Financial Statements
Strategic Report
Additional Information
Governance
25. Risk management continued 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 assigned by international credit rating agencies and with set counterparty limits that are reviewed regularly. The Group’s main cash balances are held with National Westminster Bank Plc (‘NatWest’), Nationwide International Limited (‘Nationwide’) and Lloyds Bank Plc (‘Lloyds’). 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, Nationwide and Lloyds are rated by all the major rating agencies. If the credit quality of any of these banks were to deteriorate, the Group would look to move the relevant 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 2022 and at 31 March 2021, Standard & Poor’s short-term credit rating for each of the Group’s bankers were 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 put in place 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, loan maturity profiles 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.
Less than 1 year £000 38,547 5,483
1 to 5 years £000
More than 5 years £000
Total £000
31 March 2022
Cash and cash equivalents
– –
– –
38,547 5,483
Debtors
Capitalised finance costs Obligations under head leases Fixed interest rate loans Floating interest rate loans Creditors and accruals
304 934 765 2,003
(185)
(740)
(9,083) (10,008)
(8,524) (37,049) (242,891) (288,464)
(113) (9,101)
(5,031)
– –
(5,144)
– (9,101) 26,411 (41,886) (251,209) (266,684)
Less than 1 year £000 23,358 5,109
1 to 5 years £000
More than 5 years £000
Total £000
31 March 2021
Cash and cash equivalents
– –
– –
23,358 5,109
Debtors
Capitalised finance costs Obligations under head leases Fixed interest rate loans Floating interest rate loans Creditors and accruals
370 1,355 828 2,553
(116)
(466)
(7,150)
(7,732)
(8,332) (33,329) (184,927) (226,588)
(300) (9,429)
(346)
– –
(646)
– (9,429) 10,660 (32,786) (191,249) (213,375)
The Group expects to meet its financial liabilities through the various available liquidity sources, including a secure rental income profile, asset sales, undrawn committed borrowing facilities and, in the longer-term, debt refinancing. Market risk The Group’s activities are primarily within the real estate market, exposing it to very specific industry risks. The yields available from investments in real estate depend primarily on the amount of revenue earned and capital appreciation generated by the relevant properties as well as expenses incurred. If properties do not generate sufficient revenues to meet operating expenses, including debt service costs and capital expenditure, the Group’s operating performance will be adversely affected. Revenue from properties may be adversely affected by the general economic climate, local conditions such as oversupply of properties or a reduction in demand for properties in the market in which the Group operates, the attractiveness of the properties to occupiers, the quality of the management, competition from other available properties and increased operating costs.
Picton Property Income Limited Annual Report 2022
137
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