FINANCIAL INSTRUMENTS (continued)

(b) Interest rate risk

Interest rate risk is the risk of increased net financing costs due to increases in market interest rates. The Group finances its operations and acquisitions through a mixture of retained profits, bank borrowings and equity; the Group’s main interest rate risk therefore comes from its bank borrowings, which the Group borrows principally in Sterling and Euros.

The Group policy is to undertake interest rate hedging to protect itself against adverse movements in interest rates (see note 20(g)). Any surplus cash is invested in short-term bank deposits at the prevailing rates of interest in order to achieve the market rate of return.

At 30 April 2015, the Group had interest rate hedges in place to reduce its exposure to changes in interest rates. Hedging contracts are in place fixing approximately two thirds of the Group’s interest rate exposure for the next 3 financial years.

The need for further interest rate hedges is reviewed by the Board of Directors annually. This is set out in detail in note 20(g).

At the period end the interest rate profile of the Group’s interest-bearing financial instruments was:

2015 2014

Variable rate instruments £m £m

Secured bank loans 893.7 882.4

As noted above, interest rate hedges are in place to manage the risk from changing interest rates affecting the cost of these bank loans.

2015 2014

Fixed rate instruments £m £m

Finance lease liabilities 17.4 22.5

(c) Foreign exchange risk

The Group operates internationally and is exposed to foreign currency risk on transactions denominated in a currency other than the functional currency and on the translation of the balance sheet and income statement of foreign operations into sterling. The currencies giving rise to this risk are primarily US dollars and Euros. The Group has both cash inflows and outflows in these currencies that create a natural hedge.

In managing currency risks the Group aims to reduce the impact of short-term fluctuations on the Group’s cash inflows and outflows in a foreign currency. The Group also hedges any material foreign currency transaction exposure. The Group has treated €360m of the long term funding of a subsidiary as a net investment hedge. At 30 April 2015 exchange rates the long term funding was £260.8m (2014: £295.3m) and the net investment shown in goodwill was £257.2m (2014: £295.3m).

Over the longer term permanent changes in foreign exchange could have an impact on consolidation of foreign subsidiaries

Financial Section continued

Notes to the consolidated accounts for the year ended 30 April 2015 (continued)

20. FINANCIAL INSTRUMENTS (continued)

(d) Liquidity Risk

Liquidity risk is the risk that the Group will not be able to meet its financial commitments as they fall due.

The Group‘s objective is to ensure that adequate facilities are available through use of bank loans and finance leases. The Group manages liquidity risk through regular cash flow forecasting and monitoring of cash flows, management review and regular review of working capital and costs.

The Group regularly monitors its available headroom under its borrowing facilities. At 30 April 2015, £357.9m (2014: £99.0m) of undrawn facilities were available (see note 20(e)).

In respect of the Group’s financial liabilities including estimated interest where applicable, the table below includes details (at the balance sheet date) of the periods in which they mature.

Future Less

Book cash than 1 1-2 2-3 3-4 4-5 value flows year years years years years 30 April 2015 Notes £m £m £m £m £m £m £m

Secured bank loans 14 (893.7) (1,133.4) (64.6) (52.7) (148.8) (483.7) (383.6) Finance lease liabilities * 14 (17.4) (17.4) (9.9) (5.0) (1.8) (0.6) (0.1)

Trade payables 17 (50.0) (50.0) (50.0)

-Interest rate collars/SWAPS 20(f) (12.3) (12.3) (0.9) (11.4) - - -Other financial liabilities 20(f) (6.3) (6.3) (3.2) (1.6) (0.9) (0.4) (0.2) (979.7) (1,219.4) (128.6) (70.7) (151.5) (484.7) (383.9)

Future Less

Book cash than 1 1-2 2-3 3-4 4-5 value flows year years years years years 30 April 2014 Notes £m £m £m £m £m £m £m

Secured bank loans 14 (882.4) (1,125.0) (67.3) (69.9) (53.2) (588.9) (345.7) Finance lease liabilities * 14 (22.5) (22.5) (9.7) (6.4) (4.4) (1.6) (0.4)

Trade payables 17 (47.8) (47.8) (47.8)

-Interest rate collars/SWAPS 20(f) (5.3) (5.3) - (3.4) - (1.9)

-Other financial liabilities 20(f) (11.0) (11.0) (6.2) (2.9) (1.4) (0.5) (969.0) (1,211.6) (131.0) (82.6) (59.0) (592.9) (346.1)

*These liabilities bear interest at a fixed rate

Financial Section continued

Notes to the consolidated accounts for the year ended 30 April 2015 (continued)

20. FINANCIAL INSTRUMENTS (continued)

(e) Borrowing facilities

The Group has syndicated Senior and Subordinated facility agreements with a number of banks and investment companies providing £660 million and €360 million of available funding. Of these facilities, the Group has the following available committed floating rate borrowing facilities and cash at 30 April 2015 in respect of which all conditions precedent had been met at that date:

2015 2014

£m £m

Expiring between 2 and 10 years 357.9 99.0

In addition the Group has a facility secured on UK and US trade receivables, providing up to £27.5m of additional liquidity.

In July 2013 the Group completed an amendment to the Senior and Subordinated Facilities. This extended the debt maturity profile of majority of the Group’s loans, with only 5% of bank facilities due to be repaid before 2017.

(f) Fair values of financial assets and financial liabilities

• The table below analyses financial instruments, into a fair value hierarchy based on the valuation technique used to determine fair value.

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices)

• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Carrying amount Fair value

2015 2014 2015 2014

Notes Level £m £m £m £m

Trade and other receivables 11 3 73.8 89.3 73.8 89.3

Other receivables (long-term trade debtors) 11 3 2.9 5.7 2.9 5.7

Cash and cash equivalents 13 3 349.9 68.0 349.9 68.0

Secured bank loans 14 3 (893.7) (882.4) (893.7) (882.4)

Finance lease liabilities 14 3 (17.4) (22.5) (17.4) (22.5)

Other financial liabilities – current

Interest rate collars/SWAPs - Liabilities 1 (0.9) - (0.9)

-Other financial liabilities 3 (3.3) (6.2) (3.3) (6.2)

(4.2) (6.2) (4.2) (6.2) Other financial liabilities – non-current

Other financial liabilities 3 (3.0) (4.8) (3.0) (4.8)

Financial Section continued

Notes to the consolidated accounts for the year ended 30 April 2015 (continued)

20. FINANCIAL INSTRUMENTS (continued)

(f) Fair values of financial assets and financial liabilities (continued) Estimation of fair values

The fair values of financial instruments reflect the market value at the balance sheet date. The market value of interest rate collars is determined from valuations provided by the issuing financial institution adjusted for credit risk. All other financial instruments are stated at their carrying values which are not materially different to the market value.

(g) Hedging

In respect of our overall borrowings this covers approximately 66% of our interest exposure in 2015/16 and 2016/17. The average rate of interest fixed over the period is in the range 1.02% to 2.01% for Sterling and 0.87% to 2.01% for Euros plus margin. The effect of the arrangement is to limit any detrimental interest rate moves over the period to the amount of debt not covered by these instruments. These positions are reviewed annually by the Board.

The Group also hedges any material foreign currency transaction exposure. Transaction exposures are reviewed periodically and hedged.

The Group undertakes interest rate hedging to protect itself against adverse movements in interest rates. Hedging is put in place when significant amounts of borrowing are incurred. A summary of the Group’s interest rate hedging position (including interest rate hedges taken on as part of the “acquired group”) is given in note 20(d). The figures quoted represent total interest costs including funding margin.

Note 20(d) gives details of the carrying value and expected future cash flows associated with the interest rate hedges. The Group has not applied hedge accounting to the interest rate hedges. The fair value of the interest rate hedges is determined by valuations provided by the issuing financial institution of those instruments and is taken through the income statement.

(h) Capital Management

The Group’s objectives when managing capital (retained profits and bank borrowings) are to safeguard the Group’s ability to continue as a going concern support the growth of the business and to maintain an optimal capital structure to reduce the cost of borrowing. The Group finances its operations through a combination of retained profits, equity and bank borrowings (see note 14).