REG - Pennon Group PLC - Pennon Group Full Year Results 2016/17 <Origin Href="QuoteRef">PNN.L</Origin> - Part 6
24/05/2017 07:07
- Part 6: For the preceding part double click ID:nRSX0435Ge
Amortisation of intangible assets 3.2 3.7
Non-underlying remeasurement of fair value movement in derivatives (16.0) (5.2)
Non-underlying unwind of synthetic derivative 44.8 -
Non-underlying provision charge 10.7 10.2
Share of post-tax profit from joint ventures (4.2) (3.6)
Finance income (before non-underlying items) (36.3) (42.1)
Finance costs (before non-underlying items) 95.1 96.2
Taxation charge 30.0 38.0
Changes in working capital:
Increase in inventories (0.7) (5.5)
(Increase) / decrease in trade and other receivables (13.1) 10.5
Increase in service concession arrangements receivable (22.2) (15.6)
Increase / (decrease) in trade and other payables 8.5 (27.0)
Increase / (decrease) in retirement benefit obligations 2.3 (21.2)
Decrease in provisions (24.7) (16.8)
Cash generated from operations 431.5 371.3
2017 2016
£m £m
Total interest paid
Interest paid in operating activities 76.4 79.1
Interest paid in investing activities 12.9 9.4
Total interest paid 89.3 88.5
PENNON GROUP PLC
Notes (continued)
13. Net borrowings
2017 2016
£m £m
Cash and cash deposits 598.1 632.2
Borrowings - current
Bank and other loans (74.9) -
Other current borrowings (41.1) (39.0)
Finance lease obligations (30.5) (26.0)
Total current borrowings (146.5) (65.0)
Borrowings - non-current
Bank and other loans (1,439.3) (1,502.5)
Other non-current borrowings (323.4) (234.5)
Finance lease obligations (1,353.8) (1,314.6)
Total non-current borrowings (3,116.5) (3,051.6)
Total net borrowings (2,664.9) (2,484.4)
For the purposes of the cash flow statement cash and cash equivalents comprise:
2017 2016
£m £m
Cash and cash deposits as above 598.1 632.2
Less : deposits with a maturity of three months
or more (restricted funds) (223.8) (226.5)
374.3 405.7
PENNON GROUP PLC
Notes (continued)
14. Contingent liabilities
2017 2016
£m £m
Performance bonds 187.5 159.7
Other - 4.0
187.5 163.7
Guarantees in respect of performance bonds are entered
into in the normal course of business. No liability is
expected to arise in respect of the guarantees. Other
contingent liabilities relate to a possible obligation
last year to pay further consideration in respect of a
previously acquired business when the outcome of
planning applications was known. Other contractual and
litigation uncertainties The Group establishes
provisions in connection with contracts and litigation
where it has a present legal or constructive obligation
as a result of past events and where it is more likely
than not an outflow of resources will be required to
settle the obligation and the amount can be reliably
estimated.Matters where it is uncertain that these
conditions are met are: · The Group's joint venture
Viridor Laing (Greater Manchester) Ltd is party to a PFI
contract with the Greater Manchester Waste Disposal
Authority (the Authority). The authority has announced
its intention to terminate this contract. The Group is
in negotiation with the Authority with the aim of
delivering an orderly exit from the contract. · The
Group is subject to litigation from time to time as a
result of its activities, including a prosecution from
the Health and Safety Executive in relation to the
fatality of a Viridor employee at Derriford, Plymouth in
2015. Uncertain tax items Management judgement is
required to estimate the tax provisions relating to
uncertain tax items that remain to be agreed with HMRC.
In 2015/16 the Group reported significant judgement
around uncertain tax items related to the interpretation
of tax legislation regarding financial arrangements
entered into in the normal course of business, which
could have resulted in range of outcomes of additional
liabilities of c£20m, to a reduction in liabilities of
£52m. Following engagement and subsequently resolution
with HMRC across a number of areas, achieved through a
process designed to expedite outstanding tax matters,
these items are no longer an area of significant
judgement and there is no such range related to ongoing
uncertain tax items. The Group has a small number of
ongoing uncertain tax items related to capital
allowances for expenditure incurred in the normal course
of business, where the Group has paid in full the tax
HMRC interpret as due, and therefore would receive up to
£20m (2015/16 £70m) should these tax items be concluded
in the Group's favour.
Pennon Group plc
Registered Office : Registered in England No 2366640
Peninsula House
Rydon Lane
Exeter
EX2 7HR
pennon-group.co.uk
1 Earnings before interest, tax, depreciation and amortisation
2 Before non-underlying items. Underlying earnings are presented to provide
a more useful comparison of business trends and performance
3 Underlying EBITDA plus share of Joint Venture EBITDA and IFRIC 12 interest
receivable
4 Non-underlying items are adjusted for by virtue of their size, nature or
incidence to enable a full understanding of the Group's financial performance
5 Before deferred tax and non-underlying items
6 The RPI rate used is 3.1% as of March 2017
7 See page 23
8 £3.6m net reward reflecting £3.9m net reward which will be recognised at
the end of the regulatory period and £0.3m net penalty which can be reflected
during the regulatory period
9 Excluding Avonmouth
10 Future dividends growth based on policy of 4% + RPI forecast to 2020
11 RPI as at 31 March 2017 was 3.1%
12 ROCs - Renewable Obligation Certificate
13 Ofwat methodology due for publication on 11 July 2017
14 Before non-underlying items
15 Underlying EBITDA plus share of Joint Venture EBITDA and IFRIC 12
interest receivable
16 Including construction spend on service concession arrangements
17 Before deferred tax and non-underlying items
18 The RPI rate used is 3.1% as of March 2017
19 Two arrangements are accounted for in non-underlying derivative
movements
20 Including landfill tax and construction spend on service concession
arrangements
21 Before non-underlying items
22 Underlying EBITDA plus share of Joint Venture EBITDA and IFRIC 12
interest receivable
23 Primarily relates to liquidated damages received/receivable when
construction is completed post the original contractual completion date.
24 Based on SWW's WaterShare approach to RORE calculation, see page 23
25 Based on RCV at March 2017 RPI of 3.1%
26 Including construction spend on service concession arrangements and £10.8
million of capitalised interest
27 Safety, health, environment and quality
28 Excluding Avonmouth
29 RORE reflects Base RORE plus Outperformance. It is calculated using
actual results before non-underlying items (deflated into 2012/13 prices) and
compared against the
Final Determination allowances and based on notional gearing, annual average
RCV and reflecting the value of tax impacts at the actual annual effective tax
rate for the year
30 Includes integration synergies already delivered. Phasing of actual
expenditure compared to the planned programme has been reflected.
Outperformance includes a
reduction in the RCV run-off for the RCV element of Totex outperformance
calculated based on the Final Determination PAYG. Tax impacts reflect actual
effective tax rates
31 Interest outperformance is based on the outturn effective interest rate
on net debt, translated into an effective real interest rate using cumulative
K6 forecast RPI of 2.8%,
notional debt gearing of 62.5%, and actual effective tax rates
32 Average RPI of 2.1% for 2016/17 and 1.1% for 2015/16
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