RNS Number:0779L
Bristol Water PLC
24 May 2000
BRISTOL WATER PLC
The company is a subsidiary of Bristol Water Holdings plc
which is also reporting its results today
READY FOR THE FUTURE
Year ended 31 March 2000 2000 1999 % change
Before After Before
Exceptional Exceptional Exceptional
Items Items Items
#000 #000 #000
Turnover 69,453 69,453 66,793 4%
Operating profit 20,334 18,743 19,300 5%
Pre-tax profit 15,364 13,980 14,785 4%
Net profit 12,549 11,244 13,572 -8%
Earnings per
ordinary share 191.0p 169.2p 205.3p -7%
Dividend per
ordinary share 72.6p 72.6p 64.8p 12%
" Pre-exceptional pre-tax profit up by 4%
" Capital expenditure #21 million
" Water quality compliance greater than 99.9%
" Customer service continues at high levels
" Restructuring programme implemented, staff numbers
in appointed business reduced by 20%
" Well positioned to meet Final Determination targets
For further information -
Alan Parsons Lulu Bridges
Andy Nield Tavistock Communications Limited
Bristol Water plc Tel: 0171 600 2288
Tel: 0117 953 6400
Or contact:Bristol Water Corporate Affairs on 0117 953 6470 during office
hours or 0831 453924
or 0831 518964 at any time.
Bristol Water plc
CHAIRMAN'S STATEMENT
The Company is undergoing significant change to deal with the challenges of -
the new price limits set for the next five years for the regulated
business, and the expected growth of competition in the water industry.
In preparation we have made a number of changes to the senior management team.
I have stepped up to become Chairman of the Company and its Chief Executive.
Andy Nield, who came from a senior position at Anglian Water, replaced me this
April as Finance Director and Roger Wyatt becomes Managing Director.
We have made significant commercial decisions in focussing our business on the
tasks ahead. We have introduced a continuing major cost reduction programme
for the regulated business. This has reduced the workforce by more than one
hundred, about one fifth of the total since mid 1999. The Accounts include a
provision for the continuation of this programme. We have established an
environment of continual challenge to the cost base and business processes to
achieve future efficiency targets.
During last year the Company continued to make good progress with pre-tax
profits before exceptional items 4% higher at #15.4 million. We have
recommended the final ordinary dividend be increased to 53.2 pence per share.
Including preference dividends, the total cost of dividends will increase by
6% over 1999. We believe that this provides a sound base for the future.
Our first priority for the coming year is to make the most of the new business
environment in which we operate. The financial results will be significantly
affected by the price reductions imposed by OFWAT.
Our sincere thanks go to John Browning who retired in March after more than 30
years with Bristol Water and who in that time made a major contribution to the
Company. The Board's thanks go to our staff who have again shown high levels
of commitment in difficult circumstances during the year. We wish colleagues
who have left us well for the future and we congratulate those promoted to new
and challenging roles.
We are committed to provide good returns to shareholders while fully complying
with the framework established by our regulators. Our new management structure
is in place to meet the challenges of the future and to maintain our high
standards of service to customers.
Alan Parsons
Chairman
Bristol Water plc
OPERATING AND FINANCIAL REVIEW
FINANCIAL PERFORMANCE
Summary: 2000 1999 % change
#m #m
Turnover 69.5 66.8 4%
Operating profit before
exceptional charges 20.4 19.3 5%
Exceptional charges 1.6 -
Pre-tax profits after
exceptional items 14.0 14.8 -5%
_______________________
Revenue increased broadly in line with inflation and the 1% K factor and was
reflected in the growth in underlying operating profit. Following acceptance
of the price limits for the next five years, we are committed to achieving
continuing efficiency gains. We have made a provision for the initial cost
reduction programme.
The profit before tax has fallen due to the restructuring offsetting the
underlying profit growth. The tax charge has returned to more normal levels
following the one-off ACT benefits last year. As a result attributable profits
and earnings per share after exceptional items have fallen by approximately
one fifth.
Before the exceptional items, interest was covered 4.1 times and the ordinary
dividend covered 2.6 times.
The Board proposes to increase the final ordinary dividend for the year to
53.2 pence, giving a dividend of 72.6 pence per share, a 12% increase over
1999. It will be paid to shareholders on 24 July 2000 and represents 96% of
the ordinary dividend paid to the shareholders of Bristol Water Holdings plc.
OPERATIONS
Operationally the year was very successful with the recognised high levels of
service maintained or improved. The combination of good rainfall and slowly
diminishing demand from customers ensured that there was no risk of water
restrictions. Water quality compliance was again better than 99.9%. We also
successfully met the mandatory maximum level of leakage set by OFWAT. We
continue to operate at the highest levels of customer service.
PRICE DETERMINATION
The most significant event of the year for the regulated business was the
issue by the Director General of Water Services in November 1999 of the
Periodic Review Final Determination. This set maximum price limits for charges
to customers for the five years to March 2005. The price limits included an
uplift to recognise our high levels of customer service compared to our peer
group.
PRICE LIMITS
Price limits set for the next five years are:
2000/01 -10%
2001/02 +1%
2002/03 +1%
2003/04 0%
2004/05 -1.9%
The limits, known as K factors, and movements in the RPI
index apply to a basket of tariffs defined in the company's
licence.
For Bristol Water the determination has resulted in an initial real reduction
in our regulated Tariff Basket revenues of 10% for 2000/01. This will have a
materially adverse effect on future profit levels. The price limits reflect
the Director General's assessment of the costs of meeting quality and
environmental obligations that we must deliver in part funded by his view of
potential efficiency gains. In essence we are passing the efficiencies we have
achieved in the last five years and assumed future efficiencies back to
customers as lower prices.
The key outputs required by the Price Determination in the five years to 2005
are:
A major capital investment programme of around #25m per year. This is
equivalent to more than #50 per customer per year
Installing treatment required by new more stringent regulations at key
groundwater sources to minimise the risk of a breakthrough of Cryptosporidium
Potential replacement of 68,000 of the company's lead supply pipes to
meet new quality standards
Renovation of 254 kilometres of water mains by December 2002 for quality
reasons
Treatment improvements at key works to meet new EC standards
Improving the security of supply for customers dependent on River Severn
water carried to our treatment works by British Waterways Board's Gloucester
to Sharpness Canal.
The Price Determination represents a tough challenge for the Company to
deliver the outputs while maintaining the existing high levels of service to
customers within the financial constraints imposed by the price limits.
To achieve this we are working hard to reduce the Company's cost base, and
have established a group of senior managers whose role, along with the
directors, is to challenge all costs and processes. Key initiatives to date
include:
Reduction in employee numbers, through a combination of voluntary and
compulsory redundancies, by around one hundred since mid 1999 in the
functions monitored by OFWAT. In total this will save around #2m per annum of
operating and capital costs.
The outsourcing of our optional metering programme reducing costs
significantly.
New partnership arrangements for elements of our capital programme to
increase capital expenditure efficiency.
This focus on driving down all costs will continue while maintaining high
standards of customer service.
Bristol Water plc
PROFIT AND LOSS ACCOUNT
for the year ended 31 March 2000
2000 1999
Notes Before
Exceptional Exceptional Total Total
items items
#000 #000 #000 #000
Turnover 69,453 - 69,453 66,793
Operating costs 2,3 49,119 1,591 50,710 47,493
_________________________________________
Operating profit/(loss) 20,334 (1,591) 18,743 19,300
Profit on disposal of
tangible fixed assets 4 - (207) (207) (135)
Net interest payable and
similar charges 4,970 - 4,970 4,650
_________________________________________
Profit/(loss) on ordinary
activities before taxation 15,364 (1,384) 13,980 14,785
Taxation on profit/(loss)
on ordinary activities 5 2,815 (79) 2,736 1,213
___________________________________________
Profit/(loss) on ordinary
activities after taxation 12,549 (1,305) 11,244 13,572
Dividends -
On irredeemable preference shares 1,094 - 1,094 1,094
On redeemable preference shares - - - 162
On ordinary shares 4,355 - 4,355 3,888
__________________________________________
Total dividends 6 5,449 - 5,449 5,144
__________________________________________
Profit/(loss) retained for
the financial year 7,100 (1,305) 5,795 8,428
__________________________________________
Earnings per share 7 191.0p (21.8)p 169.2p 205.3p
__________________________________________
All of the turnover and operating costs above relate to continuing operations.
There were no exceptional items in 1999.
Bristol Water plc
BALANCE SHEET
at 31 March 2000
Notes 2000 1999
#000 #000
Tangible fixed assets 8 165,309 160,765
__________________
Current assets
Stocks 811 1,128
Debtors 8,857 8,563
Cash at bank and on deposit 1,552 2,450
__________________
11,220 12,141
__________________
Creditors: amounts falling due within one year
Short term borrowings 1,419 1,523
Other creditors 21,088 23,072
__________________
22,507 24,595
__________________
Net current liabilities (11,287)(12,454)
__________________
Total assets less current liabilities 154,022 148,311
Creditors: amounts falling due
after more than one year 67,619 68,821
Deferred income 8,463 8,254
Provision for liabilities and charges 909 -
__________________
77,031 71,236
__________________
Capital and reserves
Called up share capital 18,498 18,498
Share premium account 4,415 4,415
Other reserves 5,770 5,770
Profit and loss account 48,348 42,553
_________________
Total shareholders' funds 10 77,031 71,236
_________________
Analysed as:
Equity shareholders' funds 64,531 58,736
Non-equity shareholders' funds 12,500 12,500
Bristol Water plc
CASHFLOW STATEMENT
for the year ended 31 March 2000
Notes 2000 1999
#000 #000
Net cash inflow from
operating activities 11 29,624 30,355
__________________
Returns on investments and
servicing of finance
Interest received 192 378
Interest paid (3,469) (3,590)
Interest paid on finance leases (1,522) (1,676)
Dividends paid on non-equity shares (1,094) (1,256)
__________________
(5,893) (6,144)
__________________
Taxation
Corporation tax paid (1,879) (611)
Advance corporation tax paid on dividends (136) (993)
_________________
(2,015) (1,604)
__________________
Capital expenditure
Purchase of tangible fixed assets (21,354)(34,065)
less contributions received 2,891 3,860
Proceeds on disposal of tangible
fixed assets 1,043 213
__________________
(17,420)(29,992)
__________________
Dividends paid on equity shares (3,888) (3,686)
__________________
Cash inflow/(outflow) before financing 408 (11,071)
Financing
Capital element of new finance leases 296 586
New bank loans - 15,000
Capital element of lease repayments (1,602) (1,503)
Redemption of preference shares - (5,770)
__________________
(1,306) 8,313
__________________
Decrease in cash (898) (2,758)
Cash, beginning of year 2,450 5,208
__________________
Cash, end of year 1,552 2,450
__________________
Bristol Water plc
NOTES
1.BASIS OF PREPARATION AND CIRCULATION
These preliminary statements do not constitute the statutory accounts for
the year ended 31 March 2000. The statutory accounts have been reported on
by the auditors without qualification but have not yet been delivered to
the Registrar of Companies. The comparative figures for 1999 have been
extracted from the accounts of Bristol Water plc for the year ended 31
March 1999, upon which the auditors' report was unqualified and which have
been delivered to the Registrar of Companies.
The Annual Report and Accounts will be posted to shareholders on or before
21 June 2000. Copies will be available to the public from the registered
office at PO Box 218, Bridgwater Road, Bristol BS99 7AU. The Annual General
Meeting will be held at the Registered Office at Bridgwater Road, Bristol
on Monday, 24 July 2000 at 9.00am.
2. OPERATING COSTS BEFORE EXCEPTIONAL ITEMS
2000 1999
#000 #000
Net payroll cost 10,449 9,224
Other operating expenses 25,633 25,817
Depreciation, net 13,037 12,452
________________
Total operating costs 49,119 47,493
________________
3. EXCEPTIONAL OPERATING COSTS
2000 1999
#000 #000
Restructuring costs 1,591 -
________________
The restructuring costs mainly reflect severance payments to employees made
redundant in the year together with a provision for further anticipated
redundancies.
4. PROFIT ON DISPOSAL OF TANGIBLE FIXED ASSETS
The profit on disposal of tangible fixed assets of #207,000 arises mainly
from property sales #770,000 offset by an impairment loss of #614,000 in
respect of vehicles and plant. It is anticipated that these will be
disposed of in the current year.
5. TAXATION ON PROFIT ON ORDINARY ACTIVITIES
2000 1999
#000 #000
Mainstream corporation tax payable 2,600 1,036
Advance corporation tax 136 177
_______________
Charge for the year 2,736 1,213
_______________
6. DIVIDENDS
2000 1999
#000 #000
On non-equity shares -
Irredeemable 8.75% preference shares -
Paid 547 547
Payable 1 April 547 547
________________
1,094 1,094
Paid on convertible redeemable 6.75%
preference shares 1998 - 162
________________
1,094 1,256
________________
On ordinary shares (equity shares) -
Paid 1,166 1,166
Proposed 3,189 2,722
_______________
4,355 3,888
_______________
Total dividends paid and proposed 5,449 5,144
_______________
7. EARNINGS PER SHARE
Earnings per share have been calculated as follows -
2000 1999
000 000
On average number of ordinary shares
in issue during the year -
Earnings attributable to ordinary
shares before exceptional items #11,455 #12,316
Earnings attributable to ordinary
shares after exceptional items #10,150 #12,316
Weighted average number of ordinary
shares 5,998 5,998
_________________
As the Company has no obligation to issue further shares, disclosure of
earnings per share on a fully diluted basis is not required.
8. TANGIBLE FIXED ASSETS
2000 1999
#000 #000
Net book value, beginning of year 160,765 145,197
Additions 21,099 31,599
Disposals (222) (78)
Contributions (2,411) (3,244)
Depreciation (13,922) (12,709)
___________________
Net book value, end of period 165,309 160,765
___________________
9. NET BORROWINGS
2000 1999
#000 #000
Cash 1,552 2,450
Debt due within one year (1,419) (1,523)
Debt due after one year (67,619) (68,821)
__________________
Net borrowings (67,486) (67,894)
__________________
10. MOVEMENT IN SHAREHOLDERS' FUNDS
2000 1999
#000 #000
Beginning of year 71,236 68,578
Profit for the year 11,244 13,572
Dividends (5,449) (5,144)
Redemption of preference shares - (5,770)
__________________
End of year 77,031 71,236
__________________
11. ADDITIONAL CASHFLOW INFORMATION
a)Reconciliation of operating profit to net cash inflow from operating
activities -
2000 1999
#000 #000
Operating profit 18,743 19,300
Depreciation, net 13,037 12,452
__________________
Cashflow from operations 31,780 31,752
Working capital movements -
Stocks 317 281
Debtors (294) (1,351)
Creditors (2,179) (327)
__________________
Net cash inflow from operating
activities 29,624 30,355
__________________
The cashflow from operations is arrived at after charging #1,591,000 as an
exceptional item, of which #241,000 was paid during the year, #441,000 was
accrued as a creditor at 31 March 2000 and a provision created of #909,000.
b)Reconciliation of net cashflow to movement in net borrowings -
2000 1999
#000 #000
Decrease in net cash in year (898) (2,758)
Cash used to repay borrowings 1,602 1,503
Cash from new borrowings (296) (15,586)
__________________
Decrease/(increase) in net borrowings 408 (16,841)
Net borrowings at beginning of year (67,894) (51,053)
___________________
Net borrowings at end of year (67,486) (67,894)
___________________
END
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