THE UNITE GROUP PLC Annual Report and Accounts 2024 191 4.5b) Credit risk on financial instruments In order to minimise credit risk, the Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group only transacts with entities that are rated the equivalent of investment grade and investments in these instruments, where the counterparties have minimum A- credit rating, are considered to have low credit risk for the purpose of impairment assessment. The credit rating information is supplied by independent rating agencies where available and, if not available, the Group uses other publicly available financial information including CDS prices and its own trading records to rate its major customers. The Group’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties in line with Board Policy. Before accepting any new customer, the finance team uses external credit ratings to assess the potential customer’s credit quality and defines credit limits by customer. Monitoring procedures are also in place to ensure that follow-up action is taken when ratings deteriorate. The Group does not hold any credit enhancements to cover its credit risks associated with its financial assets. The Group considers the following as constituting an event of default for internal credit risk management purposes as historical experience indicates that financial assets that meet either of the following criteria are generally not recoverable: • When there is a breach of financial covenants by the debtor • Information developed internally or obtained from external sources indicates that the debtor is unlikely to pay its creditors, including the Group, in full (without taking into account collateral held by the Group). Details of the credit quality of the Group’s financial assets as well as the Group’s maximum exposure to credit risk by credit risk rating grades are set out in note 5.3. 4.5c) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established an appropriate liquidity risk management framework for the management of the Group’s short-, medium- and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities. Details of additional undrawn facilities that the Group has at its disposal to further reduce liquidity risk are set out below. For development activities, the Group has a policy of raising substantially the full amount of capital required for each development before commencing construction. The funding requirements of developments are therefore secured at the outset of works. The Group has the following financial instruments which impact the liquidity risk of the Group either now or in the future: • Financial assets including interest rate swaps, trade receivables, amounts due from joint ventures, other receivables and cash • Financial liabilities including borrowings, lease liabilities, interest rates swaps, trade payables, retentions on construction contracts for properties, other payables and accrued expenses. The following tables detail the Group’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. 2024 Weighted average effective interest rate Less than 1 month 1-3 months 3 months - 1 year 1-5 years 5+ years Total Carrying amount % £m £m £m £m £m £m £m Variable interest rate instruments 6.2% 0.8 1.5 6.9 170.8 - 180.0 149.4 Fixed interest rate instruments 4.4% 1.9 3.9 44.0 458.5 783.4 1,291.7 1,124.4 Lease liabilities 4.2% 1.0 2.9 7.9 48.5 48.8 109.1 72.8 Trade and other payables n/a - 177.0 - - - 177.0 177.0 Total 3.7 185.3 58.8 677.8 832.2 1,757.8 1,523.6