REG - ITV PLC - Half Yearly Report <Origin Href="QuoteRef">ITV.L</Origin> - Part 4
06/09/2014 22:34
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invoice discounting
facility for £75 million maturing in 2017 and replacing the previous facility.
The second is a bilateral loan facility worth £175 million which matures in
2021. Both of these facilities are uncommitted and remain undrawn at the half
year.
4.2 Borrowings
Keeping it simple . . .
The Group borrows money from financial institutions in the form of bonds,
facilities, and other financial instruments.
The Group is required to disclose the fair value of its debt instruments.
Here, fair value is the amount the Group would pay to transfer the liability.
It is calculated based on the present value of future principal and interest
cash flows, discounted at the market rate of interest at the reporting date.
Fair value versus book value
Liabilities Maturity Book value Fair value
30 June2014£m 31 Dec2013£m 30 June2014£m 31 Dec2013£m
£525 million Revolving Credit Facility 2019* 210 - 210 -
E50 million Eurobond June 14 - 41 - 43
£78 million Eurobond Oct 15 78 78 82 83
£161 million Eurobond Jan 17 161 161 175 179
£62 million loan (previously £200 million) Mar 19 - 62 - 95
449 342 467 400
* See section 4.1 for a discussion of the terms of borrowing on the RCF.
Movements in book values of the 2014 Eurobond and 2019 bilateral loans are the
result of buybacks and maturities in the period.
4.3 Derivative financial instruments
Keeping it simple . . .
A derivative is a financial instrument used to manage risk. Its value changes
over time in response to underlying variables such as exchange rates or
interest rates and is for a fixed period. In accordance with Board approved
policies, the Group uses derivatives to manage its exposure to fluctuations in
interest on its borrowings and foreign exchange rates.
Derivative financial instruments are initially recognised as either assets or
liabilities at fair value and are subsequently remeasured at fair value at
each reporting date. Movements in instruments measured at fair value are
recorded in the income statement in net financing costs.
The Group's policy on the various methods used to calculate their respective
fair values is detailed in the 31 December 2013 financial statements.
Interest rate risk
Since 2011 the Group's interest rate policy was to have 100% of its borrowings
at fixed rates in order to lock in low interest rates. This policy was amended
in 2014 to allow fixed rate gross debt to vary between 20% and 100% of total
gross debt to accommodate floating rate borrowings under the new revolving
credit facility. At 30 June 2014 the Group's fixed rate debt represented 55%
of total debt.
The following table shows the fair value of derivative financial instruments
analysed by type of contract. Interest rate swap fair values exclude accrued
interest.
June 2014 Assets £m Liabilities £m
Current
Interest rate swaps - fair value through profit or loss - -
Forward foreign exchange contracts - fair value through profit or loss - (1)
Non-current
Interest rate swaps - fair value through profit or loss 29 (18)
Forward foreign exchange contracts - fair value through profit or loss - (1)
29 (20)
Dec 2013 Assets £m Liabilities £m
Current
Interest rate swaps - fair value through profit or loss 32 (6)
Non-current
Interest rate swaps - fair value through profit or loss 41 (27)
73 (33)
On issuing the 2015 and 2017 Eurobonds, the Group entered into and then
subsequently overlaid a portfolio of interest rate swaps with the result that
it is now 100% fixed on these borrowings. The timing of entering into these
swaps locked in an interest benefit for the Group, resulting in a net
mark-to-market gain on the portfolio.
Forward foreign exchange contracts are primarily used to hedge the Group's
foreign currency firm commitments and highly probable forecast payments and
receipts.
4.4 Fair value hierarchy
Keeping it simple . . .
The financial instruments included on the ITV statement of financial position
are measured at either fair value or amortised cost. The measurement of this
fair value can in some cases be subjective, and can depend on the inputs used
in the calculations. ITV generally uses external valuations using market
inputs or market values (e.g. external share prices). The different valuation
methods are called 'hierarchies' and are described below.
The tables below set out the financial instruments included on the ITV
statement of financial position at 'fair value'.
Fair value30 June 2014£m Level 130 June 2014£m Level 230 June 2014£m Level 330 June 2014£m
Assets measured at fair value
Available for sale financial instruments
Available for sale gilts 36 36 - -
Financial assets at fair value through profit or loss
Interest rate swaps 29 - 29 -
65 36 29 -
Fair value30 June 2014£m Level 130 June 2014£m Level 230 June 2014£m Level 330 June 2014£m
Liabilities measured at fair value
Financial liabilities at fair value through profit or loss
Interest rate swaps (18) - (18) -
Forward foreign exchange contracts (2) - (2) -
Contingent consideration (4) - - (4)
(24) - (20) (4)
Level 1
Fair values measured using quoted prices (unadjusted) in active markets for
identical assets or liabilities.
Level 2
Fair values measured using inputs, other than quoted prices included within
Level 1, that are observable for the asset or liability either directly or
indirectly.
Interest rate swaps and options are accounted for at their fair value based
upon termination prices. Forward foreign exchange contracts are accounted for
at the difference between the contract exchange rate and the quoted forward
exchange rate at the reporting date.
Level 3
Fair values measured using inputs for the asset or liability that are not
based on observable market data.
Contingent consideration is the Group's only financial instrument classified
as level 3 in the fair value hierarchy. As noted in the accounting policy
disclosed in the December 2013 financial statements, the key assumptions taken
into consideration when measuring this acquisition related liability are the
performance expectations of the acquisition and a discount rate that reflects
the size and nature of the new business. There is no reasonable change in
discount rate or performance targets that would give rise to a material change
in the liability at the half year.
The year end position of £7 million was increased to include the acquisitions
in the period, giving rise to an additional
£1 million of contingent consideration (see note 3.1 for details). Future
performance expectations for the acquisitions were revisited in the period,
resulting in a fair value release of £4 million. The unwind of interest and
fair value movements in the liability is recognised in other interest expense
in net financing costs (2013: immaterial movement).
Section 5: Other Notes
5.1 Related party transactions
Keeping it simple . . .
The related parties identified by the Directors include joint ventures,
associated undertakings, investments
and key management personnel.
Related party transactions
For the six month period to 30 June 2014£m 2013£m
Sales to joint ventures 3 6
Sales to associated undertakings 4 4
Purchases from joint ventures 13 14
Purchases from associated undertakings 26 28
There have been no significant changes to the nature of related parties
disclosed in the full consolidated financial statements for the Group as at
and for the year ended 31 December 2013.
The transactions with joint ventures primarily relate to sales and purchases
of digital multiplex services with Digital 3&4 Limited.
The purchases from associated undertakings primarily relate to the purchase of
news services from ITN. All transactions arose in the normal course of
business on an arm's length basis. None of the balances are secured.
There have been no other significant related party transactions in the six
month period ended 30 June 2014.
The amounts owed by and to these related parties at the period end were:
2014£m 2013£m
Amounts owed by joint ventures - -
Amounts owed by associated undertakings 7 4
Amounts owed to joint ventures 2 -
Amounts owed to associated undertakings 1 4
Amounts owed by pension scheme 2 1
Transactions with key management personnel
Key management consists of ITV plc Executive and Non-executive Directors and
the ITV Management Board. Key management personnel compensation for the period
is as follows:
Short-term employee benefits 4 4
Share-based compensation 3 3
7 7
7
7
5.2 Contingent liabilities
Keeping it simple . . .
A contingent liability is a liability that is not sufficiently certain to
qualify for recognition as a provision where uncertainty may exist regarding
the outcome of future events.
There has been no material change in the Group's contingent liabilities since
31 December 2013 and the disclosures in those annual financial statements
remain appropriate at 30 June 2014.
Responsibility Statement of the Directors in Respect of the Half-Yearly
Financial Report
We confirm that to the best of our knowledge:
· the condensed set of consolidated financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU;
· the interim management report includes a fair review of the information
required by:
DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of
important events that have occurred during the first six months of the
financial year and their impact on the condensed set of consolidated financial
statements; and a description of the principal risks and uncertainties for the
remaining six months of the year; and
DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year that have materially affected the financial position or
performance of the entity during that period; and any changes in the related
party transactions described in the last Annual Report that could do so.
There have been no further appointments or resignations in the period and the
remaining Directors are listed in the ITV plc 2013 Annual Report. A list of
current Directors is maintained on the ITV plc website: www.itvplc.com.
For and on behalf of the Board:
Andrew Garard
Company Secretary
30 July 2014
Independent Review Report to ITV plc
Introduction
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2014, which comprises the condensed consolidated income statement,
condensed consolidated statement of comprehensive income, condensed
consolidated statement of financial position, condensed consolidated statement
of changes in equity, condensed consolidated statement of cash flows and the
related explanatory notes. We have read the other information contained in the
half-yearly financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the
condensed set of financial statements.
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the Disclosure
and Transparency Rules ('the DTR') of the UK's Financial Conduct Authority
('the UK FCA'). Our review has been undertaken so that we might state to the
Company those matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company for our review work,
for this report, or for the conclusions we have reached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for preparing the
half-yearly financial report in accordance with the DTR of the UK FCA.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with IFRSs as adopted by the EU. The condensed set of
financial statements included in this half-yearly financial report has been
prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by
the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the UK. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK and Ireland) and consequently
does not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2014 is not prepared, in all
material respects, in accordance with IAS 34 as adopted by the EU and the DTR
of the UK FCA.
Mark Summerfield
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
30 July 2014
This information is provided by RNS
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