Northern Electric Plc 8.061 % Cum PrefLSE: NTEA

Half Yearly Report to 30 June 2024

Sep 24, 2024 at 2:35 PM UTC · Issued by Northern Electric Plc 8.061 % Cum Pref

REGISTERED NUMBER: 02366942

NORTHERN ELECTRIC plc

HALF-YEARLY FINANCIAL REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2024

INTERIM MANAGEMENT REPORT

Cautionary Statement

This interim management report has been prepared solely to provide additional information to shareholders to assess the business and strategies of Northern Electric plc (the "Company") and its subsidiaries (together the "Group") and should not be relied on by any other party or for any other purpose.

Business Model

The Company is part of the Northern Powergrid Holdings Company and its subsidiaries group of companies (the "Northern Powergrid Group") and its principal activity during the six months to 30 June 2024 was to act as a holding company, with its main operating subsidiaries being Northern Powergrid (Northeast) plc ("Northern Powergrid"), Integrated Utility Services Limited ("IUS") and Northern Powergrid Metering Limited ("Metering").

Northern Powergrid distributes electricity to approximately 1.6 million customers connected to its electricity distribution network in the North East of England and is an authorised distributor under the Electricity Act 1989. IUS provides engineering contracting services to various clients and Metering rents meters to energy suppliers.

Results for the six months ended 30 June 2024

During the period ended 30 June 2024, the Group made a profit after tax of £95.0 million; this was £28.1 million higher than the 6 months ended 30 June 2023 and was mainly as a result of higher gross margins.

IUS continued to operate its engineering contracting business with revenues higher than the 6 months ended 30 June 2023.

Metering continued to deliver a satisfactory performance in terms of the contracts secured with energy suppliers for the provision of smart meters in the United Kingdom.

Revenue

Revenue at £317.6 million was £34.6 million higher than for the six months ended 30 June 2023 mainly due to higher distribution use of system tariffs and the recovery of amounts paid under the supplier of last resort process, as well as increased contracting and metering revenues.

Cash flow

Cash and cash equivalents as at 30 June 2024 were £15.4 million, representing an increase of £0.7 million when compared with the position at 31 December 2023. This compares with an decrease of £202.4 million in the comparative six month period, primarily due to the reclassification of intercompany current account.

The Group has access to a £100 million revolving credit facility provided by Barclays Bank plc, Lloyds Bank plc, HSBC UK Bank plc and Royal Bank of Canada. The Group entered into a new Facility Agreement in December 2021 for a period of three years, with two 1-year extension options. During the year the Group exercised the second extension option which extended the termination date to December 2026.

In addition, the Group has access to short-term borrowing facilities provided by Yorkshire Electricity Group plc, a related party, and to a £19.0 million overdraft facility provided by Lloyds Bank plc.

Dividends

No ordinary dividends were paid in the period resulting in £94.2 million being transferred to reserves.

Related party transactions

The Company provides certain corporate functions to the Northern Powergrid Group.

Further details of the related party transactions entered into by the Group and the Company and changes therein are included in Note 7 to this half-yearly financial report.

Principal risks and uncertainties

Information concerning the principal long-term risks and uncertainties and the internal control system are included in the Group's latest annual reports and accounts for the year to 31 December 2023, which is available at www.northernpowergrid.com.

It is anticpated that these risks will continue to be the principal risks facing the business for the remaining six months of 2024.

Going concern

In the Group's latest annual reports and accounts for the year to 31 December 2023 the directors set out a number of factors they took into account when they considered continuing to adopt the going concern basis in preparing those annual reports and accounts. The directors confirm that no events have occurred during the six months to 30 June 2024, which alter the view expressed in the annual reports and accounts to 31 December 2023.

Future strategy and objectives

The Company will continue to develop its business as a holding company in a manner that concentrates on the Group's principal activities of electricity distribution, engineering contracting and the rental of meters to energy suppliers.

Responsibility Statement

The board of directors confirm that to the best of their knowledge:

the condensed set of finanical statements, which has been prepared in accordance with IAS 34, gives a true and fair view of the assets, liabilities, financial position and profit of the Company and the undertakings included in the consolidation as a whole as required by Disclosure and Transparency Rules ("DTR") 4.2.4R for the six months to 30 June 2023;
the interim management report contains a fair review of the information required by DTR 4.2.7R; and
the interim management report includes a fair review of the information required by DTR 4.2.8R.

By order of the board

A P Jones

Director

23 September 2024

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS - SIX MONTHS ENDED 30 JUNE 2024

	6 Months		6 Months
	ended 30		ended 30
	June 2024		June 2023
	(unaudited)		(unaudited)
	£m		£m
Revenue	317.6	283.0
Cost of sales	(28.2)		(41.0)
Gross profit	289.4	242.0
Operating expenses	(143.5)		(133.9)
Operating profit	145.9	108.1
Other (losses)/gains	-	(0.1)
Finance income	10.0	7.7
Finance costs	(27.3)		(26.2)
Profit before tax	128.6	89.5
Income tax expense	(33.6)		(22.6)
Profit from ordinary activities after tax	95.0		66.9

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME - SIX MONTHS ENDED 30 JUNE 2024

	6 Months			6 Months
	ended 30			ended 30
	June 2024			June 2023
	(unaudited)			(unaudited)
	£m			£m
PROFIT FOR THE PERIOD	95.0	66.9
OTHER COMPREHENSIVE INCOME
Items that will not be reclassified subsequently to profit or loss:
Employee benefit obligation	7.3	6.3
Income tax relating to items of other comprehensive income	(1.8)	(1.6)
Items that may be reclassified subsequently to profit or loss:	5.5			4.7

Cash flow hedge	0.6	3.0
Income tax relating to items of other comprehensive income	(0.2)	(0.8)
	0.4			2.2
OTHER COMPREHENSIVE INCOME FOR THE YEAR,
NET OF INCOME TAX	5.9		6.9
TOTAL COMPREHENSIVE INCOME FOR THE YEAR	100.9		73.8

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION - SIX MONTHS ENDED 30 JUNE 2024

	30 June	31
	2024		December
	(unaudited)	2023

ASSETS	£m		£m

NON-CURRENT ASSETS
Intangible assets	47.1	50.6
Property, plant and equipment	3,205.5	3,163.4
Right of use asset	11.2	11.2
Investments	4.0	3.6
Pension asset	160.7	148.6
Derivative asset	9.7	8.8
Trade and other receivables	4.2		6.5
	3,442.4	3,392.8
CURRENT ASSETS
Inventories	27.3	29.9
Trade and other receivables	385.8	342.9
Contract assets	7.4	7.1
Tax receivable	1.5	-
Derivative asset	5.6	5.9
Cash and cash equivalents	15.4		14.8
	443.0		400.6
TOTAL ASSETS	3,885.4	3,793.3
EQUITY
SHAREHOLDERS' EQUITY
Share capital	72.2	72.2
Share premium account	158.7	158.7
Hedging reserves	11.4	11.0
Other reserves	6.2	6.2
Retained earnings	1,323.7		1,223.2
TOTAL EQUITY	1,572.2		1,471.4

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION - SIX MONTHS ENDED 30 JUNE 2024

	30 June		31 December
	2024	2023
	(unaudited)
LIABILITIES	£m		£m

NON-CURRENT LIABILITIES
Deferred revenue	658.5	668.1
Borrowings	1,133.0	1,153.1
Lease liability	8.4	8.4
Deferred tax	180.0	160.9
Provisions	1.5		1.6
	1,981.4	1,992.1
CURRENT LIABILITIES
Trade and other payables	166.8	155.8
Deferred revenue	29.9	30.0
Borrowings	129.7	135.3
Lease liability	3.2	3.2
Tax payable	-	3.2
Provisions	2.1		2.3
	331.8		329.8
TOTAL LIABILITIES	2,313.2		2,321.9
TOTAL EQUITY AND LIABILITIES	3,885.4		3,793.3

The interim financial statements were approved by the board of directors and authorised for issue on 23 September 2024 and were signed on its behalf by:

A P Jones

Director

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY - SIX MONTHS ENDED 30 JUNE 2024

				Share
		Share		Premium		Other	Hedging	Retained	Total
		Capital		Account		Reserves	Reserves	Earnings
		£m		£m		£m	£m	£m	£m
Balance at
1 January 2024	72.2	158.7	6.2	11.0	1,223.2	1,471.4
Profit for the period								95.0
(unaudited)	-	-	-	-	95.0
Other comprehensive								5.9
income (unaudited)	-	-	-	0.4	5.5
Balance at

30 June 2023	72.2	158.7	6.2	11.4	1,323.7	1,572.2
				Share
		Share		Premium		Other	Hedging	Retained	Total
		Capital		Account		Reserves	Reserves	Earnings
		£m		£m		£m	£m	£m	£m
Balance at
1 January 2023	72.2	158.7	6.2	16.3	1,144.6	1,398.0
Profit for the period								66.9
(unaudited)	-	-	-	-	66.9
Other comprehensive								6.9
income (unaudited)	-	-	-	2.2	4.7
Balance at

30 June 2023	72.2	158.7	6.2	18.5	1,216.2	1,471.8
				Share
		Share		Premium		Other	Hedging	Retained	Total
		Capital		Account		Reserves	Reserves	Earnings
		£m		£m		£m	£m	£m	£m
Balance at
1 January 2023	72.2	158.7	6.2	16.3	1,144.6	1,398.0
Profit for the period	-	-	-	-	134.6	134.6
Other comprehensive								(13.3)
income	-	-	-	(5.3)	(8.0)
Dividends	-	-	-	-	(48.0)	(48.0)
Balance at

31 December 2023		72.2		158.7		6.2	11.0	1,223.2	1,471.4

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

	6 Months		(As restated)
		6 Months
	ended 30
		ended 30
	June 2024
		June 2023

	(unaudited)		(unaudited)
Cash flows from operating activities	£m		£m

Profit for the year	95.0	66.9
Depreciation and amortisation	83.7	81.5
Amortisation of deferred revenue	(15.0)	(15.0)
(Loss)/profit on disposal of property, plant and	-	0.1
equipment

Retirement benefit obligation	(2.9)	(3.6)
Finance income	(10.0)	(7.7)
Finance costs	27.3	26.2
Income tax expense	33.6		22.6
	211.7	171.0
(Increase)/decrease in inventories	2.0	(1.4)
Decrease/(increase) in trade and other receivables	(18.5)	10.0
Increase in contract assets	(0.3)	(1.6)
Increase/(decrease) in trade and other payables	0.9	1.0
Decrease in provisions	(0.4)		(0.1)
Cash generated from operations	195.4	178.9
Receipt of customer contributions*	17.2	33.2
Net interest paid	(30.1)	(31.4)
Tax paid	(24.3)		(19.5)

Net cash from operating activities

Investing activities

Proceeds from disposal of property, plant and equipment

Purchase of property, plant and equipment Purchase of intangible assets

Amounts loaned to group companies

Net cash used in investing activities

Financing activities

Issue of long-term borrowings Repayment of long-term borrowings Repayment of short-term borrowings Movement in loans from group undertakings Lease payment

Net cash (used in)/generated by financing activities

Net increase/(decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

158.2161.2

-	-
(119.9)	(102.0)
(2.0)	(5.3)
(20.9)		(73.2)
(142.8)		(180.5)
-	-
(19.8)	(19.5)
7.0	(10.1)
-	-
(2.0)		(2.0)
(14.8)		(31.6)

0.6 (50.9)

15.4268.7

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

Cash and cash equivalents at end of period

14.8

217.8

*Following a review of sector general practice and to align with the accounting treatment of customer contributions within revenue these amounts have been presented within operating activities rather than investing activities with the comparatives restated. Accordingly this has resulted in an increase in cash from operating activities and increase in cash used in investing activities in the comparative period by £33.2m. There has been no other impact on the financial statements from this change.

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