TIDMBD49
RNS Number : 6591I
Electricity North West Limited
27 November 2018
Electricity North West Limited (the "Company") is pleased to
announce its Half Year Financial
Report for the period ended 30 September 2018.
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 2018
Contents
Interim Management
Report...................................................................................................................
1
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 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 ("ENWL" or "the
Company") 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, with 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.
Financial statements
The Annual Report and Consolidated Financial Statements of the
Company can be found at www.enwl.co.uk.
Operations
The Group's principal activity is the operation of electricity
distribution assets owned by 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.
Consolidated results
6 months ended 30 Sept 2018 6 months ended 30 Sept 2017 Year ended 31 Mar 2018
==================================== =========================== =========================== ======================
Revenue GBP208m GBP197m GBP430m
Profit before tax and fair value GBP59m GBP42m GBP111m
movements
Profit before tax GBP71m GBP82m GBP141m
Net cash flow before financing GBP3m GBP5m GBP12m
activities
Net debt GBP1,162m GBP1,108m GBP1,150m
==================================== =========================== =========================== ======================
Revenue
Revenue is GBP11m higher in the six months to 30 September 2018
compared to the same period in the prior year. This is due to
higher unit prices which are set to recover an allowed Distribution
Use of System ("DUoS") revenue for each year. The principal reasons
for the higher unit price are higher allowed base revenue, higher
incentive revenue and a favourable movement in the correction
factor due to lower over-recovery of revenue in the relevant prior
year.
The revenue for the six months to 31 March 2019 is expected to
be higher than that in the six months to 30 September 2018, due to
the seasonally 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 GBP17m higher than
the six months to September 2017. This is primarily due to the
higher revenue.
Profit before tax
Profit before tax is GBP11m lower than the same period in the
prior year. This is primarily due to the higher revenue, net of
GBP28m lower gains on the financial instruments at fair value
through profit and loss. 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 11).
Net cash flow before financing
The net cash flow before financing is only GBP2m higher than the
same period in the prior year, despite revenue being GBP11m higher.
Cash generated from operations was actually GBP23m higher but this
is offset by GBP18m higher capital expenditure and GBP6m higher tax
paid.
Interim Management Report (continued)
Net Debt
Net debt has increased by GBP12m in the six month period to 30
September 2018; this is due to the GBP18m reduction in cash, offset
by the GBP7m reduction in borrowing primarily due to the movement
in the fair value of the GBP250m 8.875% 2026 bond at fair value
through profit and loss.
Dividends
Final dividends for the year ended 31 March 2018 of GBP16m have
been paid in the period. More details on dividends are given in
Note 8.
Retirement benefit obligation
The retirement benefit obligation has become an asset in IAS
terms over the six month period to 30 September 2018, from GBP18.2m
to an asset of GBP4.2m. The main reason for the improvement is the
increase in the discount rate used to value the liabilities (see
Note 12).
Principal risks and uncertainties
The principal trade and activities of the Group are carried out
in Electricity North West Limited ("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 outlined in the
Strategic Report of the ENWL Annual Report and Consolidated
Financial Statements for the year ended 31 March 2018, which are
available on the website, www.enwl.co.uk.
The Board considers that the principal risks and uncertainties
have not changed from the last annual report.
Going concern
When considering whether to continue to adopt the going concern
basis in preparing these condensed financial statements, the
Directors have taken into account a number of factors, including
the following:
-- The Company's electricity distribution licence includes the
obligation in standard condition 40 to maintain an investment grade
issuer credit rating;
-- 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 their 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 2019 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 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 2019 and 2023 indicate there
is significant headroom on these covenants.
Interim Management Report (continued)
Going concern (continued)
The Board has given detailed consideration to the principal
risks and uncertainties affecting the Group and Company, as
referred to above, 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 Company and 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.
The going concern basis has been adopted by the Directors, with
consideration of the guidance given in 'Going Concern and Liquidity
Risk: Guidance for Directors of UK Companies 2009' published by the
Financial Reporting Council in October 2009.
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 - resigned 26 Sept 2018
-- Susan Cooklin - appointed 25 Jul 2018
-- Alistair Buchanan - appointed 25 Jul 2018
-- Anne Baldock - appointed 26 Sept 2018
Niall Mills, Hamish Lea-Wilson, John Lynch and Anne Baldock are
shareholder appointed directors and have appointed alternate
Directors. Tomas Pedraza was alternate for both Niall Mills and
Hamish Lea-Wilson. Mark Scarsella was alternate for John Lynch,
Anne Baldock and Mike Nagle, in all cases throughout the period,
except where stated above.
Responsibility statement
We confirm that to the best of our knowledge:
-- 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;
-- the interim management report includes a fair review of the
information required by DTR 4.2.7R; and
-- 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
26 November 2018
Condensed Consolidated Statement of Comprehensive Income
For the period ended 30 September 2018
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2018
Note 2018 2017 GBPm
GBPm GBPm
======================================= ====== ============= ============= ============
Revenue 207.7 197.1 430.2
======================================= ====== ============= ============= ============
Employee costs (28.8) (26.0) (51.5)
Depreciation and amortisation expense
(net) (52.7) (50.6) (103.3)
Other operating costs (43.7) (46.0) (92.1)
======================================= ====== ============= ============= ============
Total operating expenses (125.2) (122.6) (246.9)
======================================= ====== ============= ============= ============
Operating profit 82.5 74.5 183.3
Investment income 5 0.2 0.7 1.0
Finance expense (net) 6 (11.6) 6.8 (43.0)
======================================= ====== ============= ============= ============
Profit before taxation 71.1 82.0 141.3
Taxation 7 (13.6) (15.0) (25.0)
======================================= ====== ============= ============= ============
Profit for the period attributable
to shareholders 57.5 67.0 116.3
Other comprehensive income:
Items that will not be reclassified
subsequently to profit or loss:
Remeasurement of net defined benefit
liability 15.2 15.9 27.1
Deferred tax on remeasurement of
defined benefit liability (2.6) (2.7) (4.6)
Adjustment due to change in future - - -
tax rates of brought forward deferred
tax
======================================= ====== ============= ============= ============
Other comprehensive income for the
period 12.6 13.2 22.5
======================================= ====== ============= ============= ============
Total comprehensive income for the
period attributable to shareholders 70.1 80.2 138.8
======================================= ====== ============= ============= ============
All the results for the current and prior periods are derived
from continuing operations.
Condensed Consolidated Statement of Financial Position
As at 30 September 2018
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2018
Note 2018 2017 GBPm
GBPm GBPm
================================== ====== ============= ============= ============
ASSETS
Non-current assets
Intangible assets and goodwill 50.9 48.1 49.6
Property, plant and equipment 9 3,196.0 3,079.5 3,137.9
Retirement benefit surplus 12 4.2 - -
3,251.1 3,127.6 3,187.5
================================== ====== ============= ============= ============
Current assets
Inventories 11.9 11.0 10.5
Trade and other receivables 54.0 50.8 63.4
Cash and cash equivalents 68.8 133.8 87.0
Money market deposits (maturity - - -
over 3 months)
Current tax asset - - -
================================== ====== ============= ============= ============
134.7 195.6 160.9
================================== ====== ============= ============= ============
Total assets 3,385.8 3,323.2 3,348.4
================================== ====== ============= ============= ============
LIABILITIES
Current liabilities
Trade and other payables (136.8) (128.1) (142.6)
Current tax liabilities (12.0) (11.6) (13.5)
Borrowings 10 (6.8) (6.4) (6.6)
Provisions 13 (0.6) (1.0) (0.8)
(156.2) (147.1) (163.5)
================================== ====== ============= ============= ============
Net current assets/ (liabilities) (21.5) 48.5 (2.6)
Non-current liabilities
Borrowings 10 (1,223.6) (1,235.2) (1,230.7)
Derivative financial instruments 11 (354.8) (334.8) (357.3)
Retirement benefit obligation 12 - (35.8) (18.2)
Deferred tax liabilities (141.4) (135.3) (136.0)
Provisions 13 (2.3) (2.7) (2.3)
Customer contributions (625.6) (599.5) (612.6)
(2,347.7) (2,343.3) (2,357.1)
================================== ====== ============= ============= ============
Total liabilities (2,503.9) (2,490.4) (2,520.6)
================================== ====== ============= ============= ============
Net assets 881.9 832.8 827.8
================================== ====== ============= ============= ============
EQUITY
Called up share capital 238.4 238.4 238.4
Share premium account 4.4 4.4 4.4
Revaluation reserve 89.3 91.4 90.3
Capital redemption reserve 8.6 8.6 8.6
Retained earnings 541.2 490.0 486.1
================================== ====== ============= ============= ============
Total equity 881.9 832.8 827.8
================================== ====== ============= ============= ============
Approved by the Board of Directors on 26 November 2018 and
signed on its behalf by:
D Brocksom
Director
Condensed Consolidated Statement of Changes in Equity
For the period ended 30 September 2018
Called Share Capital
up share premium Revaluation redemption Retained Total
capital account reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm
================================= ========== ========= ============ ============ ========== ========
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
Other comprehensive income
for the period - - - - 13.2 13.2
Transfer from revaluation
reserve - - (1.1) - 1.1 -
Total comprehensive income
for the period - - (1.1) - 81.3 80.2
================================= ========== ========= ============ ============ ========== ========
Equity dividends (Note 8) - - - (12.0) (12.0)
================================= ========== ========= ============ ============ ========== ========
At 30 September 2017 (unaudited) 238.4 4.4 91.4 8.6 490.0 832.8
================================= ========== ========= ============ ============ ========== ========
At 31 March 2017 (audited) 238.4 4.4 92.5 8.6 420.7 764.6
Profit for the period - - - - 116.3 116.3
Other comprehensive income
for the period - - - - 22.5 22.5
Transfer from revaluation
reserve - - (2.2) - 2.2 -
Total comprehensive income
for the period - - (2.2) - 141.0 138.8
================================= ========== ========= ============ ============ ========== ========
Equity dividends (Note 8) - - - - (75.6) (75.6)
================================= ========== ========= ============ ============ ========== ========
At 31 March 2018 (audited) 238.4 4.4 90.3 8.6 486.1 827.8
================================= ========== ========= ============ ============ ========== ========
Profit for the period - - - - 57.5 57.5
Other comprehensive income
for the period - - - - 12.6 12.6
Transfer from revaluation
reserve - - (1.0) - 1.0 -
Total comprehensive income
for the period - - (1.0) - 71.1 70.1
================================= ========== ========= ============ ============ ========== ========
Equity dividends (Note 8) - - - (16.0) (16.0)
================================= ========== ========= ============ ============ ========== ========
At 30 September 2018 (unaudited) 238.4 4.4 89.3 8.6 541.2 881.9
================================= ========== ========= ============ ============ ========== ========
Condensed Consolidated Statement of Cash Flows
For the period ended 30 September 2018
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2018
Note 2018 2017 GBPm
GBPm GBPm
========================================== ====== ============= ============= ============
Operating activities
Cash generated from operations 15 117.1 94.2 239.0
Interest paid (8.7) (7.8) (47.2)
Tax paid (12.3) (5.9) (15.1)
========================================== ====== ============= ============= ============
Net cash generated from operating
activities 96.1 80.5 176.7
========================================== ====== ============= ============= ============
Investing activities
Interest received and similar income 0.2 0.7 1.0
Purchase of property, plant and
equipment (109.1) (91.0) (200.3)
Purchase of intangible assets (4.2) (5.0) (9.5)
Proceeds from sale of property,
plant and equipment 0.1 0.1 0.2
Customer contributions received 19.6 19.8 44.0
========================================== ====== ============= ============= ============
Net cash used in investing activities (93.4) (75.4) (164.6)
========================================== ====== ============= ============= ============
Net cash flow before financing activities 2.7 5.1 12.1
Financing activities
Dividends paid 8 (16.0) (12.0) (75.6)
Repayment of external borrowings (3.4) (3.2) (6.5)
Proceeds from borrowings - - 2.5
Accretion on index-linked swaps - (8.8) (8.8)
Movement in cash collateral held (1.5) - 10.6
Transfer from money market deposits - 10.0 10.0
Net cash used in financing activities (20.9) (14.0) (67.8)
========================================== ====== ============= ============= ============
Net increase/ (decrease) in cash and
cash equivalents (18.2) (8.9) 55.7
Cash and cash equivalents at beginning
of period 87.0 142.7 142.7
========================================== ====== ============= ============= ============
Cash and cash equivalents at end
of period 68.8 133.8 87.0
========================================== ====== ============= ============= ============
Notes to the Condensed Consolidated Financial Statements
1. General Information
Electricity North West Ltd is a company incorporated in the
United Kingdom under the Companies Act 2006.
The financial information for the 6 month period ended 30
September 2018 and similarly the period ended 30 September 2017 has
neither been audited nor reviewed by the auditor. The financial
information for the year ended 31 March 2018 has been based on
information in the audited financial statements for that year.
The financial information for the year ended 31 March 2018 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 2018 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 accounting
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 (EU). 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 EU.
The results for the period ended 30 September 2018 have been
prepared using the same method of computation and the same
accounting policies set out in the Annual Report and Consolidated
Financial Statements of ENWL for the year ended 31 March 2018.
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
The Directors have, at the time of approving the financial
statements, 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. Further detail is contained in
the Interim Management Report.
Notes to the Condensed Consolidated Financial Statements
(continued)
3. Critical accounting judgements and key sources of estimation uncertainty
Changes in accounting policy
The Group has adopted the following IFRSs during the period;
IFRS 9: Financial Instruments
The Group has elected not to restate comparatives on initial
application of IFRS 9. Based on the financial instruments and
hedging relationships held during the period, the application of
IFRS 9 has not had a material impact on amounts reported in the
financial statements.
IFRS 15: Revenue from Contracts with Customers
The Group has adopted the modified retrospective approach
without restatement of comparatives.
IFRS 15 establishes a single comprehensive model for entities to
use in accounting for revenue arising from contracts with
customers. The core principle of IFRS 15 is that an entity should
recognise revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those
goods or services. Under IFRS 15, an entity recognises revenue when
(or as) a performance obligation is transferred to the
customer.
The main impact of IFRS 15 for the Group is with regards to the
customer contributions in respect of connections contracts which
were accounted for under IFRIC 18. The impact of adopting IFRS 15
has not been material for 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 finance expense
and is separately identifiable from the net interest paid or
received on these financial instruments, see Note 6. Fair value is
determined in the manner described in Note 11.
4. 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
Leadership 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.
5. Investment income
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2018
2018 2017 GBPm
GBPm GBPm
============================ ============= ============= ============
On short-term bank deposits 0.2 0.7 1.0
============================ ============= ============= ============
Notes to the Condensed Consolidated Financial Statements
(continued)
6. Finance expense (net)
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2018
2018 2017 GBPm
GBPm GBPm
=============================================== ============= ============= ============
Interest expense:
Interest on Group borrowings 7.1 7.2 14.7
Interest on borrowings held at amortised
cost 11.6 11.5 23.0
Interest on borrowings designated at
FVTPL - - 22.2
Net interest on derivatives (0.6) (1.4) (11.0)
Indexation on index-linked debt 5.6 6.9 15.3
Accretion on index-linked swaps - 8.8 8.8
Net interest on defined benefit obligations 0.1 0.6 1.1
Capitalisation of borrowing costs under
IAS 23 (0.3) (0.3) (1.0)
=============================================== ============= ============= ============
Total interest expense 23.5 33.3 73.1
=============================================== ============= ============= ============
Fair value movements on financial instruments:
Fair value movement on borrowings designated
at FVTPL (9.4) (11.4) (23.8)
Fair value movement on derivatives (2.5) (28.7) (6.3)
=============================================== ============= ============= ============
Total fair value movements on financial
instruments (11.9) (40.1) (30.1)
=============================================== ============= ============= ============
Total finance expense (net) 11.6 (6.8) 43.0
=============================================== ============= ============= ============
Notes to the Condensed Consolidated Financial Statements
(continued)
7. Taxation
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2018
2018 2017 GBPm
GBPm GBPm
========================== ============= ============= ============
Corporation tax:
Current period 10.8 9.3 21.1
Prior periods - - (0.8)
========================== ============= ============= ============
10.8 9.3 20.3
========================== ============= ============= ============
Deferred tax:
Current period 2.8 5.7 5.6
Prior periods - - (0.9)
2.8 5.7 4.7
========================== ============= ============= ============
Tax charge for the period 13.6 15.0 25.0
========================== ============= ============= ============
Corporation tax is calculated at 19% (Sept 2017: 19%, Mar 2018:
19%) of the estimated assessable profit for the period. The
Government announced that it intends to reduce the rate of
corporation tax to 17% with effect from 1 April 2020. The
legislation has been given effect by the Finance Bill 2016 which
was substantively enacted on 6 September 2016. Accordingly, the
deferred tax has been calculated on the basis that it will reverse
in future at the 17% rate. Deferred tax is calculated using the
rate at which it is expected to reverse.
8. Dividends
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2018
2018 2017 GBPm
GBPm GBPm
======================================== ============= ============= ============
Amounts recognised as distributions
to equity holders in the period:
Final dividends for the year ended
31 March 2017 of 2.52 pence per share - 12.0 12.0
Interim dividends for the year ended
31 March 2018 of 13.34 pence per share - - 63.6
Final dividends for the year ended
31 March 2018 of 3.36 pence per share 16.0 - -
======================================== ============= ============= ============
Dividends for the period 16.0 12.0 75.6
======================================== ============= ============= ============
At the Board meeting in November 2018 the Directors proposed an
interim dividend of GBP30.3m for the year ending 31 March 2019,
subject to approval by equity holders of the Company; that is not a
liability in the financial statements at 30 September 2018.
Notes to the Condensed Consolidated Financial Statements
(continued)
9. Property, plant and equipment
During the period, the Group spent GBP113.2m (Sept 2017:
GBP95.7m, Mar 2018: GBP208.9m) on additions to property, plant and
equipment as part of its capital programme for its operating
network. Included in this figure is capitalised interest of GBP0.3m
(Sept 2017: GBP0.3m, Mar 2018: GBP1.0m), in accordance with IAS
23.
10. Borrowings
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2018
2018 2017 GBPm
GBPm GBPm
======================================= ============= ============= ============
Current liabilities:
Bank and other term borrowings 6.8 6.4 6.6
======================================= ============= ============= ============
Non-current liabilities:
Bonds designated at FVTPL 357.8 379.6 367.2
Bonds held at amortised cost (Note
11) 340.1 334.4 338.4
Bank and other term borrowings 253.5 252.0 253.2
Amounts owed to parent undertaking 73.7 71.2 73.7
Amounts owed to affiliated undertaking
(Note 11) 198.5 198.0 198.2
======================================= ============= ============= ============
1,223.6 1,235.2 1,230.7
======================================= ============= ============= ============
Total borrowings 1,230.4 1,241.6 1,237.3
======================================= ============= ============= ============
As at 30 Sept 2018 the Group had GBP25.0m of unutilised
committed bank facilities (Sept 2017: GBP25.0m, Mar 2018:
GBP25.0m).
The Group's debt facilities expire between 2020 and 2046.
Notes to the Condensed Consolidated Financial Statements
(continued)
11. 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 Sept 2018 is
GBP89.5m (Sept 2017: GBP71.5m, Mar 2018: GBP93.1m), of which
GBP88.9m (Sept 2017: GBP71.3m, Mar 2018: GBP91.6m) 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 Audited
Period ended Period ended Year ended
30 Sept 2018 30 Sept 2017 31 Mar 2018
-10bps +10bps -10bps +10bps -10bps +10bps
GBPm GBPm GBPm GBPm GBPm GBPm
================= ======= ====== ======= ====== ====== ======
Inflation-linked
swaps (2.1) 2.0 (2.0) 1.9 (2.0) 1.9
================= ======= ====== ======= ====== ====== ======
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 GBP57.3m (Sept 2017: GBP31.7m, Mar 2018:
GBP58.4m). The movement in the period all relates to the
straight-line release to profit or loss.
Notes to the Condensed Consolidated Financial Statements
(continued)
11. Financial instruments (continued)
Fair values (continued)
The value of derivatives is disclosed gross of any collateral
held. At 30 September 2018, the Group held GBP9.0m (Sept 2017:
GBPnil, Mar 2018: GBP10.6m) as collateral in relation to derivative
financial instruments, included within current liabilities. The
cash collateral does not meet the offsetting criteria in IAS 32:
42, but it can be set off against the net amount of the derivatives
in the case of default and insolvency or bankruptcy, in accordance
with associated collateral arrangements.
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 Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2018
2018 2017 GBPm
GBPm GBPm
==================================== ============= ============= ============
Derivative financial liabilities;
Level 1 - - -
Level 2 (26.9) (109.6) (34.6)
Level 3 (327.9) (225.2) (322.7)
==================================== ============= ============= ============
(354.8) (334.8) (357.3)
==================================== ============= ============= ============
Financial liabilities designated at
FVTPL;
Level 1 (357.8) (379.6) (367.2)
Level 2 - - -
Level 3 - - -
==================================== ============= ============= ============
(357.8) (379.6) (367.2)
==================================== ============= ============= ============
There were no transfers between levels during the current period
(Sept 2017: same). In the year ended 31 March 2018,
inflation-linked swaps with fair values of GBP105.7m were
restructured. Prior to restructure, all GBP105.7m was classified as
Level 2; upon restructure GBP95.5m was 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 Condensed Consolidated Financial Statements
(continued)
11. Financial instruments (continued)
Fair values (continued)
The following table provides a reconciliation of the fair value
amounts disclosed as Level 3.
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2018
2018 2017 GBPm
GBPm GBPm
============================================ ============= ============= ============
Opening balance (322.7) (244.3) (244.3)
Transfers into Level 3 from Level 2 - - (95.5)
Total gains or losses in profit or
loss:
On transfers into Level 3 from Level
2 - - 1.5
On instruments carried forward in Level
3 (5.2) 19.1 15.6
============================================ ============= ============= ============
Closing balance (327.9) (225.2) (322.7)
============================================ ============= ============= ============
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 Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2018
2018 2017 GBPm
GBPm GBPm
=========================================== ============= ============= ============
Carrying value:
Non-current liabilities:
Bonds held at amortised cost (Note
10) (340.1) (334.4) (338.4)
Amounts owed to affiliated undertaking
(Note 10) (198.5) (198.0) (198.2)
Fair value:
Non-current liabilities:
Bonds held at amortised cost (498.4) (514.6) (512.9)
Amounts owed to affiliated undertaking (224.7) (235.4) (228.9)
=========================================== ============= ============= ============
Changes in circumstances significantly affecting the fair value
of financial assets and financial liabilities
Over the period there has been a GBP11.9m gain on financial
instruments held at FVTPL. This is primarily due to changes in
future interest and inflation expectations used to derive the fair
values. GBP36.7m of the gain is a result of the increase in
interest rate expectations, offset by a GBP22.2m loss as a result
of the increase in inflation expectation over the period.
Notes to the Condensed Consolidated Financial Statements
(continued)
12. Retirement benefit schemes
Defined benefit schemes
The defined benefit surplus/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 2018 for the purpose of these financial
statements. The present value of the defined benefit
surplus/obligation, 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 2018. 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 became a surplus of GBP4.2m (Sept
2017: deficit of GBP35.8m, Mar 2018: deficit of GBP18.2m),
primarily due to a 0.2% increase in the discount rate, which
decreased the value placed on the liabilities.
Under the IAS 19 'Employee Benefits' valuation basis, the Group
applies the principles of IFRIC 14, 'IAS 19 - The Limit on a
Defined Benefit Asset, Minimum Funding Requirements and their
Interaction', whereby a surplus is only recognised to the extent
that the Group is able to access the surplus either through an
unconditional right of refund to the surplus or through reduced
future contributions relating to ongoing service, which have been
substantively enacted or contractually agreed. Further, where the
Group does not have access to any funds once they are paid into the
scheme, the IFRS financial position recorded reflects the higher of
any underlying IAS 19 deficit and any obligation for committed
deficit funding where applicable.
The Group has concluded that it can recognise the full amount of
this surplus on the grounds that it could gain sufficient economic
benefit from the refund of the surplus assets that would be
available to it following the final payment to the last beneficiary
of the Section.
Notes to the Condensed Consolidated Financial Statements
(continued)
13. Provisions
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2018
2018 2017 GBPm
GBPm GBPm
============================================ ============= ============= ============
Opening Balance 3.1 4.0 4.0
Charged/ (credited) to the income statement - - (0.2)
Utilisation of provision (0.3) (0.3) (0.7)
============================================ ============= ============= ============
Closing balance 2.9 3.7 3.1
============================================ ============= ============= ============
Current 0.6 1.0 0.8
Non current 2.3 2.7 2.3
============================================ ============= ============= ============
Closing balance 2.9 3.7 3.1
============================================ ============= ============= ============
During the year ended 31 March 2013 a provision was created in
connection with a portfolio of retail properties for which the
Company was liable under privity of contract. The combined closing
provision of GBP1.3m (Sept 2017: GBP1.9m, Mar 2018: GBP1.5m), 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.
The Company has recognised GBP1.6m provision on a discounted
basis (Sept 2017: GBP1.8m, Mar 2018: GBP1.6m) in relation to
pension liabilities from the former EA Technology Limited.
Notes to the Condensed Consolidated Financial Statements
(continued)
14. 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 Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2018
2018 2017 GBPm
GBPm GBPm
========================================= ============= ============= ============
Recharges to:
Electricity North West (Construction
and Maintenance) Ltd 0.6 1.0 0.6
Electricity North West Services Ltd 1.4 0.9 1.6
Recharges from:
Electricity North West (Construction
and Maintenance) Ltd - - (0.1)
Electricity North West Services Ltd (2.0) (1.8) (4.8)
Interest payable to:
North West Electricity Networks plc (1.0) (1.0) (2.0)
ENW Finance plc (6.1) (6.2) (12.4)
Dividends paid to North West Electricity
Networks plc (16.0) (12.0) (75.6)
Directors' remuneration (1.4) (0.8) (1.9)
Directors' services (0.1) (0.1) (0.2)
========================================= ============= ============= ============
Fees of GBP60,000 (Sept 2017: GBP60,000, Mar 2018: GBP120,000)
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 GBP60,000 (Sept 2017: GBP60,000, Mar 2018: GBP120,000)
were payable to IIF Int'l Holding GP Ltd, in respect of the
provision of Directors' services. IIF Int'l Holding GP Ltd is
identified as a related party.
Notes to the Condensed Consolidated Financial Statements
(continued)
14. 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 ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2018
2018 2017 GBPm
GBPm GBPm
=========================================== ============= ============= ============
Amounts owed by:
North West Electricity Networks plc 3.4 3.3 3.3
North West Electricity Networks (Holdings)
Ltd 0.2 0.2 0.2
Electricity North West (Construction
and Maintenance) Ltd 0.2 0.3 0.2
Electricity North West Services Ltd 0.6 0.3 1.3
Electricity North West Property Ltd 0.1 - 0.1
North West Electricity Networks (Jersey)
Ltd 0.1 0.1 0.1
Amounts owed to Electricity North West
Services Ltd (0.3) (0.4) (0.3)
Group tax relief to:
North West Electricity Networks plc (3.0) (3.2) (5.6)
Electricity North West Services Ltd - - (0.1)
Interest payable to:
North West Electricity Networks plc (0.6) (0.5) (0.5)
ENW Finance plc (2.4) (2.5) (2.5)
Borrowings payable to:
North West Electricity Networks plc (73.7) (71.2) (73.7)
ENW Finance plc (198.5) (199.3) (198.2)
=========================================== ============= ============= ============
The loan from North West Electricity Networks plc accrues
weighted average interest at 2.70% per annum (Sept 2017: 2.74%, Mar
2018: 2.70%) and is repayable in March 2023.
The loan from ENW Finance plc accrues interest at 6.125% (Sept
2017: 6.125%, Mar 2018: 6.125%) and is repayable in July 2021.
Notes to the Condensed Consolidated Financial Statements
(continued)
15. Cash generated from operations
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2018
2018 2017 GBPm
GBPm GBPm
============================================== ============= ============= ============
Operating profit 82.5 74.5 183.3
Adjustments for:
Depreciation of property, plant and
equipment 55.1 53.6 108.3
Amortisation of intangible assets 2.8 2.3 5.5
Amortisation of customer contributions(1) (8.7) (8.4) (16.9)
Profit on disposal of property, plant
and equipment (0.1) (0.1) (0.2)
Cash contributions in excess of pension
charge to operating profit (11.4) (11.6) (22.4)
============================================== ============= ============= ============
Operating cash flows before movement
in working capital 120.2 110.3 257.6
Changes in working capital:
(Increase)/ decrease in inventories (1.5) (1.4) (0.9)
(Increase)/ decrease in trade and other
receivables 9.1 9.6 (2.9)
Increase/ (decrease) in provisions
and payables (10.7) (24.3) (14.8)
============================================== ============= ============= ============
Cash generated from operations 117.1 94.2 239.0
============================================== ============= ============= ============
(1) In the 6 months ended 30 September 2018 GBP3.5m (Sept 2017:
GBP3.1m, Mar 2018 GBP6.4m) of amortisation in respect of customer
contributions has been amortised through revenue as a result of the
adoption of IFRIC 18.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR ZDLFLVFFBFBK
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