28
Financial Assets and Liabilities
The Group’s financial assets and liabilities include cash, loans receivable, borrowings, derivative financial assets and liabilities, trade creditors and trade
debtors. Borrowings as at 31 March 2015 represent bank term loans, private placement loan notes, finance lease obligations, index-linked debt and
irredeemable debenture stock. The purpose of the Group's borrowings is to finance the Group’s operations. It is, and has been throughout the year and
the previous year under review, the Group’s policy that no trading in financial instruments shall be undertaken. The Group’s policy in respect of cash, loans
receivable and borrowings is to maintain flexibility with both fixed and floating interest rates and long and short-term debt while not exposing the Group
to significant risk of market movements (see below). As at 31 March 2015, derivative financial liabilities represent floating to fixed interest rate swaps used
as cash flow hedges to reduce the Group’s risk to changes in LIBOR.
Interest Rate Risk Profile
Borrowings (book value)
2015
2014
£’000 £’000
Retail Price Index-linked debt
Fixed rate financial liabilities
Floating rate financial liabilities
205,978
104,933
43,436
200,103
105,498
52,302
354,347 357,903
The floating rate borrowings comprise sterling denominated short-term bank loans (revolving credit facilities) that bear interest at rates based on LIBOR.
These include £35,000,000 (2014: £35,000,000) of loans that are floating rate but floating to fixed interest rate swaps have been entered into as at 31
March 2015 in respect of these loans that commence cash flows in October 2015 when these loans will therefore become fixed rate when combined
with these swaps. Fixed rate financial liabilities include fixed rate bank term loans of £15,763,000 (2014: £15,763,000) and floating rate bank term loans
of £46,500,000 (2014: £46,500,000) that are effectively swapped to fixed rate by cash flow hedges using floating to fixed interest rate swaps where cash
flows under the swaps have commenced. The Group's trade debtors and trade creditors are not subject to interest unless considered to be overdue.
For all financial assets and liabilities, the book values and fair values are not materially different, except for the £111,400,000 (2014: £111,400,000)
Retail Price Index-linked loan which had a book value at 31 March 2015 of £162,718,000 (2014: £158,235,000), and a fair value of £287,735,000 (2014:
£224,750,000) and the £35,000,000 (2014: £35,000,00 0) Retail Price Index-linked bond which had a book value at 31 March 2015 of £43,260,000 (2014:
£41,868,000) and a fair value of £47,642,000 (2014: £38,416,000).
Fixed Rate Borrowings
Weighted
Weighted average
average
period for which
interest rate
rate is fixed
% Years
2015
Sterling 3.9 3.1
2014
Sterling 4.0 4.1
83