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Notes to the financial statements

for the year ended 31 October 2011

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18. Financial instruments

Numerical financial instruments disclosures are set out below. Additional disclosures are set out in the Financial Review.

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Liability
  2011
£'000		 2010
£'000
Interest rate swaps
6,256 8,061
Interest rate caps
 — —
Foreign exchange contracts
(84) (72)

In accordance with IAS 39 'Financial Instruments: Recognition and Measurement', the Group has reviewed all contracts for embedded derivatives that are required to be separately accounted for if they do not meet certain requirements set out in the standard. No adjustments have been identified following this review. The fair value hierarchy of all financial instruments is level 2.

Interest rate swap

The notional principal amount of the outstanding interest rate swap contracts at 31 October 2011 was £233,100,000 and €24,000,000 (FY2010: £212,438,000 and €24,000,000). At 31 October 2011 the fixed interest rates were Sterling at 2.325% and Euro at 1.670% (FY2010: Sterling at 2.865% and Euro at 1.670%) and floating rates are at quarterly LIBOR and quarterly EURIBOR. The LIBOR swaps and the EURIBOR swaps expire in August 2013.

Foreign exchange swap

At 31 October 2011, the Group had foreign currency swap contracts outstanding for a notional principal amount of €5,500,000 every six months commencing November 2011. The Group will receive the Sterling equivalent of €5,500,000 at an exchange rate of €1.1550:£1 and pay the Sterling equivalent of the average monthly spot rates for the six months. A further notional amount of €6,000,000 has been swapped at an exchange rate of €1.1392:£1 for the six months from November 2012 to April 2013.

Fair values of non-derivative financial assets and financial liabilities

Where market values are not available, fair values of financial assets and financial liabilities have been calculated by discounting expected future cash flows at prevailing interest rates and by applying year-end exchange rates. The fair values of bank loans and finance leases are calculated as:

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2011
  
2010
  Book value
£'000		 Fair value
£'000		   Book value
£'000		 Fair value
£'000
Bank loans
337,026 350,874   309,511 339,929
Finance lease obligations
62,534 83,684   69,130 97,910

The fair values of other financial assets and liabilities equal their book values.

Financial instruments by category

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Group
 Loans and
receivables
£'000		 Assets at fair
value through
profit and loss
£'000		 Total
£'000
Assets as per balance sheet
Trade receivables and other receivables excluding prepayments
8,805 — 8,805
Derivative financial instruments
— 84 84
Cash and cash equivalents
14,674 — 14,674
As at 31 October 2011
23,479 84 23,563

Group
 Liabilities at fair
value through
profit and loss
£'000		 Other financial
liabilities at
amortised cost
£'000		 Total
£'000
Liabilities as per balance sheet
Borrowings (excluding finance lease liabilities)
 — 337,026 337,026
Finance lease liabilities
— 62,534 62,534
Derivative financial instruments
6,256 — 6,256
Trade payable and other payables
 — 35,577 35,577
As at 31 October 2011
6,256 435,137 441,393

Group
 Loans and
receivables
£'000		 Assets at fair
value through
profit and loss
£'000		 Total
£'000
Assets as per balance sheet
Trade receivables and other receivables excluding prepayments
9,490 — 9,490
Derivative financial instruments
— 299 299
Cash and cash equivalents
15,481 — 15,481
As at 31 October 2010
24,971 299 25,270

Group
 Liabilities at fair
value through
profit and loss
£'000		 Other financial
liabilities at
amortised cost
£'000		 Total
£'000
Liabilities as per balance sheet
Borrowings (excluding finance lease liabilities)
 — 309,511 309,511
Finance lease liabilities
— 69,130 69,130
Derivative financial instruments
8,288 — 8,288
Trade payable and other payables
 — 36,562 36,562
As at 31 October 2010
8,288 415,203 423,491