TIDMPNN
RNS Number : 9837R
Pennon Group PLC
03 July 2020
PENNON GROUP PLC
PUBLICATION OF ANNUAL REPORT AND ACCOUNTS 2020
In compliance with Listing Rule 9.6.1 Pennon Group Plc (the
"Company") announces that the following document has been submitted
to the Financial Conduct Authority electronically via the National
Storage Mechanism and will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
-- Annual Report and Accounts 2020
The Annual Report and Accounts 2020 may also be viewed on the
Company's website at www.pennon-group.co.uk
The Company will hold its 2020 Annual General Meeting ("AGM") at
Peninsula House, Rydon Lane, Exeter, United Kingdom, EX2 7HR at 1pm
on Friday 31 July 2020. Due to the ongoing COVID-19 pandemic and
the restrictions placed on physical public gatherings, it is
expected that the meeting will be held as a closed meeting. Further
information will be provided in the Notice of AGM, which will be
issued to shareholders shortly.
The following information in the Appendix to this announcement
is as set out in the Company's Annual Report and Accounts 2020. It
should be read in conjunction with the Company's Full Year Results
announcement released on 4 June 2020 which included a set of
consolidated financial statements, a fair review of the development
and performance of the business and the position of the Company and
its main trading subsidiary companies. Together these documents
constitute the information required by Disclosure and Transparency
Rule 6.3.5.
Simon Pugsley
Group General Counsel & Company Secretary
3 July 2020
APPIX
Principal risks and uncertainties
The Group's business model exposes the business to a variety of
external and internal risks influenced by the potential impact of
macro political, economic and environmental factors.
While the ability of the Group to influence these macro level
risks is limited, they continue to be regularly monitored and the
potential implications are considered as part of the ongoing risk
assessment process. The Group performs a range of scenario planning
and analysis exercises to understand the risk exposure of one, or a
number, of these events occurring.
The Group's principal risks have been reviewed and updated to
reflect the transfer of risks associated with waste activities as a
result of the proposed sale of Viridor, which has received
shareholder and European Commission approval. This has resulted in
the removal or reassessment of a number of the Group's principal
risks when compared with previous annual reports, reflecting the
focus of the Group on its water and wastewater businesses.
Britain's exit from the European Union
Prior to Britain's exit from the EU, detailed contingency plans
had been established and tested to mitigate against potential
issues that may have occurred in the event of a no-deal scenario.
Negotiations on a future trading agreement between Britain and the
EU is ongoing and continues to be closely monitored.
The impact of any agreement on the Group's operations and
processes will be fully evaluated as further detail is confirmed.
In the event that no agreement is reached, and trade arrangements
revert to World Trade Organization (WTO) rules, existing
contingency plans will ensure that the Group is well prepared to
mitigate against any short-term impact that is likely to arise from
this scenario.
Impact of COVID-19
The Board recognise the significant impact that COVID-19 has had
globally and within the UK. In response to the current situation
the UK Government has designated key worker status to our frontline
operational water and waste activities. In order to continue
delivering the expected levels of service to our stakeholders we
have reviewed our processes and ways of working and drawn on our
resilience and continuity plans, while continuing to prioritise the
health, safety and wellbeing of our employees and customers which
remains paramount during this period. We also continue to work
closely with our key stakeholders and peers including local
resilience forums, Water UK, Ofwat and Defra ensuring a joined up
and collaborative response. Both the Pennon Executive and Pennon
Board continue to receive regular updates on the Group's
response.
To date, our business has remained broadly resilient to the
immediate risks that have been presented by COVID-19. It is likely,
however, that there will be ongoing restrictions in place during
2020/21, which could provide continued challenges to the delivery
of our key operational activities. Medium-term response planning
has been undertaken to establish strategies to mitigate these risks
where possible, which has considered a range of potential scenarios
and been informed by actions taken by other countries impacted by
the pandemic. These plans will continue to be reviewed and updated
as further Government and Public Health guidance is provided.
The principal risks detailed below have been assessed applying
the Group's impact and likelihood methodology, separately
identifying both the underlying risk assessment prior to the onset
of the COVID-19 virus and the assessment of risk reflecting the
potential impact of COVID-19. The commentary for individual
principal risks also provides further detail on additional
mitigation steps that have been taken in response to this
event.
The Directors confirm that during 2019/20 they have carried out
a robust assessment of current and emerging risks facing the Group.
The assessment of the Group's principal risks has considered the
impact on its business model, future performance, solvency and
liquidity. These principal risks have been considered in preparing
the viability statement on page 68.
Strategic impact - long-term priorities
affected
--------------------------------------------------------------------------
1 2 3
Leadership Cost base Sustainable
in UK efficiency growth
infrastructure
------------------ -------------- --------------------------------------
Risk level
Green Amber Red
Low Medium High Increasing Stable Decreasing
Law, regulation and finance
Net risk
Principal Net risk (including
risk Strategic impact Mitigation (pre-COVID-19) COVID-19) Risk appetite
====================== ======================= =============== =========== ====================
A: Changes Long-term priorities The General Election in Green Amber We recognise
in Government affected: December 2019 has that Government
policy 1,2 provided policy evolves.
Changes in greater certainty over The Group
Government Government seeks to
policy may policy, with the minimise
fundamentally current potential
impact our UK Government risk and
ability to supportive maximise
deliver the of the existing opportunities
Group's strategic regulatory through
priorities model. We continue to regular
impacting shareholder engage engagement,
value. with MPs, all political communication
stakeholders, customers and robust
and wider stakeholders, scenario
both directly and via planning.
Water
UK, demonstrating the
value
received from our
operational
performance and
continued
investment in the
network
infrastructure.
The UK Government has
also
committed to the GBP50
Government
contribution made to
household
customers of South West
Water being retained
for
2020/21.
The speed at which
action
announced by the
Government
in response to
COVID-19,
including changes to
restrictions
and ongoing support to
the
economy, presents
challenges
in ensuring the impact
to
the business is
minimised.
================= ====================== ======================= =============== =========== ====================
B: Regulatory Long-term priorities Greater certainty over Green Amber We accept
reform affected: reform that regulatory
1,2 of the regulatory reform occurs
Reform of the framework and seek
regulatory has been provided to leverage
framework may through opportunities
result in changes the announcement of where possible
to the Group's South and minimise
priorities West Water's Final the negative
and the service Determination impact of
we provide for the 2020-25 regulatory
to our customers. regulatory reform by
It may have period. Both South West targeting
a significant Water and Pennon Water changes
impact on our Services which are
performance maintain ongoing NPV neutral
which can impact dialogue over the
shareholder directly with longer term
value. regulators to protect
and through sector-wide customer
forums and engage fully affordability
with consultations and and shareholder
proposed value.
reforms of the
regulatory
frameworks.
A number of temporary
regulatory
changes have been
introduced
in response to
COVID-19;
in particular in
respect
of the water retail
market,
including wholesaler
support.
The speed at which
these
changes are being
introduced
has impacted on the
ability
to fully consult with
regulators
and increases the
possibility
that these changes are
detrimental
to the Group's
activities.
================= ====================== ======================= =============== =========== ====================
C: Compliance Long-term priorities The Group operates Green Amber The Group
with laws affected: within has the
and regulations 1,2 robust and mature highest
The Group is regulatory standards
required to frameworks ensuring of compliance
comply with compliance and has
a range of with Ofwat, Environment no appetite
regulated and Agency and other for legal
non-regulated relevant or regulatory
laws and regulations requirements. These breaches.
across our frameworks
businesses. are subject to regular
Non-compliance review
with one or by South West Water,
a number of Pennon
these may result Water Services and the
in financial Pennon
penalties, Executive.
a negative Compliance with the
impact on our regulatory
ability to framework has become
operate effectively more
and reputational complex as a result of
damage. a
number of temporary
changes
introduced by our
regulators
in response to
COVID-19.
All regulatory changes
are
subject to detailed
review
and, where necessary,
internal
processes, systems and
controls
are revised to ensure
compliance.
The Group also
maintains
a comprehensive
internal
framework to ensure
compliance
with corporate laws and
regulations. This is
reinforced
through key policies
such
as the Group's Code of
Conduct,
supply chain code of
conduct
and anti-slavery
policy.
Additionally, the
Group's
Speak Up whistleblowing
process allows any
concerns
to be raised
confidentially
and dealt with through
appropriate
investigations.
================= ====================== ======================= =============== =========== ====================
D: Maintaining Long-term priorities The Group has mature Green Green The Group
sufficient affected: treasury, operates
finance 1,3 funding and cash flow a prudent
and funding, Failure to arrangements approach
within our maintain funding in place and the impact to our financing
debt covenants, requirements of political, economic strategy
to meet could lead and in order
ongoing to additional regulatory risks on the to ensure
commitments finance costs Group's financing our funding
and put our commitments requirements
growth agenda and cash flow is are fully
at risk. Breach regularly met.
of covenants reviewed by Pennon
could result Executive
in the requirement and the Board.
to repay certain The Group has GBP1.6
debt. billion
of cash and committed
facilities
providing liquidity and
ensuring South West
Water
is prefunded into the
next
regulatory period.
During 2019/20 GBP840
million
of new or renewed
funding
was entered into,
including
GBP245 million of
funding
through the Sustainable
Funding Framework for
South
West Water.
The strength of our
position
provides the Group with
added resilience in the
event of volatility
which
may arise as a result
of
COVID-19.
================= ====================== ======================= =============== =========== ====================
E: Non-compliance Long-term priorities The effective Red Red The Group
or occurrence affected: management has no appetite
of an avoidable 1,2,3 of health & safety for health
health & A breach of risks & safety-related
safety incident health & safety continues to be a incidents
law could lead priority and has
to financial for the Board and the highest
penalties, Pennon standards
significant Executive. of compliance
legal costs During the year there within the
and damage has Group, contractors,
to the Group's been two fatalities partners
reputation. that and other
have occurred in the third parties.
delivery
of our activities. Both
incidents are deeply
tragic
and full and thorough
root
cause analysis has been
undertaken to identify
additional
actions required to
prevent
such incidents from
occurring
again alongside
additional
training and system
upgrades.
During the year the
Group
progressed the full
roll-out
of HomeSafe across the
Group,
which has contributed
to
a lost time injury
frequency
rate of 0.9, a further
improvement
on prior year and the
Group
remains on track to
achieve
its LTIFR target of 0.5
by 2025.
In response to COVID-19
additional safety
measures
have been introduced to
ensure that key
activities
across the Group can
continue
to be performed safely,
in line with Government
and public health
guidance.
This includes remote
working,
social distancing and
the
provision of additional
hygiene and appropriate
personal protective
equipment
(PPE).
The easing of
Government
restrictions continues
to
be carefully reviewed
to
ensure the Group's
activities
can continue to be
delivered
safely and Government
and
public health guidance
will
continue to be
stringently
followed.
================= ====================== ======================= =============== =========== ====================
F: Tax compliance Long-term priorities The Group continues to Green Green The Group
and contribution affected: achieve ensures
2 the Fair Tax Mark; an full compliance
Non-compliance independent with HMRC
may result certification scheme, requirements
in financial which and will
penalties, recognises not enter
legal costs organisations into artificial
and reputational that demonstrate they tax arrangements
damage. Furthermore, are or take
the perception paying the right amount an aggressive
that Pennon's of corporation tax in stance in
overall tax the the interpretation
contribution right place, at the of tax legislation.
is inadequate right
could have time.
a detrimental The Group have an
impact on the experienced
reputation and professionally
of the Group. qualified
in-house tax team
supported,
where necessary, by
external
specialists.
Senior accounting
officers
are required to review
and
declare annually the
effectiveness
of tax-related internal
controls within their
respective
area of responsibility.
Discussions continued
with
HMRC regarding the
agreement
of uncertain tax items
in
order to enable the
finalisation
of tax returns.
================= ====================== ======================= =============== =========== ====================
G: Failure Long-term priorities The Group has an Amber Amber The Group
to pay all affected: experienced will ensure
pension 2 in-house Pensions team that all
obligations The Group could who obligations
as they be called upon also engage are met
fall due to increase professional in full
and increased funding to advisers to manage the but seeks
costs to reduce the pension to manage
the Group deficit, impacting scheme's investment this without
should the our cost base. strategy, unnecessary
deferred ensuring the scheme can increased
pension pay its obligations as costs to
scheme deficit they the Group.
increase fall due.
The triennial 2019
valuation
of the Group's
principal
pension scheme has
recently
been completed, with a
recovery
plan to return to full
funding
on a technical
provisions
basis by March 2022. In
addition, the Group has
sought to support the
scheme
through the
acceleration
of contributions of
GBP17
million during the
year.
The Group is currently
consulting
on potential changes to
its pension scheme
arrangements
including closure to
future
accrual of the main
scheme
which, if implemented,
will
be effective from July
2020.
================= ====================== ======================= =============== =========== ====================
Market and economic conditions
Net risk
Principal Strategic Net risk (including
risk impact Mitigation (pre-COVID-19) COVID-19) Risk appetite
==================== ============================= =============== =========== =================
H: Non-recovery Long-term South West Water has mature Green Red While seeking
of customer priorities and embedded debt collection to minimise
debt affected: strategies which has non-recoverable
1,2, continued debt, we
Potential to deliver improved recognise
impact on collection customer
revenue as rates and decreased debt affordability
a result of exposure during the year. challenges
reduced customer The collection of debt within and the
debt collection, Pennon Water Services has inability
particularly also improved during the to disconnect
with regards year. household
to vulnerable The potential impact of customers
customers COVID-19 could place results
and affordability. affordability in a residual
pressure on both our domestic risk of
and business retail customers uncollectable
negatively impacting on debt remaining.
collection rates and debt
exposure. Measures introduced
by regulators within the
retail water market,
including
the deferral of payments
to wholesalers, may also
impact on immediate debt
levels.
We have worked proactively
with our customers,
identifying
and contacting those most
in need and supporting them
in the most appropriate
way. This has included
automatically
extending social tariffs
and payment plans for our
domestic customers.
Additional short-term
flexibility,
requested by our regulators,
has already been incorporated
within our collection
processes
for both our domestic and
retail water businesses.
================ ==================== ============================= =============== =========== =================
I: Macroeconomic Long-term The Group has a dedicated Amber Amber The Group
risks impacting priorities procurement function seeks to
inflation, affected: supported take well-judged
commodity 3 by established processes and informed
and power Changes such to ensure the quality of decisions
prices as currency provision and price for while ensuring
exchange movements, goods and services procured. plans are
tariffs and There remains the potential in place
volatility for increased costs arising to mitigate
within the from COVID-19 due to demand the potential
energy markets and exchange rate volatility impact of
could increase for the limited goods macroeconomic
the Group's purchased risks.
cost base. from outside the UK, in
particular chemicals, which
increases risk in this area.
Energy usage is minimised
and where possible on-site
renewable generation schemes
are implemented to reduce
the requirement to purchase
electricity from the grid.
Despite the current
volatility
experienced within the spot
market, partly as a result
of COVID-19, medium-term
electricity markets are
relatively stable and South
West Water had hedged the
majority of wholesale power
costs for the first two
years of the new regulatory
period.
================ ==================== ============================= =============== =========== =================
Operating performance
Net risk
Principal Net risk (including
risk Strategic impact Mitigation (pre-COVID-19) COVID-19) Risk appetite
====================== ====================== =============== =========== ==================
J: Poor Long-term priorities The increased Amber Amber The Group
operating affected: frequency seeks to
performance 1 and impact of extreme reduce both
due to extreme Failure of weather the impact
weather our assets exposes our assets to and likelihood
or climate to cope with risk, through
change extreme weather while there continues long-term
conditions to planning
may lead to be a reduced appetite and forecasting
an inability for to ensure
to meet our reduced performance that sufficient
customers' arising measures
needs, environmental from such incidents are in place
damage, additional from to mitigate
costs and reputational the regulator and our the impact
damage. stakeholders. of extreme
The Group seeks to weather
mitigate and climate
this risk proactively change on
through our operations.
a planned capital
investment
programme as well as
established
emergency resources
and
contingency planning.
As part of the risk
management
process the Group also
performs
horizon scanning on
the
longer-term impacts of
climate
change on its
operations.
Further improvement in
South
West Water's
resilience
is a key focus within
the
next regulatory
period.
A Director of
Resilience
has been appointed
during
the year to lead this
workstream.
==================== ====================== ====================== =============== =========== ==================
K: Poor Long-term priorities Despite the retail Green Amber The Group
service affected: water continually
and/or increased 1,3 market continuing to seeks to
competition Poor customer remain increase
leading service has highly competitive, customer
to loss a direct impact Pennon satisfaction
of customers on the ability Water Services has a and maximise
of Pennon Water knowledgeable customer
Services to key account team to retention
retain and support while taking
grow market customers. The well informed
share. business risk to
has strategically develop
targeted further
high-consumption markets
customers and offerings.
to maintain market
share.
As a result of
restrictions
imposed in response to
COVID-19
a proportion of Pennon
Water
Services' customers
have
temporarily ceased
operating.
If these businesses
are
unable or choose not
to
resuming trading
following
the easing of
restrictions
this could result in
overall
attrition to the
customer
base. Regular contact
and
communication is being
maintained
with customers to
support
them during this
period.
==================== ====================== ====================== =============== =========== ==================
L: Business Long-term priorities South West Water has Amber Amber The Group
Interruption affected: mature operates
or significant 1,3 processes in place for a low tolerance
operational Operational the for significant
failures/ failure in management of their operational
incidents our water business assets failure
could mean which is done through and seeks
that we are a to mitigate
unable to supply programme of these risks
clean water sophisticated where possible.
to our customers planned and preventive
or provide maintenance
safe wastewater and effective
processes. management
This has a of stores.
direct impact In the event of a
on the successful significant
delivery of incident South West
the PR19 business Water
plan. maintains detailed
contingency
plans and incident
management
procedures which are
regularly
reviewed.
Existing processes
have
been extensively
reassessed
in light of the
potential
impact of COVID-19 and
appropriate
measures and actions
have
been introduced,
working
with the wider water
sector
and our key strategic
partners,
to ensure the
continued
delivery of our
highest
priority activities.
This
has included new
working
processes, adjusted
shift
patterns and enhanced
operational
cover to provide added
resilience.
These actions have
been
effective to date in
ensuring
the resilience of our
operations,
however, the potential
ongoing
impact of COVID-19 on
our
business will continue
to
remain a risk.
==================== ====================== ====================== =============== =========== ==================
M: Difficulty Long-term priorities The Group's HR Amber Amber While turnover
in the recruitment, affected: Strategy of employees
retention 1,2,3 continues to be does occur
and development Failure to embedded we ensure
of appropriate have a workforce across the the appropriate
skills required of skilled organisation skills and
to deliver and motivated in order to continue experience
the Group's individuals to is in place
strategy will detrimentally attract, retain and with succession
impact all develop plans providing
of our strategic our employees. adequate
priorities. Succession resilience.
We need the plans remain in place
right people for
in the right senior and other key
places to innovate, positions
share best while the Group
practice, deliver recruited
synergies and an additional 191 new
move the Group apprentices
forward. during the year.
There are also various
engagement
forums across the
Group
which provide
opportunities
for employees to
regularly
discuss business
priorities
and challenges with
business
leaders.
The impact of these
initiatives
is measured through
the
results of the most
recent
Great Places to Work
Best
Workplace Survey which
showed
an improved Trust
Index
score of 63% and
maintained
last year's engagement
score
of 68%. We also
achieved
our highest ever
participation
rate at 83%,
demonstrating
employees value this
mechanism
for feedback.
During COVID-19 we
have
refocused our
resources
where appropriate to
essential
parts of our business
and
not furloughed any
employees.
To date there has been
no
immediate impact of
COVID-19
on the ability to
attract
and retain necessary
skills
within the Group. It
is
recognised that there
may
be longer-term
challenges
and action is underway
to
minimise the impact of
these.
==================== ====================== ====================== =============== =========== ==================
N: Non-delivery Long-term priorities The regulatory Amber Red The Group
of regulatory affected: framework is committed
outcomes 1,2,3 has been in place to achieving
and performance South West since all of our
commitments Water's Regulatory 1 April 2015 and South performance
Outcomes and West commitments
performance Water has delivered over the
commitments cumulative length of
cover key strategic net ODI rewards of each regulatory
focus areas. GBP13.3 period.
Non-delivery million during Where performance
against these 2015-20. in an individual
could result The ODI regime in the year falls
in financial 2020-25 below expectation
penalties being regulatory period is we implement
applied as more action plans
well as reputational stretching with the and targeted
damage to the overall interventions
Group. reward/penalty range to ensure
more performance
penal. returns
While South West Water to committed
has levels.
used the fast-track
status
awarded by Ofwat to
commence
early roll-out of key
projects
and initiatives, the
impact
of COVID-19 could
present
additional medium-term
challenges
that impact on the
ability
to deliver the
required
step change and
outperform
the agreed performance
commitments.
Alternative strategies
and
ways of working are
being
developed which seek
to
ensure the continued
delivery
of performance
commitments
into the future.
==================== ====================== ====================== =============== =========== ==================
Business systems and capital investment
Net risk Net risk
Principal (pre (including
risk Strategic impact Mitigation COVID-19) COVID-19) Risk appetite
===================== ============================ =========== ============ ==================
O: Failure Long-term priorities All capital projects are Green Green The Group's
or increased affected: subject to a robust investment
cost of 1,3 business activities
capital Inability to case process which includes are taken
projects/exposure successfully challenge and risk on an informed
to contract deliver on modelling basis with
failures our capital of key assumptions. risks weighed
programme may Projects against
result in increased are delivered using skilled appropriate
costs and delays project management resource returns.
and detrimentally complemented by senior
impacts our oversight
ability to and leadership.
provide top The scheduling of a number
class customer of projects for the 2020-25
service and regulatory period have been
achieve our advanced and agreements
growth agenda. are in place with strategic
partners who will support
the delivery of the capital
programme.
The impact of COVID-19 has
seen further strain placed
on the financial health
of key contractors and
supply
chain partners. There is
regular engagement and
communication
with our supply chain and
early intervention is taken
where necessary.
Medium-term restrictions,
which could include
continued
social distancing or
restricted
travel, could also impact
on the costs and timescales
in delivering these
projects.
================== ===================== ============================ =========== ============ ==================
P: Failure Long-term priorities The Group operates a mature Amber Amber We seek
of information affected: and embedded governance to minimise
technology 1 framework over the IT the risk
systems, Failure of environment of informational
management our information and South West Water holds technology
and protection technology the ISO 27001 failure
including systems, due accreditation. and cyber
cyber risks to inadequate There has been a security
internal processes significant threats
or external increase in the number of to the lowest
cyber threats employees working remotely level without
could result as result of COVID-19, detrimentally
in the business which impacting
being unable has placed additional on business
to operate strain operations.
effectively on the capacity of our
and the corruption systems.
or loss of Additional bandwidth and
data. This licences have been procured
would have and IT systems have
a detrimental remained
impact on our resilient during this
customers and period.
result in financial Disaster recovery plans
penalties and are in place for corporate
reputational and operational technology,
damage for which have been updated
the Group. to reflect the impact of
COVID-19.
During this period there
has also been an increase
in the volume and
sophistication
of cyber threats. These
risks are mitigated by a
strong preventive and
detective
information security
framework
aligned to guidance issued
by the National Cyber
Security
Centre (NCSC).
South West Water also
continues
to progress actions to meet
the requirements of the
Network and Information
Systems (NIS) directive
with activities aligned
to the priorities
identified
by the Drinking Water
Inspectorate.
================== ===================== ============================ =========== ============ ==================
Statement of Directors' responsibilities
(This statement is extracted from the governance section of the
Annual Report 2020 and page numbers referred to are those in the
Annual Report 2020.)
The Directors are responsible for preparing the annual report,
the Directors' remuneration report and the financial statements in
accordance with applicable law and regulations. Company law
requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have prepared the
Group and Company financial statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted by
the European Union (EU).
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and the Company and of
the profit or loss of the Group for the year.
In preparing these financial statements the Directors are
required to:
-- Select suitable accounting policies and then apply them consistently
-- Make judgements and accounting estimates which are reasonable and prudent
-- State whether applicable IFRSs as adopted by the EU have been
followed, subject to any material departures disclosed and
explained in the financial statements. The Directors confirm that
they have complied with the above requirements in preparing the
financial statements.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions, and disclose with reasonable accuracy at any time the
financial position of the Group and the Company; and enable them to
ensure that the financial statements and the Directors'
remuneration report comply with the Companies Act 2006 and, as
regards the Group financial statements, Article 4 of the
International Accounting Standards Regulation. They are also
responsible for safeguarding the assets of the Group and the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Each of the Directors, whose names and functions are listed on
pages 76 and 77, confirms that, to the best of his or her
knowledge:
(i) The financial statements, which have been prepared in
accordance with IFRSs as adopted by the EU, give a true and fair
view of the assets, liabilities, financial position and profit of
the Group and of the Company.
(ii) The strategic report (pages 1 to 69 and 121) and the
Directors' report, include a fair review of the development and
performance of the business during the year and the position of the
Company and the Group at the year end, together with a description
of the principal risks and uncertainties they face.
(iii) Following receipt of advice from the Audit Committee, the
annual report, taken as a whole, is fair, balanced and
understandable, and provides the information necessary for the
shareholders to assess the Group's position and performance,
business model and strategy.
The Directors are responsible for the maintenance and integrity
of the Company's website www.pennon-group.co.uk.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
Related party transactions
(The following is Note 44 to the Financial Statements set out in
the Annual Report 2020.)
During the year Group companies entered into the following
transactions with joint ventures who are not members of the Group.
The year end balances as at 31 March 2020 with joint ventures are
included within assets held for sale (see note 46 for further
details).
2020 2019
GBPm GBPm
============================================ ===== =====
Sales of goods and services
-------------------------------------------- ----- -----
INEOS Runcorn (TPS) Limited 18.2 16.6
============================================ ===== =====
Purchase of goods and services
-------------------------------------------- ----- -----
Lakeside Energy from Waste Limited 12.8 12.4
-------------------------------------------- ----- -----
INEOS Runcorn (TPS) Limited 8.3 7.1
-------------------------------------------- ----- -----
Dividends received
-------------------------------------------- ----- -----
Lakeside Energy from Waste Holdings Limited 6.0 5.5
============================================ ===== =====
Year-end balances
2020 2019
GBPm GBPm
===================================================== ===== =====
Receivables due from related parties
----------------------------------------------------- ----- -----
Lakeside Energy from Waste Limited (loan balance) 7.1 7.7
----------------------------------------------------- ----- -----
INEOS Runcorn (TPS) Limited (loan balance) 59.5 65.0
===================================================== ===== =====
66.6 72.7
===================================================== ===== =====
Lakeside Energy from Waste Limited (trading balance) 1.0 1.0
----------------------------------------------------- ----- -----
INEOS Runcorn (TPS) Limited (trading balance) 1.2 1.8
===================================================== ===== =====
2.2 2.8
===================================================== ===== =====
Payables due to related parties
----------------------------------------------------- ----- -----
Lakeside Energy from Waste Limited (trading balance) 1.1 0.9
----------------------------------------------------- ----- -----
INEOS Runcorn (TPS) Limited (trading balance) 1.7 3.2
===================================================== ===== =====
2.8 4.1
===================================================== ===== =====
The GBP66.6 million (2019 GBP72.7 million) receivable relates to
loans to related parties due for repayment in instalments between
2018 and 2033. Interest is charged at an average of 13.0% (2019
13.0%).
Company
The following transactions with subsidiary undertakings occurred
in the year:
2020 2019
GBPm GBPm
================================================== ===== =====
Sales of goods and services (management fees) 17.9 19.7
================================================== ===== =====
Purchase of goods and services (support services) 0.6 2.0
================================================== ===== =====
Interest receivable 43.4 43.3
================================================== ===== =====
Interest payable 0.1 0.1
================================================== ===== =====
Dividends received 335.6 196.7
================================================== ===== =====
Sales of goods and services to subsidiary undertakings are at
cost. Purchases of goods and services from subsidiary undertakings
are under normal commercial terms and conditions which would also
be available to unrelated third parties.
Year-end balances
2020 2019
GBPm GBPm
============================================= ======= =======
Receivables due from subsidiary undertakings
--------------------------------------------- ------- -------
Loans 1,225.6 1,044.6
============================================= ======= =======
Trading balances 16.0 19.9
============================================= ======= =======
Interest on GBP591.8 million of the loans has been charged at
fixed rates during the year with an average effective rate of 4%
(2019 GBP499.8 million charged at 5%), and on GBP591.8 million at
an average effective rate of three-month LIBOR plus 2.6% (2019
GBP499.8 million charged at 12-month LIBOR + 2.2%). Interest on
GBP16.0 million (2019 GBP18.1 million) has been charged at a fixed
rate of 6.0%. These loans are due for repayment in instalments over
the period 2021 to 2045.
Interest on GBP13.0 million (2019 GBP13.5 million) of the loans
has been charged at a fixed rate of 5.0%. Interest on GBP13.0
million (2019 GBP13.5 million) of the loans has been charged at
12-month LIBOR + 3.0%. These loans are due for repayment in
instalments over a five-year period following receipt of a request
to repay.
No material expected credit loss provision has been recognised
in respect of loans to subsidiaries (2019 GBPnil).
2020 2019
GBPm GBPm
======================================== ===== =====
Payables due to subsidiary undertakings
---------------------------------------- ----- -----
Loans 284.4 283.9
======================================== ===== =====
Trading balances 9.1 14.3
======================================== ===== =====
The loans from subsidiary undertakings are unsecured and
interest-free without any terms for repayment.
3 July 2020
www.pennon-group.co.uk
End transmission
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London Stock Exchange. RNS is approved by the Financial Conduct
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END
ACSKKNBBFBKKFOK
(END) Dow Jones Newswires
July 03, 2020 04:31 ET (08:31 GMT)
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