.
Although a substantial proportion of the Group’s revenue and profit is earned outside the UK, subsidiaries generally only trade in their own currency. The Group
is therefore not subject to any significant foreign exchange transactional exposure within these subsidiaries. The Group’s principal exposure to foreign currency,
therefore, lies in the translation of overseas profits into Sterling.
This exposure is partly hedged to the extent that these profits are offset by interest charges in the same currency arising from the financing of the investment
cost of overseas acquisitions by borrowings in the same currency. The Group is also exposed to a foreign exchange transaction exposure from the conversion
of surplus cash generated by its principal overseas subsidiaries, which would be hedged where appropriate.
The Group’s US Dollar denominated borrowings are designated as a hedge of the net investment in its subsidiaries in the US. The foreign exchange movements
on translation of the borrowings into Sterling have been recognised in the translation reserve.
The Group’s other currency exposures comprise only those exposures that give rise to net currency gains and losses to be recognised in the income statement.
Such exposures reflect the monetary assets and liabilities of the Group that are not denominated in the operating (or “functional”) currency of the entity involved.
At 30 September 2011 and 30 September 2012, these exposures were immaterial to the Group.
13.3 Maturity of financial liabilities
The maturity profile of the undiscounted contractual amount of the Group’s financial liabilities at 30 September was as follows:
2012
Borrowings
£m
Trade and
other payables
£m
Other financial
liabilities
£m
Total
£m
In less than one year 9.2 259.0 60.0 328.2
In more than one year but not more than two years 2.4 – – 2.4
In more than two years but not more than five years 228.2 – 68.3 296.5
In more than five years –– ––
239.8 259.0 128.3 627.1
2011
Borrowings
£m
Trade and
other payables
£m
Other financial
liabilities
£m
Total
£m
In less than one year 2.6 261.2 50.0 313.8
In more than one year but not more than two years 3.4 – – 3.4
In more than two years but not more than five years 155.6 – – 155.6
In more than five years 83.5 – – 83.5
245.1 261.2 50.0 556.3
13.4 Borrowing facilities
The Group has the following undrawn committed borrowing facilities available at 30 September in respect of which all conditions precedent had been met
at that date:
2012
£m
2011
£m
Expiring in more than two years but not more than five years 323.3 358.3
The facilities have been arranged to help finance the expansion of the Group’s activities. All these facilities incur commitment fees at market rates. In addition, the
Group maintains overdraft and uncommitted facilities to provide short-term flexibility and has also utilised the US private placement market.
108