REG-FirstGroup PLC: Half-year Report <Origin Href="QuoteRef">FGP.L</Origin> - Part 3
15/11/2016 07:05
- Part 3: For the preceding part double click ID:nPRrFC352b
36.3 61.7 68.1
Total non-current liabilities 18.1 28.5 35.5
Total liabilities 54.4 90.2 103.6
Derivatives designated and effective as hedging instruments carried at fair value
Non-current assets
Coupon swaps (fair value hedge) 67.2 40.3 41.3
Fuel derivatives (cash flow hedge) 3.1 - 0.2
70.3 40.3 41.5
Current assets
Coupon swaps (fair value hedge) - 16.4 16.4
Currency forwards (cash flow hedge) 0.2 - -
Fuel derivatives (cash flow hedge) 0.9 - 0.3
1.1 16.4 16.7
Current liabilities
Fuel derivatives (cash flow hedge) 36.3 58.1 66.9
36.3 58.1 66.9
Non-current liabilities
Fuel derivatives (cash flow hedge) 18.1 28.5 35.5
18.1 28.5 35.5
Derivatives classified as held for trading
Current liabilities
Interest rate swaps - 3.6 1.2
The fair value measurements of the financial derivatives held by the Group
have been derived based on observable market inputs (as categorised within
Level 2 of the fair value hierarchy under IFRS 7 (2009)).
17 Derivative financial instruments continued
Fair value of the Group’s financial assets and financial liabilities that
are measured at fair value on a recurring basis:
30 September 2016
Fair value Carrying value Total
£m
Level 1 Level 2 Level 3 Total
£m £m £m £m
Financial assets
Cash and cash equivalents 310.5 - - 310.5 310.5
Derivative financial instruments - 71.4 - 71.4 71.4
Financial liabilities and derivatives
Financial liabilities 52.5 2,104.3 - 2,156.8 1,899.3
Derivative financial instruments - 54.4 - 54.4 54.4
30 September 2015
Fair value Carrying value Total £m
Level 1 £m Level 2 £m Level 3 £m Total £m
Financial assets
Cash and cash equivalents 243.0 - - 243.0 243.0
Derivative financial instruments - 56.7 - 56.7 56.7
Financial liabilities and derivatives
Financial liabilities 40.6 2,076.8 - 2,117.4 1,917.8
Derivative financial instruments - 90.2 - 90.2 90.2
31 March 2016
Fair value Carrying value Total £m
Level 1 £m Level 2 £m Level 3 £m Total £m
Financial assets
Cash and cash equivalents 360.1 - - 360.1 360.1
Derivative financial instruments - 58.2 - 58.2 58.2
Financial liabilities and derivatives
Financial liabilities - 2,068.9 - 2,068.9 1,880.5
Derivative financial instruments - 103.6 - 103.6 103.6
Level 1: Quoted prices in active markets for identical assets and liabilities.
Level 2: Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability either directly or indirectly.
Level 3: Inputs for the asset or liability that are not based on observable
market data.
There were no transfers between level 1 and level 2 during the current or
prior period.
Fair values at
Financial assets/(liabilities) 30 September 2016 30 September 2015 £m 31 March 2016 £m Fair value hierarchy Valuation technique(s) and key inputs
£m
Derivative contracts
1. Currency forwards 0.2 - - Level 2 Discounted cash flow; future cash flows are estimated based on forward exchange rates and then discounted at a rate that reflects the credit risk of the various counterparties.
2. Interest rate swaps 67.2 53.1 56.5 Level 2 Discounted cash flow; future cash flows are estimated based on forward exchange rates and contract exchange rates and then discounted at a rate that reflects the credit risk of the various counterparties.
3. Fuel derivatives (50.4) (86.6) (101.9) Level 2 Discounted cash flow; future cash flows are estimated based on forward exchange rates and contract exchange rates and then discounted at a rate that reflects the credit risk of the various counterparties.
18 Provisions
30 September 2016 30 September 2015 £m 31 March 2016 £m
£m
Insurance claims 228.9 200.2 219.9
Legal and other 49.1 22.6 39.6
Pensions 2.6 3.1 2.8
Non-current liabilities 280.6 225.9 262.3
Insurance claims £m Legal and other £m Pensions £m Total £m
At 1 April 2016 363.8 44.0 2.8 410.6
Charged to the income statement 73.0 9.0 - 82.0
Transfer from accruals - 7.5 - 7.5
Utilised in the period (95.0) (2.8) (0.2) (98.0)
Notional interest 7.9 - - 7.9
Foreign exchange movements 28.3 2.3 - 30.6
At 30 September 2016 378.0 60.0 2.6 440.6
Current liabilities 149.1 10.9 - 160.0
Non-current liabilities 228.9 49.1 2.6 280.6
At 30 September 2016 378.0 60.0 2.6 440.6
Current liabilities 143.9 4.4 - 148.3
Non-current liabilities 219.9 39.6 2.8 262.3
At 31 March 2016 363.8 44.0 2.8 410.6
Current liabilities 107.8 10.1 - 117.9
Non-current liabilities 200.2 22.6 3.1 225.9
At 30 September 2015 308.0 32.7 3.1 343.8
The current liabilities above are included within accruals in note 13.
The insurance claims provision arises from estimated exposures for incidents
occurring prior to the balance sheet date. It is anticipated that the majority
of such claims will be settled within the next six years although certain
liabilities in respect of lifetime obligations of £22.7m (H1 2015: £18.5m)
can extend for up to 30 years. The utilisation of £95.0m (H1 2015: £74.0m)
represents payments made largely against the current liability of the
preceding year.
The total insurance provision of £378.0m includes £25.9m which is
recoverable from insurance companies and is included within other receivables
in note 12.
Legal and other provisions relate to estimated exposures for cases filed or
thought highly likely to be filed for incidents that occurred prior to the
balance sheet date. It is anticipated that most of these items will be settled
within 10 years. Also included are provisions in respect of costs anticipated
on the exit of surplus properties which are expected to be settled over the
remaining terms of the respective leases and dilapidation and other provisions
in respect of contractual obligations under rail franchises. The dilapidation
provisions are expected to be settled at the end of the respective franchise.
The pension’s provision relates to unfunded obligations that arose on the
acquisition of certain First Bus companies. It is anticipated that this will
be utilised over five to 10 years.
19 Called up share capital
30 September 2016 30 September 2015 £m 31 March 2016 £m
£m
Allotted, called up and fully paid
1,205.2m ordinary shares of 5p each 60.2 60.2 60.2
The Company has one class of ordinary shares which carries no right to fixed
income. The number of ordinary shares of 5p each in issue, excluding treasury
shares and shares held in trust for employees, at the end of the period was
1,204.3m (H1 2015: 1,204.1m). At the end of the period 0.9m shares (H1 2015:
0.8m shares) were being held as treasury shares and own shares held in trust
for employees.
20 Net cash from operating activities
30 September 2016 30 September 2015 £m 31 March 2016 £m
£m
Operating profit 77.9 58.5 246.3
Adjustments for:
Depreciation charges 165.7 159.9 325.7
Capital grant amortisation (3.0) (5.9) (10.5)
Amortisation charges 28.5 27.2 51.9
Share-based payments 3.6 3.5 6.4
Profit on disposal of property and plant and equipment (17.2) (1.2) -
Operating cash flows before working capital and pensions 255.5 242.0 619.8
Decrease in inventories 2.5 8.1 10.0
Decrease in receivables 39.7 30.0 29.3
Decrease in payables (44.0) (139.7) (73.6)
Decrease in provisions (19.8) (12.9) (18.6)
Defined benefit pension payments in excess of income statement charge (26.1) (28.6) (33.6)
Cash generated by operations 207.8 98.9 533.3
Tax paid (5.1) (4.4) (7.0)
Interest paid (73.5) (78.1) (107.9)
Interest element of HP contracts and finance leases (3.4) (4.4) (8.9)
Net cash from operating activities 125.8 12.0 409.5
21 Retirement benefit schemes
The Group operates or participates in a number of defined benefit pension
schemes which cover the majority of UK employees and certain North American
employees. The scheme details are described on pages 145 to 146 of the Annual
Report and Accounts for the year ended 31 March 2016.
First Greater Western Limited, Hull Trains Limited and First TransPennine
Express Limited have sections in the Railways Pension Scheme (RPS), which is
an industry-wide arrangement. Under the terms of the RPS, any fund deficit or
surplus is shared by the employer (60%) and the employees (40%). In
calculating the Group’s pension obligations in respect of the RPS the Group
has calculated the total pension deficits in each of the RPS sections in
accordance with IAS 19 (Revised). These deficits are reduced by a “franchise
adjustment” which is that portion of the deficit which is projected to exist
at the end of the franchise and for which the Group will not be required to
fund. The franchise adjustment, which has been calculated by the Group’s
actuaries, is offset against the present value of the RPS liabilities so as to
fairly present the financial performance, position and cash flows of the
Group’s obligations.
The market value of the assets at 30 September 2016 for all defined benefit
schemes totalled £4,154m (H1 2015: £3,536m; full year 2016: £3,612m).
Contributions are paid to all defined benefit pension schemes in accordance
with rates recommended by the schemes’ actuaries. The valuations are made
using the Projected Unit Credit Method.
The key assumptions were as follows:
30 September 2016 30 September 2015 31 March 2016
First Bus First Rail % North First Bus % First Rail % North America % First Bus % First Rail % North America %
% America %
Key assumptions used:
Discount rate 2.40 2.40 3.10 4.00 4.00 3.95 3.70 3.70 3.60
Expected rate of salary increases1 3.45 3.20 2.50 3.45/1.85/2.95 3.45 - 1.75 3.10 2.50
Inflation – RPI - - - 2.95 2.95 2.00 - - -
Inflation – CPI 1.85 1.85 2.00 1.85 1.85 - 2.85 2.85 2.00
Future pension increases1 1.85 1.85 - 1.85/1.85/2.85 1.85 - 1.75 1.75 -
¹ First Bus refers to LGPS, First Bus Scheme and Group scheme respectively.
The majority of active members in the UK Bus Scheme have benefits that
increase to retirement with CPI.
Amounts (charged)/credited to the condensed consolidated income statement in
respect of these defined benefit schemes are as follows:
6 months to 30 September 2016 First Bus First Rail North America Total
£m £m £m £m
Current service cost (including employer expenses) (8.2) (15.3) (4.6) (28.1)
Franchise adjustment - 4.9 - 4.9
Net interest cost (0.4) (2.6) (3.7) (6.7)
Interest on franchise adjustment - 2.6 - 2.6
(8.6) (10.4) (8.3) (27.3)
6 months to 30 September 2015 First Bus £m First Rail £m North America £m Total £m
Current service cost (including employer expenses) (10.4) (21.5) (3.0) (34.9)
Franchise adjustment - 8.4 - 8.4
Net interest cost (1.0) (4.1) (2.9) (8.0)
Interest on franchise adjustment - 4.0 - 4.0
(11.4) (13.2) (5.9) (30.5)
Year to 31 March 2016 First Bus £m First Rail £m North America £m Total £m
Current service cost (including employer expenses) (20.2) (46.0) (7.6) (73.8)
Franchise adjustment - (10.2) - (10.2)
Past service gain on TOC schemes - 28.8 - 28.8
Past service gain on Group scheme (note 3) 10.8 - - 10.8
Net interest cost (1.4) (8.8) (6.1) (16.3)
Interest on franchise adjustment - 8.7 - 8.7
(10.8) (27.5) (13.7) (52.0)
Actuarial gains and losses have been reported in the condensed consolidated
statement of comprehensive income.
21 Retirement benefit schemes continued
The amounts included in the condensed consolidated balance sheet arising from
the Group’s obligations in respect of its defined benefit pension schemes
are as follows:
As at 30 September 2016 First Bus First Rail North America Total
£m £m £m £m
Fair value of schemes’ assets 2,603.6 1,036.6 513.9 4,154.1
Present value of defined benefit obligations (2,777.5) (1,594.6) (748.2) (5,120.3)
Deficit before adjustments (173.9) (558.0) (234.3) (966.2)
Adjustment for irrecoverable suplus1 (89.5) - - (89.5)
First Rail franchise adjustment (60%) - 332.2 - 332.2
Adjustment for employee share of RPS deficits (40%) - 223.2 - 223.2
Liability recognised in the condensed consolidated balance sheet (263.4) (2.6) (234.3) (500.3)
This amount is presented in the condensed consolidated balance sheet as follows:
Non-current assets 20.0 - - 20.0
Non-current liabilities (283.4) (2.6) (234.3) (520.3)
(263.4) (2.6) (234.3) (500.3)
As at 30 September 2015 First Bus £m First Rail £m North America £m Total £m
Fair value of schemes’ assets 2,204.1 850.7 480.7 3,535.5
Present value of defined benefit obligations (2,151.6) (1,118.1) (610.9) (3,880.6)
Surplus/(deficit) before adjustments 52.5 (267.4) (130.2) (345.1)
Adjustment for irrecoverable suplus1 (79.7) - - (79.7)
First Rail franchise adjustment (60%) - 159.7 - 159.7
Adjustment for employee share of RPS deficits (40%) - 107.0 - 107.0
Liability recognised in the condensed consolidated balance sheet (27.2) (0.7) (130.2) (158.1)
This amount is presented in the condensed consolidated balance sheet as follows:
Non-current assets 26.4 - - 26.4
Non-current liabilities (53.6) (0.7) (130.2) (184.5)
(27.2) (0.7) (130.2) (158.1)
As at 31 March 2016 First Bus £m First Rail £m North America £m Total £m
Fair value of schemes’ assets 2,281.3 875.5 455.4 3,612.2
Present value of defined benefit obligations (2,208.9) (1,168.5) (667.9) (4,045.3)
Surplus/(deficit) before adjustments 72.4 (293.0) (212.5) (433.1)
Adjustment for irrecoverable suplus1 (129.9) - - (129.9)
First Rail franchise adjustment (60%) - 174.9 - 174.9
Adjustment for employee share of RPS deficits (40%) - 117.2 - 117.2
Liability recognised in the condensed consolidated balance sheet (57.5) (0.9) (212.5) (270.9)
This amount is presented in the condensed consolidated balance sheet as follows:
Non-current assets 31.0 - - 31.0
Non-current liabilities (88.5) (0.9) (212.5) (301.9)
(57.5) (0.9) (212.5) (270.9)
(1)The irrecoverable surplus represents the amount of the surplus that the
Group could not recover through reducing future company contributions to Local
Government Pension Schemes.
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