Vesuvius plc Prospectus

charged in the income statement and the net interest paid in the statement of cash flows for
2011 by £0.6 million (FY 2010: £0.1 million; FY 2009: £2.3 million). Similarly, for 2011, a
100 basis point increase in market interest rates would result in a decrease of £10.9 million
(FY 2010: £11.5 million; FY 2009: £3.2 million) in the fair value of Vesuvius’ net debt and
a 100 basis point decrease in market interest rates would result in an increase of
£11.7 million (FY 2010: £12.3 million; FY 2009: £3.3 million) in the fair value of
Vesuvius’ net debt.
(b) Liquidity risk
Liquidity risk is the risk that Vesuvius might have difficulties in meeting its financial
obligations. Vesuvius manages this risk by ensuring that it maintains sufficient levels of
committed borrowing facilities and cash and cash equivalents to ensure that it can meet its
operational cash flow requirements and any maturing financial liabilities, while at all times
operating within its financial covenants. The level of operational headroom provided by
Vesuvius’ committed borrowing facilities is reviewed at least annually as part of Vesuvius’
three year planning process. Where this process indicates a need for additional finance, this
is normally addressed 12 to 18 months in advance by means of either additional committed
bank facilities or raising finance in the capital markets.
As at 31 December 2011, Vesuvius had committed borrowing facilities of £883.7 million
(FY 2010: £855.4 million; FY 2009: £876.2 million), of which £339.5 million (FY 2010:
£350.0 million; FY 2009: £350.0 million) were undrawn. Vesuvius’ borrowing
requirements were met by $440m of issued US Private Placement loan notes (“USPP”) and
a multi-currency committed syndicated bank facility of £600 million (FY 2010: £573.2
million; FY 2009: £674.9 million). The USPP loan notes were repayable $190 million in
May 2012, $110 million in FY 2017, and $140 million in FY 2020. The syndicated bank
facility comprises a £600 million revolving credit facility. The facility is repayable in April
2016. The commitment will reduce from £600 million to £425 million from the date of the
Demerger.
The maturity analysis of Vesuvius’ gross interest-bearing borrowings is shown below.
FY 2009
Non-current
FY 2010
£m
FY 2011
Loans and overdrafts .................................. 442.8 389.9 421.8
Obligations under finance leases ........................ 1.7 1.8 2.3
Capitalised borrowing costs ............................ (2.9) (1.7) (3.1)
Total borrowings, non-current ........................ 441.6 390.0 421.0
Current
FY 2009 FY 2010 FY 2011
£m
Loans and overdrafts .................................. 99.4 128.5 129.1
Obligations under finance leases ........................ 1.6 1.6 1.4
Capitalised borrowing costs ............................ (1.8) (1.4) (1.2)
Total borrowings, current ............................ 99.2 128.7 129.3
Total
FY 2009 FY 2010 FY 2011
£m
Loans and overdrafts .................................. 542.2 518.4 550.9
Obligations under finance leases ........................ 3.3 3.4 3.7
Capitalised borrowing costs ............................ (4.7) (3.1) (4.3)
Total interest-bearing borrowings ..................... 540.8 518.7 550.3
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