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
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