REG - Pennon Group PLC - Pennon Group Half Year Results 2015/16 <Origin Href="QuoteRef">PNN.L</Origin> - Part 2
27/11/2015 07:11
- Part 2: For the preceding part double click ID:nRSa1477Ha
Capital expenditure focused on regulatory expenditure and ERF build out
Group capital investment was £165.9m in H1 2015/16 compared to £192.0m in H1 2014/15, reflecting the ongoing investment
needs of the Group.
South West Water and Bournemouth Water expenditure was £58.0m compared to £64.6m for South West Water in H1 2014/15. South
West Water's spending has focused on preparations for the innovative new water treatment works at North Plymouth, schemes
to improve water quality and investment in digital infrastructure. Bournemouth Water has focused on continued pressure
management and commissioning two ultra violet treatment plants at Beaulieu and Knapp Mill. Both South West Water and
Bournemouth Water have made a good start to delivering their K6 capital programme.
Viridor capital investment was £107.9m compared to £127.3m in H1 2014/15, predominantly driven by ERF expenditure. Before
capitalised interest, cumulative ERF expenditure to date is £934m, leaving £345m left to invest on the ERF programme. So
far, £20m of efficiencies have been realised across Viridor's ERF capital investment programme.
The Group is making significant ongoing capital investment to support future growth.
Stable net debt position
Group net debt has increased by £148m to £2,345m, from £2,197m at 31 March 2015. The increase largely reflects the net debt
assumed in the acquisition of Bournemouth Water. Group net gearing(1) has marginally increased from 61.9% at 31 March 2015
to 62.6%.
South West Water's net debt to RCV marginally increased from 62.1% at 31 March 2015 to 62.4%.
Debt includes £868m (before capitalised interest) for ERFs operational or under construction (Runcorn II, Oxford, Exeter,
Cardiff, Glasgow, Dunbar and South London).
Pensions
The Group's defined benefit pension schemes had a deficit (net of deferred tax) under IAS 19 at 30 September 2015 of £54m
(£68m gross), an increase of £6m on the 31 March 2015 net balance.
Excluding the acquisition of Bournemouth Water, the aggregate schemes' asset value decreased from £692m at 31 March 2015 to
£667m at 30 September 2015. Over the same period, the aggregate schemes' liability value decreased from £752m at 31 March
2015 to £737m, resulting in an increase in the gross deficit of £10m (before Bournemouth Water).
At 30 September the Bournemouth Water pension scheme had assets of £83m and liabilities of £81m, resulting in a gross
surplus of £2m.
Together the total Group's schemes' asset value increased from £692m at 31 March 2015 to £750m at 30 September 2015. Over
the same period, the aggregate schemes' liability value increased from £752m at 31 March 2015 to £818m, resulting in an
increase in the gross deficit of £8m (£6m net of deferred tax).
(1)Net borrowings/(equity + net borrowings)
Taxation
The mainstream corporation tax charge for the half year (before prior year) was £18.5m (H1 2014/15 £19.8m) giving a current
year current tax rate of 17.3% (H1 2014/15 19.8%).
The reduced charge compared to last year reflects increased capital allowances due to the full year contribution of new
operational ERFs and the 1% reduction in the corporation tax rate.
The deferred tax for the half year was a charge of £18.1m (H1 2014/15 £14.2m). In addition, H1 2014/15 included an
exceptional charge of £3.0m reflecting the impact of tax on exceptional items.
PRINCIPAL RISKS AND UNCERTAINTIES
In accordance with DTR4.2.3 and 4.2.7 of the Disclosure & Transparency Rules the principal risks and uncertainties for the
remaining six months of the financial year for the Group which could have a material adverse affect on the Group's
business, financial conditions, results, operations and reputation are:
· Changes in law, regulation or decisions by governmental bodies or regulators
· Non-recovery of customer debt
· Poor operating performance due to extreme weather and climate change
· Poor service provided to customers
· Global economic downturn pressuring volumes and margins
· Downward pressure on UK wholesale power prices
· Business interruption or significant operational failures/ incidents
· Non-compliance or occurrence of avoidable health and safety incidents
· Failure or increased cost of capital projects and/or Joint Ventures not achieving predicted revenues or performance
· Exposure to contractor failure to deliver construction progress, increasing costs and potentially requiring lengthy
legal action or other redress
· Reduced customer base, increased competition affecting prices or reduced demand for services
· Information technology systems requiring replacement, development or upgrading to meet growing requirements of the
business
· Uncertainty arising from open tax computations where liabilities remain to be agreed
CORPORATE REPORTING
It has been the practice of the Company to publish Preliminary Results towards the end of May followed by its Annual Report
a few weeks later. The Board has decided with effect from the next Annual Results Announcement in May 2016 that it will no
longer issue Preliminary Results as permitted by the Listing Rules. Instead the Company will make a Final Results
Announcement on 25 May 2016 which will be followed shortly thereafter by the publication of the Company's 2016 Annual
Report & Accounts. This will enable the Company to bring forward its Annual General Meeting by approximately one month to
1 July 2016 and also its dividend timetable which is set out on page 30.
BOARD MATTERS
As previously announced, Ken Harvey retired from the Board on 31 July 2015 after over 18 years as Chairman. Mr Harvey was
succeeded by Sir John Parker who initially joined the Board on 1 April 2015 as an independent Non-executive Director and
Deputy Chairman. In addition Gerard Connell, Non-executive Director and Senior Independent Director, retired from the Board
on 31 July 2015 marking the end of a term of office lasting twelve years. Gill Rider, an existing Non-executive Director,
replaced Mr Connell as the Senior Independent Director.
Sir John Parker
Chairman
27 November 2015
FINANCIAL TIMETABLE FOR THE YEAR ENDING 31 MARCH 2016
28 January 2016 Ordinary shares quoted ex-dividend
29 January 2016 Record date for interim dividend
11 February 2016 Trading Statement
7 March 2016 Scrip election date for interim dividend
1 April 2016 Interim cash dividend paid and Scrip shares issued
25 May 2016 Full Year Results 2015/16
Early June 2016 Annual Report & Accounts published
1 July 2016 Annual General Meeting
7 July 2016* Ordinary shares quoted ex-dividend
8 July 2016* Record date for final dividend
15 August 2016* Scrip election date for final dividend
2 September 2016* Final cash dividend paid and Scrip shares issued
6 September 2016 Trading Statement
25 November 2016 Half Year Results 2016/17
* These dates are provisional and, in the case of the final dividend, subject to obtaining
shareholder approval at the 2016 Annual General Meeting.
CAUTIONARY STATEMENT IN RESPECT OF FORWARD-LOOKING STATEMENTS
This Report contains forward-looking statements relating to the Pennon Group's operations, performance and financial
position based on current expectations of, and assumptions and forecasts made by, Pennon Group management. Forward-looking
statements are identified in this Report by words such as "anticipate", "aim", "believe", "continue", "could", "due",
"estimate", "expect", "forecast", "goal", "intend", "may", "plan", "project", "remain", "seek", "should", "target", "will"
and related and similar expressions, as well as statements in the future tense. Various known and unknown risks,
uncertainties and other factors could lead to substantial differences between the actual future results, financial
situation development or performance of the Group and the estimates and historical results given herein including but not
limited to those set out on pages 28 and 29 of this Statement. Undue reliance should not be placed on forward-looking
statements which are made only as of the date of this Statement. No representation, assurance, guarantee or warranty is
given in relation to them including as to their accuracy, completeness, or the basis on which they are made and nothing in
this Statement should be construed as a profit forecast.
The Group accepts no obligation to revise or update publicly these forward-looking statements or adjust them as a result of
new information or for future events or developments, except to the extent legally required.
UNSOLICITED COMMUNICATIONS WITH SHAREHOLDERS
A number of companies, including Pennon Group Plc, continue to be aware that their shareholders receive from time to time
unsolicited telephone calls or correspondence concerning investment matters which imply a connection to the company
concerned. If shareholders have any concerns about any contact they have received then please refer to the Financial
Conduct Authority's website www.fca.org.uk/scamsmart. Details of any share dealing facilities that the Company endorses
will be included in Company mailings.
PENNON GROUP PLC
Consolidated income statement for the half year ended 30 September 2015
Unaudited
Before Exceptional
exceptional items half year Total
Half year items half year ended half year
ended ended 30 September ended
30 September 30 September 2014 30 September
2015 2014 (note 5) 2014
Note £m £m £m £m
Revenue 4 689.1 692.3 - 692.3
Operating costs
Manpower costs (89.7) (85.0) 14.9 (70.1)
Raw materials and consumables used (55.8) (56.3) - (56.3)
Other operating expenses (311.9) (351.0) - (351.0)
Earnings before interest, tax, depreciation
and amortisation 4 231.7 200.0 14.9 214.9
Depreciation and amortisation (96.4) (80.8) - (80.8)
Operating profit 4 135.3 119.2 14.9 134.1
Finance income 6 22.0 18.3 - 18.3
Finance costs 6 (51.5) (39.9) - (39.9)
Net finance costs 6 (29.5) (21.6) - (21.6)
Share of post-tax profit from joint ventures 1.0 2.4 - 2.4
Profit before tax 4 106.8 100.0 14.9 114.9
Taxation 7 (21.9) (21.4) (3.0) (24.4)
Profit for the period 84.9 78.6 11.9 90.5
Attributable to:
Ordinary shareholders of the parent 68.7 62.6 11.9 74.5
Perpetual capital security holders 16.2 16.0 - 16.0
Earnings per ordinary share (pence per share) 8
-Basic 16.8 19.4
- Diluted 16.7 19.3
- Before exceptional items, deferred tax and
adjusted proportionately to reflect the half
year impact of annual hybrid periodic
return 23.2 22.1
The notes on pages 37 to 52 form part of this condensed half year financial information.
PENNON GROUP PLC
Consolidated statement of comprehensive income for the half year ended 30 September 2015
Unaudited
Before Exceptional
exceptional items half year Total
Half year items half year ended half year
ended ended 30 September ended
30 September 30 September 2014 30 September
2015 2014 (note 5) 2014
£m £m £m £m
Profit for the period 84.9 78.6 11.9 90.5
Other comprehensive loss:
Items that will not be reclassified to profit or loss
Remeasurement of defined benefit obligations (8.6) (28.1) - (28.1)
Income tax on items that will not be reclassified 1.8 5.6 - 5.6
Total items that will not be reclassified to
profit or loss (6.8) (22.5) - (22.5)
Items that may be reclassified subsequently
to profit or loss
Share of other comprehensive income from
joint ventures (1.0) (2.4) - (2.4)
Cash flow hedges 7.4 (5.0) - (5.0)
Income tax on items that may be reclassified (1.5) (0.3) - (0.3)
Total items that may be reclassified
subsequently to profit or loss 4.9 (7.7) - (7.7)
Other comprehensive loss for
the period net of tax (1.9) (30.2) - (30.2)
Total comprehensive income for the period 83.0 48.4 11.9 60.3
Total comprehensive income attributable to:
Ordinary shareholders of the parent 66.8 32.4 11.9 44.3
Perpetual capital security holders 16.2 16.0 - 16.0
The notes on pages 37 to 52 form part of this condensed half year financial information.
PENNON GROUP PLC
Consolidated balance sheet at 30 September 2015
Unaudited
30 September 31 March
2015 2015
Note £m £m
ASSETS
Non-current assets
Goodwill 18 386.6 339.3
Other intangible assets 60.6 56.4
Property, plant and equipment 16 3,850.4 3,578.8
Other non-current assets 285.7 291.1
Derivative financial instruments 51.3 60.2
Investments in joint ventures 0.1 0.1
4,634.7 4,325.9
Current assets
Inventories 20.1 15.0
Trade and other receivables 315.4 287.7
Financial assets at fair value through profit - 0.1
Derivative financial instruments 8.0 8.1
Cash and cash deposits 14 805.9 771.0
1,149.4 1,081.9
LIABILITIES
Current liabilities
Borrowings 14 (111.4) (113.6)
Financial liabilities at fair value through profit (0.2) -
Derivative financial instruments (15.5) (19.5)
Trade and other payables (411.9) (277.7)
Current tax liabilities (45.1) (52.2)
Provisions (32.9) (32.9)
(617.0) (495.9)
Net current assets 532.4 586.0
Non-current liabilities
Borrowings 14 (3,039.6) (2,854.5)
Other non-current liabilities (109.4) (110.1)
Financial liabilities at fair value through profit (52.6) (57.3)
Derivative financial instruments (35.2) (46.0)
Retirement benefit obligations (68.4) (59.6)
Deferred tax liabilities (278.4) (235.9)
Provisions (182.4) (194.4)
(3,766.0) (3,557.8)
Net assets 1,401.1 1,354.1
Shareholders' equity
Share capital 10 167.8 162.4
Share premium account 11 212.8 118.6
Capital redemption reserve 144.2 144.2
Retained earnings and other reserves 581.5 634.1
Total shareholders' equity 1,106.3 1,059.3
Perpetual capital securities 12 294.8 294.8
Total equity 1,401.1 1,354.1
The notes on pages 37 to 52 form part of this condensed half year financial information.
PENNON GROUP PLC
Consolidated statement of changes in equity
Unaudited
Share Retained Perpetual
Share premium Capital earnings capital
capital account redemption and other securities Total
(note 10) (note 11) reserve reserves (note 12) equity
£m £m £m £m £m £m
At 1 April 2014 151.3 4.9 144.2 602.4 294.8 1,197.6
Profit for the period - - - 74.5 16.0 90.5
Other comprehensive loss for the period - - - (30.2) - (30.2)
Total comprehensive income for the period - - - 44.3 16.0 60.3
Transactions with equity shareholders
Dividends paid or approved - - - (117.0) - (117.0)
Adjustment for shares issued or to be
issued under the scrip dividend
alternative 2.6 (2.6) - 48.0 - 48.0
Convertible bond - equity issuance 8.5 116.3 - (0.5) - 124.3
Distributions due to perpetual capital
security holders - - - - (20.3) (20.3)
Current tax relief on distributions to
perpetual capital security holders - - - - 4.3 4.3
Adjustment in respect of share-based
payments - - - 1.9 - 1.9
Own shares acquired by the Pennon
Employee Share Trust in respect of
share options granted - - - (0.8) - (0.8)
Proceeds from treasury shares re-issued - - - 3.3 - 3.3
11.1 113.7 - (65.1) (16.0) 43.7
At 30 September 2014 162.4 118.6 144.2 581.6 294.8 1,301.6
Unaudited
Share Retained Perpetual
Share premium Capital earnings capital
capital account redemption and other securities Total
(note 10) (note 11) reserve reserves (note 12) equity
£m £m £m £m £m £m
At 1 April 2015 162.4 118.6 144.2 634.1 294.8 1,354.1
Profit for the period - - - 68.7 16.2 84.9
Other comprehensive loss for the period - - - (1.9) - (1.9)
Total comprehensive income for the period - - - 66.8 16.2 83.0
Transactions with equity shareholders
Dividends paid or approved - - - (129.5) - (129.5)
Adjustment for shares issued or to be
issued under the scrip dividend
alternative 0.3 (0.3) - 6.3 - 6.3
Equity issuance 4.9 95.4 - - - 100.3
Distributions due to perpetual capital security
holders - - - - (20.3) (20.3)
Current tax relief on distributions to
perpetual capital security holders - - - - 4.1 4.1
Adjustment in respect of share-based
payments - - - 2.4 - 2.4
Own shares acquired by the Pennon
Employee Share Trust in respect of
share options granted - - - (1.1) - (1.1)
Proceeds from treasury shares re-issued - - - 2.5 - 2.5
Proceeds from shares issued under the
Sharesave Scheme 0.2 1.4 - - - 1.6
Equity issuance related costs - (2.3) - - - (2.3)
5.4 94.2 - (119.4) (16.2) (36.0)
At 30 September 2015 167.8 212.8 144.2 581.5 294.8 1,401.1
The notes on pages 37 to 52 form part of this condensed half year financial information.
PENNON GROUP PLC
Consolidated statement of cash flows for the half year ended 30 September 2015
Unaudited
Half yearended30 September2015 Half year ended30 September2014
Note £m £m
Cash flows from operating activities
Cash generated from operations 13 206.4 140.9
Interest paid (41.4) (24.0)
Tax (paid)/repaid (9.5) 4.3
Net cash generated from operating activities 155.5 121.2
Cash flows from investing activities
Interest received 4.5 7.3
Loan repayments received from joint ventures 19.5 0.1
Acquisitions, net of cash acquired (90.0) -
Purchase of property, plant and equipment (141.4) (138.2)
Proceeds from sale of property, plant
and equipment 2.7 3.4
Net cash used in investing activities (204.7) (127.4)
Cash flows from financing activities
Proceeds from issuance of ordinary shares 99.6 -
Proceeds from treasury shares re-issued 10 2.5 3.3
Deposit of restricted
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