Picton Property Income Limited Annual Report 2021

Financial Statements Notes to the consolidated financial statements continued for the year ended 31 March 2021

25. Riskmanagement continued Credit risk The following tables detail the balances held at the reporting date that may be affected by credit risk:

Held at fair value through profit or loss £000

Financial assets and liabilities at amortised cost £000

Total £000

31 March 2021

Note

Financial assets Tenant debtors

– – –

4,326 4,326 23,358 23,358 27,684 27,684

15 16

Cash and cash equivalents

Financial assets and liabilities at amortised cost £000

Held at fair value through profit or loss £000

Total £000

31 March 2020

Note

Financial assets Tenant debtors

15 16

– – –

5,197 5,197 23,567 23,567

Cash and cash equivalents

28,764 28,764 Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group’s exposure and credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties. Tenant debtors consist of a large number of occupiers, spread across diverse industries and geographical areas. Ongoing credit evaluations are performed on the financial condition of tenant debtors and, where appropriate, credit guarantees, or rent deposits are acquired. Rent collection is outsourced to managing agents who report regularly on payment performance and provide the Group with intelligence on the continuing financial viability of occupiers. The Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies. The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents the Group’s maximum exposure to credit risk. The Board continues to monitor the Group’s overall exposure to credit risk. The Group has a panel of banks with which it makes deposits, based on credit ratings with set counterparty limits that are reviewed regularly. The Group’s main cash balances are held with National Westminster Bank plc (‘NatWest’), Santander plc (‘Santander’), Nationwide International Limited (‘Nationwide’) and The Royal Bank of Scotland plc (‘RBS’). Insolvency or resolution of the bank holding cash balances may cause the Group’s recovery of cash held by them to be delayed or limited. The Group manages its risk by monitoring the credit quality of its bankers on an ongoing basis. NatWest, Santander, Nationwide and RBS are rated by all the major rating agencies. If the credit quality of these banks deteriorates, the Group would look to move the short-term deposits or cash to another bank. Procedures exist to ensure that cash balances are split between banks to minimise exposure. At 31 March 2021 and at 31 March 2020 Standard & Poor’s short-term credit rating for the Group’s bankers was A-1. There has been no change in the fair values of cash or receivables as a result of changes in credit risk in the current or prior periods, due to the actions taken to mitigate this risk, as stated above. Liquidity risk Ultimate responsibility for liquidity risk management rests with the Board, which has built an appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements. The Group’s liquidity risk is managed on an ongoing basis by senior management and monitored on a quarterly basis by the Board by maintaining adequate reserves and loan facilities, continuously monitoring forecasts and actual cash flows and matching the maturity profiles of financial assets and liabilities for a period of at least 12 months. The table below has been drawn up based on the undiscounted contractual maturities of the financial assets/(liabilities), including interest that will accrue to maturity.

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