TIDM52IP
RNS Number : 9925V
Welsh Water Utilities Finance PLC
11 November 2010
News from Dwr Cymru Welsh Water
Glas Cymru Interim Financial Results
Welsh Water cuts bills for its customers
Glas Cymru - the 'not-for-profit' company that owns Welsh Water on behalf of
customers - achieved good overall progress in the six months to September 2010,
maintaining its strong financial position, whilst reducing customer bills and
investing heavily to improve customer service.
Glas Cymru is unique amongst UK utility companies in that it has no shareholders
and reinvests all its financial surpluses for the benefit of Welsh Water's
customers.
Highlights for the half-year include:
* The average household bill for Welsh Water's customers was GBP398 which is
GBP4 lower than the previous year. Over the next five years, Welsh Water's
average household bill will fall by around GBP30 in real terms as a result of
further improvements in both operational and financial efficiency.
* Welsh Water's unique range of social tariffs and Customer Assistance Fund are
now benefiting over 32,000 of its most vulnerable customers who are facing
hardship. A marked increase on a year ago (2009:22,000).
* New water treatment works have been commissioned at Cwellyn in Snowdonia (at a
cost of GBP13 million), Bryn Cowlyd, Crai, Court Farm, Mynydd Llandygai and
Rhiwgoch, providing the most up to date treatment processes to protect the
public drinking water supplies to 500,000 customers. This is part of a GBP200
million water treatment investment programme.
* A new operational control centre has been opened in Cardiff to enhance the
customer experience by enabling an integrated response to customers' problems.
* Capital investment of GBP117 million (2009: GBP170 million) - a solid start to
our 5 year, GBP1,300 million investment programme to benefit customer service,
environmental performance and drinking water quality.
* The level of net debt has been reduced below 70%, achieving the target to
reduce gearing to this level from the 93% level at which it stood when Welsh
Water was acquired by Glas Cymru in May 2001. As a result of this strong
financial position, the company has been able to redeem some GBP113 million of
more expensive junior bonds, which will save customers some GBP4 million a year
in future interest payments.
Glas Cymru Chairman, Bob Ayling, commented, "I am very pleased that Welsh
Water's customers are getting even better value for money, with lower bills on
average and continuing high levels of investment to protect the quality of
drinking water and the reliability of the service we provide to customers every
day.
"It has been a period of considerable change for the business with some 1,600
colleagues transferring into the company from our former service providers. It
is a great credit to the dedication and professionalism of all the people who
work for Welsh Water that overall service standards have remained high during
this major transition."
The results in detail:
Financial results
* Profit before tax (and fair value adjustments) reduced to GBP42 million (2009:
GBP65 million) and will all be retained in the business to fund future benefits
for customers. The main reason for the reduction in profit was the increase in
the level of RPI inflation, which impacts on the level of interest payable.
* Operational costs remained stable at GBP130 million (2009: GBP129 million).
* GBP75 million was drawn down from the company's latest loan facility with the
European Investment Bank in April 2010.
* A robust liquidity position, with GBP348 million of cash and undrawn bank
facilities as at 30 September 2010, meaning that the business is well funded to
deliver the GBP1,300 million five-year investment programme.
* The best credit ratings in the water sector, with the senior bonds being rated
A by Standard and Poor's and Fitch Ratings, and A3 by Moody's.
Operational performance
* Bacteriological compliance of drinking water 'at the tap' in the nine months
to September 2010 remained very high at 99.8% (2009: 99.8%).
* No restrictions on customer water use or negative impact on the environment,
notwithstanding the driest first half of a year since 1927. Leak detection and
repair teams were diverted to those areas where water resources were tightest,
and partly as a result total leakage is slightly higher than las year
* 99.7% compliance at wastewater treatment works (2009: 99.7%).
* In the 2010 summer season Wales had 47 Blue Flag beaches and marinas, around a
third of the UK total.
* Reduction in the number of customers experiencing sewer flooding due to
rainfall or other causes (excluding the most severe weather) from 154 to 98.
* Continuing high customer satisfaction at 78%, as measured by independent
tracking research.
GBP1.3 billion capital investment programme
* Capital investment of GBP117 million (2009: GBP170 million) benefiting
customer service, environmental quality and drinking water quality.
* Total capital investment planned for the five years (AMP5) of some GBP1,300
million (equivalent to around GBP1,000 of investment for every household
served).
* Schemes to produce renewable energy from sewage sludge are well underway at
Hereford, Cardiff and Afan wastewater treatment works (part of a GBP75 million
anaerobic digestion programme) with onsite electricity generation now being
achieved.
* We have completed our 10-year improvement programme agreed with the Drinking
Water Inspectorate in 2000, which has seen over 4,000km of new or refurbished
water mains delivered (enough to stretch from Cardiff to Jerusalem).
Note for editors:
1. Glas Cymru was formed in April 2000 for the sole purpose of acquiring Welsh
Water. It is a 'company limited by guarantee' registered under the Companies Act
2006. Glas Cymru has no shareholders. Instead, Members carry out an important
corporate governance role but they do not receive dividends nor do they have any
other financial interest in the company. This corporate structure ensures that
all financial surpluses generated are retained and reinvested for the benefit of
Welsh Water and its customers.
2. Glas Cymru's constitution strictly limits its purpose to that of financing
water assets in Welsh Water's area of appointment and managing Welsh Water's
business so that high quality water and sewerage services are delivered at least
cost to the communities served by Welsh Water. Glas Cymru cannot diversify into
other unrelated commercial activities.
3. Welsh water has a number of customer tariffs, unique in the UK water
industry, which provide assistance to some customers who are facing financial
hardship as they pay their water charges. These include capped charges for a
specific group of customers with low income and high water use, and a range of
collection methods that include a discount for direct payment from benefits.
Ends
For further information, contact the Welsh Water press office on 02920 556140.
glasGlas Cymru Cyfyngedig
Interim report and accounts
for the six months ended 30 September 2010
Chairman's statement
I am pleased to report good overall progress in the first six months to 30
September 2010. Our customers are getting even better value for money, with
lower bills on average and continuing high levels of investment to protect the
quality of drinking water and the reliability of the service we provide to
customers every day. At the same time, we have maintained our strong financial
position and improved our efficiency, resulting in Welsh Water now having the
best credit ratings in the water sector.
Organisational changes
It has been a period of considerable change for the business with some 1,600
colleagues transferring into the Company from our former service providers Kelda
Water Services Wales Limited and United Utilities Operating Services Limited.
It is a great credit to the dedication and professionalism of all the people who
work for Welsh Water that overall service standards have remained high during
this transition.
We took back operational management of our water and wastewater services in
April and May. This step, together with other improvements to our capabilities,
including the implementation of a new mobile work management system and the move
to our new operational control and billing centre in St Mellons, means that we
are now better equipped to tackle the challenges ahead and to achieve the
highest standards of customer service.
Strong financial position to fund continuing investment in services
Our financial position remains strong. The Company's gearing (net debt to
regulatory capital value) was just below 70% as at 30 September 2010 (2009:
72%). It has been the Board's long-standing target to bring gearing down to
this level from the 93% when Welsh Water was acquired by Glas Cymru in May 2001.
The Company now has the best credit ratings in the water sector, with the
senior bonds rated A by Standard and Poor's and Fitch Ratings, and A3 by
Moody's. As a result of this strong financial position we were able in June to
redeem early GBP113 million of junior bonds. This will save our customers some
GBP4 million a year in future interest payments. We have cash deposits of
GBP248 million and committed bank facilities of GBP100 million. This, alongside
operational cashflow, means that we are funded to deliver our GBP1.3 billion
5-year AMP5 capital investment programme - equivalent to GBP1,000 of capital
expenditure for every household served. This investment in our operating assets
will enable us to deliver higher standards of performance and a more reliable
service to our customers.
We invested GBP117 million in the first six months of this financial year and
are making good progress on our major programme to upgrade 28 of our 79 water
treatment works. In the first six months we commissioned schemes at Bryn
Cowlyd, Crai, Cwellyn, Court Farm, Mynydd Llandygai and Rhiwgoch and we are
currently on-site at Capel Dewi, Alwen, Eithin Fynydd, Pontsticill, and
Penycefn. We have also recently commissioned new advanced sludge digestion
plants at our Cardiff - one of the largest in Europe - Hereford and Afan
wastewater treatment works, a GBP75 million investment that will reduce our
total energy needs by some 15%.
Lower customer bills funded from continuing efficiency
By operating and financing the business more efficiently every year we are able
to deliver this substantial and continuing capital investment programme whilst
reducing customers' bills. This year our average household bill is GBP4 lower
(at GBP398) than last year and over the next five years it will fall in real
terms by around GBP30. One of our key objectives is to give customers better
value for money. We also do all we can to help customers who genuinely struggle
to pay their water bills with a customer assistance fund and through a range of
affordability tariffs which together are now helping more than 32,000
households, a marked increase on a year ago (2009: 22,000).
Customer Service
The quality of drinking water at customers' taps has remained very high and
overall compliance with water quality standards (as measured by mean zonal
compliance) was 99.96% in the first nine months of 2010, better than the same
period last year (2009: 99.95%). We are also ahead on four of the other five
indices used by the Drinking Water Inspectorate to measure water quality
compliance at each point on the water supply system. Of particular importance,
the number of water quality incidents that we report to the Drinking Water
Inspectorate is also well down. The major programme to upgrade our water
treatment works estate is intended to improve the resilience of our very large
network and reduce the risk of a breach of water quality standards. While at
99.4% (2009: 99.3%) our compliance with the standard for iron in tap water is
better than last year it is still below target. While posing no risk to public
health, iron causes discolouration and is the reason for our still relatively
high number of customer complaints about discoloured water.
Despite one of the driest starts to a year (until 30 June Wales had its lowest
rainfall since 1927), we did not impose water use restrictions. We did promote
our 'report a leak' line and endeavoured to make customers aware of the
importance of the sensible use of water both through direct communication and
through the media. We also moved leak detection and repair teams to those areas
where water resources were tightest, and partly as a result of this our total
leakage is currently running slightly higher than last year but we have
increased resources significantly to get back on track.
Chairman's statement cont'd
The dry weather in the spring has helped to reduce the number of sewage flooding
incidents, which in the first six months of this financial year are more than a
third lower than last year. However, we still have too many pollution incidents
as a result of blockages and other problems with our sewer network, and we have
agreed a programme of work with the Environment Agency to improve our
performance in this very important area.
Compliance with Environment Agency consent standards at our wastewater treatment
works remains high, with just four small works currently non-compliant, although
a number of other works require constant attention to maintain compliance with
very tight standards. Another of our important responsibilities is to ensure
our sewer network and wastewater treatment works perform properly and do not
cause avoidable pollution to rivers and coastal waters. Wales secured 47 Blue
Flag beaches and marinas this year - around a third of the total awarded to the
UK. This is a result that really matters for 'Wales plc'. Just as important
for everyone who lives in or visits Wales is the quality of our rivers and in
the Environment Agency's most recent survey of river water quality it reported
that Wales continues to have some of the best rivers in the UK with more than
90% of rivers in Wales being classed as having good or very good chemical and
biological water quality.
Measuring performance
For the last ten years, we have judged our relative position overall against the
other nine water and sewerage companies operating in England and Wales, by
reference to Ofwat's annual 'Overall Performance Assessment' or 'OPA', an index
of performance on a selection of measures for water quality, environmental
quality and customer service. The comparative competition generated by OPA has
driven up standards across the industry and the average score is now 92% of
maximum, compared with just 84% ten years ago. But with the resultant bunching
at the top of the 'OPA league table', Ofwat has introduced a new measure,
'Service Incentive Mechanism' or 'SIM', to judge and compare company performance
which places sole emphasis on measuring the service customers receive when in
contact with their water company. We support this shift in emphasis although we
will continue to monitor our performance on a much wider range of measures.
Early and provisional results from Ofwat's new way of judging customer service
show that Welsh Water has more complaints and more 'unwanted' calls than average
but that customer satisfaction with the our service is, at 78%, better than
average.
The investment we have made in new IT systems to help our front-line customer
service staff together with the move to our new operational control and billing
centre, which has a 'state of the art' telephony system, will equip us to
provide better day-to-day customer service and reduce the number of service
shortfalls and complaints.
Looking ahead
The first six months of this year has been a period of considerable change for
everyone working for Welsh Water, with some 1,600 colleagues transferring into
the company from our former service providers. We are now well placed to
tackle the challenges ahead and we are determined to make Welsh Water an
enterprise that we can all be really proud of, recognised for its high standards
of customer service and operational excellence.
Robert Ayling
Chairman - Glas Cymru Cyfyngedig
11 November 2010
Review of the business
Financial results
Financial performance
Glas Cymru's unaudited financial results cover the six months to 30 September
2010. Comparative figures are given for the six months to 30 September 2009
(unaudited) and the year ended 31 March 2010 (audited).
Turnover in the six months to 30 September 2010 was GBP334 million, as compared
to GBP339 million in the six months to 30 September 2009. The drop reflects the
RPI+K price reduction of 1% required by Ofwat.
Customer debt recovery has remained challenging during the period, a reflection
of the impact the recent economic contraction is having on customers. Welsh
Water and its service partner Veolia have taken steps to ensure that the
monitoring and recovery of customer debt are maintained at the highest possible
levels, but accept that the economic climate in Wales and England will continue
to impact on collection rates. The recently introduced Welsh Water Assist tariff
has helped make water bills more affordable for some of our most vulnerable
customers. Welsh Water offers a unique range of special tariffs and a Customer
Assistance Fund to help customers who are facing financial hardship to pay their
water bills. Over 32,000 customers are now benefiting from this range of support
(2009: 22,000).
Operating costs (excluding depreciation and infrastructure renewals expenditure)
remained stable at GBP130 million (2009: GBP129 million).
Net interest payable in the period (excluding fair value movements) was GBP73
million (2009: GBP33 million), including an indexation charge on index-linked
debt of GBP19 million (2009: credit of GBP25 million). The increase in net
interest payable therefore reflects the impact of RPI movements during the
relevant periods on the indexation charge on RPI-linked debt.
Profit before taxation (and before the fair value movements on financial
instruments) was GBP42 million, a reduction on the comparative period's profit
of GBP65 million, primarily reflecting the increases in interest payable and
reductions in infrastructure renewals expenditure. After allowing for the
movement in the fair value of financial instruments, the total loss before tax
was GBP22 million (2009: profit of GBP84 million). There was a deferred taxation
credit for the period of GBP18 million (2009: charge of GBP25 million); no
corporation tax is payable (2009: nil).
Capital investment in the six month period (including infrastructure renewals
expenditure) of GBP117 million before grants and contributions (2009: GBP170
million) will bring improvements to customer service, environmental quality and
drinking water quality. Welsh Water plans to invest a total of some GBP1.3
billion in its capital investment programme over the five years of AMP5.
Financial position
Our financial position has remained strong over the first half of the year with
gearing (net debt/regulatory capital value) at 30 September 2010 of just under
70% (2009: 72%); this achieves the target set by the company in reducing gearing
from the 93% level at which it stood on the acquisition of Welsh Water in May
2001.
The prudent financing policies followed by the company mean that, despite the
recent turmoil in credit markets, its bonds continue to trade well relative to
those of similar companies. Credit rating agency Moody's has maintained its 'A3'
corporate family rating for Welsh Water, with 'A' grade ratings of the senior
bonds by Standard and Poor's and Fitch Ratings, all reflecting the quality of
the company's creditworthiness. Welsh Water's Class A bonds are guaranteed by
MBIA but the ratings of these bonds now reflect the ratings of the underlying
business. On 18 October 2010, Standard & Poor's reaffirmed Welsh Water's ratings
on negative outlook, reflecting their assessment of the potential impact of
Ofwat's final determination following the 2009 Price Review.
As at 30 September 2010, Glas Cymru had cash, short-term deposits and undrawn
syndicated bank facilities of GBP348 million, giving the company a high level of
financial liquidity. On 15 April 2010, Welsh Water drew down the remaining GBP75
million of its latest (GBP100 million) loan facility with the European
Investment Bank. On 7 June 2010, Glas Cymru repurchased GBP113 million of its
Class C1 bonds following a tender offer to bondholders. The amount repurchased
represents a take-up rate of 90%; the balance of GBP12 million has an expected
maturity date of 31 March 2011. This will save our customers some GBP4 million a
year in future interest payments.
Review of the business cont'd
Customer service, water quality and environmental quality
The results for the first six months of the year show that service performance
continues to be of a good overall standard. Key measures include:
Levels of service
· Fewer customers experienced sewage flooding due to rainfall and other
causes (excluding the most severe weather) during the six months - 98 (2009:
154);
· 99.9% of billing enquiries responded to within five days (2009: 99.9%),
and over 99.5% of written complaints answered within ten days (2009: 99.6%);
· Continuing high standards of customer satisfaction, at 78%, as measured
by independent tracking research; and
· No restrictions on customer water use or negative impact on the
environment, notwithstanding the driest first half of a year since 1927. Leak
detection and repair teams were diverted to those areas where water resources
were tightest, and partly as a result total leakage is slightly higher than last
year.
Supplying safe drinking water
· Bacteriological compliance 'at the tap' in the nine months to September
remained very high at 99.8% (2009: 99.8%); and
· Overall compliance with water quality standards (as measured by mean
zonal compliance) was 99.96% in the nine months to September 2010 (2009:
99.95%).
Safeguarding the environment
· 99.7% waste water treatment works compliance (2009: 99.7%);
· Nine serious (Category 1 and 2) pollution incidents in the nine months to
September (2009: six incidents); and
· For the 2010 season, Wales was awarded 47 Blue Flag beaches and marinas,
around a third of the UK total.
Health and safety
· There has been a fall in reportable accidents (RIDDOR), from 18 to 9 in
the six months.
Major capital investment
Welsh Water's GBP1.3 billion AMP5 capital investment programme will deliver
improvements to drinking water quality, environmental protection and customer
service.
Total capital investment for the six months was GBP117 million (2009: GBP170
million); highlights include:
· Renewable energy from sewage sludge schemes are well underway at
Hereford, Cardiff and Afan wastewater treatment works (part of a GBP75 million
anaerobic digestion programme) with onsite electricity generation now being
achieved;
· Good progress on the major investment programme to upgrade 28 of the 79
water treatment works. In the first six months, schemes have been commissioned
at Bryn Cowlyd, Crai, Cwellyn, Court Farm, Mynydd Llandygai and Rhiwgoch, and
work has begun at Capel Dewi, Alwen, Eithin Fynydd, Pontsticill and Penycefn;
· Completion of the 10-year improvement programme agreed with the Drinking
Water Inspectorate in 2000, which has seen over 4,000km of new or refurbished
water mains delivered. The completion of the programme has reduced
infrastructure renewals expenditure for the six months to 30 September 2010; and
· Capital income (GBP9 million) is continuing to exceed expectations
considering economic conditions (2009: GBP6 million).
Total investment planned for the full year is some GBP250 million, which will
include final delivery of several important advanced digestion and water
treatment works quality schemes.
Key Performance Measures
+-------------------------------------+-----------+----------+
| | Period to | Period |
| | | to |
| | 30 Sept | 30 Sept |
| | 2010 | 2009 |
+-------------------------------------+-----------+----------+
| Safe Drinking Water | | |
+-------------------------------------+-----------+----------+
| Bacteriological compliance at water | 99.95% | 99.88% |
| treatment works1 | | |
+-------------------------------------+-----------+----------+
| Bacteriological compliance at | 99.93% | 99.93% |
| service reservoirs1 | | |
+-------------------------------------+-----------+----------+
| Iron compliance at the tap1 | 99.38% | 99.27% |
+-------------------------------------+-----------+----------+
| Number of complaints about | 6,941 | 8,560 |
| discoloured water | | |
+-------------------------------------+-----------+----------+
| Number of DWI reportable water | 9 | 15 |
| quality incidents | | |
+-------------------------------------+-----------+----------+
| Overall water quality compliance12 | 99.96% | 99.95% |
+-------------------------------------+-----------+----------+
| | | |
+-------------------------------------+-----------+----------+
| Safe Sanitation | | |
+-------------------------------------+-----------+----------+
| Sewage flooding incidents - | 62 | 121 |
| blockages | | |
+-------------------------------------+-----------+----------+
| Sewage flooding incidents - | 36 | 33 |
| hydraulic overload | | |
+-------------------------------------+-----------+----------+
| | | |
+-------------------------------------+-----------+----------+
| Protecting the Environment | | |
+-------------------------------------+-----------+----------+
| Leakage (ml/day) | 192 | 182 |
+-------------------------------------+-----------+----------+
| Number of serious pollution | 9 | 6 |
| incidents1 | | |
+-------------------------------------+-----------+----------+
| Number of less serious pollution | 241 | 222 |
| incidents1 | | |
+-------------------------------------+-----------+----------+
| Wastewater treatment works | 99.7% | 99.7% |
| compliance1 | | |
+-------------------------------------+-----------+----------+
| | | |
+-------------------------------------+-----------+----------+
| Customer Service | | |
+-------------------------------------+-----------+----------+
| Properties 'at risk' of receiving | 869 | 387 |
| low pressure | | |
+-------------------------------------+-----------+----------+
| Properties affected by unplanned | 5 | 376 |
| water supply interruptions lasting | | |
| more than 6 hours | | |
+-------------------------------------+-----------+----------+
| Number of written complaints | 6,410 | 6,932 |
+-------------------------------------+-----------+----------+
| Number of avoidable complaints | 3,702 | 4,343 |
+-------------------------------------+-----------+----------+
| Percentage of customers satisfied | 78% | 77% |
| with our service | | |
+-------------------------------------+-----------+----------+
| Number of 'unwanted' telephone | 228,000 | 273,069 |
| contacts | | |
+-------------------------------------+-----------+----------+
| | | |
+-------------------------------------+-----------+----------+
| Delivering Efficiently | | |
+-------------------------------------+-----------+----------+
| Operating costs | GBP130m | GBP129m |
+-------------------------------------+-----------+----------+
| Net energy use (savings of GW/h)3 | 262 | 256 |
+-------------------------------------+-----------+----------+
| | | |
+-------------------------------------+-----------+----------+
| Staff Wellbeing | | |
+-------------------------------------+-----------+----------+
| Total number of reportable injuries | 9 | 18 |
+-------------------------------------+-----------+----------+
1 Calendar year to end of September
2 This measure is based on 'Mean Zonal Compliance'
3The total consumption of electricity and gas offset by the renewable energy we
generate ourselves
Statement of directors' responsibility
The directors confirm that this condensed consolidated interim financial
information has been prepared in accordance with IAS 34 as adopted by the
European Union and that the interim management report includes a fair review of
the information required by the Disclosure and Transparency Rules paras 4.2.7
and 4.2.8, namely:
· an indication of important events that have occurred during the first six
months and their impact on the condensed set of financial statements, and a
description of the principal risks and uncertainties for the remaining six
months of the financial year; and
· material related party transactions in the first six months and any
material changes in the related-party transactions described in the last annual
report.
The principal risks and uncertainties affecting the group for the 6 months to 30
September 2010 are materially unchanged from those presented on pages 42 and 43
of the group's published Annual Report and Accounts for the year ended 31 March
2010. The Annual Report and Accounts are published on the group's website,
www.dwrcymru.com, and are available from the Company Secretary on request.
By order of the Board
R G Curtis LLB ACIS
Company Secretary
11 November 2010
Consolidated income statement
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| | | Six months | Six months | Year ended |
| | | ended | ended | |
+----------------------------------+------+------------------+------------------+----------------+
| | | 30 | 30 | 31 March |
| | | September | September | |
+----------------------------------+------+------------------+------------------+----------------+
| | | | 2010 | | 2009 | | 2010 |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| | | | (unaudited) | | (unaudited) | | (audited) |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| |Note | | GBPm | | GBPm | | GBPm |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| Revenue | 2 | | 334.1 | | 338.5 | | 688.2 |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| Operating costs | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| - Operational expenditure | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| Before exceptional | | | (129.9) | | (129.4) | | (265.7) |
| items | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| Exceptional items | | | - | | - | | (29.5) |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| | | | (129.9) | | (129.4) | | (295.2) |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| - Infrastructure renewals | | | (18.5) | | (42.3) | | (77.3) |
| expenditure | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| - Depreciation and | | | (70.5) | | (69.8) | | (139.5) |
| amortisation | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| - Profit/(loss) on disposal | | | - | | 0.1 | | (0.4) |
| of fixed assets | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| Operating profit analysed as: | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| Operating profit before | | | 115.2 | | 97.1 | | 205.3 |
| exceptional items | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| Exceptional items | | | - | | - | | (29.5) |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| Operating profit | | | 115.2 | | 97.1 | | 175.8 |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| Financing costs | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| - Interest payable and | 3a | | (76.9) | | (35.0) | | (101.3) |
| similar charges | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| - Interest receivable | 3a | | 4.0 | | 2.5 | | 3.4 |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| - Fair value (losses)/gains | 3b | | (64.4) | | 19.6 | | (15.0) |
| on derivative financial | | | | | | | |
| instruments | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| | | | (137.3) | | (12.9) | | (112.9) |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| (Loss)/profit before taxation | | | (22.1) | | 84.2 | | 62.9 |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| Taxation credit/(charge) | 4 | | 18.2 | | (24.5) | | 1.9 |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| (Loss)/profit for the period | | | (3.9) | | 59.7 | | 64.8 |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
+----------------------------------+----+----+--------+----+--------+----+-------+
| Underlying profit | | | | | | | |
+----------------------------------+----+----+--------+----+--------+----+-------+
| | | | | | | | |
+----------------------------------+----+----+--------+----+--------+----+-------+
| (Loss)/profit before taxation | | | (22.1) | | 84.2 | | 62.9 |
| per income statement | | | | | | | |
+----------------------------------+----+----+--------+----+--------+----+-------+
| | | | | | | | |
+----------------------------------+----+----+--------+----+--------+----+-------+
| Add back: | | | | | | | |
+----------------------------------+----+----+--------+----+--------+----+-------+
| - Exceptional items | | | - | | - | | 29.5 |
+----------------------------------+----+----+--------+----+--------+----+-------+
| - Effect of fair value losses/(gains) | 64.4 | | (19.6) | | 15.0 |
| on derivative financial instruments | | | | | |
+--------------------------------------------+--------+----+--------+----+-------+
| | | | | | | | |
+----------------------------------+----+----+--------+----+--------+----+-------+
| Profit before taxation and fair | | | 42.3 | | 64.6 | | 107.4 |
| value adjustments | | | | | | | |
+----------------------------------+----+----+--------+----+--------+----+-------+
| | | | | | | | |
+----------------------------------+----+----+--------+----+--------+----+-------+
Consolidated statement of comprehensive income
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| | | Six months | Six months | Year ended |
| | | ended | ended | |
+----------------------------------+------+------------------+------------------+----------------+
| | | 30 | 30 | 31 March |
| | | September | September | |
+----------------------------------+------+------------------+------------------+----------------+
| | | | 2010 | | 2009 | | 2010 |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| | | | (unaudited) | | (unaudited) | | (audited) |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| |Note | | GBPm | | GBPm | | GBPm |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| (Loss)/profit for the period | | | (3.9) | | 59.7 | | 64.8 |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| Other comprehensive income: | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| Actuarial loss recognised in the | | | (0.1) | | (1.1) | | (1.5) |
| pension scheme | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| Movement on deferred tax asset | 4 | | - | | 0.3 | | - |
| relating to the pension scheme | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| Total comprehensive | | | (4.0) | | 58.9 | | 63.3 |
| (losses)/income for the period | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
| | | | | | | | |
+----------------------------------+------+----+-------------+----+-------------+----+-----------+
Consolidated statement of changes in equity
+----------------------------------+----+----+-------------+----+-------------+----+-----------+
| | | Six months | Six months | Year ended |
| | | ended | ended | |
+----------------------------------+----+------------------+------------------+----------------+
| | | 30 | 30 | 31 March |
| | | September | September | |
+----------------------------------+----+------------------+------------------+----------------+
| | | | 2010 | | 2009 | | 2010 |
+----------------------------------+----+----+-------------+----+-------------+----+-----------+
| | | | (unaudited) | | (unaudited) | | (audited) |
+----------------------------------+----+----+-------------+----+-------------+----+-----------+
| | | | GBPm | | GBPm | | GBPm |
+----------------------------------+----+----+-------------+----+-------------+----+-----------+
| | | | | | | | |
+----------------------------------+----+----+-------------+----+-------------+----+-----------+
| Deficit on reserves at start of | | | (88.8) | | (152.1) | | (152.1) |
| period | | | | | | | |
+----------------------------------+----+----+-------------+----+-------------+----+-----------+
| | | | | | | | |
+----------------------------------+----+----+-------------+----+-------------+----+-----------+
| Total comprehensive | | | (4.0) | | 58.9 | | 63.3 |
| (losses)/income for the period | | | | | | | |
+----------------------------------+----+----+-------------+----+-------------+----+-----------+
| | | | | | | | |
+----------------------------------+----+----+-------------+----+-------------+----+-----------+
| Deficit on reserves at end of | | | (92.8) | | (93.2) | | (88.8) |
| period | | | | | | | |
+----------------------------------+----+----+-------------+----+-------------+----+-----------+
| | | | | | | | |
+----------------------------------+----+----+-------------+----+-------------+----+-----------+
Consolidated balance sheet
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| | | | At | | At | | At |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| | | 30 | 30 | 31 March |
| | | September | September | |
+----------------------------------+-------+-----------------+------------------+----------------+
| | | | 2010 | | 2009 | | 2010 |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| | | | (unaudited) | | (unaudited) | | (audited) |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| | Note | | GBPm | | GBPm | | GBPm |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| Assets | | | | | | | |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| Non-current assets | | | | | | | |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| Property, plant and equipment | 5 | | 3,144.1 | | 3,028.8 | | 3,103.9 |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| Intangible assets | 6 | | 64.8 | | 49.6 | | 60.1 |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| Financial assets: derivative | | | - | | 1.2 | | 0.8 |
| financial instruments | | | | | | | |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| | | | 3,208.9 | | 3,079.6 | | 3,164.8 |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| Current assets | | | | | | | |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| Trade and other receivables | 7 | | 305.4 | | 303.9 | | 499.3 |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| Financial assets: derivative | | | 2.9 | | 4.5 | | 4.4 |
| financial instruments | | | | | | | |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| Cash and cash equivalents | | | 248.4 | | 114.2 | | 248.7 |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| | | | 556.7 | | 422.6 | | 752.4 |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| Liabilities | | | | | | | |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| Current liabilities | | | | | | | |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| Trade and other payables | 8 | | (310.5) | | (289.3) | | (515.8) |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| Financial liabilities: | | | | | | | |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| - Borrowings | | | (55.0) | | (51.2) | | (150.2) |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| - Derivative financial | | | (39.3) | | (17.8) | | (36.0) |
| instruments | | | | | | | |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| Provisions | | | (13.8) | | - | | (14.8) |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| | | | (418.6) | | (358.3) | | (716.8) |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| | | | | | | | |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| Net current assets | | | 138.1 | | 64.3 | | 35.6 |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| | | | | | | | |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| Non-current liabilities | | | | | | | |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| Trade and other payables | 8 | | (17.3) | | (2.8) | | (2.3) |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| Financial liabilities: | | | | | | | |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| - Borrowings | | | (2,861.8) | | (2,712.5) | | (2,761.8) |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| - Derivative financial | | | (200.7) | | (126.1) | | (141.9) |
| instruments | | | | | | | |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| Retirement benefit obligations | | | (8.0) | | (8.8) | | (8.0) |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| Provisions | | | (17.6) | | (9.9) | | (22.6) |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| | | | (3,105.4) | | (2,860.1) | | (2,936.6) |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| | | | | | | | |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| Net assets before deferred tax | | | 241.6 | | 283.8 | | 263.8 |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| | | | | | | | |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| Deferred tax (net) | | | (334.4) | | (377.0) | | (352.6) |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| | | | | | | | |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| Net liabilities | | | (92.8) | | (93.2) | | (88.8) |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| | | | | | | | |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| | | | | | | | |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| Deficit on reserves | | | (92.8) | | (93.2) | | (88.8) |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
| | | | | | | | |
+----------------------------------+-------+---+-------------+----+-------------+----+-----------+
Consolidated statement of cash flows
+--------------------------------+----+--+------+---------+----------+-------+----------+---------+-------+-----------+----------+
| | Six months | Six months ended | Year ended | |
| | ended | | | |
+--------------------------------+------------------------+---------------------------------------+-------------------+----------+
| | 30 September | 30 September | 31 March | |
+--------------------------------+------------------------+---------------------------------------+-------------------+----------+
| | | 2010 | | 2009 | | 2010 | |
+--------------------------------+--------------+---------+------------------+--------------------+-------+-----------+----------+
| | | (unaudited) | | (unaudited) | | (audited) | |
+--------------------------------+-------+----------------+------------------+--------------------+-------+-----------+----------+
| | | GBPm | | GBPm | | GBPm | |
+--------------------------------+--------------+---------+------------------+--------------------+-------+-----------+----------+
| | | | | | | | |
+--------------------------------+--------------+---------+------------------+--------------------+-------+-----------+----------+
| Operating profit | | 115.2 | | 97.1 | | 175.8 | |
+--------------------------------+--------------+---------+------------------+--------------------+-------+-----------+----------+
| | | | | | | | |
+--------------------------------+--------------+---------+------------------+--------------------+-------+-----------+----------+
| Adjustments for | | | | | | | |
+--------------------------------+--------------+---------+------------------+--------------------+-------+-----------+----------+
| - Depreciation and | | 70.5 | | 69.8 | | 139.5 | |
| amortisation | | | | | | | |
+--------------------------------+--------------+---------+------------------+--------------------+-------+-----------+----------+
| - (Profit)/loss on disposal | | - | | (0.1) | | 0.4 | |
| of fixed assets | | | | | | | |
+--------------------------------+--------------+---------+------------------+--------------------+-------+-----------+----------+
| | | | | | | | |
+--------------------------------+--------------+---------+------------------+--------------------+-------+-----------+----------+
| Changes in working capital | | | | | | | |
+--------------------------------+--------------+---------+------------------+--------------------+-------+-----------+----------+
| - Decrease in trade and | | 193.9 | | 230.7 | | 39.0 | |
| other receivables | | | | | | | |
+--------------------------------+--------------+---------+------------------+--------------------+-------+-----------+----------+
| - Decrease in trade and | | (179.8) | | (262.1) | | (51.2) | |
| other payables | | | | | | | |
+--------------------------------+--------------+---------+------------------+--------------------+-------+-----------+----------+
| - Pension contributions in | | (1.3) | | - | | (1.1) | |
| excess of operating costs | | | | | | | |
+--------------------------------+--------------+---------+------------------+--------------------+-------+-----------+----------+
| - (Decrease)/increase in | | (6.0) | | 0.7 | | 28.2 | |
| provisions | | | | | | | |
+--------------------------------+--------------+---------+------------------+--------------------+-------+-----------+----------+
| | | 6.8 | | (30.7) | | 14.9 | |
+--------------------------------+--------------+---------+------------------+--------------------+-------+-----------+----------+
| | | | | | | | |
+--------------------------------+--------------+---------+------------------+--------------------+-------+-----------+----------+
| Cash generated from operations | | 192.5 | | 136.1 | | 330.6 | |
+--------------------------------+--------------+---------+------------------+--------------------+-------+-----------+----------+
| | | | | | | |
+--------------------------------+--------------+--------------------+------------------+---------+-------+----------------------+
| Interest received | | 7.5 | | 2.5 | | 3.5 |
+--------------------------------+--------------+--------------------+------------------+---------+-------+----------------------+
| Interest paid | | (36.2) | | (27.5) | | (116.1) |
+--------------------------------+--------------+--------------------+------------------+---------+-------+----------------------+
| Cash flows from operating | | 163.8 | | 111.1 | | 218.0 |
| activities - net | | | | | | |
+--------------------------------+--------------+--------------------+------------------+---------+-------+----------------------+
| | | | | | | |
+--------------------------------+--------------+--------------------+------------------+---------+-------+----------------------+
| Cash flows from investing | | | | | | |
| activities | | | | | | |
+--------------------------------+--------------+--------------------+------------------+---------+-------+----------------------+
| Purchases of property, plant | | (131.2) | | (139.8) | | (281.4) |
| and equipment | | | | | | |
+--------------------------------+--------------+--------------------+------------------+---------+-------+----------------------+
| Grants and contributions | | 8.7 | | 6.1 | | 12.3 |
| received | | | | | | |
+--------------------------------+--------------+--------------------+------------------+---------+-------+----------------------+
| Net proceeds from/(costs of) sale | | - | | 0.1 | | (0.4) |
| of property, plant and equipment | | | | | | |
+-------------------------------------+---------+--------------------+------------------+---------+-------+----------------------+
| Cash flows from investing | | (122.5) | | (133.6) | | (269.5) |
| activities - net | | | | | | |
+--------------------------------+--------------+--------------------+------------------+---------+-------+----------------------+
| | | | | | | |
+--------------------------------+--------------+--------------------+------------------+---------+-------+----------------------+
| Net cash inflow/(outflow) | | 41.3 | | (22.5) | | (51.5) |
| before financing activities | | | | | | |
+--------------------------------+--------------+--------------------+------------------+---------+-------+----------------------+
| | | | | | | |
+--------------------------------+--------------+--------------------+------------------+---------+-------+----------------------+
| Cash flows from financing | | | | | | |
| activities | | | | | | |
+--------------------------------+--------------+--------------------+------------------+---------+-------+----------------------+
| Long term loans and finance | | 75.0 | | - | | 35.0 |
| leases received | | | | | | |
+--------------------------------+--------------+--------------------+------------------+---------+-------+----------------------+
| Bond issue proceeds | | - | | - | | 139.3 |
+--------------------------------+--------------+--------------------+------------------+---------+-------+----------------------+
| Revolving credit facility and | | (3.3) | | (2.2) | | (4.4) |
| term loan repayments | | | | | | |
+--------------------------------+--------------+--------------------+------------------+---------+-------+----------------------+
| Capital element of finance | | - | | - | | (8.6) |
| lease payments | | | | | | |
+--------------------------------+--------------+--------------------+------------------+---------+-------+----------------------+
| Repayment of Class C bonds | | (112.9) | | - | | - |
+--------------------------------+--------------+--------------------+------------------+---------+-------+----------------------+
| Other loan repayments | | (0.4) | | (0.4) | | (0.4) |
+--------------------------------+--------------+--------------------+------------------+---------+-------+----------------------+
| Cash flows from financing | | (41.6) | | (2.6) | | 160.9 |
| activities - net | | | | | | |
+--------------------------------+--------------+--------------------+------------------+---------+-------+----------------------+
| | | | | | | |
+--------------------------------+--------------+--------------------+------------------+---------+-------+----------------------+
| Net (decrease)/increase in | | | | (25.1) | | |
| cash, cash equivalents and | | (0.3) | | | | 109.4 |
| bank overdrafts | | | | | | |
+--------------------------------+--------------+--------------------+------------------+---------+-------+----------------------+
| | | | | | | |
+--------------------------------+--------------+--------------------+------------------+---------+-------+----------------------+
| Cash, cash equivalents and | | | | 139.3 | | |
| bank overdrafts at start of | | 248.7 | | | | 139.3 |
| period | | | | | | |
+--------------------------------+--------------+--------------------+------------------+---------+-------+----------------------+
| | | | | | | |
+--------------------------------+--------------+--------------------+------------------+---------+-------+----------------------+
| Cash, cash equivalents and bank | 248.4 | | 114.2 | | 248.7 |
| overdrafts at end of period | | | | | |
+-----------------------------------------------+--------------------+------------------+---------+-------+----------------------+
| | | | | | | | | | | | |
+--------------------------------+----+--+------+---------+----------+-------+----------+---------+-------+-----------+----------+
Notes to the condensed consolidated financial statements
1. Basis of preparation
The interim report and accounts are for the six months ended 30 September 2010;
they have been prepared in accordance with the Disclosure and Transparency Rules
of the Financial Services Authority and with IAS 34, 'Interim financial
reporting' as adopted by the European Union, using accounting policies
consistent with International Financial Reporting Standards (IFRSs). The interim
report and accounts should be read in conjunction with the annual financial
statements for the year ended 31 March 2010, which have been prepared in
accordance with IFRSs as adopted by the European Union. Except as described
below, the accounting policies applied are consistent with those of the annual
financial statements for the year ended 31 March 2010, as described in those
annual financial statements.
Taxes on income in the interim period are accrued using the tax rate that would
be applicable to expected total annual earnings.
Following its adoption by the European Union, IFRIC 18, "Transfers of assets
from customers", is mandatory for the first time for the financial year
beginning 1 April 2010. IFRIC 18 is an interpretation published by the IASB to
clarify the accounting treatment when a property developer lays a pipe to
connect a new development to the network and transfers the asset to the water
company for no charge. Welsh Water's accounts have not previously allocated any
value to these transactions as there was no financial outlay. The accounts
contain infrastructure asset additions with a value of GBP15.3m, offset by a
deferred income credit of equal amount. The fair values, calculated as the cost
to the business of constructing the assets, will be depreciated over the assets'
estimated useful lives and the deferred income will be released over the same
period.
These financial statements are unaudited but have been formally reviewed by the
auditors and their report is set out on page 15. The interim financial results
do not comprise statutory accounts within the meaning of Section 434 of the
Companies Act 2006. The results shown for the year ended 31 March 2010 have been
derived from the group's audited full financial statements filed with the
Registrar of Companies. The report of the auditors on those accounts was
unqualified and did not contain a statement under Section 498(2) or 498(3) of
the Companies Act 2006.
The company is limited by guarantee and does not have any share capital. In the
event of the company being wound up, the liability of its members is limited to
GBP1 each.
2. Segmental information
All reported revenue and operating profits arise from the operation of water and
sewerage business in the United Kingdom. Revenue recognised reflects the actual
charges levied on customers in the period.
3. Financing costs and fair value of derivative financial instruments
+------------------------------------+-+--+--------+-+--+--------+-+--+---------+
| | Six months | Six months | Year ended |
| | ended | ended | |
+------------------------------------+-------------+-------------+--------------+
| a) Net interest before fair | | 30 | | 30 | | 31 March |
| value (losses)/gains on derivative | | September | | September | | 2010 |
| financial instruments | | 2010 | | 2009 | | |
+------------------------------------+-+-----------+-+-----------+-+------------+
| | | GBPm | | GBPm | | GBPm |
+------------------------------------+----+--------+----+--------+----+---------+
| Interest payable on bonds | | (48.3) | | (43.6) | | (84.9) |
+------------------------------------+----+--------+----+--------+----+---------+
| Indexation on | | (18.8) | | 25.5 | | 9.5 |
| index-linked bonds | | | | | | |
+------------------------------------+----+--------+----+--------+----+---------+
| Interest payable on | | (6.0) | | (11.0) | | (18.4) |
| finance leases | | | | | | |
+------------------------------------+----+--------+----+--------+----+---------+
| Other loan interest | | (5.9) | | (5.2) | | (10.9) |
+------------------------------------+----+--------+----+--------+----+---------+
| Other interest payable | | (1.7) | | (1.0) | | (2.4) |
| and finance costs | | | | | | |
+------------------------------------+----+--------+----+--------+----+---------+
| Interest debit on pension | | (0.2) | | (0.2) | | (0.3) |
| scheme liabilities | | | | | | |
+------------------------------------+----+--------+----+--------+----+---------+
| Capitalisation of | | 4.0 | | 0.5 | | 6.1 |
| borrowing costs under IAS 23 | | | | | | |
+------------------------------------+----+--------+----+--------+----+---------+
| Interest payable | | (76.9) | | (35.0) | | (101.3) |
+------------------------------------+----+--------+----+--------+----+---------+
| Interest receivable | | 4.0 | | 2.5 | | 3.4 |
+------------------------------------+----+--------+----+--------+----+---------+
| Net interest payable | | (72.9) | | (32.5) | | (97.9) |
| before fair value adjustments | | | | | | |
+------------------------------------+----+--------+----+--------+----+---------+
| | | | | | | | | | |
+------------------------------------+-+--+--------+-+--+--------+-+--+---------+
Notes to the condensed consolidated financial statements cont'd
3. Financing costs and fair value of derivative financial instruments
(cont'd)
+------------------------------------+--+--+--------+--+--+--------+--+-+--------+
| | Six months | Six months | Year ended |
| | ended | ended | |
+------------------------------------+--------------+--------------+-------------+
| b) Fair value (losses)/gains | | 30 | | 30 | | 31 March |
| on derivative financial | | September | | September | | 2010 |
| instruments | | 2010 | | 2009 | | |
+------------------------------------+--+-----------+--+-----------+--+----------+
| | | GBPm | | GBPm | | GBPm |
+------------------------------------+-----+--------+-----+--------+----+--------+
| Fair value (losses)/gains | | (20.9) | | 5.5 | | 9.5 |
| on interest rate swaps | | | | | | |
+------------------------------------+-----+--------+-----+--------+----+--------+
| Fair value (losses)/gains | | (43.5) | | 14.1 | | (24.5) |
| on index-linked swaps | | | | | | |
+------------------------------------+-----+--------+-----+--------+----+--------+
| Total fair value | | | | 19.6 | | (15.0) |
| (losses)/gains on derivative | | (64.4) | | | | |
| financial | | | | | | |
| instruments | | | | | | |
+------------------------------------+-----+--------+-----+--------+----+--------+
| Deferred tax effect at | | 17.4 | | (5.5) | | 4.2 |
| 27% of fair value (losses)/gains | | | | | | |
| (prior periods at 28%) | | | | | | |
+------------------------------------+-----+--------+-----+--------+----+--------+
| Net of tax impact of fair | | (47.0) | | 14.1 | | (10.8) |
| value (losses)/gains | | | | | | |
+------------------------------------+-----+--------+-----+--------+----+--------+
| | | | | | | | | | |
+------------------------------------+--+--+--------+--+--+--------+--+-+--------+
Whilst the group employs an economically effective policy using interest rate
and index-linked swaps, the hedge accounting criteria of IAS 39 are not
satisfied. Consequently, the group's interest rate and index-linked swaps are
fair valued at each balance sheet date with the movement (net loss or gain)
disclosed in the income statement. Over the life of these swaps, if held to
maturity, these fair value adjustments will reverse and reduce to zero.
The notional value of the interest rate swaps is GBP192m (2009: GBP192m) and the
index linked swaps GBP736m (2009: GBP743m).
4. Taxation
+---------------------------------+-----------+-----------+----------+
| | 30 | 30 | 31 March |
| | September | September | |
| | 2010 | 2009 | 2010 |
+---------------------------------+-----------+-----------+----------+
| Tax on (loss)/profit comprises: | GBPm | GBPm | GBPm |
+---------------------------------+-----------+-----------+----------+
| | | | |
+---------------------------------+-----------+-----------+----------+
| Current tax | | | |
+---------------------------------+-----------+-----------+----------+
| Adjustment in respect of | - | - | 1.7 |
| prior periods | | | |
+---------------------------------+-----------+-----------+----------+
| | | | |
+---------------------------------+-----------+-----------+----------+
| Deferred tax | | | |
+---------------------------------+-----------+-----------+----------+
| Current year movements | 5.6 | (23.6) | (15.8) |
+---------------------------------+-----------+-----------+----------+
| Effect of change in expected | 12.6 | - | - |
| tax rate | | | |
+---------------------------------+-----------+-----------+----------+
| Adjustment in respect of | - | (0.6) | 16.0 |
| prior periods | | | |
+---------------------------------+-----------+-----------+----------+
| | 18.2 | (24.2) | 0.2 |
+---------------------------------+-----------+-----------+----------+
| | | | |
+---------------------------------+-----------+-----------+----------+
| Taxation (credit)/charge | 18.2 | (24.2) | 1.9 |
+---------------------------------+-----------+-----------+----------+
| | | | |
+---------------------------------+-----------+-----------+----------+
| Analysed as: | | | |
+---------------------------------+-----------+-----------+----------+
| Credited/(charged) to income | 18.2 | (24.5) | 1.9 |
| statement | | | |
+---------------------------------+-----------+-----------+----------+
| Credited to statement of | - | 0.3 | - |
| comprehensive income | | | |
+---------------------------------+-----------+-----------+----------+
| | 18.2 | (24.2) | 1.9 |
+---------------------------------+-----------+-----------+----------+
The company does not expect to pay corporation tax on its trading profits for
the current year due to the availability of capital allowances on its investment
programme.
Notes to the condensed consolidated financial statements cont'd
5. Property, plant and equipment
+-----------------------+-----------+----------------+-------------+------------+---------+
| | Freehold | Infrastructure | Operational | Plant | Total |
| | land & | assets | structures | equipment, | |
| | buildings | | | computer | |
| | | | | hardware | |
+-----------------------+-----------+----------------+-------------+------------+---------+
| | GBPm | GBPm | GBPm | GBPm | GBPm |
+-----------------------+-----------+----------------+-------------+------------+---------+
| Cost | | | | | |
+-----------------------+-----------+----------------+-------------+------------+---------+
| At 1 April 2010 | 34.4 | 1,546.0 | 2,605.6 | 227.5 | 4,413.5 |
+-----------------------+-----------+----------------+-------------+------------+---------+
| Additions net of | - | 18.3 | 88.2 | 0.4 | 106.9 |
| grants and | | | | | |
| contributions | | | | | |
+-----------------------+-----------+----------------+-------------+------------+---------+
| At 30 September | 34.4 | 1,564.3 | 2,693.8 | 227.9 | 4,520.4 |
| 2010 | | | | | |
+-----------------------+-----------+----------------+-------------+------------+---------+
| | | | | | |
+-----------------------+-----------+----------------+-------------+------------+---------+
| | | | | | |
+-----------------------+-----------+----------------+-------------+------------+---------+
| Accumulated | | | | | |
| depreciation | | | | | |
+-----------------------+-----------+----------------+-------------+------------+---------+
| At 1 April 2010 | 17.3 | 165.0 | 942.6 | 184.7 | 1,309.6 |
+-----------------------+-----------+----------------+-------------+------------+---------+
| Charge for the | - | 11.1 | 50.9 | 4.7 | 66.7 |
| period | | | | | |
+-----------------------+-----------+----------------+-------------+------------+---------+
| At 30 September | 17.3 | 176.1 | 993.5 | 189.4 | 1,376.3 |
| 2010 | | | | | |
+-----------------------+-----------+----------------+-------------+------------+---------+
| | | | | | |
+-----------------------+-----------+----------------+-------------+------------+---------+
| Net book value | | | | | |
+-----------------------+-----------+----------------+-------------+------------+---------+
| At 30 September | 17.1 | 1,388.2 | 1,700.3 | 38.5 | 3,144.1 |
| 2010 | | | | | |
+-----------------------+-----------+----------------+-------------+------------+---------+
| At 31 March 2010 | 17.1 | 1,381.0 | 1,663.0 | 42.8 | 3,103.9 |
+-----------------------+-----------+----------------+-------------+------------+---------+
The net book value of fixed assets includes GBP10.1m (March 2010: GBP0.5m)
of capitalised interest.
The group forecasts GBP140m of capital expenditure over the remainder of the
financial year. While only a portion of this amount has been formally contracted
for as at 30 September 2010, the group is effectively committed to the total as
part of its overall capital expenditure programme approved by its regulator.
6. Intangible assets
Intangible assets comprise computer software and related system
developments.
+---------------------------------+----------+--------------+----------+
| | | Amortisation | Net book |
| | Cost | | value |
+---------------------------------+----------+--------------+----------+
| | GBPm | GBPm | GBPm |
+---------------------------------+----------+--------------+----------+
| | | | |
+---------------------------------+----------+--------------+----------+
| At 1 April 2010 | 116.6 | (56.5) | 60.1 |
+---------------------------------+----------+--------------+----------+
| Additions | 8.5 | (3.8) | 4.7 |
+---------------------------------+----------+--------------+----------+
| At 30 September 2010 | 125.1 | (60.3) | 64.8 |
+---------------------------------+----------+--------------+----------+
7. Trade and other receivables
+------------------------------------+-----------+-----------+----------+
| | 30 | 30 | 31 March |
| | September | September | 2010 |
| | 2010 | 2009 | |
+------------------------------------+-----------+-----------+----------+
| | GBPm | GBPm | GBPm |
+------------------------------------+-----------+-----------+----------+
| Amounts falling due | | | |
| within one year | | | |
+------------------------------------+-----------+-----------+----------+
| Trade receivables | 274.8 | 268.0 | 471.3 |
+------------------------------------+-----------+-----------+----------+
| Less provision for | (45.1) | (37.2) | (44.2) |
| impairment of receivables | | | |
+------------------------------------+-----------+-----------+----------+
| Trade receivables - net | 229.7 | 230.8 | 427.1 |
+------------------------------------+-----------+-----------+----------+
| Prepayments and accrued | 65.4 | 62.7 | 62.1 |
| income | | | |
+------------------------------------+-----------+-----------+----------+
| Corporation tax | - | - | 1.7 |
+------------------------------------+-----------+-----------+----------+
| Other receivables | 10.3 | 10.4 | 8.4 |
+------------------------------------+-----------+-----------+----------+
| | 305.4 | 303.9 | 499.3 |
+------------------------------------+-----------+-----------+----------+
Notes to the condensed consolidated financial statements cont'd
8. Trade and other payables
+------------------------------------+-----------+-----------+----------+
| | 30 | 30 | 31 March |
| | September | September | 2010 |
| | 2010 | 2009 | |
+------------------------------------+-----------+-----------+----------+
| Current | GBPm | GBPm | GBPm |
+------------------------------------+-----------+-----------+----------+
| | | | |
+------------------------------------+-----------+-----------+----------+
| Trade payables | 31.7 | 17.8 | 21.5 |
+------------------------------------+-----------+-----------+----------+
| Capital payables | 30.5 | 40.5 | 56.5 |
+------------------------------------+-----------+-----------+----------+
| Other taxation and social | 2.8 | 0.5 | 0.5 |
| security | | | |
+------------------------------------+-----------+-----------+----------+
| Accruals and deferred | 245.5 | 230.5 | 437.3 |
| income | | | |
+------------------------------------+-----------+-----------+----------+
| | 310.5 | 289.3 | 515.8 |
+------------------------------------+-----------+-----------+----------+
| Non-current | | | |
+------------------------------------+-----------+-----------+----------+
| Deferred income | 17.3 | 2.8 | 2.3 |
+------------------------------------+-----------+-----------+----------+
9. Analysis and reconciliation of net debt
+------------------------------------+-----------+-----------+-----------+
| a) Net debt at the balance | 30 | 30 | 31 March |
| sheet date may be analysed as: | September | September | |
| | 2010 | 2009 | 2010 |
+------------------------------------+-----------+-----------+-----------+
| | GBPm | GBPm | GBPm |
+------------------------------------+-----------+-----------+-----------+
| | | | |
+------------------------------------+-----------+-----------+-----------+
| Cash and cash equivalents | 248.4 | 114.2 | 248.7 |
+------------------------------------+-----------+-----------+-----------+
| | | | |
+------------------------------------+-----------+-----------+-----------+
| Debt due after one year | (1,950.2) | (1,794.0) | (1,850.2) |
+------------------------------------+-----------+-----------+-----------+
| Debt due within one year | (11.9) | (4.0) | (134.4) |
+------------------------------------+-----------+-----------+-----------+
| Finance leases | (883.5) | (892.1) | (883.5) |
+------------------------------------+-----------+-----------+-----------+
| Accrued interest | (71.2) | (73.6) | (43.9) |
+------------------------------------+-----------+-----------+-----------+
| | (2,916.8) | (2,763.7) | (2,912.0) |
+------------------------------------+-----------+-----------+-----------+
| | | | |
+------------------------------------+-----------+-----------+-----------+
| Net debt | (2,668.4) | (2,649.5) | (2,663.3) |
+------------------------------------+-----------+-----------+-----------+
| | | | |
+------------------------------------+-----------+-----------+-----------+
+------------------------------------+-----------+-----------+-----------+
| b) The movement in net debt | 30 | 30 | 31 March |
| during the period may be | September | September | |
| summarised as: | 2010 | 2009 | 2010 |
+------------------------------------+-----------+-----------+-----------+
| | GBPm | GBPm | GBPm |
+------------------------------------+-----------+-----------+-----------+
| | | | |
+------------------------------------+-----------+-----------+-----------+
| Net debt at start of | (2,663.3) | (2,620.4) | (2,620.4) |
| period | | | |
+------------------------------------+-----------+-----------+-----------+
| | | | |
+------------------------------------+-----------+-----------+-----------+
| (Decrease)/increase in | (0.3) | (25.1) | 109.4 |
| net cash | | | |
+------------------------------------+-----------+-----------+-----------+
| Decrease/(increase) in | 41.6 | 2.5 | (160.9) |
| debt | | | |
+------------------------------------+-----------+-----------+-----------+
| Decrease/(increase) in | 41.3 | (22.6) | (51.5) |
| net debt arising from cash flows | | | |
+------------------------------------+-----------+-----------+-----------+
| Movement in accrued | (27.3) | (31.7) | (2.0) |
| interest | | | |
+------------------------------------+-----------+-----------+-----------+
| Indexation of | (0.3) | 25.5 | 9.5 |
| index-linked debt | | | |
+------------------------------------+-----------+-----------+-----------+
| Other non-cash movements | (18.8) | (0.3) | 1.1 |
+------------------------------------+-----------+-----------+-----------+
| Movement in net debt | (5.1) | (29.1) | (42.9) |
| during the period | | | |
+------------------------------------+-----------+-----------+-----------+
| | | | |
+------------------------------------+-----------+-----------+-----------+
| Net debt at end of period | (2,668.4) | (2,649.5) | (2,663.3) |
+------------------------------------+-----------+-----------+-----------+
Notes to the condensed consolidated financial statements cont'd
10. Subsequent events
On 9 February 2010 Welsh Water announced its intention to restructure the
business by terminating the outsourced operational contracts with United
Utilities Operational Services (UUOS) and Kelda Water Services (KWS) and by
implementing a phased headcount reduction of around 300 people. In accordance
with TUPE legislation, on 1 April 2010 1,093 UUOS employees transferred to Welsh
Water, followed by 476 KWS employees on 1 May 2010.
On 20 October 2010, a bulk transfer of assets with a value of GBP26m was made
into the DCWW Pension Scheme from the KWS Pension Scheme, being the accrued
benefits of 192 ex-KWS employees who elected to transfer their past service
benefits. On or around 17 November 2010, GBP129m of assets will be transferred
into the DCWW scheme from the United Utilities pension schemes (UUPS and ESPS
schemes - GBP123m and GBP6m respectively), being the accrued benefits of 652
ex-UUOS employees who elected to transfer their past service benefits. In
aggregate, the actuarial valuation of the total scheme post-transfer implies a
surplus of some GBP3m (using 31 March 2009 actuarial assumptions).
These accounts do not recognise any IAS 19 assets or liabilities in respect of
these transfers owing to their occurrence post 30 September 2010. In the event
that the IAS 19 valuation differs from the actuarial valuation at the date of
transfer, any differences will be taken to the statement of comprehensive income
for the year to 31 March 2011.
Independent review report to Glas Cymru Cyfyngedig
Introduction
We have been engaged by the company to review the condensed set of financial
statements in the interim report and accounts for the six months ended 30
September 2010, which comprises the consolidated income statement, consolidated
statement of comprehensive income, consolidated statement of changes in equity,
consolidated balance sheet, consolidated statement of cash flows and related
notes. We have read the other information contained in the interim report and
accounts and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set of financial
statements.
Directors' responsibilities
The interim report and accounts is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the interim
report and accounts in accordance with the Disclosure and Transparency Rules of
the United Kingdom's Financial Services Authority.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in the interim report and
accounts has been prepared in accordance with International Accounting Standard
34, "Interim Financial Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the interim report and accounts based on our
review. This report, including the conclusion, has been prepared for and only
for the company for the purpose of the Disclosure and Transparency 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.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the interim report and
accounts for the six months ended 30 September 2010 is not prepared, in all
material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
PricewaterhouseCoopers LLP
Chartered Accountants
11 November 2010
This information is provided by RNS
The company news service from the London Stock Exchange
END
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