Bristol Wtr.8t% Regulatory News (BWRA)

For further information contact:

Mel Karam, Chief Executive Officer

Mick Axtell, Chief Financial Officer

Bristol Water plc

Tel 0117 953 6470

Or contact:

Bristol Water Corporate Affairs on 0117 953 6470 during office hours or 07554 771538 at any time.

£m

Profit after taxation for 6 months to 30 September 2016

13.4

Significant changes between periods:

Increase in revenue

3.1

Increase in operational expenditure

(1.5)

Increase in profit on disposal of assets

2.2

Impairment of fixed assets

(4.7)

Increase in debt indexation charge

(1.4)

(2.3)

Decrease in taxation due to lower year-end forecast profits

0.2

Increase in taxation due to tax rate change benefit recognised last year

(3.3)

Profit after taxation for 6 months to 30 September 2017

8.0

Six months to

30 September

2017

(unaudited)

Six months to

30 September

2016

 (unaudited)

Year to

31 March

2017

Note

£m

£m

£m

Revenue

3.2,5

58.1

55.0

111.0

Operating costs

6

(42.4)

(38.4)

(79.7)

Operating profit

15.7

16.6

31.3

Other net interest payable and similar charges

7

(5.0)

(3.6)

(9.3)

Dividends on 8.75% irredeemable cumulative preference

shares

7

(0.5)

(0.5)

(1.1)

Net interest payable and similar charges

(5.5)

(4.1)

(10.4)

Profit on ordinary activities before taxation

10.2

12.5

20.9

Taxation on profit on ordinary activities

8

(2.2)

0.9

(0.9)

Profit for the period /year

8.0

13.4

20.0

Earnings per ordinary share

9

133.3p

223.3p

333.3p

Six months to

30 September

2017

(unaudited)

Six months to

30 September

2016

(unaudited)

Year to

31 March

2017

Note

£m

£m

£m

Profit for the period / year

8.0

13.4

20.0

Other comprehensive income:

Items that will not be reclassified to profit and loss

Actuarial losses on retirement benefit surplus

(5.6)

(0.9)

(0.6)

Attributable current taxation

8

-

(0.1)

(0.1)

Re-measurement of defined benefit pension scheme

8

1.8

0.1

(0.2)

Items that may be subsequently reclassified to profit and loss

Change in the fair value of the interest rate swaps

0.9

(1.0)

0.2

Attributable deferred taxation

8

(0.2)

0.2

-

Other comprehensive expense for the period / year, net of tax

(3.1)

(1.7)

(0.7)

Total comprehensive income for the period / year

4.9

11.7

19.3

30 September

2017

(unaudited)

30 September

2016

(unaudited)

 31 March

2017

Note

£m

£m

£m

Non-current assets

Property, plant and equipment

10

588.5

560.7

573.4

Intangible assets

11

4.5

4.9

5.1

Investments

68.5

68.5

68.5

Deferred tax assets

12

4.9

5.0

5.1

Retirement benefit surplus

13

28.9

31.7

32.3

695.3

670.8

684.4

Current assets

Inventory

1.5

1.3

1.1

Trade and other receivables

27.6

33.2

22.3

Cash and cash equivalents

16.1

18.0

16.1

45.2

52.5

39.5

Assets classified as held for sale

14

1.4

-

8.1

Total assets

741.9

723.3

732.0

Non-current liabilities

Borrowings and derivatives

15

(301.6)

(309.8)

(290.9)

8.75% irredeemable cumulative preference shares

15

(12.5)

(12.5)

(12.5)

Deferred income

17

(72.9)

(71.2)

(72.1)

Deferred tax liabilities

12

(62.1)

(60.9)

(61.4)

(449.1)

(454.4)

(436.9)

Current liabilities

Trade and other payables

(34.2)

(30.8)

(34.6)

Borrowings and derivatives

15

(20.6)

(0.4)

(20.8)

Deferred income

17

(1.7)

(1.7)

(1.7)

(56.5)

(32.9)

(57.1)

Liabilities classified as held for sale

14

-

-

(1.0)

Total liabilities

(505.6)

(487.3)

(495.0)

Net assets

236.3

236.0

237.0

Equity

Called-up share capital

6.0

6.0

6.0

Share premium account

4.4

4.4

4.4

Other reserves

5.0

3.3

4.3

Retained earnings

220.9

222.3

222.3

Total Equity

236.3

236.0

237.0

The financial statements of Bristol Water plc, registered number 2662226 on pages 3-15, were approved by the Board of directors on 23 November 2017 and signed on its behalf by:

Called up share capital

Share premium

Capital redemption

Hedging reserve

Retained earnings

Total

£m

£m

£m

£m

£m

£m

Balance at 1 April 2016

6.0

4.4

5.8

(1.7)

212.4

226.9

-

-

-

-

Profit for the year

20.0

20.0

Other comprehensive income for the year:

Actuarial gains recognised in respect of

(0.6)

(0.6)

of retirement benefit obligations

-

-

-

-

Attributable current taxation

-

-

-

-

(0.2)

(0.2)

Re-measurement of defined benefit scheme

(0.1)

(0.1)

Fair value of interest rate swap

-

-

-

0.2

-

0.2

Attributable deferred taxation

-

-

-

-

-

-

Total comprehensive income for the year

-

-

-

0.2

19.1

19.3

Ordinary dividends

-

-

-

-

(9.2)

(9.2)

Balance as at 31 March 2017

6.0

4.4

5.8

(1.5)

222.3

237.0

Balance as at 1 April 2017

6.0

4.4

5.8

(1.5)

222.3

237.0

Profit for the period

-

-

-

-

8.0

8.0

Other comprehensive income for the period:

Actuarial gains recognised in respect of

-

-

-

-

(5.6)

(5.6)

retirement benefit obligations

Attributable current taxation

-

-

-

-

-

-

Re-measurement of defined benefit scheme

-

-

-

-

1.8

1.8

Fair value of interest rate swaps

-

-

-

0.9

-

0.9

Attributable deferred taxation

-

-

-

(0.2)

-

(0.2)

Total comprehensive income for the period

-

-

-

0.7

4.2

4.9

Ordinary dividends

-

-

-

-

(5.6)

(5.6)

Balance as at 30 September 2017

6.0

4.4

5.8

(0.8)

220.9

236.3

Six months to

30 September

2017

(unaudited)

Six months to

30 September

2016

 (unaudited)

Year to

31 March

2017

Note

£m

£m

£m

Cashflows from operating activities

Profit before taxation

10.2

12.5

20.9

Adjustments for:

Depreciation, net of amortisation of deferred income

6

8.5

8.5

17.2

Amortisation of intangible assets

6

1.0

1.0

2.0

Impairment of tangible assets

6

4.7

-

-

Difference between pension charges and normal

contributions

0.2

0.3

0.5

Loss on disposal of assets

-

-

0.3

Profit on sale of held for sale assets

6

(2.2)

-

-

Interest income

7

(2.0)

(2.1)

(4.1)

Interest expense

7

8.1

7.0

16.1

Pension interest income

7

(0.6)

(0.8)

(1.6)

(Increase) / decrease in inventory

(0.4)

-

0.2

Decrease / (increase) in trade and other receivables

1.0

(3.2)

0.2

Decrease in trade and other creditors and provisions

(2.1)

(2.2)

(1.7)

Additional contributions to pension scheme

-

(0.1)

(0.1)

Cash generated from operations

26.4

20.9

49.9

Interest paid

(5.8)

(5.9)

(11.8)

Corporation taxes (paid) / received

(1.6)

0.7

(1.4)

Net cash inflows from operating activities

19.0

15.7

36.7

Cash flows from investing activities

Purchase of property plant and equipment

(28.5)

(16.4)

(35.7)

Contributions received

1.7

2.1

3.8

Proceeds from sale of fixed assets

0.1

-

0.1

Proceeds from disposal of held for sale assets

2.6

-

-

Interest received

2.0

2.1

4.1

Net cash used in investing activities

(22.1)

(12.2)

(27.7)

Cash flows from financing activities

Transaction costs related to loans and borrowings

(0.2)

-

(0.3)

Proceeds from long-term borrowings

9.9

-

-

Payment of finance lease liabilities

(0.4)

(0.4)

(0.3)

Preference dividends paid

(0.6)

(0.5)

(1.1)

Equity dividends paid

(5.6)

(2.6)

(9.2)

Net cash used in financing activities

3.1

(3.5)

(10.9)

Net decrease in cash and cash equivalents

-

-

(1.9)

Cash and cash equivalents, beginning of period

16.1

18.0

18.0

Cash and cash equivalents, end of period

16.1

18.0

16.1

1

General Information

Bristol Water plc ("the Company") is one of six regulated Water only supply companies ("WOCs") in England and Wales. The company is the licensed monopoly provider of water services in the Bristol area, and as such is regulated by the Water Services Regulation Authority - Ofwat.

The Company is incorporated and domiciled in the UK. The address of its registered office is Bridgwater Road, Bristol, BS13 7AT, England.

2

Basis of preparation

The financial information contained in this interim announcement does not constitute statutory accounts within the meaning of section 435 of the Companies Act 2006.The interim accounts have been prepared in accordance with Financial Reporting Standard 104 "Interim Financial Reporting" issued by the Financial Reporting Council and the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority.

The Company has adopted FRS 101 "Reduced disclosure framework - Disclosure exemptions from EU-adopted IFRS for qualifying entities".

The Company has adopted a statement of financial position presentation which is in line with the financial statements produced by its parent company under IFRS. The September 2016 comparative figures have been represented accordingly.

3

Accounting policies

With the exception of the revenue policy noted below which has been updated to reflect revenue received from retailers, the same accounting policies and methods of computation used in preparing the annual financial statements as at 31 March 2017 have been used in preparing these interim accounts.

3.1

Going concern

The Company meets its day-to-day working capital requirements through its cash reserves and borrowings. The Company's forecasts and projections show that the Company will be able to operate within the level of its current cash reserves and borrowing facilities. After making enquiries, the Directors have an expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. The Company therefore continues to adopt the going concern basis in preparing its financial statements. Further information on the Company's borrowings is given in note5.

3.2

Revenue

Revenue comprises charges to customers and retailers for water and other services, exclusive of VAT.

Revenue from metered water supply is based on water consumption, and is recognised upon delivery of water. Revenue from metered water supply includes an estimate of the water consumption for customers of both the Company and retailers whose meters were not read at the reporting date. For customers the estimate covers the period between the last meter reading and the reporting dates and for retailers the last month of the period. The estimate is recorded within accrued income.

Revenue from unmetered water supply is based on either the rateable value of the property or on an assessed volume of water supplied, and is recognised over the period to which the bill relates.

Revenue from other services is recognised upon completion of the related services.

4

Critical accounting estimates and judgments

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances

Critical accounting estimates and assumptions

The company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.

Revenue Recognition

An estimate of water consumption by metered customers since the date of the last bill and the corresponding income that remains not billed (accrued income) is required to be made each year. The accrual is based on metered volumes, and consumption already billed and tariffs.

Classification of costs between operating expenditure and capital expenditure

Expenditure on assets can be for repairs, maintenance or enhancement, and judgement is required to determine whether it should be classified as operating expenditure or capital expenditure.

The Company incurs a high level of infrastructure maintenance expenditure. Each infrastructure scheme is reviewed to determine the accounting treatment as either capital or operating expenditure, depending on the nature of the scheme. Consideration is given to a range of factors, including the degree of upgrade which results from the maintenance project, the frequency of the maintenance relative to the overall life of the underlying asset, whether the maintenance is likely to result in increased useful life or enhanced working standard or capacity of the asset, and if the maintenance is expected to result in a separate component of infrastructure asset. The results are assessed against the requirements of accounting standards.

Classification of costs between operating expenditure and capital expenditure (continued)

Payroll costs are allocated to cost centres that reflect the nature of activity being undertaken. A judgement is applied, based on the activity for each cost centre, of an appropriate proportion to capitalise. This is a formal procedure under which figures are reviewed and assessed to ensure they meet the required criteria (directly attributable to an asset, probable future economic benefit and can be measured reliably).

Useful economic lives of property, plant and equipment

The annual depreciation charge for property, plant and equipment is sensitive to changes in the estimated useful economic lives and residual values of the assets. These are amended when necessary to reflect current estimates, based on technological advancement, future investments, economic utilisation and the physical condition of the assets. See note 10 for the carrying amount of the property plant and equipment.

Useful economic lives of intangible assets

The annual amortisation for computer software is sensitive to changes in the estimated useful economic lives of the assets. These are amended when necessary to reflect current estimates, based on technological advancement, future investments and economic utilisation. See note 11 for the carrying amount of the intangible assets.

Impairment of trade receivables

The company makes an estimate of the recoverable value of trade and other receivables. When assessing impairment of trade and other receivables, management considers factors including the credit rating of the receivable, the aging profile of the receivables and historical experience.

Defined benefit pension scheme

The Company has an obligation to pay pension benefits to certain employees. The cost of these benefits and the present value of the obligation depends on a number of factors, including; life expectancy, asset valuations and the discount rate on corporate bonds. Management estimates these factors and receives advice from the pension scheme administrators in determining the net pension obligation in the balance sheet. The assumptions reflect historical experience and current trends.

In March 2016 the scheme closed to future benefit accrual and as a result any surplus on the scheme would only be available to the Company as refund rather than as a reduction in future contributions. Under current UK tax legislation an income tax deduction of 35% is applied to a refund from a UK pension scheme, before it is passed to the employer which is shown as a restriction to the value of the net pension scheme asset.

See note 13 for the disclosures of the defined benefit pension scheme.

Fair value of derivatives

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Company uses the services of third party experts to provide the valuation. See note 16 for details of the Company's interest rate swaps.

5

Revenue

Revenue is wholly derived from water supply and related activities in the United Kingdom. The maximum level of prices the Company may levy for the majority of water charges is controlled by the Water Services Regulation Authority (Ofwat) through the RPI +/- K price formula.

6

Operating expenses

Six months to

30 September 2017

(unaudited)

Six months to

30 September 2016

(unaudited)

Year to

31 March 2017

(restated)

£m

£m

£m

Operating expenses include -

Payroll cost, net of recharges to fixed assets and

including retirement benefit costs

8.0

7.3

15.1

Depreciation and amortisation, net of deferred income amortisation

9.5

9.5

19.2

Impairment of fixed assets

4.7

-

-

Profit on sale of disposal group

(2.2)

-

-

The impairment of fixed assets arose following the Board's decision not to continue with the construction of the Cheddar 2 Reservoir.

7

Net interest payable and similar charges

Six months to

30 September 2017

(unaudited)

Six months to

30 September 2016

(unaudited)

Year to

31 March 2017

£m

£m

£m

Interest payable and similar charges relate to:

Bank borrowings

1.1

1.2

2.3

Term loans and debentures:

interest charges

4.8

4.7

9.5

indexation and amortisation of fees and premium

on loans

2.2

0.8

3.5

Finance leases

-

-

0.1

Capitalisation of borrowing cost

(0.5)

(0.2)

(0.4)

Dividends on 8.75% irredeemable cumulative

preference shares

0.5

0.5

1.1

8.1

7.0

16.1

Less interest receivable and similar income:

Interest income in respect of retirement

benefit scheme

(0.6)

(0.8)

(1.6)

Loan to Bristol Water Holdings UK Ltd - interest

receivable

(2.0)

(2.0)

(4.0)

Other external investments and deposits income

-

(0.1)

(0.1)

(2.6)

(2.9)

(5.7)

Total net interest payable and similar charges

5.5

4.1

10.4

The rate used to determine the amount of borrowing costs eligible for capitalisation was 5.9% (30 September 2016: 4.7%), which is the weighted average interest rate of applicable borrowings

Dividends on the 8.75% irredeemable cumulative preference shares are payable at a fixed rate of 4.375% on 1 April and 1 October each year. Payment by the Company to the share registrars is made two business days earlier. The payments are classified as interest in accordance with IAS 39 "Financial Instruments - Recognition and Measurement".

8

Taxation

Six months to

30 September

2017

(unaudited)

Six months to

30 September

2016

 (unaudited)

Year to

31 March 2017

£m

£m

£m

Tax expense / (income) included in Income Statement

Current tax:

Corporation tax on profits for the period / year

1.4

1.7