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IMI plc
SECTION 4 – CAPITAL STRUCTURE AND FINANCING COSTS
Continued
d) Currency profile of assets and liabilities
Net assets/
excluding
Exchange
cash & debt
Cash*
Debt
contracts Net assets
Net assets
2014
2014
2014
2014
2014
2013
£m
£m
£m
£m
£m
£m
Sterling
83
(23)
-
366
426
474
US Dollar
138
-
(218)
106
26
11
Euro
287
6
(1)
(302)
(10)
10
Other
246
38
(2)
(170)
112
153
Total
754
21
(221)
-
554
648
* Cash is stated net of overdrafts.
Exchange contracts and non-sterling debt are financial instruments used as currency hedges of overseas net assets.
4.4.3.2 Interest rate risk
The Group is exposed to a number of global interest rates through assets and liabilities denominated in jurisdictions to which these rates are applied,
most notably US, Eurozone and UK rates. The Group is exposed to these because market movements in these rates will increase or decrease the interest
charge recognised in the Group income statement.
a) Management of interest rate risk
The Group adopts a policy of maintaining a portion of its liabilities at fixed interest rates and reviewing the balance of the floating rate exposure to ensure that if interest
rates rise globally the effect on the Group’s income statement is manageable.
Interest rates are managed using fixed and floating rate debt and financial instruments including interest rate swaps. Floating rate liabilities comprise short-term debt
which bears interest at short-term bank rates and the liability side of exchange contracts where the interest element is based primarily on three month inter-bank rates.
The Group has raised US Dollar debt through the issuance of medium to long-term fixed rate loan notes. In 1999 US$30m of this fixed rate exposure was hedged
back to floating rates through the use of interest rate swaps covering loan notes which matured and were repaid in 2014. The interest component of the fair value
of this portion of the loan notes was designated as a hedged item and was revalued accordingly in the accounts. The fair value of these interest rate swaps,
which were settled in the year, was included in the 2013 balance sheet at £0.8m with a corresponding uplift in the value of the debt (the hedged item).
All cash surpluses are invested for short periods and are treated as floating rate investments.
Non-interest bearing financial assets and liabilities including short-term trade receivables and payables have been excluded from the following analysis.
