directors report and accounts 2006 - Notes 21-23

 
 

 Notes 21-23

 21 Borrowings

 CurrencyMaturity datesInterest rates2006
£m
2005
restated
£m
EurobondsEuro2006 to 20193.6% to 5.4%3,465 3,881
 UK sterling2008 to 20195.5% to 6.5%1,364 1,087
Floating rate notesEuro2006 to 2010floating rate355 692
Other notesJapanese yen20061.4% 75
 Malaysian ringgit2007 to 20094.6% to 7.9%103 109
 US dollar20086.9%176 200
 Other currencies  93 196
Syndicated bank loansUS dollar2006 to 2007floating rate358 404
Bank loans   460 418
Other loans   11 8
Finance leases   62 64
Overdrafts   179 126
    6,626 7,260

The floating rate interest rates are based on EURIBOR or US LIBOR plus a margin ranging between 36 and 200 basis points.

 2006
£m
2005
restated
£m
Current1,058 2,202
Non-current5,568 5,058
 6,626 7,260

As described in note 10, borrowings in respect of finance leases for 2005 have been restated by a £4 million increase to comply with IFRIC Interpretation 4. At the end of 2006 finance lease obligations of £8 million were included within borrowings on a similar basis.

Current borrowings include interest payable of £133 million at 31 December 2006 (2005: £128 million). In addition, the carrying value of non-current borrowings which are subject to fair value hedges has been decreased by £52 million at 31 December 2006 (2005: increased £57 million). The carrying value of current borrowings which are subject to fair value hedges has been adjusted by £nil at 31 December 2006 (2005: increased £2 million).

The fair value of borrowings is estimated to be £6,772 million (2005: £7,498 million) and has been determined using quoted market prices, market prices of comparable instruments at the balance sheet date or discounted cash flow analysis.

 2006
£m
2005
restated
£m
Amounts secured on Group assets88 68

Amounts secured include finance leases of £62 million (2005: £64 million) and the remaining amounts are secured on certain property and inventory of the Group, see note 10 and note 17.

Borrowings are repayable as follows:

 2006
£m
2005
restated
£m
Within one year1,058 2,202
Between one and two years419 514
Between two and three years1,240 445
Between three and four years361 1,230
Between four and five years828 3
Beyond five years2,720 2,866
 6,626 7,260

Borrowings are denominated in the functional currency of the subsidiary undertaking or other currencies as shown below:

 Functional
currency
£m
US
dollar
£m
UK
sterling
£m
Euro
£m
Canadian
dollar
£m
Australian
dollar
£m
Other
currencies
£m
Total
£m
31 December 2006        
Total borrowings3,128 809 327 2,362    6,626
Effect of derivative financial instruments        
- cross-currency swaps(113)762 (325)(637) 244  (69)
- forward foreign currency contracts(907)   307 529 73 2
 2,108 1,571 2 1,725 307 773 73 6,559
31 December 2005        
Total borrowings (restated)3,319 889 218 2,833   1 7,260
Effect of derivative financial instruments        
- cross currency swaps104 950 (217)(1,408)349 259  37
- forward foreign currency contracts(78)     77 (1)
 3,345 1,839 1 1,425 349 259 78 7,296

Details of the derivative financial instruments included in these tables are given in note 16.

The exposure to interest rate changes when borrowings are repriced is as follows:

 Within
1 year
£m
Between
1 and 2 years
£m
Between
2 and 3 years
£m
Between
3 and 4 years
£m
Between
4 and 5 years
£m
Beyond
5 years
£m
Total
£m
31 December 2006       
Total borrowings1,505 419 1,240 8 735 2,719 6,626
Effect of derivative financial instruments       
- interest rate swaps1,409  (539)  (870) 
- cross-currency swaps1,141 (217)(101)  (843)(20)
 4,055 202 600 8 735 1,006 6,606
31 December 2005       
Total borrowings (restated)2,564 166 431 1,230 3 2,866 7,260
Effect of derivative financial instruments       
- interest rate swaps1,404 21  (550) (875) 
- cross-currency swaps904  (217)(103) (529)55
 4,872 187 214 577 3 1,462 7,315

Details of the derivative financial instruments included in these tables are given in note 16.

Effective interest rates are as follows:

 2006
£m
2005
restated
£m
2006
%
2005
%
US dollar866 936 6.66.0
UK sterling1,382 1,090 5.46.2
Euro3,814 4,595 4.54.2
Canadian dollar13 13 5.85.0
Australian dollar7 86 6.56.5
Other currencies544 540 6.87.0
 6,626 7,260   

The values and rates shown above do not reflect the effect of the interest rate and cross-currency swaps detailed in note 16.

Finance lease liabilities are payable as follows:

 2006 2005
 Principal
£m
Interest
£m
Total
£m
Principal
restated
£m
Interest
restated
£m
Total
restated
£m
Within one year18 3 21 19 4 23
Between one and two years17 2 19 15 3 18
Between two and three years13 1 14 13 1 14
Between three and four years8 1 9 10  10
Between four and five years3  3 3  3
Beyond five years3 1 4 4 1 5
 62 8 70 64 9 73 

Borrowings facilities
 2006
£m
2005
£m
Undrawn committed facilities expiring:  
- within one year85 116
- between one and two years57  
- between four and five years1,750 1,750
 1,892 1,866

The facilities include undrawn amounts in respect of the Group's central banking facility of £1.75 billion (2005: £1.75 billion).

 22 Other provisions for liabilities and charges

 Restructuring
of existing
businesses
£m
Acquired
businesses
£m
Employee
related
benefits
£m
Other
provisions
£m
Total
£m
1 January 2006222 76 25 172 495
Differences on exchange(15)(4)(2)(13)(34)
Provided in respect of the year99 (12)1 38 126
Utilised during the year(111)(19)(4)(31)(165)
Other movements(4) (6)2 (8)
31 December 2006191 41 14 168 414
Analysed on the balance sheet as     
- current120 24 5 104 253
- non-current71 17 9 64 161
 191 41 14 168 414
1 January 2005156 105 28 152 441
Differences on exchange3 1 2 9 15
Provided in respect of the year157  4 84 245
Utilised during the year(94)(30)(9)(66)(199)
Other movements   (7)(7)
31 December 2005222 76 25 172 495
Analysed on the balance sheet as     
- current103 19 6 106 234
- non-current119 57 19 66 261
 222 76 25 172 495

The restructuring provisions relate to the restructuring costs incurred and reported as exceptional items in the income statement. The principal restructurings provided in 2006 and 2005 are as described in note 3e. While some elements of the non-current provisions of £71 million will unwind over several years, as termination payments are made over extended periods in some countries, it is estimated that approximately two-thirds will unwind in 2008 and approximately 90 per cent within five years.

Provisions in respect of acquired businesses mostly relate to those which were part of the integration of the Rothmans businesses in 1999, the transition of Imperial Tobacco Canada to a subsidiary in 2000 and the reorganisation of the Italian business acquired in 2003. While some elements of the non-current provisions of £17 million will unwind over several years, it is estimated that approximately three quarters will unwind within five years.

Employee related benefits mainly relate to long term employee benefits other than post-retirement benefits. As the principal components of these provisions are long service awards and "jubilee" payments due after a certain service period they will unwind over several years. It is estimated that approximately 60 per cent of the non-current provisions of £9 million will unwind within five years.

Other provisions comprise balances set up in the ordinary course of general business that cannot be classified within the other categories, such as sales returns, onerous contracts and the age verification scheme in Japan, together with amounts in respect of supplier, excise and other disputes. The nature of the amounts provided in respect of disputes is such that the extent and timing of cash flows is difficult to estimate and the ultimate liability may vary from the amounts provided.

Amounts provided in respect of 2006 above are shown net of reversals of unused provisions which include £15m for restructuring of existing businesses, £12m for acquired businesses, £2m for employee related benefits and £12m for other provisions.

 23 Trade and other payables

 2006
£m
2005
£m
Trade payables 611550
Duty, excise and other taxes1,4671,581
Accrued charges and deferred income553620
Social security and other taxation92
Sundry payables 272310
 2,9123,063
Analysed on the balance sheet as  
- current2,7662,883
- non-current146180
 2,9123,063

Accrued charges and deferred income include £12 million (2005: £17 million) in respect of interest payable.

There is no material difference between the above amounts for trade and other payables and their fair value, due to the short term duration of the majority of trade and other payables.

Trade and other payables are predominantly denominated in the functional currencies of subsidiary undertakings with less than 6 per cent in other currencies.