TIDMNTEA
RNS Number : 8018K
Northern Electric PLC
26 September 2016
NORTHERN ELECTRIC plc
HALF-YEARLY FINANCIAL REPORT
SIX MONTHSED 30 JUNE 2016
Page
INTERIM MANAGEMENT REPORT 1
Condensed consolidated statement
of profit or loss 8
CONDENSED Consolidated Statement
of PROFIT OR LOSS AND OTHER Comprehensive
Income 9
CONDENSED Consolidated Statement
of Financial Position 10
CONDENSED Consolidated Statement
of Changes in Equity 12
CONDENSED Consolidated STATEMENT
OF Cash FlowS 13
Notes to the CONDENSED Financial
Statements 14
Cautionary Statement
This interim management report has been prepared solely to
provide additional information to shareholders to assess the
business strategies of Northern Electric plc (the "Company") and
its subsidiaries (together the "Group") and the potential for those
strategies to succeed and should not be relied on by any other
party or for any other purpose.
Review of the six months to 30 June 2016
The Company is part of the Northern Powergrid Holdings Company
group of companies (the "Northern Powergrid Group") and its
principal activity during the six months to 30 June 2016 was to act
as a holding company, with its main operating subsidiaries being
Northern Powergrid (Northeast) Limited ("Northern Powergrid"),
Integrated Utility Services Limited ("IUS") and Northern Powergrid
Metering Limited ("Metering").
Northern Powergrid distributes electricity to approximately 1.6
million customers connected to its electricity distribution network
in the North East of England and is an authorised distributor under
the Electricity Act 1989. IUS provides engineering contracting
services to various clients and Metering rents smart meters to
energy suppliers. The Group operates a business model and strategy
based on the Northern Powergrid Group's core principles, details of
which can be found in the Group's annual reports and accounts for
the year ended 31 December 2015.
Financial strength
Results for the six months ended 30 June 2016
The half-yearly accounts for the six months ended 30 June 2016
consolidate the results of the Group and are prepared under
International Financial Reporting Standards. The half-yearly
accounts do not comprise statutory accounts required to be
delivered to the Registrar of Companies under the Companies Act
2006 and have not been subject to audit or review by the Group's
auditor. The Group will deliver its statutory accounts for the
current financial year ending on 31 December 2016 to the Registrar
of Companies by 30 June 2017.
The Group delivered a satisfactory performance for the six
months ended 30 June 2016, although profit after tax reduced by
GBP11.1 million when compared to the previous year mainly as a
result of lower revenue, the reasons for which are set out below,
and higher depreciation charges. A summary of the key financial
results is as follows:
Key financials
Revenue
Revenue at GBP190.0 million was GBP10.6 million lower than for
the six months ended 30 June 2015 mainly due to receipt of lower
Distribution Use of System revenues by Northern Powergrid, offset
by higher smart meter rental income.
Key financials (continued)
Cash flow
Cash and cash equivalents as at 30 June 2016 were GBPNil,
representing a decrease of GBP8.8 million when compared with the
position at 31 December 2015.
Northern Powergrid has access to GBP75.0 million under a
five-year committed revolving credit facility provided by Lloyds
Bank plc, Royal Bank of Scotland plc and Abbey National Treasury
Services plc, which is due to expire on 30 April 2020.
In addition, the Group has access to short-term borrowing
facilities provided by Yorkshire Electricity Group plc, a related
party, and to a GBP22 million overdraft facility provided by Lloyds
Bank plc.
Financial position
Profit before tax at GBP75.0 million was GBP15.0 million lower
than the six months ended 30 June 2015 mainly as a result of lower
revenues and higher depreciation.
Dividends
No ordinary dividends were paid in the period resulting in
GBP59.6 million being transferred to reserves.
Related party transactions
The Company provides certain corporate functions to the Northern
Powergrid Group, including financial accounting and planning,
treasury, taxation, pensions, internal audit, legal advice,
insurance management, claims handling and litigation services.
Further details of the related party transactions entered into
by the Group and the Company and changes therein are included in
Note 8 to this half-yearly financial report.
Customer service
Northern Powergrid's key customer service performance indicators
are customer interruptions ("CI") and customer minutes lost ("CML")
and, for the regulatory year to 31 March 2016 (the "Regulatory
Year"), both indicators were better than Ofgem's targets. As at the
date of this half-yearly financial report, Northern Powergrid's
currently reported performance for the Regulatory Year is as
follows:
Year to 31 March Year to 31 March
2016 2015
Actual Target Actual Target
CML 49.7 65.9 56.1 70.6
CI 58.2 63.8 65.3 68.1
Customer service (continued)
Under the Broad Measure of Customer Satisfaction, an independent
market research company carries out telephone surveys with Northern
Powergrid's customers to find out how satisfied they were with the
services provided. Those surveys are of a number of customers who
contacted Northern Powergrid regarding an unplanned or a planned
power cut, requested a price quotation and a subsequent connection
or had a general enquiry where a service had been provided or a job
completed. In that respect, Northern Powergrid recorded an overall
satisfaction score of 84.1% (2015: 81.9%) for the Regulatory
Year.
Indicative of the continued, gradual improvement in the standard
of customer service provided in the first half of 2016 was the
achievement in May of an overall satisfaction score of 93.8% in
respect of planned power cuts, which was the highest monthly score
ever recorded in that category by any group of DNOs. The best ever
overall customer satisfaction result was recorded in May 2016 but a
slightly reduced score in June 2016 placed Northern Powergrid and
its affiliate, Northern Powergrid (Yorkshire) plc, joint fourth in
the ranking of DNOs, although only 0.2% separated the scores of the
DNOs in joint fourth and second position. Individual performance in
respect of power cuts, connections and general enquiries has been
encouraging year-to-date and provides a solid base as further
improvement initiatives are introduced.
Northern Powergrid continued to deliver its customer
satisfaction improvement programme in respect of new connections to
the network in the first half of 2016, which is focussed on actions
derived from customers' feedback obtained from the weekly telephone
surveys and is designed to support Northern Powergrid's goal to be
the leading provider of customer service within the electricity
distribution sector.
Operational excellence
Northern Powergrid continued to implement its approved network
investment strategy in order to deliver improvements in an
efficient and cost-effective manner and to enhance the distribution
network's resilience and invested GBP90.4 million in the network
during the six months to 30 June 2016, which was a decrease on the
GBP116.7 million recorded in the six months to 30 June 2015 and
included the refurbishment, replacement and construction of assets
such as substations, transformers, switchgear and overhead and
underground cables so that the number of power cuts that occur and
number of customers affected by those power cuts are minimised as
far as possible. That investment and the locally-focussed basis of
Northern Powergrid's operations have contributed to average
high-voltage and low-voltage restoration times being in line with
their year-to-date targets.
Northern Powergrid responded well to the high winds that
impacted its network during Storm Gertrude on 29 January 2016,
which resulted in Northern Powergrid invoking its major incident
management plan. Storm Gertrude mainly affected Northumberland,
Tyne and Wear and County Durham and resulted in some 25,000
customers being affected by power cuts, with 98% of those customers
having their power restored within 12 hours and 82% within three
hours.
Operational excellence (continued)
IUS continued to operate its engineering contracting business
and saw a reduction in revenues in the six months to 30 June 2016,
mainly due to lower activity in delivering contracts for Network
Rail. Work on private electrical infrastructure for network owners
in the North East of England and Yorkshire and on Multi-Utility
contracts, which relate to the provision of electric, gas and water
connections to housing developers, has increased in 2016. However,
competition for business in the sectors, within which IUS operates,
remained strong.
Metering continued to deliver a satisfactory performance in
terms of the contracts secured with energy suppliers for the
provision of smart meters in the United Kingdom and Ireland and
also to develop further opportunities with other energy
suppliers.
Employee commitment - Health and safety
The safety of its employees continued to be of paramount
importance to the Group, with the on-going focus being on the goal
that every employee and contractor should go home at the end of
each shift uninjured and in good health after a productive day's
work. During the six months to 30 June 2016, the Group did not
experience any lost time accidents (six months to 30 June 2015:
Nil) against an annual target of one and incurred seven preventable
vehicle accidents (six months to 30 June 2015: 4) against an annual
target of 11.
The Group's continued use of targeted online driver training has
assisted in reducing slow-speed and reversing incidents in the year
to date and the exercise to equip all fleet vehicles with
fully-operational telematics equipment was completed in May. The
impact of this investment on accident rates will be subject to
on-going assessment and accident investigations are able to utilise
the technology in order to assist with identification of root
causes and to support improvements in driving behaviour.
Environmental respect
Environmental performance for the first half of 2016 was
encouraging with leakage rates from underground cables and
oil-filled equipment continuing to be below historic levels over
that part of the year and all of the Northern Powergrid Group's key
performance indicators being ahead of target. That performance was
supported by increased awareness of environmental matters across
the Group's business and effective and early notification of issues
occurring that provide the opportunity to take action to manage
those issues in a timely manner.
In addition, Northern Powergrid was presented with a Silver
award at the Zero Waste Awards 2016 for excellence in recycling and
waste management, which recognise contributions made by businesses
to create a more sustainable and resourceful economy by embedding
waste reduction practices into their operations.
Principal risks and uncertainties
Regulatory risk
During the current price control period, which is known as ED1
and runs until 31 March 2023, the rate of inflation, as measured by
the Retail Prices Index ("RPI"), is taken into account in setting
Northern Powergrid's allowed income in respect of each regulatory
year. Consequently, one of the risks faced by Northern Powergrid is
that its costs may increase by more than RPI. Any changes in costs
incurred will have a direct impact on Northern Powergrid's
financial results, as will changes in performance under incentive
schemes, such as in customer service, which can lead to adjustments
to allowed revenues. In addition, the following are likely to have
an impact on Northern Powergrid's financial performance during the
ED1 period:
- the period over which new regulatory assets are depreciated is
being gradually lengthened, from 20 years to 45 years;
- allowed revenues will be adjusted during the ED1 period,
rather than at the next price control review, to partially reflect
cost variances relative to cost allowances;
- the allowed cost of debt will be updated within the ED1 period
by reference to a long-run trailing average based on external
benchmarks of public debt costs; and
- allowed revenues will be adjusted in relation to some new
service standard incentives, principally relating to speed and
service standards for new connections to the network.
Many aspects of the previous price control remain in place,
including adjustments to revenues in relation to the number and
duration of power cuts and customer service standards. There is
also scope for a mid-period review and adjustment to revenues in
the latter half of the ED1 period for any changes in the outputs
required of licensees for certain specified reasons.
Financial risk
The principal risks associated with the regulatory environment,
within which Northern Powergrid operates, are mentioned above.
As IUS' business is primarily in the competitive engineering
contracting market, it continues to be subject to the issues
created by the general economic environment and trading conditions
and the associated fluctuations in demand for its services. In
addition, there continues to be an enhanced risk of counter-party
default, with the associated increase in the potential for IUS to
be exposed to bad debt.
Northern Powergrid Metering operates as a meter asset provider,
exposed to the risk of payment default, it reduces the risk by
adhereing to credit checking, payment terms, payment performance
tracker and debt managerment, as a result its overdue debt position
was not considered material.
The Group addresses interest rate risk by a policy of having a
stable, low cost of financing over time, whilst observing approved
risk parameters. The Group finances its activities by a combination
of long-term borrowings at fixed rates of interest and by having
access to short-term borrowing facilities at floating rates.
Principal risks and uncertainties (continued)
Financial risk (continued)
As at 30 June 2016, 100% of the Group's long-term borrowings
were at fixed rates and the average maturity for these borrowings
was 12 years. No material currency risks are faced by the Group and
it is policy that no trading in financial instruments should be
undertaken.
Northern Powergrid operates a stable and regulated business, in
respect of which its allowed income is set in respect of each
regulatory year through the special conditions in the electricity
distribution licence. The principal risk is of an increase to the
deficit currently attributable to the defined benefit pension
scheme, of which the Company is the Principal Employer, given
current volatility and uncertainty in the financial markets. The
triennial valuation as at 31 March 2016 is currently ongoing, as
part of which the Group and the Trustees will agree contributions
required (if any) to ensure the scheme is fully funded over time on
the basis of suitable, prudent assumptions.
Further information on the principal long-term risks and
uncertainties and the internal control system are included in the
Group's latest annual reports and accounts for the year to 31
December 2015, which is available at www.northernpowergrid.com.
It is anticpated that these risks will continue for the
remaining six months of 2016.
Going concern
In the Group's latest annual reports and accounts for the year
to 31 December 2015 the directors set out a number of factors they
took into account when they considered continuing to adopt the
going concern basis in preparing those annual reports and accounts.
The directors confirm that no events have occurred during the six
months to 30 June 2016, which alter the view expressed in the
annual reports and accounts to 31 December 2015.
Future strategy and objectives
The Company will continue to develop its business as a holding
company in a manner that concentrates on the Group's principal
activities of electricity distribution, engineering contracting and
the rental of meters to energy suppliers.
Northern Powergrid will continue to develop its business by
operating with the goal of efficiently investing in the
distribution network and improving the quality of supply and
service provided to customers and delivering the regulatory
business plan for ED1.
IUS will look to develop further its engineering contracting
business by delivering a high standard of service to its existing
clients and pursuing further opportunities in other sectors.
Metering will continue to explore commercial opportunities to
develop its business in smart metering sector.
Responsibility Statement
The board of directors confirm that to the best of their
knowledge:
(a) the condensed set of finanical statements, which has been
prepared in accordance with IAS 34, "Interim Financial Reporting",
gives a true and fair view of the assets, liabilities, financial
position and profit of the Company and the undertakings included in
the consolidation as a whole as required by DTR 4.2.4 R for the six
months to 30 June 2016;
(b) the interim management report contains a fair review of the
information required by DTR 4.2.7 R (indication of important events
during the first six months of the year and description of the
principal risks and uncertainties for the remaining six months of
the year); and
(c) the interim management report includes a fair review of the
information required by DTR 4.2.8 R (related parties' transactions
and changes therein).
By order of the board
T E Fielden
Director
23 September 2016
6 Months 6 Months
ended ended
30 June 30 June
2016 2015
(unaudited) (unaudited)
GBPm GBPm
Revenue 190.0 200.6
Cost of sales (20.4) (22.1)
------------ ------------
Gross profit 169.6 178.5
Operating expenses (75.8) (71.3)
------------ ------------
Operating profit 93.8 107.2
Other gains 0.4 0.2
Finance income 0.2 0.8
Finance costs (19.4) (18.2)
------------ ------------
Profit before tax 75.0 90.0
Income tax expense (15.4) (19.3)
------------ ------------
Profit from ordinary activities
after tax 59.6 70.7
------------ ------------
6 Months 6 Months
ended ended
30 June 30 June
2016 2015
(unaudited) (unaudited)
GBPm GBPm
PROFIT FOR THE PERIOD 59.6 70.7
OTHER COMPREHENSIVE INCOME
Items that will not be reclassified
subsequently to profit or loss:
Employee benefit obligation 15.8 (15.0)
Income tax relating to items of
other comprehensive income (2.9) 3.0
------------ ------------
OTHER COMPREHENSIVE INCOME FOR THE
YEAR, NET OF INCOME TAX 12.9 (12.0)
TOTAL COMPREHENSIVE INCOME FOR THE
YEAR 72.5 72.5
------------ ------------
30 June 31 December
2016 2015
(unaudited)
GBPm GBPm
ASSETS
NON-CURRENT ASSETS
Intangible assets 36.2 31.6
Property, plant and equipment 2,228.6 2,130.1
Investments 3.8 3.5
Pension asset 119.8 88.1
Trade and other receivables 9.5 8.8
------------ ------------
2,398.0 2,262.2
------------ ------------
CURRENT ASSETS
Inventories 11.9 13.5
Trade and other receivables 75.5 73.8
Cash and cash equivalents - 8.8
------------ ------------
87.4 96.1
------------ ------------
TOTAL ASSETS 2,485.4 2,358.3
------------ ------------
EQUITY
SHAREHOLDERS' EQUITY
Share capital 72.2 72.2
Share premium account 158.8 158.8
Other reserves 6.2 6.2
Retained earnings 844.0 771.5
------------ ------------
TOTAL EQUITY 1,081.2 1,008.7
------------ ------------
30 June 31 December
2016 2015
(unaudited)
GBPm GBPm
LIABILITIES
NON-CURRENT LIABILITIES
Trade and other payables 544.3 526.8
Borrowings 487.2 487.2
Deferred tax 108.8 104.9
Provisions 1.2 2.0
------------ ------------
1,141.5 1,120.9
------------ ------------
CURRENT LIABILITIES
Trade and other payables 125.1 110.1
Borrowings 132.2 113.6
Tax payable 3.6 4.0
Provisions 1.8 1.0
------------ ------------
262.7 228.7
------------ ------------
TOTAL LIABILITIES 1,404.2 1,349.6
------------ ------------
TOTAL EQUITY AND LIABILITIES 2,485.4 2,358.3
------------ ------------
The interim financial statements were approved by the board of
directors and authorised for issue on 23 September 2016 and were
signed on its behalf by:
T E Fielden
Director
Share
Share Premium Other Retained
Capital Account Reserves Earnings Total
GBPm GBPm GBPm GBPm GBPm
Balance at
1 January 2016 72.2 158.8 6.2 771.5 1,008.7
Profit for
the period
(unaudited) - - - 59.6 59.6
Other comprehensive
income (unaudited) - - - 12.9 12.9
Balance at
30 June 2016 72.2 158.8 6.2 844.0 1,081.2
-------- -------- --------- --------- --------
Share
Share Premium Other Retained
Capital Account Reserves Earnings Total
GBPm GBPm GBPm GBPm GBPm
Balance at
1 January 2015 72.2 158.8 6.2 649.7 886.9
Profit for
the period
(unaudited) - - - 70.7 70.7
Other comprehensive
income (unaudited) - - - (12.0) (12.0)
Balance at
30 June 2015 72.2 158.8 6.2 708.4 945.6
-------- -------- --------- --------- -------
Share
Share Premium Other Retained
Capital Account Reserves Earnings Total
GBPm GBPm GBPm GBPm GBPm
Balance at
1 January 2015 72.2 158.8 6.2 649.7 886.9
Profit for
the year - - - 144.9 144.9
Other comprehensive
income (2.5) (2.5)
Dividends - - - - (20.6) (20.6)
Balance at
31 December
2015 72.2 158.8 6.2 771.5 1,008.7
-------- -------- --------- --------- --------
6 Months 6 Months
ended ended
30 June 30 June
2016 2015
(unaudited) (unaudited)
GBPm GBPm
Cash generated from operations 108.3 113.6
Net interest paid (17.8) (18.1)
Tax paid (14.7) (12.2)
------------ ------------
Net cash from operating activities 75.8 83.3
------------ ------------
Investing activities
Proceeds from disposal of
property, plant and equipment 0.2 0.2
Purchase of property, plant
and equipment (120.6) (148.0)
Purchase of intangible assets (6.1) (5.2)
Dividends received from joint
venture - 0.5
Receipt of customer contributions 26.1 20.9
------------ ------------
Net cash used in investing
activities (100.4) (131.6)
------------ ------------
Financing activities
Movement in external loans 12.4 (9.0)
Movement in loans from group 3.4 -
undertakings
Net cash generated/(used in)
by financing activities 15.8 (9.0)
------------ ------------
Net decrease in cash and cash
equivalents (8.8) (57.3)
Cash and cash equivalents
at beginning of period 8.8 85.6
------------ ------------
Cash and cash equivalents
at end of period - 28.3
------------ ------------
1. GENERAL INFORMATION
The information included within these condensed financial
statements for the year ended 31 December 2015, does not constitute
statutory accounts as defined in section 434 of the Companies Act
2006. A copy of the statutory accounts for that year has been
delivered to the Registrar of Companies. The auditor reported on
those accounts and that report was unqualified, did not draw
attention to any matters by way of emphasis and did not contain a
statement under section 498(2) or (3) of the Companies Act
2006.
2. ACCOUNTING POLICIES
Basis of preparation
The annual financial statements of the Group are prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union. The condensed set of financial
statements included in this half-yearly financial report has been
prepared in accordance with International Accounting Standard 34,
'Interim Financial Reporting', as adopted by the European
Union.
Going concern
In the Company's latest annual reports and accounts for the year
to 31 December 2015 the directors set out a number of factors they
took into account when they considered continuing to adopt the
going concern basis in preparing those annual reports and accounts.
The directors confirm that no events have occurred during the six
months to 30 June 2016, which alter the view expressed in the
annual reports and accounts to 31 December 2015.
Changes in accounting policy
The Group's accounting policies and methods of computation are
the same as the accounting policies which are described in the
Group's financial statements for the year ended 31 December 2015.
The Group has not adopted any new or revised accounting standards
in the current year.
3. SEGMENTAL ANALYSIS
The Group operates in the principal area of activity of the
distribution of electricity in the United Kingdom.
There has been no change in the basis of segmentation or in the
basis of measurement of segment profit or loss in the period.
The following is an analysis of the Group's revenue and results
by reportable segment in the six months ended 30 June 2016
(unaudited):
Consolidation
Distribution Contracting Other Adjustments Total
GBPm GBPm GBPm GBPm GBPm
REVENUE
External
sales 165.3 14.5 10.2 - 190.0
Inter-segment
sales 0.3 0.9 (0.3) (0.9) -
------------- ------------ ------ -------------- -------
Total Revenue 165.5 15.4 9.9 (0.9) 190.0
------------- ------------ ------ -------------- -------
SEGMENT RESULTS
Operating
profit 77.0 0.1 1.1 15.6 93.8
------------- ------------ ------ --------------
Other gains 0.4
Finance income 0.2
Finance costs (19.4)
-------
Profit before
tax 75.0
-------
OTHER INFORMATION
Capital additions 99.1 - 26.6 - 142.9
Depreciation
and amortisation 37.9 - 4.4 (0.9) 41.4
Amortisation
of deferred
revenue 9.4 - - - 9.4
------------- ------------ ------ -------------- -------
3. SEGMENTAL ANALYSIS (CONTINUED)
The following is an analysis of the Group's revenue and results
by reportable segment in the six months ended 30 June 2015
(unaudited):
Consolidation
Distribution Contracting Other Adjustments Total
GBPm GBPm GBPm GBPm GBPm
REVENUE
External
sales 178.8 16.0 5.8 - 200.6
Inter-segment
sales 0.3 1.4 (0.2) (1.5) -
------------- ------------ ------ -------------- -------
Total Revenue 179.1 17.4 5.6 (1.5) 200.6
------------- ------------ ------ -------------- -------
SEGMENT RESULTS
Operating
profit 90.4 0.2 (0.4) 17.0 107.2
------------- ------------ ------ --------------
Other gains 0.2
Finance income 0.8
Finance costs (18.2)
-------
Profit before
tax 90.0
-------
OTHER INFORMATION
Capital additions 116.8 - 26.6 - 143.4
Depreciation
and amortisation 35.8 - 1.3 (0.9) 36.2
Amortisation
of deferred
revenue 10.4 - - - 10.4
------------- ------------ ------ -------------- -------
"Other" comprises smart meter rental and business support
units.
Sales and purchases between the different segments are made at
commercial prices.
External sales to RWE Npower plc in the six months ended 30 June
2016 of GBP40.1 million (30 June 2015: GBP48.2 million) are
included within the Distribution segment.
External sales to British Gas Ltd in the six months ended 30
June 2016 of GBP20.4 million (30 June 2015: GBP22.7 million) are
included within the Distribution segment.
3. SEGMENTAL ANALYSIS (CONTINUED)
The accounting policies of the reportable segments are the same
as the Group's accounting policies which are described in the
Group's latest annual financial statements. The segment results
represent the profit earned by each segment without allocation of
the share of profits of joint ventures, associates, finance income
and finance costs and income tax expense.
Segment net assets 30 June 31 December
2016 Unaudited 2015
GBPm GBPm
Distribution 1,620.3 1,576.1
Contracting 12.8 11.4
Other 107.8 74.1
Consolidation Adjustments (52.1) 44.4
---------------- ------------
Total net assets by segment 1,688.7 1,706.0
Unallocated net corporate
liabilities (607.5) (697.5)
---------------- ------------
Total net assets 1,081.2 1,008.5
---------------- ------------
Unallocated net corporate liabilities include cash and cash
equivalents of GBPnil million (December 2015: GBP8.8 million),
borrowings of GBP618.9 million (December 2015: GBP601.1 million),
retirement benefit asset of GBP119.8 million (December 2015:
GBP88.1 million), and taxation of GBP112.4 million (December 2015:
GBP108.8 million).
4. INCOME TAX EXPENSE
Tax for the six month period ended 30 June 2016 is charged at
20.00% (six months ended 30 June 2015: 20.25%; year ended 31
December 2015: 20.25%) which represents the best estimate of the
average annual effective tax rate expected for the full year, as
applied to the pre-tax income of the six month period.
6 months 6 months
ended ended
30 June 30 June
2015 2014
Unaudited Unaudited
GBPm GBPm
Current tax 11.7 13.7
Deferred tax 3.7 5.6
Total income tax
expense 15.4 19.3
---------- ----------
The Finance No 2 Act 2015 included a provision that the standard
rate of corporation tax in the United Kingdom was to reduce from
20% to 19% from April 2017 and to 18% from April 2020. Deferred
taxation is measured at the tax rates that apply in the periods in
which the temporary differences are expected to reverse based on
the tax rates and laws that have been substantively enacted at the
statement of financial position date. Accordingly, 18% has been
applied when calculating deferred tax assets and liabilities as at
30 June 2016.
The Finance Bill 2016 contains provisions to further reduce the
rate of corporation tax to 17% with effect from 1 April 2020. It is
expected that the Finance Act 2016 will be substantively enacted in
October 2016. As substantive enactment of Finance Act 2016 is after
the statement of financial position date the further reduction to
the rate of UK corporation tax has been disregarded in calculating
the deferred tax position at 30 June 2016.
5. NOTES TO THE CASH FLOW STATEMENT
6 Months 6 Months
ended ended
30 June 30 June
2016 2015
(unaudited) (unaudited)
GBPm GBPm
Profit before income
tax 75.0 90.0
Depreciation charges 41.4 36.2
Profit on disposal
of fixed assets (0.2) (0.2)
Amortisation of deferred
revenue (9.5) (10.4)
Retirement benefit
obligations (15.9) (18.0)
Decrease in provisions (0.2) (0.6)
Finance costs 19.4 18.2
Finance income (0.2) (0.8)
------------ ------------
109.8 114.4
Decrease/(increase)
in inventories 1.5 (1.2)
(Increase)/decrease
in trade and other
receivables (2.1) 5.6
(Decrease) in trade
and other payables (0.9) (4.2)
------------ ------------
Cash generated from
operations 108.3 113.6
------------ ------------
6. RETIREMENT BENEFIT SCHEMES
The defined benefit obligation as at 30 June 2016 is calculated
on a year-to-date basis, using the annual actuarial valuation as at
31 December 2015. If the current market conditions as at 30 June
2016 were to be adopted, the amount recognised pre-tax in Other
Comprehensive Income would be GBP247.4m and the pension expense for
the year ended 31 December 2016 would increase by GBP1.1 to
GBP13.6m. However due to the current volatility of the market the
interim accounts have not been adjusted and the 2016 annual reports
and accounts will reflect market conditions as at 31 December
2016.
7. FINANCIAL INSTRUMENTS
Except as detailed in the following table, the directors
consider that the carrying value amounts of financial assets and
financial liabilities are approximately equal to their fair
values:
Carrying value Fair value
30 June 31 December 30 June 31 December
2016 2015 2016 2015
Unaudited Unaudited
GBPm GBPm GBPm GBPm
Financial liabilities
Inter-company short-term
loan 3.4 0.2 3.4 0.2
Bond 2020 - 8.875%
(Northern Electric
Finance plc) 105.6 101.1 136.7 130.6
Bond 2035 - 5.125%
(Northern Electric
Finance plc) 149.1 152.9 197.6 180.5
EIB Loan (2018-2020)* 120.4 123.4 131.4 132.8
EIB Loan 2027 - 2.564%
(Northern Powergrid
(Northeast) Ltd 121.7 120.1 130.9 117.1
Yorkshire Electricity
Group plc 2037 -
5.9% 102.9 100.0 145.8 132.1
Cumulative preference
shares 3.4 3.4 167.5 160.8
---------- ------------ ---------- ------------
542.9 552.2 913.3 854.1
* The borrowings from the European Investment Bank were drawn
down in twelve tranches, repayable in 2018, 2019 and 2020. The
spread of interest rate is as follows:
2018: 3.901% - 4.283%
2019: 4.077% - 4.455%
2020: 4.227% - 4.586%
8. RELATED PARTY TRANSACTIONS
Group
Transactions entered into with related parties and balances
outstanding were as follows:
Finance
income/
Purchases Amounts (costs)
Sales from owed Borrowings from/(to)
to related related to related from related related
parties parties parties parties parties
GBPm GBPm GBPm GBPm GBPm
Related party
Six months ended
30 June 2016:
Northern Powergrid
Limited - - - - (3.1)
Northern Powergrid
(Yorkshire)
plc 8.4 4.9 - - -
Vehicle Lease
and Service
Limited 0.1 2.2 0.4 - 0.4
Yorkshire Electricity
Group plc - - - 102.9 (3.2)
------------ ---------- ------------ -------------- -----------
8.5 7.4 0.3 102.9 (5.9)
============ ========== ============ ============== ===========
Six months ended
30 June 2015:
Northern Powergrid
Gas Limited 0.1 - - - -
Northern Powergrid
Insurance Services
Limited - 0.2 - - -
Northern Powergrid
Limited - - - - (3.1)
Northern Powergrid
(Yorkshire)
plc 9.8 4.5 - - -
Vehicle Lease
and Service
Limited 0.1 2.0 0.3 0.6 0.4
Yorkshire Electricity
Group plc - - - 102.9 (2.9)
------------ ---------- ------------ -------------- -----------
10.0 6.7 0.3 103.5 (5.6)
============ ========== ============ ============== ===========
8. RELATED PARTY TRANSACTIONS (CONTINUED)
Group - continued
Finance
income/
Purchases Amounts (costs)
Sales from owed Borrowings from/(to)
to related related to related to/(from) related
parties parties parties related parties parties
GBPm GBPm GBPm GBPm GBPm
Related party
Year ended 31
December 2015:
Integrated Utility
Services Limited
(registered
in Eire) - 2.8 0.1 - -
Northern Powergrid
Gas Limited 0.1 - - - -
Northern Powergrid
Insurance Services
Limited - 0.3 - - -
Northern Powergrid
Limited - - - - (6.2)
Northern Powergrid
(Yorkshire)
plc 25.7 10.7 - - -
Vehicle Lease
and Service
Limited 0.2 3.7 0.4 - 0.6
Yorkshire Electricity
Group plc - - - 100.2 (6.0)
------------ ---------- ------------ ----------------- -----------
26.0 17.5 0.5 100.2 (11.6)
============ ========== ============ ================= ===========
Sales and purchases from related parties were made at commercial
prices.
Interest on loans to/from Group companies is charged at a
commercial rate.
During the six months ended 30 June 2016 two directors (six
months ended 30 June 2015: 2, year ended 31 December 2015: 2)
utilised the services provided by Northern Transport Finance
Limited, a subsidiary company.
8. RELATED PARTY TRANSACTIONS (CONTINUED)
Company
Transactions entered into with related parties and balances
outstanding were as follows:
Finance
income/
Purchases (costs)
Sales from Borrowings from/(to)
to related related to/(from) related
parties parties related parties parties
GBPm GBPm GBPm GBPm
Related party
Six months ended
30 June 2016:
Integrated Utility
Services Limited - 0.3 - -
Northern Powergrid
Gas Limited 0.1 - - -
Northern Powergrid
Limited - - - (3.1)
Northern Powergrid
(Northeast)
Limited 3.2 - - -
Northern Powergrid
(Yorkshire)
plc 2.5 - - -
Vehicle Lease
and Service
Limited 0.1 - - -
Yorkshire Electricity
Group plc - - 27.0 -
------------ ---------- ----------------- -----------
5.9 0.3 27.0 (3.1)
============ ========== ================= ===========
Six months ended
30 June 2015:
Integrated Utility
Services Limited - 0.3 - -
Northern Powergrid
Gas Limited 0.1 - - -
Northern Powergrid
Limited - - - (3.1)
Northern Powergrid
(Northeast)
Limited 3.7 - - -
Northern Powergrid
(Yorkshire)
plc 2.3 - - -
Vehicle Lease
and Service
Limited 0.1 - - 0.4
Yorkshire Electricity
Group plc - - 29.0 0.1
------------ ---------- ----------------- -----------
6.2 0.3 29.0 (2.6)
============ ========== ================= ===========
8. RELATED PARTY TRANSACTIONS (CONTINUED)
Company - continued
Finance
income/
Purchases Amounts (costs)
Sales from owed Borrowings from/(to)
to related related to related to/(from) related
parties parties parties related parties parties
GBPm GBPm GBPm GBPm GBPm
Related party
Year ended 31
December 2015:
Integrated Utility
Services Limited 0.1 0.5 - - -
Northern Powergrid
Gas Limited 0.1 - - - -
Northern Powergrid
Limited - - - - (6.2)
Northern Powergrid
(Northeast)
Limited 6.4 0.1 - - 20.6
Northern Powergrid
(Yorkshire)
plc 4.0 - - - -
Vehicle Lease
and Service
Limited 0.2 - - - 0.5
Yorkshire Electricity
Group plc - - - 24.3 0.2
------------ ---------- ------------ ----------------- -----------
10.8 0.6 - 24.3 15.1
============ ========== ============ ================= ===========
Sales and purchases from related parties were made at commercial
prices.
Interest on loans to/from Group companies is charged at a
commercial rate.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR GIGDCUUDBGLL
(END) Dow Jones Newswires
September 26, 2016 04:57 ET (08:57 GMT)
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