TIDMBD49
RNS Number : 2437R
Electricity North West Limited
07 December 2016
Electricity North West Limited (the "Company") is pleased to
announce its unaudited half year condensed financial statements for
the period ended 30 September 2016.
The unaudited half year condensed financial statements are
available to view on the Company's website at:
http://www.enwl.co.uk/about-us/financial-reports
For further information please contact Electricity North West's
press office on 0844 209 1957 oremail pressoffice@enwl.co.uk
Company Registration No. 02366949
ELECTRICITY NORTH WEST LIMITED
Half Year Condensed Consolidated
Financial Statements
for the period ended 30
September 2016
CONTENTS
Interim Management Report 3
Condensed Consolidated Income Statement 5
Condensed Consolidated Statement of Other Comprehensive
Income
6
Condensed Consolidated Statement of Financial Position 7
Condensed Consolidated Statement of Changes in Equity 8
Condensed Consolidated Statement of Cash Flows 9
Notes to the Condensed set of Consolidated Financial
Statements
10
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 (appointed 27 May 2016)
Steve Johnson (resigned 27 May 2016)
David Brocksom
Non-executive Directors
Dr John Roberts
Niall Mills
Mike Nagle
Mark Walters
Chris Dowling
Hamish Lea-Wilson
Rob Holden
Niall Mills, Hamish Lea-Wilson and Mark Walters have all
appointed alternate Directors. Tomas Pedraza was alternate for both
Niall Mills and Hamish Lea-Wilson, and Andrew Truscott was
alternate for Mark Walters, 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
2016 2015 2016
---------------- ---------- -------- ----------------
Revenue GBP227m GBP212m GBP451m
Operating GBP110m GBP98m GBP215m
profit
Profit
before
tax and
fair value
movements,
after accretion GBP73m GBP81m GBP164m
Profit/(loss) GBP(67m) GBP86m GBP122m
before
tax
---------------- ---------- -------- ----------------
Revenue
Revenue is GBP15m higher in the six months to 30 September 2016
compared to the same period in the prior year. This is due to a
higher unit price, in line with the allowed Distribution Use of
System ("DUoS") revenue.
As experienced in the year to 31 March 2016, the revenue for the
six months to 31 March 2017 is expected to be higher than that in
the six months to 30 September 2016, due to the higher volumes of
electricity units distributed over the winter period.
Operating profit
Operating profit is GBP12m higher mainly as a result of the
higher revenue and an ongoing focus on operating cost control.
Profit before tax and fair value movements
Profit before tax and fair value movements is GBP8m lower. This
is due to the GBP19m increase in finance expense (before fair value
movements). This is primarily due to the GBP16m scheduled accretion
payment on the index-linked swaps. These payments are not annual,
but fall under either a five, seven or ten yearly profile dependant
on the swap. The last payment (GBP10m) was in July 2012 and the
next payment (estimated at GBP9m) is due in July 2017.
Profit before tax
Profit/ (loss) before tax has deteriorated significantly, by
GBP153m. In addition to the GBP8m lower profit before tax and fair
value movements, the further GBP145m deterioration is due largely
to net fair value losses on financial instruments at FVTPL of
GBP140m. This compares to a GBP6m gain in the comparative period.
These fair value losses are a result of the combined effect of the
decrease in market expectations of future interest rates, and the
increase in market expectations of future inflation rates following
the Brexit decision in June 2016.
INTERIM MANAGEMENT REPORT (continued)
Dividends
Final dividends for the year ended 31 March 2016 of GBP18m have
been paid in the period. More details on dividends are given in
Note 7.
Retirement benefit obligation
The retirement benefit obligation has increased significantly
over the six month period to 30 September 2016, from GBP16.2m to
GBP179.3m. The main reason for the deterioration is the significant
fall in the discount rate used to value the liabilities, following
on from the Brexit result in June 2016.
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 2016, 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 10 to 11, 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:
304 Bridgewater Place
Birchwood Park
Warrington
WA3 6XG
Approved by the Board of Directors and signed on its behalf:
D Brocksom
Chief Financial Officer
7 December 2016
CONDENSED CONSOLIDATED INCOME STATEMENT
For the period ended 30 September 2016
Unaudited Unaudited
Period Period Audited
ended ended Year ended
30 September 30 September 31 March
Note 2016 2015 2016
GBPm GBPm GBPm
Revenue 226.8 211.6 450.8
Employee costs (22.4) (23.8) (47.2)
Depreciation and amortisation
expense (net) (49.6) (42.4) (94.4)
Retail property provision
(charge)/release 14 (0.1) 0.7 1.0
Other operating costs (44.9) (47.8) (95.6)
Total operating expenses (117.0) (113.3) (236.2)
Operating profit 109.8 98.3 214.6
Investment income 4 0.4 0.4 0.9
Finance expense (net) 5 (176.7) (12.5) (94.0)
(Loss)/ profit before
taxation (66.5) 86.2 121.5
Taxation 6 19.7 (17.4) (4.5)
(Loss)/ profit for
the period/year attributable
to equity shareholders (46.8) 68.8 117.0
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 2016
Unaudited Unaudited
Period Period Audited
ended ended Year ended
30 September 30 September 31 March
2016 2015 2016
GBPm GBPm GBPm
(Loss)/ profit for the
period/year (46.8) 68.8 117.0
Items that will not be
classified subsequently
to profit or loss:
Remeasurement of defined
benefit pension scheme (168.2) 44.7 9.1
Deferred tax on remeasurement
of defined benefit pension
scheme taken directly to
equity 28.6 (8.9) (1.6)
Adjustment due to change
in future tax rates of
brought forward deferred
tax taken directly to equity (1.0) - (2.2)
Other comprehensive income
for the period/year (140.6) 35.8 5.3
Total comprehensive income
for the period/year and
attributable to equity
shareholders (187.4) 104.6 122.3
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 September 2016 Unaudited Unaudited Audited
30 Sept 30 Sept 31 March
2016 2015 2016
Note GBPm GBPm GBPm
ASSETS
Non-current assets
Intangible assets and
goodwill 41.7 35.8 39.5
Property, plant and equipment 8 2,982.9 2,890.2 2,942.7
Retirement benefit surplus 12 - 15.2 -
3,024.6 2,941.2 2,982.2
Current assets
Inventories 9.4 7.6 8.5
Trade and other receivables 54.3 54.7 67.9
Cash and cash equivalents 134.3 139.4 119.3
Money market deposits
(maturity over 3 months) 10.0 10.0 23.5
Current tax asset 7.0 - -
215.0 211.7 219.2
Total assets 3,239.6 3,152.9 3,201.4
LIABILITIES
Current liabilities
Trade and other payables (126.9) (123.5) (137.1)
Current tax liabilities - (11.3) (7.1)
Provisions 14 (0.4) (1.6) (0.6)
Borrowings 9 (6.2) - (4.6)
(133.5) (136.4) (149.4)
Net current assets 81.5 75.3 69.8
Non-current liabilities
Borrowings 9 (1,256.8) (1,225.5) (1,228.4)
Derivative financial
instruments 10 (379.7) (223.3) (267.7)
Deferred tax liabilities (101.1) (183.5) (158.0)
Customer contributions (573.8) (548.1) (561.0)
Refundable customer deposits - (2.5) -
Provisions 14 (2.0) (2.5) (1.9)
Retirement benefit obligation 12 (179.3) - (16.2)
(2,492.7) (2,185.4) (2,233.2)
Total liabilities (2,626.2) (2,321.8) (2,382.6)
Net assets 613.4 831.1 818.8
EQUITY
Called up share capital (238.4) (238.4) (238.4)
Share premium account (4.4) (4.4) (4.4)
Revaluation reserve (93.5) (94.1) (93.5)
Capital redemption reserve (8.6) (8.6) (8.6)
Retained earnings (268.5) (485.6) (473.9)
Total equity (613.4) (831.1) (818.8)
Approved by the Board of Directors on 7 December 2016 and signed
on its behalf by:
D Brocksom
Director
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the period ended 30 September 2016
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 2015 (audited) 238.4 4.4 99.2 8.6 375.9 726.5
Profit for the period - - - - 68.8 68.8
Transfer from revaluation
reserve - - (5.1) - 5.1 -
Other comprehensive
income - - - - 44.7 44.7
Tax on other comprehensive
income - - - - (8.9) (8.9)
Total comprehensive
(expense)/ income for
the period - - (5.1) - 109.7 104.6
Transactions with owners
recorded directly in
equity:
Equity dividends - - - - - -
At 30 September 2015
(unaudited) 238.4 4.4 94.1 8.6 485.6 831.1
At 31 March 2015 (audited) 238.4 4.4 99.2 8.6 375.9 726.5
Profit for the year - - - - 117.0 117.0
Transfer from revaluation
reserve - - (5.7) - 5.7 -
Other comprehensive
income - - - - 5.3 5.3
Total comprehensive
(expense)/ income for
the year - - (5.7) - 128.0 122.3
Transactions with owners
recorded directly in
equity:
Equity dividends - - - - (30.0) (30.0)
At 31 March 2016 (audited) 238.4 4.4 93.5 8.6 473.9 818.8
Profit/ (loss) for
the period - - - - (46.8) (46.8)
Transfer from revaluation
reserve - - - - - -
Other comprehensive
income - - - - (168.2) (168.2)
Tax on other comprehensive
income - - - - 27.6 27.6
Total comprehensive
(expense)/ income for
the period - - - - (187.4) (187.4)
Transactions with owners
recorded directly in
equity:
Equity dividends - - - - (18.0) (18.0)
At 30 September 2016
(unaudited) 238.4 4.4 93.5 8.6 268.5 613.4
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the period ended 30 September 2016
Unaudited Unaudited
Period Period Audited
ended ended Year ended
30 September 30 September 31 March
2016 2015 2016
Note GBPm GBPm GBPm
Operating activities
Cash generated from operations 11 168.6 116.7 270.8
Interest paid (24.0) (7.8) (46.8)
Tax paid (51.3) (10.9) (22.8)
Net cash generated from
operating activities 93.3 98.0 201.2
Investing activities
Interest received and
similar income 0.5 0.3 0.9
Purchase of property,
plant and equipment (90.2) (102.5) (199.5)
Purchase of intangible
assets (4.1) (8.6) (14.9)
Customer contributions
received 21.5 21.7 44.3
Proceeds from sale of
property, plant and equipment 0.1 0.1 0.2
Net cash used in investing
activities (72.2) (89.0) (169.0)
Net cash (outflow)/ inflow
before financing activities 21.1 9.0 32.2
Financing activities
Dividends paid to equity
shareholders of the Company 7 (18.0) - (30.0)
Transfer from/(to) money
market deposits 13.5 15.0 1.5
Proceeds from borrowings - - 1.8
Repayment of external
borrowings (1.6) (20.6) (22.2)
Net cash (used in)/ generated
from financing activities (6.1) (5.6) (48.9)
Net increase/ (decrease)
in cash and cash equivalents 15.0 3.4 (16.7)
Cash and cash equivalents
at beginning of the period/
year 119.3 136.0 136.0
Net cash and cash equivalents
at end of the period/
year 134.3 139.4 119.3
NOTES TO THE CONDENSED SET OF CONSOLIDATED FINANCIAL
STATEMENTS
1 GENERAL INFORMATION
The financial information for the 6 month period ended 30
September 2016 and similarly the period ended 30 September 2015 has
neither been audited nor reviewed by the auditor. The financial
information for the year ended 31 March 2016 has been based on
information in the audited financial statements for that year.
The financial information for the year ended 31 March 2016 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 2016 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 2016 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 2016.
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 3, when comparing the interim results to those
expected to be achieved in the second half of the year.
Going concern
When considering continuing to adopt the going concern basis in
preparing the Half Year Condensed Consolidated Financial Statements
for the six months ended 30 September 2016, 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 2017 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 our 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. Further liquidity is
provided by surplus cash and short-term deposit balances.
Furthermore, committed undrawn bank facilities of GBP50m within
ENWL are available from lenders. 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; and
Notes to the condensed set of consolidated financial statements
(continued)
2 SIGNIFICANT ACCOUNTING POLICIES (continued)
Going concern (continued)
-- The Group and ENWL are financed largely by long term external
funding, and this, together with the present cash position and
committed undrawn facilities, provides the appropriate liquidity
platform to allow the Company and Group to meet their operational
and financial commitments for the foreseeable future.
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 2016, or for the remainder of
the year to 31 March 2017, 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 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.
Notes to the condensed set of consolidated financial statements
(continued)
4 INVESTMENT INCOME
Unaudited Unaudited
Period Period Audited
ended ended Year ended
30 September 30 September 31 March
2016 2015 2016
GBPm GBPm GBPm
Interest receivable on short-term
bank deposits held at amortised
cost 0.4 0.4 0.9
5 FINANCE EXPENSE (NET)
Unaudited Unaudited
Period Period Audited
ended ended Year ended
30 September 30 September 31 March
2016 2015 2016
GBPm GBPm GBPm
Interest payable
Interest payable on Group
borrowings 7.2 7.8 15.0
Interest payable on borrowings
held at amortised cost 11.5 11.5 23.3
Interest payable on borrowings
designated at fair value
through profit or loss - - 22.2
Net receipts on derivatives
held for trading (1.6) (2.4) (12.9)
Other finance charges related
to index-linked debt 3.9 1.1 3.9
Interest cost on pension
plan obligations 0.2 0.3 0.7
Capitalisation of borrowing
costs under IAS 23 (0.2) (0.3) (1.0)
Total interest expense 21.0 18.0 51.2
Fair value movements on
financial instruments
Fair value movement on borrowings
designated at fair value
through profit or loss 27.4 (16.6) (12.7)
Fair value movement on derivatives
held for trading 112.1 11.1 55.5
Accretion payable on index-linked
swaps 16.2 - -
Total fair value movements 155.7 (5.5) 42.8
Total finance expense (net) 176.7 12.5 94.0
Notes to the condensed set of consolidated financial statements
(continued)
6 TAXATION
Unaudited Unaudited
Period Period Audited
ended ended Year ended
30 September 30 September 31 March
2016 2015 2016
GBPm GBPm GBPm
Current tax:
Current period/year 9.6 25.7 31.9
Prior year - 1.6
9.6 25.7 33.5
Deferred tax:
Current period/year (19.5) (8.3) (6.6)
Prior year - - (1.9)
Impact of change in future
tax rates (9.8) - (20.5)
(29.3) (8.3) (29.0)
Tax charge for the period/year (19.7) 17.4 4.5
Corporation tax is calculated at 20% (period ended 30 September
2015: 20%, year ended 31 March 2016: 20%) being the best estimate
of the effective tax rate for the full financial year.
The tax rate will change to 19% on 1 April 2017 and 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.
7 DIVIDS
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
2016 2015 2016
GBPm GBPm GBPm
Interim dividends for the
year ended 31 March 2016
of 6.29 pence per share - - 30.0
Final dividends for the
year ended 31 March 2016
of 3.77 pence per share 18.0 - -
Dividends for the period/year 18.0 - 30.0
Notes to the condensed set of consolidated financial statements
(continued)
8 PROPERTY, PLANT AND EQUIPMENT
During the period, the Group spent GBP93.2m (period ended 30
September 2015: GBP100.7m, year ended March 2016: GBP206.4m) on
additions to property, plant and equipment as part of its capital
programme for its operating network. Included in these figures are
capitalised interest of GBP0.2m (period ended 30 September 2015:
GBP0.3m, year ended March 2016: GBP1.0m), in accordance with IAS
23.
9 BORROWINGS
Unaudited Unaudited Audited
30 September 30 September 31 March
2016 2015 2016
GBPm GBPm GBPm
Current liabilities
Bank and other term borrowings 6.2 - 4.6
6.2 - 4.6
Non-current liabilities
Bonds 738.8 705.8 711.3
Bank and other term borrowings 249.6 254.2 249.0
Amounts owed to parent
undertaking 70.9 68.6 70.9
Amounts owed to affiliated
undertaking 197.5 196.9 197.2
1,256.8 1,225.5 1,228.4
1,263.0 1,225.5 1,233.0
As at 30 September 2016 the Group had GBP50.0m of unutilised
committed bank facilities (30 September 2015: GBP50.0m, 31 March
2016: GBP50.0m).
The Group's debt facilities expire between 2017 and 2046.
Notes to the condensed set of 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 rate expectations 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 2016
is GBP81.3m (30 September 2015: GBP74.1m, 31 March 2016: GBP93.2m),
of which GBP77.9m (30 September 2015: GBPnil, 31 March 2016:
GBP91.3m) 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
2016 2015 31 March 2016
-10bps +10bps -10bps +10bps -10bps +10bps
GBPm GBPm GBPm GBPm GBPm GBPm
------------------- ------- ------ ------- ------ ------- -------
Inflation-linked
swaps (5.2) 5.0 - - (3.3) 3.2
------------------- ------- ------ ------- ------ ------- -------
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 GBP32.7m (30 September 2015: GBPnil, 31 March
2016: GBP33.2m). The movement in the period all relates to the
straight-line release to profit or loss.
Notes to the condensed set of 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
2016 2015 2016
GBPm GBPm GBPm
Derivative financial
liabilities;
Level 1 - - -
Level 2 (132.5) (223.3) (99.9)
Level 3 (247.2) - (167.8)
(379.7) (223.3) (267.7)
Financial liabilities
designated at FVTPL;
Level 1 (408.1) (376.8) (380.7)
Level 2 - - -
Level 3 - - -
(408.1) (376.8) (380.7)
There were no transfers between levels during the current period
(period ended 30 September 2015: same). In the year ended 31 March
2016, GBP131.4m 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.
Notes to the condensed set of 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
2016 2015 2016
GBPm GBPm GBPm
Opening balance (167.8) - -
Transfers into Level
3 from Level 2 - - (131.4)
Total gains or losses
in profit or loss;
On transfers into Level
3 from Level 2 - - (26.0)
On new derivatives in
the period - - (10.4)
On derivatives in Level
3 for the whole period (79.4) - -
Closing balance (247.2) - (167.8)
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
2016 2015 2016
GBPm GBPm GBPm
Non-current liabilities:
Borrowings measured at
amortised cost
Carrying value (1,256.8) (1,225.5) (1,228.4)
Fair value (1,471.9) (1,362.2) (1,371.3)
Changes in circumstances significantly affecting the fair value
of financial assets and financial liabilities
Over the period, market expectations of future interest rates
have fallen significantly; this has resulted in GBP93.3m of the
total GBP139.5m fair value movement over the period. A further
GBP17.1m is a result of the increase in market expectations of
future inflation rates, with the remaining GBP29.1m due to changes
in the credit risk profiles used in the DVA and CVA
calculations.
Notes to the condensed set of consolidated financial statements
(continued)
11 CASH GENERATED FROM OPERATIONS
Unaudited Unaudited
Period Period Audited
ended ended Year ended
30 September 30 September 31 March
2016 2015 2016
GBPm GBPm GBPm
Operating profit 109.8 98.3 214.6
Adjustments for:
Depreciation of property,
plant and equipment 53.0 47.4 100.3
Amortisation of intangible
assets 1.9 2.1 4.8
Amortisation of customer
contributions(1) (8.0) (7.6) (15.3)
Profit on disposal of
property, plant and
equipment (0.1) (0.1) (0.2)
Cash contributions in
excess of pension charge
to operating profit (8.1) (4.5) (16.0)
Operating cash flows
before movement in working
capital 148.5 135.6 288.2
Changes in working capital:
(Increase)/decrease in
inventories (0.9) (0.3) (1.2)
Decrease/(increase) in
trade and other receivables 12.8 9.2 (2.0)
Increase/ (decrease)
in provisions and payables 8.2 (27.8) (14.2)
Cash generated from operations 168.6 116.7 270.8
1 In the 6 months ended 30 September 2016 GBP2.6m (period ended
September 2015: GBP1.3m, year ended March 2016 GBP4.6m) 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 2016. 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 2016. 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 increased to GBP179.3m (30 September
2015: surplus of GBP15.2m, 31 March 2016: deficit of GBP16.2m),
primarily due to the significant fall in the discount rate, which
increased the value placed on the liabilities.
Notes to the condensed set of 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
2016 2015 2016
GBPm GBPm GBPm
Transactions with related
parties
Recharges to Electricity
North West (Construction
and Maintenance) Ltd 0.7 0.7 1.2
Recharges from Electricity
North West (Construction
and Maintenance) Ltd - 0.2 0.2
Directors' remuneration 0.8 0.6 1.3
Directors' services 0.1 0.1 0.2
Interest payable to North
West Electricity Networks
plc 1.0 1.6 2.6
Interest payable to ENW
Finance plc 6.1 6.1 12.4
Dividends paid to North
West Electricity Networks
plc 18.0 - 30.0
Fees of GBP0.1m (September 2015: GBP0.1m, March 2016: 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 2015: GBP0.1m, March 2016: GBP0.1m)
were payable to IIF Int'l Holding GP Ltd ('IIF') in respect of the
provision of Directors' services which is identified as a related
party; IIF have refunded GBP0.1m of fees for previous periods as a
result of a true up exercise.
Notes to the condensed set of consolidated financial statements
(continued)
13 RELATED PARTIES (continued)
Amounts outstanding between the Group and other companies within
the North West Electricity Networks (Jersey) Group:
Unaudited Unaudited
Period Period Audited
ended ended Year ended
30 September 30 September 31 March
2016 2015 2016
GBPm GBPm GBPm
Amounts owed to related
parties
Group tax relief to North
West Electricity Networks
plc 5.0 4.9 12.9
Interest payable to North
West Electricity Networks
plc 0.5 0.5 0.5
Interest payable to ENW
Finance plc 2.5 2.4 2.4
Amounts owed to Electricity - 0.2 -
North West (Construction
and Maintenance) Ltd
Borrowings from North West
Electricity Networks plc 70.9 69.1 70.9
Borrowings from ENW Finance
plc 199.1 198.9 199.0
Amounts owed by related
parties
Amounts owed by North West
Electricity Networks plc 3.7 3.7 3.7
Amounts owed by Electricity
North West (Construction
and Maintenance) Ltd 0.2 0.4 0.5
Amounts owed by North West
Electricity Networks (Jersey)
Limited 0.1 0.1 0.1
Amounts owed by North West
Electricity Networks (Holdings)
Ltd 0.2 0.2 0.2
The loan from North West Electricity Networks plc accrues
weighted average interest at 2.74% per annum (September 2015:
2.75%, March 2016: 2.74%) and is repayable in March 2023.
The loan from ENW Finance plc accrues interest at 6.125%
(September 2015: 6.125%, March 2016: 6.125%) and is repayable in
July 2021.
Notes to the condensed set of consolidated financial statements
(continued)
14 PROVISIONS
Unaudited Unaudited
Period Period Audited
ended ended Year ended
30 September 30 September 31 March
2016 2015 2016
GBPm GBPm GBPm
Opening Balance 2.5 6.1 6.1
Charge/(release) to the income
statement on
re-estimate of provision 0.1 (0.7) (1.0)
Utilisation of provision (0.2) (1.3) (2.6)
2.4 4.1 2.5
Current 0.4 1.6 0.6
Non current 2.0 2.5 1.9
2.4 4.1 2.5
During the year ended 31 March 2013 a provision was created in
connection with a portfolio of retail properties which the company
was liable for under privity of contract.
The carried forward provision at 1 April 2016 was GBP2.5m and
related to former Norweb properties, 1 High Street retail property
and 10 out of town retail properties. During the period to 30
September 2016 GBP0.2m of the provision has been utilised and
GBP0.1m has been charged to the income statement on the
re-estimation on the liabilities.
The combined closing provision of GBP2.4m, which now relates to
1 High Street retail property and 3 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.
15 CONTINGENT LIABILITY
The Company is part of a Covenanter Group ('CG') which is party
to a Deed of Covenant with EA Technology Limited (EATL) under which
certain guarantees over the benefits of members of the EATL Group
of the Electricity Supply Pension Scheme have been given. In the
event of EATL being unable to meet the obligations for its part of
the ESPS pension scheme deficit following a discontinuance event,
the members of the pension scheme can make a claim against the
CG.
In December 2015, EATL filed their annual report and financial
statements to the year ended 31 March 2015, containing an emphasis
of matter on going concern noting a material uncertainty in the
company's ability to continue as a going concern.
Under the terms of the Deed of Covenant if there was such a
discontinuance event the Company is liable to pay 6.7% of the
deficit. This deficit has been calculated using a going concern
basis and the actual deficit on an insolvency event could be
higher. Management do not consider that this event is probable and
no provision has been made in these accounts. The total deficit has
been estimated at GBP75m as at 31 March 2016, of which the
Company's share would be GBP5.0m to GBP7.0m.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR QDLFBQLFLFBL
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December 07, 2016 11:34 ET (16:34 GMT)
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