Notes to the consolidated financial statements (continued) 194 Vodafone Group Plc Annual Report 2024 2020 22. Capital and financial risk management (continued) 194 Vodafone Group Plc Annual Report 2024 Strategic report Governance
Financials
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No bonds issued by the Group or the Revolving Credit Facilities are subject to financial covenant ratios. Approximately €32 billion (2023: €35 billion) of issued bonds have a change of control clause. The Group uses derivative instruments for currency and interest rate risk management purposes that are transacted by specialist treasury personnel. The Group mitigates banking sector credit risk by the use of collateral support agreements. The Group’s financial risk management policies seek to reduce the Group’s exposure to any future disruption to financial markets, including any future impacts from global economic and political uncertainty and other macro economic events. The Group has combined cash and cash equivalent and short-term investments of €9.4 billion, providing significant headroom over short-term liquidity requirements. Additionally the Group maintains undrawn revolving credit facilities of €7.8 billion euro equivalent. As at 31 March 2024 and after hedging, substantially all the Group’s borrowings are held on a fixed interest basis, mitigating exposure to interest rate risk. The Group has no significant currency exposures other than positions in economic hedging relationships. The Group’s credit risk under financing activities is spread across a portfolio of highly rated institutions to reduce counterparty exposures and derivative balances are substantially all collateralised. The Group’s operating activities result in customer credit risk, for which provisions for expected credit losses are recognised. Credit risk Credit risk is the risk that a counterparty will not meet its obligations under a financial asset leading to a financial loss for the Group. The Group is exposed to credit risk from its operating activities and from its financing activities, the Group considers its maximum exposure to credit risk at 31 March to be: 2024 2023 €m €m Cash and bank deposits (note 19) 4,168 3,924 Money market funds (note 19) 2,015 7,781 Managed investment funds (note 13) 2,024 2,967 Bonds and debt securities (note 13) 2,142 2,337 Collateral assets (note 13) 741 239 Other investments (note 13) 1,126 2,473 Derivative financial instruments (note 14) 4,226 6,124 Trade receivables (note 14) 1 5,513 6,158 Contract assets and other receivables (note 14) 4,067 4,353 Financial Guarantees 2 2,038 3,381 28,060 39,737 Note: 1 Includes amounts guaranteed under sales of trade receivables €1,929 million (2023: €1,927 million). 2 Principally comprises Vodafone Group Plc’s guarantee of the Group’s share in a multicurrency loan facility, amounting to US$1 billion and €0.6 billion (2023: US$1.75 billion), which forms part of its overall joint venture investment in TPG Telecom Ltd. The Group’s share of these loan balances is included in the net investment in joint venture (see note 12 'Investments in associates and joint arrangements'). Financial guarantees also includes INR42.5 billion (2023: INR42.5 billion) in relation to the secondary pledge over shares owned by Vodafone Group in Indus Towers (see note 29 'Contingent liabilities and legal proceedings'). Expected credit loss The Group has financial assets classified and measured at amortised cost and fair value through other comprehensive income that are subject to the expected credit loss model requirements of IFRS 9. Cash and bank deposits and certain other investments are both classified and measured at amortised cost and subject to impairment requirements. However, the identified expected credit loss is considered to be immaterial. Information about expected credit losses for trade receivables and contract assets can be found under ‘Operating activities’ on page 195. Financing activities The Group invests in government securities on the basis they generate a fixed rate of return and are amongst the most creditworthy of investments available. Investments are made in accordance with established internal treasury policies which dictate the scaled maximum exposure permissible in relation to an investment’s long-term credit rating. The Group invests in AAA unsecured money market mutual funds, where the investment is limited to 10% of each fund; A to AAA government securities, both directly and through money market mutual funds; and has two managed investment funds that hold securities with an average credit quality of AA. In respect of financial instruments used by the Group’s treasury function, the aggregate credit risk the Group may have with one counterparty is limited by reference to the long-term credit ratings assigned for that counterparty by Moody’s, Fitch Ratings and Standard & Poor’s. Furthermore, collateral support agreements reduce the Group’s exposure to counterparties who must post collateral when there is value due to the Group under outstanding derivative contracts that exceeds a contractually agreed threshold amount. When value is due to the counterparty the Group is required to post collateral on identical terms. Such cash collateral is adjusted daily as necessary.
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