THE UNITE GROUP PLC Annual Report and Accounts 2024 189 4.3 Net financing costs/(gains) Accounting policies Net financing costs comprise interest payable on borrowings and interest on lease liabilities, less interest receivable on funds invested (both calculated using the effective interest rate method) and gains and losses on hedging instruments that are recognised in the income statement. 2024 2023 Recognised in the income statement: £m £m Interest income (16.7) (1.3) Finance income (16.7) (1.3) Gross interest expense on loans 39.0 32.5 Amortisation of fair value of debt recognised on acquisition (4.1) (4.3) Interest capitalised (15.5) (8.4) Loan interest and similar charges 19.4 19.8 Interest on lease liabilities 8.8 7.7 Mark to market changes in interest rate swaps 0.4 17.2 Swap cancellation and loan break costs 3.1 - Finance costs 31.7 44.7 Net financing costs 15.0 43.4 The average cost of the Group’s wholly-owned debt at 31 December 2024 is 3.0% (2023: 2.7%). The overall average cost of debt on an EPRA basis is 3.6% (2023: 3.2%). 4.4 Gearing LTV is a key indicator that the Group uses to manage its indebtedness. The Group also monitors gearing, which is calculated using EPRA net tangible assets (NTA) and adjusted net debt. Adjusted net debt excludes IFRS 16 lease liabilities, the unamortised fair value of debt recognised on acquisition and mark to market of interest rate swaps as shown below. The Group’s gearing ratios are calculated as follows: 2024 2023 Note £m £m Cash and cash equivalents 5.1 274.3 37.5 Current borrowings 4.1 - (299.4) Non-current borrowings 4.1 (1,273.8) (782.2) Lease liabilities 4.6a (72.8) (83.8) Interest rate swaps 4.2 53.4 56.0 Net debt per balance sheet (1,018.9) (1,071.9) Lease liabilities 4.6a 72.8 83.8 Unamortised fair value of debt recognised on acquisition 2.3c 11.1 15.2 Adjusted net debt (935.0) (972.9) Reported net asset value 4,811.5 4,067.0 EPRA NTA 2.3c 4,758.4 4,014.7 Gearing Basic (net debt/reported net asset value) 21% 26% Adjusted gearing (adjusted net debt/EPRA NTA) 20% 24% Loan to value 2.3a 24% 28%