RNS Number:9043S
Bristol Water PLC
05 December 2003
BRISTOL WATER plc
INTERIM RESULTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2003
Bristol Water plc is a subsidiary of Bristol Water Group plc (BWG)
At 30 September 2003 Bristol Water plc was a subsidiary of
Bristol Water Holdings plc whose results are also being reported today
HIGHLIGHTS
PERIOD OF CHANGE
Six months ended 30 September 2003 2002 % change
(unaudited) (unaudited)
#m #m
Turnover 36.0 35.0 3%
Operating profit 10.4 10.1 4%
Profit before tax 7.4 7.4 -%
Profit after tax 6.3 4.5 41%
Earnings per ordinary share 96.2p 65.7p 46%
Interim dividend per ordinary share 29.10p 27.73p 5%
* Turnover increased by 3% reflecting impact of 2.7%
increase under RPI + K price formula
* Profit before tax maintained in spite of relatively low
RPI+K price increase and with increased financing and depreciation costs from
continuing capital programme
* Net capital expenditure #11.1m
* New financing arrangements completed in May
* High service levels maintained - rated fifth overall by
Ofwat for 2002/03
* Low tax charge with effective tax rate of 15% reflects
deferred tax credit
* Periodic Review is key focus
* Parent company has announced proposals for a #51m return
of capital to shareholders
The company is one of the largest independent water supply companies in the
country, providing an average of 300 million litres of water each day through
6,500 kilometres of mains. It is responsible for supplying over one million
people and businesses in an area of almost 2,400 square kilometres, centred on
Bristol.
CHAIRMAN'S STATEMENT
Changes within the group
The last eight months have been a time of major change for the Bristol Water
group.
At its AGM in July Bristol Water Holdings plc announced that it was actively
reviewing methods of returning value to it's shareholders and believed that,
after implementing any necessary restructuring, the Board would be able to
recommend the return of 135 pence per ordinary share (approximately #51m in
aggregate).
The first stage of the process to allow the group to return value to
shareholders was to create a new ultimate holding company, Bristol Water Group
plc. The ordinary shares of the new holding company were admitted to the
Official List on 27 November 2003 following approval by Bristol Water Holdings
plc shareholders and the Court and the consequent completion of the scheme of
arrangement.
The Board of Bristol Water Group plc has today announced its recommendation for
the return of capital to its shareholders.
In May 2003 we completed a new financing package for Bristol Water plc. This is
based on a financial ringfencing of the regulated water business and provides
the flexibility to substantially increase the level of gearing. The Board
propose that this flexibility will be used to finance the return of capital to
shareholders by Bristol Water Group plc if implemented.
Trading and operational performance
In last year's annual report we signalled that the continued progressive build
up of the capital programme, with its consequent additional financing,
depreciation and operating costs, together with the relatively low level of
increases in charges to customers under the RPI+K price limits to customers for
2003/04 of 2.7%, including a K factor of 0%, and a negative K factor of 1.9% in
2004/05, would constrain profits for both the current year and 2004/05.
In addition to the impact of the capital programme and the lower level of
increase in charges to customers, one of our major industrial customers closed
in April 2003, resulting in an annual loss of revenue of approximately #0.6m.
Against this background, the company has performed extremely well. Turnover
increased by 3%, from #35.0m to #36.0m. Profit before tax was maintained at
#7.4m.
In these accounts we have accounted for pensions on a SSAP24 basis. The charge
of #0.7m is broadly in line with the increased level of cash contributions,
effective from April 2003, to our defined benefit schemes. The level of cash
contributions was agreed with the pension scheme trustees in accordance with the
latest triennial actuarial valuation at April 2002. Given adverse movements in
equity markets since April 2002, if the SSAP24 charge was recalculated to
reflect these changes, the charge could potentially increase significantly. The
company has not yet fully adopted FRS17, however under FRS17 at 30 September
2003 the net deficit, before tax, of the schemes would have been approximately
#13.1m. We will review in due course the level of contributions to the scheme
in the light of actuarial advice and movements in the equity and gilt markets.
The tax charge for the six months of #1.1m was much lower than the equivalent
charge for 2002. This reflects a deferred tax credit, due to two factors. The
first is an increase in discount rates used to calculate our overall deferred
tax liability. As required by FRS19 the discount rates applied are based on
government gilts for the relevant periods and the change to some extent reverses
the impact of the reduction in rates in the previous year. The second factor is
a disclaimer of capital allowances in respect of a prior year allowing us to
claim back ACT, which also reduces the future deferred tax liability. The
effect of the changes has been spread in relation to the total expected tax
charge for the year.
Net debt increased by #16.9m in the period to #91.7m, representing approximately
47% of the average Regulatory Capital Value (RCV) for 2003/04. In connection
with Bristol Water Group plc's planned return of capital to its shareholders it
is intended to significantly increase the level of debt in Bristol Water plc and
to make an intercompany loan to Bristol Water Group plc. After this increase in
debt we anticipate that the ratio of net debt to RCV will increase to
approximately 67% at March 2004.
Net gearing (debt:equity) at 30 September 2003 was 132% compared to 114% at 31
March 2003.
Capital investment, including infrastructure renewals, net of grants and
contributions, in the period amounted to #11.1m. The key project is the #12m
project for a major upgrade of our Barrow treatment plant, with completion
planned for mid 2004. We anticipate net capital expenditure for the full year
of approximately #26m.
Once again we were ranked highly in Ofwat's latest report on service levels by
water companies in England and Wales for 2002/03. Our position of fifth
continued our record of consistently high rankings. This recognises our
commitment to the delivery of high levels of service to customers.
The joint venture with Wessex Water to enable the two companies to issue
combined bills to customers is continuing to progress well and beginning to
deliver real efficiency gains.
The prolonged warm and dry weather over the summer and autumn has meant that
surface reservoir levels have been dropping steadily. At this stage we hope to
avoid significant operational difficulties but heavy winter rainfall levels are
needed to recharge the reservoirs. We are actively reviewing contingency plans.
A key activity during the period was the preparation and submission to Ofwat of
our draft plan for the period 2005-10. This is an important part of Ofwat's
periodic review process which will determine price limits for our charges to
customers for the five-year period. The outcome of this process will have a
very important bearing on the company's financial prospects. We will submit our
final plan in April 2004 and Ofwat is due to determine price limits in November
2004.
In May 2003 we finalised new financing arrangements. Prior to the refinancing
the business had a relatively short debt maturity profile and the new structure
provides a better mix and considerably longer maturity profile appropriate to
the long-term nature of the assets being financed. #15m of indexed linked debt
was drawn through the existing Artesian Finance plc monoline wrapped bond
programme arranged by The Royal Bank of Scotland, and an equivalent #30m was
drawn on a fixed interest basis through a new bond programme issued by Artesian
Finance II plc. The new debt has maturities of 2032 and 2033 respectively.
#20m of the new facilities was used to repay existing bank debt.
We have been discussing with Ofwat some changes to the licence of appointment.
The modifications now proposed by Ofwat principally concern the ringfencing of
the regulated water business, the management and conduct of the business and the
role of Bristol Water Group plc as the ultimate parent. The modifications are
broadly similar to those agreed by other companies who have significantly
increased gearing levels. We have reached agreement in principle with Ofwat on
the changes, and anticipate that Ofwat will commence the formal public
consultation process in the near future.
Summary
The business is performing well, with good operating and financial performance.
Results for the six months to March 2004 will be impacted by a number of
factors, including the build up of the capital programme and seasonal operating
cost profiles.
The key focus over the next twelve months will be the Periodic Review process.
Alan Parsons
Chairman
Bristol Water plc
5 December 2003
PROFIT & LOSS ACCOUNT
Six months to Six months to Year to
30 September 30 September 31 March
2003 2002 2003
(unaudited) (unaudited)
Note #000 #000 #000
Turnover 2 35,991 35,038 69,974
Operating costs 3 (25,552) (24,963) (50,613)
Operating profit 10,439 10,075 19,361
(Loss)/profit on disposals of tangible fixed assets (43) 27 386
Net interest payable 4 (2,986) (2,664) (5,184)
Profit on ordinary activities before taxation 7,410 7,438 14,563
Taxation 5 (1,093) (2,950) (6,093)
Profit on ordinary activities after taxation 6,317 4,488 8,470
Dividends - 6
On irredeemable preference shares (547) (547) (1,094)
On ordinary shares (1,745) (1,663) (15,788)
Total dividends (2,292) (2,210) (16,882)
Profit/(loss) retained 4,025 2,278 (8,412)
Earnings per share 7 96.2p 65.7p 123.0p
Dividend per ordinary share 6 29.10p 27.73p 263.2p
The profit on ordinary activities after taxation includes all recognised gains
and losses.
BALANCE SHEET
At 30 September At 30 September At 31 March
2003 2002 2003
(unaudited) (unaudited)
restated
Note #000 #000 #000
Tangible fixed assets 8 188,131 181,216 184,685
Current assets
Stocks 592 609 634
Debtors 19,547 13,805 16,765
Cash and term deposits 9 16,463 8,496 9,661
36,602 22,910 27,060
Creditors: amounts falling due within one year
Short term borrowings 9 7,697 1,630 6,760
Other creditors 19,656 19,075 34,056
27,353 20,705 40,816
Net current assets/(liabilities) 9,249 2,205 (13,756)
Total assets less current liabilities 197,380 183,421 170,929
Creditors: amounts falling due after more
than one year 9 (100,469) (81,955) (77,724)
Deferred income (8,482) (8,434) (8,429)
Provisions for liabilities and charges 10 (18,870) (16,808) (19,242)
Net operating assets 69,559 76,224 65,534
Shareholders' funds
Called up share capital 18,498 18,498 18,498
Share premium account 4,415 4,415 4,415
Other reserves 5,770 5,770 5,770
Profit and loss account 40,876 47,541 36,851
Total shareholders' funds 11 69,559 76,224 65,534
Analysed as:
Equity shareholders' funds 57,059 63,724 53,034
Non-equity shareholders' funds 12,500 12,500 12,500
Details of restatements are set out in Note 1
CASH FLOW STATEMENT
Six months to Six months to Year to
30 September 30 September 31 March
2003 2002 2003
(unaudited) (unaudited)
Note #000 #000 #000
Net cash inflow from operating activities 12 13,628 14,927 29,743
Returns on investments and servicing of finance
Net interest paid (2,967) (3,192) (5,598)
Dividends paid on preference (non-equity) shares (547) (547) (1,094)
(3,514) (3,739) (6,692)
Taxation paid (935) (1,553) (3,010)
Capital expenditure and investing activities
Purchase of tangible fixed assets (12,835) (10,586) (20,395)
Contributions received 1,646 1,808 3,409
Proceeds from disposal of tangible fixed assets 41 146 887
(11,148) (8,632) (16,099)
Dividends paid on ordinary (equity) shares (14,124) (3,929) (5,592)
Net cash outflow before management
of liquid resources and financing (16,093) (2,926) (1,650)
Management of liquid resources
(Increase)/decrease in short term deposits (9,500) 5,500 7,500
Financing
New loans and leases 45,000 - -
Costs of issue of new loans (585) - -
Capital element of loan and lease repayments (21,520) (3,032) (1,580)
Loan and bank overdraft repayments - (222) (1,785)
22,895 (3,254) (3,365)
(Decrease)/increase in cash 12 (2,698) (680) 2,485
Cash, beginning of period 3,161 676 676
Cash, end of period 463 (4) 3,161
NOTES TO THE INTERIM RESULTS
Note 1: Accounting policies and basis of restatement
The financial information contained in this interim announcement does not constitute statutory
accounts within the meaning of s.240 of the Companies Act 1985. The interim results, which have not
been audited but have been reviewed by the company's auditors, have been prepared on the basis of the
accounting policies adopted by Bristol Water plc for the year ended 31 March 2003 as set out in the
Annual Report and Accounts. Those accounts (on which the auditors gave an unqualified report) have
been delivered to the Registrar of Companies.
The 30 September 2002 results have been restated in respect of a bank overdraft of #222,000 reported
within short-term borrowings. This has now been offset against cash balances held at the same bank
to give a net cash position in accordance with the treatment adopted at 31 March 2003.
Note 2: Turnover
Six months to Six months to Year to
30 September 30 September 31 March
2003 2002 2003
(unaudited) (unaudited)
#000 #000 #000
Turnover comprises -
Metered water supply 13,298 12,450 25,399
Unmetered water supply 20,250 20,325 40,377
Other services 2,443 2,263 4,198
35,991 35,038 69,974
Note 3: Operating costs
Operating costs comprise -
Payroll cost, net of recharges to fixed assets 4,590 4,743 9,029
Other operating expenses 13,552 13,208 27,616
Depreciation, net 7,410 7,012 13,968
25,552 24,963 50,613
Note 4: Net interest payable
Net interest payable and similar charges comprise -
Interest payable and similar charges 3,408 2,934 5,672
Interest receivable and similar income (422) (270) (488)
2,986 2,664 5,184
Note 5: Taxation
Six months to Six months to Year to
30 September 30 September 31 March
2003 2002 2003
(unaudited) (unaudited)
#000 #000 #000
The charge for taxation comprises -
Current tax:
Corporation Tax at 30% 1,185 1,157 2,535
Advance Corporation Tax written (back)/off (560) 110 1,379
Adjustment to prior periods 840 221 (1,643)
Total current tax 1,465 1,488 2,271
Deferred tax:
Current year movement 1,135 821 1,413
Adjustment to prior periods (807) 291 1,204
Effect of discounting (700) 350 1,205
Total deferred tax (372) 1,462 3,822
Total tax on profit on ordinary activities 1,093 2,950 6,093
For the six months to 30 September 2002, the tax charge above has been re-analysed to reflect the analysis
disclosed in the 2003 annual report.
Included within the effect of discounting credit for the six months to 30 September 2003 is #472,000
relating to the effect of the change in discount rates on the deferred tax balance brought forward. This
credit is increased by #228,000, representing the net effect of discounting on the current and prior year
movements recognised above.
Note 6: Dividends
The dividend on the 8.75% Irredeemable Preference Shares for the first half of the financial year was paid
on 1 October 2003 and amounted to #547,000. The Board has declared an interim dividend of 29.10 pence
(2002 - 27.73 pence) on each Ordinary share amounting to #1,745,000 (2002 - #1,663,000), payable on 5
December 2003.
Note 7: Earnings per share
Earnings per share attributable to ordinary shares have been calculated as follows:
Six months to Six months to Year to
30 September 30 September 31 March
2003 2002 2003
(unaudited) (unaudited)
000 000 000
On average number of shares in issue:
Earnings #5,770 #3,941 #7,376
Number of ordinary shares in issue 5,998 5,998 5,998
Note 8: Movement in tangible fixed assets
Six months to Six months to Year to
30 September 30 September 31 March
2003 2002 2003
(unaudited) (unaudited)
#000 #000 #000
The movement in tangible fixed assets comprises -
Net book value, beginning of period 184,685 179,426 179,426
Additions 12,734 10,873 23,429
Disposals (84) (119) (501)
Grants and contributions (1,646) (1,808) (3,409)
Depreciation (7,558) (7,156) (14,260)
Net book value, end of period 188,131 181,216 184,685
Note 9: Net debt
Six months to Six months to Year to
30 September 30 September 31 March
2003 2002 2003
(unaudited) (unaudited)
#000 #000 #000
Net debt comprises -
Debt due after one year 100,469 81,955 77,724
Debt due within one year 7,697 1,630 6,760
Less cash balances and short term deposits (16,463) (8,496) (9,661)
Net debt 91,703 75,089 74,823
Note 10: Provisions for liabilities and charges
Six months to Six months to Year to
30 September 30 September 31 March
2003 2002 2003
(unaudited) (unaudited)
#000 #000 #000
Deferred taxation provision
Deferred tax liability 32,570 30,661 32,241
Effect of discounting (13,700) (13,853) (12,999)
18,870 16,808 19,242
Note 11: Shareholders' funds
Six months to Six months to Year to
30 September 30 September 31 March
2003 2002 2003
(unaudited) (unaudited)
#000 #000 #000
Movement in shareholders' funds -
Beginning of period 65,534 73,946 73,946
Profit for the period 6,317 4,488 8,470
Dividends (2,292) (2,210) (16,882)
End of period 69,559 76,224 65,534
Following resolutions passed at the Annual General Meeting on 21 July 2003:
* all non-voting ordinary shares of #1 each were reclassified as ordinary shares of #1 each.
* the authorised share capital of the company was reduced to #19,998,025 by the cancellation of
all of the 5,770,250 authorised but unissued 6.75 percent cumulative convertible preference shares of #1
each.
Note 12: Supplementary cashflow information
Six months to Six months to Year to
30 September 30 September 31 March
2003 2002 2003
(unaudited) (unaudited)
#000 #000 #000
a) Reconciliation of operating profit to net
cash inflow from operating activities
Operating profit 10,439 10,075 19,361
Depreciation, net 7,410 7,012 13,968
Cashflow from operations 17,849 17,087 33,329
Working capital movements (4,221) (2,160) (3,586)
Net cash inflow from operating activities 13,628 14,927 29,743
b) Reconciliation of net cashflow to
movement in net debt -
(Decrease)/increase in cash in the period (2,698) (680) 2,485
Cash used to repay borrowings 21,520 3,254 3,365
Cash from new borrowings (45,000) - -
Costs of issue of new loans 585 - -
Cash outflow/(inflow) from management
of liquid resources 9,500 (5,500) (7,500)
Increase in net borrowings arising from (16,093) (2,926) (1,650)
cash flows
New debt not affecting cash flow (775) (659) (1,669)
Amortisation of issue costs of new loans (12) - -
Net debt, beginning of period (74,823) (71,504) (71,504)
Net debt, end of period (91,703) (75,089) (74,823)
Note 13: Pensions
Pension arrangements for the majority of the company's employees are provided through the group's
membership of the Water Companies' Pension Scheme (WCPS) which provides defined benefits based on
final pensionable pay. The company's membership of WCPS is through separate sections. These pension
sections are closed to new entrants.
The most recent triennial actuarial valuation at 1 April 2002 showed the market value of section
assets relating to the company as #97 million and that the actuarial value of these assets represented
107% of accrued benefits allowing for future earnings increases.
The charge to the Profit and Loss account for the period is calculated in accordance with SSAP24 based
on the 1 April 2002 valuation. Given adverse movements in equity markets since 1 April 2002, if the
SSAP24 charge was recalculated to reflect these changes, the charge to Profit and Loss could
potentially increase significantly.
Full implementation of FRS17 "Retirement Benefits" in the primary financial statements will not be
mandatory for the company until the year ending 31 March 2006. Transitional disclosures will continue
to be included within the full year accounts. Under FRS17 at 30 September 2003 the net deficit, before
tax, of the schemes would have been approximately #13.1m.
Note 14: Post Balance Sheet events
On 27 November 2003, by way of a scheme of arrangement under Section 425 of the Companies Act 1985,
the former ultimate parent company, Bristol Water Holdings plc, became a wholly owned subsidiary of
Bristol Water Group plc. This company is the new ultimate parent company of Bristol Water plc.
On 5 December 2003, Bristol Water Group plc announced proposals for the return of capital of 135 pence
per ordinary share (approximately #51m in aggregate) to its shareholders. To effect this, it is
intended to significantly increase the level of debt within Bristol Water plc and for Bristol Water
plc to make an inter-company loan to Bristol Water Group plc.
Note 15: Circulation
This interim announcement is being sent to all shareholders and debenture holders. Copies are
available to the public from the Company's registered office at PO Box 218, Bridgwater Road, Bristol,
BS99 7AU and on the Bristol Water web site: http://www.bristolwater.co.uk.
INDEPENDENT REVIEW REPORT TO BRISTOL WATER PLC
Introduction
We have been instructed by the company to review the financial information which
comprises Profit and Loss Account, Balance Sheet, Cash Flow Statement and
related notes, for the six months ended 30 September 2003. We have read the
other information contained in the interim report and considered whether it
contains any apparent misstatements or material inconsistencies with the
financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly we do not
express an audit opinion on the financial information. This report, including
the conclusion, has been prepared for and only for the company for the purpose
of the Listing Rules of the Financial Services Authority and for no other
purpose. We do not, in producing this report, accept or assume responsibility
for any other purpose or to any other person to whom this report is shown or
into whose hands it may come save where expressly agreed by our prior consent in
writing.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 September 2003.
PricewaterhouseCoopers LLP
Chartered Accountants
Bristol
5 December 2003
Notes:
(a) The maintenance and integrity of the Bristol Water group website is the responsibility of the directors; the
work carried out by the auditors does not involve consideration of these matters and, accordingly, the
auditors accept no responsibility for any changes that may have occurred to the interim report since it was
initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation and dissemination of financial information may
differ from legislation in other jurisdictions.
This information is provided by RNS
The company news service from the London Stock Exchange
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