RNS Number:7781M
Bristol Water Group PLC
26 May 2005
BRISTOL WATER GROUP plc
26 May 2005
FOCUS ON CORE REGULATED BUSINESS COMPLETED
PROPOSED #30m RETURN TO SHAREHOLDERS
Year ended 31 March 2005 2004 % change
#m #m
Group turnover -
Regulated water business 70.6 70.6 -
Other businesses - continuing - 0.1 na
- discontinued 27.9 42.8 -35%
------- -------
Total 98.5 113.5 -13%
------- -------
Operating profit including share of joint ventures -
Regulated water business
- normal activities 18.7 19.9 -6%
- exceptional restructuring costs (2.0) - na
------- -------
16.7 19.9 -16%
Other businesses - continuing - (0.2) na
- discontinued (1.6) 0.5 na
------- -------
Total 15.1 20.2 -25%
------- -------
Exceptional items (4.8) 0.3 na
------- -------
Interest charge (8.7) (6.0) 46%
------- -------
Profit before tax 1.6 14.5 -89%
------- -------
Profit after tax 1.5 11.6 -87%
------- -------
Earnings per existing ordinary share
Before operating and non-operating exceptional items
- Shares in issue 31.8p 51.5p -38%
- Fully diluted 31.1p 50.8p -39%
After operating and non-operating exceptional items
- Shares in issue 2.1p 53.3p -96%
- Fully diluted 2.0p 52.2p -96%
Full year dividend per ordinary share*
Equivalent on existing ordinary shares before
proposed share consolidation 26.64p 26.64p -
Equivalent after proposed share consolidation 34.63p 34.63p -
* Assuming that the proposed #30m return to shareholders and the 10 for 13
consolidation of ordinary shares are approved by shareholders and completed, the
final dividend will be proposed and paid on a per consolidated share basis.
Accordingly, the final dividend is expected to be 24.43 pence per share,
equivalent to 18.79 pence per existing ordinary share.
Net debt/(cash) at 31 March #m #m
Regulated water business 140.1 140.3
Other businesses (14.4) (18.9)
------- -------
Total 125.7 121.4
------- -------
* Regulated water business
- High service standards maintained
- Operating profit before exceptional restructuring costs of #2.0m reduced by
6% reflecting price increase of just 0.6% and lower measured consumption
- Net capital investment in year #16.6m
- Ofwat's Final Determination of price limits 2005-10 accepted
- Additional debt of #57m to be raised in June 2005, in part to finance
proposed return of capital
- Anticipated net debt: Regulatory Capital Value of 75% to 80% over next five
years
- Additional contribution of #7m to reduce pension deficit
* Other businesses
- Lawrence sale completed February 2005
- Majority of international leakage business sold May 2005
- Agreement with partners to exit Watergrid
* Group results and corporate developments
- Actions to focus Group on core regulated water business completed
- Dividend maintained at 2004/05 levels
- Further return of #30m to shareholders proposed
- Board anticipates recommending dividend for 2005/06 of #5.8m, with intended
dividend policy of maintaining this in real terms until 2009/10
For further information:
Alan Parsons, Chief Executive Oliver Winters
Andy Nield, Group Finance Director City Profile
Bristol Water Group plc
Tel: 0117 953 6407 Tel: 0207 448 3244
Or contact:
Bristol Water Corporate Affairs on 0117 953 6470 during office hours or 07831
453924 at any time
CHAIRMAN'S STATEMENT
Introduction
It has been a year of major change.
We have completed the refocusing of the group on its regulated water business.
During the year we completed the sale of Lawrence and sold our interest in
Purton Carbons, we also agreed with our partners to terminate our involvement in
Watergrid and after the year end completed the sale of the majority of our
international leakage control business. Accordingly the group will in the
foreseeable future undertake no material activities apart from the regulated
water business.
Ofwat completed its determination of price limits for the five year period 1
April 2005 to 31 March 2010 for the group's regulated water business as part of
the industry wide review. In December 2004, Ofwat set out its Final
Determination which, after careful consideration, the board of the regulated
water business accepted.
Return to Shareholders
In light of the finalisation of the price limits and related output assumptions
for the regulated water business for the period 1 April 2005 to 31 March 2010
and the disposal of Lawrence and the other non-regulated businesses, the Board
carried out a review of the group's capital requirements. The review concluded
that shareholders' interests are best served by increasing the level of gearing
in the regulated water business, increasing its inter-company loan to Bristol
Water Group plc and reducing the level of cash held elsewhere in the group. This
will increase the capital efficiency of the group and allow a further return to
shareholders.
Accordingly on 20 May 2005 the Board announced proposals to effect a return to
shareholders of 148 pence per share (approximately #30m in aggregate). Full
details were set out in a Circular posted to shareholders on 20 May 2005. The
proposals are subject to shareholder and Court approval and the required
additional finance being put in place. It is expected that the proceeds will be
posted to shareholders by 15 July 2005.
In order to make the future share price more comparable with the historic share
price and to try to maintain the value of options over ordinary shares, subject
to shareholder approval and the return proceeding, the company is proposing a
consolidation of its ordinary shares. For every 13 ordinary shares held at 6pm
on 5 July 2005, shareholders will receive 10 consolidated shares.
The group plans to raise #57m of additional long term borrowings within the
regulated water business through the Artesian programmes. Approximately #35m of
these borrowings will be utilised to finance the capital expenditure and debt
maturity requirements for the current year and part of 2006/07 and a
contribution of #7m to reduce the deficit in the final salary pension scheme.
Approximately #22m of the additional borrowings will be used to provide a loan
from the regulated water business to the parent company.
Should approval for the return not be obtained, the surplus funds will be used
to finance the regulated water business's longer term capital expenditure, debt
maturity and working capital requirements. The contribution to the regulated
water business final salary scheme is conditional on the return proceeding.
On a pro forma basis including the contribution to its final salary scheme the
return will increase the net indebtedness in the regulated water business from
#140m at 1 April 2005 to approximately #169m, representing approximately 62 per
cent and 75 per cent respectively of the regulated water business's Regulatory
Capital Value (RCV) at 1 April 2005, and will reduce the level of cash balances
held elsewhere in the group by approximately #9m to approximately #5m.
Whilst the regulated water business will need to raise additional debt over the
current regulatory period to fund its capital expenditure obligations, the Board
believes that it will be able to maintain a debt to RCV ratio in the range of 75
to 80 per cent over the current regulatory period. The cash balances retained by
the group will assist the group in managing its working capital requirements and
any outstanding obligations from its previous non-regulated businesses.
Dividends
As previously announced, for the financial year ended 31 March 2005 the Board is
proposing, as with the interim dividend already paid, a final dividend
equivalent to that for the preceding year. This will result in the total for the
interim and final ordinary share dividends for each of the two financial years
being approximately #5.3m. Given the return of value completed in February 2004,
this represents a significant increase in the level of underlying dividends.
Assuming the proposed return and share consolidation are approved by
shareholders, the final dividend will be proposed and paid on a per consolidated
share basis. Accordingly, the final dividend is expected to be 24.43p per share,
equivalent to 18.79p per existing ordinary share.
The following table summarises actual and proposed dividends per share and their
equivalents in relation to the February 2004 consolidation and the proposed
consolidation:
Relating to ordinary shares held
Prior to the After the After the
2004 2004 proposed
Financial 53 for 100 53 for 100 10 for 13
year ended consolidation consolidation consolidation
31 March Interim dividend 4.16p
2004 paid ---------
Equivalent per share
after the February
2004 consolidation to 7.85p
Final dividend proposed and paid 18.79p
---------
Total 26.64p
---------
31 March Interim dividend 7.85p
2005 paid
Equivalent per share
after the proposed
consolidation to 10.20p
Final dividend per
consolidated ordinary
share expected to be
proposed at the 2005
Annual General Meeting 24.43p
Equivalent per
ordinary share prior
to the proposed
consolidation to 18.79p
--------- ---------
Total 26.64p 34.63p
--------- ---------
The Board anticipates recommending dividends for the year ended 31 March 2006 of
approximately #5.8m. Whilst actual dividends declared or recommended will
depend, inter alia, on the trading performance of the group, pension charges,
the cost of debt and the effect of the implementation of International Financial
Reporting Standards, it remains the Board's intention to pursue a dividend
policy that maintains such value in real terms for the period to March 2010.
This represents a significant underlying increase in the dividend per share
given the reduction in the equity base of the group when the return is
implemented.
Trading and operational performance
The group results for the year are significantly affected by exceptional items
relating to the exit from the majority of our non-regulated activities, together
with exceptional operating costs of #2m related to the restructuring of the
regulated water business. The results also reflect for the first time, the full
year effect of the additional interest costs following completion of the #51m
return to shareholders in February 2004. The results and disposals are discussed
in detail in the Operating and Financial Review.
The regulated water business continued to deliver high quality services to
customers and at the end of March had substantially delivered the key required
outputs for the five year period 2000-05 as agreed with Ofwat in the 1999 Final
Determination of price limits.
Rainfall during the winter period was much lower than normal, but impounding
reservoirs have now recovered to approximately 84% full against a normal
guideline target of 93%. The difference does not represent a significant
operational risk but does mean that full use of abstraction available from the
Sharpness Canal will be made during the next few months to manage the rate of
reservoir draw down.
Board changes
I have been asked by my fellow directors to seek re-election at the forthcoming
annual general meeting and continue as Chairman for a further year, which I have
agreed to do.
Sir Richard Gaskell has decided to retire and not seek re-election having served
as a non-executive for 15 years. Subject to his re-election at the forthcoming
annual general meeting, Trevor Smallwood will become Deputy Chairman and Senior
Independent Director.
After 17 years of service as a non-executive director of the company Tom
Lachelin resigned from the Board at the end of March 2005.
I would like to thank both Sir Richard and Tom for their independent thinking
and considerable contribution and commitment to the group.
The Board proposes that Chris Curling be appointed a director of the company
with a resolution being put to the annual general meeting. He has been a
non-executive director of Bristol Water plc since March 2004. For 15 years until
December 2004 he was Managing or Senior Partner of the law firm Osborne Clarke.
Following these changes the boards of the company and Bristol Water plc will
have the same non-executive directors.
After 37 years service to the group, Roger Wyatt, managing director of the
regulated water business will retire at the end of March 2006. We currently
expect his duties to be shared between the other executives rather than seek a
replacement, reflecting the more focused nature of the group going forward.
Prospects
The year again saw the delivery of high quality services to our customers. Other
than this the results for the year are not representative of the future. They
reflect the final year of the 2000-05 regulatory period for the regulatory
business, restructuring costs preparing for the next five year period together
with the financial impact of the disposal of Lawrence and exit from our other
non-regulated activities.
Following the disposal of all material non-regulated activities and the
increased focus on the regulated water business, the group's future performance
will be closely linked to that of the regulated water business.
The new price limits agreed with Ofwat for the five year period 2005-10 will
enable us to deliver the obligations set out in the PR04 Final Determination and
to improve the profitability of the regulated water business. Although Ofwat set
challenging efficiency targets, the board of the regulated water business
believes that it will be able to deliver the relevant service outputs within the
targets set. We remain determined that our consistently high standards of
service to customers and quality of water supplied will remain key features of
the business.
Future interest charges will increase as a result of the additional debt and
reduction in group cash balances resulting from the proposed return to
shareholders.
The Board is confident in the prospects for the refocused group.
Moger Woolley
Chairman
26 May 2005
OPERATING AND FINANCIAL REVIEW
Results overview
Group turnover decreased from #113.5m to #98.5m, this reflects a lower level of
activity in Lawrence prior to sale and then the absence of Lawrence turnover
after completion of the sale.
Operating profit reduced by #5.1m to #15.1m. This reflects an underlying
reduction of #1.2m together with an exceptional operating charge of #2.0m for
restructuring costs in the regulated water business and a loss of #1.6m in our
other business compared to a profit of #0.3m in the previous year.
Non-operating exceptional items of #4.8m have been charged in relation to
disposals. These comprise net losses on disposal of Lawrence and other
businesses of #2.8m, together with a provision of #2.0m for retained pension
liabilities following disposals.
Interest costs increased significantly from #6.0m to #8.7m primarily as a result
of the additional financing costs after the #51m return of capital to
shareholders completed in February 2004.
The tax charge for the year was #0.1m and represents 6% of profit before tax,
compared to #2.9m (20%). The low charge for the year reflects the reduction in
profit before tax, partially offset by non tax deductible losses relating to
disposals of subsidiaries, together with the recovery of ACT previously written
off totalling #1.5m.
Consequently profit after tax decreased by #10.1m to #1.5m. Earnings per share
on a fully diluted basis decreased by 39% before operating and non-operating
exceptional items and by 96% after operating and non-operating exceptional
items.
As explained in the Chairman's Statement, the Board has proposed an unchanged
final ordinary dividend for the year ended 31 March 2005. The dividend will have
a record date after the proposed share consolidation and will therefore be 24.43
pence per share, equivalent to 18.79 pence per pre consolidation share in the
previous year. The final dividend will be paid on 1 October 2005 to shareholders
on the register on 2 September 2005. This brings the total dividend for the year
to an equivalent of 34.63 pence per share after the share consolidation or 26.64
pence per share before the share consolidation. Shares will go ex dividend on 31
August 2005. Ordinary dividend cover is 0.1 times compared to 2.0 times last
year.
Regulated water business - Bristol Water plc
As previously indicated, the allowed price increase under the RPI+K formula for
2004/05 was just 0.6% (RPI of 2.5% less a real price reduction of 1.9%). This is
significantly lower than inflationary increases on our operating cost base and
therefore operating profits were reduced.
Income from our main water supply charges fell by #0.4m to #65.9m, this
represents the net effect of price increases of #0.6m and new connections of
#0.4m offset by lower consumption levels by metered customers during the poor
summer weather compared to the previous year.
Operating costs before depreciation and exceptional restructuring costs
increased by #1.5m to #37.3m. The increase reflects inflation, including
significantly higher energy prices, offset by further efficiency gains.
Net depreciation reduced by #0.3m to #14.6m reflecting the re-lifing of meters
which reduced the charge by #0.5m, offset by depreciation on new assets coming
into service.
The exceptional operating charge of #2.0m represents redundancy costs related to
the restructuring programme that has been instigated to improve the operational
efficiency of the regulated water business.
Operating profit before operating exceptional items reduced by #1.2m to #18.7m,
and after operating exceptional items reduced by #3.2m to #16.7m.
Net capital investment in the year after grants and contributions from
developers was #16.6m, compared to #24.5m in 2004.
Ofwat issued their Final Determination of price limits for the five year period
2005-10 in December 2004. After careful consideration the Determination was
accepted.
The price limits are expressed as K factors, which are the overall adjustment to
tariffs before inflationary effects are taken into account. The limits are:
Company
business plan Final
proposal Determination
2005/06 20% 13.8%
2006/07 6% 2.8%
2007/08 6% 1.5%
2008/09 0% 0.7%
2009/10 0% -2.3%
The main reasons for these differences are:
*A smaller capital expenditure programme of #117m compared to the #156m we
proposed (2002/03 price base). This reflects the deletion of a number of
schemes, mainly related to improvements to the security of supply for
customers, together with more challenging efficiency assumptions.
*An operating cost efficiency target of 2.5% per annum compared to the
0.8% per annum we proposed.
*The Final Determination deals with a number of uncertainties through
Ofwat's Notified Item process which could trigger interim price
determinations within the period. In our business plan we had built a number
of these uncertainties into the proposed K factors.
The average annual household water bill for our customers in the current year is
#108, some 8% lower than the industry average of #117. Under the new price
limits by 2009/10 the average household water bill for our customers will
increase to #122 (2004/05 prices) remaining well below the expected industry
average of #140.
Ofwat have set challenging efficiency targets, however the Board believes that
it will be able to deliver the relevant service outputs within the targets set.
Other businesses
Before the exceptional charges related to disposals our other businesses
recorded an operating loss of #1.6m (2004 - profit of #0.3m).
Lawrence: The company recorded an operating loss for the period prior to sale of
#0.9m compared to a profit for 2003/04 of #0.8m. The sale of the business was
completed in February 2005. The sale consisted of:
*A payment to the purchaser of #0.5m in cash payable upon completion
*Payments by the purchaser to the group of up to #3.0m in cash, payable
over a three year period dependent upon Lawrence being awarded certain
contracts
*A loan to Lawrence by the group of #0.5m; repayable in September 2005
*The group retained potential liability for the outcome of one contract
which we now believe will be settled without recourse to the group
*The group also retained liability for pension liabilities relating to the
period up to completion.
The accounts include exceptional non-operating charges of #2.5m in respect of
the loss on sale including #0.4m in respect of goodwill previously written off
direct to reserves and now credited back to reserves and a #2.0m provision for
pension liabilities. None of the potential additional consideration has been
recognised in these accounts.
Bristol Water Services: The division recorded a #0.6m operating loss, after
redundancy costs, compared to a profit of #0.1m in 2003/04. The group completed
the sale of the majority of the division's activities in May 2005 for nominal
consideration with potential additional consideration over the next 10 years
mainly related to the performance of one of the businesses sold.
Watergrid: Our contribution to development costs, via our 50% interest in
Waternet Limited was #0.1m (2004 - #0.1m). Prior to the year end the group
reached agreement with its partners to end its involvement in the joint venture.
Formal agreements are expected to be signed in June 2005.
Purton Carbons: Our interests in the joint venture were sold to our joint
venture partner in December 2004. Prior to sale the business recorded a break
even result.
Accordingly the group will in the foreseeable future undertake no material
activities apart from the regulated water business.
Treasury
Group net cash inflow from operating activities was #31.2m (2004 - #35.4m), net
cash outflows from investments and servicing of finance totalled #9.2m (2004 -
#7.5m) and net capital expenditure amounted to #16.4m (2004 - #24.7m). Total
cash outflows before management of liquid resources and financing were #2.0m
(2004 - #4.7m).
Net borrowings increased from #121.4m to #125.7m during the year. Net debt in
Bristol Water plc, the regulated water business, at 31 March 2005 was #140.1m
(2004 - #140.3m) and represented approximately 62% of Regulatory Capital Value
(RCV) at that date.
Net interest charges in the year totalled #8.7m (2004 - #6.0m) and were covered
1.2 times (2004 - 3.4 times) after exceptional items.
Capital restructuring and return to shareholders
On 20 May 2005, the group announced proposals for a return of 148 pence per
ordinary share (approximately #30m in aggregate) to shareholders through the
issue and subsequent cancellation of B shares.
The group also announced a proposed consolidation of its ordinary shares. For
every 13 ordinary shares held at 6pm on 5 July 2005, shareholders will receive
10 consolidated shares.
Details of the proposals were set out in a circular to shareholders dated 20 May
2005 and are subject to approval by shareholders at an Extraordinary General
Meeting on 16 June 2005, Court approval on 6 July 2005 and the required
additional finance being put in place.
No provision for the costs of the return, estimated to be approximately #0.8m,
have been made within these accounts.
The group's regulated water business, Bristol Water plc, plans to raise further
funds under the Artesian monoline wrapped bond programmes arranged by The Royal
Bank of Scotland amounting to #57m of index-linked debt. No provision has been
made in the accounts for the cost of raising the funds, estimated at #0.4m.
Bristol Water plc has agreed to advance approximately #22m of the new funds in
the form of a long term interest bearing loan to the parent company. Together
with other cash balances this loan will be used to finance the #30m return to
shareholders.
The remaining #35m of new funds will be used by Bristol Water plc to finance
capital expenditure, debt maturities and working capital requirements together
with a payment of #7m to reduce the deficit in the pension scheme.
On a proforma basis the proposals will increase the net indebtedness of the
regulated water business from #140m at 1 April 2005 to approximately #169m,
representing approximately 62% and 75% respectively of RCV at 1 April 2005.
Pensions
Pension arrangements for the majority of the group's employees are provided
through the group's membership of the Water Companies' Pension Scheme (WCPS)
which provides defined benefits based on final pensionable pay. The group has
separate sections within WCPS for the regulated water business and for the
retained liabilities related to its previous non-regulated activities.
The last triennial actuarial review of the group's sections within the Water
Companies' Pension Scheme was as at 1 April 2002 and showed combined net
surpluses on an actuarial basis of #5.6m. The next triennial actuarial review is
due as at 1 April 2005, the valuation is currently in progress and results will
be available during late summer/early autumn 2005.
An updated interim valuation, for SSAP24 purposes only, was carried out as at 1
April 2003 to recognise the significant change in the funding level following
the downturn in the equity markets since 1 April 2002. The interim valuation
showed a net deficit of #4.2m.
Since the actuarial valuation, increases in the level of cash contributions to
the pension funds effective from 1 April 2003 and 1 April 2004 have been agreed
with the trustee. The estimated normal cash contributions for 2005/06 are
approximately #1.8m (2004/05 - #1.7m).
The sections are currently invested primarily in equities. In consultation with
both the trustee and the scheme actuary, we have carefully examined the
investment strategy and concluded that the appropriate long-term strategy is to
reduce the proportion of equities with a corresponding increase in investments
in bonds and other fixed income securities. In accordance with this strategy,
#16m of investments were switched from equities to bonds during February 2005.
The appropriate transitional disclosures required under FRS17 are made in the
annual Report and Accounts of the group. These show that the group's pension
position would under FRS17 be represented on the balance sheet as a deficit
before tax of #11.9m for the regulated water business section and #0.9m for the
non-regulated section. After taking provisions already made within these
accounts for pension liabilities, adoption of FRS17 would reduce net assets by
approximately #6m.
In considering the proposed return, the directors have taken into account the
group's obligations in respect of both sections of WCPS. The regulated water
business intends to make a one-off contribution to the WCPS of #7m. It also
intends to make additional contributions of #1m in each of the four years
beginning 1 April 2006 and #0.9m in 2010/11. These amounts are in addition to
the normal pension contributions required by the WCPS trustee to the section. In
addition, the group has agreed to make a one-off contribution of #0.3m to the
non-regulated section in addition to its existing commitment for annual
contributions of #0.2m until this section is fully funded on an actuarial basis.
The additional contributions to the regulated water business section and the
#0.3m to the non-regulated section are conditional on the return to shareholders
being made.
International Financial Reporting Standards
Background:
International Financial Reporting Standards (IFRS) will be mandatory for all UK
listed groups preparing consolidated financial statements for accounting periods
beginning on or after 1 January 2005.
For its consolidated accounts the group will adopt IFRS for the year ended 31
March 2006.
The group does not currently anticipate adopting IFRS for individual companies
within the group. In such circumstances, full adoption of FRS17 regarding
pensions will be required in each company's accounts from 1 April 2005.
Nature of the changes:
In the opinion of the Board, the areas that will differ materially under IFRS
reporting remain those as listed below:
* Deferred tax liabilities will be required to be provided for in full and
not on a discounted basis
* Pension fund surpluses and deficits will be included within the group
results rather than disclosed by way of note
* Renewals accounting for infrastructure assets will no longer be
permitted
* Inclusion of fair values of financial assets and liabilities and
derivatives will be mandatory unless effective hedges are in place
* Proposed dividends will be excluded from the financial statements.
In some areas the relevant standards remain under review by the International
Accounting Standards Board and the Board will continue to monitor developments.
The conversion process:
A team continues to identify and resolve all conversion issues. The group will
work with its advisors, Ofwat and other companies in the water industry to
establish so far as practical a common application/interpretation of the new
standards.
Timetable:
In accordance with the conversion timetable laid down in IFRS 1 dealing with
first time adoption of IFRS, the interim financial statements for the six months
ending 30 September 2004 and the annual financial statements for the year ending
31 March 2005 have been prepared under UK accounting standards. The interim
consolidated financial statements for the six months ending 30 September 2005
and the annual consolidated financial statements for the year ending 31 March
2006 will be prepared under IFRS.
Comparative figures included within the financial statements as at 30 September
2004 and 31 March 2005 have been prepared under UK accounting standards.
Comparative figures included within the financial statements as at 30 September
2005 and 31 March 2006 will be those originally prepared under UK accounting
standards, restated under IFRS.
Consequences of the adoption of IFRS:
First time adoption of IFRS will result in a reduction in the level of reserves
for the consolidated group. The reported financial performance of the group will
become more dependent upon external factors outside the group's control, and
therefore more volatile, as a result of the adoption of IFRS.
There will also be significant changes to the format of financial statements.
Strategy and Objectives
The group's strategy is focussed around the regulated water business, Bristol
Water plc, and after the recent disposals, the group will in the foreseeable
future undertake no material activities apart from its regulated water business.
Monitoring the business
A number of systems are used to monitor the financial and operational
performance of the group including:
* Monthly management accounts and budgetary control
* Monthly key performance indicators
* Ad hoc internal audits of business processes
* Detailed Quality Assurance systems.
Outlook
Following the disposal of all material non-regulated businesses and the focus on
the regulated water business, the group's future performance will be closely
linked to that of the regulated water business. The price limits for the five
years from 2005-10 set in Ofwat's Final Determination provide for significant
real increases in charges to customers.
At a group level interest costs will increase due to the new debt being raised
and reduction in cash balances to finance the #30m return to shareholders.
Alan Parsons Andy Nield
Group Chief Executive Group Finance Director
GROUP PROFIT AND LOSS ACCOUNT
for the year ended 31 March 2005
Continuing Discontinued Continuing Discontinued
operations operations Total operations operations Total
2005 2005 2005 2004 2004 2004
Note #m #m #m #m #m #m
Turnover including
share of
joint ventures 75.6 28.6 104.2 75.2 46.3 121.5
Less: share
of turnover of (5.0) (0.7) (5.7) (4.5) (3.5) (8.0)
joint ventures
-------- -------- ------ -------- -------- ------
Group turnover 70.6 27.9 98.5 70.7 42.8 113.5
Operating
costs (51.9) (29.3) (81.2) (51.0) (42.3) (93.3)
Exceptional
operating costs (2.0) - (2.0) - - -
-------- -------- ------ -------- -------- ------
Total operating costs 2 (53.9) (29.3) (83.2) (51.0) (42.3) (93.3)
-------- -------- ------ -------- -------- ------
Group operating
profit/(loss) 16.7 (1.4) 15.3 19.7 0.5 20.2
Share of operating
loss of joint ventures - (0.2) (0.2) - - -
-------- -------- ------ -------- -------- ------
Total operating
profit/(loss):
group and share of 16.7 (1.6) 15.1 19.7 0.5 20.2
joint ventures
Net exceptional
items being:
(Loss)/profit
related to disposal
of businesses 3 - (4.8) (4.8) - 0.3 0.3
-------- -------- ------ -------- -------- ------
Operating
profit/(loss)
after exceptional items 16.7 (6.4) 10.3 19.7 0.8 20.5
Net interest
payable and
similar charges (8.8) 0.1 (8.7) (6.0) - (6.0)
-------- -------- ------ -------- -------- ------
Profit/(loss)
on ordinary activities
before taxation 7.9 (6.3) 1.6 13.7 0.8 14.5
-------- -------- -------- --------
Taxation on
profit/(loss)
on ordinary activities (0.1) (2.9)
------ ------
Profit on
ordinary activities 1.5 11.6
after taxation
Minority
shareholders' interest (1.1) (1.1)
------ ------
Profit attributable
to Bristol Water
Group plc shareholders 0.4 10.5
Dividends 5 (5.3) (5.3)
------ ------
Retained (loss)/profit
for the year (4.9) 5.2
------ ------
Note 2005 2004
Earnings per share -
Before operating and non-operating
exceptional items
On average number of
ordinary shares in issue 6 31.8p 51.5p
On fully diluted basis 6 31.1p 50.8p
After operating and non-operating
exceptional items
On average number of
ordinary shares in issue 6 2.1p 53.3p
on fully diluted basis 6 2.0p 52.2p
The company has no recognised gains or losses other than those included in the
profit and loss account above and therefore no separate statement of total
recognised gains and losses has been presented.
There is no difference between the profit/(loss) on ordinary activities before
taxation and the retained (loss)/profit for the year stated above and their
historical cost equivalents.
GROUP BALANCE SHEET
at 31 March 2005
2005 2004
Note #m #m
Fixed assets
Tangible fixed assets 7 195.7 194.7
Investments in joint ventures -
Share of gross assets 3.4 2.6
Share of gross liabilities (3.4) (2.2)
--------- --------
Total - 0.4
--------- --------
--------- --------
Total fixed assets 195.7 195.1
--------- --------
Current assets
Stocks 0.7 0.7
Debtors 19.3 30.1
Cash at bank and on deposit 8 26.4 36.3
--------- --------
46.4 67.1
--------- --------
Creditors: amounts falling due within one year
Short term borrowings 8 (3.7) (6.9)
Other creditors (24.8) (34.9)
--------- --------
(28.5) (41.8)
--------- --------
Net current assets 17.9 25.3
--------- --------
Total assets less current liabilities 213.6 220.4
Creditors: amounts falling due after more
than one year 8 (148.4) (150.8)
Deferred income (8.6) (8.5)
Provisions for liabilities and charges 9 (19.7) (18.7)
--------- --------
Net assets 36.9 42.4
--------- --------
Capital and reserves
Called up share capital 1.0 2.1
Share premium 0.2 0.1
Merger reserve and other reserves (67.7) (67.7)
Profit and loss account 90.9 95.4
--------- --------
Total shareholders'funds (excluding
minority interests) 10 24.4 29.9
Minority shareholders' interests 12.5 12.5
--------- --------
36.9 42.4
--------- --------
GROUP CASH FLOW STATEMENT
for the year ended 31 March 2005
Note 2005 2004
#m #m
Net cash inflow from operating activities 11(a) 31.2 35.4
------- --------
Dividends received from joint ventures - 0.1
------- --------
Returns on investments and servicing of finance
Interest received 1.6 1.4
Interest paid on term loans and debentures (8.0) (6.0)
Interest paid on finance leases (1.1) (1.1)
Dividends paid to minorities (1.7) (1.1)
Net costs of issue of new loans - (0.7)
------- --------
(9.2) (7.5)
------- --------
Taxation
Corporation tax paid (2.0) (2.8)
------- --------
Capital expenditure
Purchase of tangible fixed assets (20.1) (28.1)
Contributions received 3.7 3.4
------- --------
(16.4) (24.7)
------- --------
Acquisitions and disposals
Net proceeds on disposal of subsidiary and joint venture (0.1) 0.3
Cash eliminated on disposals (0.1) -
Investment in joint ventures (0.1) (0.2)
------- --------
(0.3) 0.1
------- --------
Dividends paid on equity shares (5.3) (5.3)
------- --------
Cash outflow before management of liquid resources and
financing (2.0) (4.7)
Management of liquid resources
being decrease/(increase) in short-term deposits 7.0 (16.9)
------- --------
Financing
Return of capital to shareholders by redemption of B shares (1.1) (49.5)
Expenses of scheme of arrangement/return of capital - (2.5)
Issue of shares 0.1 0.8
Redemption of preference shares - (0.1)
New term loans - 98.5
Capital element of lease repayments (1.6) (1.6)
Capital element of loan repayments (5.3) (24.3)
------- --------
(7.9) 21.3
------- --------
Decrease in cash (2.9) (0.3)
Cash, beginning of year 5.9 6.2
------- --------
Cash, end of year 3.0 5.9
------- --------
SEGMENTAL ANALYSIS
for the year ended 31 March 2005
Continuing Discontinued Total Continuing Discontinued Total
operations operations operations operations
2005 2005 2005 2004 2004 2004
#m #m #m #m #m #m
Turnover -
Regulated water 70.6 - 70.6 70.6 - 70.6
business
Contracting
and other non-
regulated services
Group 0.6 34.2 34.8 1.1 50.7 51.8
Joint 5.0 0.7 5.7 4.5 3.5 8.0
ventures
Intra-group sales (0.6) (6.3) (6.9) (1.0) (7.9) (8.9)
--------- --------- ------ -------- -------- ------
Turnover including
share of joint 75.6 28.6 104.2 75.2 46.3 121.5
ventures --------- --------- ------ -------- -------- ------
Group turnover
excluding joint 70.6 27.9 98.5 70.7 42.8 113.5
ventures --------- --------- ------ -------- -------- ------
Turnover, included in discontinued operations, of #1.6m (2004 - #5.0m) was derived
from services provided outside the United Kingdom, namely in the United States of
America and South East Asia.
Continuing Discontinued Total Continuing Discontinued Total
operations operations operations operations
2005 2005 2005 2004 2004 2004
#m #m #m #m #m #m
Operating profit/
(loss) of group and
share of joint ventures -
Regulated water business
-normal activities 18.7 - 18.7 *19.9 - 19.9
-exceptional restructuring
charge (2.0) - (2.0) - - -
Contracting and other
non-regulated services - (1.6) (1.6) (0.2) 0.5 0.3
-------- --------- ------ -------- -------- ------
Group total 16.7 (1.6) 15.1 19.7 0.5 20.2
-------- --------- ------ -------- -------- ------
Profit/(loss) before taxation -
Regulated water business 10.1 - 10.1 13.5 - 13.5
Contracting and other non-
regulated services 0.1 (1.5) (1.4) - 0.5 0.5
-------- --------- ------ -------- -------- ------
Trading activities 10.2 (1.5) 8.7 13.5 0.5 14.0
Holding companies
expenses -
mainly net interest
(charges)/credits (2.3) - (2.3) 0.2 - 0.2
Exceptional charges - (4.8) (4.8) - 0.3 0.3
-------- --------- ------ -------- -------- ------
Group total 7.9 (6.3) 1.6 13.7 0.8 14.5
-------- --------- ------ -------- -------- ------
Net assets employed -
Regulated water business 68.9 - 68.9 69.3 - 69.3
Less intercompany
loan to ultimate
parent company (47.0) - (47.0) (47.0) - (47.0)
-------- --------- ------ -------- -------- ------
Net investment in
regulated water business 21.9 - 21.9 22.3 - 22.3
Other net assets 15.0 - 15.0 18.5 1.6 20.1
-------- --------- ------ -------- -------- ------
Group total 36.9 - 36.9 40.8 1.6 42.4
-------- --------- ------ -------- -------- ------
Number of employees (average full time equivalent)
Regulated water business - continuing 403 412
Contracting and other non-regulated services
- continuing 3 3
- discontinued 305 377
------ ------
711 792
------ ------
*In the statutory accounts for Bristol Water plc, the regulated water business, operating
profit is lower by #0.2m. This relates to costs incurred in respect of the 2004 return of
capital/financial restructuring which in the consolidated group accounts were charged direct
to reserves.
NOTES
1. BASIS OF PREPARATION AND CIRCULATION
These preliminary statements do not constitute the statutory accounts for
the year ended 31 March 2005. The statutory accounts have been reported on
by the auditors without qualification but have not yet been delivered to the
Registrar of Companies.
The Annual Report and Accounts will be posted to shareholders on or before 24
June 2005. Copies will be available to the public from the registered office
at PO Box 218, Bridgwater Road, Bristol BS99 7AU. The Annual General Meeting
will be held at The Novotel, Victoria Street, Bristol, on Monday 18 July 2005
at 11.00 am.
2. OPERATING COSTS
The directors believe that the nature of the group's business is such that
the analysis of operating costs required by the Companies Act 1985 is not
appropriate. As required by the Act the directors have therefore adapted the
prescribed format so that disclosure of operating costs is appropriate to
the group's principal business.
Continuing Exceptional Discontinued
operations operating Operations Continuing Discontinued
before costs * operations operations
exceptional items Total Total
2005 2005 2005 2005 2004 2004 2004
#m #m #m #m #m #m #m
Net payroll 11.0 1.8 9.5 22.3 10.2 13.5 23.7
cost
Total other 26.3 0.2 19.6 46.1 26.0 28.4 54.4
operating costs
Net 14.6 - 0.2 14.8 14.8 0.4 15.2
depreciation
-------- ------- -------- ----- ------- -------- ------
Total 51.9 2.0 29.3 83.2 51.0 42.3 93.3
operating -------- ------- -------- ----- ------- -------- ------
costs
*Exceptional operating costs
Before the year end the Board of the regulated water business instigated a
restructuring programme to improve its operating efficiency. This involves a
number of redundancies, pension funding payments, asset write downs and
incidental expenses. Accordingly the restructuring costs have been recognised
in the profit and loss account for the year ended 31 March 2005. There were no
exceptional operating costs in 2004.
3. NET EXCEPTIONAL ITEMS
2005 2004
#m #m
(Loss)/profit related to disposal of businesses:
Loss related to disposal of Walter Lawrence Civil &
Mechanical Limited (Lawrence) including charge of
#0.4m in respect of goodwill previously written off
to reserves (2.5) (0.1)
Provision for retained pension liabilities
associated with the disposal of Lawrence (2.0) -
Net profit/(loss) related to disposal of (0.5) 0.4
international leakage division
Profit on disposal of other businesses 0.2 -
------------ ---------
(4.8) 0.3
------------ ---------
The total tax attributable to the above (loss)/profit related to disposal of
businesses amounts to #0.1m (2004 - #0.1m) current tax credit and #0.1m
(2004 - #Nil) deferred tax credit.
4. TAXATION ON PROFIT ON ORDINARY ACTIVITIES
Analysis of charge for the year:
2005 2004
#m #m
Current tax:
UK Corporation tax at 30% (2004 - 30%) 0.8 3.0
Advance Corporation Tax written back (1.5) (0.8)
Adjustment to prior periods 1.7 1.2
Share of associates/joint ventures tax 0.1 0.1
--------- ---------
Total current tax 1.1 3.5
--------- ---------
Deferred tax:
Current year movement 1.1 1.0
Adjustment to prior periods (1.8) (1.0)
Effect of discounting (0.3) (0.6)
--------- ---------
Total deferred tax (1.0) (0.6)
--------- ---------
--------- ---------
Total tax on profit on ordinary activities 0.1 2.9
--------- ---------
The adjustment to prior periods primarily related to the effect of Bristol
Water plc reducing its capital allowance claim for the year ended 31 March
2003. This amendment enabled the company to write back Advance Corporation
Tax (ACT) to be utilised against the resulting increased taxable profits.
The ACT written back was not recognised as a deferred tax asset in the
previous year.
5. DIVIDENDS
Dividends paid and proposed comprise - 2005 2004
#m #m
On ordinary shares (equity) -
Interim dividend paid 1.6 1.6
Proposed final dividend 3.7 3.7
--------- ---------
Total dividends paid and proposed 5.3 5.3
--------- ---------
The interim dividend paid was 7.85p (2004 - equivalent to 7.85p) per pre
consolidation share.
The Board has proposed a final dividend for 2004/05 equivalent to that for
the previous year.
Assuming that the proposed #30m return to shareholders and the 10 for 13
consolidation of ordinary shares are approved by shareholders and completed,
the final dividend will be proposed and paid on a per consolidated share
basis. Accordingly, the final dividend is expected to be 24.43 pence per
share, equivalent to 18.79 pence per existing ordinary share.
6. EARNINGS PER ORDINARY SHARE
Earnings per ordinary share have been calculated based on -
2005 2004
m m
Weighted average number of ordinary shares
in issue during the year 19.9 19.8
fully diluted 20.4 20.2
Earnings before operating and non-operating exceptional #6.4 #10.2
items
Earnings after operating and non-operating exceptional #0.4 #10.5
items
The weighted average number of fully diluted ordinary shares includes
options over shares where the option price is less than or equal to the
average share price during the year.
Earnings per share are stated with reference to the existing rather than the
proposed consolidated shares.
7. TANGIBLE FIXED ASSETS
2005 2004
#m #m
Net book value, beginning of year 194.7 185.8
Additions 20.3 28.1
Disposals (0.5) (0.3)
Contributions (3.7) (3.4)
Depreciation (15.1) (15.5)
--------- ---------
Net book value, end of year 195.7 194.7
--------- ---------
8. NET BORROWINGS
2005 2004
#m #m
Cash and short term deposits 26.4 36.3
Debt due within one year (3.7) (6.9)
Debt due after one year (148.4) (150.8)
--------- ---------
Net borrowings (125.7) (121.4)
--------- ---------
9. PROVISIONS FOR LIABILITIES AND CHARGES
2005 2004
#m #m
Restructuring costs - see note 2 2.0 -
Deferred tax 17.7 18.7
--------- ---------
19.7 18.7
--------- ---------
2005 2004
Provision for deferred tax comprises: #m #m
Accelerated capital allowances and capital element
of finance leases 35.3 35.4
Deferred income (2.6) (2.5)
Short-term timing differences (1.1) (0.6)
--------- ---------
31.6 32.3
Effect of discounting (13.9) (13.6)
--------- ---------
Net provision 17.7 18.7
--------- ---------
10. MOVEMENT IN GROUP SHAREHOLDERS' FUNDS (EXCLUDING MINORITY INTERESTS)
2005 2004
#m #m
Beginning of the year 29.9 75.9
Issue of shares by former holding company - 0.7
Issue of redeemable preference shares - 0.1
Redemption of redeemable preference shares - (0.1)
Share exchange - acquisition of share capital of
Bristol Water Holdings plc at open market value - 109.3
Merger accounting adjustment - replacement of Bristol
Water Holdings plc by Bristol Water Group plc - (109.3)
Redemption of B shares (1.1) (49.5)
Shares issued under option scheme 0.1 0.1
Issue/redemption expenses - (2.5)
Goodwill written back on disposal 0.4 -
--------- ---------
29.3 24.7
Profit for the year 0.4 10.5
Dividends (5.3) (5.3)
--------- ---------
End of year 24.4 29.9
--------- ---------
These funds are attributed to equity and non-equity
shareholders' as follows:
Equity 24.4 28.8
Non-equity - 1.1
--------- ---------
24.4 29.9
--------- ---------
The share capital of the company at 31 March 2005 comprised 19,976,692
ordinary shares of 5 pence each.
11. ADDITIONAL CASHFLOW INFORMATION
(a) Reconciliation of operating profit to net cash inflow from operating
activities -
2005 2004
#m #m
Operating profit 15.1 20.2
Depreciation and amortisation 14.8 15.2
--------- --------
Cash flow from operations 29.9 35.4
Working capital movements -
Stocks - 0.1
Debtors 2.7 (3.9)
Creditors (1.4) 3.8
--------- --------
Net cash inflow from operating activities 31.2 35.4
--------- --------
(b) Reconciliation of net cash flow to movement in net
borrowings -
2005 2004
#m #m
Decrease in cash in year (2.9) (0.3)
Cash used to repay leases 1.6 1.6
Cash used to repay borrowings 5.3 24.3
Cash from new borrowings - (98.5)
Decrease/(increase) in short term deposits (7.0) 16.9
Net costs of issue of loans - 0.7
--------- --------
Increase in net borrowings (3.0) (55.3)
New debt not affecting cash flow (1.3) (1.3)
Net borrowings at beginning of year (121.4) (64.8)
--------- --------
Net borrowings at end of year (125.7) (121.4)
--------- --------
12. PENSIONS
These accounts are prepared on a SSAP 24 basis.
An analysis of the group's pension assets and liabilities under FRS 17 is
set out below:
2005 2004
#m #m
Market value of assets 105.9 95.9
Present value of liabilities (118.7) (112.0)
--------- ---------
Deficit (12.8) (16.1)
Deferred taxation 3.9 4.9
--------- ---------
Net pension liability under FRS 17 (8.9) (11.2)
--------- ---------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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