Last checked at 29 May 2008 07:00
BRISTOL WATER plc
Bristol Water plc is a subsidiary of Bristol Water Group Ltd, which is itself a subsidiary of Sociedad General de Aguas de Barcelona S.A. (Agbar)
| Year ended 31 March | 2008 | 2007 |
| £m | £m | |
| Turnover | 91.0 | 86.3 |
| Operating profit | 26.3 | 25.2 |
| Profit before tax | 17.9 | 18.9 |
| Profit after tax | 14.5 | 16.4 |
| Regulatory Capital Value (RCV) | 275.5 | 260.4 |
| Net debt (excluding 8.75% irredeemable cumulative preference shares) as percentage of RCV | 71% | 68% |
| For further information contact: | |||
| Alan Parsons, Managing Director | |||
| Stefano Pellegri, Finance Director | |||
| Bristol Water plc | |||
| Tel 0117 953 6407 | |||
| Or contact: | Bristol Water Corporate Affairs on 0117 953 6470 during office hours or 07831 453924 at any time. | ||
CHAIRMAN'S STATEMENT
Introduction
It has been another highly satisfactory year for Bristol Water. We have made substantial progress with our capital programme and service levels to customers have been at or near the highest levels in the industry.
Operational performance
We have just completed the largest annual capital programme in our history at some £50 million. Key schemes that have now been completed, which provide benefits to nearly all of our customers, include -
A £24 million project to improve the security of supply for a population of almost 200,000 in the north and eastern parts of Bristol and surrounding areas.
An £11 million project to upgrade Banwell treatment works which serves Weston-Super-Mare to improve its effectiveness in dealing with a range of raw water qualities.
A £7 million project to construct a new treatment works to treat water from the River Axe providing support to customers in the south of our area.
We are now at the end of the third year in the current 5 year regulatory period 2005-10. We have now spent £118 million of a planned £178 million for the period, broadly in line with Ofwat's assumptions. The focus of work in the remaining two years now falls back to the smaller maintenance replacements.
Our customer service continues to achieve high satisfaction ratings with customers with 88% rating our service as good or very good.
After a long period of mild weather, we experienced an abnormal level of bursts during the Christmas holiday period. Emergency crews and technical staff worked throughout the period in difficult conditions to ensure the effect on customers was minimised.
We are half way through a £2 million project to install comprehensive mobile working facilities for field staff together with improved job scheduling. Already we are seeing improvements in efficiency, reduced paper work and immediate updating of computer systems. This project will contribute toward the highly demanding efficiency assumptions made by Ofwat when price limits were last set.
We were also pleased to help the people of Gloucester, customers of Severn Trent Water, with emergency water supplies during the summer floods. In total, one third of our staff worked at some point during the crisis on this project and I thank them all for their contribution to those in need and for maintaining excellent service to our own customers.
Regulatory developments
When Ofwat set price limits in 2004 for the current regulatory period, they identified a number of uncertainties where, if the original assumptions were wrong by a material amount, price limits could be reviewed. Bristol Water is experiencing significant increases in three of these cost areas, namely the number of meter optants, the level of bad debts and charges from the Environment Agency for water abstraction.
Following our request for a review, Ofwat issued in December an Interim Determination of revised price limits for the last two years of the regulatory period. As a result, from 1 April 2008, average prices have been increased by 3.6% above RPI and for the following year they will increase by RPI. The effect will be to raise approximately £6 million of extra revenue to cover costs incurred over the full five year period. Including these additional amounts, our charges remain below the national average and we consider they represent excellent value to customers.
Also in December we published our 25 year vision of how we see Bristol Water developing to continue to meet the needs of customers and the environment. We have identified, through extensive work and customer surveys, the following five key objectives -
Dealing with growth in the number of customers
Coping with the impact of climate change
Managing an ageing infrastructure
Improving resilience
Maintaining bills at affordable levels.
Our proposals identify a need to double our investment levels for a sustained period. It will only be possible to achieve all of these challenges by continuing to be efficient and innovative. A copy of "Water in the Future" is available on our website.
The process for setting prices for the five years starting from April 2010 has already begun. We are pleased that Ofwat have requested all water companies to prepare long term Strategic Direction Statements as these provide a much improved context for five year plans. It is of course too early to predict the outcome of the current price review but we anticipate it will have to be designed to accommodate a substantial increase in borrowings to assist in funding our expected increase in capital spending.
Ofwat is increasingly focussed on the promotion of competition in the industry. We do not believe current legislation is helpful to the promotion of competition but we continue to monitor developments closely.
Financial performance
Operating profit increased marginally over the previous year but pre-tax profit declined. However, it is relevant to point out that the sustained high level of capital expenditure has increased depreciation and interest costs in particular. We also remain concerned about the substantial increases in power and chemical costs and the levels of bad debts.
Although we will gain benefit from the revised price limits, we project a continuing adverse impact from the factors described in the last paragraph.
Dividends
The company policy is to declare normal dividends on the ordinary shares that reflect the cost of capital allowed by Ofwat in determining price limits (adjusted to reflect actual gearing levels and where appropriate actual performance relative to Ofwat assumptions) and an amount equal to the post-tax interest receivable from Bristol Water Group Limited in respect of intercompany loans.
During the year, the company paid £6.0 million in respect of dividends related to 2006/7 and an interim dividend of £3.1 million in respect of 2007/8, in addition to £2.8 million in relation to the intercompany loan element referred to above.
A final dividend of £3.2 million in respect of 2007/8 will be proposed at the AGM.
In addition, dividends of £1.1 million have been paid during the year on the irredeemable preference shares which are required to be shown as debt on the balance sheet.
Board membership
Professor David Blockley and Andy Nield left us in May and November respectively last year and Dr Arnold Bates retires at the end of this May. On behalf of the Board I would like to thank each for their substantial contributions to the development of the company and the wider Bristol Water group and wish them well for the future.
We welcome Stefano Pellegri as our new Finance Director, appointed in November, and Tony Harding, appointed in September as a non-executive with significant experience in the water sector.
Moger Woolley
Chairman
29 May 2008
PROFIT AND LOSS ACCOUNT
for the year ended 31 March 2008
| 2008 | 2007 | |||
| Note | £m | £m | ||
| Turnover | 1 | 91.0 | 86.3 | |
| Operating costs | 2 | (64.7) | (61.1) | |
| Operating profit | 26.3 | 25.2 | ||
| Other net interest payable and similar charges | 3 | (8.4) | (6.7) | |
| Dividends on 8.75% irredeemable cumulative preference shares | 3 | (1.1) | (1.1) | |
| Interest in respect of retirement benefit scheme surplus | 3 | 1.1 | 1.5 | |
| Net interest payable and similar charges | 8.4 | 6.3 | ||
| Profit on ordinary activities before taxation | 17.9 | 18.9 | ||
| Taxation on profit on ordinary activities | 4 | (3.4) | (2.5) | |
| Profit on ordinary activities after taxation | 14.5 | 16.4 | ||
| Earnings per ordinary share | 5 | 243.2p | 273.0p | |
| Dividends per ordinary share | ||||
| - declared or proposed in respect of the period | 19 | 152.28p | 147.10p | |
| - paid during the period | 19 | 198.78p | 105.09p | |
All activities above relate to the continuing activities of the company.
There is no difference between the profit on ordinary activities before taxation and the retained profit for the financial year stated above and their historical cost equivalents.
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the year ended 31 March 2008
| 2008 | 2007 | |||
| Note | £m | £m | ||
| Profit attributable to Bristol Water plc shareholders | 14.5 | 16.4 | ||
| Actuarial gains recognised in respect of retirement benefit obligations | 8 | 1.1 | 4.8 | |
| Attributable deferred taxation | (0.3) | (1.3) | ||
| Deferred tax asset reversal upon closure of equity-settled share based payment scheme | - | (0.6) | ||
| Total recognised gains for the year | 15.3 | 19.3 | ||
BALANCE SHEET
at 31 March 2008
| 2008 | 2007 | |||
| Note | £m | £m | ||
| Fixed assets | 5 | 244.1 | 218.7 | |
| Investments - Loans to ultimate UK holding company | 68.5 | 68.5 | ||
| Current assets | ||||
| Stocks | 0.9 | 0.8 | ||
| Debtors | 20.9 | 20.8 | ||
| Other investments | 6 | 21.3 | 28.0 | |
| Cash at bank | 6 | 0.2 | 2.8 | |
| 43.3 | 52.4 | |||
| Creditors: amounts falling due within one year | ||||
| Short term borrowings and derivatives | 6 | (16.9) | (2.5) | |
| Other creditors | (26.2) | (23.8) | ||
| (43.1) | (26.3) | |||
| Net current assets | 0.2 | 26.1 | ||
| Total assets less current liabilities | 312.8 | 313.3 | ||
| Creditors: amounts falling due after more than one year | ||||
| Borrowings | 6 | (201.2) | (204.6) | |
| Other creditors | (0.4) | (0.3) | ||
| (201.6) | (204.9) | |||
| 8.75% irredeemable cumulative preference shares | 6 | (12.5) | (12.5) | |
| Deferred income | (10.0) | (9.4) | ||
| Provisions for liabilities | 7 | (20.3) | (19.7) | |
| Retirement benefit scheme surplus, net of attributable deferred taxation | 8 | 10.1 | 8.3 | |
| Net assets | 78.5 | 75.1 | ||
| Capital and reserves | ||||
| Called up share capital | 6.0 | 6.0 | ||
| Share premium account | 4.4 | 4.4 | ||
| Share option reserve | - | - | ||
| Other reserves | 5.8 | 5.8 | ||
| Profit and loss account | 62.3 | 58.9 | ||
| Shareholders' funds | 9 | 78.5 | 75.1 | |
CASH FLOW STATEMENT
for the year ended 31 March 2008
| 2008 | 2007 | |||
| Note | £m | £m | ||
| Net cash inflow from operating activities | 11(a) | 49.4 | 42.6 | |
| Returns on investments and servicing of finance | ||||
| Interest received | 5.6 | 6.0 | ||
| Interest paid on term loans and debentures | (9.0) | (8.7) | ||
| Interest paid on finance leases | (1.0) | (1.0) | ||
| Dividends paid on 8.75% irredeemable cumulative preference shares | (1.1) | (1.1) | ||
| Net costs of issue of new loans | (0.2) | - | ||
| (5.7) | (4.8) | |||
| Taxation | ||||
| Corporation tax paid | (2.1) | (1.0) | ||
| Capital expenditure and investing activities | ||||
| Purchase of tangible fixed assets | (50.5) | (41.2) | ||
| Contributions received | 4.0 | 3.5 | ||
| (46.5) | (37.7) | |||
| Equity dividends paid | 10 | (11.9) | (6.3) | |
| Cash outflow before management of liquid resources and financing | (16.8) | (7.2) | ||
| Management of liquid resources | ||||
| being decrease in short term deposits | 6.7 | 11.5 | ||
| Financing | ||||
| New term loans | 20.0 | - | ||
| Capital element of lease repayments | (2.5) | (2.2) | ||
| Loan repayments | (10.0) | - | ||
| Payments in respect of swap liability | - | (0.3) | ||
| 7.5 | (2.5) | |||
| (Decrease)/increase in cash | 11(b) | (2.6) | 1.8 | |
| Cash, beginning of year | 2.8 | 1.0 | ||
| Cash, end of year | 0.2 | 2.8 |
NOTES TO THE ACCOUNTS
| 1. | BASIS OF PREPARATION AND CIRCULATION These preliminary statements do not constitute the statutory accounts for the year ended 31 March 2008 or the year ended 31 March 2007. The statutory accounts for 2007 have been delivered to the Registrar of Companies and those for 2008 have been reported on by the auditors without qualification but have not yet been delivered to the Registrar of Companies. The comparative figures for 2007 have been extracted from the accounts of Bristol Water plc for the year ended 31 March 2007 upon which the auditors' report was unqualified and did not contain a statement under S.237(2) or (3) of the Companies Act 1985. |
| The preliminary announcement was approved by the Board of Directors on 21 May 2008. | |
| The Annual Report and Accounts will be posted to shareholders on or before 5 July 2008. 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 Bristol Water plc Head Office, Bridgwater Road, Bristol, on Monday 4 August 2008 at 9.00 am. | |
| As outlined in the company's Annual Report and Accounts for the year ended 31 March 2007, the company has not adopted IFRS for its financial statements for the year ended 31 March 2008, and has no current plans to do so until UKGAAP and IFRS are fully harmonised. |
| 2. | OPERATING COSTS | ||
| Operating costs comprise - | 2008 | 2007 | |
| £m | £m | ||
| Net payroll cost | 12.2 | 11.2 | |
| Total other operating costs | 32.8 | 31.0 | |
| Net depreciation | 19.7 | 18.9 | |
| Total operating costs | 64.7 | 61.1 | |
| 3. | TAXATION ON PROFIT ON ORDINARY ACTIVITIES | ||||
| 2008 | 2007 | ||||
| £m | £m | ||||
| (a) | Analysis of charge for the year, all arising in the United Kingdom: | ||||
| Current tax: | |||||
| Corporation tax at 30% (2007 - 30%) | 2.4 | 2.4 | |||
| Advance Corporation Tax (ACT) previously recovered now written off | - | 0.5 | |||
| Adjustment to prior periods | (0.2) | (1.1) | |||
| 2.2 | 1.8 | ||||
| Deferred tax: | |||||
| Current year movement | 3.1 | 2.7 | |||
| Effect of corporation tax rate change | (2.6) | - | |||
| Effect of changes related to abolition of Industrial Buildings Allowances | (0.9) | - | |||
| Adjustment to prior periods | 0.2 | 0.7 | |||
| (0.2) | 3.4 | ||||
| Effect of discounting | 1.4 | (2.7) | |||
| 1.2 | 0.7 | ||||
| Tax on profit on ordinary activities | 3.4 | 2.5 | |||
| The charge for corporation tax includes amounts that may be paid in consideration of group relief surrendered by other companies. | |||||
| The ACT written off in the prior period relates to a review of the taxation of capitalised contributions. | |||||
| A number of measures that affected the future tax charges of the company were enacted in the Finance Act 2007. The effects of the changes are disclosed within the above deferred tax charge. Reduction in corporation tax rate to 28% with effect from 1 April 2008. The withdrawal of the clawback of Industrial Buildings Allowance on disposal of an industrial building. | |||||
| Discount rates have decreased during the current year. Within the effect of discounting a decrease in the beneficial effect of discounting of £1.0m has been recognised in respect of the restatement of the opening balance at the new rates, increasing the overall deferred tax charge. | |||||
| 4. | EARNINGS PER ORDINARY SHARE | ||||
| 2008 | 2007 | ||||
| m | m | ||||
| Earnings per ordinary share have been calculated as follows - | |||||
| On average number of ordinary shares in issue during the year - | |||||
| Earnings attributable to ordinary shares | £14.5 | £16.4 | |||
| Weighted average number of ordinary shares | 6.0 | 6.0 | |||
| As the company has no obligation to issue further shares, disclosure of earnings per share on a fully diluted basis is not required. | |||||
| 5. | TANGIBLE FIXED ASSETS | |||
| 2008 | 2007 | |||
| £m | £m | |||
| Net book value, beginning of year | 218.7 | 197.0 | ||
| Additions | 49.6 | 45.5 | ||
| Disposals | - | - | ||
| Grants and contributions | (4.0) | (3.9) | ||
| Depreciation | (20.2) | (18.9) | ||
| Contributions received in 2005/06 reclassified | - | (1.0) | ||
| Net book value, end of year | 244.1 | 218.7 | ||
| 6. | NET BORROWINGS | ||||
| 2008 | 2007 | ||||
| £m | £m | ||||
| Cash and short term deposits | 21.5 | 30.8 | |||
| Debt due within one year | (16.9) | (2.5) | |||
| Debt due after one year | (201.2) | (204.6) | |||
| Net borrowings excluding 8.75% irredeemable cumulative preference shares | (196.6) | (176.3) | |||
| 8.75% irredeemable cumulative preference shares | (12.5) | (12.5) | |||
| Net borrowings including 8.75% irredeemable cumulative preference shares | (209.1) | (188.8) | |||
| 7. | PROVISIONS FOR LIABILITIES | ||
| 2008 | 2007 | ||
| £m | £m | ||
| Provision for deferred tax comprises - | |||
| Accelerated capital allowances and capital element of finance leases | 37.3 | 38.5 | |
| Deferred income | (1.8) | (2.0) | |
| Short term timing differences | (0.6) | (1.1) | |
| Retirement benefit obligations | 3.9 | 3.3 | |
| 38.8 | 38.7 | ||
| Effect of discounting: | |||
| Retirement benefit obligations | - | (0.3) | |
| Other | (14.6) | (15.7) | |
| (14.6) | (16.0) | ||
| Net provision, including deferred tax on retirement benefit obligations | 24.2 | 22.7 | |
| Less, attributable to retirement benefit obligations | (3.9) | (3.0) | |
| Net provision, excluding deferred tax on retirement benefit obligations | 20.3 | 19.7 | |
| Deferred tax movement: | 2008 | 2007 | |
| £m | £m | ||
| Beginning of year | 22.7 | 20.1 | |
| Charge to Profit and Loss Account (note 3) | 1.2 | 0.7 | |
| Charge to Statement of Total Recognised Gains and Losses in respect of pension actuarial gains in the year | 0.3 | 1.3 | |
| Charge to share options reserve | - | 0.6 | |
| Provision carried forward at 31 March | 24.2 | 22.7 | |
| 8. | RETIREMENT BENEFIT OBLIGATIONS | |||||||
| The following table sets out the key assumptions used for the valuation of the company's section of WCPS. The table also sets out as at the accounting date the fair value of the assets, a breakdown of the assets into the main asset classes, the present value of the section liabilities, and the resulting surplus. | ||||||||
| Expected long term | Market values of | |||||||
| rate of return | section assets | |||||||
| 2008 | 2007 | 2006 | 2008 | 2007 | 2006 | |||
| £m | £m | £m | ||||||
| Equities | 7.7% | 7.8% | 7.4% | 41.1 | 61.9 | 78.8 | ||
| Bonds | 4.4% | 4.7% | 4.3% | 97.2 | 69.3 | 46.9 | ||
| Cash | 3.9% | 5.4% | 4.5% | 0.2 | 0.1 | 0.1 | ||
| Market value of section assets | 138.5 | 131.3 | 125.8 | |||||
| Present value of liabilities | (121.9) | (120.0) | (121.4) | |||||
| Surplus in the section | 16.6 | 11.3 | 4.4 | |||||
| Amount not recognised due to recognition limit | (2.6) | - | - | |||||
| Surplus in section | 14.0 | 11.3 | 4.4 | |||||
| Deferred taxation | (3.9) | (3.0) | (1.3) | |||||
| Net pension asset | 10.1 | 8.3 | 3.1 | |||||
| 9. | MOVEMENT IN SHAREHOLDERS' FUNDS | ||
| 2008 | 2007 | ||
| £m | £m | ||
| At beginning of year | 75.1 | 62.1 | |
| Profit for year | 14.5 | 16.4 | |
| Actuarial gains recognised in respect of retirement benefit obligations | 1.1 | 4.8 | |
| Attributable deferred taxation | (0.3) | (1.3) | |
| Deferred tax asset released upon closure of equity-settled share based payment scheme | - | (0.6) | |
| Dividends | (11.9) | (6.3) | |
| End of year | 78.5 | 75.1 | |
| 10. | DIVIDENDS IN RESPECT OF ORDINARY SHARES | |||
| 2008 | 2007 | |||
| £m | £m | |||
| Dividends paid | ||||
| • Dividend in respect of 2005/06: | ||||
| Fourth and final dividend of 58.02 pence per share, | ||||
| approved by the Board on 16 May 2006 | - | 3.5 | ||
| • Dividend in respect of 2006/07: | ||||
| First interim dividend of 23.60 pence per share, | ||||
| approved by the Board on 28 September 2006 | - | 1.4 | ||
| Second interim dividend of 23.47 pence per share, | ||||
| approved by the Board on 22 March 2007 | - | 1.4 | ||
| Final dividend of 100.03 pence per share, | ||||
| approved by the Board on 31 May 2007 | 6.0 | - | ||
| • Dividend in respect of 2007/08: | ||||
| First interim dividend of 23.60 pence per share, | ||||
| approved by the Board on 28 September 2007 | 1.4 | - | ||
| Second interim dividend of 51.68 pence per share, | ||||
| approved by the Board on 29 November 2007 | 3.1 | - | ||
| Third interim dividend of 23.47 pence per share, | ||||
| approved by the Board on 27 March 2008 | 1.4 | - | ||
| 11.9 | 6.3 | |||
| On 21 May 2008 the Board proposed a final dividend of 53.53 pence per share, totalling £3.2m, in respect of the year ended 31 March 2008 (31 March 2007: 100.03p per share totalling £6.0m). In accordance with FRS21 this dividend is not recognised in these accounts as a liability. | ||||
| 11. | SUPPLEMENTARY CASH FLOW INFORMATION | ||||
| (a) | Reconciliation of operating profit to net cash inflow from operating activities - | ||||
| 2008 | 2007 | ||||
| £m | £m | ||||
| Operating profit | 26.0 | 25.2 | |||
| Depreciation, net of amortisation of deferred income | 19.7 | 18.9 | |||
| Difference between pension charges and normal contributions | 0.9 | 0.5 | |||
| Cash flow from operations | 46.6 | 44.6 | |||
| Working capital movements - | |||||
| Stocks | (0.1) | (0.1) | |||
| Debtors | (0.2) | (1.8) | |||
| Creditors and provisions | 4.1 | 0.9 | |||
| Additional contributions to pension scheme | (1.0) | (1.0) | |||
| Net cash inflow from operating activities | 49.4 | 42.6 | |||
| (b) | Reconciliation of net cash flow to movement in net borrowings - | ||||
| 2008 | 2007 | ||||
| £m | £m | ||||
| (Decrease)/increase in net cash in year | (2.6) | 1.8 | |||
| Cash used to repay borrowings | 12.5 | 2.5 | |||
| Cash from new borrowings | (20.0) | - | |||
| Net costs of issue of loans | 0.2 | - | |||
| Cash from decrease in short term deposits | (6.7) | (11.5) | |||
| (16.6) | (7.2) | ||||
| New debt increase not affecting cash flow | (3.7) | (2.9) | |||
| Net borrowings at beginning of year including 8.75% irredeemable cumulative preference shares | (188.8) | (178.7) | |||
| Net borrowings at end of year including 8.75% irredeemable cumulative preference shares | (209.1) | (188.8) | |||