Annual Report and Accounts 2014

 

Notes to the Financial Statements

26. Movement in Working Capital
27. Cash and Cash Equivalents
28. Derivative Financial Instruments
29. Borrowings
30. Analysis of Net Debt

26. Movement in Working Capital

 

Trade

Trade

 

and other

and other

 

Inventories

receivables

payables

Total

Group

£’000

£’000

£’000

£’000

 

 

 

 

Year ended 31 March 2014

 

 

 

 

At 1 April 2013 (restated)

389,526

1,139,266

(1,463,330)

65,462

Translation adjustment

(1,693)

(11,376)

12,259

(810)

Arising on acquisition (note 45)

6,748

22,209

(25,811)

3,146

Disposal of subsidiaries

(2,209)

(1,525)

(671)

(4,405)

Exceptional items, interest accruals and other

-

969

(9,006)

(8,037)

Increase/(decrease) in working capital (note 41)

109,393

(189,888)

(6,409)

(86,904)

At 31 March 2014

501,765

959,655

(1,492,968)

(31,548)

 

 

 

 

 

Year ended 31 March 2013 (restated)

 

 

 

 

At 1 April 2012

282,000

1,077,147

(1,279,102)

80,045

Translation adjustment

2,215

5,007

(6,097)

1,125

Arising on acquisition (note 45)

17,191

35,755

(44,225)

8,721

Exceptional items, interest accruals and other

-

(383)

4,155

3,772

Increase/(decrease) in working capital (note 41)

88,120

21,740

(138,061)

(28,201)

At 31 March 2013

389,526

1,139,266

(1,463,330)

65,462

 

 

 

 

 

 

 

 

 

 

 

Trade

Trade

 

and other

and other

 

receivables

payables

Total

Company

£’000

£’000

£’000

 

Year ended 31 March 2014

 

 

 

At 1 April 2013 (restated)

315,632

(275,766)

39,866

Translation adjustment

(7,003)

6,573

(430)

Dividends receivable

29,476

-

29,476

Decrease in working capital (note 41)

(2,443)

(47,608)

(50,051)

At 31 March 2014

335,662

(316,801)

18,861

 

 

 

 

Year ended 31 March 2013 (restated)

 

 

 

At 1 April 2012

341,612

(285,336)

56,276

Translation adjustment

3,694

(3,519)

175

Exceptional item

(82)

-

(82)

(Decrease)/increase in working capital (note 41)

(29,592)

13,089

(16,503)

At 31 March 2013

315,632

(275,766)

39,866

 

 

 

 

27. Cash and Cash Equivalents

Restated

 

2014

2013

Group

£’000

£’000

 

 

 

Cash at bank and in hand

313,792

282,289

Short-term bank deposits

649,352

236,636

 

963,144

518,925

 

 

 

Cash at bank earns interest at floating rates based on daily bank deposit rates. The short-term deposits are for periods up to three months and earn interest at the respective short-term deposit rates.

Cash and cash equivalents include the following for the purposes of the Group Cash Flow Statement:

 

Restated

 

2014

2013

 

£’000

£’000

 

 

 

Cash and short-term bank deposits

963,144

518,925

Bank overdrafts

(148,578)

(87,851)

 

814,566

431,074

 

 

 

Bank overdrafts are included within current borrowings (note 29) in the Group Balance Sheet.

 

Restated

 

2014

2013

Company

£’000

£’000

 

 

 

Cash at bank and in hand

2,999

3,381

 

 

 

28. Derivative Financial Instruments

 

Restated

 

2014

2013

Group

£’000

£’000

 

Non-current assets

 

 

Interest rate swaps - fair value hedges

7,323

16,071

Cross currency interest rate swaps - fair value hedges

48,917

109,841

 

56,240

125,912

Current assets

 

Interest rate swaps - fair value hedges

318

-

Cross currency interest rate swaps - fair value hedges

253

9,754

Foreign exchange forward contracts - cash flow hedges

373

554

Commodity forward contracts - cash flow hedges

20

847

Foreign exchange forward contracts - fair value hedges

2

36

Commodity forward contracts - fair value hedges

193

227

Foreign exchange forward contracts - not designated as hedges

28

325

Commodity forward contracts - not designated as hedges

34

51

 

1,221

11,794

Total assets

57,461

137,706

 

 

Non-current liabilities

 

Currency swaps - not designated as hedges

(4,308)

(9,249)

Cross currency interest rate swaps - fair value hedges

(31,671)

(3,346)

Cross currency interest rate swaps - cash flow hedges

(9,657)

(841)

 

(45,636)

(13,436)

Current liabilities

 

Currency swaps - not designated as hedges

(13,843)

-

Cross currency interest rate swaps - fair value hedges

(950)

-

Foreign exchange forward contracts - cash flow hedges

(129)

(951)

Commodity forward contracts - cash flow hedges

(3,348)

(1,083)

Foreign exchange forward contracts - fair value hedges

(240)

-

Commodity forward contracts - fair value hedges

(8)

-

Foreign exchange forward contracts - not designated as hedges

(109)

(209)

Commodity forward contracts - not designated as hedges

(72)

(129)

 

(18,699)

(2,372)

Total liabilities

(64,335)

(15,808)

Net (liability)/asset arising on derivative financial instruments

(6,874)

121,898

 

 

The full fair value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity of the hedged item is more than twelve months and as a current asset or liability if the maturity of the hedged item is less than twelve months.

Interest rate swaps

The notional principal amounts of the outstanding interest rate swap contracts designated as fair value hedges under IAS 39 at 31 March 2014 total US$200.0 million, Stg£55.0 million and €20.0 million. At 31 March 2014, the fixed interest rates vary from 4.58% to 6.18% and the floating rates are based on US$ LIBOR, sterling LIBOR and EURIBOR.

In addition to the above and as referred to in note 29 to the financial statements, on 20 March 2014 the Group committed itself to issuing US$, euro and sterling denominated debt of US$516.0 million, €85.0 million and £70.0 million. This debt will be drawn down on 21 May 2014 (US$436.0 million, €85.0 million and £70.0 million) and on 23 September 2014 (US$80.0 million). The Group has entered a number of cross currency interest rate swaps and interest rate swaps to hedge the interest rate and currency risk arising from this debt issuance. The interest rate swaps swapped the fixed rate €85.0 million issuance to floating rate euro debt, and swapped the fixed rate £70.0 million to floating rate sterling debt. The swaps to floating rate euro and sterling are designated as fair value hedges under IAS 39.

Currency swaps

The Group utilises currency swaps in conjunction with interest rate swaps designated as fair value hedges (as noted above) to swap fixed rate US$ denominated debt into floating rate euro debt. The currency swaps (which swap floating US$ denominated debt based on US$ LIBOR into floating euro denominated debt based on EURIBOR) have notional principal amounts of US$200.0 million/€167.113 million and are not designated as hedges under IAS 39.

Cross currency interest rate swaps

The Group utilises cross currency interest rate swaps to swap fixed rate US$ denominated debt of US$980.5 million into floating rate sterling debt of Stg£343.445 million and floating rate euro debt of €304.961 million. At 31 March 2014 the fixed interest rates vary from 3.41% to 6.19%. These swaps are designated as fair value hedges under IAS 39.

The Group utilises cross currency interest rate swaps to swap fixed rate US$ denominated debt of US$130.0 million into fixed rate sterling debt of Stg£29.664 million and floating rate euro debt of €64.970 million. At 31 March 2014 the fixed US$ interest rates vary from 4.04% to 4.19%. These swaps are designated as cash flow hedges under IAS 39.

In addition to the above, the cross currency interest rate swaps entered into in connection with the 20 March 2014 fundraising commitment referred to above and in note 29, swapped the fixed rate US$516.0 million issuance to floating rate euro debt of €195.4 million, floating rate sterling debt of £36.4 million, fixed rate euro debt of €98.1 million and fixed rate sterling debt of £31.5 million. The swaps to floating rate euro and sterling are designated as fair value hedges under IAS 39 and the swaps to fixed rate euro and sterling are designated as cash flow hedges under IAS 39.

Forward foreign exchange contracts

The notional principal amounts of outstanding forward foreign exchange contracts at 31 March 2014 total £62.204 million (2013: £80.596 million). Gains and losses recognised in the cash flow hedge reserve in equity (note 38) at 31 March 2014 on forward foreign exchange contracts designated as cash flow hedges under IAS 39 will be released to the Income Statement at various dates up to twelve months after the balance sheet date.

Commodity price forward contracts

The notional principal amounts of outstanding forward commodity contracts at 31 March 2014 total £41.056 million (2013: £16.225 million). Gains and losses recognised in the cash flow hedge reserve in equity (note 38) at 31 March 2014 on forward commodity contracts designated as cash flow hedges under IAS 39 will be released to the Income Statement at various dates up to twelve months after the balance sheet date.

29. Borrowings

 

Restated

 

2014

2013

Group

£’000

£’000

 

 

 

Non-current

 

 

Finance leases*

619

619

Unsecured Notes

725,212

672,096

 

725,831

672,715

 

Current

 

Bank borrowings

148,578

87,851

Finance leases*

501

722

Unsecured Notes

167,647

65,487

 

316,726

154,060

Total borrowings

1,042,557

826,775

*Secured on specific plant and equipment

 

 

Restated

 

2014

2013

The maturity of non-current borrowings is as follows:

£’000

£’000

 

 

 

Between 1 and 2 years

14,697

188,498

Between 2 and 5 years

152,708

186,358

Over 5 years

558,426

297,859

 

725,831

672,715

 

 

 

Bank borrowings and finance leases

Interest on bank borrowings is at floating rates set in advance for periods ranging from overnight to six months by reference to inter-bank interest rates (EURIBOR, sterling LIBOR and US$ LIBOR) and consequently fair value approximates carrying amounts. The majority of finance leases are at fixed rates.

In January 2012, the Group put in place a five year committed revolving credit facility with four relationship banks: Barclays, HSBC, JP Morgan and RBS. The Group had various other uncommitted bank facilities available at 31 March 2014.

Unsecured Notes

The Group’s Unsecured Notes which fall due between 2014 and 2029 are comprised of fixed rate debt of US$200.0 million and Stg£30.0 million issued in 2004 and maturing in 2014 and 2016 (the ‘2014/16 Notes’), fixed rate debt of US$200.0 million and Stg£25.0 million issued in 2007 and maturing in 2017 and 2019 (the ‘2017/19 Notes’), fixed rate debt of US$22.5 million issued in 2008 and maturing in 2015 (the ‘2015 Notes’), fixed rate debt of US$363.0 million and €20.0 million issued in 2010 and maturing in 2015, 2017, 2020 and 2022 (the ‘2015/17/20/22 Notes’), fixed rate debt of US$525 million issued in 2013 and maturing in 2020, 2023 and 2025 (the ‘2020/23/25 Notes’) and fixed rate debt of US$516.0 million, €85.0 million and £70.0 million committed to be issued in 2014 and maturing in 2021, 2024, 2026 and 2029 (the ‘2021/24/26/29 Notes’).

The 2015 Notes denominated in US$ have been swapped (using cross currency interest rate swaps designated as fair value hedges under IAS 39) from fixed US$ to floating sterling rates, repricing quarterly based on sterling LIBOR.

The 2014/16 Notes denominated in US$ have been swapped from fixed to floating US$ rates (using interest rate swaps designated as fair value hedges under IAS 39) and further swapped (using currency swaps not designated as hedges under IAS 39) from floating US$ to floating euro rates, repricing semi-annually based on EURIBOR. The 2014/16 Notes denominated in sterling have been swapped from fixed to floating sterling rates (using an interest rate swap designated as a fair value hedge under IAS 39), repricing semi-annually based on sterling LIBOR.

The 2017/19 Notes denominated in US$ have been swapped (using cross currency interest rate swaps designated as fair value hedges under IAS 39) from fixed US$ to floating sterling rates, repricing quarterly based on sterling LIBOR. The 2017/19 Notes denominated in sterling have been swapped from fixed to floating sterling rates (using an interest rate swap designated as a fair value hedge under IAS 39), repricing quarterly based on sterling LIBOR.

Of the 2015/17/20/22 Notes denominated in US$, $213.0 million has been swapped (using cross currency interest rate swaps designated as fair value hedges under IAS 39) from fixed US$ to floating sterling rates, repricing quarterly based on sterling LIBOR and $150.0 million has been swapped (using cross currency interest rate swaps designated as fair value hedges under IAS 39) from fixed US$ to floating euro rates, repricing quarterly based on EURIBOR. The 2015/17/20/22 Notes denominated in euro have been swapped from fixed to floating euro rates (using an interest rate swap designated as a fair value hedge under IAS 39), repricing quarterly based on EURIBOR.

Of the 2020/23/25 Notes denominated in US$, $255.0 million has been swapped (using cross currency interest rate swaps designated as fair value hedges under IAS 39) from fixed US$ to floating euro rates, repricing quarterly based on EURIBOR, $140.0 million has been swapped (using cross currency interest rate swaps designated as fair value hedges under IAS 39) from fixed US$ to floating sterling rates, repricing quarterly based on sterling LIBOR, $85.0 million has been swapped (using cross currency interest rate swaps designated as cash flow hedges under IAS 39) from fixed US$ to fixed euro rates and $45.0 million has been swapped (using cross currency interest rate swaps designated as cash flow hedges under IAS 39) from fixed US$ to fixed sterling rates.

On 20 March 2014 the Group committed to issue fixed rate US$, sterling and euro denominated debt of US$516.0 million, €85.0 million and £70.0 million maturing in 2021, 2024, 2026 and 2029. Of the 2021/24/26/29 Notes, $269.0 million has been swapped (using cross currency interest rate swaps designated as fair value hedges under IAS 39) from fixed US$ to floating euro rates, repricing quarterly based on EURIBOR, $60.0 million has been swapped (using cross currency interest rate swaps designated as fair value hedges under IAS 39) from fixed US$ to floating sterling rates, repricing quarterly based on sterling LIBOR, $135.0 million has been swapped (using cross currency interest rate swaps designated as cash flow hedges under IAS 39) from fixed US$ to fixed euro rates, $52.0 million has been swapped (using cross currency interest rate swaps designated as cash flow hedges under IAS 39) from fixed US$ to fixed sterling rates, €85.0 million has been swapped (using interest rate swaps designated as fair value hedges under IAS 39) from fixed euro to floating euro rates, repricing quarterly based on EURIBOR and £70.0 million has been swapped (using rate swaps designated as fair value hedges under IAS 39) from fixed sterling to floating sterling rates, repricing quarterly based on LIBOR. The 2021/24/26/29 Notes will be drawn down on 21 May 2014 (US$436.0 million, €85.0 million and £70.0 million) and on 23 September 2014 (US$80.0 million). In accordance with IAS 39, the adjusted value corresponding to the portion of the 2021/24/26/29 Notes which has been swapped using cross currency interest rate swaps designated as fair value hedges and using interest rate swaps designated as fair value hedges has been included in the Group’s borrowings at 31 March 2014.

The maturity and interest profile of the Unsecured Notes is as follows:

 

2014

2013

 

 

 

Average maturity*

7.8 years

6.1 years

 

Average fixed interest rates**

- US$ denominated*

4.76%

4.96%

- sterling denominated*

4.91%

5.95%

- euro denominated*

3.49%

4.58%

 

Average floating rate including swaps

- sterling denominated

1.94%

1.84%

- euro denominated

1.84%

1.49%

 

 

 

* Including the 2021/24/26/29 Notes and excluding the portion of the 2004 Notes repaid on 22 April 2014 (US$157.0 million and £30.0 million).

**Issued and repayable at par.

30. Analysis of Net Debt

Reconciliation of opening to closing net debt

The reconciliation of opening to closing net debt for the year ended 31 March 2014 is as follows:

 

Restated

Fair value adjustment

 

At 1

Income

Cash Flow

Translation

At 31

 

April 2013

Cash flow

Statement

Hedge Reserve

adjustment

March 2014

 

£’000

£’000

£’000

£’000

£’000

£’000

 

 

 

 

 

 

 

Cash and short term bank deposits

518,925

452,873

-

-

(8,654)

963,144

Overdrafts

(87,851)

(61,005)

-

-

278

(148,578)

 

431,074

391,868

-

-

(8,376)

814,566

Finance leases

(1,341)

175

-

-

46

(1,120)

Unsecured Notes

(737,583)

(282,586)

110,988

-

16,322

(892,859)

Derivative financial instruments (net)

121,898

(7,500)

(113,116)

(8,300)

144

(6,874)

Group net debt (including share of net
cash in joint ventures)

(185,952)

101,957

(2,128)

(8,300)

8,136

(86,287)

Group net debt (excluding share of net
cash in joint ventures)

(186,649)

101,628

(2,128)

(8,300)

8,157

(87,292)

 

 

 

 

 

 

 

The reconciliation of opening to closing net debt for the year ended 31 March 2013 (restated) is as follows:

 

Restated

Fair value adjustment

Restated

 

At 1

Income

Cash Flow

Translation

At 31

 

April 2012

Cash flow

Statement

Hedge Reserve

adjustment

March 2013

 

£’000

£’000

£’000

£’000

£’000

£’000

 

 

 

 

 

 

 

Cash and short term bank deposits

559,411

(43,947)

-

-

3,461

518,925

Overdrafts

(59,005)

(28,276)

-

-

(570)

(87,851)

 

500,406

(72,223)

-

-

2,891

431,074

Finance leases

(440)

(861)

-

-

(40)

(1,341)

Unsecured Notes

(707,212)

-

(24,617)

-

(5,754)

(737,583)

Derivative financial instruments (net)

100,328

(3,060)

23,245

(811)

2,196

121,898

Group net debt (including share of
net cash in joint ventures)

(106,918)

(76,144)

(1,372)

(811)

(707)

(185,952)

Group net debt (excluding share of
net cash in joint ventures)

(108,366)

(75,399)

(1,372)

(811)

(701)

(186,649)

 

 

 

 

 

 

 

Currency profile

The currency profile of net debt at 31 March 2014 is as follows:

 

Euro

Sterling

US Dollar

Swedish Krona

Other

Total

 

£’000

£’000

£’000

£’000

£’000

£’000

 

 

 

 

 

 

 

Cash and cash equivalents

242,777

674,728

13,777

16,972

14,890

963,144

Borrowings

(392,873)

(571,121)

(78,162)

(401)

-

(1,042,557)

Derivatives

(33,200)

26,455

(129)

-

-

(6,874)

 

(183,296)

130,062

(64,514)

16,571

14,890

(86,287)

 

 

 

 

 

 

 

The currency profile of net debt at 31 March 2013 (restated) is as follows:

 

Euro

Sterling

US Dollar

Swedish Krona

Other

Total

 

£’000

£’000

£’000

£’000

£’000

£’000

 

 

 

 

 

 

 

Cash and cash equivalents

92,987

386,109

11,168

22,172

6,489

518,925

Borrowings

(291,817)

(533,567)

(798)

(593)

-

(826,775)

Derivatives

15,871

106,404

(377)

-

-

121,898

 

(182,959)

(41,054)

9,993

21,579

6,489

(185,952)

 

 

 

 

 

 

 

Interest rate profile

Cash and cash equivalents at 31 March 2014 and 31 March 2013 have maturity periods up to three months (note 27).

Bank borrowings are at floating interest rates for periods less than six months while the Group’s Unsecured Notes due 2014 to 2029 have been swapped to a combination of fixed rates and floating rates which reset on a quarterly or semi-annual basis (note 29). The majority of finance leases are at fixed rates.