REG - Tesco Personal FinTesco PLC - Final Results <Origin Href="QuoteRef">TSCO.L</Origin> - Part 7
12/04/2017 07:06
- Part 7: For the preceding part double click ID:nRSL2440Cf
- 406.0
Derivative financial instruments - - 133.3 - 133.3
Other liabilities - 925.3 - - 925.3
Subordinated liabilities - 235.0 - - 235.0
Total financial liabilities - 10,532.9 133.3 - 10,666.2
Company Loans and receivables Other (amortised cost) Derivatives held for hedging Available-for-sale Total
2016 £m £m £m £m £m
Financial assets
Cash and balances with central banks 506.6 - - - 506.6
Loans and advances to customers 8,545.7 - - - 8,545.7
Derivative financial instruments - - 29.3 - 29.3
Investment securities:
- Available-for-sale - - - 983.6 983.6
- Loans and receivables 34.1 - - - 34.1
Other assets 315.5 - - - 315.5
Total financial assets 9,401.9 - 29.3 983.6 10,414.8
Financial liabilities
Deposits from banks - 82.0 - - 82.0
Deposits from customers - 7,398.5 - - 7,398.5
Debt securities in issue - 408.9 - - 408.9
Derivative financial instruments - - 150.5 - 150.5
Other liabilities - 919.0 - - 919.0
Subordinated liabilities - 235.0 - - 235.0
Total financial liabilities - 9,043.4 150.5 - 9,193.9
88
TESCO PERSONAL FINANCE PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
35. Financial Instruments (continued)
Offsetting
The following tables show those financial assets and liabilities subject to offsetting, enforceable master netting
arrangements and similar agreements.
Group and Company Related amounts not offset
2017 Gross and net amounts presentedin Statement of Financial Position Financial instruments Collateral pledged Net amounts
£m £m £m £m
Financial assets
Derivative financial instruments 28.7 (17.5) (11.0) 0.2
Total financial assets 28.7 (17.5) (11.0) 0.2
Financial liabilities
Derivative financial instruments (133.3) 17.5 114.5 (1.3)
Repurchases, securities lending and similar agreements* (99.8) 100.0 - 0.2
Total financial liabilities (233.1) 117.5 114.5 (1.1)
Group and Company Related amounts not offset
2016 Gross and net amounts presentedin Statement of Financial Position Financial instruments Collateral pledged Net amounts
£m £m £m £m
Financial assets
Derivative financial instruments 29.3 (20.6) (3.8) 4.9
Total financial assets 29.3 (20.6) (3.8) 4.9
Financial liabilities
Derivative financial instruments (150.5) 20.6 120.5 (9.4)
Repurchases, securities lending and similar agreements* (82.0) 83.1 (1.1) -
Total financial liabilities (232.5) 103.7 119.4 (9.4)
*Repurchases, securities lending and similar agreements are included within the Deposits from Banks balance of £499.8m
(2016: £82.0m) in the Company and Consolidated Statements of Financial Position
For the financial assets and financial liabilities subject to enforceable master netting arrangements above, each agreement
between the Group and the counterparty allows for net settlement of the relevant financial assets and financial liabilities
when both elect to settle on a net basis. In the absence of such an election, financial assets and financial liabilities
will be settled on a gross basis. However, each party to the master netting agreement or similar agreement will have the
option to settle all such amounts on a net basis in the event of default of the other party.
89
TESCO PERSONAL FINANCE PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
35. Financial Instruments (continued)
Fair values of financial assets and financial liabilities
Except as detailed in the following table, the Directors consider that the carrying value amounts of financial assets and
financial liabilities recorded on the Statement of Financial Position are approximately equal to their fair values.
Group 2017 2016
Carrying value Fair Value Carrying value Fair value
£m £m £m £m
Financial assets
Loans and advances to customers 9,961.2 10,178.2 8,545.7 8,825.3
Investment securities - loans and receivables 34.1 55.3 34.1 43.3
9,995.3 10,233.5 8,579.8 8,868.6
Financial liabilities
Deposits from customers 8,466.8 8,489.1 7,398.5 7,406.5
Debt securities in issue 1,204.3 1,210.0 1,206.6 1,186.3
Subordinated liabilities 235.0 239.9 235.0 204.7
9,906.1 9,939.0 8,840.1 8,797.5
Company 2017 2016
Carrying value Fair Value Carrying value Fair value
£m £m £m £m
Financial assets
Loans and advances to customers 9,961.2 10,178.2 8,545.7 8,825.3
Investment securities - loans and receivables 34.1 55.3 34.1 43.3
9,995.3 10,233.5 8,579.8 8,868.6
Financial liabilities
Deposits from customers 8,466.8 8,489.1 7,398.5 7,406.5
Debt securities in issue 406.0 410.0 408.9 391.8
Subordinated liabilities 235.0 239.9 235.0 204.7
9,107.8 9,139.0 8,042.4 8,003.0
The only financial assets and financial liabilities which are carried at fair value in the Statement of Financial Position
are available-for-sale investment securities and derivative financial instruments. The valuation techniques and inputs used
to derive fair values at the year end are described below.
90
TESCO PERSONAL FINANCE PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
35. Financial Instruments (continued)
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Where an active market is considered to exist, fair values are based
on quoted prices. For instruments which do not have active markets, fair value is calculated using present value models,
which take individual cash flows together with assumptions based on market conditions and credit spreads, and are
consistent with accepted economic methodologies for pricing financial instruments.
In each case the fair value is calculated by discounting future cash flows using benchmark, observable market interest
rates.
The table below categorises all financial instruments held at fair value (recurring measurement) and the fair value of
financial instruments held at amortised cost according to the method used to establish the fair value disclosed.
Group Level 1 Level 2 Level 3 Total
2017 £m £m £m £m
Financial assets carried at fair value
Financial assets classified as available-for-sale 964.4 - 1.7 966.1
Derivative financial instruments:
- Interest rate swaps - 27.6 - 27.6
- Forward foreign currency contracts - 0.1 - 0.1
- Cross currency swaps - 1.0 - 1.0
Financial assets carried at amortised cost
Loans and advances to customers - - 10,178.2 10,178.2
Investment securities - loans and receivables - 55.3 - 55.3
Total 964.4 84.0 10,179.9 11,228.3
Financial liabilities carried at fair value
Derivative financial instruments:
- Interest rate swaps - 123.8 - 123.8
- Forward foreign currency contracts - 0.2 - 0.2
- Cross currency swaps - 9.3 - 9.3
Financial liabilities carried at amortised cost
Deposits from customers - - 8,489.1 8,489.1
Debt securities in issue 1,210.0 - - 1,210.0
Subordinated liabilities - 239.9 - 239.9
Total 1,210.0 373.2 8,489.1 10,072.3
91
TESCO PERSONAL FINANCE PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
35. Financial Instruments (continued)
Company Level 1 Level 2 Level 3 Total
2017 £m £m £m £m
Financial assets carried at fair value
Financial assets classified as available-for-sale 964.4 - 1.7 966.1
Derivative financial instruments:
- Interest rate swaps - 27.6 - 27.6
- Forward foreign currency contracts - 0.1 - 0.1
- Cross currency swaps - 1.0 - 1.0
Financial assets carried at amortised cost
Loans and advances to customers - - 10,178.2 10,178.2
Investment securities - loans and receivables - 55.3 - 55.3
Total 964.4 84.0 10,179.9 11,228.3
Financial liabilities carried at fair value
Derivative financial instruments:
- Interest rate swaps - 123.8 - 123.8
- Forward foreign currency contracts - 0.2 - 0.2
- Cross currency swaps - 9.3 - 9.3
Financial liabilities carried at amortised cost
Deposits from customers - - 8,489.1 8,489.1
Debt securities in issue 410.0 - - 410.0
Subordinated liabilities - 239.9 - 239.9
Total 410.0 373.2 8,489.1 9,272.3
Group Level 1 Level 2 Level 3 Total
2016 £m £m £m £m
Financial assets carried at fair value
Financial assets classified as available-for-sale 980.1 - 3.5 983.6
Derivative financial instruments:
- Interest rate swaps - 25.4 - 25.4
- Cross currency swaps - 3.9 - 3.9
Financial assets carried at amortised cost
Loans and advances to customers - - 8,825.3 8,825.3
Investment securities - loans and receivables - 43.3 - 43.3
Total 980.1 72.6 8,828.8 9,881.5
Financial liabilities carried at fair value
Derivative financial instruments:
- Interest rate swaps - 144.8 - 144.8
- Forward foreign currency contracts - 1.2 - 1.2
- Cross currency swaps - 4.5 - 4.5
Financial liabilities carried at amortised cost
Deposits from customers - - 7,406.5 7,406.5
Debt securities in issue 1,186.3 - - 1,186.3
Subordinated liabilities - 204.7 - 204.7
Total 1,186.3 355.2 7,406.5 8,948.0
92TESCO PERSONAL FINANCE PLCNOTES TO THE FINANCIAL STATEMENTS (continued)35. Financial Instruments (continued)
Company Level 1 Level 2 Level 3 Total
2016 £m £m £m £m
Financial assets carried at fair value
Financial assets classified as available-for-sale 980.1 - 3.5 983.6
Derivative financial instruments:
- Interest rate swaps - 25.4 - 25.4
- Cross currency swaps - 3.9 - 3.9
Financial assets carried at amortised cost
Loans and advances to customers - - 8,825.3 8,825.3
Investment securities - loans and receivables - 43.3 - 43.3
Total 980.1 72.6 8,828.8 9,881.5
Financial liabilities carried at fair value
Derivative financial instruments:
- Interest rate swaps - 144.8 - 144.8
- Forward foreign currency contracts - 1.2 - 1.2
- Cross currency swaps - 4.5 - 4.5
Financial liabilities carried at amortised cost
Deposits from customers - - 7,406.5 7,406.5
Debt securities in issue 391.8 - - 391.8
Subordinated liabilities - 204.7 - 204.7
Total 391.8 355.2 7,406.5 8,153.5
There are three levels to the hierarchy as follows:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly (for example, as prices) or indirectly (for example, derived from prices).
Derivative financial instruments which are categorised as Level 2 are those which either:
· Have future cash flows which are on known dates and for which the cash flow amounts are known or calculable by
reference to observable interest and foreign exchange rates; or
· Have future cash flows which are not pre-defined, but for which the fair value of the instrument has very low
sensitivity to changes in estimate of future cash flows.
In each case the fair value is calculated by discounting future cash flows using benchmark, observable market interest
rates.
Available-for-sale investment securities which are categorised as Level 2 are those where no active market exists or where
there are quoted prices available for similar instruments in active markets.
Fair values of investment securities classified as loans and receivables are based on quoted prices, where available, or by
using discounted cash flows applying market rates.
The estimated fair value of subordinated liabilities is calculated using a discounted cash flow model based on a current
yield curve appropriate for the remaining term to maturity.
93
TESCO PERSONAL FINANCE PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
35. Financial Instruments (continued)
Level 3 - Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Loans and advances to customers are net of charges for impairment. The estimated fair value of loans and advances
represents the discounted amount of estimated future cash flows expected to be received. Expected cash flows are
discounted at current market rates to determine fair value.
The estimated fair value of deposits from customers represents the discounted amount of estimated future cash flows
expected to be paid. Expected cash flows are discounted at current market rates to determine fair value.
The estimated fair value of financial assets classified as available-for-sale, being the Group's interest in VISA Inc., is
described in note 16.
There were no transfers between Levels 1 and Level 2 in the year to 28 February 2017 (2016: no transfers).
There were no transfers between Level 2 and Level 3 in the year to 28 February 2017 (2016: no transfers).
36. Cash and Cash Equivalents
For the purposes of the Cash Flow Statement, cash and cash equivalents comprise the following balances with short term
maturities from the date of acquisition:
Group Company
2017 2016 2017 2016
£m £m £m £m
Cash and balances with central banks* (note 13) 788.6 551.8 680.2 493.5
*Mandatory reserve deposits held with the Bank of England of £14.3m (2016: £13.1m) are not included within cash and cash
equivalents for the purposes of the cash flow statement as these do not have short term maturities.
94
TESCO PERSONAL FINANCE PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
37. Cash Outflow from Operating Activities
Group Company
2017 2016 2017 2016
Non cash items included in operatingprofit before taxation £m £m £m £m
Loan impairment charges (refer note 9) 102.8 64.2 102.8 64.2
Depreciation and amortisation (refer notes 22 & 23) 110.3 86.0 110.3 86.0
Gain on disposal of investment securities (4.2) (0.6) (4.2) (0.6)
Disposal of non-current assets (refer notes 22 & 23) 6.5 - 6.5 -
Provision for liabilities and charges (refer note 27) 59.6 2.8 59.6 2.8
Impairment loss on insurance premiums (refer note 9) 3.6 3.6 3.6 3.6
Share of loss of joint venture (refer note 20) 15.6 2.6 - -
Equity settled share based payments (refer note 11) 0.9 10.1 0.9 10.1
Interest on subordinated liabilities (refer note 4) 4.3 4.5 4.3 4.5
Fair value movements (12.6) 19.2 (13.1) 18.1
Total 286.8 192.4 270.7 188.7
Changes in operating assets and liabilities
Net movement in mandatory balances with central banks (1.2) (0.1) (1.2) (0.1)
Net movement in loans and advances to customers (1,528.8) (872.3) (1,528.8) (872.3)
Net movement in prepayments and accrued income 0.9 (2.1) 0.9 (2.1)
Net movement in other assets (21.7) (76.5) (71.7) (64.0)
Net movement in deposits from banks 417.8 (24.5) 417.8 (24.5)
Net movement in deposits from customers 1,068.3 483.7 1,068.3 483.7
Net movement in accruals and deferred income (12.6) 8.2 (12.6) 8.2
Provisions utilised (36.1) (34.7) (36.1) (34.7)
Net movement in other liabilities 5.5 (0.2) 6.3 (8.8)
Total (107.9) (518.5) (157.1) (514.6)
95
TESCO PERSONAL FINANCE PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
38. Capital Resources
On 27 June 2013 the final CRD IV rules were published in the Official Journal of the European Union. Following the
publication of the CRD IV rules, the Prudential Regulatory Authority (PRA) issued a policy statement on 19 December 2013
detailing how the rules will be enacted within the UK with corresponding time frames for implementation. The CRD IV rules
are currently being phased in. The following tables analyse the regulatory capital resources of the Company (being the
regulated entity) applicable as at the year end and also the 'end point' position, once all of the rules contained within
CRD IV have come into force:
Transitional Transitional
2017 2016
£m £m
Movement in common equity tier 1 capital:
At the beginning of the year 1,217.6 1,041.1
Profit attributable to shareholders 152.6 189.7
Gains and losses on liabilities arising from own credit 0.9 (1.9)
Other reserves 5.7 7.8
Ordinary dividends (50.0) (50.0)
Movement in intangible assets 63.9 38.7
Movement in material holdings 3.4 3.4
Deferred tax liabilities related to intangible assets (13.0) (11.2)
At the end of the year 1,381.1 1,217.6
96
TESCO PERSONAL FINANCE PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
38. Capital Resources (continued)
End Point Transitional Transitional
2017 2017 2016
£m £m £m
Common equity tier 1
Shareholders' equity (accounting capital) 1,671.5 1,671.5 1,562.1
Regulatory adjustments
Unrealised gains on cash flow hedge reserve 0.5 0.5 1.6
Adjustment to own credit/Additional Value Adjustments (1.1) (1.1) (1.9)
Intangible assets (300.0) (300.0) (363.9)
Deferred tax liabilities related to intangible assets 13.6 13.6 26.5
Material holdings in financial sector entities - (3.4) (6.8)
Core tier 1 capital 1,384.5 1,381.1 1,217.6
Tier 2 capital (instruments and provisions)
Undated subordinated notes 45.0 45.0 45.0
Dated subordinated notes net of regulatory amortisation 190.0 190.0 190.0
Credit risk adjustment 63.1 63.1 44.6
Tier 2 capital (instruments and provisions) before regulatory adjustments 298.1 298.1 279.6
Regulatory adjustments
Material holdings in financial sector entities (34.1) (30.7) (27.3)
Total regulatory adjustments to tier 2 capital (instruments and provisions) (34.1) (30.7) (27.3)
Total tier 2 capital(instruments and provisions) 264.0 267.4 252.3
Total capital 1,648.5 1,648.5 1,469.9
Total risk weighted assets (unaudited) 8,255.1 8,255.1 7,345.9
Common equity tier 1 ratio (unaudited) 16.8% 16.7% 16.6%
Tier 1 ratio (unaudited) 16.8% 16.7% 16.6%
Total capital ratio (unaudited) 20.0% 20.0% 20.0%
97
TESCO PERSONAL FINANCE PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
38. Capital Resources (continued)
The table below reconciles shareholders' equity of the Group to shareholders' equity of the Company:
2017 2016
£m £m
Tesco Personal Finance plc (Group) shareholders' equity 1,670.5 1,565.8
Share of joint venture's retained earnings 10.4 (5.2)
Subsidiaries' retained earnings 0.8 1.2
Share of joint venture's available-for-sale reserve (10.2) 0.3
Tesco Personal Finance plc (Company) shareholders' equity 1,671.5 1,562.1
It is the Group's policy to maintain a strong capital base, to expand it as appropriate and to utilise it efficiently
throughout its activities to optimise the return to shareholders while maintaining a prudent relationship between the
capital base and the underlying risks of the business. In carrying out this policy, the Group has regard to the
supervisory requirements of the PRA.
Leverage ratio (unaudited)
The Basel III reforms include the introduction of a capital leverage measure as defined as the ratio of tier 1 capital to
total exposure. This is intended to reinforce the risk based capital requirements with a simple, non-risk based 'backstop'
measure. The Basel Committee has proposed that final adjustments to the definition and calibration of the leverage ratio
be carried out in 2017, with a view to migrating to a Pillar 1 treatment in 2018. In January 2015 the European Commission
revised the CRD IV leverage rules to closely align to the Basel III Leverage Framework.
In the interim, the Group has published the estimated leverage ratio on a fully transitional CRD IV basis.
Exposures for leverage ratio (unaudited) End point Transitional
2017 £m £m
Total balance sheet exposures 12,558.3 12,558.3
Removal of accounting value of derivatives and Securities Financing Transactions (SFTs) (25.0) (25.0)
Exposure value for derivatives and SFTs 9.1 9.1
Off balance sheet: unconditionally cancellable (10%) 1,197.7 1,197.7
Off balance sheet: other (20%) 31.1 31.1
Regulatory adjustment - intangible assets (343.9) (343.9)
Regulatory adjustment - other - (3.4)
Total 13,427.3 13,423.9
Common equity tier 1 1,384.5 1,381.1
Leverage ratio 10.3% 10.3%
The Company's estimated end point leverage ratio is 10.3%. The Basel Committee's minimum ratio of 3.0% is proposed to
become a Pillar 1 requirement by 1 January 2018.
98
TESCO PERSONAL FINANCE PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
38. Capital Resources (continued)
Capital Management
The Group operates an integrated risk management process to identify, quantify and manage risk in the Group. The
quantification of risk includes the use of both stress and scenario testing. Where capital is considered to be an
appropriate mitigant for a given risk, this is identified and reflected in the Group's internal capital assessment. The
capital resources of the Group are regularly monitored against the higher of this internal assessment and regulatory
requirements. Capital adequacy and performance against the Group's Capital plan is monitored daily by Treasury, with
monthly reporting provided to the Board, ALCo and Capital Management Forum.
During the year capital and leverage regulations continued to evolve.
Pillar 2 capital methodologies
The PRA updated its Pillar 2 capital methodologies in July 2016 following the publication of prudential requirements for
implementation of ring-fencing and in February 2017 consulted on Pillar 2A adjustments to the Standardised approach for
Credit risk, revisions to internal ratings based benchmarking and additional consideration for standardised firms using
IFRS accounting.
These proposals are aimed at promoting the safety and soundness of PRA-regulated firms, to facilitate a more effective
banking sector and to make the PRA's Pillar 2A capital assessment more robust and more proportionate by addressing some of
the concerns over the differences between Standardised approach and IRB risk weights. This will continue to be managed as
part of the Bank's internal capital adequacy process in line with the PRA updated expectations as advised in Feb 2017. The
PRA general safety and soundness objectives in relation to continuity of core services in the UK and ring-fencing of Bank
activities where core deposits are in excess of £25bn are due to be implemented from 1 January 2019.
Management forecasts indicate that the Group will not exceed this threshold and will not automatically be required to
ring-fence the Group's core activities by the 2019 implementation date.
Credit Risk
In December 2015 the Basel Committee on Banking Supervision (BCBS) published a second consultation on revisions to the
Standardised credit risk framework and the impact of these proposed revisions was assessed through a Quantitative Impact
Study during 2016. The proposed revisions are designed to increase the risk sensitivity of the framework and to better
align with IRB approaches. Final rules have not yet been agreed.
Operational risk
In March 2016 BCBS proposed a revised Standardised Approach for Operational Risk which is expected to replace the existing
approaches with a new standardised measurement approach. Final rules have not yet been agreed.
Leverage
In April 2016 BCBS issued revisions to the Basel III leverage ratio framework which included revisions for derivative
exposures, off balance sheet items and the treatment of prudent valuation adjustments and also noted that further clarity
was required on general and specific provisions. In August 2016 an EBA report recommended a minimum Pillar 1 leverage of 3%
to be applied to all credit institutions in scope for CRD IV requirements by 1 January 2018. The EBA also recommended a
potential cap on the use of additional tier 1 capital for globally systematically important institutions and recommended
that the inclusion of Tier 2 capital would not be appropriate in the leverage capital measure.
A PRA leverage statement in August 2016 invited firms which are currently subject to the UK leverage ratio framework to
apply for a temporary modification to allow firms to exclude from the calculation of the total exposure measure those
assets constituting claims on central banks.
99
TESCO PERSONAL FINANCE PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
38. Capital Resources (continued)
The Group is subject to the CRR reporting and disclosure requirements and is not currently subject to temporary
modifications of the UK leverage ratio framework.
The European Commission's minimum requirements for own funds and eligible liabilities (MREL)
MREL requires banks to maintain at all times a sufficient aggregate amount of own funds and eligible liabilities (that may
be bailed-in if required). MREL will, on full implementation, be set on a firm-specific basis and calculated as the sum of
two components: a loss absorption amount, being the amount needed to absorb losses up to and in resolution; and a
recapitalisation amount which reflects the capital that a firm is likely to need post resolution.
MREL is expected to be set annually over the transitional period until 1 January 2022. Prior to 31 December 2019, MREL
will be equal to an institution's minimum regulatory capital requirements. From 1 January 2020 until 31 December 2021 an
interim requirement will be set, with full compliance applicable on 1 January 2022. The Group is working towards
implementation of these requirements and has reflected requirements in its strategic plan.
100
TESCO PERSONAL FINANCE PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
39. Related Party Transactions
During the year the Group had the following transactions with related parties:
Transactions involving Directors and other key connected persons
For the purposes of IAS 24, 'Related Party Disclosures', the Group's key Management personnel comprise Directors of the
Group. The captions in the Group's primary Financial Statements include the following amounts attributable, in aggregate,
to key connected persons of both the Group and Tesco PLC, the Company's ultimate parent undertaking.
Group and Company 2017 2016
£m £m
Loans and advances to customers
At the beginning of the year 1.0 0.6
Loans issued during the year 0.1 0.5
Loan repayments during the year (0.1) (0.2)
Loans outstanding at the end of the year 1.0 0.9
Interest income earned - -
Deposits from customers
Deposits at the beginning of the year 0.8 1.1
Deposits received during the year 1.6 0.1
Deposits repaid during the year (0.7) -
Deposits at the end of the year 1.7 1.2
Interest expense on deposits - -
No provisions have been recognised in respect of loans and advances to related parties (2016: £nil).
Remuneration of key Management personnel
The amount of remuneration incurred by the Group in relation to the Directors is set out below in aggregate. Further
information about the remuneration of Directors is provided in note 10.
Group and Company 2017 2016
£m £m
Short-term employee benefits 5.2 5.2
Termination benefits 0.4 -
Post employment benefits - -
Other long term benefits 2.1 4.5
Share based payments 1.2 1.5
Total emoluments 8.9 11.2
101
TESCO PERSONAL FINANCE PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
39. Related Party Transactions (continued)
Trading transactions
Group 2017 2017 2017 2016 2016 2016
Tesco PLC Tesco PLC subsidiaries TescoUnderwriting Limited Tesco PLC Tesco PLC subsidiaries Tesco Underwriting Limited
£m £m £m £m £m £m
Interest received and other income - 35.6 78.5 - 43.6 1.5
Interest paid - (4.3) - - (4.5) -
Provision of services - (73.4) (1.3) (0.7) (115.2) (2.6)
Company 2017 2017 2017 2016 2016 2016
Tesco PLC Tesco PLC subsidiaries Tesco Underwriting Limited Tesco PLC Tesco PLC subsidiaries Tesco Underwriting Limited
£m £m £m £m £m £m
Interest received and other income - 35.6 78.5 - 43.6 1.5
Interest paid - (13.6) - - (14.0) -
Provision of services - (73.4) (1.3) (0.7) (115.2) (2.6)
Balances owing to/from related parties are identified in notes 16, 18, 25, 26, 28, 29, and 30.
For the year ended 28 February 2017 the Group and Company generated 58% (2016: 60%) of its insurance commission from the
sale and service of Motor and Home insurance policies underwritten by TU, a joint venture company and therefore a related
party. Customer premiums on such sales are collected directly by the Group and the net premium is remitted to TU.
Investment transactions with TU are identified in note 20.
Ultimate parent undertaking
The Company's ultimate parent undertaking and controlling party is Tesco PLC which is incorporated in England. The
Financial Statements for Tesco PLC can be obtained from its registered office at Tesco House, Shire Park, Kestrel Way,
Welwyn Garden City, AL7 1GA.
Immediate parent undertaking
The Company's immediate parent company is Tesco Personal Finance Group Limited which is incorporated in Scotland.
Financial Statements for Tesco Personal Finance Group Limited can be obtained from its registered office at Interpoint
Building, 22 Haymarket Yards, Edinburgh, EH12 5BH. The smallest group into which the Company is consolidated is Tesco
Personal Finance Group Limited and the largest group is Tesco PLC.
102
TESCO PERSONAL FINANCE PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
40. Contingent Liabilities and Commitments
Lending commitments
Mortgage offers made are legally binding commitments made by the Group to provide secured funding to customers. Undrawn
Mortgage commitments relate to formal offers made to customers during the application process whereby the customer has
successfully passed eligibility and affordability checks but has not yet received the funds.
Under an undrawn Credit Card commitment the Group agrees to make funds available to a customer in the future. Undrawn
Credit Card commitments, which are usually for a specified term, may be unconditionally cancelled or may persist, providing
all facility conditions are satisfied or waived.
Under a Personal Current Account or Clubcard Plus overdraft commitment the Group agrees to make funds available to a
customer in the future. Personal Current Account overdraft commitments are usually for a specified term and may be
unconditionally cancelled or may persist, providing all facility conditions are satisfied or waived.
Further detail on undrawn lending commitments is included in the liquidity and funding risk disclosure in Note 34.
The contractual amounts do not represent the amounts at risk at the reporting date but the amounts that would be at risk
should the available facilities be fully drawn upon.
Capital commitments
At 28 February 2017 the Group and Company had capital commitments related to property, plant and equipment of £3.9m (2016:
£0.6m) and intangible assets of £1.2m (2016: £0.3m). This is in respect of IT software development and IT hardware. The
Group's Management are confident that future net revenues and funding will be sufficient to cover this commitment.
Operating lease commitments
The future minimum lease payments under non-cancellable operating leases are as follows:
Group and Company 2017 2016
£m £m
No later than one year 5.2 5.2
Later than one year and no later than five years 20.1 23.2
Later than five years 33.0 42.1
58.3 70.5
103
TESCO PERSONAL FINANCE PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
41. Share Based Payments
The Group charge for the year recognised in respect of share based payments is £10.4m (2016: £12.1m), which is made up of
share option schemes and share bonus payments. Of this amount, £4.5m (2016: £10.7m) will be equity-settled and £5.9m (2016:
£1.4m) cash-settled.
Share option schemes
The Group had three share option schemes in operation during the year, all of which are equity-settled schemes using Tesco
PLC shares:
· The Discretionary Share Option Plan (2004) was adopted on 5 July 2004. This scheme permitted the grant of approved,
unapproved and international options in respect of ordinary shares to selected executives. Options are normally exercisable
between three and ten years from the date of grant at a price not less than the middle-market quotation or average
middle-market quotations of an ordinary share for the dealing day or three dealing days preceding the date of grant. The
exercise of options will normally be conditional upon the achievement of a specified performance target related to the
annual percentage growth in earnings per share over a three-year period. There were no discounted options granted under
this scheme.
· The Savings-related Share Option Scheme (1981) permits the grant to colleagues of options in respect of ordinary
shares linked to a building society/bank save-as-you-earn contract for a term of three or five years with contributions
from colleagues of an amount between £5 and £500 per four-weekly period. Options are capable of being exercised at the end
of the three or five-year period at a subscription price of not less than 80% of the average of the middle-market
quotations of an ordinary share over the three dealing days immediately preceding the offer date.
· The Performance Share Plan (2011) was adopted on 1 July 2011 and amended on 4 July 2011. This scheme permits the
grant of options in respect of ordinary shares to selected executives. Options are normally exercisable between the vesting
date(s) set at grant and ten years from the date of grant for nil consideration. The exercise of options will normally be
conditional upon the achievement of specified performance targets over a three-year period and/or continuous employment.
104
TESCO PERSONAL FINANCE PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
41. Share Based Payments (continued)
The following table reconciles the number of share options outstanding and the weighted average exercise price (WAEP):
Savings-related share option scheme Options Savings-related share option scheme WAEP (pence) Approved share option schemeOptions Approved share option scheme WAEP (pence) Unapproved share options schemeOptions Unapproved share options scheme WAEP (pence)
Outstanding at 29 February 2016 3,584,756 159.63 210,181 341.36 237,426 353.26
- More to follow, for following part double click ID:nRSL2440ChRecent news on Tesco
See all newsREG - Tesco PLC - Director/PDMR Shareholding
AnnouncementREG - Tesco PLC - Director/PDMR Shareholding
AnnouncementREG - Tesco PLC - Total Voting Rights
AnnouncementREG - Tesco PLC - Director/PDMR Shareholding
AnnouncementREG - Tesco PLC - Transaction in Own Shares
Announcement