Notes to the accounts
21 Borrowings and net debt
This note sets out the calculation of net debt, a measure considered important in explaining our financing position. As shown below, IAS 39 requires that the carrying value of borrowing includes accrued interest, and the fair value of any interest rate or currency swaps held to hedge the borrowings. The Company’s measure of ‘net debt’ is a non-GAAP measure and is stated before these valuation adjustments.
|
|
2007 |
2006 |
|
Cash and cash equivalents |
|
|
|
Net cash and deposits including assets of disposal group (note 19) |
189.3 |
120.6 |
|
Short-term borrowings |
|
|
|
Bank loans and overdrafts – including impact of cash pooling gross up: £123.2m (2006: £83.6m) |
(186.4) |
(174.1) |
|
Other loans |
(3.1) |
(3.6) |
|
B shares (note 26) |
(18.1) |
|
|
|
(207.6) |
(177.7) |
|
Long-term borrowings |
|
|
|
7.875% Sterling Eurobond 2010 |
(149.5) |
(149.3) |
|
7.25% Sterling Eurobond 2016 |
(148.7) |
(148.5) |
|
5.45% US$ Private Placement 2013 |
(122.8) |
(131.0) |
|
Floating Rate Revolving Credit Facility 2012 (multi-currency) |
(67.2) |
(354.6) |
|
EIB Sterling R. & D. Loan 2010 |
(70.0) |
(70.0) |
|
Bank and other loans |
(11.7) |
(12.7) |
|
|
(569.9) |
(866.1) |
|
Borrowings before valuation adjustments |
(777.5) |
(1,043.8) |
|
Net debt |
(588.2) |
(923.2) |
|
Borrowings – valuation adjustments |
|
|
|
– interest accrual |
(4.5) |
(7.3) |
|
– fair value of swapped debt |
2.8 |
3.8 |
|
Borrowings per balance sheet |
(779.2) |
(1,047.3) |
Current assets
The weighted interest rate on net cash at 31 July 2007 was approximately 2.6% (2006: 3.7%) with rates ranging from 0% to 11% (2006: 0% to 14%).
Short-term borrowings
The weighted interest rate on short-term borrowings at 31 July 2007 was approximately 5.2% (2006: 5.2%).
Long-term borrowings
Loans due after one year are repayable over various periods as follows:
|
|
2007 |
2006 |
|
Between one and two years |
(0.5) |
(0.5) |
|
Between two and three years |
(149.9) |
(0.6) |
|
Between three and four years |
(70.3) |
(149.9) |
|
Between four and five years |
(67.6) |
(425.1) |
|
After five years |
(281.6) |
(290.0) |
|
|
(569.9) |
(866.1) |
The loans repayable after five years carry interest at effective rates between 5% and 8% (2006: between 5% and 8%). Interest is payable annually in arrears on the 2016 Sterling Eurobond and semi annually in arrears on the 2013 Private Placement. The interest rate hedging relates to loans repayable after five years. The repayment dates range from 2013 to 2022. The average effective interest rate of all public bonds at 31 July 2007 was approximately 7.6% (2006: 7.6%) and £22.5m (2006: £23.4m) was charged to the Consolidated income statement in this period. The weighted average cost of Smiths’ total borrowings after currency and interest rate swaps at 31 July 2007 was 5.8% (2006: 5.6%).
Secured loans
Loans amounting to £11.5m (2006: £11.8m) were secured by charges on freehold properties with a carrying value of £9.8m (2006: £10.2m).