TIDMBD49
RNS Number : 1940V
Electricity North West Limited
29 November 2019
Electricity North West Limited (the "Company") is pleased to
announce its Half Year Financial Report for the period ended 30
September 2019.
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 2019
Contents
Interim Management
Report....................................................................................................................................
1
Condensed Consolidated Statement of Comprehensive
Income........................................................
6
Condensed Consolidated Statement of Financial
Position.....................................................................
7
Condensed Consolidated Statement of Changes in
Equity....................................................................
9
Condensed Consolidated Statement of Cash
Flows.................................................................................
11
Notes to the Condensed Consolidated Financial
Statements.............................................................
12
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.
Adoption of IFRS 16 'Leases'
The Group has adopted IFRS 16 during the year. IFRS 16 has
resulted in an opening reserves adjustment of GBP0.2m, along with
incremental lease liabilities of GBP5.0m and right of use assets of
GBP4.6m at 30 September 2019. More details of the impact of IFRS 16
can be found in Notes 3 and 12.
Adoption of IFRS 9 'Financial Instruments'
The results for the period ended 30 September 2018 have been
restated to reflect the adoption of IFRS 9, on 1 April 2018. The
opening reserves for the period have been adjusted (see the
Statement of Changes in Equity), as have the finance expense,
borrowings and interest payable. IFRS 9 was fully reflected in the
audited accounts for the year ended 31 March 2019, and more details
on the impact of IFRS 9 can be found in the Annual Report and
Consolidated Financial Statements of the Company at
www.enwl.co.uk.
Consolidated results
Restated
6 months 6 months Year
ended ended ended
30 Sep 30 Sep 31 Mar
2019 2018 2019
------------------ ---------- ---------- ----------
Revenue GBP222m GBP208m GBP458m
Profit before GBP57m GBP50m GBP134m
tax and fair
value movements
Profit/ (loss) GBP(22)m GBP53m GBP87m
before tax
Net cash flow GBP6m GBP3m GBP(2)m
before financing
activities
Net debt GBP1,165m GBP1,098m GBP1,146m
------------------ ---------- ---------- ----------
Revenue
Revenue is GBP14m higher in the six months to 30 September 2019
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 including
adjustments for inflation, higher incentive revenue and the impact
of the final over recovery of revenue in the prior year.
The revenue for the six months to 31 March 2020 is expected to
be higher than that in the six months to 30 September 2019, 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 GBP7m higher than
the six months to September 2018. This is primarily due to the
higher revenue.
Interim Management Report (continued)
Profit/ (loss) before tax
There is a loss before tax of GBP22m, compared to a profit of
GBP53m for the same period in the prior year, a movement of GBP75m.
This is primarily due to a fair value loss on the derivative
financial instruments of GBP80m, compared to a gain of GBP3m in the
prior period. 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 12).
Net cash flow before financing
The net cash flow before financing is GBP3m higher than the same
period in the prior year. Cash generated from operations was
stable, with the increase primarily due to GBP7m lower capital
expenditure offset by GBP4m higher tax paid.
Net Debt
Net debt has increased by GBP19m in the six month period to 30
September 2019; this is due to the GBP20m increase in borrowings,
offset by the GBP1m increase in cash. The increase in borrowings is
mainly due to a GBP14m drawing on the revolving credit facility and
a GBP5m lease liability recognised following adoption of IFRS 16 on
1 April 2019.
Dividends
Final dividends for the year ended 31 March 2019 of GBP17m have
been paid in the period. The Directors have proposed an interim
dividend of GBP21.4m for the year ended 31 March 2020. More details
on dividends are given in Note 8.
Retirement benefit scheme
The retirement benefit asset over the six month period to 30
September 2019, has reduced from GBP33m to GBP24m. The main reason
for the decrease is the decrease in the discount rate used to value
the liabilities (see Note 13).
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 2019, 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 licence condition 40 to maintain an
investment grade issuer credit rating, which has been met;
-- 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;
Interim Management Report (continued)
Going concern (continued)
-- Management has prepared, and the Directors have reviewed, the
approved Group budgets for the year ending 31 March 2020 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 GBP36m 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 2020 and 2023 indicate there
is significant headroom on these covenants.
The Board has given detailed consideration to the principal
risks and uncertainties affecting the Group and Company, as
referred to above, and all other known 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.
Ultimate parent undertaking and controlling party
The immediate parent undertaking is North West Electricity
Networks plc, a company incorporated and registered in the United
Kingdom. The ultimate parent undertaking is North West Electricity
Networks (Jersey) Limited, a company incorporated and registered in
Jersey. On 20 August 2019, there was a change in ownership of the
shares in North West Electricity Networks (Jersey) Limited and,
therefore, a change in the ultimate controlling parties of the
Company. Prior to the sale, the ultimate controlling parties were
First State Investments Fund Management S.a.r.l. on behalf of First
State European Diversified Infrastructure Fund FCP-SIF ('EDIF') and
IIF Int'l Holding GP Ltd ('IIF'), each with a 50% holding.
Following the sale, the shareholdings are:
-- KDM Power Limited (32.07%);
-- IIF Int'l NWEN UK Cayman Limited (25%);
-- First State Investments Fund Management S.a.r.l. on behalf of
First State European Diversified Infrastructure Fund FCP-SIF (25%);
and
-- Equitix ENW 6 Limited (17.93%).
Interim Management Report (continued)
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
-- Anne Baldock
-- Alistair Buchanan
-- Susan Cooklin
-- Chris Dowling
-- Rob Holden
-- Niall Mills
-- Sion Jones - appointed 20 August 2019
-- Yamabayashi Yoshihiro - appointed 20 August 2019
-- Mark Scarsella - appointed 10 September 2019
-- Hamish Lea-Wilson - resigned 20 August 2019
-- John Lynch - resigned 10 September 2019
Niall Mills, Sion Jones, Yamabayashi Yoshihiro and Mark
Scarsella are shareholder appointed directors and have appointed
alternate Directors. Hamish Lea-Wilson resigned as director and has
been appointed as the alternate for Niall Mills. Peter O'Flaherty
is the alternate for Sion Jones, Toru Kuwahara is the alternate for
Yamabayashi Yoshihiro and Gary Blackburn is the alternate for Mark
Scarsella.
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
Borron Street
Stockport
Cheshire
SK1 2JD
Approved by the Board of Directors and signed on its behalf:
D Brocksom
Chief Financial Officer
29 November 2019
Condensed Consolidated Statement of Comprehensive Income
For the period ended 30 September 2019
Restated
Unaudited Unaudited Audited
Period ended Period ended Year ended
Note 30 Sept 30 Sept 31 Mar 2019
2019 2018 GBPm
GBPm GBPm
============================================= ====== ============== ============= =============
Revenue 222.4 207.7 458.3
============================================= ====== ============== ============= =============
Employee costs (29.4) (28.8) (58.1)
Depreciation and amortisation expense
(net) (60.4) (52.7) (116.9)
Other operating costs (44.0) (43.7) (92.8)
============================================= ====== ============== ============= =============
Total operating expenses (133.8) (125.2) (267.8)
============================================= ====== ============== ============= =============
Operating profit 88.6 82.5 190.5
Investment income 5 0.1 0.2 0.4
Finance expense (net) 6 (111.1) (29.8) (103.9)
============================================= ====== ============== ============= =============
Profit/(loss) before taxation (22.4) 52.9 87.0
Taxation 7 2.9 (13.6) (15.2)
============================================= ====== ============== ============= =============
Profit/(loss) for the period attributable
to shareholders (19.5) 39.3 71.8
Other comprehensive income:
Items that will not be reclassified
subsequently to profit or loss:
Remeasurement of defined benefit
scheme (15.5) 15.2 41.4
Deferred tax on remeasurement of
defined benefit scheme 2.6 (2.6) (7.0)
Other comprehensive income/(expense)
for the period (12.9) 12.6 34.4
============================================= ====== ============== ============= =============
Total comprehensive income/(expense)
for the period attributable to shareholders (32.4) 51.9 106.2
============================================= ====== ============== ============= =============
All the results for the current and prior periods are derived
from continuing operations.
The results for the period ended 30 September 2018 have been
restated to reflect the adoption of IFRS 9, effective from 1 April
2018. The opening reserves for the period have been adjusted (see
the Statement of Changes in Equity), as has the finance expense for
the period.
Condensed Consolidated Statement of Financial Position
As at 30 September 2019 Restated
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2019
Note 2019 2018 GBPm
GBPm GBPm
================================= ====== ============== ============== ============
ASSETS
Non-current assets
Intangible assets and goodwill 53.0 50.9 52.3
Property, plant and equipment 3,311.6 3,196.0 3,259.7
Retirement benefit surplus 13 24.1 4.2 32.8
3,388.7 3,251.1 3,344.8
================================= ====== ============== ============== ============
Current assets
Inventories 10.5 11.9 12.2
Trade and other receivables 57.7 54.0 57.7
Cash and cash equivalents 23.6 68.8 22.7
91.8 134.7 92.6
================================= ====== ============== ============== ============
Total assets 3,480.5 3,385.8 3,437.4
================================= ====== ============== ============== ============
LIABILITIES
Current liabilities
Trade and other payables (126.7) (148.3) (120.6)
Current tax liabilities (0.7) (12.0) (6.6)
Borrowings 10 (8.6) (6.8) (6.8)
Provisions 14 (0.4) (0.6) (0.8)
(136.4) (167.7) (134.8)
================================= ====== ============== ============== ============
Net current liabilities (44.4) (33.0) (42.2)
Non-current liabilities
Borrowings 10 (1,179.9) (1,159.6) (1,161.8)
Derivative financial instruments 12 (484.1) (354.8) (404.6)
Deferred tax liabilities (134.7) (153.1) (150.1)
Provisions 14 (1.9) (2.3) (2.2)
Customer contributions (645.9) (625.6) (637.2)
(2,446.5) (2,295.4) (2,355.9)
================================= ====== ============== ============== ============
Total liabilities (2,582.9) (2,463.1) (2,490.7)
================================= ====== ============== ============== ============
Net assets 897.6 922.7 946.7
================================= ====== ============== ============== ============
EQUITY
Called up share capital 238.4 238.4 238.4
Share premium account 4.4 4.4 4.4
Revaluation reserve 87.2 89.3 88.2
Capital redemption reserve 8.6 8.6 8.6
Retained earnings 559.0 582.0 607.1
================================= ====== ============== ============== ============
Total equity 897.6 922.7 946.7
================================= ====== ============== ============== ============
The balance sheet as at 30 September 2018 has been restated to
reflect the adoption of IFRS 9, effective from 1 April 2018. The
opening reserves for the period have been adjusted (see the
Statement of Changes in Equity), as have the borrowings and
interest payable amounts.
Approved by the Board of Directors on 29 November 2019 and
signed on its behalf by:
D Brocksom
Director
Condensed Consolidated Statement of Changes in Equity
For the period ended 30 September 2019
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 2018 (audited) 238.4 4.4 90.3 8.6 486.1 827.8
Opening reserve adjustment: transition
to IFRS 9 - - - - 71.0 71.0
Tax impact on IFRS 9 adjustment - - - - (12.0) (12.0)
------------------------------------------ ---------- --------- ------------ ------------ ---------- --------
Opening reserves 238.4 4.4 90.3 8.6 545.1 886.8
Profit for the period - - - - 39.3 39.3
Other comprehensive income for the period - - - - 12.6 12.6
Transfer from revaluation reserve - - (1.0) - 1.0 -
Total comprehensive income/(expense)
for the period - - (1.0) - 52.9 51.9
========================================== ========== ========= ============ ============ ========== ========
Equity dividends (Note 8) - - - (16.0) (16.0)
========================================== ========== ========= ============ ============ ========== ========
At 30 September 2018 (unaudited) 238.4 4.4 89.3 8.6 582.0 922.7
========================================== ========== ========= ============ ============ ========== ========
At 31 March 2018 (audited) 238.4 4.4 90.3 8.6 486.1 827.8
Opening reserve adjustment: transition
to IFRS 9 - - - - 71.0 71.0
Tax impact on IFRS 9 adjustment - - - - (12.0) (12.0)
------------------------------------------ ---------- --------- ------------ ------------ ---------- --------
Opening reserves 238.4 4.4 90.3 8.6 545.1 886.8
Profit for the period - - - - 71.8 71.8
Other comprehensive income for the period - - - - 34.4 34.4
Transfer from revaluation reserve - - (2.1) - 2.1 -
Total comprehensive income/(expense)
for the period - - (2.1) - 108.3 106.2
========================================== ========== ========= ============ ============ ========== ========
Equity dividends (Note 8) - - - - (46.3) (46.3)
========================================== ========== ========= ============ ============ ========== ========
At 31 March 2019 (audited) 238.4 4.4 88.2 8.6 607.1 946.7
========================================== ========== ========= ============ ============ ========== ========
Opening reserve adjustment: transition
to IFRS 16 - - - - 0.2 0.2
Opening reserves 238.4 4.4 88.2 8.6 607.3 946.9
Loss for the period - - - - (19.5) (19.5)
Other comprehensive expense for the
period - - - - (12.9) (12.9)
Transfer from revaluation reserve - - (1.0) - 1.0 -
Total comprehensive expense for the
period - - (1.0) - (31.4) (32.4)
========================================== ========== ========= ============ ============ ========== ========
Equity dividends (Note 8) - - - (16.9) (16.9)
========================================== ========== ========= ============ ============ ========== ========
At 30 September 2019 (unaudited) 238.4 4.4 87.2 8.6 559.0 897.6
========================================== ========== ========= ============ ============ ========== ========
The opening reserves and profit for the period ended 30
September 2018 have been restated to reflect the adoption of IFRS
9, effective from 1 April 2018.
Condensed Consolidated Statement of Cash Flows
For the period ended 30 September 2019
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2019
Note 2019 2018 GBPm
GBPm GBPm
========================================== ====== ============= ============= ============
Operating activities
Cash generated from operations 16 117.1 117.1 267.6
Interest paid (9.2) (8.7) (48.3)
Tax paid (15.8) (12.3) (27.1)
========================================== ====== ============= ============= ============
Net cash generated from operating
activities 92.1 96.1 192.2
========================================== ====== ============= ============= ============
Investing activities
Interest received and similar income 0.1 0.2 0.4
Purchase of property, plant and
equipment (100.1) (109.1) (224.2)
Purchase of intangible assets (4.0) (4.2) (8.9)
Proceeds from sale of property,
plant and equipment 0.3 0.1 0.4
Customer contributions received 17.4 19.6 37.8
========================================== ====== ============= ============= ============
Net cash used in investing activities (86.3) (93.4) (194.5)
========================================== ====== ============= ============= ============
Net cash flow before financing activities 5.8 2.7 (2.3)
Financing activities
Dividends paid 8 (16.9) (16.0) (46.3)
Repayment of external borrowings (3.5) (3.4) (6.7)
Proceeds from external borrowings 14.0 - -
Proceeds from inter-company borrowings 1.5 - 1.6
Movement in cash collateral held - (1.5) (10.6)
Net cash used in financing activities (4.9) (20.9) (62.0)
========================================== ====== ============= ============= ============
Net increase/(decrease) in cash and
cash equivalents 0.9 (18.2) (64.3)
Cash and cash equivalents at beginning
of period 22.7 87.0 87.0
========================================== ====== ============= ============= ============
Cash and cash equivalents at end
of period 23.6 68.8 22.7
========================================== ====== ============= ============= ============
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 2019 and similarly the period ended 30 September 2018 has
neither been audited nor reviewed by the auditor. The financial
information for the year ended 31 March 2019 has been based on
information in the audited financial statements for that year.
The financial information for the year ended 31 March 2019 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 2019 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 2019 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 2019 with
the exception of the adoption of IFRS 16 'Leases'.
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.
Adoption of IFRS 9 'Financial Instruments'
The results and financial position for 30 September 2018 have
been restated to reflect the adoption of IFRS 9, effective from 1
April 2018. IFRS was fully reflected in the audited accounts for
the year ended 31 March 2019, and more details on the impact of
IFRS 9 can be found in the Annual Report and Consolidated Financial
Statements of the Company at www.enwl.co.uk.
The transition to IFRS 9 resulted in a fair value gain of GBP71m
being recognised in the opening retained earnings of the Company,
along with associated deferred tax of GBP12m, having a net impact
on opening retained earnings of GBP59m.
The application of IFRS 9 has had no impact on the consolidated
cash flows of the Group.
Notes to the Condensed Consolidated Financial Statements
2. Significant accounting policies (continued)
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.
3. Critical accounting judgements and key sources of estimation uncertainty
Changes in accounting policy
The Group has adopted the following IFRS Standards during the
period;
IFRS 16: Leases
The Group has adopted the modified retrospective approach
without restatement of comparatives.
The change in definition of a lease mainly relates to the
concept of control. IFRS 16 distinguishes between leases and
service contracts on the basis of whether the use of an identified
asset is controlled by the customer. Control is considered to exist
if the customer has:
-- The right to obtain substantially all the economic benefits
from the use of an identified asset; and
-- The right to direct the use of that asset.
The Group has applied the definition of a lease and related
guidance set out in IFRS 16 to all lease contracts entered into or
modified on or after 1 April 2019 (whether it is a lessor or a
lessee in the lease contract).
IFRS 16 has resulted in an opening reserves adjustment of
GBP0.2m, along with incremental lease liabilities of GBP5.0m and
right of use assets of GBP4.6m at 30 September 2019.
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 payable or
receivable on these financial instruments, see Note 6. Fair value
is determined in the manner described in Note 12.
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.
Notes to the Condensed Consolidated Financial Statements
(continued)
5. Investment income
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2019
2019 2018 GBPm
GBPm GBPm
======================================= ============= ============= ============
Interest receivable on short-term bank
deposits 0.1 0.2 0.4
======================================= ============= ============= ============
6. Finance expense (net)
Restated
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2019
2019 2018 GBPm
GBPm GBPm
=============================================== ============== ============= =============
Interest expense:
Interest on Group borrowings (Note
15) 7.3 7.1 14.7
Interest on borrowings held at amortised
cost 20.2 20.4 41.2
Net receipts on derivatives held for
trading (0.4) (0.6) (9.9)
Other finance charges related to index-linked
debt 5.1 5.6 11.4
Interest payable on leases 0.1 - -
Net interest on defined benefit obligations (0.4) 0.1 0.3
Capitalisation of borrowing costs under
IAS 23 (Note 9) (0.3) (0.3) (1.1)
=============================================== ============== ============= =============
Total interest expense 31.6 32.3 56.6
Fair value movements on financial instruments:
Fair value losses/(gains) on derivatives
(Note 12) 79.5 (2.5) 47.3
=============================================== ============== ============= =============
Total finance expense (net) 111.1 29.8 103.9
=============================================== ============== ============= =============
The finance expense for the period ended 30 September 2018 has
been restated to reflect the adoption of IFRS 9, effective from 1
April 2018.
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 2019
2019 2018 GBPm
GBPm GBPm
==================================== ============= ============= ============
Corporation tax:
Current period 9.8 10.8 21.9
Prior periods - - (1.6)
==================================== ============= ============= ============
9.8 10.8 20.3
==================================== ============= ============= ============
Deferred tax:
Current period (12.7) 2.8 (5.4)
Prior periods - - 0.3
(12.7) 2.8 (5.1)
==================================== ============= ============= ============
Tax (credit)/ charge for the period (2.9) 13.6 15.2
==================================== ============= ============= ============
Corporation tax is calculated at 19% (30 Sept 2018: 19%, 31 Mar
2019: 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 Act 2019 which was
substantively enacted on 12 February 2019. Deferred tax is
calculated using the rate at which it is expected to reverse.
Accordingly, the deferred tax has been calculated on the basis that
it will reverse in future at the 17% rate.
8. Dividends
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2019
2019 2018 GBPm
GBPm GBPm
======================================= ============= ============= ============
Amounts recognised as distributions
to equity holders in the period:
Final dividends for the year ended
31 March 2018 of 3.36 pence per share - 16.0 16.0
Interim dividends for the year ended
31 March 2019 of 6.35 pence per share - - 30.3
Final dividends for the year ended
31 March 2019 of 3.54 pence per share 16.9 - -
======================================= ============= ============= ============
Dividends for the period (Note 15) 16.9 16.0 46.3
======================================= ============= ============= ============
At the Board meeting in November 2019 the Directors proposed an
interim dividend of GBP21.4m for the year ending 31 March 2020,
subject to approval by equity holders of the Company. This is not
shown as a liability in the financial statements at 30 September
2019.
Notes to the Condensed Consolidated Financial Statements
(continued)
9. Property, plant and equipment
During the period, the Group spent GBP109.2m (30 Sept 2018:
GBP113.2m, 31 Mar 2019: GBP232.5m) 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
(30 Sept 2018: GBP0.3m, 31 Mar 2019: GBP1.1m), in accordance with
IAS 23 (see Note 6).
The Company has recognised incremental right of use assets of
GBP4.6m (30 Sept 2018: GBPnil, 31 Mar 2019: GBPnil), in accordance
with IFRS 16 (see Note 11).
10. Borrowings
Restated
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2019
2019 2018 GBPm
GBPm GBPm
======================================= ============== ============= =============
Current liabilities:
Bank and other term borrowings 6.8 6.8 6.8
Lease liabilities (Note 11) 1.8 - -
======================================= ============== ============= =============
8.6 6.8 6.8
Non-current liabilities:
Bonds held at amortised cost (Note
12) 632.9 633.9 634.8
Bank and other term borrowings 268.0 253.5 253.0
Lease liabilities (Note 11) 3.2 - -
Amounts owed to parent undertaking
(Note 15) 76.8 73.7 75.3
Amounts owed to affiliated undertaking
(Note 12, 15) 199.0 198.5 198.7
======================================= -------------- ------------- =============
1,179.9 1,159.6 1,161.8
======================================= -------------- ------------- =============
Total borrowings 1,188.5 1,166.4 1,168.6
======================================= ============== ============= =============
The borrowings at 30 September 2018 have been restated to
reflect the adoption of IFRS 9, effective from 1 April 2018.
As at 30 Sept 2019 the Group had GBP36.0m of unutilised
committed bank facilities (30 Sept 2018: GBP25.0m, 31 Mar 2019:
GBP50.0m).
The Group's debt facilities expire between 2021 and 2046.
Notes to the Condensed Consolidated Financial Statements
(continued)
11. Leases
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2019
2019 GBPm 2018 GBPm GBPm
================================== ============= ============= ============
Lease assets:
Land and buildings 2.4 - -
Vehicles 2.2 - -
---------------------------------- ------------- ------------- ------------
Total assets 4.6 - -
---------------------------------- ------------- ------------- ------------
Lease liabilities:
Land and buildings 2.8 - -
Vehicles 2.2 - -
---------------------------------- ------------- ------------- ------------
Total liabilities 5.0 - -
================================== ============= ============= ============
IFRS 16 was adopted on 1 April 2019 and the modified
retrospective approach has been applied without restatement of
comparatives. The lease liabilities have been discounted at a range
of 4.75% to 5% for land and buildings and 6% to 8% for
vehicles.
Notes to the Condensed Consolidated Financial Statements
(continued)
12. Financial instruments
Fair values
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 2019 is
GBP104.0m (30 Sept 2018: GBP89.5m, 31 Mar 2019: GBP100.5m), of
which GBP103.7m (30 Sept 2018: GBP88.9m, 31 Mar 2019: GBP100.3m) 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 Audited
Period ended Period ended Year ended
30 Sept 2019 30 Sept 2018 31 Mar 2019
-10bps +10bps -10bps +10bps -10bps +10bps
GBPm GBPm GBPm GBPm GBPm GBPm
================= ======= ====== ======= ====== ====== ======
Inflation-linked
swaps (6.7) 6.5 (2.1) 2.0 (2.2) 2.1
================= ======= ====== ======= ====== ====== ======
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 GBP58.7m (30 Sept 2018: GBP63.0m, 31 Mar 2019:
GBP60.7m). The movement in the period all relates to the
straight-line release to profit or loss.
Notes to the Condensed Consolidated Financial Statements
(continued)
12. Financial instruments (continued)
Fair values (continued)
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2019
2019 2018 GBPm
GBPm GBPm
========================================= ============= ============= ============
FV of derivatives pre IFRS 13 adjustment (646.8) (507.3) (565.8)
CVA/ DVA 104.0 89.5 100.5
Day 1 adjustments 58.7 63.0 60.7
----------------------------------------- ------------- ------------- ------------
IFRS 13 FV of derivatives (484.1) (354.8) (404.6)
========================================= ============= ============= ============
The value of derivatives is disclosed gross of any collateral
held. At 30 September 2019, the Group held GBPnil (30 Sept 2018:
GBP9.0m, 31 Mar 2019: GBPnil) 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 2019
2019 2018 GBPm
GBPm GBPm
================================== ============= ============= ============
Derivative financial liabilities;
Level 1 - - -
Level 2 (13.1) (26.9) (9.2)
Level 3 (471.0) (327.9) (395.4)
---------------------------------- ------------- ------------- ------------
(484.1) (354.8) (404.6)
================================== ============= ============= ============
Notes to the Condensed Consolidated Financial Statements
(continued)
12. Financial instruments (continued)
There were no transfers between levels during the current period
(30 Sept 2018: same). In the year ended 31 March 2019, GBP30.0m was
transferred from Level 2 to Level 3, and GBP2.3m was transferred
from Level 2 to Level 3, principally due to a change in the
significance of the unobservable inputs used to derive the Group'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.
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 2019
2019 2018 GBPm
GBPm GBPm
============================================ ============= ============= ============
Opening balance (395.4) (322.7) (322.7)
Transfers into Level 3 from Level 2 - - (30.0)
Transfers from Level 3 into Level 2 - - 2.3
Total gains or losses in profit or
loss:
On transfers into Level 3 from Level
2 - - (8.2)
On instruments carried forward in Level
3 (75.6) (5.2) (36.8)
============================================ ============= ============= ============
Closing balance (471.0) (327.9) (395.4)
============================================ ============= ============= ============
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.
Restated
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2019
2019 2018 GBPm
GBPm GBPm
=========================================== ============== ============= =============
Carrying value:
Non-current liabilities:
Bonds held at amortised cost (Note
10) (632.9) (633.9) (634.8)
Amounts owed to affiliated undertaking
(Note 10) (199.0) (198.5) (198.7)
Fair value:
Non-current liabilities:
Bonds held at amortised cost (916.7) (856.2) (1,127.5)
Amounts owed to affiliated undertaking (217.8) (224.7) (221.2)
=========================================== ============== ============= =============
Notes to the Condensed Consolidated Financial Statements
(continued)
12. Financial instruments (continued)
Changes in circumstances significantly affecting the fair value
of financial assets and financial liabilities
Over the period there has been a GBP79.5m loss on financial
instruments held at FVTPL (Note 6). This is primarily due to
changes in future interest and inflation expectations used to
derive the fair values. GBP89.9m of the loss is a result of the
decrease in interest rate expectations, offset by a GBP4.3m gain as
a result of the change in inflation expectation profile and GBP6.1m
as a result in the change of credit risk over the period.
13. 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 2019 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 2019. 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 decrease in the defined benefit surplus to GBP24.1m (30 Sept
2018: GBP4.2m, 31 Mar 2019: GBP32.8m), was primarily due to a fall
in the discount rate, which increased the value placed on the
liabilities, partially offset by an increase in the asset value due
to higher than expected returns.
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)
14. Provisions
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2019
2019 2018 GBPm
GBPm GBPm
================================ ============= ============= ============
Opening Balance 3.0 3.1 3.1
Charged to the income statement - - 0.7
Utilisation of provision (0.7) (0.2) (0.8)
================================ ============= ============= ============
Closing balance 2.3 2.9 3.0
================================ ============= ============= ============
Current 0.4 0.6 0.8
Non current 1.9 2.3 2.2
================================ ============= ============= ============
Closing balance 2.3 2.9 3.0
================================ ============= ============= ============
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 GBP0.4m (30 Sept 2018: GBP1.3m, 31 Mar 2019: GBP1.1m),
which now relates to two high street retail properties and one out
of town retail property, 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 is part of a Covenanter Group (CG) which is party to
a Deed of Covenant under which certain guarantees over the benefits
of members of the EATL Group of the Electricity Supply Pension
Scheme have been given. The Company has recognised a GBP1.9m
provision on a discounted basis at 30 Sept 2019 (30 Sept 2018:
GBP1.6m, 31 Mar 2019: GBP1.9m) relating to the Company's 6.7% share
of the liabilities.
Notes to the Condensed Consolidated Financial Statements
(continued)
15. 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 2019
2019 2018 GBPm
GBPm GBPm
===================================== ============= ============= ============
Recharges to:
Electricity North West (Construction
and Maintenance) Ltd 0.6 0.6 1.6
Electricity North West Services Ltd 0.8 1.4 1.8
Recharges from:
Electricity North West (Construction
and Maintenance) Ltd (0.1) - (0.1)
Electricity North West Services Ltd (2.9) (2.0) (7.6)
Interest payable to:
North West Electricity Networks plc (1.1) (1.0) (2.0)
ENW Finance plc (6.2) (6.1) (12.3)
------------------------------------- ------------- ------------- ------------
Interest on Group borrowings (Note
6) (7.3) (7.1) (14.3)
------------------------------------- ------------- ------------- ------------
Dividends paid to:
North West Electricity Networks plc
(Note 8) (16.9) (16.0) (46.3)
Directors' remuneration (1.1) (1.4) (2.1)
Directors' services (0.1) (0.1) (0.2)
===================================== ============= ============= ============
Fees of GBP47,000 (30 Sept 2018: GBP60,000, 31 Mar 2019:
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 GBP47,000 (30 Sept 2018: GBP60,000, 31 Mar 2019:
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)
15. 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 2019
2019 2018 GBPm
GBPm GBPm
=========================================== ============= ============= ============
Amounts owed by:
North West Electricity Networks plc 3.4 3.4 3.5
North West Electricity Networks (Holdings)
Ltd 0.7 0.2 0.2
Electricity North West (Construction
and Maintenance) Ltd 0.2 0.2 0.4
Electricity North West Services Ltd 0.2 0.6 0.3
Electricity North West Property Ltd - 0.1 -
North West Electricity Networks (Jersey)
Ltd - 0.1 0.2
Amounts owed to:
Electricity North West Services Ltd (0.4) (0.3) (0.7)
Group tax relief to:
North West Electricity Networks plc (3.2) (3.0) (5.0)
North West Electricity Networks (Holdings)
Ltd (0.1) - -
Interest payable to:
North West Electricity Networks plc (0.6) (0.6) (0.6)
ENW Finance plc (4.6) (2.4) (2.5)
Borrowings payable to (Note 10):
North West Electricity Networks plc (76.8) (73.7) (75.3)
ENW Finance plc (199.0) (198.5) (198.7)
=========================================== ============= ============= ============
The loan from North West Electricity Networks plc accrues
weighted average interest at 2.69% per annum (30 Sept 2018: 2.70%,
31 Mar 2019: 2.70%) and is repayable in March 2023.
The loan from ENW Finance plc accrues interest at 6.125% (30
Sept 2018: 6.125%, 31 Mar 2019: 6.125%) and is repayable in July
2021.
Notes to the Condensed Consolidated Financial Statements
(continued)
16. Cash generated from operations
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2019
2019 2018 GBPm
GBPm GBPm
============================================== ============= ============= ============
Operating profit 88.6 82.5 190.5
Adjustments for:
Depreciation of property, plant and
equipment 57.2 55.1 110.7
Amortisation of intangible assets 3.2 2.8 6.2
Amortisation of customer contributions(1) (9.0) (8.7) (17.6)
Profit on disposal of property, plant
and equipment (0.3) (0.1) (0.4)
Cash contributions in excess of pension
charge to operating profit (10.1) (11.4) (18.0)
============================================== ============= ============= ============
Operating cash flows before movement
in working capital 129.6 120.2 271.4
Changes in working capital:
Decrease/(increase) in inventories 1.8 (1.5) (1.8)
Decrease in trade and other receivables - 9.1 5.0
Decrease in provisions and payables (14.3) (10.7) (7.0)
============================================== ============= ============= ============
Cash generated from operations 117.1 117.1 267.6
============================================== ============= ============= ============
(1) In the 6 months ended 30 September 2019 GBP9.0m (30 Sept
2018: GBP8.7m, 31 Mar 2019 GBP17.6m) of amortisation in respect of
customer contributions has been amortised through revenue as a
result of the adoption of IFRS 15.
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 XKLFLKFFEFBL
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