TIDMBC39
RNS Number : 8020K
Northern Powergrid (Yorkshire) plc
26 September 2016
NORTHERN POWERGRID (YORKSHIRE) plc
HALF-YEARLY FINANCIAL REPORT
SIX MONTHSED 30 JUNE 2016
Page
INTERIM MANAGEMENT REPORT 1
Condensed statement of profit or
loss 7
CONDENSED Statement of OTHER Comprehensive
Income 7
CONDENSED Statement of Financial
Position 8
CONDENSED Statement of Changes in
Equity 9
CONDENSED STATEMENT OF Cash FlowS 10
Notes to the CONDENSED Financial
Statements 11
Cautionary Statement
This interim management report has been prepared solely to
provide additional information to shareholders to assess the
business and strategies of Northern Powergrid (Yorkshire) plc (the
"Company") 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 an authorised distributor under the Electricity Act 1989. The
Company distributes electricity to approximately 2.3 million
customers connected to its electricity distribution network within
its distribution services area.
Financial strength
Results for the six months ended 30 June 2016
The half-yearly accounts for the six months ended 30 June 2016
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 Company's
auditor. The Company 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 Company delivered a satisfactory performance for the six
months ended 30 June 2016 although profit after tax reduced by
GBP10.3 million when compared to the previous year mainly as a
result of lower revenue, the reasons for which are set out below. A
summary of the key financial results is as follows:
Key financials
Revenue
Revenue at GBP206.6 million was GBP11.5 million lower than for
the six months ended 30 June 2015 mainly due to reduced
Distribution Use of System ("DUoS") revenue when compared to the
previous year.
Cash flow
Cash and cash equivalents as at 30 June 2016 were GBP153.1
million, representing an increase of GBP7.4 million when compared
with the position at 31 December 2015.
Financial strength (continued)
Key financials (continued)
Cash flow (continued)
The Company has access to GBP75 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. The Company also has
access to a GBP50 million committed loan facility provided by the
European Investment Bank.
In addition, the Company has access to short-term borrowing
facilities provided by Yorkshire Electricity Group plc, a related
party, and to a GBP19 million overdraft facility provided by Lloyds
Bank plc.
Financial position
Profit before tax at GBP78.1 million was GBP13.0 million lower
than the six months ended 30 June 2015 mainly as a result of lower
DUoS revenue.
Dividends
No ordinary dividends were paid in the period resulting in
GBP62.0 million being transferred to reserves.
Related party transactions
Details of the related party transactions entered into by the
Company and changes therein are included in Note 7 to this
half-yearly financial report.
Customer service
The Company'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, the Company'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 42.1 63.1 50.4 76.0
CI 52.7 68.5 60.9 75.3
Customer service (continued)
Under the Broad Measure of Customer Satisfaction, an independent
market research company carries out telephone surveys with the
Company's customers to find out how satisfied they were with the
services provided. Those surveys are of a number of customers who
contacted the Company 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, the Company recorded an overall
satisfaction score of 83.3% (2015: 82.6%) 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 the Company and its
affiliate, Northern Powergrid (Northeast) Limited, 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.
The Company 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 the Company's goal to be the leading
provider of customer service within the electricity distribution
sector.
Operational excellence
The Company 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 GBP103.6 million in the network
during the six months to 30 June 2016, which was a decrease on the
GBP158.7 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.
Employee commitment - Health and safety
The safety of its employees continued to be of paramount
importance to the Company, 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 Company
experienced four lost time accidents (six months to 30 June 2015:
2) against an annual target of two and incurred six preventable
vehicle accidents (six months to 30 June 2015: 6) against an annual
target of 13.
Employee commitment - Health and safety (continued)
Flashovers on electrical equipment were the most significant
incidents in the year to date and appropriate restrictions were
placed on the equipment concerned pending completion of
investigations that are currently ongoing. The Company'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 Company'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, the Company 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
the Company's allowed income in respect of each regulatory year.
Consequently, one of the risks faced by the Company is that its
costs may increase by more than RPI. Any changes in costs incurred
will have a direct impact on the Company'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 the Company'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.
Principal risks and uncertainties (continued)
Regulatory risk (continued)
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 and there is
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 the Company operates, are mentioned above.
The Company addresses interest rate risk by a policy of having a
stable, low cost of financing over time, whilst observing approved
risk parameters. The Company 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.
As at 30 June 2016, 100% of the Company's long-term borrowings
were at fixed rates and the average maturity for these borrowings
was 11 years. No material currency risks are faced by the Company
and it is policy that no trading in financial instruments should be
undertaken.
The Company operates a stable and regulated electricity
distribution business, in respect of which its allowed income is
set for each regulatory year through the special conditions in the
electricity distribution licence. The principal risk is of an
increase in the deficit currently attributable to the defined
benefit pension scheme, in which the Company is a Participating
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 Northern Powergrid 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
Company'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 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.
Future strategy and objectives
The directors intend that the Company will continue to develop
its business by operating with the goal of efficiently investing in
its distribution network, improving the quality of supply and
service provided to customers and delivering the regulatory
business plan for ED1.
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 as required by DTR 4.2.4 R for
the six months to 30 June 2016; and
(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).
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 206.6 218.1
Cost of sales (8.0) (8.0)
------------ ------------
Gross profit 198.6 210.1
Operating expenses (97.3) (97.8)
------------ ------------
Operating profit 101.3 112.3
Other gains 0.3 0.1
Net finance costs (23.5) (21.3)
------------ ------------
Profit before tax 78.1 91.1
Income tax expense (16.1) (18.8)
------------ ------------
Profit from ordinary activities
after tax 62.0 72.3
------------ ------------
CONDENSED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME - SIX MONTHSED 30 JUNE 2016
There is no other comprehensive income for the Company for the
six months to 30 June 2016 or the comparative six month period in
2015 other than the profits reported above.
30 June 31 December
2016 2015
(unaudited)
GBPm GBPm
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 2,989.5 2,921.1
------------- ------------
2,989.5 2921.1
------------- ------------
CURRENT ASSETS
Inventories 0.4 0.5
Trade and other receivables 55.4 63.8
Cash and cash equivalents 153.1 145.7
------------- ------------
208.9 210.0
------------- ------------
TOTAL ASSETS 3,198.4 3,313.0
------------- ------------
EQUITY
SHAREHOLDERS' EQUITY
Share capital 290.0 290.0
Retained earnings 891.5 829.5
------------- ------------
TOTAL EQUITY 1,181.5 1,119.5
------------- ------------
LIABILITIES
NON-CURRENT LIABILITIES
Trade and other payables 750.5 728.9
Borrowings 972.5 972.2
Deferred tax 134.7 134.2
Provisions 0.9 0.9
------------- ------------
1,858.6 1,836.2
------------- ------------
CURRENT LIABILITIES
Trade and other payables 114.9 129.8
Borrowings 25.2 33.3
Tax payable 17.2 11.2
Provisions 1.0 1.1
------------- ------------
158.3 175.4
------------- ------------
TOTAL LIABILITIES 2,016.9 2,011.5
------------- ------------
TOTAL EQUITY AND LIABILITIES 3,198.4 3,131.0
------------- ------------
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 Retained
Capital Earnings Total
GBPm GBPm GBPm
Balance at 1 January 2016 290.0 829.5 1,119.5
Profit for the period (unaudited) - 62.0 62.0
Balance at 30 June 2016 290.0 891.5 1,181.5
-------- --------- --------
Share Retained
Capital Earnings Total
GBPm GBPm GBPm
Balance at 1 January 2015 290.0 710.4 1,000.4
Profit for the period (unaudited) - 72.3 72.3
Balance at 30 June 2015 290.0 782.7 1,072.7
-------- --------- --------
Share Retained
Capital Earnings Total
GBPm GBPm GBPm
Balance at 1 January 2015 290.0 710.4 1,000.4
Profit for the year - 146.7 146.7
Equity dividends paid - (27.6) (27.6)
Balance at 31 December 2015 290.0 829.5 1,119.5
-------- --------- --------
6 Months 6 Months
ended ended
30 June 30 June
2016 2015
(unaudited) (unaudited)
GBPm GBPm
Cash generated from operations 138.6 144.7
Net interest paid (32.6) (29.4)
Tax paid (9.6) (19.9)
------------ ------------
Net cash from operating activities 96.4 95.4
------------ ------------
Investing activities
Proceeds from disposal of property,
plant and equipment 0.3 0.1
Purchase of property, plant and
equipment (117.6) (154.2)
Receipt of customer contributions 28.3 38.0
------------ ------------
Net cash used in investing activities (89.0) (116.1)
------------ ------------
Financing activities
Movement in external loans - 130.4
Movement in loan from group undertaking - (23.4)
Net cash generated by financing
activities - 107.0
------------ ------------
Net increase in cash and cash
equivalents 7.4 86.3
Cash and cash equivalents at beginning 145.7 -
of period
------------ ------------
Cash and cash equivalents at end
of period 153.1 86.3
------------ ------------
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 Company 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 Company's accounting policies and methods of computation are
the same as the accounting policies which are described in the
Company's financial statements for the year ended 31 December 2015.
The Company has not adopted any new or revised accounting standards
in the current year.
3. SEGMENTAL ANALYSIS
Revenue, profit before tax and net assets are attributable to
electricity distribution. Revenue is all in respect of sales to
United Kingdom customers.
Revenue represents charges made to customers for use of the
distribution system, rental of meters the recharge of costs
incurred on behalf of related parties, amortisation of customer
contributions and other goods sold and services provided, exclusive
of value added tax.
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 2014: 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 30 ended 30
June June
2016 2015
(unaudited) (unaudited)
GBPm GBPm
Current tax 15.6 18.1
Deferred tax 0.5 0.7
Total income tax expense 16.1 18.8
------------ ------------
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 78.1 91.1
Depreciation charges 46.6 43.2
Profit on disposal of fixed
assets (0.3) (0.1)
Amortisation of deferred
revenue (12.2) (11.3)
Decrease in provisions (0.1) -
Finance costs 23.5 21.3
135.6 144.2
Decrease/(increase) in inventories 0.1 (0.1)
(Increase)/decrease in trade
and other receivables (5.4) 15.4
Increase/(decrease) in trade
and other payables 8.3 (14.8)
------------ ------------
Cash generated from operations 138.6 144.7
------------ ------------
6. 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 (unaudited) 2015 2016 (unaudited) 2015
GBPm GBPm GBPm GBPm
Financial liabilities
Short-term loans - 0.1 - 0.1
Inter-company
short-term loan - - - -
Bond 2020 - 9.25% 207.9 217.1 262.0 269.8
Bond 2025 - 2.5% 148.5 150.3 156.7 146.6
Bond 2032 - 4.375% 153.7 150.4 186.0 164.5
Bond 2035 - 5.125% 198.9 203.8 264.0 240.3
EIB Loan - 4.133% 156.3 153.7 184.4 173.0
EIB Loan - 2.564% 131.8 130.1 141.8 126.9
1,049.6 1,005.5 1,039.2 1,121.1
7. RELATED PARTY TRANSACTIONS
Transactions entered into with related parties and balances
outstanding were as follows:
Amounts
Purchases owed Interest
Sales from from Borrowings from
to related related related to related related
parties parties parties parties parties
GBPm GBPm GBPm GBPm GBPm
Related party
Six months ended
30 June 2016:
Integrated Utility
Services Limited 0.1 0.2 - - -
Northern Electric
plc - 2.5 - - -
Northern Powergrid
Metering Limited 0.2 - - - -
Northern Powergrid
(Northeast)
Limited 4.7 8.2 - - -
Vehicle Lease
and Service
Limited - 2.0 0.2 - -
Yorkshire Electricity
Group plc - - - 153.1 0.4
------------ ---------- --------- ------------ ---------
5.0 12.9 0.2 153.1 0.4
============ ========== ========= ============ =========
Six months ended
30 June 2015:
Integrated Utility
Services Limited 0.1 1.0 - - -
Northern Electric
plc - 2.3 - - -
Northern Powergrid
Insurance Services
Limited - 0.2 - - -
Northern Powergrid
Metering Limited 0.1 - - - -
Northern Powergrid
(Northeast)
Limited 4.5 9.4 - - -
Vehicle Lease
and Service
Limited - 2.0 0.2 - -
Yorkshire Electricity
Group plc - - - 86.3 0.3
------------ ---------- --------- ------------ ---------
4.7 14.9 0.2 86.3 0.3
============ ========== ========= ============ =========
7. RELATED PARTY TRANSACTIONS - (CONTINUED)
Purchases Amounts Interest
Sales from owed Borrowings from
to related related to related to related related
parties parties parties parties parties
GBPm GBPm GBPm GBPm GBPm
Year ended 31
December 2015:
Integrated Utility
Services Limited 0.1 1.4 - - -
Integrated Utility
Services Limited
(registered
in Eire) - 0.2 - - -
Northern Electric
plc - 4.0 - - -
Northern Powergrid
Insurance Services
Limited - 0.6 - - -
Northern Powergrid
Metering Limited 0.3 - - - -
Northern Powergrid
(Northeast)
Limited 9.3 17.9 - - -
Vehicle Lease
and Service
Limited 0.1 3.9 0.4 - -
Yorkshire Electricity
Group plc - - - 145.7 0.8
------------ ---------- ------------ ------------ ---------
9.8 28.0 0.4 145.7 0.8
============ ========== ============ ============ =========
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 LIFETATIRFIR
(END) Dow Jones Newswires
September 26, 2016 05:01 ET (09:01 GMT)
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