REG - SSE Plc - Preliminary results for the year to 31 March 2015 <Origin Href="QuoteRef">SSE.L</Origin> - Part 6
15/07/2015 18:29
- Part 6: For the preceding part double click ID:nRST7125Ne
Finance costs:
Bank loans and overdrafts (23.9) - (23.9) (18.5) - (18.5)
Other loans and charges (262.5) - (262.5) (310.8) - (310.8)
Interest on pension scheme liabilities (25.1) - (25.1) (26.8) - (26.8)
Notional interest arising on discounted provisions (14.0) - (14.0) (9.5) - (9.5)
Foreign exchange translation of monetary assets and liabilities (0.5) - (0.5) - - -
Finance lease charges (34.2) - (34.2) (35.7) - (35.7)
Less: interest capitalised 57.8 - 57.8 58.9 - 58.9
Total finance costs (302.4) - (302.4) (342.4) - (342.4)
Changes in fair value of financing derivative assets or liabilities at fair value through profit or loss - (44.2) (44.2) - (64.2) (64.2)
Net finance costs (206.5) (44.2) (250.7) (219.7) (64.2) (283.9)
Presented as:
Finance income 95.9 - 95.9 122.7 - 122.7
Finance costs (302.4) (44.2) (346.6) (342.4) (64.2) (406.6)
Net finance costs (206.5) (44.2) (250.7) (219.7) (64.2) (283.9)
The capitalisation rate applied in determining the amount of borrowing costs to capitalise in the period was 4.21% (2014 -
4.88%).
Notes to the Preliminary Statement
for the year ended 31 March 2015
8. Finance income and costs (continued)
Adjusted net finance costs are arrived at after the following adjustments:
2015£m 2014restated£m
Net finance costs (250.7) (283.9)
(add)/less:
Share of interest from joint ventures and associates:
Scotia Gas Networks loan stock (33.3) (33.3)
Other joint ventures and associates (90.9) (104.2)
(124.2) (137.5)
Interest on pension scheme liabilities 25.1 26.8
Share of interest on net pension liabilities in joint ventures (11.1) 1.4
Movement on financing derivatives (Note 17) 44.2 64.2
Adjusted net finance costs (316.7) (329.0)
Notional interest arising on discounted provisions 14.0 9.5
Finance lease charges 34.2 35.7
Hybrid coupon payment (Note 15) (121.3) (122.9)
Adjusted net finance costs for interest cover calculations (389.8) (406.7)
9. Taxation
Analysis of charge recognised in the income statement:
Before Exceptional items and certain re-measure ments Exceptional items and certain re-measure ments 2015 Before Exceptional items and certain re-measure ments Exceptional items and certain re-measure- ments 2014
(restated) (restated) (restated)
£m £m £m £m £m £m
Current tax
UK corporation tax 231.4 (25.1) 206.3 248.1 (24.8) 223.3
Adjustments in respect of previous years (29.8) - (29.8) (21.4) - (21.4)
Total current tax 201.6 (25.1) 176.5 226.7 (24.8) 201.9
Deferred tax
Current year 52.7 (159.7) (107.0) 162.2 (162.0) 0.2
Effect of change in tax rate - (15.6) (15.6) - (59.8) (59.8)
Adjustments in respect of previous years 16.9 - 16.9 18.4 (14.2) 4.2
Total deferred tax 69.6 (175.3) (105.7) 180.6 (236.0) (55.4)
Total taxation charge 271.2 (200.4) 70.8 407.3 (260.8) 146.5
In October 2014, SSE became the first FTSE 100 listed group to be accredited with the Fair Tax Mark. As a consequence,
these financial statements include a number of areas of enhanced disclosure which have been provided in order to develop
stakeholder understanding of the tax the Group pays. The table below reconciles the tax which would be expected to be paid
on SSE's reported profit before tax to the reported current tax charge and the reported total taxation charge:
Notes to the Preliminary Statement
for the year ended 31 March 2015
9. Taxation (continued)
2015 2015 2014 2014
(restated)
£m % £m %
Group profit before tax 735.2 592.5
Less: share of results of associates and jointly controlled entities (163.6) (185.6)
Profit before tax 571.6 406.9
Tax on profit on ordinary activities at standard UK corporation tax rate of 21% (2014 - 23%) 120.0 21.0 93.6 23.0
Tax effect of:
Depreciation in excess of capital allowances 86.0 15.1 67.4 16.6
Increase in restructuring and settlement provisions 2.6 0.5 34.4 8.3
Non-taxable gain on sale of shares (13.8) (2.4) - -
Fair value movements on derivatives 23.6 4.1 48.0 11.8
Pension movements (11.0) (1.9) (11.6) (2.9)
Relief for capitalised interest and revenue costs (22.3) (3.9) (25.4) (6.2)
Hybrid capital coupon payments (25.5) (4.5) (27.8) (6.8)
Corporation tax relief on PRT paid (4.5) (0.8) (5.5) (1.4)
Expenses not deductible for tax purposes 7.7 1.3 15.6 3.8
Impact of higher current tax rates on E&P profits 42.1 7.4 35.2 8.7
Impact of foreign tax rates 1.4 0.2 (0.6) (0.1)
Adjustments to tax charge in respect of previous years (29.8) (5.2) (21.4) (5.2)
Reported current tax charge and effective rate 176.5 30.9 201.9 49.6
Depreciation in excess of capital allowances (68.5) (12.0) (48.5) (11.9)
Increase in restructuring and settlement provisions (2.6) (0.5) (34.4) (8.5)
Fair value movements on derivatives (23.6) (4.1) (48.0) (11.8)
Pension movements 11.0 1.9 11.6 3.0
Relief for capitalised interest and revenue costs 22.3 3.9 25.4 6.2
Impact of higher deferred tax rates on E&P profits (34.8) (6.1) 45.6 11.2
Impact of foreign tax rates (4.2) (0.7) (2.5) (0.6)
Adjustments to tax charge in respect of previous years 6.5 1.1 27.8 6.8
Change in rate of UK corporation tax (15.6) (2.7) (59.8) (14.7)
Other items 3.8 0.6 27.4 6.7
Reported deferred tax credit and effective rate (105.7) (18.6) (55.4) (13.6)
Group tax charge and effective rate 70.8 12.3 146.5 36.0
The adjusted current tax charge is arrived at after the following adjustments:
2015£m 2015% 2014£m 2014%
Group tax charge and effective rate 70.8 12.3 146.5 36.0
Less: reported deferred tax credit and effective rate 105.7 18.6 55.4 13.6
Current tax charge and effective rate 176.5 30.8 201.9 49.6
Effect of adjusting items (see below) - (19.6) - (36.5)
Current tax charge and effective rate on adjusted basis 176.5 11.3 201.9 13.1
add/(less):
Share of current tax from joint ventures and associates 23.2 1.5 10.0 0.6
Current tax on exceptional items 25.1 1.6 24.8 1.6
Adjusted current tax charge and effective rate 224.8 14.4 236.7 15.3
Notes to the Preliminary Statement
for the year ended 31 March 2015
9. Taxation (continued)
The adjusted effective rate is based on adjusted profit before tax being:
2015 2014(restated)
£m £m
Profit before tax 735.2 592.5
Add/(less):
Exceptional items and certain re-measurements 781.3 896.6
Share of tax from jointly controlled entities and associates before exceptional items and certain re-measurements 34.2 33.8
Interest on pension scheme liabilities 25.1 26.8
Share of interest on net pension liabilities in jointly controlled entities and associates (11.1) 1.4
Adjusted profit before tax 1,564.7 1,551.1
The adjusted current tax charge can therefore be reconciled to the adjusted profit before tax as follows:
2015£m 2015% 2014£m 2014%
Adjusted profit before tax 1,564.7 1,551.1
Tax on profit on ordinary activities at standard UK corporation tax rate 328.6 21.0 356.7 23.0
Tax effect of:
Capital allowances in excess of depreciation (42.1) (2.7) (57.0) (3.7)
Non taxable gain on sale of shares (6.3) (0.4)
Increase in restructuring and settlement provisions 3.9 0.2 19.6 1.3
Pension movements (13.9) (0.9) (17.5) (1.1)
Relief for capitalised interest and revenue costs (15.2) (1.0) (25.4) (1.6)
Hybrid capital coupon payments (25.4) (1.6) (27.8) (1.8)
Corporation tax relief on PRT paid (4.4) (0.3) (5.5) (0.4)
Expenses not deductible for tax purposes 10.1 0.7 13.5 0.9
Relief for brought forward losses (23.6) (1.5) (32.9) (2.1)
Impact of higher current tax rates on oil and gas profits 42.1 2.7 35.2 2.3
Impact of foreign tax rates 1.4 0.1 (0.6) (0.1)
Adjustments to tax charge in respect of previous years (30.4) (1.9) (21.6) (1.4)
Adjusted current tax charge and effective rate 224.8 14.4 236.7 15.3
Notes to the Preliminary Statement
for the year ended 31 March 2015
10. Dividends
Ordinary dividends
Year ended 31 March 2015 Total Settled via scrip Pence per ordinary share Year ended 31 March 2014 Total Settled via scrip Pence per ordinary share
£m £m £m £m
Interim - year ended 31 March 2015 262.6 81.6 26.6 - - -
Final - year ended 31 March 2014 591.5 174.0 60.7 - - -
Interim - year ended 31 March 2014 - - - 251.0 112.4 26.0
Final - year ended 31 March 2013 - - - 568.6 17.8 59.0
854.1 255.6 819.6 130.2
The final dividend of 60.7p per ordinary share declared in the financial year ended 31 March 2014 (2013- 59.0p) was
approved at the Annual General Meeting on 25 July 2014 and was paid to shareholders on 19 September 2014. Shareholders
were able to elect to receive ordinary shares credited as fully paid instead of the cash dividend under the terms of the
Company's scrip dividend scheme.
An interim dividend of 26.6p per ordinary share (2014 - 26.0p) was declared and paid on 20 March 2015 to those shareholders
on the SSE plc share register on 23 January 2015. Shareholders were able to elect to receive ordinary shares credited as
fully paid instead of the interim cash dividend under the terms of the Company's scrip dividend scheme.
The proposed final dividend of 61.8p per ordinary share (which equates to a dividend of £613.7m) based on the number of
issued ordinary shares at 31 March 2015 is subject to approval by shareholders at the Annual General Meeting and has not
been included as a liability in these financial statements.
11. Earnings per Share
Basic earnings per share
The calculation of basic earnings per ordinary share at 31 March 2015 is based on the net profit attributable to Ordinary
shareholders and a weighted average number of ordinary shares outstanding during the year ended 31 March 2015. All
earnings are from continuing operations.
Adjusted earnings per share
Adjusted earnings per share has been calculated by excluding the charge for deferred tax, interest on net pension
liabilities under IAS 19R and the impact of exceptional items and certain re-measurements (Note 7).
Year ended 31 March 2015 Year ended 31 March 2015 Year ended 31 March 2014 Year ended 31 March 2014
Earnings £m Earnings per sharepence Earnings £m (restated) Earnings per sharePence (restated)
Basic 543.1 55.3 323.1 33.5
Exceptional items and certain re-measurements (Note 7) 580.9 59.2 635.8 65.8
Basic excluding exceptional items and certain re-measurements 1,124.0 114.5 958.9 99.3
Adjusted for:
Interest on net pension scheme liabilities (Note 8) 25.1 2.5 26.8 2.8
Share of interest on net pension scheme liabilities in joint venture (Note 8) (11.1) (1.1) 1.4 0.1
Deferred tax (Note 9) 69.6 7.1 180.6 18.7
Deferred tax from share of joint ventures and associates 11.0 1.1 23.8 2.5
Adjusted 1,218.6 124.1 1,191.5 123.4
Basic 543.1 55.3 323.1 33.5
Dilutive effect of outstanding share options - (0.1) - (0.2)
Diluted 543.1 55.2 323.1 33.3
Notes to the Preliminary Statement
for the year ended 31 March 2015
11. Earnings per Share (continued)
The weighted average number of shares used in each calculation is as follows:
31 March 2015Number of shares(millions) 31 March 2014Number of shares(millions)
For basic and adjusted earnings per share 981.8 965.5
Effect of exercise of share options 2.1 6.1
For diluted earnings per share 983.9 971.6
12. Notes to the Consolidated Cash Flow Statement
(a) Reconciliation of Group operating profit to cash generated from operations
2015 2014Restated (note 3)
Note £m £m
Profit for the year 664.4 446.0
Add back: taxation 9 70.8 146.5
Add back: net finance costs 8 250.7 283.9
Operating profit 985.9 876.4
Less share of profit of joint ventures and associates (163.6) (185.6)
Operating profit before joint ventures and associates 822.3 690.8
Movement on operating derivatives 67.8 150.9
Pension service charges less contributions paid (77.5) (75.9)
Exceptional charges 648.7 712.3
Depreciation of assets 656.7 649.4
Amortisation and impairment of intangible assets 3.4 18.1
Impairment of inventories 1.4 2.0
Release of provisions - (0.7)
Release of deferred income (16.9) (16.8)
Charge in respect of employee share awards 15.0 15.5
(Profit) on disposal of assets and businesses - non exceptional (40.2) (11.4)
Cash generated from operations before working capital movements 2,080.7 2,134.2
(b) Reconciliation of net increase in cash and cash equivalents to movement in adjusted net debt and hybrid capital
2015 2014
£m £m
Increase/(decrease) in cash and cash equivalents 1,053.5 (109.0)
Add/(less):
Issue of hybrid capital (1,184.3) -
New borrowings (151.1) (1,815.8)
Repayment of borrowings 66.3 1,514.8
Non-cash movement on borrowings 269.8 89.5
Increase/(decrease) in cash held as collateral 20.5 (3.8)
Movement in adjusted net debt and hybrid capital 74.7 (324.3)
The non-cash movement on borrowings includes a decrease in loans of £228.8m in relation to the disposal of seven street
lighting PFI companies as well as the revaluation of fair value items, exchange movements and accretion of index-linked
bonds.
Cash held as collateral refers to amounts deposited on commodity trading exchanges which are reported within Trade and
other receivables on the face of the balance sheet.
Notes to the Preliminary Statement
for the year ended 31 March 2015
13. Acquisitions, disposals and held for sale assets
a. Acquisitions
On 31 July 2014, the Group through its wholly owned subsidiary, SSE Contracting Group Limited, acquired 100% of the share
capital of Energy Solutions Group Limited ('ESG'). The consideration for the business was £71.9m, consisting of cash of
£66m and deferred consideration of £5.9m. The acquisition provided the Group with cash and working capital of £5.1m and
resulted in the recognition of goodwill, including related deferred tax, of £80.0m. The acquisition of ESG complements and
enhances SSE's services in competitive markets for industrial and commercial customers and the contribution from the
business will be reported as part of the Enterprise reportable segment. The acquired business, which was subsequently
renamed SSE Enterprise Energy Solutions, contributed £30.9m to revenue, £2.2m to operating profit and £1.4m to profit after
tax for the period to 31 March 2015.
b. Disposals
On 11 November 2014, the Group completed the disposal of seven street lighting Private Finance Initiative ('PFI') vehicles
to Equitix Infrastructure 3 Limited ("Equitix") for cash consideration of £97.5m. The result of these activities had been
reported within the Enterprise business and the net assets had been recognised as 'held for sale' at 31 March 2014. The
contracts held by the companies had been treated as service concession arrangements. The Group's Enterprise business has
retained sub-contracts to provide capital and maintenance services to the PFI contract holders. This disposal provides the
benefit of reducing the Group's debt by £324.0m (being cash of £95.2m and debt reduction of £228.8m). The Group recorded a
gain on disposal of £38.0m after provisions associated with the retained sub-contracts were recognised. The pre-disposal
contribution to the Group from the disposed activities in the financial year was £1.4m.
On 26 November 2014, CBPE Capital acquired the shareholdings of Anesco Limited including 100% from the Environmental Energy
Fund in which the Group holds a 49% stake. Accordingly, on completion a payment of £22.2m cash dividend in relation to the
Group's share of the investment by the fund was received, the Group recognised a gain on disposal of £19.6m. This
investment was not 'held for sale' at 31 March 2014. Both this transaction and the Equitix transaction were treated as
exceptional items in the Financial Statements.
During the year, the Group disposed of a number of other businesses and assets for the combined net cash consideration of
£116.4m and deferred consideration of £12.1m. This included the disposal, on 1 September 2014, of its previously 'held for
sale' gas connections business, to the Environmental Energies Fund, in which the Group has a 49% interest and in respect of
which the Group recognised a gain on disposal of £15.3m. The following table summarises all businesses and assets disposed
of, including those not previously 'held for sale' and including other assets and investments disposed of as part of the
normal course of business.
Held for sale at March 2014 Not held for sale at March 2014
Businesses Other Assets Total Businesses Other Assets Total Total
Net assets disposed: £m £m £m £m £m £m £m
Property, plant and equipment 58.8 13.4 72.2 - 2.2 2.2 74.4
Intangible and biological assets - 2.5 2.5 2.4 9.7 12.1 14.6
Investments - joint venture and other 0.3 - 0.3 - 15.7 15.7 16.0
Trade and other receivables 348.7 348.7 1.7 - 1.7 350.4
Trade and other payables (94.3) - (94.3) - - - (94.3)
Loans and borrowings (230.2) - (230.2) - - - (230.2)
Net assets 83.3 15.9 99.2 4.1 27.6 31.7 130.9
Proceeds of disposal
Cash consideration 381.4 18.2 399.6 5.3 62.6 67.9 467.5
Deferred consideration 1.1 - 1.1 11.0 - 11.0 12.1
Debt reduction (228.8) - (228.8) - - - (228.8)
Costs of disposal (3.6) - (3.6) - (1.3) (1.3) (4.9)
Provisions (12.5) - (12.5) - 11.0 11.0 (1.5)
Total 137.6 18.2 155.8 16.3 72.3 88.6 244.4
Gain on disposal after provisions 54.3 2.3 56.6 12.2 44.7 56.9 113.5
The £467.5m cash consideration less related costs of £4.9m includes the £228.8m debt reduction associated with the disposal
of the street lighting PFI. Actual cash proceeds of £233.8m are recorded in the Cash Flow Statement as £167.2m from
disposal of held for sale assets, £25.3m from disposal of property, plant and equipment, £5.3m from disposal of businesses
and £36.0m from sale of other investments.
Notes to the Preliminary Statement
for the year ended 31 March 2015
13. Acquisitions, disposals and held for sale assets (continued)
c. Held-for-sale assets and liabilities
On 26 March 2014, the Group announced its intention to dispose of a number of non-core assets and businesses and to
identify further operational efficiencies as part of a value programme. A number of these businesses and assets have been
sold in the year and a number of additional businesses and assets are now in the process of or have been identified for
sale.
As a result, a number of assets and liabilities associated with activities are deemed available for immediate sale and have
been separately presented on the face of the balance sheet. The assets have been stated at the lower of their carrying
value and their fair value less costs to sell. These held for sale assets include the 16MW Langhope Rig wind farm for
which agreement has been reached for sale but which has not reached completion, a further street lighting PFI vehicle and a
portfolio of wind farm development assets. The aggregated pre-tax profit contribution of the held for sale assets and
businesses in the year to 31 March 2015 was £1.8m (2014: £1.2m).
The assets and liabilities classified as held for sale, and the comparative balances at 31 March 2014, are as follows:
Energy Portfolio Management and Electricity Generation Enterprise
Total2015 Total2014
£m £m £m £m
Property Plant and Equipment 54.2 - 54.2 62.3
Forestry Assets 1.8 - 1.8 3.4
Other intangible 21.3 - 21.3 5.5
Non-current assets 77.3 - 77.3 71.2
Inventories - - - 0.8
Trade and other receivables 3.5 29.5 33.0 260.4
Non trade debtors - - - 0.1
Current assets 3.5 29.5 33.0 261.3
Total assets 80.8 29.5 110.3 332.5
Trade and other payables (10.3) (0.5) (10.8) (14.9)
Provisions - - - (0.7)
Current liabilities (10.3) (0.5) (10.8) (15.6)
Deferred tax liabilities (0.3) - (0.3) (2.7)
Provisions - - - (0.9)
Non-current liabilities (0.3) - (0.3) (3.6)
Total liabilities (10.6) (0.5) (11.1) (19.2)
Net assets 70.2 29.0 99.2 313.3
Notes to the Preliminary Statement
for the year ended 31 March 2015
14. Loans and other borrowings
Current 2015£m 2014£m
Bank overdraft 0.2 0.3
Other short-term loans 712.4 600.3
712.6 600.6
Obligations under finance leases 20.2 18.1
732.8 618.7
Non current
Loans 5,068.4 5,365.5
Obligations under finance leases 299.5 310.8
5,367.9 5,676.3
Total loans and borrowings 6,100.7 6,295.0
Add:
Cash and cash equivalents (1,512.3) (458.9)
Unadjusted Net Debt 4,588.4 5,836.1
Add/(less):
Hybrid capital (Note 15) 3,371.1 2,186.8
Obligations under finance leases (319.7) (328.9)
Cash held as collateral (71.7) (51.2)
Adjusted Net Debt and Hybrid Capital 7,568.1 7,642.8
Borrowing facilities
The Group has an established E1.5bn Euro commercial paper programme (paper can be issued in a range of currencies and
swapped into sterling). The Group has £1.5bn (2014 - £1.5bn) of committed credit facilities in place; maturing in April
and July 2018, which provide a back up to the commercial paper programme and at 31 March 2015 these facilities were
undrawn. The Group has a further £50m facility available from the European Investment Bank which will be drawn in the
first half of 2015/16 when it will become a term loan.
15. Hybrid Capital
2015 2014
£m £m
GBP 750m 5.453% perpetual subordinated capital securities 744.5 744.5
EUR 500m 5.025% perpetual subordinated capital securities 416.9 416.9
USD 700m 5.625% perpetual subordinated capital securities 427.2 427.2
EUR 750m 5.625% perpetual subordinated capital securities 598.2 598.2
GBP 750m 3.875% perpetual subordinated capital securities 748.3 -
EUR 600m 2.375% perpetual subordinated capital securities 436.0 -
3,371.1 2,186.8
On 10 March 2015, the Company issued £750m and E600m hybrid capital bonds with no fixed redemption date, but the Company
may at its sole discretion redeem all, but not part of, the capital securities at their principal amount. The date for the
first discretionary redemption of the £750m hybrid capital bond is 10 September 2020 and then every 5 years thereafter.
The date for the first discretionary redemption of the E600m hybrid capital bond is 1 April 2021 and then every 5 years
thereafter.
The Company previously issued £750m and E500m hybrid capital bonds on 20 September 2010 and E750m and $700m hybrid capital
bonds on 18 September 2012.
Each bond has no fixed redemption date, but the Company may, at its sole discretion, redeem all, but not part, of these
capital securities at their principal amount. The date for the discretionary redemption of the capital issued on 18
September 2012 is 1 October 2017 and every five years thereafter. The 20 September 2010 issued capital may be redeemed
fully (not in part) at their principal amounts on 1 October 2015 or 1 October 2020 or any subsequent coupon payment date.
In addition, under certain circumstances defined in the terms and conditions of the issue, the Company may at its sole
discretion redeem all (but not part of) the bonds at their principal amount at any time prior to 1 October 2017 (for the 18
September 2012 securities) or at any time prior to 1 October 2015 (for the 20 September 2010 securities).
The Company has the option to defer coupon payments on the bonds on any relevant payment date, as long as a dividend on the
ordinary shares has not been declared. Deferred coupons shall be satisfied only in the following circumstances, all of
which occur at the sole option of the Company: (i) redemption; or, (ii) dividend payment on ordinary shares. Interest will
accrue on any deferred coupon.
Notes to the Preliminary Statement
for the year ended 31 March 2015
15. Hybrid Capital (continued)
For the capital issued on 20 September 2010 and the E750m capital issued on 18 September 2012, coupon payments are expected
to be made annually in arrears on 1 October in each year. For the US$700m capital issued on 18 September 2012, coupon
payments are expected to be made bi-annually in arrears on 1 April and 1 October each year. For the £750m capital issued
on 10 March 2015, the first coupon payment is expected to be 10 September 2016 and then annually in arrears thereafter, and
for the E600m capital issued on 10 March 2015, the first coupon payment is expected to be made on 1 April 2016 and then
annually in arrears thereafter. The purpose of all three issues was to strengthen SSE's capital base and fund the Group's
ongoing capital investment and acquisitions.
Coupon payments of £23.6m (2014 - £24.2m) in relation to the US$ capital issued on 18 September 2012 were paid on 2 April
2014 and 1 October 2014. In addition coupon payments of £97.7m (2014 - £98.7m) in relation to the other hybrid capital
bonds were made on 1 October 2014.
16. Share capital
Number(millions) £m
Allotted, called up and fully paid:
At 1 April 2014 974.9 487.4
Issue of shares (i) 18.1 9.1
At 31 March 2015 993.0 496.5
The Company has one class of ordinary share which carries no right to fixed income. The holders of ordinary shares are
entitled to receive dividends as declared and are entitled to one vote per share at meetings of the Company.
(i) Shareholders were able to elect to receive ordinary shares in place of the final dividend of 60.7p per ordinary share
(in relation to year ended 31 March 2014) and the interim dividend of 26.6p (in relation to the current year) under the
terms of the Company's scrip dividend scheme. This resulted in the issue of 11,775,169 and 5,348,770 new fully paid
ordinary shares respectively (2014: 1,128,181 and 8,551,629). In addition, the Company issued 1.0m (2014 - 0.9m) shares
during the year under the savings-related share option schemes for a consideration of £10.3m (2014 - £8.9m).
During the year, on behalf of the Company, the employee share trust purchased 0.6m shares for a total consideration of
£9.0m (2014 - 0.8m shares, consideration of £12.0m). At 31 March 2015, the trust held 3.1m shares (2014 - 3.2m) which had
a market value of £47.5m (2014 - £46.6m).
17. Capital and Financial Risk Management
(i) Capital management
The Board's policy is to maintain a strong balance sheet and credit rating so as to support investor, counterparty and
market confidence and to underpin future development of the business. The Group's credit ratings are also important in
maintaining an efficient cost of capital and in determining collateral requirements throughout the Group. As at 31 March
2015, the Group's long term credit rating was A- stable outlook for Standard & Poor's and A3 negative outlook for Moody's.
The maintenance of a medium-term corporate model is a key control in monitoring the development of the Group's capital
structure, and allows for detailed scenarios and sensitivity testing. Key ratios drawn from this analysis underpin regular
updates to the Board and include the ratios used by the rating agencies in assessing the Group's credit ratings.
The Group has the option to purchase its own shares from the market; the timing of these purchases depends on market prices
and economic conditions. The use of share buy-backs is the Group's benchmark for investment decisions and can be utilised
at times when management believe the Group's shares are undervalued. No share buy-back was made during the year.
The Group's debt requirements are principally met through issuing bonds denominated in Sterling and Euros as well as
private placements and medium term bank loans including those with the European Investment Bank. In addition, the Group
has issued hybrid capital securities which bring together features of both debt and equity are perpetual and subordinate to
all senior creditors. The Group has £1.5bn of committed bank facilities which relate to the Group's revolving credit and
bilateral facilities that can be accessed at short notice for use in managing the Group's short term funding requirements.
The Group also has a £50m facility with the European Investment Bank that will be drawn in the first half of 2015/16 when
it will become a term loan. However, these committed facilities remain undrawn for the majority of the time.
Notes to the Preliminary Statement
for the year ended 31 March 2015
17. Capital and Financial Risk Management (continued)
(i) Capital management (continued)
The Group capital comprises:
2015£m 2014(Restated)£m
Total borrowings (excluding finance leases) 5,781.0 5,966.1
Less : Cash and cash equivalents (1,512.3) (458.9)
Net debt (excluding hybrid capital) 4,268.7 5,507.2
Hybrid capital 3,371.1 2,186.8
Cash held as collateral (71.7) (51.2)
Adjusted Net Debt and Hybrid Capital 7,568.1 7,642.8
Equity attributable to shareholders of the parent 2,709.4 2,932.7
Total capital 10,277.5 10,575.5
In summary, the Group's intent is to balance returns to shareholders between current returns through dividends and
long-term capital investment for growth. In doing so, the Group will maintain its capital discipline and will continue to
operate within the current economic environment prudently. There were no changes to the Group's capital management
approach during the year.
(ii) Financial risk management
The Board has overall responsibility for the establishment and oversight of the Group's risk management framework. The
Risk and Trading Committee, which reports to the Executive Committee, comprises the two Executive Directors and senior
managers from the Energy Portfolio Management, Retail, Corporate and Finance functions. Its specific remit is to support
the Group's risk management responsibilities by reviewing the strategic, market, credit, operational and liquidity risks
and exposures that arise from the Group's energy portfolio management, generation and treasury operations. This committee
is discussed further in the Corporate Governance section of the Annual Report.
The Group's policies for risk management are established to identify the risks faced by the Group, to set appropriate risk
limits and controls, and to monitor risks and adherence to limits. These policies, and the systems used to monitor
activities, are reviewed regularly by the Risk and Trading Committee.
Exposure to the commodity, currency and interest rate risks noted arise in the normal course of the Group's business and
derivative financial instruments are entered into to hedge exposure to these risks. The objectives and policies for
holding or issuing financial instruments and similar contracts and the strategies for achieving those objectives that have
been followed during the year are explained below.
The Company is required to disclose information on its financial instruments and has adopted policies identical to that of
the Group, where applicable. Separate disclosure is provided where necessary.
For financial reporting purposes, the Group has classified derivative financial instruments into two categories, operating
derivatives and financing derivatives. Operating derivatives relate to qualifying commodity contracts which includes
certain contracts for electricity, gas, oil, coal and carbon. Financing derivatives include all fair value and cash flow
interest rate hedges, non-hedge accounted (mark-to-market) interest rate derivatives, cash flow foreign exchange hedges and
non-hedge accounted foreign exchange contracts. Non-hedge accounted contracts is treated as held for trading.
The net movement reflected in the interim income statement can be summarised thus:
2015£m 2014£m
Operating derivatives
Total result on operating derivatives (i) (1,073.5) (785.4)
Less: amounts settled (ii) 1,005.7 634.5
Movement in unrealised derivatives (67.8) (150.9)
Financing derivatives (and hedged items)
Total result on financing derivatives (i) (395.5) (754.7)
Less: amounts settled (ii) 351.3 690.5
Movement in unrealised derivatives (44.2) (64.2)
Net income statement impact (112.0) (215.1)
(i) Total result on derivatives in the income statement represents the total amounts (charged) or credited to the income
statement in respect of operating and financial derivatives.
(ii) Amounts settled in the year represent the result on derivatives transacted which have matured or been delivered and
have been included within the total result on derivatives.
Notes to the Preliminary Statement
for the year ended 31 March 2015
17. Capital and Financial Risk Management (continued)
Financial risk management (continued)
The fair values of the primary financial assets and liabilities of the Group, together with their carrying values, are as
follows:
2015 2015 2014(restated) 2014(restated)
CarryingValue£m FairValue£m CarryingValue£m FairValue£m
Financial Assets
Current
Trade receivables 2,977.5 2,977.5 2,797.5 2,797.5
Other receivables 25.2 25.2 29.0 29.0
Cash collateral 71.7 71.7 51.2 51.2
Cash and cash equivalents 1,512.3 1,512.3 458.9 458.9
Derivative financial assets 1,999.9 1,999.9 1,261.2 1,261.2
6,586.6 6,586.6 4,597.8 4,597.8
Non-current
Unquoted equity investments 11.2 11.2 24.3 24.3
Loans to associates and jointly controlled entities 559.4 559.4 521.6 521.6
Derivative financial assets 566.8 566.8 368.4 368.4
1,137.4 1,137.4 914.3 914.3
7,724.0 7,724.0 5,512.1 5,512.1
Financial Liabilities
Current
Trade payables (2,707.7) (2,707.7) (2,496.3) (2,496.3)
Bank loans and overdrafts (712.6) (714.3) (600.6) (603.5)
Finance lease liabilities (20.2) (20.2) (18.1) (18.1)
- More to follow, for following part double click ID:nRST7125NgRecent news on SSE
See all newsREG - SSE Plc - Director/PDMR Shareholding
AnnouncementREG - SSE Plc - Holding(s) in Company
AnnouncementREG - SSE Plc - Result of AGM
AnnouncementREG - SSE Plc - Q1 Trading Statement
AnnouncementREG - SSE Plc - Director/PDMR Shareholding
Announcement