Note 19 Financial instruments


Analysis of interest rate exposure and currency of net debt
The interest rate exposure and currency of group net debt as at 22 February 1997 after swaps was:

Fixed rate debt
_________________________




Currency                         		  Total



£m		  Floating Rate
debt

£m		    Fixed rate
debt

£m		             Weighted
average
interest rate
22 February 1997
%		Weighted
average time
for which
rate is fixed
Years
_______________________________________________________
Sterling6384362029.26
French franc138301086.74
Other(27)(27)---
_______________________________________________________
Net debt at 22 February 19977494393108.36
_______________________________________________________
% of net debt59%41%
Net debt at 24 February 19968136821319.56
_______________________________________________________


The interest rate exposure of the group has been further managed by the purchase of interest rate caps with an aggregate notional principal of £70m (1996 - nil) and an average strike rate of 8.14% for the period to October 2001. The current value of these contracts, if realised, would generate a gain of £1m.

The following interest rate hedging transactions were undertaken in achieving the above position:
  Swaps converting French franc floating debt, with a notional principal sterling equivalent at year end rates of £85m, to French franc fixed debt for an average period of 4 years at a weighted average rate of 5.8%.

  Swaps converting £385m net notional principal sterling denominated fixed rate debt into floating debt for an average period of 5 years at a weighted average rate of 7.1%.

The current value of these contracts, if realised, would generate a loss of £7m. In addition, as set out in note16 , a gain of £45m was crystallised by selling profitable swaps and entering into new swaps for an equivalent remaining life and contract value at less attractive rates. This gain is being released over the period of the replacement swaps and an amount of £28m has been deferred as at 22 February 1997.

Long term debt over one year with a book value of £588m has an estimated current value, considering only the movements in risk-free interest rates, of £629m. The difference between the book value and the current value of this long term debt is partially offset by the deferred realised gain on the swaps.

Currency analysis of net assets
The group's net assets and debt by currency on 22 February 1997 were:

FinancingNet investment
_________________________________________________________________



Currency
Net assets
before financing
£m		Effect of
currency
swaps
£m
Gross
debt
£m

1997
£m

1996
£m
_________________________________________________________________
Sterling4,53162(797)3,7963,562
French franc132(55)(86)(9)-
Other121(7)(11)10326
_________________________________________________________________
Total4,784-(894)3,8903,588
_________________________________________________________________

The currency swaps are shown above at year end value which is equal to their current value.

Other significant financial instruments outstanding at the year end are £64m nominal value forward foreign exchange contracts hedging the cost of currency denominated purchases. On a mark-to-market basis these contracts show a loss of £1m.