TIDMBD49
RNS Number : 4021V
Electricity North West Limited
01 December 2023
Electricity North West Limited (the "Company") is pleased to
announce its Half Year Financial Report for the period ended 30
September 2023.
The Half Year Report is available to view on the Company's
website:
https://www.enwl.co.uk/about-us/financial-investor-relations/financial-reports/
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
Interim Report and Condensed Consolidated Financial
Statements
for the half year ended 30 September 2023
Contents
Interim Management
Report.........................................................................................................
1
Condensed Consolidated Statement of Profit or Loss and Other
Comprehensive Income................. 5
Condensed Consolidated S tatement of Financial
Position...............................................................
6
Condensed Consolidated Statement of Changes in
Equity..............................................................
8
Condensed Consolidated Statement of Cash
Flows........................................................................
9
Notes to the Condensed Consolidated Financial
Statements.........................................................
10
This interim financial report does not include all the notes
normally included in an annual financial report. Accordingly, this
report should be read in conjunction with the Annual Report for the
year ended 31 March 2023.
Electricity North West Limited is a company limited by shares,
incorporated and domiciled in England, UK. Its registered office
and principal place of business is Electricity North West Limited,
Borron Street, Stockport, England, SK1 2JD.
These condensed interim financial statements were approved for
issue on 30 November 2023.
These condensed interim financial statements have been reviewed,
not audited.
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 Company is the main operating company within the North West
Electricity Networks (Jersey) Limited ("NWEN (Jersey)") group of
companies.
The Group's principal activity is the operation and maintenance
of electricity distribution assets owned by ENWL. ENWL is one of 14
distribution network operators in the UK regulated by the Gas and
Electricity Markets Authority, which operates through Office of Gas
and Electricity Markets (Ofgem).
There have been no significant changes to the activity of the
Company in the current period, nor are there any planned
changes.
Consolidated results
Unaudited Unaudited
Half Half Audited
year year Year
ended ended ended
30 Sept 30 Sept 31 Mar
GBPm 23 22 23
Revenue 268.1 273.1 568.8
========== ========== ==========
(Loss)/profit
before tax
and fair value
movements (41.6) 17.7 69.8
========== ========== ==========
Net cash flow
before financing
activities (8.9) (7.2) (290.1)
========== ========== ==========
Net debt (1,379.2) (1,276.9) (1,279.5)
========== ========== ==========
Revenue
Revenue in the half year to 30 September 2023 was consistent
with revenue in the same period in the prior year.
The allowed revenue set by Ofgem is recovered against an
estimated level of electricity demand across the network. Given the
difficulty of predicting this demand each year, the Company ends up
with either an over or an under recovery against planned revenue.
These over or under recoveries are reflected in the reported
revenue for the period and will be corrected in future periods
through the Ofgem price setting mechanism.
The revenue for the half year to 31 March 2024 is expected to be
higher than that in the half year to 30 September 2023, due to the
seasonally higher volumes of electricity units distributed over the
winter period.
Interim Management Report (continued)
(Loss)/profit before tax and fair value movements
The profit before tax and fair value movements was GBP59.3m
lower than the same period in the prior year. Whilst operating
profit and finance income were GBP4.4m and GBP10.2m higher,
respectively, finance costs (excluding fair value) were GBP73.9m
higher, primarily due to the GBP66.9m higher accretion payment on
index-linked swaps. The accretion payments do not occur each year,
with the next not due until July 2027; see Note 3 for more
details.
Net cash flow before financing activities
The net cash outflow before financing activities of GBP8.9m for
the six-months to 30 September 2023 was comparable to the net cash
outflow of GBP7.2m in the same period in the prior year.
The GBP66.9m higher accretion obligation (see above) was largely
met with the GBP65.1m maturing money market deposits.
Excluding the increased accretion payment, the net cash
generated from operating activities was GBP11.6m higher than that
in the same period in the prior year, offset by the GBP11.5m higher
cash used in investing activities (excluding the maturing money
market deposits).
Net Debt
Net debt increased by GBP99.7m over the half year to 30
September 2023. This was primarily due to a lower cash balance,
resulting from the GBP87.0m accretion payment, and a GBP21.5m
increase in the index-linked debt arising from RPI increases (Note
3).
Dividends
During the half year, the Company paid dividends of GBP18.6m.
See Note 5 for more details. As at the date of signing this Interim
Report, the Directors do not propose an interim dividend for the
year ended 31 March 2024.
Retirement benefit scheme
The retirement benefit surplus has increased from GBP42.6m to
GBP70.0m over the half year to 30 September 2023. The main reasons
for the increase in the surplus were the increase in the discount
rate and changes to the mortality assumption resulting in a
decrease of the scheme obligations, partially offset by a reduction
in the value of certain of the scheme's assets (see Note 9).
Principal risks and uncertainties
An assessment of the change in risk affecting the Company and
Group has been carried out and the principal risks are deemed
comparable to those at the last Annual Report.
The principal trade and activities of the Group are carried out
in the Company and a comprehensive review of the strategy and
operating model, the regulatory environment, the resources and
principal risks and uncertainties facing the Company, and
ultimately the Group, are outlined on pages 34 to 40 of the
Strategic Report in the Company's Annual Report and Consolidated
Financial Statements for the year ended 31 March 2023, which are
available on the website, www.enwl.co.uk.
Events after the Balance Sheet date
There are no events after the balance sheet date that require
disclosure.
Interim Management Report (continued)
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 electricity distribution licence of the Company 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;
-- Management has prepared, and the Directors have reviewed and
approved, Group budgets for the year ending 31 March 2024. These
budgets include profit projections and cash flow forecasts,
including covenant compliance considerations. Inherent in
forecasting is an element of uncertainty and key sensitivities are
considered when budgets are approved, including possible changes in
inflation and under recoveries of allowed revenue as plausible
downside scenarios;
-- Management have prepared forecasts covering the current
five-year regulatory period to 31 March 2028, reflecting the final
determination for RIIO-ED2 allowances. Forecasts demonstrate that
there is sufficient headroom on key covenants and that there are
sufficient resources available to the Group within the forecast
period;
-- Short-term liquidity requirements are forecast to be met from
the Company's operating cash flows and short-term deposit balances.
A further GBP50.0m of committed undrawn bank facilities are
available from lenders; these have a maturity of greater than one
year; and
-- Whilst the utilisation of these facilities is subject to
gearing covenant restrictions, projections to both 31 March 2024
and 2028 indicate there is sufficient headroom on these
covenants.
After making appropriate enquiries, and with consideration of
the guidance published by the Financial Reporting Council, the
Directors have a reasonable expectation that the Company and Group
have adequate resources to continue in operational existence for
the foreseeable future. In making this assessment, the Directors
have considered the foreseeable future to be a period of at least
twelve months from the date of approval of these interim financial
statements. Accordingly, they continue to adopt the going concern
basis in preparing these interim financial statements.
Corporate governance
The NWEN (Jersey) group has established a governance framework
for monitoring and overseeing strategy, conduct of business
standards and operations of the entire business. Details of the
internal control and risk management systems which govern the
Company are outlined in the Corporate Governance Report on pages 41
to 55 of the ENWL Annual Report and Consolidated Financial
Statements, which are available on the website www.enwl.co.uk.
Interim Management Report (continued)
Parent, ultimate parent and controlling party
The immediate parent undertaking is North West Electricity
Networks plc ("NWEN plc"), a company incorporated and registered in
the United Kingdom.
The ultimate parent undertaking is North West Electricity
Networks (Jersey) Limited ("NWEN (Jersey"), a company incorporated
and registered in Jersey.
At 30 September 2023, the ownership of the shares in NWEN
(Jersey) and, therefore, the ultimate controlling parties of the
Company were:
-- KDM Power Limited (40.0%);
-- Equitix ENW 6 Limited (25.0%);
-- Equitix MA North HoldCo Limited (15.0%); and
-- Swingford Holdings Corporation Limited (20.0%).
Directors
The Directors who held office during the half year are given
below. Directors served for the entire half year, and to the date
of this report, except where otherwise indicated.
Executive Directors
-- Ian Smyth
-- Chris Johns (appointed 25 May 2023)
-- David Brocksom (resigned 25 May 2023)
Non-executive Directors
-- Anne Baldock
-- Alistair Buchanan
-- Susan Cooklin
-- Rob Holden
-- Sion Jones
-- Peter O'Flaherty
-- Genping Pan
-- Masahide Yamada
-- Mitsuo Wada (appointed 31 July 2023)
-- Takeshi Tanaka (resigned 31 July 2023)
Alternate Directors
-- Aisha Hamid
-- Makoto Murata
-- Tatsuhiro Tamura
-- Hailin Yu
At no time during the half year did any Director have a material
interest in any contract or arrangement which was significant in
relation to the Company's business.
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,
and 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 IAS 34 'Interim Financial
Reporting'.
Approved by the Board and signed on its behalf by:
Chris Johns
Chief Financial Officer
30 November 2023
Condensed Consolidated Statement of Profit or Loss and Other
Comprehensive Income
For the half year ended 30 September 2023
Unaudited Unaudited Audited
Half year Half year Year
ended ended ended
Note 30 Sept 30 Sept 31 Mar 2023
2023 2022 GBPm
GBPm GBPm
====================================== ====== ========== ========== ============
Revenue 2 268.1 273.1 568.8
Other income(1) 8.4 13.3 25.9
Employee costs (35.9) (33.4) (67.0)
Depreciation and amortisation expense (71.4) (69.1) (140.7)
Other operating costs(2) (72.2) (91.3) (191.5)
====================================== ====== ========== ========== ============
Total operating costs (179.5) (193.8) (399.2)
====================================== ====== ========== ========== ============
Operating profit 97.0 92.6 195.5
Finance income 10.3 0.1 4.2
Finance costs 3 (24.6) 97.2 (4.7)
====================================== ====== ========== ========== ============
Profit/(loss) before income tax 82.7 189.9 195.0
Income tax expense 4 (20.5) (51.3) (49.5)
====================================== ====== ========== ========== ============
Profit for the period 62.2 138.6 145.5
Other comprehensive income:
Items that will not be reclassified
to profit or loss:
Remeasurement of retirement benefit
obligations 26.1 71.1 9.4
Income tax relating to these items (6.3) (17.8) (2.3)
Other comprehensive income for
the period 19.8 53.3 7.1
====================================== ====== ========== ========== ============
Total comprehensive income for
the period 82.0 191.9 152.6
====================================== ====== ========== ========== ============
(1) Other income has been presented as a separate line item for
the half year ended 30 September 2023; previously this was included
in revenue. Accordingly, the comparative amounts have been
presented as a separate line item, with a corresponding reduction
in revenue.
(2) For the half year ended 30 September 2023 and the audited
year ended 31 March 2023, the revenue from Supplier of Last Resort
(SoLR) levies and associated costs are shown gross in revenue and
other operating costs respectively; previously they were shown net
of each other in revenue. Accordingly, the comparative information
for the half year ended 30 September 2022 has been re-presented
with a GBP40.7m increase in operating costs and a corresponding
increase in revenue.
All the results for the current and prior periods are derived
from continuing operations.
The above condensed consolidated statement of profit or loss and
other comprehensive income should be read in conjunction with the
notes.
Condensed Consolidated Statement of Financial Position
As at 30 September 2023
Unaudited Unaudited Audited
As at As at As at
30 Sept 30 Sept 31 Mar 2023
Note 2023 2022 GBPm
GBPm GBPm
================================= ====== ========= ========= =============
ASSETS
Non-current assets
Property, plant and equipment 6 3,699.3 3,557.3 3,634.5
Right-of-use assets(1) 4.5 3.5 4.0
Intangible assets and goodwill 54.2 56.8 55.2
Derivative financial instruments 8 232.9 284.2 327.4
Retirement benefit surplus 9 70.0 96.7 42.6
================================= ====== ========= ========= =============
Total non-current assets 4,060.9 3,998.5 4,063.7
--------------------------------- ------ --------- --------- -------------
Current assets
Inventories 38.1 20.8 22.4
Trade and other receivables 99.3 100.7 97.8
Current income tax asset - 3.0 2.8
Cash and cash equivalents 155.6 61.9 173.8
Money market deposits > 3 months 240.6 - 305.7
Total current assets 533.6 186.4 602.5
================================= ====== ========= ========= =============
Total assets 4,594.5 4,184.9 4,666.2
================================= ====== ========= ========= =============
(1) Right-of-use-assets have been presented as a separate line
item at 30 September 2023; previously these were included in
property, plant and equipment. Accordingly, the comparative amounts
have been presented as a separate line item, with a corresponding
reduction in property, plant and equipment.
Condensed Consolidated Statement of Financial Position
(continued)
As at 30 September 2023
Unaudited Unaudited Audited
As at As at As at
30 Sept 30 Sept 31 Mar 2023
Note 2023 2022 GBPm
LIABILITIES GBPm GBPm
================================= ====== ========= ========= =============
Current liabilities
Trade and other payables (162.0) (133.2) (140.0)
Contract liabilities(2) (11.1) (12.8) (12.3)
Current income tax liability (5.0) - -
Borrowings 7 (231.4) (8.4) (221.7)
Lease liabilities(3) (1.7) (1.5) (1.6)
Customer contributions (82.2) (45.7) (76.6)
Provisions (0.5) (0.6) (0.6)
================================= ====== ========= ========= =============
Total current liabilities (493.9) (202.2) (452.8)
--------------------------------- ------ --------- --------- -------------
Net current assets/(liabilities) 39.7 (15.8) 149.7
Non-current liabilities
Borrowings 7 (1,544.0) (1,330.4) (1,537.3)
Lease liabilities(3) (3.0) (2.2) (2.5)
Derivative financial instruments 8 (534.8) (663.4) (753.6)
Customer contributions (704.8) (697.8) (688.5)
Deferred tax liabilities (256.4) (254.8) (237.3)
Provisions (0.4) (1.0) (0.4)
Total non-current liabilities (3,043.4) (2,949.6) (3,219.6)
================================= ====== ========= ========= =============
Total liabilities (3,537.3) (3,151.8) (3,672.4)
================================= ====== ========= ========= =============
Net assets 1,057.2 1,033.1 993.8
================================= ====== ========= ========= =============
EQUITY
Share capital 238.4 238.4 238.4
Share premium account 4.4 4.4 4.4
Revaluation reserve 71.0 73.1 72.0
Capital redemption reserve 8.6 8.6 8.6
Retained earnings 734.8 708.6 670.4
================================= ====== ========= ========= =============
Total equity 1,057.2 1,033.1 993.8
================================= ====== ========= ========= =============
(2) Contract liabilities have been presented as a separate line
item at 30 September 2023; previously these were included in trade
and other payables. Accordingly, the comparative amounts have been
presented as a separate line item, with a corresponding reduction
in trade and other payables.
(3) Lease liabilities have been presented as a separate line
item at 30 September 2023; previously these were included in
borrowings. Accordingly, the comparative amounts have been
presented as a separate line item, with a corresponding reduction
in borrowings.
The above consolidated statement of financial position should be
read in conjunction with the notes.
The consolidated financial statements on pages 5 to 9 were
authorised for issue by the Board of Directors on 30 November 2023
and were signed on its behalf by:
Chris Johns
Director
Condensed Consolidated Statement of Changes in Equity
For the half year ended 30 September 2023
Called Share Capital
up share premium Revaluation redemption Retained Total
capital account reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm
================================== ========== ========= ============ ============ ========== ========
At 1 April 2022 (audited) 238.4 4.4 74.1 8.6 538.7 864.2
Profit for the half year - - - - 138.6 138.6
Other comprehensive income for
the half year - - - - 53.3 53.3
Transfer from revaluation reserve - - (1.0) - 1.0 -
Total comprehensive income for
the half year - - (1.0) - 192.9 191.9
================================== ========== ========= ============ ============ ========== ========
Equity dividends (Note 5) - - - - (23.0) (23.0)
================================== ========== ========= ============ ============ ========== ========
At 30 September 2022 (unaudited) 238.4 4.4 73.1 8.6 708.6 1,033.1
================================== ========== ========= ============ ============ ========== ========
At 1 April 2022 (audited) 238.4 4.4 74.1 8.6 538.7 864.2
Profit for the year - - - - 145.5 145.5
Other comprehensive income for
the year - - - - 7.1 7.1
Transfer from revaluation reserve - - (2.1) - 2.1 -
Total comprehensive income for
the year - - (2.1) - 154.7 152.6
================================== ========== ========= ============ ============ ========== ========
Equity dividends (Note 5) - - - - (23.0) (23.0)
================================== ========== ========= ============ ============ ========== ========
At 31 March and 1 April 2023
(audited) 238.4 4.4 72.0 8.6 670.4 993.8
================================== ========== ========= ============ ============ ========== ========
Profit for the half year - - - - 62.2 62.2
Other comprehensive income for
the half year - - - - 19.8 19.8
Transfer from revaluation reserve - - (1.0) - 1.0 -
Total comprehensive income for
the half year - - (1.0) - 83.0 82.0
================================== ========== ========= ============ ============ ========== ========
Equity dividends (Note 5) - - - - (18.6) (18.6)
================================== ========== ========= ============ ============ ========== ========
At 30 September 2023 (unaudited) 238.4 4.4 71.0 8.6 734.8 1,057.2
================================== ========== ========= ============ ============ ========== ========
The above consolidated statement of changes in equity should be
read in conjunction with the notes.
Condensed Consolidated Statement of Cash Flows
For the half year ended 30 September 2023
Unaudited Unaudited Audited
Half year Half year Year
ended ended ended
Note 30 Sept 30 Sept 31 Mar 2023
2023 2022 GBPm
GBPm GBPm
========================================== ====== ========== ========== ============
Operating activities
Cash generated from operations 11 125.5 119.8 297.0
*Customer contributions received 32.2 28.7 60.6
Interest paid (22.3) (14.5) (58.8)
Interest portion of lease liabilities (0.1) - (0.2)
*Accretion on index-linked swaps (87.0) (20.1) (20.1)
Income taxes paid - (10.3) (10.3)
------------------------------------------ ------ ---------- ---------- ------------
Net cash generated from operating
activities 48.3 103.6 268.2
------------------------------------------ ------ ---------- ---------- ------------
Investing activities
Interest received and similar income 9.8 0.1 2.0
Transfer from/(to) money market deposits
> 3 months 65.1 - (305.7)
Purchase of property, plant and equipment (126.4) (106.3) (244.6)
Purchase of intangible assets (5.9) (4.9) (10.5)
Proceeds from sale of property, plant
and equipment 0.2 0.3 0.5
========================================== ====== ========== ========== ============
Net cash used in investing activities (57.2) (110.8) (558.3)
========================================== ====== ========== ========== ============
Net cash flow before financing activities (8.9) (7.2) (290.1)
Financing activities
Proceeds from external borrowings - 37.0 37.0
Repayment of external borrowings (4.5) (4.1) (45.3)
Repayment of lease liabilities (0.9) (0.7) (1.5)
Increase in inter-company loan from
parent 2.3 0.5 12.3
Decrease in inter-company loan from
group - - 425.0
Cash collateral on derivatives 12.4 - -
Dividends paid 5 (18.6) (23.0) (23.0)
Net cash (used in)/generated from
financing activities (9.3) 9.7 404.5
========================================== ====== ========== ========== ============
Net (decrease)/increase in cash and
cash equivalents (18.2) 2.5 114.4
-------------------------------------------------- ---------- ---------- ------------
Cash and cash equivalents at beginning
of period 173.8 59.4 59.4
========================================== ====== ========== ========== ============
Cash and cash equivalents at end
of period 155.6 61.9 173.8
========================================== ====== ========== ========== ============
*As customer contributions received are recognised in revenue
over the expected useful economic lives of related assets, the
associated cash flows have been presented in operating activities
for the year ended 31 March 2023. As they were previously presented
in investing activities, comparative amounts for the half year to
30 September 2022 have been restated, with an increase in cash
flows from operating activities of GBP28.7m, and a corresponding
decrease in cash flows from investing activities. Similarly, the
accretion on index-linked swaps has been presented in operating
activities, previously presented in financing activities. This has
resulted in a decrease in cash flows from operating activities of
GBP20.1m, with a corresponding increase in cash flows from
financing activities.
The above consolidated statement of cash flows should be read in
conjunction with the notes.
Notes to the Condensed Consolidated Financial Statements
1. Basis of preparation
This condensed consolidated interim financial report has been
prepared in accordance with International Accounting Standard 34
'Interim Financial Reporting' (IAS 34).
The financial information for the half year ended 30 September
2023, and similarly the half year ended 30 September 2022, has not
been audited or reviewed by the auditor. The financial information
for the year ended 31 March 2023 has been based on information in
the audited financial statements for that year; it 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 2023 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.
The interim report does not include all the notes included in
the audited financial statements. Accordingly, this report is to be
read in conjunction with the audited financial statements for the
year ended 31 March 2023.
The interim report is prepared on a going concern basis.
The Directors do not believe that the Group is affected by
seasonal factors which would have a material effect on the
performance of the Group when comparing the interim results to
those expected to be achieved in the second half of the year, with
the exception of the impact on revenue referred to in Note 2.
The accounting policies adopted, and methods of computation
used, in this interim report are consistent with those of the
previous financial year and corresponding interim reporting period,
except for the adoption of new and amended standards as set out
below.
Adoption of new and amended standards
A number of amended standards became applicable for the current
reporting period. The Group did not have to change its accounting
policies or make retrospective adjustments as a result of adopting
these new and amended standards.
Critical accounting judgments and key sources of estimation
uncertainty
The areas of critical accounting judgements and key sources of
estimation uncertainty are consistent with those of the previous
financial year and corresponding interim reporting period.
Notes to the Condensed Consolidated Financial Statements
(continued)
2. Segment and revenue information
Predominantly all Group operations arise from one operating
segment, electricity distribution in the North West of England and
the associated activities. This is regularly reviewed by the Chief
Executive Officer and Executive Leadership Team.
The geographical origin and destination of revenue is all within
the United Kingdom.
The revenue for the second half of the year is expected to be
higher than that in the first half of the year, due to the
seasonally higher volumes of electricity units distributed over the
winter period, as outlined on page 1.
3. Finance costs
Unaudited Unaudited Audited
Half year Half year Year
ended ended ended
30 Sept 30 Sept 31 Mar 2023
2023 2022 GBPm
GBPm GBPm
=============================================== ========== ========== ============
Finance costs (excluding fair value
movements):
Interest on group borrowings at amortised
cost (Note 10) 14.7 3.2 10.6
Interest on borrowings at amortised
cost 20.2 20.1 41.1
Net interest settlements on derivatives
at fair value 7.1 6.4 4.3
Indexation of index-linked debt 21.5 25.8 55.2
Accretion paid on index linked swaps 87.0 20.1 20.1
Reimbursement of inter-company loan
impairment (Note 10) (0.3) (0.1) 0.4
Interest on leases 0.1 0.1 0.2
Net interest cost on pension plan obligations (1.0) (0.3) (0.8)
Capitalisation of borrowing costs under
IAS 23 (Note 6) (0.4) (0.3) (1.2)
----------------------------------------------- ---------- ---------- ------------
148.9 75.0 129.9
----------------------------------------------- ---------- ---------- ------------
Fair value movements on financial instruments:
Inter-company derivative asset (Note
8 & 10) 111.0 142.3 96.5
Inter-company derivative liability (Note
8 & 10) (111.0) (142.3) (96.5)
Derivative assets (Note 8) (16.5) - (15.1)
Derivative liabilities (Note 8) (107.8) (172.2) (110.1)
=============================================== ========== ========== ============
(124.3) (172.2) (125.2)
=============================================== ========== ========== ============
Total finance costs 24.6 (97.2) 4.7
=============================================== ========== ========== ============
Details on the valuation techniques used to derive the fair
values can be found in Note 8.
No new derivatives were entered or closed during the half year
(30 Sept 2022: none, 31 Mar 2023: none).
Notes to the Condensed Consolidated Financial Statements
(continued)
3. Finance costs (continued)
There has been GBP87.0m (30 Sept 2022: GBP20.1m, 31 Mar 2023:
GBP20.1m) accretion payments on the index-linked swaps in the half
year; these are scheduled five-yearly, seven-yearly and ten-yearly
with the next payment due in July 2027. The amount of accretion
accrued over the half year was GBP21.4m (30 Sept 2022: GBP29.8m, 31
Mar 2023: GBP57.1m), split as follows:
Five-yearly Seven-yearly Ten-yearly Total
Accumulated Accretion GBPm GBPm GBPm GBPm
====================== =========== ============ ========== ======
1 April 2022 14.8 51.9 22.7 89.4
Accrued in half year 7.0 14.2 8.6 29.8
Paid in half year (20.1) - - (20.1)
---------------------- ----------- ------------ ---------- ------
30 September 2022 1.7 66.1 31.3 99.1
---------------------- ----------- ------------ ---------- ------
1 April 2022 14.8 51.9 22.7 89.4
Accrued in year 13.4 27.2 16.5 57.1
Paid in year (20.1) - - (20.1)
====================== =========== ============ ========== ======
31 March 2023 8.1 79.1 39.2 126.4
Accrued in half year 5.0 10.2 6.2 21.4
Paid in half year - (87.0) - (87.0)
====================== =========== ============ ========== ======
30 September 2023 13.1 2.3 45.4 60.8
====================== =========== ============ ========== ======
Notes to the Condensed Consolidated Financial Statements
(continued)
4. Income tax
Unaudited Unaudited Audited
Half year Half year Year
ended ended ended
30 Sept 30 Sept 31 Mar 2023
2023 2022 GBPm
GBPm GBPm
======================================= ========== ========== ============
Current tax:
Current period 7.7 0.7 2.9
Adjustments in respect of prior period - - (1.7)
======================================= ========== ========== ============
7.7 0.7 1.2
======================================= ========== ========== ============
Deferred tax:
Current period 12.8 50.6 44.0
Adjustments in respect of prior period - - 4.3
12.8 50.6 48.3
======================================= ========== ========== ============
Income tax expense 20.5 51.3 49.5
======================================= ========== ========== ============
Current tax is calculated at 25% (30 Sept 2022: 19%, 31 Mar
2023: 19%) of the estimated assessable profit for the half
year.
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 25% (30
Sept 2022: 25%, 31 Mar 2023: 25%).
5. Dividends
Amounts recognised as distributions to equity holders in the
half year comprise:
Unaudited Unaudited Audited
Half year Half year Year
ended ended ended
30 Sept 30 Sept 31 Mar 2023
2023 2022 GBPm
GBPm GBPm
======================================= ========== ========== ============
Final dividends for the year ended
31 March 2022 of 4.82 pence per share
(paid June 2022) - 23.0 23.0
Final dividends for the year ended
31 March 2023 of 3.90 pence per share
(paid June 2023) 18.6 - -
Dividends for the period (Note 10) 18.6 23.0 23.0
======================================= ========== ========== ============
As at the date of signing of this interim report, the Directors
have not proposed an interim dividend for the year ending 31 March
2024.
Notes to the Condensed Consolidated Financial Statements
(continued)
6. Property, plant and equipment
During the half year, the Group spent GBP128.2m (30 Sept 2022:
GBP116.6m, 31 Mar 2023: GBP252.9m) on additions to property, plant
and equipment as part of its capital programme. Included in this
figure is capitalised interest of GBP0.4m (30 Sept 2022: GBP0.3m,
31 Mar 2023: GBP1.2m) (see Note 3), derived in accordance with IAS
23, using an average annual capitalisation rate of 4.74% (30 Sept
2022: 4.01%, 31 Mar 2023: 4.13%).
7. Borrowings
Unaudited Unaudited Audited
Half year Half year Year
ended ended ended
30 Sept 30 Sept 31 Mar 2023
2023 2022 GBPm
GBPm GBPm
======================================== ========== ========== ============
Current liabilities:
Bank and other term borrowings 231.4 8.4 221.7
======================================== ========== ========== ============
231.4 8.4 221.7
---------------------------------------- ---------- ---------- ------------
Non-current liabilities:
Bonds (Note 8) 652.3 635.8 646.4
Bank and other term borrowings 71.2 311.2 72.8
Amounts owed to parent undertaking
(Note 8 & 10) 98.8 84.7 96.5
Amounts owed to group undertaking (Note
8 & 10) 721.7 298.7 721.6
---------------------------------------- ---------- ---------- ------------
1,544.0 1,330.4 1,537.3
Borrowings 1,775.4 1,338.8 1,759.0
======================================== ========== ========== ============
The Group's debt facilities expire between February 2024 and
April 2046. All borrowings were unsecured and in sterling, and
there were no formal bank overdraft facilities in place. The fair
values of the Group's financial instruments are shown in Note
8.
The Group's unutilised committed borrowing facilities were as
follows:
Unaudited Unaudited Audited
Half year Half year Year
ended ended ended
30 Sept 30 Sept 31 Mar 2023
2023 2022 GBPm
GBPm GBPm
======================================== ========== ========== ============
Expiring beyond one year:
Bank revolving credit facility - expiry
December 2024 50.0 13.0 50.0
======================================== ========== ========== ============
Notes to the Condensed Consolidated Financial Statements
(continued)
8. Fair value measurement of financial instruments
This note provides an update on the judgements and estimates
made by the Group in determining the fair values of the financial
instruments since the last annual financial report.
All of the fair value measurements recognised in the statement
of financial position occur on a recurring basis.
Fair value hierarchy
Financial instruments that are recognised in the statement of
financial position at fair value are classified into three levels,
as prescribed under accounting standards, based on the degree to
which the inputs used in determining the fair value are
observable:
-- Level 1: includes financial instruments traded in an active
market and the fair value is derived from quoted market prices
(unadjusted);
-- Level 2: includes financial instruments not traded in an
active market and the fair value is determined using valuation
techniques that maximise the use of observable market data and rely
as little as possible on entity-specific estimates. If all
significant inputs are observable, the financial instrument is
included in level 2; and
-- Level 3: if one or more significant inputs is not based on
observable market data, the financial instrument is included in
level 3. This is the case for the majority of derivative financial
instruments.
Notes to the Condensed Consolidated Financial Statements
(continued)
8. Fair value measurement of financial instruments (continued)
The following table presents the Group's financial instruments
that are measured and recognised at fair value, grouped into the
three levels outlined above:
Level 1 Level 2 Level 3 Total
At 30 September 2023 GBPm GBPm GBPm GBPm
========================================== ======= ======= ======= =======
Financial assets:
Inter-company derivative asset - - 201.3 201.3
Derivative assets - inflation-linked
swaps - 24.8 6.8 31.6
------------------------------------------ ------- ------- ------- -------
- 24.8 208.1 232.9
------------------------------------------ ------- ------- ------- -------
Financial liabilities:
Inter-company derivative liability - - (201.3) (201.3)
Derivative liabilities - inflation-linked
swaps - (4.9) (276.1) (281.0)
Derivative liabilities - interest
rate swap - (52.5) - (52.5)
------------------------------------------ ------- ------- ------- -------
- (57.4) (477.4) (534.8)
------------------------------------------ ------- ------- ------- -------
Total - (32.6) (269.3) (301.9)
------------------------------------------ ------- ------- ------- -------
At 30 September 2022
------------------------------------------ ------- ------- ------- -------
Financial assets:
Inter-company derivative asset - - 284.2 284.2
Derivative assets - inflation-linked - - - -
swaps
------------------------------------------ ------- ------- ------- -------
- - 284.2 284.2
------------------------------------------ ------- ------- ------- -------
Financial liabilities:
Inter-company derivative liability - - (284.2) (284.2)
Derivative liabilities - inflation-linked
swaps - (15.7) (303.4) (319.1)
Derivative liabilities - interest
rate swap - (60.1) - (60.1)
------------------------------------------ ------- ------- ------- -------
- (75.8) (587.6) (663.4)
------------------------------------------ ------- ------- ------- -------
Total - (75.8) (303.4) (379.2)
------------------------------------------ ------- ------- ------- -------
At 3 1 March 2023
------------------------------------------ ------- ------- ------- -------
Financial assets:
Inter-company derivative asset - - 312.3 312.3
Derivative assets - inflation-linked
swaps - 3.5 11.6 15.1
------------------------------------------ ------- ------- ------- -------
- 3.5 323.9 327.4
------------------------------------------ ------- ------- ------- -------
Financial liabilities:
Inter-company derivative liability - - (312.3) (312.3)
Derivative liabilities - inflation-linked
swaps - (15.9) (379.7) (395.6)
Derivative liabilities - interest
rate swap - (45.7) - (45.7)
------------------------------------------ ------- ------- ------- -------
- (61.6) (692.0) (753.6)
------------------------------------------ ------- ------- ------- -------
Total - (58.1) (368.1) (426.2)
========================================== ======= ======= ======= =======
Notes to the Condensed Consolidated Financial Statements
(continued)
8. Fair value measurement of financial instruments (continued)
Valuation techniques used to determine fair values
Where available, quoted market prices have been used to
determine fair values (Level 1 inputs). Where not available, fair
values have been calculated by discounting estimated future cash
flows based on observable interest and RPI curves sourced from
market available data (Level 2 inputs).
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 where possible.
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 of the Group and
proxy bonds, and then extrapolated over the term of the
derivatives. It is this extrapolation that is deemed to be Level
3.
For certain derivatives, the Level 3 inputs form an
insignificant part of the fair value and, therefore, these
derivatives are disclosed as Level 2. Otherwise, the derivatives
are disclosed as Level 3.
At 30 September 2023, the net adjustment for non-performance
risk as was GBP69.1m (30 Sept 2022: GBP108.4m, 31 Mar 2023:
GBP87.3m), of which GBP70.6m (30 Sept 2022: GBP122.6m, 31 Mar 2023:
GBP87.1m) was classed as Level 3.
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. At 30 September 2023, the aggregate difference yet to
be recognised was GBP46.2m (30 Sept 2022: GBP48.5m, 31 Mar 2023:
GBP47.4m). The movement in the half year all relates to the
straight-line release to profit or loss.
These valuation techniques remain consistent for all periods
covered in this report.
Notes to the Condensed Consolidated Financial Statements
(continued)
8. Fair value measurement of financial instruments (continued)
Fair value measurements using significant unobservable inputs
(Level 3 inputs)
The following table provides a reconciliation of the fair value
amounts disclosed as Level 3.
Unaudited Unaudited Audited
Half year Half year Year
ended ended ended
30 Sept 30 Sept 31 Mar 2023
2023 2022 GBPm
GBPm GBPm
=========================================== ========== ========== ============
Opening balance (368.1) (517.1) (517.1)
On new instruments in the period - - -
Transfers from Level 3 into Level 2 (8.1) 15.8 46.5
Transfers from Level 2 into Level 3 - (7.7) (7.7)
Total gains or losses in profit or
loss:
- On transfers from Level 2 into Level
3 - 19.4 14.5
- On instruments carried forward in
Level 3 106.9 186.2 95.7
=========================================== ========== ========== ============
Closing balance (269.3) (303.4) (368.1)
=========================================== ========== ========== ============
These fair value movements are recognised in the finance costs
line in the statement of profit or loss and other comprehensive
income (see Note 3).
The transfers were 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 the section above. Any
transfers between levels are deemed to have occurred at the
beginning of the reporting period.
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
Half year ended Half year ended Year ended
30 Sept 2023 30 Sept 2022 31 Mar 2023
-10bps +10bps -10bps +10bps -10bps +10bps
GBPm GBPm GBPm GBPm GBPm GBPm
============ ======== ======== ======== ======== ====== ======
Derivatives (3.4) 3.3 (4.0) 4.0 (3.8) 3.7
============ ======== ======== ======== ======== ====== ======
Notes to the Condensed Consolidated Financial Statements
(continued)
8. Fair value measurement of financial instruments (continued)
Fair values of other financial instruments (unrecognised)
The Group has a number of financial instruments which are not
measured at fair value in the statement of financial position. For
the majority of these instruments, the fair values are not
materially different to their carrying values, since the interest
receivable/payable is either close to current market rates or the
instruments are short-term in nature, such as cash and cash
equivalents, trade and other receivables, and trade and other
payables.
The instruments for which significant differences were
identified are presented in the following table.
Unaudited Unaudited Audited
Half year Half year Year
ended ended ended
30 Sept 30 Sept 31 Mar 2023
2023 2022 GBPm
GBPm GBPm
============================================ ========== ========== ============
Carrying value:
Bonds (Note 7) (652.3) (635.8) (646.4)
Amounts owed to group undertaking (Note
7) (721.7) (298.7) (721.6)
Fair value:
Bonds(1) (618.4) (651.2) (655.3)
Amounts owed to group undertaking(1) (1,025.0) (214.6) (654.0)
============================================ ========== ========== ============
(1) These fair values are derived from quoted market prices and,
therefore, meet the Level 1 criteria.
9. Retirement benefit scheme
The defined benefit surplus/obligation has been calculated based
on the results of the 31 March 2022 triennial funding valuation,
which 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 2023 for the purpose of
these interim financial statements. The present value of the
defined benefit 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 at 30 September 2023. The difference
between the two amounts is recognised as a surplus or obligation in
the statement of financial position.
A pension surplus under IAS 19 (revised 2011) of GBP70.0m is
included in the statement of financial position (30 Sept 2022:
GBP96.7m surplus, 31 Mar 2023: GBP42.6m surplus).
The increase in the defined benefit surplus over the half year
to 30 September 2023 to GBP70.0m, was due to the increase in the
discount rate assumption by 75 basis points driven by the market
movement in corporate bond yields, partially offset by a 5 basis
points increase in expected future inflation. This, along with
changes to the mortality assumptions, resulted in a decrease in the
scheme's obligation. This was partially offset by a reduction in
the value of certain of the scheme's assets.
Notes to the Condensed Consolidated Financial Statements
(continued)
10. Related party transactions
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 half year, the Group entered the
following transactions with related parties:
Unaudited Unaudited Audited
Half year Half year Year
ended ended ended
30 Sept 30 Sept 31 Mar 2023
2023 2022 GBPm
GBPm GBPm
=============================================== ========== ========== ============
Charges to:
Electricity North West (Construction
and Maintenance) Limited 1.3 1.2 2.5
Electricity North West Services Limited 0.7 0.7 1.6
Electricity North West Property Limited 0.1 0.1 -
Charges from:
Electricity North West (Construction
and Maintenance) Limited (0.2) (0.5) (0.5)
Electricity North West Services Limited (4.0) (4.0) (7.5)
Interest payable to:
North West Electricity Networks plc (2.0) (1.1) (2.3)
ENW Finance plc (12.7) (2.2) (8.3)
----------------------------------------------- ---------- ---------- ------------
Interest on group borrowings (Note 3) (14.7) (3.2) (10.6)
----------------------------------------------- ---------- ---------- ------------
Reimbursement of inter-company loan impairment
on loan from ENW Finance plc (Note 3) 0.3 (0.1) 0.4
Fair value movement on inter-company
derivative asset with ENW Finance plc
(Note 3) 111.0 142.3 96.5
Fair value movement on inter-company
derivative liability with ENW Finance
plc (Note 3) (111.0) (142.3) (96.5)
Dividends paid to North West Electricity
Networks plc (Note 5) (18.6) (23.0) (23.0)
Directors' remuneration (1.3) (1.2) (3.2)
=============================================== ========== ========== ============
The Group's key management personnel comprise solely of its
Directors.
Notes to the Condensed Consolidated Financial Statements
(continued)
10. Related party transactions (continued)
Amounts outstanding with related parties were as follows:
Unaudited Unaudited Audited
Half year Half year Year
ended ended ended
30 Sept 30 Sept 31 Mar 2023
2023 2022 GBPm
GBPm GBPm
=========================================== ========== ========== ============
Amounts owed by:
North West Electricity Networks plc 3.6 3.5 3.5
North West Electricity Networks (Holdings)
Limited 0.3 0.2 0.2
Electricity North West (Construction and
Maintenance) Limited 0.3 0.4 1.2
Electricity North West Services Limited 0.3 0.6 0.6
Electricity North West Property Limited 0.1 0.1 0.1
North West Electricity Networks (Jersey)
Limited 0.1 0.1 0.1
------------------------------------------- ---------- ---------- ------------
Total in debtors 4.7 4.9 5.7
------------------------------------------- ---------- ---------- ------------
Amounts owed to:
North West Electricity Networks (Holdings)
Limited (0.2) (0.2) (0.2)
Electricity North West (Construction and
Maintenance) Limited - (0.1) -
Electricity North West Services Limited (0.6) (0.5) (0.5)
North West Electricity Networks (Jersey)
Limited (0.1) (0.1) (0.1)
Interest payable to:
North West Electricity Networks plc (1.2) (0.6) (0.2)
ENW Finance plc (8.7) (1.1) (7.7)
Total in creditors (10.8) (2.6) (8.7)
------------------------------------------- ---------- ---------- ------------
Borrowings payable to (Note 7):
North West Electricity Networks plc (98.8) (84.7) (96.5)
ENW Finance plc (721.7) (298.7) (721.6)
Inter-company derivative asset with ENW
Finance plc (Note 8) 201.3 266.6 312.3
Inter-company derivative liability with
ENW Finance plc (Note 8) (201.3) (266.6) (312.3)
Group tax relief to:
North West Electricity Networks plc - - (2.0)
=========================================== ========== ========== ============
The loan from North West Electricity Networks plc accrues
weighted average interest at 4.10% per annum (30 Sept 2022: 2.47%,
31 Mar 2023: 4.07%) and is repayable in March 2028.
Of the loans from ENW Finance plc, GBP298.9m (30 Sept 2022:
GBP298.7m, 31 Mar 2023: GBP298.8m) accrues interest at 1.415% and
is repayable in July 2030, and GBP422.8m (30 Sept 2022: nil, 31 Mar
2023: GBP422.8m) accrues interest at 4.893% and is repayable in
November 2032.
Notes to the Condensed Consolidated Financial Statements
(continued)
11. Cash generated from operations
Unaudited Unaudited Audited
Half year Half year Year
ended ended ended
30 Sept 30 Sept 31 Mar 2023
2023 2022 GBPm
GBPm GBPm
=========================================== ========== ========== ============
Operating profit 97.0 92.6 195.5
Adjustments for:
Depreciation of property, plant and
equipment 64.4 69.1 126.5
Amortisation of intangible assets 7.0 - 14.2
Amortisation of customer contributions (10.4) (10.0) (20.2)
Profit on disposal of property, plant
and equipment (0.2) (0.3) (0.5)
Cash contributions in excess of pension
charge to operating profit (2.8) (10.7) (20.4)
=========================================== ========== ========== ============
Operating cash flows before movement
in working capital 155.0 140.7 295.1
Changes in working capital:
(Increase)/decrease in inventories (15.7) (2.7) (4.3)
(Increase)/decrease in trade and other
receivables (1.0) (20.7) (15.6)
Increase/(decrease) in provisions and
payables (12.8) 2.5 21.8
=========================================== ========== ========== ============
Cash generated from operations 125.5 119.8 297.0
=========================================== ========== ========== ============
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IR BFLFBXLLXFBF
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December 01, 2023 05:35 ET (10:35 GMT)
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