REG - Severn Trent PLC - Half Yearly Report <Origin Href="QuoteRef">LMPL.L</Origin> <Origin Href="QuoteRef">SVT.L</Origin> - Part 3
26/11/2015 07:11
- Part 3: For the preceding part double click ID:nRSZ9958Gb
Discounted cash flow
Liabilities (2.0) (0.8) Future cash flows are estimated based on forward
electricity prices from observable indices at
the period end and contract prices discounted at
a rate that reflects the credit risk of counterparties.
Foreign currency forward contracts Discounted cash flow
Assets 2.3 0.2 Future cash flows are estimated based on observable
Liabilities (0.8) (0.2) forward exchange rates at the period end
and contract forward rates discounted at a rate
that reflects the credit risk of counterparties.
b) Comparison of fair value of financial instruments with their carrying
amounts
The directors consider that the carrying amounts of cash and short term
deposits, bank overdrafts, trade receivables and trade payables are not
materially different from their fair values. Derivative financial instruments
are carried at fair value. The carrying values and estimated fair values of
other non-derivative financial instruments are set out below. This analysis
does not take into account the impact of interest rate swaps. At 30 September
2015 the group held interest rate swaps that converted floating rate interest
to fixed on a net principal amount of £556.2 million (31 March 2015: £581.6
million).
30 September 31 March
2015 2015
Carryingvalue Fairvalue Carryingvalue Fairvalue
£m £m £m £m
Floating rate debt
Bank loans 829.3 830.0 984.3 970.3
Currency bonds 33.0 33.0 84.3 84.3
862.3 863.0 1,068.6 1,054.6
Fixed rate debt
Bank loans 188.1 186.9 188.5 204.4
Sterling bonds 1,856.3 2,164.2 1,855.3 2,268.4
Currency bonds 380.8 390.7 370.8 391.3
Other loans 2.8 2.8 2.0 2.0
Finance leases 142.6 147.5 180.0 190.7
2,570.6 2,892.1 2,596.6 3,056.8
Index-linked debt
Bank loans 107.7 119.7 106.4 123.0
Sterling bonds 1,159.3 1,323.1 1,155.1 1,585.1
1,267.0 1,442.8 1,261.5 1,708.1
4,699.9 5,197.9 4,926.7 5,819.5
Fixed rate sterling and currency bonds are valued using market prices.
Index-linked bonds are rarely traded and therefore quoted prices are not
considered to be a reliable indicator of fair value. Therefore, these bonds
are valued using discounted cash flow models with discount rates derived from
observed market prices for a sample of bonds.
Fair values of the other debt instruments are also calculated using discounted
cash flow models.
11 Retirement benefit schemes
The group operates two defined benefit schemes being the Severn Trent Pension
Scheme and the Severn Trent Mirror Image Scheme. These schemes closed to
future accrual on 31 March 2015, therefore there is no service cost in the
current period. The group also has an unfunded obligation to provide benefits
to certain former employees whose earnings were in excess of the pensions cap
that operated when the benefits were accrued.
The retirement benefit obligation as at 30 September 2015 has been calculated
on a year to date basis, using the actuarial valuation update as at 31 March
2015. There have not been any significant fluctuations or one time events
since that date that would require adjustment to the actuarial assumptions
made at 31 March 2015. However, the market based assumptions have been
updated for conditions prevailing at the balance sheet date as follows:
30 September 31 March
2015 2015
Discount rate 3.8% 3.3%
RPI 3.0% 3.0%
The defined benefit assets have been updated to reflect their market value as
at 30 September 2015. Actuarial gains and losses on the scheme assets and
defined benefit obligations have been reported in the statement of
comprehensive income. Service cost, and the cost of administrating the
scheme, are recognised in operating costs and interest cost is recognised in
net finance costs. Amounts recognised in the income statement in respect of
these defined benefit schemes are as follows:
Six months ended 30 September 2015 2014
£m £m
Current service cost - (11.7)
Administration cost (0.6) (2.0)
Net interest cost (7.6) (7.6)
Total amount charged to the income statement (8.2) (21.3)
The amount included in the balance sheet arising from the group's obligations
under defined benefit schemes was as follows:
30 September 31 March
2015 2015
£m £m
Total fair value of assets 1,946.2 2,086.8
Present value of the defined benefit obligations - funded schemes (2,319.3) (2,545.7)
Present value of the defined benefit obligations - unfunded schemes (9.3) (10.0)
Liability recognised in the balance sheet (382.4) (468.9)
Movements in the liability recognised in the balance sheet were as follows:
2015 2014
£m £m
At 1 April (468.9) (348.3)
Current service cost - (11.7)
Administration cost (0.6) (2.0)
Net interest cost (7.6) (7.6)
Contributions from the sponsoring companies 4.4 12.3
Net actuarial gain/(loss) recognised in the statement of comprehensive income 90.3 (31.4)
At 30 September (382.4) (388.7)
12 Share capital
At 30 September 2015 the issued and fully paid share capital was 239.3 million
shares of 9717/19p amounting to £234.3 million (31 March 2015: 238.7 million
shares of 9717/19p amounting to £233.7 million).
During the period the company issued 680,902 (2014: 657,416) shares as a
result of the exercise of employee share options and repurchased 2,987,871
shares (2014: nil) under its share buy back programme. Of these repurchased
shares, 51,514 (2014: nil) were cancelled and the remaining 2,936,357 (2014:
nil) are held as treasury shares.
13 Cash flow
a) Reconciliation of operating profit to operating cash flows
Six months ended 30 September 2015 2014
£m £m
Profit before interest and tax from continuing operations 281.0 280.3
Profit before interest and tax from discontinued operations 2.1 1.1
Profit before interest and tax 283.1 281.4
Depreciation of property, plant and equipment 144.6 143.2
Amortisation of intangible assets 11.4 12.9
Pension service cost - 11.7
Defined benefit pension scheme administration costs 0.6 2.0
Pension contributions (4.4) (12.3)
Share based payments charge 2.7 4.0
(Profit)/loss on sale of property, plant and equipment (1.4) -
Deferred income movement (5.3) (5.0)
Provisions for liabilities and charges 2.8 3.6
Utilisation of provisions for liabilities and charges (5.6) (6.6)
Decrease/(Increase) in inventory 2.5 (2.2)
Increase in receivables (19.2) (37.9)
Increase in payables 83.7 91.5
Cash generated from operations 495.5 486.3
Tax paid (7.9) (15.3)
Net cash generated from operating activities 487.6 471.0
b) Non-cash transactions
No additions to property, plant and equipment during the six months to 30
September 2015 were financed by new finance leases (2014: nil).
c) Exceptional cash flows
The following cash flows arose from items classified as exceptional in the
income statement:
Six months ended 30 September 2015 2014
£m £m
Restructuring costs (4.0) -
d) Reconciliation of movements in net debt
As at RPI uplift Other As at 30
1 April Cash Fair value on index Foreign non-cash September
2015 flow adjustments linked debt exchange movements 2015
£m £m £m £m £m £m £m
Cash and cash equivalents 176.7 (138.7) - - (0.1) 19.3 1 57.2
Bank overdrafts - (2.6) - - - - (2.6)
Net cash and cash equivalents 176.7 (141.3) - - (0.1) 19.3 54.6
Bank loans (1,279.2) 155.4 - (1.3) - - (1,125.1)
Other loans (3,467.5) 41.6 2.4 (4.2) (8.4) 3.9 (3,432.2)
Finance leases (180.0) 37.4 - - - - (142.6)
Cross currency swaps hedging debt (2.6) - 5.5 - - 5.2 8.1
Net debt (4,752.6) 93.1 7.9 (5.5) (8.5) 28.4 (4,637.2)
1. Other non-cash movements on cash and cash equivalents represent amounts
within assets held for sale at the beginning of the period (see note 6)
14 Post balance sheet events
In November 2015 the group secured £471 million of floating rate funding from
the US Private Placement market.
15 Contingent liabilities
Details of the group's contingent liabilities were disclosed in the financial
statements for the year ended 31 March 2015 which were approved on 28 May
2015. There have been no significant developments relating to the contingent
liabilities disclosed in those financial statements.
16 Related party transactions
There have been no related party transactions that materially affected the
financial position or performance of the group during the period.
Responsibility statement
We confirm to the best of our knowledge:
(a) the condensed set of financial statements has been prepared in
accordance with IAS 34 "Interim Financial Reporting"; and
(b) the interim management report includes a fair review of the
information required by Disclosure and Transparency Rules 4.2.7R and 4.2.8R of
the United Kingdom Financial Conduct Authority.
Signed on behalf of the Board who approved the half yearly financial report on
25 November 2015.
Andrew Duff James Bowling
Chairman Chief Financial Officer
Further copies of this half yearly financial report may be obtained from the
Company Secretary, Severn Trent Plc, Severn Trent Centre, PO Box 5309,
Coventry, CV3 9FH.
INDEPENDENT REVIEW REPORT TO SEVERN TRENT PLC
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
September 2015 which comprises the condensed consolidated income statement,
the condensed consolidated statement of comprehensive income, the condensed
consolidated statement of changes in equity, the condensed consolidated
balance sheet, the condensed consolidated cash flow statement and related
notes 1 to 16. 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 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. Our work has been undertaken so that
we might state to the company those matters we are required to state to them
in an independent review 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 formed.
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 Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34, "Interim Financial Reporting," as adopted by the European Union.
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 United Kingdom. A review of interim financial
information consists of making inquiries, 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 September 2015 is not prepared,
in all material respects, in accordance with International Accounting Standard
34 as adopted by the European Union and the Disclosure and Transparency Rules
of the United Kingdom's Financial Conduct Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditor
London, UK
25 November 2015
Forward-looking statements
This document contains certain 'forward-looking statements' with respect to
Severn Trent's financial condition, results of operations and business, and
certain of Severn Trent's plans and objectives with respect to these items.
Forward-looking statements are sometimes, but not always, identified by their
use of a date in the future or such words as 'anticipates', 'aims', 'due',
'could', 'may', 'will', 'should', 'expects', 'believes', 'seeks',
'anticipates', 'intends', 'plans', 'potential', 'reasonably possible',
'targets', 'goal' or 'estimates', and words of similar meaning. By their very
nature forward-looking statements are inherently unpredictable, speculative
and involve risk and uncertainty because they relate to events and depend on
circumstances that will occur in the future.
There are a number of factors that could cause actual results and developments
to differ materially from those expressed or implied by these forward-looking
statements. These factors include, but are not limited to, the Principal
Risks disclosed in our Annual Report as at May 2014 (which have not been
updated since), changes in the economies and markets in which the group
operates; changes in the regulatory and competition frameworks in which the
group operates; changes in the capital markets from which the group raises
finance; the impact of legal or other proceedings against or which affect the
group; and changes in interest and exchange rates.
All written or verbal forward-looking statements, made in this document or
made subsequently, which are attributable to Severn Trent or any other member
of the group or persons acting on their behalf are expressly qualified in
their entirety by the factors referred to above. No assurances can be given
that the forward-looking statements in this document will be realised. Subject
to compliance with applicable law and regulations, Severn Trent does not
intend to update these forward-looking statements and does not undertake any
obligation to do so. Nothing in this document should be regarded as a profits
forecast.
Without prejudice to the above
(a) neither Severn Trent Plc nor any other member of the group, nor persons
acting on their behalf shall otherwise have any liability whatsoever for loss
howsoever arising, directly or indirectly, from use of the information
contained within this document; and
(b) neither Severn Trent Plc nor any other member of the group, nor persons
acting on their behalf makes any representation or warranty, express or
implied, as to the accuracy or completeness of the information contained
within this document.
This document is accurate as at the date of publication. You should be aware
that this document has not been and will not be updated to reflect any changes
since that date.
Past performance of securities of Severn Trent Plc cannot be relied upon as a
guide to the future performance of securities of Severn Trent Plc.
Cautionary statement
This document is not an offer to sell, exchange or transfer any securities of
Severn Trent Plc or any of its subsidiaries and is not soliciting an offer to
purchase, exchange or transfer such securities in any jurisdiction. Securities
may not be offered, sold or transferred in the United States absent
registration or an applicable exemption from the registration requirements of
the US Securities Act of 1933 (as amended).
This information is provided by RNS
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