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Name | Symbol | Market | Type |
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Sth.e.wtr.11%db | LSE:52HO | London | Debenture |
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TIDM52HO
RNS Number : 9332H
South East Water Limited
04 December 2015
South East Water Limited
Condensed Group financial statements
for the six months ended 30 September 2015
Registered number 02679874
Contents Page 3 Chairman's statement 6 Statement of directors' responsibilities 7 Condensed Group income statement 7 Condensed Group statement of comprehensive income 8 Condensed Group statement of financial position 9 Condensed Group statement of changes in equity 10 Condensed Group statement of cash flows 11 Notes to the condensed Group financial statements
Chairman's statement
Introduction
I am pleased to present our interim report for the first half of the 2015/16 financial year.
This is the first report on progress of our new business plan covering the five year period starting in April 2015. Our plans, which cover both our wholesale and retail operations, put customer satisfaction right at the heart of everything we do. As well as satisfying our legal and statutory duties, our plans include a comprehensive set of targeted customer outcomes linked to financial incentives or penalties to us and set out how we will achieve our objectives in an efficient and effective way. You can read more about our plans and our Outcome Delivery Incentives (ODIs) at http://www.southeastwater.co.uk/businessplan.
With the challenges now clearly set, we have been engaging our employees and partners to ensure that everyone is focussed on our vision for the future: to be the water company people want to be supplied by and want to work for.
As part of the long term strategy to manage our water resources more efficiently, we are continuing with our Customer Metering Programme. Working closely with our external partner, Clancy Docwra, we have installed 21,500 meters in the first half of the year. This improved our household meter coverage in our area to 74%. The programme continues and we are planning to achieve 90% by 2020. I am pleased with the progress in this area and would like to thank our customers for their cooperation and support throughout this process.
Following average rainfall during the summer and autumn and reduced demand for water from customers, our water resources are at a healthy level. As a result we are not anticipating the need to consider any water restrictions in the coming year. We will continue to work closely with our regulatory stakeholders to monitor the situation and with our customers to promote the importance of using water wisely whatever the weather.
I joined the Board as Chairman at the start of this reporting period in April 2015. In August, Andrew Farmer joined the Board as Finance Director to replace Jo Stimpson, who retired from the company after 12 years' service. I would like to thank Jo for her hard work and significant achievements over her time with the business. Likewise, I would also like to thank Paul Seeley who retired in November from the position of Operations Director for his significant contribution over 12 years with the business. Paul has been replaced by Simon Earl who joins us from Thames Water. I would like to welcome Andrew and Simon to the company.
Results and Key Performance Indicators
The results published in this statement summarise our performance for the six months ended 30 September 2015. The financial statements are prepared under International Financial Reporting Standards ("IFRS") and incorporate the performance of South East Water Limited and its subsidiary, South East Water (Finance) Limited.
At the beginning of the financial year South East Water Limited adopted IFRS for the first time for its company only reporting. This has highlighted that the group's previous accounting for Property, Plant and Equipment required restatement and has led to some of the comparative amounts for the six months to 30 September 2014 and the year to 31 March 2015 being restated. Further details on the changes to the Company's accounting policies and the prior periods' restatements are provided in note 2 of these financial statements.
Revenue for the period was GBP109.4 million compared with GBP110.2 million for the same period in the previous year. The reporting period to September 2015 is the first period under which we are reporting under Ofwat's separate price controls. Our revenue for the period to September 2015 is in line with expectation. Our customer demand is marginally higher when compared to the six month period to 30 September 2014. However, this is matched by a reduction in revenue from customers who have transferred from an unmeasured supply to measured supply under our metering programme, due to the average measured bill being lower than the average unmeasured bill.
Net operating costs for the year to 30 September 2015 were GBP72.6 million, an increase of 2.7% compared with the same period in the previous year. The increase in operating costs of GBP1.9 million is principally due to increases in reactive maintenance charges and staff costs. Operating profit was GBP40.4 million for the first half of the 2015/16 financial year which compares with GBP42.4 million in the prior year. Operating profit as a percentage of revenue has decreased from 38.5% in the first half of 2014/15 to 36.9% in the current year.
Interest costs have decreased by GBP6.1 million from GBP27.3 million to GBP21.2 million. This reflects the lower RPI being applied to the indexed linked loans during the first half of the year and valuation of the interest rate swap.
Profit before tax has increased from GBP17.7 million to GBP21.8 million when compared to the same period last year. This represents 19.9% of revenue compared with 16.1% for the corresponding period last year.
Profit after tax has increased from GBP14.9 million to GBP17.7 million for the first six months of the year. This is due to the reduction in finance costs detailed above being offset by a significant increase in the deferred tax liability. The increase in the deferred tax liability in the period when compared to the same period in the previous year is due to the prior year benefiting from the reduction in the forward corporation tax rates from 23% to 20%. During the six months to 30 September 2015 the deferred tax charge was GBP2.4 million.
Net cash generated from operations was GBP71.7 million for the six months ended 30 September 2015 compared to GBP68.4 million in the same period for the previous year. This increase is predominantly due to improvements in supplier payment terms in the period.
We continue to comply with the financial covenants set out in our securitisation structure and continue to hold ratings from Moody's and Standard & Poor's consistent with the requirements of both our securitisation and our instrument of appointment.
Capital Expenditure
We have continued to invest in our infrastructure and other fixed assets during the six months to September 2015 to maintain and, where possible, improve the security and delivery of services to our current and future customers.
During this period our capital expenditure was GBP47.7 million. We have spent GBP13 million on our below ground infrastructure network and our above ground asset expenditure includes GBP4.1 million on our water treatment refurbishment programme. Our Customer Metering Programme has seen GBP5.1 million of investment and we have also invested GBP3 million on the completion of our new state-of-the-art laboratory. It is here that we operate our year-round testing to make sure we maintain the excellent quality water delivered to our 2.1 million customers.
Customer Service
I am pleased to report that customer complaints to South East Water have fallen for the fourth year running and I am determined that this improvement continues.
A report from the Consumer Council for Water published in September 2015 shows that during 2014 - 15, South East Water saw almost a 45 per cent drop in customer complaints compared to the previous year. This was the best improvement seen within the industry.
We saw our Service Incentive Mechanism score for 2014 - 15 improve for a third year in a row from 75 to 82, out of a score of 100. We are on track to improve further, with our current year to date performance placing us 12(th) in the industry league table. We are pleased with this progress and remain focused on continuing to improve this area of our performance.
To help customers having difficulty paying their water bills we have created a specially trained Customer Care Team which talks with customers to understand their circumstances and discuss our range of payment options along with our special tariffs. These include the newly introduced Social Tariff and Service Plus for vulnerable customers who may be elderly, deaf, blind, partially sighted or suffering from a chronic illness.
There are also a wide range of support tariffs, payment schemes and financial assistance through our charitable trust the Helping Hand Social Fund.
We continue to work closely with the Citizens Advice Bureau to share ideas on the best way to manage debt and understand the potential implications of the welfare reform on customers' ability to pay our bills.
Principal risks and uncertainties
The principle risks and uncertainties facing the business are set out in the Strategic Report within the Group's Annual Report for 2014/15, which can be found on the South East Water website.
Going Concern
The directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report.
Looking ahead
For the immediate term, we are continuing to deliver our business plan for 2015-2020 and ensuring everyone is focussed on putting customer priorities at the heart of everything we do.
We are also preparing for the introduction of competition for our non- household customers and ensuring that company is well placed to accept the challenges of this development in the water sector.
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The Board and I are confident that we have the right management team in place to deliver on our plans, both now and in the longer term, to the benefit of today's and tomorrow's customers and we would like to thank our staff and our partners for their continued hard work and support.
Nick Salmon
Chairman
4 December 2015
Statement of directors' responsibilities
The directors confirm that to the best of their knowledge:
-- the condensed Group financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as endorsed by the European Union; and
-- the condensed Group statements herein include a fair review of the information required by the Disclosure and Transparency Rules 4.2.7R.
The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the Group financial statements comply with the Companies Act 2006. They are responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are also responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
By order of the Board
Paul Butler
Managing Director
4 December 2015
Condensed Group income statement
for the six months ended 30 September 2015
Six months Six months ended ended 30 September 30 September 2015 2014 (restated) Notes GBP000 GBP000 Revenue 3 109,449 110,244 Net operating costs 5 (72,571) (70,659) Other income 6 3,528 2,792 Operating profit 40,406 42,377 Finance costs 7 (21,152) (27,319) Finance income 8 2,518 2,593 Profit before tax 21,772 17,651 Taxation 9 (4,063) (2,743) -------------- -------------- Profit for the period 17,709 14,908 -------------- -------------- Earnings per share Basic and diluted from continuing operations 35.91p 30.23p -------------- --------------
Condensed Group statement of comprehensive income
for the six months ended 30 September 2015
Six months Six months ended ended 30 September 30 September 2015 2014 (restated) GBP000 GBP000 Profit for the period 17,709 14,908 -------------- -------------- Items that will not be reclassified subsequently to profit or loss: Re-measurement of defined benefit liability 17,693 (10,528) Return on scheme assets excluding interest income (12,099) 11,170 Income tax relating to items not reclassified (1,119) (128) 4,475 514 -------------- -------------- Total comprehensive income for the period attributable to Owners of the Company 22,184 15,422 -------------- --------------
Condensed Group statement of financial position
as at 30 September 2015
30 September 31 March 30 September 2015 2015 2014 (restated) (restated) Notes GBP000 GBP000 GBP000 Assets Non-current assets Intangible assets 11 8,889 9,237 9,429 Property, plant and equipment 12 1,396,246 1,370,157 1,345,804 Amount due from parent undertaking 190,013 190,013 190,013 Defined benefit pension surplus 5,555 2,794 - 1,600,703 1,572,201 1,545,246 -------------- -------------- -------------- Current assets Inventories 244 245 332 Trade and other receivables 13 69,959 65,614 67,368 Cash and cash equivalents 14 23,204 28,719 46,016 93,407 94,578 113,716 -------------- -------------- -------------- Total Assets 1,694,110 1,666,779 1,658,962 -------------- -------------- -------------- Liabilities Current liabilities Trade and other payables 17 (92,220) (89,597) (97,280) Deferred income (3,686) (2,631) (2,715) Provisions (4,184) (4,130) (1,550) (100,090) (96,358) (101,545) Non-current liabilities Loans and borrowings (864,303) (863,418) (858,778) Trade and other payables 17 (2,281) (1,751) (1,113) Derivative financial instruments 15/16 (92,566) (88,811) (87,960) Deferred tax liabilities (153,248) (150,295) (144,863) Defined benefit pension liability (5,159) (9,783) (29,532) Deferred income 17 (66,638) (64,835) (61,112) (1,184,195) (1,178,893) (1,183,358) -------------- -------------- -------------- Total Liabilities (1,284,285) (1,275,251) (1,284,903) -------------- -------------- -------------- Net assets 409,825 391,528 374,059 -------------- -------------- -------------- Equity Ordinary shares 49,312 49,312 49,312 Capital redemption reserve - - 4,000 Revaluation reserve 261,702 264,155 266,939 Retained earnings 98,811 78,061 53,808 -------------- -------------- -------------- Total equity 409,825 391,528 374,059 -------------- -------------- --------------
The notes on pages 11 to 18 are an integral part of these condensed Group financial statements.
Condensed statement of changes in equity
for the six months ended 30 September 2015
Capital Issued redemption Revaluation Retained capital reserve reserve earnings Total equity GBP000 GBP000 GBP000 GBP000 GBP000 At 1 April 2015 49,312 - 264,155 78,061 391,528 ---------- ------------ -------------- ----------- --------------- Profit for the period - - - 17,709 17,709 Other comprehensive income - - - 4,475 4,475 Total comprehensive income - - - 22,184 22,184 Dividends (see note 10) - - - (4,500) (4,500) Amortise revaluation reserve - - (3,065) 3,065 - Release revaluation on disposals - - (1) 1 - Deferred tax on reserve releases - - 613 - 613
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---------- ------------ -------------- ----------- --------------- At 30 September 2015 49,312 - 261,702 98,811 409,825 ---------- ------------ -------------- ----------- ---------------
for the six months ended 30 September 2014
Capital Issued redemption Revaluation Retained capital reserve reserve earnings Total equity (restated) (restated) (Restated) GBP000 GBP000 GBP000 GBP000 GBP000 At 1 April 2014 49,312 4,000 269,424 48,852 371,588 ---------- ------------ -------------- ------------- --------------- Profit for the period - - - 14,908 14,908 Other comprehensive income 514 514 ---------- ------------ -------------- ------------- --------------- Total comprehensive income - - 15,422 15,422 Dividends (see note 10) - - (13,572) (13,572) Amortise revaluation reserve - - (3,069) 3,069 - Release revaluation on disposals - - (37) 37 - Deferred tax on reserve releases - - 621 - 621 ---------- ------------ -------------- ------------- --------------- At 30 September 2014 49,312 4,000 266,939 53,808 374,059 ---------- ------------ -------------- ------------- ---------------
Condensed Group statement of cash flows
for the six months ended 30 September 2015
Six months Six months ended ended 30 September 30 September 2015 2014 Notes GBP000 GBP000 Cash flows from operating activities Net cash generated from operations 72,196 69,574 Interest received 2,518 2,549 Interest paid (17,411) (17,082) Pension contributions paid (2,400) (4,904) Group tax relief paid (1,250) (1,524) Net cash from operating activities 53,653 48,613 --------------- -------------- Cash flows from investing activities Sale of property, plant and equipment 54 105 Purchase of property, plant and equipment (54,211) (39,498) Purchase of intangible assets (1,058) (1,168) Fixed asset contributions received /(paid) 550 63 Net cash used in investing activities (54,655) (40,498) --------------- -------------- Cash flows from financing activities Finance lease principal payments - (1,237) Repayment of borrowings (3) - Dividends paid to shareholder 10 (4,500) (13,572) Net cash used in financing activities (4,503) (14,809) --------------- -------------- Net decrease in cash and cash equivalents (5,515) (6,694) Cash and cash equivalents at 1 April 28,719 52,710 --------------- -------------- Cash and cash equivalents at 30 September 14 23,204 46,016 --------------- --------------
Notes to the condensed Group financial statements
for the six months ended 30 September 2015
1. Basis of preparation
The condensed Group financial statements for the six months ended 30 September 2015 are set out on pages 7 to 18 and have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and IAS 34 Interim Financial Reporting as endorsed by the European Union. The statements should be read in conjunction with the financial statements for the year ended 31 March 2015, which have been prepared in accordance with International Financial Reporting Standards ("IFRS") endorsed by the European Union.
The condensed Group financial statements are presented in sterling.
These interim financial results are neither audited nor reviewed by our auditor. The information for the year ended 31 March 2015 does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2015 were approved by the Board of directors on 3 July 2015 and delivered to the Registrar of Companies. The report of the auditors on those accounts was not qualified, did not include any reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not contain any statement under section 498(2) or (3) of the Companies Act 2006.
This interim report contains a number of restated values for the results of the six months ended 30 September 2014 and the year ended 31 March 2015. These changes are as a result of the Company and its subsidiary adopting IFRS for their company only reporting for the first time in the current year. Note 2 provides further explanations of the nature of these changes and the amounts involved.
2. Accounting policies
Restatement
South East Water Limited has previously reported under UK GAAP at a company level. It has adopted IFRS in the year, with a transition date of 1 April 2014. The company will publish its first set of accounts under IFRS for the year ending 31 March 2016. A rigorous exercise has been performed in establishing accounting policies for the Company under this accounting framework. This has highlighted that the group's previous accounting for property, plant and equipment ("PP&E") did not adequately reflect our current understanding of our PP&E valuation and componentisation, and as a result of this, it has been necessary to correct the group accounts to be consistent with the new company accounting policies and practices. The information available to the group now in relation to fixed assets was not available at the date of the original IFRS transition and it is therefore impracticable to restate the accounts back to the original date. The earliest date at which it is practicable to obtain corrected information is as at 1 April 2014.
The following restatements at a group level have been recognised:
Statement of financial Income statement position Property, plant & Deferred Operating Tax equipment tax costs charge GBP000 GBP000 GBP000 GBP000 30 September 2014 Amounts as previously reported 1,231,083 (122,528) (67,755) (3,432) Adjustments at 1 April 2014 117,625 (23,645) - - Adjustments in the period (2,904) 1,310 (2,904) 689 ------------ ----------- ------------ --------- 1,345,804 (144,863) (70,659) (2,743) ------------ ----------- ------------ --------- 31 March 2015 Amounts as previously reported 1,266,462 (130,896) (127,598) (8,256) Adjustments at 1 April 2014 117,625 (23,645) - - Adjustments in the period (13,930) 4,246 (12,906) 2,886 ------------ ----------- ------------ --------- 1,370,157 (150,295) (140,504) (5,370) ------------ ----------- ------------ ---------
Notes to the condensed Group financial statements (continued)
for the six months ended 30 September 2015
2. Accounting policies (continued)
Property, plant & equipment: As described above, the group has adopted new accounting policies in respect of componentisation and useful economic lives in relation to fixed assets. The principles and methodology adopted by the group have now been applied to the group PP&E balances together with the related correction to the subsequent accounting for additions, disposals and depreciation.
Deferred tax: The increase in deferred tax relates to the change in valuation of the fixed assets.
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Operating costs: The changes to the accounting policies in respect of useful economic lives have resulted in changes to depreciation.
Changes in accounting policies
The accounting policies adopted are consistent with those of the financial statements for the year ended 31 March 2015 as described in those financial statements, except as detailed below.
-- Infrastructure assets have been redefined into the following categories and the economic lives of these assets have been reassessed as detailed below.
Category Economic lives (years) Surface Reservoirs 250 Communication pipes 100 Distribution mains - ductile Iron 70 Distribution mains - cast iron 100 Distribution mains - polyethylene 100 Other mains 70 3. Revenue Six months Six months ended ended 30 September 30 September 2015 2014 (restated) GBP000 GBP000 Metered water income 76,583 70,454 Unmetered water income 29,956 37,478 Other sales 2,910 2,312 -------------- -------------- 109,449 110,244 -------------- --------------
All revenue is generated from activities within the United Kingdom and was from external customers.
Notes to the condensed Group financial statements (continued)
for the six months ended 30 September 2015
4. Segmental analysis
The Group's revenue mainly arises from the supply of water and related activities. The activities of the Group, for management purposes, fall into three operating areas being regulated activities, non-regulated activities and new connections to the Group's network. However, because of the relative size of the latter two segments they are reported together as "Other activities" below.
The Group analyses results by segment to operating profits only, so no segmental statement of financial position or statement of cash flows are presented.
The adjustment of revenue relates to work performed on the Group's network for new connections on behalf of third parties. This is reported as revenue for management purposes, but is treated as deferred income for the purposes of these accounts.
Period to 30 September 2015 Regulated Other activities activities GBP000 Adjustments Total GBP000 GBP000 GBP000 Total revenue 108,492 3,588 (2,631) 109,449 ------------ ----------------- -------------- --------- Operating profit 38,423 2,163 - 46,406 ------------ ----------------- -------------- Investment income 2,518 Finance costs (21,152) --------- Profit before taxation 21,772 Taxation (4,063) --------- Profit for the year 17,709 --------- Period to 30 September 2014 (restated) Total revenue 109,114 3,363 (2,233) 110,244 ------------ ----------------- -------------- --------- Operating profit 39,505 2,872 - 42,377 ------------ ----------------- -------------- Investment income 2,593 Finance costs (27,319) --------- Profit before taxation 17,651 Taxation (2,743) --------- Profit for the year 14,908 --------- 5. Net operating costs Six months Six months ended ended 30 September 30 September 2015 2014 (restated) GBP000 GBP000 Employee benefits expense 12,907 12,389 Asset expense 19,766 19,072 Other operating expenses 39,898 39,198 -------------- -------------- 72,571 70,659 -------------- --------------
Notes to the condensed Group financial statements (continued)
for the six months ended 30 September 2015
6. Other income Six months Six months ended ended 30 September 30 September 2015 2014 (restated) GBP000 GBP000 Rental income 521 557 Sundry income 3,007 2,235 -------------- -------------- 3,528 2,792 -------------- -------------- 7. Finance costs Six months Six months ended ended 30 September 30 September 2015 2014 GBP000 GBP000 Effective interest on listed debt 12,167 12,057 Fair value movements on interest rate swap 3,755 4,989 Indexation on listed debt 1,187 2,406 Interest on index linked loans 4,294 4,247 Indexation on index linked loans (572) 2,762 Other finance costs 1,547 1,541 Pension fund finance charge 98 644 -------------- ----------------------- 22,476 28,646 Less: interest capitalised (1,324) (1,327) -------------- ----------------------- 21,152 27,319 -------------- ----------------------- 8. Finance income Six months Six months ended ended 30 September 30 September 2015 2014 GBP000 GBP000 Interest receivable from Group undertakings 2,448 2,423 Interest receivable on bank balances and short term deposits 70 170 2,518 2,593 -------------- --------------
Notes to the condensed Group financial statements (continued)
for the six months ended 30 September 2015
9. Taxation Six months Six months ended ended 30 September 30 September 2015 2014 (restated) GBP000 GBP000 Current taxation charge 1,616 1,653 Deferred taxation charge 2,447 1,090 4,063 2,743 -------------- --------------
The current tax charge is recognised based on management's estimate of the weighted average annual corporation tax rate expected for the full financial year.
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10. Dividends
Six months Six months ended ended 30 September 30 September 2015 2014 GBP000 GBP000 Equity dividends paid during the period of 9.1p per share (2014: 27.5p) 4,500 13,572 -------------- --------------
11. Intangible assets
GBP000 Net book amount At 1 April 2015 9,237 Additions for the period 1,058 Amortisation for the period (1,406) -------- At 30 September 2015 8,889 -------- Net book amount At 1 April 2014 9,713 Additions for the year 2,371 Disposals for the year (6) Amortisation for the year (2,841) -------- At 31 March 2015 9,237 -------- Net book amount At 1 April 2014 9,713 Additions for the period 1,169 Amortisation for the period (1,453) -------- At 30 September 2014 9,429 --------
Notes to the condensed Group financial statements (continued)
for the six months ended 30 September 2015
12. Property, plant and equipment
GBP000 Net book amount At 1 April 2015 1,370,157 Additions for the period 46,610 Disposals for the period (23) Depreciation for the period (20,498) ---------- At 30 September 2015 1,396,246 ---------- Net book amount (restated) At 1 April 2014 1,324,133 Additions for the year 89,636 Disposals for the year (238) Depreciation for the year (40,858) Impairment in the year (2,516) ---------- At 31 March 2015 1,370,157 ---------- Net book amount (restated) At 1 April 2014 1,324,133 Additions for the period 41,874 Disposals for the period (127) Depreciation for the period (20,076) ---------- At 30 September 2014 1,345,804 ----------
13. Trade and other receivables
30 September 31 March 30 September 2015 2015 2014 GBP000 GBP000 GBP000 Trade receivables 29,223 28,422 27,199 Amounts due from Group undertakings - 59 51 Prepayments and accrued income 38,359 33,387 37,572 Other receivables 2,377 3,746 2,546 ------------- --------- ------------- 69,959 65,614 67,368 ------------- --------- -------------
14. Cash and cash equivalents
30 September 31 March 30 September 2015 2015 2014 GBP000 GBP000 GBP000 Cash at bank 904 1,269 416 Short term cash deposits 22,300 27,450 45,600 ------------- --------- ------------- 23,204 28,719 46,016 ------------- --------- -------------
Notes to the condensed Group financial statements (continued)
for the six months ended 30 September 2015
15. Financial liabilities
30 September 31 March 30 September 2015 2015 2014 GBP000 GBP000 GBP000 Non-current liabilities Irredeemable debenture stock 997 1,000 1,048 Listed bonds due after five years 515,641 516,258 515,697 Index linked loans 347,665 346,160 342,033 ------------- --------- ------------- Loans and borrowings 864,303 863,418 858,778 Interest rate swap 92,566 88,811 87,960 956,869 952,229 946,738 ------------- --------- -------------
16. Financial Instruments
Fair values of financial assets and financial liabilities
Fair value is the amount at which a financial instrument could be exchanged in an arm's length transaction between informed and willing parties. In the opinion of the directors, the fair values of the financial assets and liabilities of the Group (apart from the specific items shown in the fair value table below) are not materially different from the book values.
Book Fair Book Fair Value Value Book Fair Value Value 30 September 30 September Value Value 30 September 30 September 2015 2015 31 March 31 March 2014 2014 GBP000 GBP000 2015 2015 GBP000 GBP000 GBP000 GBP000 Loans and receivables Amounts due from parent undertaking 190,013 134,041 190,013 152,004 190,013 134,249 -------------- -------------- ----------- ------------ -------------- -------------- Financial liabilities at amortised cost Irredeemable debentures 997 670 1,000 691 1,048 719 Listed bonds 520,961 631,496 516,258 631,496 513,784 553,488 Index linked loans 355,378 335,391 346,160 391,946 338,506 354,910 -------------- -------------- ----------- 877,336 967,557 863,418 1,024,133 853,338 909,117 -------------- -------------- ----------- ------------ -------------- --------------
The following table details the financial instruments that are carried in the Group's books at the fair value at 30 September 2015.
Book and Book and Book and Fair Value Fair Value Fair Value 30 September 31 March 30 September 2015 2015 2014 GBP000 GBP000 GBP000 At fair value through the income statement Interest rate swap 92,566 88,811 87,960 -------------- ------------ --------------
The book value of the interest rate swap has been adjusted to reflect its fair value.
Notes to the condensed Group financial statements (continued)
for the six months ended 30 September 2015
16. Financial Instruments (continued)
Fair value hierarchy
The Group held the following financial instruments measured at fair value:
Total Level 1 Level 2 Level 3 GBP000 GBP000 GBP000 GBP000 Financial liabilities at fair value through the income statement 30 September 2015 Interest rate swap (92,566) - (92,566) - ----------- -------- ----------- -------- 31 March 2015 Interest rate swap (88,811) - (88,811) - ----------- -------- ----------- -------- 30 September 2014 Interest rate swap (87,960) - (87,960) - ----------- -------- ----------- --------
During the reporting period ending 30 September 2015, there were no transfers between Level 1 and Level 2 fair value measurements and no transfers into and out of Level 3 fair value measurements.
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
-- Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
-- Level 2: other techniques for which all inputs with a significant effect on the recorded fair value are observable, either directly or indirectly; and
-- Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
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