REG - United Utilities Grp - Final Results <Origin Href="QuoteRef">UU.L</Origin> - Part 3
25/05/2017 07:06
- Part 3: For the preceding part double click ID:nRSY1703Gb
88.3 87.3
Final dividend 174.8 171.4
263.1 258.7
The proposed final dividends for the years ended 31 March 2017 and 31 March
2016 were subject to approval by equity holders of United Utilities Group PLC
as at the reporting dates, and therefore have not been included as liabilities
in the consolidated financial statements as at 31 March 2017 and 31 March 2016
respectively.
The final dividend of 25.92 pence per ordinary share (2016: 25.64 pence per
ordinary share) is expected to be paid on 4 August 2017 to shareholders on the
register at the close of business on 23 June 2017. The ex-dividend date for
the final dividend is 22 June 2017.
The interim dividend of 12.95 pence per ordinary share (2016: 12.81 pence per
ordinary share) was paid on 1 February 2017 to shareholders on the register at
the close of business on 16 December 2016.
10. Disposal of non-household retail business
On 3 May 2016 the Competition and Markets Authority approved the formation of
a joint venture, Water Plus Group Limited, between United Utilities PLC and
Severn Trent PLC. On 1 June 2016 the group completed the disposal of its
non-household water and wastewater retail business, principally comprising
billing and customer service activities, to Water Plus. This resulted in a
£22.1 million profit and £3.3 million of cash proceeds on disposal of the
business, together with a £15.6 million disposal of assets that had been
classified as held for sale. The formation of the joint venture resulted in an
increase in interests in joint ventures of £39.1 million, comprising £25.6
million of shares in the joint venture received on disposal of the
non-household retail business, and £13.5 million of equity contributed during
the year. The group's £2.0 million share of the joint venture's losses for the
period was subsequently recognised, which included £5.2 million of initial set
up costs not expected to be incurred in future years.
11. Retirement benefit surplus
The main financial assumptions used by the company's actuary to calculate the
defined benefit surplus of the United Utilities Pension Scheme (UUPS) and the
United Utilities PLC Group of the Electricity Supply Pension Scheme (ESPS)
were as follows:
Year ended Year ended
31 March 31 March
2017 2016
%pa %pa
Discount rate 2.55 3.40
Pensionable salary growth and pension increases 3.40 3.20
Price inflation 3.40 3.20
Mortality in retirement is assumed to be in line with the Continuous Mortality
Investigation's (CMI) S2PA (31 March 2016: S1NA) year of birth tables, with
scaling factor of 108 per cent for males and 102 per cent for females (31
March 2016: one-year age rating for males in the UUPS only), reflecting actual
mortality experience; and CMI 2015 (31 March 2016: CMI 2014) long-term
improvement factors, with a long-term annual rate of improvement of 1.75 per
cent (31 March 2016: 1.75 per cent).
The net pension expense before tax in the income statement in respect of the
defined benefit schemes is summarised as follows:
Year ended Year ended
31 March 31 March
2017 2016
£m £m
Current service cost 19.7 22.3
Curtailments/settlements 3.1 1.1
Administrative expenses 2.7 2.7
Pension expense charged to operating profit 25.5 26.1
Net pension interest credited to investment income (note 5) (10.2) (3.1)
Net pension expense charged before tax 15.3 23.0
The reconciliation of the opening and closing net pension surplus included in
the statement of financial position is as follows:
Year ended Year ended
31 March 31 March
2017 2016
£m £m
At the start of the year 275.2 79.2
Expense recognised in the income statement (15.3) (23.0)
Contributions paid 64.3 58.9
Remeasurement (losses)/gains gross of tax (76.7) 160.1
At the end of the year 247.5 275.2
The closing surplus at each reporting date is analysed as follows:
31 March 31 March
2017 2016
£m £m
Present value of defined benefit obligations (3,615.5) (2,970.4)
Fair value of schemes' assets 3,863.0 3,245.6
Net retirement benefit surplus 247.5 275.2
In the year ended 31 March 2017 the discount rate has decreased by 0.85 per
cent, which includes a 0.6 per cent decrease in credit spreads and a 0.25 per
cent decrease in swap yields over the year. The £76.7 million remeasurement
loss has largely resulted from the impact of the decrease in credit spreads
during the year, partially offset by growth asset gains, the reduction in swap
yields and the favourable impact of changes in mortality during the year.
Further details on the approach to managing pension scheme risk are set out in
the audited consolidated financial statements of United Utilities Group PLC
for the year ended 31 March 2016.
Member data used in arriving at the liability figure included within the
overall IAS 19 surplus has been based on the finalised actuarial valuation as
at 31 March 2016 for the group's ESPS scheme, and the preliminary results of
the actuarial valuation as at 31 March 2016 for the group's UUPS scheme.
12. Borrowings
New borrowings raised during the year ended 31 March 2017 were as follows:
· On 9 June 2016 the group issued EUR 30.0 million fixed interest rate
notes due June 2031.
· On 13 June 2016 the group issued HKD 600.0 million fixed interest rate
notes due June 2031.
· On 15 June 2016 the group drew down the remaining £75.0 million against
its existing £250.0 million term RPI index-linked loan facility signed in
March 2015 with the European Investment Bank. This loan is structured on an
amortising basis with final repayment in June 2034.
· On 17 June 2016 the group drew down £75.0 million against its new £250.0
million term RPI index-linked loan facility signed in April 2016 with the
European Investment Bank. This loan is structured on an amortising basis with
final repayment in June 2034.
· On 30 September 2016 the group issued £20.0 million RPI index-linked
notes due October 2028 and £26.5 million RPI index-linked notes due September
2036.
· On 9 December 2016 the group issued £38.0 million RPI index-linked notes
due December 2031, £20.0 million CPI index-linked notes due December 2031,
£29.0 million RPI index-linked notes due December 2036 and £20.0 million CPI
index-linked notes due December 2036.
· On 10 February 2017 the group issued £60.0 million CPI index-linked
notes due February 2037.
The notes were issued through private placement under the Euro medium-term
note programme.
13. Fair values of financial instruments
The fair values of financial instruments are shown in the table below.
31 March 31 March
2017 2016
Fair Carrying Fair Carrying
value value value value
£m £m £m £m
Available for sale financial assets
Investments 9.0 9.0 8.7 8.7
Financial assets at fair value through profit or loss
Derivative financial assets - fair value hedge 591.1 591.1 583.8 583.8
Derivative financial assets - held for trading 216.6 216.6 181.8 181.8
Financial liabilities at fair value through profit or loss
Derivative financial liabilities - held for trading (249.7) (249.7) (261.7) (261.7)
Financial liabilities designated as fair value through profit or loss (375.5) (375.5) (338.0) (338.0)
Financial instruments for which fair value does not approximate carrying value
Financial liabilities in fair value hedge relationships (2,544.6) (2,522.4) (2,293.0) (2,373.0)
Other financial liabilities at amortised cost (5,682.8) (4,486.6) (4,830.1) (4,267.0)
(8,035.9) (6,817.5) (6,948.5) (6,465.4)
A decrease in underlying interest rates on index-linked debt during the year
is the principal reason for the reduction in the difference between the fair
value and carrying value of the group's borrowings.
The group has calculated fair values using quoted prices where an active
market exists, which has resulted in 'level 1' fair value liability
measurements under the IFRS 13 'Fair value measurement' hierarchy of £1,766.1
million (31 March 2016: £2,149.5 million) for financial liabilities in fair
value hedge relationships and £937.9 million (31 March 2016: £1,309.9 million)
for other financial liabilities at amortised cost.
The £755.4 million reduction (31 March 2016: £1,213.5 million reduction) in
'level 1' fair value liability measurements is largely due to a decrease in
the number of observable quoted bond prices in active markets at 31 March
2017. In the absence of an appropriate quoted price, the group has applied
discounted cash flow valuation models utilising market available data which
are classified as 'level 2' valuations. More information in relation to the
valuation techniques used by the group and the IFRS 13 hierarchy can be found
in the audited financial statements of United Utilities Group PLC for the year
ended 31 March 2016.
14. Net debt
Year ended Year ended
31 March 31 March
2017 2016
£m £m
At the start of the year 6,260.5 5,924.0
Net capital expenditure 691.7 681.6
Dividends (note 9) 263.1 258.7
Interest 156.1 166.8
Loans to joint ventures 109.0 -
Inflation uplift on index-linked debt (note 6) 80.7 37.9
Tax 41.2 53.1
Other 4.4 1.5
Fair value movements (9.9) 42.4
Cash generated from operations (note 15) (1,018.1) (905.5)
At the end of the year 6,578.7 6,260.5
Net debt comprises borrowings, net of cash and short-term deposits and
derivatives.
Fair value movements includes net fair value gains on debt and derivative
instruments of £24.3 million (31 March 2016: £26.3 million net fair value
losses) less net receipts on swaps and debt designated at fair value of £14.4
million (31 March 2016: £16.1 million).
15. Cash generated from operations
Year ended Year ended
31 March 31 March
2017 2016
£m £m
Operating profit 605.5 567.9
Adjustments for:
Depreciation of property, plant and equipment 336.2 332.5
Amortisation of intangible assets 28.7 31.2
Impairment of property, plant and equipment 0.2 11.4
Impairment of assets classified as available for sale - 2.7
Loss on disposal of property, plant and equipment 3.3 5.4
Loss on disposal of intangible assets 0.5 -
Amortisation of deferred grants and contributions (6.7) (6.9)
Equity-settled share-based payments charge 3.4 2.3
Other non-cash movements (3.0) (3.8)
Changes in working capital:
Decrease in inventories 6.9 11.2
Decrease/(increase) in trade and other receivables 71.1 (14.1)
Decrease in trade and other payables (0.6) (4.1)
Increase in provisions 11.4 2.6
Pension contributions paid less pension expense charged to operating profit (38.8) (32.8)
Cash generated from operations 1,018.1 905.5
16. Commitments and contingent liabilities
At 31 March 2017 there were commitments for future capital expenditure
contracted but not provided for of £336.9 million (31 March 2016: £447.3
million).
Following a review undertaken during the year, the group has determined that
the possibility of any outflow in respect of performance guarantees issued is
remote and, as such, there are no contingent liabilities to be disclosed in
respect of these (31 March 2016: £9.8 million).
A contingent liability exists in relation to the equalisation of Guaranteed
Minimum Pension (GMP), which is expected to have a widespread impact for
defined benefit pension schemes operating in the UK. At this stage it is not
possible to quantify the impact of legislative changes proposed by the UK
Government in this area.
17. Related party transactions
The related party trading transactions with the group's joint ventures during
the period and amounts outstanding at the period end date were as follows:
Year ended Year ended
31 March 31 March
2017 2016
£m £m
Sales of services 404.3 1.2
Purchases of goods and services 0.7 0.7
Costs recharged at nil margin under transitional service agreements 18.5 -
Interest income and fees recognised on loans to related parties 2.6 -
Amounts owed by related parties 163.5 2.9
Amounts owed to related parties 12.1 -
Sales of services to related parties during the year mainly represent
non-household wholesale charges and were on the group's normal trading terms.
At 31 March 2017 amounts owed by joint ventures, as recorded within trade and
other receivables in the statement of financial position, were £163.5 million
(31 March 2016: £2.9 million), comprising £41.5 million of trade balances,
which are unsecured and will be settled in accordance with normal credit
terms, and £122.0 million relating to loans. Included within these loans
receivable were the following amounts owed by Water Plus:
· £100.0 million outstanding on a £100.0 million revolving credit facility
provided by United Utilities Water Limited, which is guaranteed by United
Utilities PLC, with a maturity date of 30 September 2019, bearing a floating
interest rate of LIBOR plus a credit margin;
· £9.0 million receivable being the fair value of amounts owed in relation
to a £12.5 million unsecured loan note held by United Utilities PLC, with a
maturity date of 28 March 2027. This is an interest-free shareholder loan with
a total amount outstanding at 31 March 2017 of £12.5 million, comprising the
£9.0 million receivable held at fair value, and £3.5 million recorded as an
equity contribution to Water Plus recognised within interests in joint
ventures; and
· £9.7 million outstanding on a £19.6 million unsecured amortising loan
note held by United Utilities PLC, with a final maturity date of 30 November
2017, bearing a floating interest rate of LIBOR plus a credit margin.
Repayments received on this loan note represent part of the proceeds received
on disposal of the group's non-household retail business (see note 10).
A further £3.3 million (31 March 2016: £2.5 million) of non-current
receivables was owed by other related parties at 31 March 2017.
No expense or allowance has been recognised for bad and doubtful receivables
in respect of the amounts owed by related parties (31 March 2016: £nil).
During the year, United Utilities PLC provided guarantees in support of Water
Plus in respect of certain amounts owed to wholesalers. The aggregate limit of
these guarantees was £42.5 million, of which £24.0 million related to
guarantees to United Utilities Water Limited.
At 31 March 2017, amounts owed to joint ventures were £12.1 million (31 March
2016: £nil). The amounts outstanding are unsecured and will be settled in
accordance with normal credit terms (31 March 2016: £nil).
18. Events after the reporting period
There were no events arising after the reporting date that required
recognition or disclosure in the financial statements for the year ended 31
March 2017.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The responsibility statement below has been prepared in connection with the
group's full annual report for the year ended 31 March 2017. Certain parts
thereof are not included within this announcement.
Responsibilities Statement
We confirm that to the best of our knowledge:
· the financial statements have been prepared in accordance with IFRS as
adopted by the European Union, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the company and the
undertakings included in the consolidation taken as a whole;
· the strategic report includes a fair review of the development and
performance of the business and the position of the issuer and the
undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face; and
· the directors consider the annual report, taken as a whole, is fair,
balanced and understandable and provides the information necessary for
shareholders to assess the group's performance, business model and strategy.
The directors of United Utilities Group PLC at the date of this announcement
are listed below:
Dr John McAdam
Steve Mogford
Stephen A Carter
Mark Clare
Alison Goligher
Russ Houlden
Brian May
Sara Weller
This responsibility statement was approved by the board and signed on its
behalf by:
____________________ _____________________
Steve Mogford Russ Houlden
24 May 2017 24 May 2017
Chief Executive Officer Chief Financial Officer
This information is provided by RNS
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