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Classification of financial instruments
 12 Months Ended
Dec. 31, 2023
Text block [abstract]  
Classification of financial instruments
14. Classification of financial instruments
The accounting classification of each class of the Group’s financial assets, and their carrying values, is as follows:
 
             
 
2023
                                                          2022  
                       
Fair value
    
Amortised cost
                                    
 
Fair value
         
 
Amortised cost
             
All figures in £ millions    Notes     
Fair value
through other
comprehensive
income
    
Fair value
through profit
and loss
    
Fair value
– hedging
 instrument
    
Financial
assets
    
Total
carrying
value
          Fair value
through other
comprehensive
income		      Fair value
through profit
and loss		          Fair value
– hedging
instrument		          Financial assets          Total
carrying
value		  
Investments in unlisted securities      15     
 
23
 
  
 
120
 
  
 
–
 
  
 
–
 
  
 
143
 
        24        109          –          –          133  
Cash and cash equivalents      17     
 
–
  
  
 
31
  
  
 
–
  
  
 
281
  
  
 
312
  
        –        40          –          518          558   
Derivative financial instruments      16     
 
–
 
  
 
1
 
  
 
47
 
  
 
–
 
  
 
48
 
        –        5          54          –          59  
Trade receivables      22     
 
–
 
  
 
–
 
  
 
–
 
  
 
695
 
  
 
695
 
        –        –          –          825          825  
Investment in finance lease receivable      22     
 
–
 
  
 
–
 
  
 
–
 
  
 
100
 
  
 
100
 
        –        –          –          121          121  
Other receivable   
 
 
 
   
 
–
 
  
 
–
 
  
 
–
 
  
 
12
 
  
 
12
 
  
 
      –        –    
 
      –    
 
      3    
 
      3  
Total financial assets
   
 
 
 
   
 
23
 
  
 
152
 
  
 
47
 
  
 
1,088
 
  
 
1,310
 
  
 
      24        154    
 
      54    
 
      1,467    
 
      1,699  
The carrying value of the Group’s financial assets is equal to, or approximately equal to, the market value. The other receivable relates to the deferred consideration receivable on the disposal of POLS.
The accounting classification of each class of the Group’s financial liabilities, together with their carrying values and market values, is as follows:
 
             
 
2023
                                           2022  
                 
Fair value
    
Amortised
cost
                            
Fair value
 
        
Amortised cost
 
             
All figures in £
millions		    Notes     
Fair value
 through profit
and loss
    
Fair value
– hedging
 instrument
    
Other
financial
  liabilities
    
Total
 carrying value
    
Total
market
value
         
Fair value
  through profit
and loss
    
Fair value
– hedging
instrument
        
Other
financial
liabilities
   
Total
     carrying
value
     Total
market
value		  
Derivative financial instruments      16     
 
(7
) 
  
 
(36
) 
  
 
–
 
  
 
(43
) 
  
 
(43
) 
        (2 )      (63 )      –      (65 )      (65 ) 
Trade payables      24     
 
–
 
  
 
–
 
  
 
(317
) 
  
 
(317
) 
  
 
(317
) 
        –       –       (348)      (348 )        (348 ) 
Deferred and contingent consideration      24     
 
(57
) 
  
 
–
 
  
 
–
 
  
 
(57
) 
  
 
(57
) 
        (79 )      –       –      (79 )      (79 ) 
Borrowings due within one year      18     
 
–
 
  
 
–
 
  
 
(67
) 
  
 
(67
) 
  
 
(67
) 
        –       –       (86)      (86 )      (86 ) 
Borrowings due after more than one year      18     
 
–
 
  
 
–
 
  
 
(1,094
) 
  
 
(1,094
) 
  
 
(1,062
) 
  
 
      –       –    
 
   (1,144)      (1,144 )      (1,096 ) 
Total financial liabilities
   
 
 
 
   
 
(64
) 
  
 
(36
) 
  
 
(1,478
) 
  
 
(1,578
) 
  
 
(1,546
) 
  
 
      (81 )      (63 )   
 
   (1,578)      (1,722 )      (1,674 ) 
The market value of leases approximates their book value.
 
 
Fair value measurement
As shown above, the Group’s derivative assets and liabilities, unlisted securities, marketable securities and deferred and contingent consideration are held at fair value. Financial instruments that are measured subsequently to initial recognition at fair value are grouped into levels 1 to 3, based on the degree to which the fair value is observable, as follows:
Level 1 fair value measurements are those derived from unadjusted quoted prices in active markets for identical assets or liabilities. The Group’s bonds valued at £611m (2022: £610m) and money market funds of £31m (2022: £40m) included within cash and cash equivalents are classified as level 1.
Level 2 fair value measurements are those derived from inputs, other than quoted prices included within level 1, that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices). The Group’s derivative assets valued at £48m (2022: £59m) and derivative liabilities valued at £43m (2022: £65m) are classified as level 2.
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). The Group’s investments in unlisted securities are valued at £143m (2022: £133m), deferred and contingent consideration of £57m (2022: £79m) and the other receivable of £12m (2022: £3m) are classified as level 3.
The movements in fair values of level 3 financial assets measured at fair value, are shown in the table below:
 
                   
 
2023
 
         
   2022
 
  
All figures in £ millions
 
   
Other
 receivable
 
    
 
Investments
in unlisted
securities
 
    
   Total
 
         
Total
 
  
At 1 January
   
 
3
 
  
 
133
 
  
 
136
 
       200  
Exchange differences
   
 
–
 
  
 
(5
) 
  
 
(5
) 
       10  
Acquisition of investments and other receivable   
 
12
 
  
 
8
 
  
 
20
 
       19  
Repayments
   
 
(3
) 
  
 
–
 
  
 
(3
) 
       (92 ) 
Disposal of investments
   
 
–
 
  
 
(7
) 
  
 
(7
) 
       (48 ) 
Fair value movements – OCI   
 
–
 
  
 
1
 
  
 
1
 
       18  
Fair value movements – income statement   
 
–
 
  
 
13
 
  
 
13
 
  
 
     29  
At 31 December
   
 
12
 
  
 
143
 
  
 
155
 
  
 
     136  
The fair value of the investments in unlisted securities is determined by reference to the financial performance of the underlying asset, recent funding rounds and amounts realised on the sale of similar assets.
The other receivable relates to £12m (2022: £nil) in respect of the contingent consideration receivable for the sale of the POLS business, which comprises a 27.5% share of positive adjusted EBITDA in each calendar year for six years and 27.5% of the proceeds received by the purchaser in relation to any future monetisation event. The valuation of the deferred consideration has been determined on the basis of a discounted cash flow model, and valued by a third-party specialist.
 
The key inputs into the discounted cash flow model are the estimates of adjusted EBITDA for the next 6 years and the estimate of the valuation of the business thereafter. Reasonably possible changes in assumptions for the inputs into the model would not have a material impact on the carrying value of the contingent consideration, and therefore sensitivities have not been disclosed.
The deferred consideration payable in respect of prior year acquisitions is measured as the net present value of the expected cash flows. The movement in the fair value of the deferred consideration payable is shown in the table below:
 
All figures in £ millions
   
 
    2023
    
 
    2022
  
At 1 January
   
 
(79
) 
     (44 ) 
Exchange differences
   
 
3
 
     (7 ) 
Acquisitions
   
 
–
 
     (42 ) 
Fair value movements – income statement
   
 
(4
) 
     4  
Repayments
   
 
23
 
     10  
At 31 December
   
 
(57
) 
     (79 )