25 – Financial instruments ( continued )
Notes to the consolidated financial statements
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25 – Financial instruments ( continued )
Included within the Group ’ s trade receivable balance are receivables with a carrying amount of £ 7.2m ( 2017 : £ 5.2m ) which are past due at the reporting date for which the Group has not provided as there has not been a significant change in credit quality and the Group considers that the amounts are still recoverable .
The amounts due from construction contract customers and other trade receivable balances are reviewed for collectability on a routine basis and where there are indications of impairment these are immediately recognised .
b ) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as and when they fall due . An ageing profile of the Group ’ s loans and borrowings is presented in note 18 .
The Group ’ s objective is to manage liquidity by ensuring that it will always have sufficient liquidity to meet its liabilities as they become due . This will be assessed under normal and stress conditions , without incurring losses or risking damage to the Group ’ s reputation .
The Keystone JVco Limited Group ’ s primary source of capital is £ 100.0m 9.5 % Senior Secured Notes due for repayment in 2019 . Short term liquidity is managed through the use of committed bank facilities and cash . See note 18 for maturity analysis of the Group ’ s non-derivative financial liabilities .
The Group has rigorous cash management processes . Cash balances are reported daily with detailed analysis of variances to short term cash forecasts . Short term cash forecasts are updated monthly and are for a period of 26 weeks with the first 8 weeks on a daily basis and the remaining 18 weeks on a weekly basis . These complement a minimum of four long term quarterly cash forecasts each year which are compared to the annual cash flow budget and to previous quarterly forecasts . These facilitate management ’ s assessments of the Group ’ s expected cash performance and to compare to the facilities available .
Key risks to liquidity and cash balances are a decrease in the value of open market sales , a downturn in the UK housing market , deterioration in credit terms obtainable in the market from suppliers and subcontractors , a downturn in the profitability of work , delayed receipt of cash from customers and a general decline in the ability of local authorities to fund urban regeneration projects .
In order to mitigate this risk the Group continually monitors open market house sales volumes and prices ; continuous monitoring of working capital levels and contract profitability and the review of client and supplier credit references and credit terms with clients and suppliers to ensure they continue to be appropriate .
The Group does not have any derivative financial liabilities . c ) Market risk
Market risk is the risk that changes in market prices such as interest rates , house prices and foreign exchange rates will affect the Group income or the value of the Group ’ s financial instruments .
Interest rate risk
The wider Keystone JVco Limited Group ’ s exposure to changes in market interest rates is significantly mitigated as its long term borrowings comprise exclusively fixed interest rate instruments . The committed bank facilities are at floating interest rates at a margin over the London Interbank Borrowing Rate ( LIBOR ) and management continually keeps this exposure under review .
At 31 March 2018 , 70 % ( 2017 : 89 %) of the wider Keystone JVco Limited Group ’ s borrowings were at a fixed rate of interest .
Housing market risk
The Group is affected by price fluctuations of the UK housing market . The market is impacted by consumer demand and employment levels and is dependent on the availability of mortgage finance . Furthermore , Government incentives , such as the “ Help to Buy ” scheme , have helped to stimulate consumer demand . Whilst these risks are beyond the Group ’ s ultimate control , risk is spread across differing business activities undertaken by the Group and the geographical regions in which it operates .