John Lewis Partnership plc annual report and accounts 2012

Notes to the accounts continued

22 Management of financial risks (continued)

The following analysis shows the contractual undiscounted cash flows payable under financial liabilities and derivative financial and liabilities at the balance sheet date:

Table showing Financial Risks

Due within 1 year (£m) | Due within 1 and 2 years (£m) | Due 2 years and beyond (£m)

Non-derivative financial liabilities
Borrowings and overdrafts (302.1) | (100.0) | (707.6)
Interest payments on borrowings* (64.2) | (54.5) | (358.6)
Finance lease liabilities (1.8) | (1.8) | (51.2)
Trade and other payables (966.7) | (1.7) | –
Derivative financial liabilities
Derivative contracts – receipts 152.9 | – | –
Derivative contracts – payments (153.2) | – | –
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
At 28 January 2012 (1,335.1) | (158.0) | (1,117.4)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Non-derivative financial liabilities
Borrowings and overdrafts (165.3) | (142.0) | (732.7)
Interest payments on borrowings* (61.1) | (51.9) | (392.2)
Finance lease liabilities (2.0) | (1.9) | (53.8)
Trade and other payables (864.7) | (1.1) | –
Derivative financial liabilities
Derivative contracts – receipts 112.3 | – | –
Derivative contracts – payments (106.0) | – | –
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
At 29 January 2011 (1,086.8) | (196.9) | (1,178.7)

* Excludes annual interest of £0.3m on cumulative preference stock which have no fixed redemption date.

Interest on borrowings is calculated based on the borrowing position at the financial year end without taking account of future issues. Future floating rate interest liabilities are estimated using the forward interest rate curve as at the relevant year end date.

For the purposes of this note, the foreign currency element of forward foreign currency contracts is translated at spot rates prevailing at the year end.

Interest rate risk

In order to manage the risk of interest rate fluctuations the Partnership targets a ratio of fixed and floating rate debt in line with the Board approved treasury policy. An analysis of the Partnership’s financial liabilities is detailed in note 25. Exposures to interest rate fluctuations are managed using interest rate swaps. As authorised by the Board, the ratio of fixed to floating rate borrowing has remained outside treasury policy during the year, as it was decided not to enter into new interest rate swaps given the historically low bond yield levels and the sustained uncertainty within the global economy. On 30 January 2012, the interest rate swaps used to convert £142.0m (2011: £142.0m) of fixed rate bond debt to floating rate, which were accounted for as fair value hedges under IAS 39, matured in line with the maturity of the underlying 6.375% 2012 bond. The movement in the fair value of the swaps and of the underlying hedged item attributable to the hedged risk is £7.0m (2011: £5.7m).

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