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Elc. N 8.875%26 | LSE:BD49 | London | Bond |
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TIDMBD49
RNS Number : 3990X
Electricity North West Limited
23 November 2017
Electricity North West Limited (the "Company") is pleased to announce its Half Year Financial
Report for the period ended 30 September 2017.
The Half Year Report is available to view on the Company's website:
https://www.enwl.co.uk/about-us/news/stock-exchange-announcements.
For further information please contact Electricity North West's press office on 0844 209 1957
or email pressoffice@enwl.co.uk.
Company Registration No. 02366949
ELECTRICITY NORTH WEST LIMITED Half Year Condensed Consolidated Financial Statements for the period ended 30 September 2017
Contents
Interim Management Report 1
Condensed Consolidated Income Statement 3
Condensed Consolidated Statement of Comprehensive Income 4
Condensed Consolidated Statement of Financial Position 5
Condensed Consolidated Statement of Changes in Equity 6
Condensed Consolidated Statement of Cash Flows 7
Notes to the Condensed set of Consolidated Financial Statements
8
Interim Management Report
Cautionary statement
This interim management report contains certain forward-looking statements with respect to the consolidated financial condition and business of Electricity North West Limited and its subsidiaries (together referred to as the "Group"). Statements or forecasts relating to events in the future necessarily involve risk and uncertainty and are made by the Directors in good faith based on the information available at the date of signature of this report. Electricity North West Limited (the "Company") undertakes no obligation to update these forward-looking statements. Nothing in this unaudited interim management report should be construed as a profit forecast nor should past performance be relied upon as a guide to future performance.
Directors
The names of the Directors who held office during the period and subsequently are given below:
Executive Directors
Peter Emery
David Brocksom
Non-executive Directors
Dr John Roberts
Chris Dowling
Rob Holden
Niall Mills
Hamish Lea-Wilson
John Lynch
Mike Nagle
Niall Mills, Hamish Lea-Wilson and John Lynch are shareholder appointed directors and have appointed alternate Directors. Tomas Pedraza was alternate for both Niall Mills and Hamish Lea-Wilson, Andrew Truscott and Mark Scarsella were alternates for John Lynch, in all cases, throughout the period.
Operations
The Group's principal activity is the operation of electricity distribution assets owned by Electricity North West Limited ("ENWL"). The distribution of electricity is regulated by the terms of ENWL's Electricity Distribution Licence granted under the Electricity Act 1989 and monitored by the Gas and Electricity Markets Authority.
Results 6 months 6 months Year ended ended ended 30 Sept 30 Sept 31 March 2017 2016 2017 ------------- ---------- --------- --------- Revenue GBP197m GBP227m GBP486m Profit GBP42m GBP73m GBP187m before tax and fair value movements Profit/(loss) GBP82m GBP(67m) GBP81m before tax Net Debt GBP1,108m GBP1,119m GBP1,096m ------------- ---------- --------- ---------
Revenue
Revenue is GBP30m lower in the six months to 30 September 2017 compared to the same period in the prior year. This is due to lower unit prices which are set to recover an allowed Distribution Use of System ("DUoS") revenue for each year. The principal reason for the lower unit price is a lower correction factor adjustment for over- recovered revenue in prior years.
As experienced in the year to 31 March 2017, the revenue for the six months to 31 March 2018 is expected to be higher than that in the six months to 30 September 2017, due to the higher volumes of electricity units distributed over the winter period.
Profit before tax and fair value movements
Profit before tax and fair value movements is GBP31m lower than the six months to September 2016. This is primarily due to the lower revenue.
Profit before tax
Profit/(loss) before tax is GBP149m higher than the same period in the prior year. This is primarily due to the GBP180m favourable shift in fair values, being the difference between the GBP40m favourable fair value movement in the period, compared to the significant adverse movement of GBP140m in the same period in the prior year, net of the reduction in revenue. The fair value movements are a result of the combined effect of the changes in market expectations of future interest rates and of inflation rates (see Note 10).
Net Debt
Net debt has increased by GBP12m in the six month period to 30 September 2017; this is largely due to the reduction in the money market deposits, offset by the favourable movement in the fair value of the GBP250m 8.875% 2026 bond at fair value through profit and loss.
Interim Management Report
(continued)
Dividends
Final dividends for the year ended 31 March 2017 of GBP12m have been paid in the period. More details on dividends are given in Note 7.
Retirement benefit obligation
The retirement benefit obligation has decreased over the six month period to 30 September 2017, from GBP58.0m to GBP35.8m. The main reason for the improvement is the small increase in the discount rate used to value the liabilities (see Note 12).
Principal risks and uncertainties
The Board considers that the principal risks and uncertainties have not changed from the last annual report.
The principal trade and activities of the Group are carried out by ENWL and a comprehensive review of the strategy and operating model, the regulatory environment, the resources and principal risks and uncertainties facing that Company, and ultimately the Group, are discussed in the ENWL Annual Report and Consolidated Financial Statements for the year ended 31 March 2017, which are available on our website, www.enwl.co.uk.
The principal risks that may affect the Group's performance and results have been identified and disclosed in the Strategic Report of the Annual Report and Consolidated Financial Statements.
Financial statements
The Annual Reports and Consolidated Financial Statements of the Company can be found at www.enwl.co.uk.
Going concern
After making enquiries as discussed in the accounting policies on pages 8 to 9, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in preparing the Half Year Condensed Consolidated Financial Statements.
Responsibility statement
We confirm that to the best of our knowledge:
a. the condensed set of consolidated financial statements; which has been prepared in accordance with the applicable set of accounting standards, gives a true and fair view of the assets, liabilities, financial position and profit or loss of the issuer, or the undertakings included in the consolidation as a whole as required by DTR 4.2.4R;
b. the interim management report includes a fair review of the information required by DTR 4.2.7R; and
c. the condensed set of consolidated financial statements has been prepared in accordance with IAS34 'Interim Financial Reporting'.
Registered address
Electricity North West Limited
304 Bridgewater Place
Birchwood Park
Warrington
WA3 6XG
Approved by the Board of Directors and signed on its behalf:
D Brocksom
Chief Financial Officer
22 November 2017
Condensed Consolidated Income Statement
For the period ended 30 September 2017
Unaudited Unaudited Period Period Audited ended ended Year ended 30 September 30 September 31 March Note 2017 2016 2017 GBPm GBPm GBPm Revenue 197.1 226.8 485.5 Employee costs (26.0) (22.4) (46.9) Depreciation and amortisation expense (net) (50.6) (49.6) (99.3) Other operating costs (46.0) (45.0) (79.9) Total operating expenses (122.6) (117.0) (226.1) Operating profit 74.5 109.8 259.4 Investment income 4 0.7 0.4 0.7 Finance income/(expense) (net) 5 6.8 (176.7) (179.1) Profit/(loss) before taxation 82.0 (66.5) 81.0 Taxation 6 (15.0) 19.7 (10.0) Profit/(loss) for the period/year attributable to equity shareholders 67.0 (46.8) 71.0
All the results shown in the Condensed Consolidated Income Statement derive from continuing operations.
Condensed Consolidated Statement of Comprehensive Income
For the period ended 30 September 2017
Unaudited Unaudited Period Period Audited ended ended Year ended 30 September 30 September 31 March 2017 2016 2017 GBPm GBPm GBPm Profit/(loss) for the period/year 67.0 (46.8) 71.0 Items that will not be classified subsequently to profit or loss: Remeasurement of defined benefit pension scheme 15.9 (168.2) (52.1) Deferred tax on remeasurement of defined benefit pension scheme taken directly to equity (2.7) 28.6 8.9 Adjustment due to change in future tax rates of brought forward deferred tax taken directly to equity - (1.0) (1.0) Other comprehensive income/(expense) for the period/year 13.2 (140.6) (44.2) Total comprehensive income/(expense) for the period/year attributable to equity shareholders 80.2 (187.4) 26.8
Condensed Consolidated Statement of Financial Position
as at 30 September 2017
Unaudited Period Unaudited Audited ended Period ended Year ended 30 Sept 30 Sept 31 March 2017 2016 2017 Note GBPm GBPm GBPm ASSETS Non-current assets Intangible assets and goodwill 48.1 41.7 45.5 Property, plant and equipment 8 3,079.5 2,982.9 3,037.3 3,127.6 3,024.6 3,082.8 Current assets Inventories 11.0 9.4 9.6 Trade and other receivables 50.8 54.3 60.5 Cash and cash equivalents 133.8 134.3 142.7 Money market deposits (maturity over 3 months) - 10.0 10.0 Current tax asset - 7.0 - 195.6 215.0 222.8 Total assets 3,323.2 3,239.6 3,305.6 LIABILITIES Current liabilities Trade and other payables (128.1) (126.9) (142.7) Current tax liabilities (11.6) - (8.2) Provisions 14 (1.0) (0.4) (1.1) Borrowings 9 (6.4) (6.2) (6.4) (147.1) (133.5) (158.4) Net current assets 48.5 81.5 64.4 Non-current liabilities Borrowings 9 (1,235.2) (1,256.8) (1,242.7) Derivative financial instruments 10 (334.8) (379.7) (363.5) Deferred tax liabilities (135.3) (101.1) (126.7) Customer contributions (599.5) (573.8) (588.8) Provisions 14 (2.7) (2.0) (2.9) Retirement benefit obligation 12 (35.8) (179.3) (58.0) (2,343.3) (2,492.7) (2,382.6) Total liabilities (2,490.4) (2,626.2) (2,541.0) Net assets 832.8 613.4 764.6 EQUITY Called up share capital (238.4) (238.4) (238.4) Share premium account (4.4) (4.4) (4.4) Revaluation reserve (91.4) (93.5) (92.5) Capital redemption reserve (8.6) (8.6) (8.6) Retained earnings (490.0) (268.5) (420.7) Total equity (832.8) (613.4) (764.6)
Approved by the Board of Directors on 22 November 2017 and signed on its behalf by:
D Brocksom
Director
Condensed Consolidated Statement of Changes in Equity
For the period ended 30 September 2017
Called up Share Capital share premium Revaluation redemption Retained Total capital account reserve reserve earnings Equity GBPm GBPm GBPm GBPm GBPm GBPm At 31 March 2016 (audited) 238.4 4.4 93.5 8.6 473.9 818.8 Loss for the period - - - - (46.8) (46.8) Transfer from revaluation reserve - - - - - - Other comprehensive expense - - - - (140.6) (140.6) Total comprehensive expense for the period - - - - (187.4) (187.4) Transactions with owners recorded directly in equity: Equity dividends (note 7) - - - - (18.0) (18.0) At 30 September 2016 (unaudited) 238.4 4.4 93.5 8.6 268.5 613.4 At 31 March 2016 (audited) 238.4 4.4 93.5 8.6 473.9 818.8 Profit for the year - - - - 71.0 71.0 Transfer from revaluation reserve - - (1.0) - 1.0 - Other comprehensive expense - - - - (44.2) (44.2) Total comprehensive (expense)/ income for the year - - (1.0) - 27.8 26.8 Transactions with owners recorded directly in equity: Equity dividends (note 7) - - - - (81.0) (81.0) At 31 March 2017 (audited) 238.4 4.4 92.5 8.6 420.7 764.6 Profit for the period - - - - 67.0 67.0 Transfer from revaluation reserve - - (1.1) - 1.1 - Other comprehensive income - - - - 13.2 13.2 Total comprehensive (expense)/ income for the period - - (1.1) - 81.3 80.2 Transactions with owners recorded directly in equity: Equity dividends (note 7) - - - - (12.0) (12.0) At 30 September 2017 (unaudited) 238.4 4.4 91.4 8.6 490.0 832.8
Condensed Consolidated Statement of Cash Flows
For the period ended 30 September 2017
Unaudited Unaudited Period Period Audited ended ended Year ended 30 September 30 September 31 March 2017 2016 2017 Note GBPm GBPm GBPm Operating activities Cash generated from operations 11 94.2 168.6 348.1 Interest paid (7.8) (24.0) (46.3) Tax paid (5.9) (51.3) (32.3) Net cash generated from operating activities 80.5 93.3 269.5 Investing activities Interest received and similar income 0.7 0.5 0.8 Purchase of property, plant and equipment (91.0) (90.2) (194.3) Purchase of intangible assets (5.0) (4.1) (10.1) Customer contributions received 19.8 21.5 45.5 Proceeds from sale of property, plant and equipment 0.1 0.1 0.1 Net cash used in investing activities (75.4) (72.2) (158.0) Net cash inflow before financing activities 5.1 21.1 111.5 Financing activities Dividends paid to equity shareholders of the Company 7 (12.0) (18.0) (81.0) Transfer from money market deposits 10.0 13.5 13.5 Proceeds from borrowings - - 0.4 Repayment of external borrowings (3.2) (1.6) (4.8) Accretion on index-linked swaps (8.8) - (16.2) Net cash used in financing activities (14.0) (6.1) (88.1)
Net (decrease)/increase in cash and cash equivalents (8.9) 15.0 23.4 Cash and cash equivalents at beginning of the period/ year 142.7 119.3 119.3 Net cash and cash equivalents at end of the period/ year 133.8 134.3 142.7
Notes to the Half Year Condensed Consolidated Financial Statements
1 General Information
The financial information for the 6 month period ended 30 September 2017 and similarly the period ended 30 September 2016 has neither been audited nor reviewed by the auditor. The financial information for the year ended 31 March 2017 has been based on information in the audited financial statements for that year.
The financial information for the year ended 31 March 2017 does not constitute the statutory financial statements for that year (as defined in s434 of the Companies Act 2006), but is derived from those financial statements. Statutory financial statements for 31 March 2017 have been delivered to the Registrar of Companies. The auditor reported on those financial statements: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under s498(2) or s498(3) of the Companies Act 2006.
2 Significant accounting policies
Basis of preparation
The Annual Report and Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted for use in the European Union. The Half Year Condensed Consolidated Financial Statements of the Group which are unaudited, have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' ("IAS 34") as adopted by the European Union.
The results for the period ended 30 September 2017 have been prepared using the same method of computation and on the basis of accounting policies consistent with those set out in the Annual Report and Consolidated Financial Statements of ENWL for the year ended 31 March 2017.
Although some of the Group's operations may sometimes be affected by seasonal factors such as general weather conditions, the Directors do not feel that this has a material effect on the performance of the Group, beyond the expected impact on revenue outlined on page 1, when comparing the interim results to those expected to be achieved in the second half of the year.
Going concern
When considering whether to continue to adopt the going concern basis in preparing the Half Year Condensed Consolidated Financial Statements for the six months ended 30 September 2017, the Directors have taken into account a number of factors, including the following:
-- Electricity North West Limited's electricity distribution licence includes the obligation in standard condition 40 to maintain an investment grade issuer credit rating and this has been maintained through the period under review;
-- Under section 3A of the Electricity Act 1989, the Gas and Electricity Markets Authority has a duty, in carrying out its functions, to have regard to the need to secure that licence holders are able to finance the activities, which are the subject of obligations imposed by or under Part 1 of the Electricity Act 1989 or the Utilities Act 2000;
-- Management has prepared, and the Directors have reviewed, the approved Group budgets for the year ending 31 March 2018 and forecasts covering the period to the end of the current price review, in 2023. These forecasts include projections and cash flow forecasts, including covenant compliance considerations. Inherent in forecasting is an element of uncertainty and forecasts have been sensitised for possible changes in the key assumptions, including RPI and over/under recoveries of allowed revenue. This analysis demonstrates that there is sufficient headroom on key covenants and that sufficient resources are available to the Group within the forecast period;
-- Short-term liquidity requirements are forecast to be met from the Group's normal operating cash flow and short-term deposit balances. A further GBP25m of committed undrawn bank facilities are available from lenders; these have a maturity of more than one year. Whilst the utilisation of these facilities is subject to gearing covenant restrictions, projections to 31 March 2023 indicate there is significant headroom on these covenants.
Notes to the Half Year Condensed Consolidated Financial Statements (continued)
2 Significant accounting policies (continued)
Going concern (continued)
The Board has given detailed consideration to the principal risks and uncertainties affecting the Group and Company, as referred to in the interim management report, and all other factors which could impact on the Group and the Company's ability to remain a going concern.
Consequently, after making appropriate enquiries, the Directors have a reasonable expectation that the Group and Company have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Half Year Condensed Consolidated Financial Statements.
Critical accounting judgements and key sources of estimation uncertainty
Changes in accounting policy
There are no accounting policies and standards adopted for the six month period ended 30 September 2017, or for the remainder of the year to 31 March 2018, that have a significant impact on the Group.
Financial instruments at fair value through profit or loss (FVTPL)
Financial instruments at FVTPL are stated at fair value, with any gains or losses on re-measurement recognised in the income statement. The net gain or loss is recognised in the income statement in finance expense and is separately identifiable from the net interest paid or received on these financial instruments, see Note 5. Fair value is determined in the manner described in Note 10.
3 Operating segments
Predominantly all Group operations arise from electricity distribution in the North West of England and associated activities. Only one significant operating segment is therefore regularly reviewed by the Chief Executive Officer and executive team.
The geographical origin and destination of revenue is all within the United Kingdom. In addition whilst revenue can fluctuate marginally with weather conditions, revenues are not affected significantly by seasonal trends.
4 Investment income Unaudited Unaudited Period Period Audited ended ended Year ended 30 September 30 September 31 March 2017 2016 2017 GBPm GBPm GBPm Interest receivable on short-term bank deposits held at amortised cost 0.7 0.4 0.7
Notes to the Half Year Condensed Consolidated Financial Statements (continued)
5 Finance (income)/expense (net) Unaudited Unaudited Period Period Audited ended ended Year ended 30 September 30 September 31 March 2017 2016 2017 GBPm GBPm GBPm Interest payable Interest payable on Group borrowings 7.2 7.2 14.7 Interest payable on borrowings held at amortised cost 11.5 11.5 23.0 Interest payable on borrowings designated at FVTPL - - 22.2 Net receipts on derivatives held for trading (1.4) (1.6) (12.0) Other finance charges related to index-linked debt 6.9 3.9 9.5 Accretion on index-linked swaps 8.8 16.2 16.2 Interest cost on pension plan obligations 0.6 0.2 0.1 Capitalisation of borrowing costs under IAS 23 (0.3) (0.2) (0.8) Total interest expense 33.3 37.2 72.9 Fair value movements on financial instruments Fair value movement on borrowings designated at FVTPL (11.4) 27.4 10.3 Fair value movement on derivatives held for trading (28.7) 112.1 95.9 Total fair value movements (40.1) 139.5 106.2 Total finance (income)/expense (net) (6.8) 176.7 179.1 6 Taxation Unaudited Unaudited Period Period Audited ended ended Year ended 30 September 30 September 31 March 2017 2016 2017 GBPm GBPm GBPm Current tax: Current period/year 9.3 9.6 34.4 Prior year - - (1.1) 9.3 9.6 33.3 Deferred tax: Current period/year 5.7 (19.5) (14.7) Prior year - - 1.2 Impact of change in future
tax rates - (9.8) (9.8) 5.7 (29.3) (23.3) Tax charge/ (credit) for the period/year 15.0 (19.7) 10.0
Corporation tax is calculated at 19% (period ended 30 September 2016: 20%, year ended 31 March 2017: 20%) being the best estimate of the effective tax rate for the full financial year. The tax rate will change to 17% on 1 April 2020.
Deferred tax has been recalculated based on the expected future tax rates, giving rise to the impact of change in future tax rates shown above.
Notes to the Half Year Condensed Consolidated Financial Statements (continued)
7 Dividends
Amounts recognised as distributions to equity holders in the period/year comprise:
Unaudited Unaudited Period Period Audited ended ended Year ended 30 September 30 September 31 March 2017 2016 2017 GBPm GBPm GBPm Final dividends for the year ended 31 March 2016 of 3.77 pence per share - 18.0 18.0 Interim dividends for the year ended 31 March 2017 of 13.21 pence per share - - 63.0 Final dividends for the year ended 31 March 2017 of 2.52 pence per share 12.0 - - Dividends for the period/year 12.0 18.0 81.0 8 Property, plant and equipment
During the period, the Group spent GBP95.7m (period ended 30 September 2016: GBP93.2m, year ended March 2017: GBP200.4m) on additions to property, plant and equipment as part of its capital programme for its operating network. Included in these figures is capitalised interest of GBP0.3m (period ended 30 September 2016: GBP0.2m, year ended March 2017: GBP0.8m), in accordance with IAS 23.
9 Borrowings Unaudited Unaudited Period Period Audited ended ended Year Ended 30 September 30 September 31 March 2017 2016 2017 GBPm GBPm GBPm Current liabilities Bank and other term borrowings 6.4 6.2 6.4 Non-current liabilities Borrowings designated at FVTPL: Bonds 379.6 408.1 391.0 Borrowings measured at amortised cost: Bonds 334.4 330.7 333.4 Bank and other term borrowings 252.0 249.6 249.4 Amounts owed to parent undertaking 71.2 70.9 71.2 Amounts owed to affiliated undertaking 198.0 197.5 197.7 1,235.2 1,256.8 1,242.7 Total borrowings 1,241.6 1,263.0 1,249.1
As at 30 September 2017 the Group had GBP25.0m of unutilised committed bank facilities (30 September 2016: GBP50.0m, 31 March 2017: GBP25.0m).
The Group's debt facilities expire between 2020 and 2046.
Notes to the Half Year Condensed Consolidated Financial Statements (continued)
10 Financial instruments
Fair values
Borrowings designated at fair value through profit or loss and derivative financial instruments are carried in the statement of financial position at fair value. All of the fair value measurements recognised in the statement of financial position for the Group and Company occur on a recurring basis.
Where available, market values have been used to determine fair values (see Level 1 in the fair value hierarchy overleaf).
Where market values are not available, fair values have been calculated by discounting future cash flows at prevailing interest and RPI rates sourced from market data (see Level 2 in the fair value hierarchy overleaf). In accordance with IFRS 13, an adjustment for non-performance risk has then been made to give the fair value.
The non-performance risk has been quantified by calculating either a credit valuation adjustment (CVA) based on the credit risk profile of the counterparty, or a debit valuation adjustment (DVA) based on the credit risk profile of the relevant group entity, using market-available data.
Whilst the majority of the inputs to the CVA and DVA calculations meet the criteria for Level 2 inputs, certain inputs regarding the Group's credit risk are deemed to be Level 3 inputs, due to the lack of market-available data. The credit risk profile of the Group has been built using the few market-available data points, e.g. credit spreads on the listed bonds, and then extrapolated over the term of the derivatives. It is this extrapolation that is deemed to be Level 3. All other inputs to both the underlying valuation and the CVA and DVA calculations are Level 2 inputs.
For certain derivatives, the Level 3 inputs form an insignificant part of the fair value and, as such, these derivatives are disclosed as Level 2. Otherwise, the derivatives are disclosed as Level 3.
The adjustment for non-performance risk as at 30 September 2017 is GBP71.5m (30 September 2016: GBP81.3m, 31 March 2017: GBP74.4m), of which GBP71.3m (30 September 2016: GBP77.9m, 31 March 2017: GBP73.3m) is classed as Level 3.
The following table shows the sensitivity of the fair values of derivatives disclosed as Level 3 to the Level 3 inputs, determined by applying a 10bps shift to the credit curve used to calculate the DVA.
Unaudited Unaudited Period ended Period ended Audited 30 September 30 September Year ended 2017 2016 31 March 2017 -10bps +10bps -10bps +10bps -10bps +10bps GBPm GBPm GBPm GBPm GBPm GBPm ------------------- ------- ------ ------- ------ -------- ------ Inflation-linked swaps (2.0) 1.9 (5.2) 5.0 (2.2) 2.0 ------------------- ------- ------ ------- ------ -------- ------
On entering certain derivatives, the valuation technique used resulted in a fair value loss. As this, however, was neither evidenced by a quoted price nor based on a valuation technique using only data from observable markets, this loss on initial recognition was not recognised. This was supported by the transaction price of nil. This difference is being recognised in profit or loss on a straight-line basis over the life of the derivatives. The aggregate difference yet to be recognised in profit or loss is GBP31.7m (30 September 2016: GBP32.7m, 31 March 2017: GBP32.2m). The movement in the period all relates to the straight-line release to profit or loss.
Notes to the Half Year Condensed Consolidated Financial Statements (continued)
10 Financial instruments (continued)
The following table provides an analysis of the Group's financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:
-- Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
-- 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 (i.e. as prices) or indirectly (i.e. derived from prices); and
-- 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).
Unaudited Unaudited Period Period Audited ended ended Year ended 30 September 30 September 31 March 2017 2016 2017 GBPm GBPm GBPm Derivative financial liabilities; Level 1 - - - Level 2 (109.6) (132.5) (119.3) Level 3 (225.2) (247.2) (244.3) (334.8) (379.7) (363.5) Financial liabilities designated at FVTPL; Level 1 (379.6) (408.1) (391.0) Level 2 - - - Level 3 - - - (379.6) (408.1) (391.0)
There were no transfers between levels during the current period (period ended 30 September 2016: same). In the year ended 31 March 2017, GBP8.7m of derivative financial liabilities were transferred from Level 2 to Level 3, principally due to a change in the significance of the unobservable inputs used to derive Electricity North West's credit curve for the DVA, as described in this section above. Any transfers between levels are determined and recognised at the end of the reporting period.
Notes to the Half Year Condensed Consolidated Financial Statements (continued)
10 Financial instruments (continued)
The following table provides a reconciliation of the fair value amounts disclosed as Level 3.
Unaudited Unaudited Period Period Audited ended ended Year ended 30 September 30 September 31 March 2017 2016 2017 GBPm GBPm GBPm Opening balance (244.3) (167.8) (167.8) Transfers into Level 3 from Level 2 - - (8.7) Total gains or losses in profit or loss; On transfers into Level 3 from Level 2 - - 4.4 On new derivatives in the period - - - On instruments carried forward in Level 3 19.1 (79.4) (72.2) Closing balance (225.2) (247.2) (244.3)
For cash and cash equivalents, trade and other receivables and trade and other payables the book values approximate to the fair values because of their short-term nature.
Except as detailed in the following table, the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements are approximately equal to their fair values. The fair values shown in the table below are derived from market values and, therefore, meet the Level 1 criteria.
Unaudited Unaudited Period Period Audited ended ended Year ended 30 September 30 September 31 March 2017 2016 2017 GBPm GBPm GBPm Carrying value: Non-current liabilities: Borrowings measured at amortised cost Bonds (334.4) (330.7) (333.4) Amounts owed to affiliated undertaking (198.0) (197.5) (197.7) Fair value: Non-current liabilities: Borrowings measured at amortised cost Bonds (514.6) (545.7) (528.2) Amounts owed to affiliated undertaking (235.4) (248.0) (240.0)
Changes in circumstances significantly affecting the fair value of financial assets and financial liabilities
Over the period, market expectations of future interest rates have increased significantly; this has resulted in GBP40.5m of the total GBP40.1m fair value movement over the period.
Notes to the Half Year Condensed Consolidated Financial Statements (continued)
11 Cash generated from operations Unaudited Unaudited Period Period Audited ended ended Year ended 30 September 30 September 31 March 2017 2016 2017 GBPm GBPm GBPm Operating profit 74.5 109.8 259.4 Adjustments for: Depreciation of property, plant and equipment 53.6 53.0 105.8 Amortisation of intangible assets 2.3 1.9 4.1 Amortisation of customer contributions(1) (8.4) (8.0) (16.1) Profit on disposal of property, plant and equipment (0.1) (0.1) (0.1) Cash contributions in excess of pension charge to operating profit (11.6) (8.1) (16.5) Operating cash flows before movement in working capital 110.3 148.5 336.6 Changes in working capital: (Increase) in inventories (1.4) (0.9) (1.1) Increase in trade and other receivables 9.6 12.8 6.3 (Decrease)/increase in provisions and payables (24.3) 8.2 6.3 Cash generated from operations 94.2 168.6 348.1
1 In the 6 months ended 30 September 2017 GBP3.1m (period ended September 2016: GBP2.6m, year ended March 2017 GBP5.5m) of amortisation in respect of customer contributions has been amortised through revenue as a result of the adoption of IFRIC 18.
12 Retirement benefit schemes
Defined benefit schemes
The defined benefit obligation is calculated using the latest actuarial valuation as at 31 March 2016 and has been projected forward by an independent actuary to take account of the requirements of IAS 19 'Employee Benefits' in order to assess the position at 30 September 2017. The present value of the defined benefit deficit, the related current service cost and the past service cost were measured using the projected unit credit method. The defined benefit plan assets have been updated to reflect their market value as at 30 September 2017. Differences between the expected return on assets and the actual return on assets have been recognised as an actuarial gain or loss in the statement of comprehensive income in accordance with the Group's accounting policy.
The defined benefit deficit decreased to GBP35.8m (30 September 2016: deficit of GBP179.3m, 31 March 2017: deficit of GBP58.0m), primarily due to a 0.1% increase in the discount rate, which decreased the value placed on the liabilities.
Notes to the Half Year Condensed Consolidated Financial Statements (continued)
13 Related party transactions
Loans are made between companies in the North West Electricity Networks (Jersey) Group on which varying rates of interest are chargeable. Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
During the period, the Electricity North West Ltd Group companies entered into the following transactions with related parties who are not members of that Group:
Unaudited Unaudited Period Period Audited ended ended Year ended 30 September 30 September 31 March 2017 2016 2017 GBPm GBPm GBPm Transactions with related parties Recharges to Electricity North West (Construction and Maintenance) Ltd 1.0 0.7 1.0 Recharges from Electricity North West (Construction and Maintenance) Ltd - - (0.1) Recharges to Electricity North West Services Ltd 0.9 - 1.2 Recharges from Electricity North West Services Ltd (1.8) - (0.6) Directors' remuneration (0.8) (0.8) (2.0) Directors' services (0.1) (0.1) (0.2) Interest payable to North West Electricity Networks plc (1.0) (1.0) (1.9) Interest payable to ENW Finance plc (6.2) (6.1) (12.8) Dividends paid to North West Electricity Networks plc (12.0) (18.0) (81.0)
Fees of GBP0.1m (September 2016: GBP0.1m, March 2017: GBP0.1m) were payable to Colonial First State in respect of the provision of Directors' services. Colonial First State is part of the Commonwealth Bank of Australia which is identified as a related party.
Fees of GBP0.1m (September 2016: GBP0.1m, March 2017: GBP0.1m) were payable to IIF Int'l Holding GP Ltd ('IIF'), which is identified as a related party, in respect of the provision of Directors' services.
Notes to the Half Year Condensed Consolidated Financial Statements (continued)
13 Related party transactions (continued)
Amounts outstanding between the Group and other companies within the North West Electricity Networks (Jersey) Limited Group:
Unaudited Unaudited Audited Period Period Year ended ended ended 30 September 30 September 31 March 2017 2016 2017 GBPm GBPm GBPm Amounts owed to related parties Group tax relief to North West Electricity Networks plc (3.2) (5.0) (23.6) Interest payable to North West Electricity Networks plc (0.5) (0.5) (0.5) Interest payable to ENW Finance plc (2.5) (2.5) (2.5) Amounts owed to Electricity North West Services Ltd (0.4) - (0.6) Borrowings from North West Electricity Networks plc (71.2) (70.9) (71.2) Borrowings from ENW Finance
plc (199.3) (199.1) (197.7) Amounts owed by related parties Amounts owed by North West Electricity Networks plc 3.3 3.7 3.3 Amounts owed by North West Electricity Networks (Holdings) Ltd 0.2 0.2 0.2 Amounts owed by Electricity North West (Construction and Maintenance) Ltd 0.3 0.2 0.4 Amounts owed by Electricity North West Services Ltd 0.3 - 1.4 Amounts owed by North West Electricity Networks (Jersey) Limited 0.1 0.1 0.1
The loan from North West Electricity Networks plc accrues weighted average interest at 2.74% per annum (September 2016: 2.74%, March 2017: 2.74%) and is repayable in March 2023.
The loan from ENW Finance plc accrues interest at 6.125% (September 2016: 6.125%, March 2017: 6.125%) and is repayable in July 2021.
Notes to the Half Year Condensed Consolidated Financial Statements (continued)
14 Provisions Unaudited Unaudited Period Period Audited ended ended Year ended 30 September 30 September 31 March 2017 2016 2017 GBPm GBPm GBPm Opening Balance 4.0 2.5 2.5 Charge to the income statement on re-estimate of provision - 0.1 1.9 Utilisation of provision (0.3) (0.2) (0.4) 3.7 2.4 4.0 Current 1.0 0.4 1.1 Non current 2.7 2.0 2.9 3.7 2.4 4.0
During the year ended 31 March 2013 a provision was created in connection with a portfolio of retail lease properties to which the Company was liable under privity of contract. The combined closing provision of GBP1.9m, which now relates to one high street retail property and two out of town retail properties, has been evaluated by management, is supported by relevant external property specialists, and reflects the Company's best estimate as at the Statement of Financial Position date of the amounts that could become payable by the Company, on a discounted basis. The estimate is a result of a detailed risk assessment process, which considers a number of variables including the location and size of the stores, expectations regarding the ability of the Company to both defend its position and also to re-let the properties, conditions in the local property markets, demand for retail warehousing, likely periods of vacant possession and the results of negotiations with individual landlords, letting agents and tenants, and is hence inherently judgemental.
ENWL remains a guarantor of the pension liability of the former EA Technology Limited (EATL). A provision of GBP1.8m was created in the year ended 31 March 2017 for the estimated value of liability of amounts due under this guarantee, on a discounted basis.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR QXLFLDFFLFBX
(END) Dow Jones Newswires
November 23, 2017 11:31 ET (16:31 GMT)
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