RNS Number:3278V
Bristol Water Group PLC
08 December 2005
BRISTOL WATER GROUP PLC
Announcement of interim dividend and interim results for six months ended 30
September 2005
Set out below is the text of Bristol Water Group plc's unaudited consolidated
interim results for the six months ended 30 September 2005.
For further information:
Alan Parsons, Group Chief Executive Jonathan Gillen
Andy Nield, Group Finance Director City Profile
Bristol Water Group plc Tel: 020 7448 3244
Tel: 020 7448 3244 (8th December) Jeremy Williams, Corporate Affairs
Tel: 0117 953 6470 (thereafter) Bristol Water Group plc
Tel: 0117 953 6470 / 07831 453924
or contact:
Bristol Water Corporate Affairs on 0117 953 6470 during office hours or 07831
453924 or 07831 518964 at any time
BRISTOL WATER GROUP plc's main activity, through its subsidiary Bristol Water
plc, is the supply of water to over one million people and businesses in an area
of almost 2,400 square kilometres centred on Bristol.
BRISTOL WATER GROUP PLC
Consolidated interim results for the six months ended 30 September 2005
HIGHLIGHTS
Six months ended 30 September 2005 2004 % change
(unaudited) (unaudited)
(restated)*
#m #m
Continuing operations:
Group revenue 41.1 35.1 +17%
Profit from
operations 14.3 11.1 +29%
Net finance costs
Net interest payable/receivable (4.2) (4.1)
In respect of retirement benefit 0.4 0.3
obligations
--------------------------------------------------------------------------------
(3.8) (3.8)
--------------------------------------------------------------------------------
Profit before tax 10.5 7.3 +44%
--------------------------------------------------------------------------------
Profit after tax 7.4 5.8 +28%
--------------------------------------------------------------------------------
Profit for period including
discontinued operations 7.4 5.5 +34%
--------------------------------------------------------------------------------
Earnings per ordinary share (continuing
& discontinued operations)**
- Basic 44.3p 32.2p +38%
- Fully diluted 43.0p 31.4p +37%
Interim dividend per ordinary share** 14.7p 10.2p +44%
#m #m
Net debt/(cash) at end of period
Regulated water business 168.0 143.7
Other businesses (5.7) (19.5)
--------------------------------------------------------------------------------
Total 162.3 124.2
--------------------------------------------------------------------------------
Regulatory Capital Value(RCV)*** #235m #229m
Regulated water business net debt as a
percentage of RCV 71% 63%
* Group consolidated results reported under IFRS for the first time.
Bristol Water plc, the group's principal subsidiary also reports its results
today under UK GAAP.
* #30m return to shareholders completed in July 2005.
* Interim dividend of 14.7p per share to be paid on 31 January 2006.
- This represents approximately 40% of the anticipated total dividend payment
of #5.8m for the year.
- Interim/final dividend allocation rebalanced from previous policy of c30%
interim / 70% final.
- Full year dividend of #5.8m represents a 9% increase compared to 2004/05.
* Regulated water business:
- Profit from operations #15.2m reflecting K factor of 13.8%
- Capital investment of #7.4m in the period
- Net debt of #168.0m - approximately 71% of forecast Regulatory Capital Value
for 2005/06
* Other businesses and corporate overheads:
- Loss from operations of #0.9m mainly related to expenses of #0.7m in respect
of the #30m return to shareholders
*The consolidated interim results for the period ended 30 September 2004 have
been restated following the adoption of International Financial Reporting
Standards (IFRS) for the consolidated group on 1 April 2005.
**Earnings per ordinary share and interim dividend per ordinary share, for 2004
and the period prior to the share consolidation in July 2005, have been restated
to reflect the 10 for 13 share consolidation effected in July 2005.
***Forecast year end RCV, 2004 RCV represents opening PR04 value.
CHAIRMAN'S STATEMENT
Introduction
Group strategy is now firmly focused on the regulated water business. Earlier in
the year we completed the remaining disposals of our former non-regulated
businesses. The disposals were accounted for within the 2004/05 final
statements.
In July, following shareholder and court approvals, we successfully completed
the return of a further #30m to shareholders.
The regulated water business is in the first year of the new regulatory period
covering the 5 years 2005-10 and is making good progress towards delivery of the
required outputs and efficiency targets assumed by Ofwat in its determination of
the new price limits.
Financial performance of the regulated water business in 2004/05 was adversely
affected by a combination of expenses being incurred that were not provided for
within allowed price limits, together with a provision for restructuring costs.
The price limits for the new five-year period provide for most of these
additional costs together with the financing of a substantial capital investment
programme. The allowed price limit increase of 17.3% for the current year,
together with efficiency gains from the restructuring programme, has
substantially improved profitability.
This is the first interim statement for the group prepared under International
Financial Reporting Standards (IFRS) and consequently it is a more complicated
statement than those previously presented. It sets out details of the
restatement of comparatives originally reported under UK GAAP now reported under
IFRS.
Return to shareholders
We announced at the end of May 2005 that following the finalisation of Ofwat's
price determination and the progress made in the disposal of our previous
non-regulated businesses we proposed to increase the level of debt relative to
regulatory capital value (RCV) in the regulated water business and to return a
further #30m to group shareholders. Excluding those specifically related to debt
raising, expenses of #0.7m in respect of the return were charged to income in
the period.
Additional long-term index-linked debt of #57m was successfully raised by the
regulated water business through the Artesian programmes arranged by The Royal
Bank of Scotland. #21.5m was used to provide an intercompany loan to the company
and #7m was used to make a special contribution to the regulated water
business's defined benefit pension scheme. The remainder will be used to finance
capital expenditure and debt maturities over the next two years.
The #21.5m loan and other group cash balances were used to finance the return to
shareholders, which was completed during July 2005.
In order to make the future share price more comparable with the historic share
price and to maintain the value of options over ordinary shares, a 10 for 13
consolidation of ordinary shares became effective on 6 July 2005.
Dividends
As previously announced, the Board anticipates recommending ordinary 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 and the cost of debt, 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 following the #30m
return to shareholders.
The regulated water business is the principal source of profits from which
dividends are paid. The regulatory price cap regime allows returns calculated
using current cost accounting on a UK GAAP basis and is therefore the main
driver for dividends. Profits, and therefore, dividend covers under IFRS are
higher than under UK GAAP. However there is no cash impact and no change in
dividend paying capacity by adoption of IFRS.
Accordingly the Board has declared an interim dividend of 14.7p per ordinary
share representing approximately 40% of the anticipated #5.8m for the full year.
This represents a rebalancing of the group's interim/final dividend allocation
which has previously been approximately 30% interim / 70% final. The interim
dividend will be paid on 31 January 2006 to shareholders on the register as at
30 December 2005. Shares will go ex dividend on 28 December 2005. The
anticipated full year dividend represents a 9% increase compared to 2004/05.
Regulated water business
During 2004/05 we initiated a programme to further improve the operating
efficiency of the regulated water business. Over the past six months we have
implemented a number of redundancies and arranged for the outsourcing of our
laboratory services. We are continuing to seek further potential savings where
consistent with maintaining service standards and appropriate levels of risk.
The regulated water business has performed well with profit from operations
increasing by 36% to #15.2m. This includes the effect of the average 17.3%
increase in our main water supply tariffs, reflecting the 13.8% K factor for
2005/06 set by Ofwat in the price determination for the five years 2005-10.
Gross capital expenditure in the period amounted to #7.4m. A major focus during
the period has been the planning and initiation of projects for the five-year
period and we anticipate a significant increase in capital expenditure during
the second half of the year.
A key scheme is the #20m project to improve the security of supply for customers
in the northern part of our area. The first stages of this are progressing well
and the overall scheme should be completed during 2007/08. We have also been
working on two schemes to deal with deteriorating sources of raw water and are
finalising two innovative solutions that will allow us to achieve the quality
related objectives and also to streamline existing processes at two of our
treatment plants.
Levels of service to customers remain extremely high, as reflected in Ofwat's
assessment of levels of service and customer surveys.
At a national level there has been considerable publicity about drought
conditions during the summer and the potential restriction of water supplies. In
the Bristol area we suffered from low rainfall during both the important 2004/05
winter period and during this summer. This has led to reservoir levels being
lower than normal, but still within normal control parameters. Heavy rainfall
during October and early November meant that by the end of November 2005
reservoir levels had improved significantly to above normal levels. We are
continuing, as always, to encourage customers to minimise the waste of water
wherever possible, but have not sought to impose restrictions on use. The next
2-3 month's rainfall remains important to ensure an adequate recharge of our
reservoirs.
Group financial performance
At a group level profit from operations increased by 29% to #14.3m.
Interest charges, excluding IAS19 'Employee Benefits' net finance income,
increased by #0.1m to #4.2m reflecting the increase in net debt following the
#30m return to shareholders offset by positive cash flows in the regulated water
business. Interest charges are expected to increase in the second half of the
year.
The tax rate for the period at 30% is equal to the standard UK tax rate. This is
higher than the rate in the previous year which benefited from the recovery of
Advance Corporation Tax.
Earnings per share on a fully diluted basis for the six months to 30 September
2005 was 43.0p (2004 - 31.4p) per share.
Net debt at a group level increased to #162.3m at 30 September 2005 compared to
#126.4m at 31 March 2005. The increase reflects the #30m return to shareholders
and additional contributions to the pension scheme.
At 30 September 2005 the regulated water business had net debt of #168.0m
representing approximately 71% of the forecast Regulatory Capital Value (RCV) at
March 2006. We anticipate that the regulated water business will be able to
maintain a debt to RCV ratio in the range of 75% to 80% over the remainder of
the five-year regulatory period to 2009/10.
IFRS
In September 2005 we announced the anticipated implications of IFRS for the
group. This is the first consolidated interim report for the group prepared
under International Financial Reporting Standards (IFRS). The comparative
figures for the six months to 30 September 2004 and for the year ended 31 March
2005 have been restated accordingly. In the absence of IFRS the group would have
applied the UK GAAP standards, FRS17 'Pensions' and FRS21 'Events after the
balance sheet date', from 1 April 2005. For the group FRS17 and FRS21 are
substantially similar to IAS 19 and IAS10 respectively.
The table below summarises the impact on the financial statements at a
consolidated group level following the transition from UK GAAP to IFRS:
30 September 2005 30 September 2004 31 March 2005
Profit Profit Profit
for the Net for the Net for the Net
period assets period assets year assets
#m #m #m #m #m #m
As originally
reported under UK GAAP 3.9 43.2 1.5 36.9
Adoption of FRS17 0.3 (10.4) 1.9 (7.0)
Adoption of FRS21 - 1.6 - 3.8
------------------------------------------------------------------------------------------
Restated result
under UK GAAP 4.2 34.4 3.4 33.7
IFRS adjustments 1.3 17.0 3.0 18.3
------------------------------------------------------------------------------------------
IFRS result from
continuing and
discontinued operations 7.4 28.0 5.5 51.4 6.4 52.0
==========================================================================================
Further detail of the adjustments is provided in note 16. The reduction in net
assets in the current period reflects the #30m return to shareholders.
As explained in our transition statement, IFRS and their interpretation continue
to evolve alongside industry practice. As a result the above table differs
slightly from that published in the transition statement. The most significant
change from the transition statement is the restatement of net assets to adjust
for the effects of deferred taxation on capital losses in accordance with IAS12
'Income Taxes'. This adjustment totalled #0.7m in the period ended 30 September
2004 and #0.7m in the year ended 31 March 2005.
Whilst the consolidated group is required under EU legislation to adopt IFRS for
the year ended 31 March 2006, it does not currently intend to adopt IFRS for any
of the individual entities within the group. The regulated water business,
Bristol Water plc, reports its results under UK GAAP today. The table below
summarises the Bristol Water plc results as reported under UK GAAP, their
equivalent as reflected in the group consolidated accounts and the overall group
results:
30 September 2005 30 September 2004 31 March 2005
Profit Profit Profit
for the Net for the Net for the Net
period assets period assets year assets
#m #m #m #m #m #m
Bristol Water plc
results reported/
restated under UK
GAAP 7.4 69.1 5.2 64.4 9.1 66.7
IFRS adjustments 1.6 20.2 1.3 17.6 2.6 18.7
-----------------------------------------------------------------------------------------
Bristol Water plc
results on
IFRS basis 9.0 89.3 6.5 82.0 11.7 85.4
Other group
activities (1.6) (61.3) (1.0) (30.6) (5.3) (33.4)
-----------------------------------------------------------------------------------------
IFRS group result
from continuing
and discontinued
operations 7.4 28.0 5.5 51.4 6.4 52.0
=========================================================================================
IFRS group result
from continuing
operations only 7.4 28.0 5.8 50.6 9.4 52.0
=========================================================================================
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 former non-regulated activities. The pension
sections were closed to new entrants a number of years ago and all new employees
are offered stakeholder pension arrangements.
At 30 September 2005 the gross deficit, under IAS19 and included within the
group's balance sheet, on the group's sections within WCPS was #1.9m. This is
#11.2m lower than the equivalent figure at 31 March 2005 reflecting additional
special contributions of #7.3m made during the period together with payments
relating to early retirements in consequence of restructuring, and favourable
actuarial movements. For the regulated water business section the group has also
agreed to make further additional contributions of #1.0m in each of the four
years beginning April 2006 and #0.9m in 2010/11. For the non-regulated section
the group has agreed to make further annual contributions of #0.2m until the
section is fully funded on an actuarial rather than an IAS19 basis.
Outlook
The group's strategy is now firmly focused on the regulated water business which
is performing well. The group is well placed for the future.
Moger Woolley
Chairman
8 December 2005
CONSOLIDATED INCOME STATEMENT
for the six months ended 30 September 2005
Six months ended Year ended
30 September 30 September 31 March
2005 2004 2005
(unaudited) (unaudited) (unaudited)
(restated) (restated)
Notes #m #m #m
Continuing operations
Revenue 41.1 35.1 70.3
Other income 0.2 0.2 0.4
Expenses:
Raw materials and
consumables (14.6) (13.5) (27.1)
Employee benefit costs (6.3) (5.5) (13.4)
Depreciation and
amortisation of assets (5.6) (5.1) (10.4)
Amortisation of deferred
income 0.6 0.5 0.9
Other expenses (0.4) (0.6) (1.0)
Expenses related to
#30m return to
shareholders (0.7) - -
--------------------------------------------------------------------------------
Total expenses 3 (27.0) (24.2) (51.0)
--------------------------------------------------------------------------------
Profit from operations 4 14.3 11.1 19.7
Finance costs/income
Interest payable (5.5) (5.0) (9.9)
Interest receivable on 1.3 0.9 1.5
deposits
--------------------------------------------------------------------------------
(4.2) (4.1) (8.4)
In respect of retirement 0.4 0.3 0.8
benefit obligations
--------------------------------------------------------------------------------
(3.8) (3.8) (7.6)
--------------------------------------------------------------------------------
Profit before taxation 10.5 7.3 12.1
Taxation 5 (3.1) (1.5) (2.7)
--------------------------------------------------------------------------------
Profit for the period
from continuing
operations 7.4 5.8 9.4
Discontinued operations
Loss for the period
from discontinued
operations 6 - (0.3) (3.0)
--------------------------------------------------------------------------------
Profit for the period 7.4 5.5 6.4
================================================================================
Attributable to:
Equity holders 6.9 5.0 5.3
Minority interests 0.5 0.5 1.1
--------------------------------------------------------------------------------
7.4 5.5 6.4
================================================================================
Ordinary dividends
charged in the
period* 7
- #m 3.8 3.7 5.3
- pence per share 24.43 24.43 34.63
*Dividends per ordinary share for the six months ended 30 September 2004 and the
year ended 31 March 2005 have been restated to reflect the 10 for 13 share
consolidation effected in July 2005.
The Board has declared an interim ordinary dividend for the period ended 30
September 2005 of 14.7p per ordinary share, #2.3m in total (2004: 10.20p per
share, #1.6m in total). This will be paid on 31 January 2006. The interim
dividend is not recognised as a liability in these accounts in accordance with
IAS10.
The accompanying notes to the accounts form an integral part of this statement.
CONSOLIDATED INCOME STATEMENT (continued)
for the six months ended 30 September 2005
Six months ended Year ended
30 September 30 September 31 March
2005 2004 2005
(unaudited) (unaudited) (unaudited)
(restated) (restated)
Notes p p p
Earnings per ordinary
share*
from continuing
operations
Basic 8 44.3 34.1 54.2
Diluted 8 43.0 33.2 52.7
--------------------------------------------------------------------------------
from discontinued
operations
Basic 8 - (1.9) (19.5)
Diluted 8 - (1.8) (19.0)
--------------------------------------------------------------------------------
from continuing and
discontinued
operations
Basic 8 44.3 32.2 34.7
Diluted 8 43.0 31.4 33.7
--------------------------------------------------------------------------------
*Earnings per ordinary share for the period prior to the share consolidation in
the six months ended 30 September 2005, for the six months ended 30 September
2004 and the year ended 31 March 2005, have been restated to reflect the 10 for
13 share consolidation effected in July 2005.
The accompanying notes to the accounts form an integral part of this statement.
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
for the six months ended 30 September 2005
Six months ended Year ended
30 September 30 September 31 March
2005 2004 2005
(unaudited) (unaudited) (unaudited)
(restated) (restated)
#m #m #m
Return to shareholders charged to
retained earnings (5.6) - -
Actuarial gains/(losses) on defined
benefit pension schemes 3.0 (0.6) 1.8
Deferred tax (charge)/credit on net
actuarial gains/losses not recognised
in income statement (0.9) 0.2 (0.5)
--------------------------------------------------------------------------------
Net (losses)/gain not recognised
in income statement (3.5) (0.4) 1.3
Profit for the period 7.4 5.5 6.4
--------------------------------------------------------------------------------
Total recognised income for the
period 3.9 5.1 7.7
================================================================================
Attributable to:
Equity holders 3.4 4.6 6.6
Minority interests 0.5 0.5 1.1
--------------------------------------------------------------------------------
3.9 5.1 7.7
================================================================================
The accompanying notes to the accounts form an integral part of this statement.
CONSOLIDATED BALANCE SHEET
30 September 2005
At At At
30 September 30 September 31 March
2005 2004 2005
unaudited unaudited (unaudited)
(restated) (restated)
Notes #m #m #m
Assets:
Non-current assets
Intangible fixed assets 9 4.9 5.7 5.4
Tangible fixed assets -
property, plant and equipment 10 274.6 268.5 272.4
Interests in joint ventures - 0.4 -
--------------------------------------------------------------------------------
279.5 274.6 277.8
--------------------------------------------------------------------------------
Current assets
Inventories 0.7 0.6 0.7
Construction contracts - 8.9 -
Trade and other receivables 21.4 20.9 19.3
Investments - deposits exceeding
3 months maturity 11 20.0 - 1.0
Cash and cash equivalents 11 25.0 31.4 25.4
--------------------------------------------------------------------------------
67.1 61.8 46.4
--------------------------------------------------------------------------------
Total assets 346.6 336.4 324.2
================================================================================
Liabilities:
Current liabilities
Financial liabilities 11 (4.6) (5.8) (4.2)
Trade and other payables (16.0) (28.6) (17.2)
Current tax liabilities (1.2) (0.4) (0.5)
--------------------------------------------------------------------------------
(21.8) (34.8) (21.9)
--------------------------------------------------------------------------------
Net current assets 45.3 27.0 24.5
--------------------------------------------------------------------------------
Non-current liabilities
Financial liabilities 11 (202.7) (149.8) (148.6)
Retirement benefit obligations 12 (1.9) (16.8) (13.1)
Deferred tax liabilities (45.8) (42.0) (43.1)
Deferred income (44.8) (41.5) (42.8)
Provisions (1.6) (0.1) (2.7)
--------------------------------------------------------------------------------
(296.8) (250.2) (250.3)
--------------------------------------------------------------------------------
Total liabilities (318.6) (285.0) (272.2)
================================================================================
Net assets 28.0 51.4 52.0
================================================================================
Equity:
Share capital 13 1.0 1.0 1.0
Share premium account 0.6 0.2 0.2
Other reserves (91.6) (67.6) (67.6)
Retained earnings 105.5 105.3 105.9
--------------------------------------------------------------------------------
Equity attributable to equity
holders 15.5 38.9 39.5
Minority interests 12.5 12.5 12.5
--------------------------------------------------------------------------------
Total equity 28.0 51.4 52.0
================================================================================
The accompanying notes to the accounts form an integral part of this statement.
CONSOLIDATED CASH FLOW STATEMENT
30 September 2005
Six months ended Year ended
30 September 30 September 31 March
Notes 2005 2004 2005
(unaudited) (unaudited) (unaudited)
(restated) (restated)
#m #m #m
NET CASH FROM OPERATING
ACTIVITIES 14 9.1 11.5 27.9
--------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of tangible fixed
assets (7.1) (9.2) (18.3)
Purchase of intangible
fixed assets (0.3) (0.1) (0.5)
Grants and contributions
received 1.8 2.0 3.7
Proceeds from sale of
tangible fixed assets - 0.1 0.1
Net payments on disposal
of businesses - - (0.2)
Cash eliminated on
disposals (0.1) - (0.1)
Investment in joint - - (0.1)
venture
Purchase of deposits (19.0) - (1.0)
--------------------------------------------------------------------------------
NET CASH USED IN INVESTING
ACTIVITIES (24.7) (7.2) (16.4)
--------------------------------------------------------------------------------
FINANCING ACTIVITIES
Interest paid (4.3) (3.9) (7.9)
Interest paid on
obligations under finance
leases (1.2) (1.1) (1.1)
Interest received 1.0 0.9 1.6
Dividends paid to ordinary
shareholders 7 (3.8) - (5.3)
Dividends paid to minority
interests (0.6) (0.6) (1.7)
Repayment of borrowings - (1.8) (5.3)
Repayment of obligations
under finance leases (1.9) (1.7) (1.7)
New term loans 57.0 - -
New financing arrangement
costs (1.1) - -
Proceeds from issue of
shares 0.4 0.1 0.1
Redemption of New B shares
- return to shareholders
in July 2005 (29.6) - -
Redemption of Old B shares
- February 2004 return to - (1.1) (1.1)
shareholders
Expenses of return to
shareholders (0.7) - -
--------------------------------------------------------------------------------
NET CASH FROM/(USED IN)
FINANCING ACTIVITIES 15.2 (9.2) (22.4)
--------------------------------------------------------------------------------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (0.4) (4.9) (10.9)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 14 25.4 36.3 36.3
--------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD 14 25.0 31.4 25.4
================================================================================
The accompanying notes to the accounts form an integral part of this statement.
NOTES TO THE CONSOLIDATED INTERIM RESULTS
For the six months ended 30 September 2005
Note 1: General information and accounting policies
The information for the year ended 31 March 2005 does not constitute
statutory accounts within the meaning of section 240 of the Companies Act
1985. Statutory accounts, for the year ended 31 March 2005, prepared in
accordance with UK GAAP, (on which the auditors gave an unqualified report)
have been delivered to the Registrar of Companies. The statutory accounts
have been restated on an unaudited basis to provide comparative data for
this interim results statement.
Accounting policies are attached in the Appendix to this announcement.
Changes to accounting policies have resulted from the adoption of
International Financial Reporting Standards.
Note 2: Basis of preparation
The interim results, which have not been audited but have been reviewed by
the group's auditors, have been prepared in accordance with International
Financial Reporting Standards (IFRS) and interpretations which the group
expects will be applicable for the year ended 31 March 2006. The group is
not applying IAS 34 'Interim Statements'.
The standards and interpretations are continuing to evolve alongside
industry practice. As a consequence, the group notes that the results
disclosed herein may be subject to change following any review and/or
revision of standards by standard setters and/or application of those
standards by the water industry as a whole. The final financial impact of
transition to IFRS will not be known therefore until the financial
statements for the year ended 31 March 2006 are reported.
The results for the year ended 31 March 2005 and the six months ended 30
September 2004 have been restated in accordance with IFRS. The disclosures
required by first-time adopters as specified in IFRS 1 'First time adoption
of International Financial Reporting Standards', concerning the transition
from UK GAAP to IFRS are given in note 16.
IFRS 1 sets out the rules for first time adoption of IFRS. In general a
company is required to define its IFRS policies and then to apply them
retrospectively. IFRS does however allow a company to take advantage of a
number of exemptions from the restatement of historic data in certain
circumstances. For the consolidated group statements the following
exemptions have been applied:
*Designation of previously recognised financial instruments - the group's
interest rate swap has been designated at fair value at the opening IFRS
balance sheet date (i.e. 1 April 2004).
*For first time adoption of IAS 16 in respect of infrastructure renewals
expenditure the group has reconstructed its asset records from 1 April 1990
in line with IAS 16. Infrastructure assets have been analysed into
approximately 70 discrete assets. Investment properties held by the group,
mainly residential properties that are leased to tenants, have not been
fair valued in the balance sheet.
*Business Combinations - acquisitions or mergers occurring prior to the date
of transition will not be restated in accordance with IFRS 3 'Business
Combinations'.
*Share-based Payment - IFRS 2 'Share-based Payment' will not be applied to
share options issued on or before 7 November 2002. Neither will it be
applied to options issued after 7 November 2002 which have vested by 1
January 2005.
*Cumulative Translation Differences - translation differences
arising on foreign operations will be deemed to be zero at the date of
transition.
*Retirement benefit obligations - all cumulative actuarial gains and
losses arising at the opening IFRS balance sheet date are recognised
within the balance sheet.
Note 3: Restructuring costs
Total expenses for the year ended 31 March 2005 included restructuring
costs totalling #1.7m. The board of the regulated water business, Bristol
Water plc, instigated a restructuring programme to improve its operating
efficiency. This involved a number of redundancies and related pension
funding payments, asset write-downs and incidental expenses. Accordingly
the restructuring costs were recognised in the income statement for the
year ended 31 March 2005. There were no restructuring costs in either the
six months to 30 September 2005 or the six months to 30 September 2004.
Note 4: Profit from operations
Following the disposal of the majority of the non-regulated entities within
the group, revenue and profit from operations largely result from the
activities of the regulated water business, Bristol Water plc.
Profit from operations is analysed as follows:
Six months ended Year ended
30 September 30 September 31 March
2005 2004 2005
(unaudited) (unaudited) (unaudited)
(restated) (restated)
#m #m #m
Bristol Water plc:
Basic operations 15.2 11.2 21.7
Restructuring costs - - (1.7)
--------------------------------------------------------------------------------
15.2 11.2 20.0
Other businesses and corporate
overheads (0.2) (0.1) (0.3)
Expenses related to #30m return
to shareholders (0.7) - -
--------------------------------------------------------------------------------
Total profit from operations 14.3 11.1 19.7
================================================================================
Note 5: Taxation
Six months ended Year ended
30 September 30 September 31 March
2005 2004 2005
(unaudited) (unaudited) (unaudited)
(restated) (restated)
#m #m #m
Current tax:
UK corporation tax 1.2 0.7 1.0
Adjustments to prior - 0.6 1.9
periods
Advance Corporation Tax - (0.6) (1.5)
written back
--------------------------------------------------------------------------------
Total current tax 1.2 0.7 1.4
--------------------------------------------------------------------------------
Deferred tax:
Current period movement 1.9 1.4 3.1
Adjustments to prior - (0.6) (1.8)
periods
--------------------------------------------------------------------------------
Total deferred tax 1.9 0.8 1.3
--------------------------------------------------------------------------------
Total 3.1 1.5 2.7
================================================================================
Corporation tax for the interim period is charged at 30% (2004: 21%),
representing the estimated weighted average annual corporation tax rate
expected for the full financial year.
Note 6: Discontinued operations
In December 2004 the group sold its interest in Purton Carbons Limited.
In February 2005, the group sold its subsidiary Walter Lawrence Civil &
Mechanical Limited (Lawrence), which carried out the group's contracting
operations.
In May 2005, the group sold its interest in the majority of the activities
of Bristol Water Services Limited, its overseas consulting business.
In July 2005 the group sold its interests in Waternet Limited and
Watergrid Limited.
The results of the discontinued operations, which have been included in the
consolidated income statement, were as follows:
Six months ended Year ended
30 September 30 September 31 March
2005 2004 2005
(unaudited) (unaudited) (unaudited)
(restated) (restated)
#m #m #m
Revenue - 16.3 27.9
Expenses - (16.6) (29.5)
--------------------------------------------------------------------------------
Loss before tax - (0.3) (1.6)
Attributable net investment
income - - 0.1
--------------------------------------------------------------------------------
Loss on trading activities - (0.3) (1.5)
Loss on disposal - - (1.9)
Attributable tax credit - - 0.4
--------------------------------------------------------------------------------
Net loss attributable to
discontinued operations - (0.3) (3.0)
================================================================================
In the statutory accounts for the year ended 31 March 2005 the group recorded
a loss of #4.5m related to the disposal of Lawrence including a #2.0m
provision for retained pension liabilities. Under IFRS, pension liabilities
are accounted for under IAS19 and therefore a #2.5m liability is recognised
within the opening IFRS balance sheet. In addition, goodwill of #0.4m
previously written off to reserves is not included in the loss on disposal in
the income statement under IFRS. Accordingly under IFRS the loss on disposal
was #1.6m.
A loss of #0.5m arose on disposal of the majority of the overseas activities
of Bristol Water Services Limited. A net gain of #0.2m arose on the disposal
of other businesses.
Note 7: Ordinary dividends
Six months ended Year ended
30 September 30 September 31 March
2005 2004 2005
(unaudited) (unaudited) (unaudited)
(restated) (restated)
#m #m #m
Amounts recognised as
distributions to equity holders
in the period:
Dividend in respect of 2003/04
trading:
Final dividend of 24.43p - 3.7 3.7
(2004: 24.43p) per share
approved at July 2004 AGM
Dividend in respect of 2004/05
trading:
Interim dividend of 10.20p - - 1.6
per share approved by the
Board in December 2004
Final dividend of 24.43p per 3.8 - -
share approved at July 2005 AGM
--------------------------------------------------------------------------------
3.8 3.7 5.3
================================================================================
The Board has declared an interim ordinary dividend for the period ended 30
September 2005 of 14.7p per ordinary share, #2.3m in total (2004: 10.20p per
share, #1.6m in total), this will be paid on 31 January 2006. The interim
dividend is not recognised as a liability in these accounts in accordance with
IAS10.
Dividends per ordinary share for the six months ended 30 September 2004 and the
year ended 31 March 2005 have been restated to reflect the 10 for 13 share
consolidation effected in July 2005.
Note 8: Earnings per ordinary share
From continuing and discontinued operations
The calculation of the basic and diluted earnings per share is based on the
following data:
Six months ended Year ended
30 September 30 September 31 March
2005 2004 2005
(unaudited) (unaudited) (unaudited)
(restated) (restated)
#m #m #m
Earnings
Earnings for the purpose of
calculation of basic and
diluted earnings per share 6.9 5.0 5.3
================================================================================
Six months ended Year ended
30 September 30 September 31 March
2005 2004 2005
(unaudited) (unaudited) (unaudited)
(restated) (restated)
m m m
Number of shares
Weighted average number of
ordinary shares for the
purpose of calculation of basic 15.4 15.3 15.3
earnings per share
Effect of dilutive potential
ordinary shares:
Share options 0.5 0.4 0.5
--------------------------------------------------------------------------------
Weighted average number of
ordinary shares for the
purpose of calculation of 15.9 15.7 15.8
diluted earnings per share
--------------------------------------------------------------------------------
Earnings per ordinary share for the period prior to the share consolidation in
the six months ended 30 September 2005, for 30 September 2004 and 31 March 2005,
have been restated to reflect the 10 for 13 share consolidation effected in July
2005.
From continuing operations
The calculation of the basic and diluted earnings per share is based on the
following data:
Six months ended Year ended
30 September 30 September 31 March
2005 2004 2005
(unaudited) (unaudited) (unaudited)
(restated) (restated)
#m #m #m
Net profit attributable
to equity holders 6.9 5.0 5.3
Adjustments to exclude loss for
the period from
discontinued operations - 0.3 3.0
--------------------------------------------------------------------------------
Earnings from continuing
operations for the purpose
of calculation of basic and
diluted earnings per share
excluding discontinued
operations 6.9 5.3 8.3
================================================================================
From discontinued operations
The calculation of the basic and diluted earnings per share is based on the
following data:
Six months ended Year ended
30 September 30 September 31 March
2005 2004 2005
(unaudited) (unaudited) (unaudited)
(restated) (restated)
#m #m #m
Net loss from discontinued
operations - 0.3 3.0
================================================================================
Note 9: Movement in intangible fixed assets
Six months ended Year ended
30 September 30 September 31 March
2005 2005 2005
(unaudited) (unaudited) (unaudited)
(restated) (restated)
#m #m #m
Net book value, beginning 5.4 6.3 6.3
of period
Additions 0.3 0.1 0.5
Amortisation (0.8) (0.7) (1.4)
--------------------------------------------------------------------------------
Net book value, end of period 4.9 5.7 5.4
================================================================================
Note 10: Movement in tangible fixed assets
Six months ended Year ended
30 September 30 September 31 March
2005 2004 2005
(unaudited) (unaudited) (unaudited)
(restated) (restated)
#m #m #m
Net book value, beginning 272.4 263.7 263.7
of period
Additions 7.1 9.2 18.3
Disposals (0.1) - (0.6)
Depreciation (4.8) (4.4) (9.0)
--------------------------------------------------------------------------------
Net book value, end of period 274.6 268.5 272.4
================================================================================
Note 11: Net debt
At At At
30 September 30 September 31 March
2005 2004 2005
(unaudited) (unaudited) (unaudited)
(restated) (restated)
#m #m #m
Net debt comprises -
Debt due after one year 202.7 149.8 148.6
Debt due within one year 4.6 5.8 4.2
Less:
cash balances and (25.0) (31.4) (25.4)
short-term deposits
deposits exceeding 3 (20.0) - (1.0)
months maturity
--------------------------------------------------------------------------------
Net debt 162.3 124.2 126.4
================================================================================
Note 12: Retirement benefit schemes
Pension arrangements
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 assets of each section are held separately from those of
the group and are invested by discretionary fund managers appointed by the
trustees of the Scheme. All sections have been closed to new entrants and
all new eligible employees are offered stakeholder pensions.
In addition to providing benefits to employees and ex-employees of the group,
the Bristol Water plc section provides benefits to former Bristol Water plc
employees who transferred to Bristol Wessex Billing Services Ltd. The majority
of the section assets and liabilities relate to Bristol Water plc employees
and ex-employees.
The Verdan Group Limited section (Verdan section) relates primarily to
retained pension liabilities in respect of previously owned non-regulated
businesses.
During 2005, the group reached agreement with the WCPS trustee which resulted
in an immediate injection of #0.5m into the Verdan section and a commitment to
make further additional contributions of #0.2m per annum until the deficit
related to the Verdan section of WCPS was eliminated. In support of these
obligations Bristol Water Group plc has provided a guarantee of #2.0m to the
trustee. This guarantee of #2.0m reduces by the #0.5m already injected into
the scheme and any additional payments made by Verdan Group Limited.
In considering the #30m return to shareholders, the directors assessed the
group's obligations in respect of both sections of WCPS. It was concluded that
the regulated water business would make an additional contribution to WCPS of
#7.0m. It will also make additional contributions of #1.0m 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 agreed to make a one-off contribution of
#0.3m to the Verdan section in addition to its existing commitment for annual
contributions of #0.2m until this section is fully funded on an actuarial
basis.
A triennial actuarial valuation of the WCPS sections at 1 April 2005 is
currently being finalised by the scheme actuary.
Accounting under IAS19:
In summary the assets and liabilities of the Bristol Water plc and Verdan
sections of WCPS were:
At At At
30 September 30 September 31 March
2005 2004 2005
#m #m #m
Total fair value of assets 124.5 97.8 105.6
IAS19 value of
liabilities (126.4) (114.6) (118.7)
--------------------------------------------------------------------------------
Gross retirement benefit liability
before attributable
deferred taxation (1.9) (16.8) (13.1)
================================================================================
Note 13: Share capital
At 1 April 2005 the share capital of the company consisted of: 27,559,999
ordinary shares of 5 pence each of which 19,976,692 shares had been issued
and were fully paid, together with 828,123 redeemable Old B shares of #1.35
each, none of which were in issue.
In connection with the return to shareholders, on 16 June 2005:
*the authorised but unissued Old B shares were cancelled,
*the authorised share capital was increased to #25,296,999.95 by the creation
of 20,100,000 New B shares of 119 pence each,
*the company issued 19,998,248 New B shares to shareholders on the register
of members at that time, treated as paid up in full out of the company's
merger reserve and profit and loss account.
On 5 July 2005:
* 101,752 authorised but unissued New B shares were cancelled,
* the issued New B shares were cancelled and 148 pence per New B share
paid to members pursuant to a Court approved reduction of capital,
* each ordinary share in issue was sub-divided into 10 shares of 0.5
pence each. After sub-division every 13 of those new shares resulting from
sub-division were consolidated into one ordinary share of 6.5 pence
each,
* fractional entitlements to consolidated ordinary shares totalling
1,688 consolidated ordinary shares were sold in the market for the benefit
of the company for a total consideration of #11,141,
* all unissued ordinary shares of 5 pence each were consolidated into
one undesignated ordinary share of #378,088 and subsequently sub-divided
into 5,816,731 unissued new consolidated ordinary shares of 6.5 pence
each. Fractional entitlements arising were cancelled.
At 30 September 2005 the authorised share capital of the company consisted of
21,199,998 shares of 6.5 pence each, of which 15,569,932 had been issued as
fully paid.
Authorised Issued & fully paid
shares shares
Ordinary B Ordinary B
5p 6.5p 5p 6.5p
#m #m #m #m #m #m
At 1 April 2005 1.4 - 1.1 1.0 - -
Cancellation of Old B shares of
#1.35 nominal value each - - (1.1) - - -
Creation of New B shares of
#1.19 nominal value each - - 23.9 - - -
Issue of New B shares, credited
fully paid at #1.48 each - - - - - 29.6
Consolidation of 5p shares into
6.5p shares (1.4) 1.4 - (1.0) 1.0 -
Redemption & cancellation of New
B shares - - (23.9) - - (29.6)
--------------------------------------------------------------------------------
At 30 September 2005 - 1.4 - - 1.0 -
--------------------------------------------------------------------------------
Note 14: Notes to the cash flow statement
Explanation of material adjustments to the cash flow statement for the
period ended 30 September 2004 and for the year ended 31 March 2005:
Six months ended Year ended
30 September 30 September 31 March
2005 2004 2005
(unaudited) (unaudited) (unaudited)
(restated) (restated)
#m #m #m
Profit from continuing operations 14.3 11.1 19.7
Loss from discontinued operations - (0.3) (3.0)
Adjustments for:
Depreciation of tangible fixed 4.8 4.4 9.0
assets
Amortisation of intangible 0.8 0.7 1.4
fixed assets
Amortisation of deferred (0.6) (0.5) (0.9)
income
Gain on disposal of tangible - - (0.1)
fixed assets
Loss on disposal of - - 3.9
businesses
Expenses of return of 0.7 - -
capital
Increase in fair value of - - 0.1
share options
--------------------------------------------------------------------------------
Operating cash flows before
movements in working capital 20.0 15.4 30.1
(Increase)/decrease in - 0.1 -
inventories
(Increase)/decrease in (1.7) 0.3 2.7
receivables
Additional contributions to (7.3) - -
pension scheme
Decrease in payables (1.3) (2.7) (2.9)
--------------------------------------------------------------------------------
Cash generated by operations 9.7 13.1 29.9
Corporation taxes paid (0.6) (1.6) (2.0)
--------------------------------------------------------------------------------
Net cash from operating activities 9.1 11.5 27.9
================================================================================
Analysis of cash equivalents and investments
At At At
30 September 30 September 31 March
2005 2004 2005
(unaudited) (unaudited) (unaudited)
#m #m #m
Cash at bank and in hand 2.8 1.2 0.1
Short-term bank deposits 22.2 30.2 25.3
--------------------------------------------------------------------------------
Cash and cash equivalents 25.0 31.4 25.4
Deposits exceeding 3 months
maturity 20.0 - 1.0
--------------------------------------------------------------------------------
Total bank and cash 45.0 31.4 26.4
================================================================================
Finance leases
No new finance leases were entered into to finance fixed asset additions during
the period. No additions were acquired on deferred payment terms and settled in
the current period.
Note 15: Circulation
These interim results are being sent to all shareholders of Bristol Water
Group plc. Copies are available to the public from the Company's registered
office at PO Box 218, Bridgwater Road, Bristol, BS99 7AU and on the Bristol
Water website: http://www.bristolwater.co.uk.
Note 16: EXPLANATION OF TRANSITION TO IFRS
This is the first year during which the group will prepare its
financial statements under IFRS. The following disclosures are
required in the year of transition. The last financial statements
under UK GAAP were for the year ended 31 March 2005. The date of
transition to IFRS was 1 April 2004. The UK GAAP numbers noted below
represent those as published in prior periods unless otherwise
stated.
In summary the main effects of IFRS on the group are:
Six months ended Six months ended Year ended Year ended
30 September 2005 30 September 2005 31 March 2005 31 March 2004
(originally prepared (originally prepared (originally prepared
(prepared under IFRS) under UK GAAP) under UK GAAP) under UK GAAP)
#m #m #m #m
As reported/restated
under IFRS
Profit for the period 7.4 5.5 6.4 13.5
Total recognised
income 3.9 5.1 7.7 17.3
Net assets 28.0 51.4 52.0 50.5
EPS* - fully diluted
from continuing and
discontinued
operations 43.0p 31.4p 33.7p 81.9p
As previously N/a
reported under UK
GAAP
Profit after tax 3.9 1.5 11.6
Total recognised
income 3.9 1.5 11.6
Net assets 43.2 36.9 42.4
EPS - fully diluted -
before operating and
non-operating exceptional
items 16.5p 31.1p 50.8p
EPS - fully diluted -
after operating and 16.5p 2.0p 52.2p
non-operating exceptional
items
EPS restated for
share consolidation*
EPS - fully
diluted -
before operating and
non-operating exceptional
items 21.5p 40.4p 66.0p
EPS - fully
diluted -
after operating and 21.5p 2.6p 67.9p
non-operating exceptional
items
*Earnings per ordinary share for the period prior to the share consolidation in
the six months ended 30 September 2005, for the six months ended 30 September
2004 and the years ended 31 March 2005 and 31 March 2004, have been restated to
reflect the 10 for 13 share consolidation effected in July 2005.
Reconciliation of profit: For the period ended For the year ended
30 September 2004 31 March 2005
Notes Effect of Effect of
transition transition
UK GAAP to IFRS UK GAAP to IFRS
#m #m #m #m #m #m
(a) Revenue 51.6 (16.5) 35.1 98.5 (28.2) 70.3
(a) Other income - 0.2 0.2 - 0.4 0.4
(b) Raw materials (22.3) 8.8 (13.5) (42.7) 15.6 (27.1)
and consumables
(c) Employee (11.1) 5.6 (5.5) (22.3) 8.9 (13.4)
benefit costs
(d) Depreciation (7.5) 2.4 (5.1) (15.1) 4.7 (10.4)
and amortisation
of assets
(d) Amortisation of 0.2 0.3 0.5 0.3 0.6 0.9
deferred income
(e) Other expenses (1.8) 1.2 (0.6) (3.4) 2.4 (1.0)
-------------------------------------------------------------------------------------
Total expenses (42.5) 18.3 (24.2) (83.2) 32.2 (51.0)
-------------------------------------------------------------------------------------
Profit from operations 9.1 2.0 11.1 15.3 4.4 19.7
(e) Net exceptional items - - - (4.8) 4.8 -
Finance (costs)/income:
(f) Interest payable (5.1) 0.1 (5.0) (10.3) 0.4 (9.9)
(e) Interest recievable 0.9 - 0.9 1.6 (0.1) 1.5
on deposits
-------------------------------------------------------------------------------------
(4.2) 0.1 (4.1) (8.7) 0.3 (8.4)
(g) In respect of - 0.3 0.3 - 0.8 0.8
retirement benefit
obligations
-------------------------------------------------------------------------------------
(4.2) 0.4 (3.8) (8.7) 1.1 (7.6)
-------------------------------------------------------------------------------------
(e) Share of results (0.1) 0.1 - (0.2) 0.2 -
of joint ventures
-------------------------------------------------------------------------------------
Profit before taxation 4.8 2.5 7.3 1.6 10.5 12.1
(h) Taxation (0.9) (0.6) (1.5) (0.1) (2.6) (2.7)
-------------------------------------------------------------------------------------
Profit for the year from 3.9 1.9 5.8 1.5 7.9 9.4
continuing operations
Discontinued operations
(i) Loss for the year - (0.3) (0.3) - (3.0) (3.0)
from discontinued
operations
-------------------------------------------------------------------------------------
Profit for the year 3.9 1.6 5.5 1.5 4.9 6.4
====================================================================================
Notes Notes to the reconciliation of profit for the period ended 30 September
2004 and for the year ended 31 March 2005
(a) Revenue as reported under UK GAAP includes revenue from discontinued
operations. Under IFRS revenue relates only to continuing operations.
Adjustment is also made to reclassify income from rental properties as
'other income'.
(b) Costs relating to discontinued operations are excluded in line with the
treatment of relevant revenue.
(c) Costs relating to discontinued operations are excluded in line with the
treatment of relevant revenue. SSAP24 pension costs charged under UK
GAAP are excluded and replaced by charges under IAS19. The costs are
increased for the expense associated with the provision of share options
under IFRS 2.
(d) Infrastructure renewals accounting is not permitted by IAS 16 'Property,
plant and equipment'. An adjustment has therefore been made to charge
revenue expenditure previously capitalised in the balance sheet to
operating costs. The infrastructure renewals charge, which was
previously reported as part of depreciation, has also been removed and a
revised depreciation charge on an IAS 16 basis has been charged to
depreciation and amortisation.
Grants and contributions, previously netted off infrastructure and
non-infrastructure assets, have been added back and credited to deferred
income and then amortised over appropriate periods.
(e) The results of discontinued operations are reclassified below profit for
the year from continuing operations.
(f) In accordance with IAS 39, 'Financial Instruments: Recognition and
Measurement', and IAS 32, 'Financial Instruments: Disclosure and
Presentation', the group has fair valued its interest-rate swap. The
adjustment reflects current period movements in fair value.
(g) Adjustment has been made to reflect the net finance charges related to
retirement benefit assets and liabilities accounted for on the basis of
IAS 19 'Employee Benefits'.
(h) IAS 12 'Income taxes' does not permit discounting of the deferred tax
liability. Current period effect of discounting has therefore been
removed. Taxation has also been adjusted for the impacts on deferred
taxation of the fair value movements in interest rate swaps, the effect
of pension adjustments, the fair value impact of share options and the
removal of infrastructure renewals accounting.
(i) The results for the period from discontinued operations are reclassified
below profit after tax from discontinuing operations in accordance with
IAS 1 'Presentation of Financial Statements'.
Reconciliation of balance sheet:
At 30 September 2004 At 31 March 2005 Opening balance sheet as
at 1 April 2004
Notes Effect of Effect of Effect of
transition transition transition
UK GAAP to IFRS IFRS UK GAAP to IFRS IFRS UK GAAP to IFRS IFRS
#m #m #m #m #m #m #m #m #m
Assets:
Non-current assets:
(j) Intangible fixed - 5.7 5.7 - 5.4 5.4 - 6.3 6.3
assets
(j) Tangible fixed 195.3 73.2 268.5 195.7 76.7 272.4 194.7 69.1 263.8
assets
Interests in joint 0.4 - 0.4 - - - 0.4 - 0.4
ventures
-------------------------------------------------------------------------------------------------------------------
195.7 78.9 274.6 195.7 82.1 277.8 195.1 75.4 270.5
-------------------------------------------------------------------------------------------------------------------
Current assets:
Inventories 0.6 - 0.6 0.7 - 0.7 0.7 - 0.7
Construction contracts 8.9 - 8.9 - - - 11.0 - 11.0
Trade and other recievables 20.9 - 20.9 19.3 - 19.3 19.1 - 19.1
(k) Deposits exceeding 3 - - - - 1.0 1.0 - - -
months maturity
Cash and cash equivalents 31.4 - 31.4 26.4 (1.0) 25.4 36.3 - 36.3
-------------------------------------------------------------------------------------------------------------------
61.8 - 61.8 46.4 - 46.4 67.1 - 67.1
-------------------------------------------------------------------------------------------------------------------
Total assets 257.5 78.9 336.4 242.1 82.1 324.2 262.2 75.4 337.6
===================================================================================================================
Liabilities:
Current liabilities
(l) Financial (5.4) (0.4) (5.8) (3.7) (0.5) (4.2) (6.9) (1.7) (8.6)
liabilities
(m) Trade and (31.9) 3.3 (28.6) (24.3) 7.1 (17.2) (33.5) 5.2 (28.3)
other payables
Tax liabilities (0.4) - (0.4) (0.5) - (0.5) (1.4) - (1.4)
--------------------------------------------------------------------------------------------------------------------
(37.7) 2.9 (34.8) (28.5) 6.6 (21.9) (41.8) 3.5 (38.3)
--------------------------------------------------------------------------------------------------------------------
Net current assets 24.1 2.9 27.0 17.9 6.6 24.5 25.3 3.5 28.8
--------------------------------------------------------------------------------------------------------------------
Non-current liabilities
(n) Financial (149.3) (0.5) (149.8) (148.4) (0.2)(148.6) (150.8) (0.5)(151.3)
liabilities
(o) Retirement - (16.8) (16.8) - (13.1) (13.1) - (16.3) (16.3)
benefit obligations
(p) Deferred tax (18.8) (23.2) (42.0) (17.7) (25.4) (43.1) (18.7) (22.7) (41.4)
liabilities
(q) Deferred income (8.5) (33.0) (41.5) (8.6) (34.2) (42.8) (8.5) (31.2) (39.7)
(r) Provisions - (0.1) (0.1) (2.0) (0.7) (2.7) - (0.1) (0.1)
--------------------------------------------------------------------------------------------------------------------
(176.6) (73.6)(250.2) (176.7) (73.6)(250.3) (178.0) (70.8)(248.8)
--------------------------------------------------------------------------------------------------------------------
Total liabilities (214.3) (70.7)(285.0) (205.2) (67.0)(272.2) (219.8) (67.3)(287.1)
====================================================================================================================
Net assets 43.2 8.2 51.4 36.9 15.1 52.0 42.4 8.1 50.5
====================================================================================================================
Equity:
Share capital 1.0 - 1.0 1.0 - 1.0 2.1 (1.1) 1.0
Share premium 0.2 - 0.2 0.2 - 0.2 0.1 - 0.1
(s) Other (67.7) 0.1 (67.6) (67.7) 0.1 (67.6) (67.7) - (67.7)
reserves
(t) Retained 97.2 8.1 105.3 90.9 15.0 105.9 95.4 9.2 104.6
earnings
-------------------------------------------------------------------------------------------------------------------
Equity attributable to
equity holders 30.7 8.2 38.9 24.4 15.1 39.5 29.9 8.1 38.0
Minority interests 12.5 - 12.5 12.5 - 12.5 12.5 - 12.5
-------------------------------------------------------------------------------------------------------------------
(u) Total equity 43.2 8.2 51.4 36.9 15.1 52.0 42.4 8.1 50.5
===================================================================================================================
Notes to the reconciliation of equity at 30 September 2004, 31 March
2005 and 1 April 2004
Notes
(j) Infrastructure renewals accounting is not permitted by IAS 16 'Property,
plant and equipment'. All revenue expenditure previously capitalised has
been charged to operating costs to reverse the effects of UK GAAP
infrastructure renewals accounting. The infrastructure network has been
analysed into approximately 70 discrete assets. Depreciable lives have
been assigned to identified segments and a depreciation charge
calculated accordingly. The resulting depreciation charge is
considerably lower than the previous charge calculated on a UK GAAP
basis. Application of IAS 16 has therefore resulted in a write back to
depreciation previously charged.
In addition, previously capitalised software expenditure has been
separately identified and reclassified as intangible fixed assets and
amortised accordingly.
Grants and contributions previously netted off infrastructure and
non-infrastructure capital expenditure have been added back and credited
to deferred income. They are now amortised over the life of the
underlying asset to which they relate with the exception of revenue
deficit contributions received from developers regarding mains
reinforcement which are amortised over three years.
(k) Cash and deposits placed for less than 3 months under IAS 7 'Cash Flow
Statements' are deemed to be cash. Consequently, deposits placed for
greater than 3 months have been reclassified as investments under
IFRS.
(l) In accordance with IAS 39, 'Financial Instruments: Recognition and
Measurement', and IAS 32, 'Financial Instruments: Disclosure and
Presentation', the group has fair valued its interest-rate swap. The
adjustment made reflects the uplift to fair value net of current period
movements in fair value. The group's index-linked loans are deemed to be
effectively hedged and have not therefore been restated at fair value.
The group has not fair valued any other loans.
At 1 April 2004 the group's Old redeemable B shares, previously
classified as equity under UK GAAP, have been reclassified as debt in
accordance with IAS 32.
(m) Under IAS 37, 'Provisions, Contingent Liabilities and Contingent
Assets', dividends are not accrued unless they have been declared prior
to the period end. Therefore, dividends accrued under UK GAAP not
declared before the period end have been excluded.
Adjustment has been made for pension liabilities previously accrued in
accordance with the UK GAAP pensions standard, SSAP 24. These
liabilities have been replaced with a pension liability in non-current
liabilities in accordance with the provisions of IAS 19, 'Employee
Benefits'.
Further adjustment has been made to reclassify provisions (see (r)).
(n) The increase represents the non-current proportion of the group's
interest rate swap uplifted to its fair value.
(o) The group has recognised its final salary pension scheme deficit in full
on the balance sheet in accordance with IAS 19 'Employee Benefits'.
(p) The application of IAS 12, 'Income Taxes', prohibits the discounting of
deferred tax liabilities. The liability has been grossed up to exclude
the effects of discounting.
The following is a summary of the changes to the deferred tax balance:
30 September 2004 31 March 2005 1 April 2004
#m #m #m #m #m #m
Deferred tax under UK GAAP (18.8) (17.7) (18.7)
Adjustments for deferred
tax on:
Removal of deferred tax (13.8) (13.9) (13.6)
discounting
Non-qualifying assets (0.2) (0.2) (0.2)
Fair value increase in 0.3 0.2 0.3
interest rate swap
Retirement benefit 4.7 3.2 4.5
obligations
Fair value of share - 0.1 -
options
Net infrastructure (14.2) (14.8) (13.7)
renewals accounting
adjustments
--------------------------------------------------------------------------------
(23.2) (25.4) (22.7)
--------------------------------------------------------------------------------
Deferred tax under IFRS (42.0) (43.1) (41.4)
================================================================================
(q) Grants and contributions previously netted off infrastructure and
non-infrastructure assets have been added back and credited to deferred
income. They are now being amortised over the life of the asset to which
they relate.
(r) Provisions previously included in trade creditors and accruals have been
reclassified in accordance with IAS 1 'Presentation of financial
statements'.
(s) The group has fair valued relevant employee share options granted in
accordance with IFRS 2 'Share-based Payment'.
(t) The adjustments made to retained earnings are as follows:
30 September 2004 31 March 2005 1 April 2004
#m #m #m #m #m #m
Retained earnings under UK GAAP 97.2 90.9 95.4
Removal of deferred tax (13.8) (13.9) (13.6)
discounting not permitted
by IAS12
Deferred tax on (0.2) (0.2) (0.2)
non-qualifying assets
Fair value increase in (0.6) (0.5) (0.8)
interest rate swap less
associated deferred
tax
Removal of accrual for 1.6 3.8 3.7
dividends proposed but
not declared
Increase in pension (10.6) (7.2) (10.3)
liability on an IAS 19
basis less associated
deferred tax
IAS 16 adjustments to 31.7 33.0 30.4
fixed assets less
associated deferred tax
Fair value share options - - -
less associated deferred tax
--------------------------------------------------------------------------------
8.1 15.0 9.2
--------------------------------------------------------------------------------
Retained earnings under IFRS 105.3 105.9 104.6
================================================================================
(u) The adjustments made to total equity are as follows:
30 September 2004 31 March 2005 1 April 2004
#m #m #m #m #m #m
Total equity under UK GAAP 43.2 36.9 42.4
Adjustments to
retained earnings:
Net adjustments at 9.2 9.2 3.3
beginning of
period
Net current period 1.5 4.4 2.2
adjustments
reflected in the
income statement
excluding
dividends
Dividends (2.2) 0.1 3.7
Net current period (0.4) 1.3 -
actuarial gains
taken direct to
retained earnings
--------------------------------------------------------------------------------
8.1 15.0 9.2
Reclassification of - - (1.1)
redeemable B shares to
financial liabilities
Share options equity 0.1 0.1 -
reserve on adoption of
IFRS2
--------------------------------------------------------------------------------
Total equity under IFRS 51.4 52.0 50.5
================================================================================
INDEPENDENT REVIEW REPORT TO BRISTOL WATER GROUP PLC
For the six months ended 30 September 2005
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 September 2005 which comprises the Income Statement, the
Statement of Recognised Income and Expense, the Balance Sheet, the Cash Flow
Statement and related notes. We have read the other information contained in the
interim report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority.
As disclosed in note 2, the next annual financial statements of the group will
be prepared in accordance with accounting standards adopted for use in the
European Union. This interim report has been prepared in accordance with the
basis set out in note 2.
The accounting policies are consistent with those that the directors intend to
use in the next annual financial statements. As explained in note 2, there is,
however, a possibility that the directors may determine that some changes are
necessary when preparing the full annual financial statements for the first time
in accordance with accounting standards adopted for use in the European Union.
The IFRS standards and IFRIC Interpretations that will be applicable and adopted
for use in the European Union at 31 March 2006 are not known with certainty at
the time of preparing this interim financial information.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the disclosed accounting policies have
been applied. A review excludes audit procedures such as tests of controls and
verification of assets, liabilities and transactions. It is substantially less
in scope than an audit and therefore provides a lower level of assurance.
Accordingly, we do not express an audit opinion on the financial information.
This report, including the conclusion, has been prepared for and only for the
company for the purpose of the Listing Rules of the Financial Services Authority
and for no other purpose. We do not, in producing this report, accept or assume
responsibility for any other purpose or to any other person to whom this report
is shown or into whose hands it may come save where expressly agreed by our
prior consent in writing.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 September 2005.
PricewaterhouseCoopers LLP
Chartered Accountants
Bristol
8 December 2005
Notes:
(a) The maintenance and integrity of the Bristol Water website is the
responsibility of the directors; the work carried out by the auditors does
not involve consideration of these matters and, accordingly, the auditors
accept no responsibility for any changes that may have occurred to the
interim report since it was initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation and
dissemination of financial information may differ from legislation in other
jurisdictions.
APPENDIX
Accounting policies
The significant accounting policies expected to be adopted in the preparation of
the accounts for the year ended 31 March 2006, and applied in these interim
accounts to 30 September 2005, are set out below.
a. Accounting convention
The accounts are prepared in accordance with applicable International Financial
Reporting Standards (IFRS) and interpretations originated by the International
Financial Reporting Interpretations Committee (IFRIC) and with those parts of
the Companies Act 1985 (as amended) applicable to groups reporting under IFRS.
The financial statements have been prepared under the historical cost convention
except for the group's interest rate swap, which has been designated at fair
value at the date of transition to IFRS.
The date of transition to IFRS is 1 April 2004.
The group has not adopted IAS34 "Interim Statements".
The group has taken advantage of the following exemptions available under IFRS:
* Designation of previously recognised financial instruments - the group's
interest rate swap will be designated at fair value at the opening IFRS
balance sheet date.
* For first time adoption of IAS 16 in respect of infrastructure renewals
expenditure the group has reconstructed its asset records from 1 April 1990
in line with IAS 16. Infrastructure assets have been broken down into
approximately 70 discrete assets. Investment properties held by the group,
mainly residential properties that are leased to tenants, have not been fair
valued in the balance sheet.
* Business Combinations - acquisitions or mergers occurring prior to the
date of transition will not be restated in accordance with IFRS 3 "Business
Combinations".
* Share-based Payment - IFRS 2 "Share-based Payment" will not be applied
to share options issued on or before 7 November 2002. Neither will it be
applied to options issued after 7 November 2002 which have vested by 1
January 2005.
* Cumulative Translation Differences - translation differences arising on
foreign operations will be deemed to be zero at the date of transition.
* Retirement benefit obligations - all cumulative actuarial gains and
losses arising at the opening IFRS balance sheet date will be recognised
within that balance sheet.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Although these estimates are based on management's best
knowledge of the amount, event or actions, actual results ultimately may differ
from those estimates.
b. Basis of consolidation
The group accounts comprise the consolidation of the accounts of the company and
all its subsidiary undertakings after eliminating inter-company transactions.
Merger accounting has been applied to the reconstruction of the former Bristol
Water Holdings plc group that took place in 2003/04.
On acquisition of all other subsidiaries, all of the subsidiary's assets and
liabilities that exist at the date of acquisition are recorded at their fair
values reflecting their condition at that date and alignment with group
accounting policies. All changes to those assets and liabilities, and the
resulting gains and losses that arise after the group has gained control of the
subsidiary are reflected in the post acquisition income statement.
Acquisitions and mergers occurring prior to the date of transition have not been
restated in accordance with IFRS 3, "Business Combinations".
The group's share of profits less losses of joint ventures is included in the
consolidated income statement, and the group's share of their net assets is
included in the consolidated balance sheet under the gross equity method.
The group accounts for its own share of assets, liabilities and cash flows
arising within joint arrangements, measured according to the terms of the
agreement governing each arrangement.
Subsidiaries and joint ventures which are sold during the year are consolidated
only for their respective periods of ownership by the group.
c. Goodwill
Goodwill arising on consolidation represents the excess of fair value of the
consideration given over the fair value of the identifiable net assets acquired.
Goodwill arising on the acquisition of subsidiaries and joint ventures is
reviewed for impairment annually. If an impairment event occurs the carrying
value of goodwill is reviewed and, if necessary, written down to appropriate
levels. Goodwill which arose prior to 1 April 1998 was eliminated against
reserves.
d. Revenue
Revenue comprises charges to and accrued income from customers, exclusive of
VAT, and after eliminating inter-company transactions.
Income from metered supplies is based upon volumes of water invoiced plus
estimated volumes of un-invoiced water delivered to customers during the year.
e. Fixed assets and depreciation
Fixed assets comprise intangible and tangible assets:
Intangible assets
Intangible assets are principally computer software insofar as this is separable
from the relevant hardware.
Tangible assets
Tangible assets include land and buildings, operational structures, fixed and
mobile plant, equipment and motor vehicles, together with infrastructure assets,
comprising the integrated network of impounding and pumped raw water storage
reservoirs and water mains and associated underground pipework. All are included
at cost. The cost of tangible assets is their purchase cost together with
incidental expenses of acquisition and any directly attributable labour costs
which would not otherwise be incurred by the group.
Depreciation
Depreciation is charged, where appropriate, on a straight-line basis on the
original cost of assets, less their estimated residual values, over their
expected economic lives. Freehold land is not depreciated. Depreciation of
assets commences when the assets are capitalised, and is generally applied over
the following estimated economic lives:
Operational properties and structures 15 to 100 years
Infrastructure assets - reservoirs 90 - 250 years
Infrastructure assets - pipeline network 70 - 200 years
Treatment, pumping and general plant 20 to 24 years
Computer hardware and software, communications, meters and 3 to 15 years
telemetry equipment
Vehicles and mobile plant 5 to 7 years
Assets under construction are not depreciated.
Impairment
The values of fixed assets are reviewed regularly to ensure that their carrying
amounts do not exceed their fair values in use. Where such an excess is believed
to exist it will be treated as an impairment loss and charged in the income
statement.
f. Grants and contributions
Grants and contributions received in respect of tangible and intangible assets
other than those relating to revenue deficits calculated under S42 of the Water
Act 1991 (as amended) are treated as deferred income and amortised in the income
statement over the expected useful lives of the related assets.
As a result of changes made in the Water Act 2003, revenue deficit grants
received on or after 1 April 2005 are credited to deferred income and amortised
over a three-year period.
Grants and contributions in respect of expenditure charged directly to the
income statement are netted against such expenditure as received.
g. Leased assets
Assets financed by leasing agreements that transfer substantially all the risks
and rewards of ownership of an asset to the lessee are capitalised and
depreciated over the shorter of their estimated useful lives and the lease term.
The capital portion of the lease commitment is included in current or
non-current creditors as appropriate. The capital element of the lease rental is
deducted from the obligation to the lessor as paid. The interest element of
lease rentals and the depreciation of the relevant assets are charged to the
income statement.
Operating lease rental payments are charged to the income statement as incurred
over the term of the lease.
h. Pension costs
The group operates both defined benefit and defined contribution pension
schemes.
Defined benefit pension scheme liabilities are measured by an independent
actuary using the projected unit method and discounted at the current rate of
return on high quality corporate bonds of equivalent term and currency to the
liability. The increase in the present value of the liabilities of the group's
defined benefit pension schemes expected to arise from employee service in the
period is charged to operating profit. The expected return on the scheme's
assets and the increase during the period in the present value of the scheme's
liabilities, arising from the passage of time, is included in other finance
income or cost.
Actuarial gains and losses arising from experience adjustments, changes in
actuarial assumptions and amendments to pension plans are charged or credited
direct to equity and recorded in the statement of recognised income and expense.
Costs of defined contribution pension schemes are charged to the income
statement in the period in which they fall due. Administration costs of defined
contribution schemes are borne by the group.
i. Research and development
Research expenditure is charged to the income statement as incurred. Development
expenditure is capitalised as an intangible asset to the extent that it is
likely to generate future economic benefits.
j. Taxation
The charge for taxation is computed based on the profit for the period adjusted
according to tax legislation. Advance Corporation Tax (ACT) in respect of
dividends in previous years is written off to the income statement unless it
could be recovered against mainstream corporation tax in the current year or
with reasonable assurance in the future. Credit is taken for ACT previously
written off when it is recovered against mainstream corporation tax liabilities.
Deferred tax is recognised as a liability or asset if transactions have occurred
at the balance sheet date that give rise to an obligation to pay more taxation
in future, or a right to pay less taxation in future. An asset is not recognised
to the extent that the transfer of economic benefits in future years is not
probable. Deferred tax is provided in full, using the liability method, on
temporary differences between the carrying value of an asset or liability and
its tax value.
k. Share-based payments
The group operates a number of equity settled, share-based compensation plans
for employees. The fair value of the employee services received in exchange for
the grant is recognised as an expense over the vesting period of the grant.
The fair value of employee services is determined by reference to the fair value
of the awards granted calculated using an appropriate pricing model, excluding
the impact of any non-market vesting conditions. Non-market based vesting
conditions are adjusted for in assumptions as to the number of awards that are
expected to vest.
l. Distributions to shareholders
Dividends and other distributions to shareholders are reflected in financial
statements when approved by shareholders in a general meeting, except for
interim dividends which are included in financial statements when paid by the
company. Accordingly, proposed dividends are not included as a liability in the
financial statements.
m. Stocks
Stocks are valued at the lower of weighted average cost and net realisable
value, taking into account obsolescence and slow-moving stock. Following
established practice in the water industry no value is included in the accounts
in respect of water held in store.
n. Financial assets and liabilities
The group uses interest rate derivatives to manage exposure to fluctuations in
interest rates. The group has an interest rate swap which is measured at fair
value.
The net costs of issue of loans (being expenses incurred less premiums received)
are amortised over the lives of the respective loans and disclosed within net
borrowings. Index-linked loans are considered to be effective economic hedges
and are valued at cost plus accrued indexation.
o. Foreign exchange transactions
Transactions in foreign currencies are recorded at the rate of exchange ruling
at the date of the transaction or, where forward exchange contracts have been
arranged, at the contracted rate. Monetary assets and liabilities denominated in
foreign currencies are translated at the exchange rate ruling at the balance
sheet date, and any exchange differences are taken to the income statement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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