NATS-Annual-Report-2015

Annual Report and Accounts 2015 | NATS Holdings Limited
Financial Statements 128
Notes forming part of the
consolidated accounts
(continued)
19. Financial instruments (continued)
Liquidity risk management
The responsibility for liquidity risk management, the risk that the group will have insufficient funds to meet its obligations as they fall due,
rests with the Board with oversight provided by the Treasury Committee. The group manages liquidity by maintaining adequate reserves
and borrowing facilities by monitoring actual and forecast cash flows, including contributions to the defined benefit pension scheme,
and ensuring funding is diversified by source and maturity and available at competitive cost. Specific liquidity policies are maintained for
NERL. NATS Services and NATS Limited had no debt at the year end.
With regard to NERL, the group’s policy is to:
a. maintain free cash equal to between one and two months of UK en route services revenues (see below). Free cash is defined as cash
and cash equivalents and short term investments, excluding a debt service reserve account of £29.7m used to fund interest, fees and
bond amortisation payments scheduled in the next six months and a liquidity reserve account of £21.3m held to provide liquidity in the
event of certain pre-defined circumstances, particularly to ensure compliance with financial covenants;
b. ensure access to bank facilities sufficient to meet 110% of forecast requirements that are not otherwise covered by operating cash
flows or other sources of finance through the period of the business plan. At 31 March 2015 NERL had access to bank facilities
totalling £275m available until 21 December 2016. The facilities comprise a £245m revolving term loan facility and a £30m revolving
credit facility;
c. ensure access to long term funding to finance its long term assets. This is achieved in the form of a £600m amortising sterling bond
with a final maturity date of 2026;
d. ensure that the ratio of bank funding to total gross borrowings does not exceed 75%; and
e. maintain a portfolio of debt diversified by source and maturity. This is achieved through the issuance of a £600m sterling bond that
started to amortise in 2012 and has a final maturity date of 2026 and by having available shorter dated committed bank facilities.
The following table shows the ratio of free cash in NERL to average monthly UK en route services income during the year:
2015 2014
£m £m
Average monthly UK en route services income 51.0 51.2
Free cash at 31 March 55.9 50.2
Ratio of free cash to UK en route services income 1.1 1.0
The following table shows the ratio of the group’s bank borrowings to its gross borrowings at 31 March:
2015 2014
£m £m
Bank borrowings 152.0 127.0
Gross borrowings 650.0 654.5
Bank borrowings as a percentage of gross borrowings 23.4% 19.4%
It is company policy not to issue new guarantees in respect of the borrowings of subsidiaries or to allow the creation of any new
mortgages or other charges over group assets.
Financial
Statements