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Notes on the Condensed Interim Statements
for the period 1 April 2016 to 30 September 2016
15. Share capital
Number
(millions) £m
Allotted, called up and fully paid:
At 1 April 2016 1,007.6 503.8
Issue of shares 9.4 4.7
At 30 September 2016 1,017.0 508.5
The Company has one class of ordinary share which carries no right to fixed income. The holders of ordinary shares are entitled to receive
dividends as declared and are entitled to one vote per share at meetings of the Company.
Shareholders were able to elect to receive ordinary shares in place of the final dividend for the year to 31 March 2016 of 62.5p (61.8p –
September 2015 in relation to the final dividend for the year to 31 March 2015; 26.9p – March 2016, in relation to the interim dividend for
the year to 31 March 2016) per ordinary share under the terms of the Company’s scrip dividend scheme. This resulted in the issue of
9,395,092 (September 2015 – 10,600,639, March 2016 – 1,172,973) new fully paid ordinary shares.
The Company issued 0.1m shares (2015 – 0.2m, March 2016 – 2.8m) during the period under the savings-related share option schemes,
and discretionary share option schemes for a consideration of £0.9m (2015 - £1.1m, March 2016 - £25.0m).
During the period, on behalf of the Company, the employee share trust purchased 0.3 million shares (2015 – 0.4 million, March 2016 – 0.8
million) for a consideration of £5.0m (2015 – £7.4m, March 2016 – £11.1m) to be held in trust for the benefit of employee share schemes.
16. Capital and Financial Risk Management
Capital management
The Board’s policy is to maintain a strong balance sheet and credit rating so as to support investor counterparty and market confidence
and to underpin future development of the business. The Group’s credit ratings are also important in maintaining an efficient cost of
capital and in determining collateral requirements throughout the Group. Based on latest assessment, the Group’s long term credit rating
was A- negative outlook for Standard & Poor’s, and was A3 stable outlook for Moody’s. Further detail of the capital management
objectives, policies and procedures are included in the ‘Financial management and balance sheet’ section of the Strategy and Finance
section of this report.
The maintenance of a medium-term corporate model is a key control in monitoring the development of the Group’s capital structure, and
allows for detailed scenarios and sensitivity testing. Key ratios drawn from this analysis underpin regular updates to the Board and include
the ratios used by the rating agencies in assessing the Group’s credit ratings.
The Group has the option to purchase its own shares on the market; the timing of these purchases depends on market prices and
economic conditions. The use of share buy-backs shall be implemented if the Directors believe that doing so would be in the best interests
of shareholders. Following the disposal of 16.7% of the group’s stake in Scotia Gas Networks, this method of returning capital to
shareholders could have the advantage of offsetting the earnings per share (EPS) reduction resulting from the potential disposal and
reducing the total dividend outflow in future years.
The Group’s debt requirements are principally met through issuing bonds denominated in Sterling and Euros as well as private placements
and medium term bank loans including those with the European Investment Bank. In addition the Group has issued hybrid capital
securities which bring together features of both debt and equity, are perpetual and subordinate to all senior creditors. The Group has
£1.5bn of committed bank facilities which relate to the Group’s revolving credit and bilateral facilities that can be accessed at short notice
for use in managing the Group’s short term funding requirements; however, these committed facilities remain undrawn for the majority
of the time.
The Group’s intent is to balance returns to shareholders between current returns through dividends and long-term capital investment for
growth. In doing so, the Group will maintain its capital discipline and will continue to operate within the current economic environment
prudently. There were no changes to this capital management approach during the period.
Financial risk management
The Board has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Risk and Trading
Committee, which reports to the Executive Committee, comprises the two Executive Directors and senior managers from the Energy
Portfolio Management, Generation, Retail, Corporate and Finance functions. Its specific remit is to support the Group’s risk management
responsibilities by reviewing the strategic, market, credit, operational and liquidity risks and exposures that arise from the Group’s energy
portfolio management, generation, energy supply and treasury operations. The membership and deliberations of the Risk and Trading
Committee are designed to ensure strict business separation requirements are maintained. The specific financial risks which involve the
use of financial instruments are the Group’s commodity, currency, credit, liquidity and interest rate risks.
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