REG - Severn Trent PLC - Half Yearly Report <Origin Href="QuoteRef">LMPL.L</Origin> <Origin Href="QuoteRef">SVT.L</Origin> - Part 2
26/11/2015 07:11
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146.2
Loss on cashflow hedges - - (0.6) - (0.6) - (0.6)
Deferred tax on loss on cashflow hedges - - 0.1 - 0.1 - 0.1
Amounts on cash flow hedges transferred to the income statement - - 6.8 - 6.8 - 6.8
Deferred tax on transfers to the income statement - - (1.4) - (1.4) - (1.4)
Exchange movement on translation of overseas results and net assets - - (3.5) - (3.5) 0.1 (3.4)
Cumulative exchange losses transferred to income statement - - 11.7 - 11.7 - 11.7
Disposal of minority interest - - - - - (13.7) (13.7)
Net actuarial gains - - - 90.3 90.3 - 90.3
Tax on net actuarial gains - - - (18.1) (18.1) - (18.1)
Deferred tax arising from rate change - - - - - - -
Total comprehensive income for the period - - 13.1 215.9 229.0 (11.1) 217.9
Share options and LTIPs
- proceeds from shares issued 0.7 6.3 - - 7.0 - 7.0
- value of employees' services - - - 2.7 2.7 - 2.7
- own shares purchased - - - (1.7) (1.7) - (1.7)
Current tax on share based payments - - - 1.1 1.1 - 1.1
Deferred tax on share based payments - - - (0.1) (0.1) - (0.1)
Share cancellation (0.1) - 0.1 - - - -
Dividends paid - - - (121.2) (121.2) - (121.2)
At 30 September 2015 234.3 106.5 111.4 474.5 926.7 2.3 929.0
Condensed consolidated balance sheetAt 30 September 2015 30 September 31 March
Notes 2015 2015
(restated)
£m £m
Non-current assets
Goodwill 14.1 14.3
Other intangible assets 66.7 66.7
Property, plant and equipment 7,581.6 7,520.0
Interests in joint ventures and associates 4.7 4.6
Derivative financial instruments 13.2 13.5
Available for sale financial assets 0.1 0.1
7,680.4 7,619.2
Current assets
Inventory 16.2 16.7
Trade and other receivables 506.0 492.0
Current tax receivable - 11.2
Derivative financial instruments 2.3 13.5
Cash and cash equivalents 57.2 176.7
Assets held for sale 6 - 107.9
581.7 818.0
Total assets 8,262.1 8,437.2
Current liabilities
Borrowings 9 (562.5) (463.0)
Derivative financial instruments (6.6) (32.2)
Trade and other payables (546.6) (494.0)
Current income tax liabilities (11.3) -
Provisions for liabilities and charges (11.6) (15.9)
Liabilities associated with assets held for sale 6 - (35.3)
(1,138.6) (1,040.4)
Non-current liabilities
Borrowings 9 (4,140.0) (4,463.7)
Derivative financial instruments (160.3) (175.1)
Trade and other payables (838.9) (822.2)
Deferred tax (652.4) (625.1)
Retirement benefit obligations 11 (382.4) (468.9)
Provisions for liabilities and charges (20.5) (18.5)
(6,194.5) (6,573.5)
Total liabilities (7,333.1) (7,613.9)
Net assets 929.0 823.3
Equity
Called up share capital 12 234.3 233.7
Share premium account 106.5 100.2
Other reserves 111.4 98.2
Retained earnings 474.5 377.8
Equity attributable to owners of the company 926.7 809.9
Non-controlling interests 2.3 13.4
Total equity 929.0 823.3
Condensed consolidated cash flow statementSix months ended 30 September 2015 2015 2014
Notes £m £m
Cash generated from operations 13 495.5 486.3
Tax paid (7.9) (15.3)
Net cash generated from operating activities 487.6 471.0
Investing activities
Interest received 0.6 1.1
Proceeds on disposal of discontinued operations 6 47.1 -
Proceeds on disposal of property, plant and equipment 5.4 0.5
Purchases of intangible assets (11.5) (4.4)
Purchases of property, plant and equipment (206.7) (226.2)
Contributions and grants received 22.6 17.3
Net cash used in investing activities (142.5) (211.7)
Financing activities
Interest paid (69.3) (77.4)
Interest element of finance lease payments (1.7) (2.7)
Dividends paid to shareholders of the parent (121.2) (115.5)
Dividends paid to non-controlling interests - (1.6)
Repayments of borrowings (527.7) (15.5)
Repayments of obligations under finance leases (37.4) (20.5)
New loans raised 330.7 -
Issues of shares 7.0 6.2
Share buy back (65.1) -
Purchase of own shares (1.7) (2.5)
Net cash used in financing activities (486.4) (229.5)
Net (decrease)/increase in cash and cash equivalents (141.3) 29.8
Net cash and cash equivalents at beginning of period 176.7 123.2
Amounts in assets held for sale at beginning of period 6 19.3 -
Effect of foreign exchange rates (0.1) 0.5
Net cash and cash equivalents at end of period 54.6 153.5
Net cash and cash equivalents
Cash and cash equivalents 57.2 154.1
Bank overdrafts (2.6) (0.6)
54.6 153.5
Notes to the condensed interim financial information
1 General information
The interim report has been prepared in accordance with the recognition and
measurement criteria of IFRS and the disclosure requirements of the Listing
Rules.
The information for the year ended 31 March 2015 does not constitute statutory
accounts within the meaning of section 434 of the Companies Act 2006. A copy
of the statutory accounts for that year prepared under IFRS has been delivered
to the Registrar of Companies. The auditor's report on those accounts was
unqualified, did not draw attention to any matters by way of emphasis and did
not contain statements under section 498 (2) or (3) of the Companies Act
2006.
Accounting policies
The interim financial information has been prepared on the going concern basis
using accounting policies consistent with International Financial Reporting
Standards and in accordance with IAS 34 "Interim Financial Reporting" as
adopted by the European Union. The same accounting policies, presentation and
methods of computation are followed in the interim financial information as
applied in the group's annual financial statements for the year ended 31 March
2015.
Prior year restatement
Prior year figures in the consolidated income statement and related notes have
been restated to present separately amounts relating to operations classified
as discontinued in the current year. For details see note 6.
The comparative balance sheet has been restated to reflect a reclassification
between property plant and equipment and non-current trade and other payables.
Contributions, which had been received in previous years in relation to
infrastructure assets, and which had a carrying value of £280.2 million as at
31 March 2015, were identified as being deducted from the carrying value of
property plant and equipment. In order to comply with the requirements of IAS
16 and IAS 18, these contributions have been reclassified from property plant
and equipment to non-current trade and other payables.
As a consequence of this reclassification, the cumulative depreciation charge
recognised in retained earnings as at 31 March 2015 has increased by £25.3
million with a corresponding increase of the same amount in the cumulative
release of deferred income to the income statement.
Going concern
Including undrawn committed credit facilities, the group is fully funded for
its investment and cash flow needs until January 2018. After making enquiries
the directors have a reasonable expectation that the group has adequate
resources to continue in operational existence for the foreseeable future and
hence the interim financial information has been prepared on a going concern
basis.
Seasonality
The group's businesses are not seasonal in nature.
2 Segmental analysis
The group is organised into two main business segments:
Regulated Water and Waste Water includes the wholesale water and waste water
activities of the group's regulated subsidiary Severn Trent Water Limited and
its retail services to domestic customers.
Business Services includes the group's Operating Services businesses in the US
and the UK, Severn Trent Water Limited's non-household retail activities and
the group's renewable energy business.
In the prior year interim results all of Severn Trent Water Limited's
activities comprised a single segment and Severn Trent Services comprised the
group's Operating Services and Water Purification businesses. Comparative
information for the new segmentation is not available and the cost to develop
it would be excessive. Therefore the current year results have been presented
on both the old basis and new basis of segmentation in accordance with IFRS
8.
The Water Purification business was classified as a discontinued operation in
the year ended 31 March 2015 and the sale of this business was completed on 2
July 2015. The prior year segmental results have been restated to present the
Water Purification business as a discontinued operation.
The tables below show the changes from the old to the new segmentation for
turnover and PBIT for the six month period ended 30 September 2015:
Regulated Water and Waste Water Severn Trent Water Renewable energy (regulated)1 Non household retail2 Additional inter-segment sales3 Regulated Water and Waste Water
£m £m £m £m £m
External sales 780.5 (12.0) (200.3) - 568.2
Inter-segment sales 0.5 - - 185.7 186.2
Total sales 781.0 (12.0) (200.3) 185.7 754.4
Profit before interest and tax 283.0 (6.5) (6.3) - 270.2
Business Services Severn Trent Services Renewable energy (regulated and non-regulated)1 Non household retail2 Additional inter-segment sales4 Business Services
£m £m £m £m £m
External sales 113.2 14.3 200.3 - 327.8
Inter-segment sales - 1.6 - 7.9 9.5
Total sales 113.2 15.9 200.3 7.9 337.3
Profit before interest and tax 4.9 6.1 6.3 - 17.3
Corporate and Other Corporate and Other (old basis) Renewable energy (non-regulated)1 Non household retail2 Additional inter-segment sales Corporate and Other (new basis)
£m £m £m £m £m
External sales 2.4 (2.3) - - 0.1
Inter-segment sales 4.5 (1.6) - - 2.9
Total sales 6.9 (3.9) - - 3.0
Profit before interest and tax (6.2) 0.4 - - (5.8)
1. The electricity generating assets owned by Severn Trent's regulated and
non-regulated businesses are now managed by the Business Services segment
2. Management of the non-household retail activities in England has been
transferred to the Business Services segment
3. The additional inter-segment sales in Regulated Water and Waste Water
represent the wholesale water and waste water charges to non-household retail
within Business Services
4. The additional inter-segment sales in Business Services represent sales
from the Regulated Renewable Energy business to Regulated Water and Waste
Water
The following table shows the segmental turnover and PBIT on the old
segmentation:
Six months ended 30 September 2015 2014
(restated)
Severn Trent Water Severn Trent Services Severn Trent Water Severn Trent Services
£m £m £m £m
External sales 780.5 113.2 792.2 104.5
Inter-segment sales 0.5 - 0.8 -
Total sales 781.0 113.2 793.0 104.5
Profit before interest, tax and exceptional items 283.0 4.9 275.1 4.5
Exceptional items (see note 3) - - - 6.5
Profit before interest and tax 283.0 4.9 275.1 11.0
The reportable segments' external turnover is reconciled to group turnover as
follows:
Six months ended 30 September 2015 2015 2014
(new basis) (old basis) (restated)
£m £m £m
Severn Trent Water - 780.5 792.2
Severn Trent Services - 113.2 104.5
Regulated Water and Waste Water 568.2 - -
Business Services 327.8 - -
Corporate and other 0.1 2.4 1.6
896.1 896.1 898.3
Segmental underlying PBIT is reconciled to the group's profit before tax as
follows:
Six months ended 30 September 2015 2015 2014
(new basis) (old basis) (restated)
£m £m £m
Underlying PBIT:
Severn Trent Water - 283.0 275.1
Severn Trent Services - 4.9 4.5
Regulated Water and Waste Water 270.2 - -
Business Services 17.3 - -
Corporate and other (5.8) (6.2) (7.6)
Consolidation adjustments (0.7) (0.7) 1.8
Group underlying PBIT 281.0 281.0 273.8
Exceptional items:
Severn Trent Services - - 6.5
Net finance costs (106.3) (106.3) (119.1)
Net gains/(losses) on financial instruments 11.5 11.5 (24.1)
Profit before tax 186.2 186.2 137.1
The tables below show the changes from the old to the new segmentation for
capital employed as at 30 September 2015:
Regulated Water and Waste Water Severn Trent Water Renewable energy (regulated) Non household retail Inter-segment payables & receivables Regulated Water and Waste Water
£m £m £m £m £m
Operating assets 8,016.5 (61.6) (101.3) 29.7 7,883.3
Goodwill 1.3 - - - 1.3
Interests in joint ventures and associates 0.1 - - - 0.1
Segment assets 8,017.9 (61.6) (101.3) 29.7 7,884.7
Segment operating liabilities (1,678.5) 3.0 10.3 (3.8) (1,669.0)
Capital employed 6,339.4 (58.6) (91.0) 25.9 6,215.7
Business Services Severn Trent Services Renewable energy (regulated and non-regulated) Non household retail Inter-segment payables & receivables Business Services
£m £m £m £m £m
Operating assets 103.5 118.5 101.3 3.8 327.1
Goodwill 14.1 - - - 14.1
Interests in joint ventures and associates 4.6 - - - 4.6
Segment assets 122.2 118.5 101.3 3.8 345.8
Segment operating liabilities (61.9) (4.6) (10.3) (29.7) (106.5)
Capital employed 60.3 113.9 91.0 (25.9) 239.3
The following table shows the segmental capital employed on the old
segmentation:
30 September 2015 31 March 2015
Severn Trent Water Severn Trent Services Severn Trent Water Severn Trent Services
£m £m £m £m
Operating assets 8,016.5 103.5 7,960.1 100.9
Goodwill 1.3 14.1 1.3 14.3
Interests in joint ventures and associates 0.1 4.6 0.1 4.5
Segment assets 8,017.9 122.2 7,961.5 119.7
Segment operating liabilities (1,678.5) (61.9) (1,630.3) (58.8)
Capital employed 6,339.4 60.3 6,331.2 60.9
Operating assets comprise other intangible assets, property, plant and
equipment, inventory and trade and other receivables.
Operating liabilities comprise trade and other payables, retirement benefit
obligations and provisions.
3 Exceptional items before tax
The group classifies items of income or expenditure as exceptional if
individually or, if of a similar type, in aggregate they should, in the
opinion of the directors, be disclosed by virtue of their size or nature if
the financial statements are to give a true and fair view. In this context
materiality is assessed at the segment level.
Six months ended 30 September 2015 2014
£m £m
Severn Trent Services
Release of provision for bad debts - (6.5)
Total exceptional operating items before tax - (6.5)
4 Net gains/(losses) on financial instruments
Six months ended 30 September 2015 2014
£m £m
Loss on cross currency swaps used as hedging instruments in fair value hedges (4.0) (3.4)
Gain arising on adjustment for foreign currency debt in fair value hedges 2.4 1.5
Exchange (loss)/gain on other loans (8.3) 35.0
Loss on cash flow hedges transferred from equity (6.8) (6.0)
Ineffectiveness of cashflow hedges 0.5 2.6
Gain/(loss) arising on swaps where hedge accounting is not applied 27.7 (53.8)
11.5 (24.1)
5 Tax
Six months ended 30 September 2015 2014
£m £m
Current tax
Current year 31.5 29.6
Total current tax 31.5 29.6
Deferred tax
Origination and reversal of temporary differences - current year 7.8 0.3
Total deferred tax 7.8 0.3
39.3 29.9
Income tax for the period is charged in the income statement at 21.1% (2014:
charged at 21.8% based on restated profit before tax), representing the best
estimate of the annual average effective income tax rate expected for the full
year applied to the pre-tax income for the six month period.
The effective rate of current tax, excluding prior year charges and current
tax on exceptional items and on financial instruments, calculated on profit
before tax, exceptional items and net gains (2014: losses) on financial
instruments was 18.4% (2014: 19.1% based on restated profit before tax).
Current tax credits of £1.1 million (2014: £0.6 million) and deferred tax
charges of £19.5 million (2014: £7.0 million credit) have been taken to
reserves in the period.
On 8th July 2015, the Government announced the main rate of corporation tax
would reduce to 19% with effect from 1 April 2017 and 18% with effect from 1
April 2020. These rate reductions were substantively enacted on 26th October
2015. As this was after the balance sheet date, deferred tax assets and
liabilities have not been remeasured in this reporting period.
6 Discontinued operations
On 23 January 2015 the Board approved a process to dispose of the group's
Water Purification business which formed part of the Severn Trent Services
segment. These operations were classified as discontinued and as a disposal
group held for sale as at 31 March 2015. The results of discontinued
operations are disclosed separately in the income statement and the assets and
liabilities of the disposal group are presented separately in the balance
sheet.
On 12 May 2015 the group entered into a binding agreement to sell the business
to Industrie De Nora. The sale was completed on 2 July 2015.
The profit for the period from discontinued operations was as follows:
Six months ended 30 September 2015 2014
£m £m
Turnover 29.7 49.3
Operating costs (27.6) (48.2)
Profit before tax 2.1 1.1
Attributable tax expense (0.1) -
Profit after tax 2.0 1.1
Loss recognised on sale of disposal group (2.7) -
(Loss)/profit for the period from discontinued operations (0.7) 1.1
Attributable to:
Owners of the company (0.6) 0.5
Non-controlling interests (0.1) 0.6
(0.7) 1.1
The major classes of assets and liabilities comprising the operations
classified as held for sale were:
31 March 2015
£m
Goodwill 1.8
Other intangible assets 7.2
Property, plant and equipment 5.0
Inventories 17.3
Trade and other receivables 57.3
Cash and bank balances 19.3
Total assets classified as held for sale 107.9
Trade and other payables (33.6)
Tax liabilities (0.2)
Provisions for liabilities and charges (1.5)
Total liabilities associated with assets held for sale (35.3)
Net assets of disposal group 72.6
Cash flows arising from the disposal group were:
Six months ended 30 September 2015 2014
£m £m
Net cash flows attributable to:
- operating activities (0.5) 4.2
- investing activities (11.6) (1.0)
- financing activities (6.4) 4.5
(18.5) 7.7
Basic and diluted earnings per share from discontinued operations are:
Six months ended 30 September 2015 2014
Earnings Weighted average number of shares Per share amount Earnings Weighted average number of shares Per share amount
£m m pence £m m pence
Basic earnings per share (0.6) 238.5 (0.3) 0.5 238.6 0.2
Diluted earnings per share (0.6) 239.4 (0.3) 0.5 239.5 0.2
The net assets of the business at the date of disposal were:
Total
£m
Goodwill 1.8
Other intangible assets 6.5
Property, plant and equipment 3.6
Investments 0.1
Inventories 14.6
Trade and other receivables 59.9
Cash and bank balances 11.0
Trade and other payables (36.1)
Tax liabilities (0.2)
Intercompany borrowings (18.1)
Provisions for liabilities and charges (1.5)
41.6
Attributable to:
Owners of the company 27.9
Non-controlling interest 13.7
41.6
The net loss on disposal is calculated as follows:
Total
£m
Consideration 42.8
Net assets attributable to owners of the company (27.9)
Disposal costs (4.8)
Provisions arising on disposal (1.1)
Net gain on disposal before foreign exchange losses 9.0
Foreign exchange losses recycled from reserves (11.7)
Net loss on disposal (2.7)
The net cash flows arising from disposal in the period were:
Total
£m
Consideration received in cash and cash equivalents 42.8
Settlement of intercompany loans 18.1
Disposal costs paid in cash and cash equivalents (2.8)
Cash and bank balances disposed of (11.0)
47.1
7 Dividends
Amounts recognised as distributions to owners of the company in the period:
Six months ended 30 September 2015 2014
Pence per share £m Pence per share £m
Final dividend for the year ended 31 March 50.94 121.2 48.24 115.5
The proposed interim dividend of 32.26p per share (2014: 33.96p per share) was
approved by the Board on 25 November 2015 and has not been included as a
liability as at 30 September 2015.
8 Earnings per share
a) Basic and diluted earnings per share
Basic earnings per share is calculated by dividing the earnings attributable
to ordinary shareholders by the weighted average number of ordinary shares in
issue during the period, excluding those held in the Severn Trent Employee
Share Ownership Trust which are treated as cancelled.
For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all potentially dilutive ordinary
shares. These represent share options granted to employees where the exercise
price is less than the average market price of the company's shares during the
period.
Basic and diluted earnings per share from continuing and discontinued
operations are calculated on the basis of profit from continuing and
discontinued operations attributable to the owners of the company.
The calculation of basic and diluted earnings per share is based on the
following data:
Earnings for the purpose of basic and diluted earnings per share from
continuing operations
Six months ended 30 September 2015 2014
£m £m
Profit for the period attributable to owners of the company 143.7 107.5
Adjusted for loss/(profit) from discontinued operations (see note 6) 0.6 (0.5)
Profit for the period from continuing operations attributable to owners of the company 144.3 107.0
Number of shares
Six months ended 30 September 2015 2014
m m
Weighted average number of ordinary shares for the purpose of basic earnings per share 238.5 238.6
Effect of dilutive potential ordinary shares:
- share options and LTIPs 0.9 0.9
Weighted average number of ordinary shares for the purpose of diluted earnings per share 239.4 239.5
b) Underlying earnings per share
Six months ended 30 September 2015 2014
(restated)
Pence Pence
Underlying basic earnings per share 58.6 52.6
Underlying diluted earnings per share 58.4 52.4
Underlying earnings per share figures are presented for continuing operations.
These exclude the effects of exceptional items, net gains/(losses) on
financial instruments, current tax on exceptional items and on net
gains/(losses) financial instruments and deferred tax in both 2015 and 2014.
The directors consider that the underlying figures provide a useful additional
indicator of performance. The denominators used in the calculations of
underlying basic and diluted earnings per share are the same as those used in
the unadjusted figures set out above.
The adjustments to earnings are as follows:
Six months ended 30 September 2015 2014
(restated)
£m £m
Earnings for the purpose of basic and diluted earnings per share 144.3 107.0
Adjustments for:
- exceptional items before tax - (6.5)
- current tax on exceptional items - 0.2
- net (gains)/losses on financial instruments (11.5) 24.1
- current tax on net gains/losses on financial instruments (0.9) 0.4
- deferred tax 7.8 0.3
Earnings for the purpose of underlying basic and diluted earnings per share 139.7 125.5
9 Borrowings
30 September 31 March
2015 2015
£m £m
Bank overdrafts 2.6 -
Bank loans 1,125.1 1,279.2
Other loans 3,432.2 3,467.5
Obligations under finance leases 142.6 180.0
Borrowings 4,702.5 4,926.7
The borrowings are repayable as follows:
30 September 31 March
2015 2015
£m £m
On demand or within one year - included in current liabilities 562.5 463.0
Over one year - included in non-current liabilities 4,140.0 4,463.7
4,702.5 4,926.7
10 Fair value of financial instruments
a) Fair value measurements
The table below describes the valuation technique that the group applies for
each class of financial instrument which is measured at fair value on a
recurring basis. All techniques are classified as Level 2 under the hierarchy
defined by IFRS 13. There have been no changes in the levels of classification
during the period.
Fair value as at
30 September 31 March
2015 2015 Valuation techniques and key inputs
£m £m
Cross currency swaps Discounted cash flow
Assets 13.2 22.6 Future cash flows are estimated based on forward
Liabilities (5.1) (25.2) interest rates from observable yield curves at
the period end and contract interest rates discounted at
a rate that reflects the credit risk of counterparties. The
currency cash flows are translated at the spot rate.
Interest rate swaps Discounted cash flow
Assets - 4.2 Future cash flows are estimated based on forward
Liabilities (159.0) (181.1) interest rates from observable yield curves at
the period end and contract interest rates discounted at
a rate that reflects the credit risk of counterparties.
Energy swaps
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