Bristol Wtr.8t% Regulatory News (BWRA)

For further information contact:

Luis García, Chief Executive

Mick Axtell, Finance Director

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 2014

15.0

Significant changes between periods:

Decrease in Revenue

(10.4)

Decrease in operational expenditure

2.3

Increase in depreciation

(0.6)

Decrease in debt indexation charge

1.8

Decrease in other interest charges

(0.3)

(7.2)

Decrease in taxation due to lower profit before tax

2.4

Profit after tax for 6 months to 30 September 2015

10.2

Six months to

30 September

2015

(unaudited)

Six months to

30 September

2014

restated

(unaudited)

Year to

31 March

2015

restated

(unaudited)

Note

£m

£m

£m

Revenue

4

55.6

66.0

132.8

Operating expenses

5

(39.1)

(40.8)

(86.0)

Operating profit

16.5

25.2

46.8

Gain on disposal of tangible assets

-

-

0.3

Other net interest payable and similar charges

6

(3.1)

(4.6)

(8.8)

Dividends on 8.75% irredeemable cumulative preference

shares

6

(0.5)

(0.5)

(1.1)

Net interest payable and similar charges

(3.6)

(5.1)

(9.9)

Profit on ordinary activities before taxation

12.9

20.1

37.2

Taxation on profit on ordinary activities

7

(2.7)

(5.1)

(7.8)

Profit for the period

10.2

15.0

29.4

Earnings per ordinary share

170.0p

250.0p

490.0p

Six months to

30 September

2015

(unaudited)

Six months to

30 September

2014

restated

(unaudited)

Year to

31 March

2015

restated

(unaudited)

Note

£m

£m

£m

Profit attributable to Bristol Water plc shareholders

10.2

15.0

29.4

Other comprehensive income:

Items that will not be reclassified to profit and loss

Actuarial gains on retirement benefit surplus

12

5.9

4.8

16.5

Attributable deferred taxation

7

(1.2)

(0.9)

(3.3)

-

Change in the fair value of the interest rate swaps

0.4

0.1

(0.6)

Attributable deferred taxation

7

(0.1)

-

0.1

Total comprehensive income for the period

15.2

19.0

42.1

30 September

2015

(unaudited)

30 September

2014

restated

(unaudited)

 31 March

2015

restated

(unaudited)

1 April

2014

restated

(unaudited)

Note

£m

£m

£m

£m

Fixed assets

Property, plant and equipment

8

558.3

539.3

552.5

516.6

Other investments - Loans to a UK holding company

68.5

68.5

68.5

68.5

Current assets

Inventories

1.3

1.3

1.3

1.3

Trade and other receivables

31.4

38.3

34.5

31.9

Cash and cash equivalents

13

11.2

8.4

10.5

12.7

43.9

48.0

46.3

45.9

Creditors: amounts falling due within one year

Current portion of borrowings

9

(0.4)

(18.3)

(0.4)

(0.4)

Other creditors

(32.9)

(44.2)

(42.5)

(42.9)

(33.3)

(62.5)

(42.9)

(43.3)

Net current assets/(liabilities)

10.6

(14.5)

3.4

2.6

Total assets less current liabilities

637.4

593.3

624.4

587.7

Creditors: amounts falling due after more than one year

Borrowings and derivatives

9

(306.2)

(286.6)

(306.7)

(292.1)

8.75% irredeemable cumulative preference shares

9

(12.5)

(12.5)

(12.5)

(12.5)

Deferred income

10

(70.2)

(68.1)

(69.2)

(67.2)

Provision for liabilities

11

(66.6)

(59.2)

(62.3)

(56.1)

Net assets excluding retirement benefit surplus

181.9

166.9

173.7

159.8

Retirement benefit surplus

12

42.5

26.9

37.1

22.4

Net assets including retirement benefit surplus

224.4

193.8

210.8

182.2

Equity

Called-up share capital

6.0

6.0

6.0

6.0

Share premium account

4.4

4.4

4.4

4.4

Other reserves

4.6

4.9

4.3

4.8

Retained earnings

209.4

178.5

196.1

167.0

Total Equity

224.4

193.8

210.8

182.2

Called up share capital

Share premium

Capital redemption

Hedging reserve

Retained earnings

Total

£m

£m

£m

£m

£m

£m

Balance at 1 April 2014 (restated)

6.0

4.4

5.8

(1.0)

167.0

182.2

Profit for the year

-

-

-

-

29.4

29.4

Other comprehensive income for the year:

Actuarial gains recognised in respect

of retirement benefit obligations

-

-

-

-

16.5

16.5

Attributable deferred taxation

-

-

-

-

(3.3)

(3.3)

Fair value of interest rate swap

-

-

-

(0.6)

-

(0.6)

Attributable deferred taxation

-

-

-

0.1

-

0.1

Total comprehensive income for the year

-

-

-

(0.5)

42.6

42.1

Ordinary dividends

-

-

-

-

(13.5)

(13.5)

Balance as at 31 March 2015 (restated)

6.0

4.4

5.8

(1.5)

196.1

210.8

Balance as at 1 April 2015 (restated)

6.0

4.4

5.8

(1.5)

196.1

210.8

Profit for the period

-

-

-

-

10.2

10.2

Other comprehensive income for the period:

Actuarial gains recognised in

respect of retirement benefit obligations

-

-

-

-

5.9

5.9

Attributable deferred taxation

-

-

-

-

(1.2)

(1.2)

Fair value of interest rate swaps

-

-

-

0.4

-

0.4

Attributable deferred taxation

-

-

-

(0.1)

-

(0.1)

Total comprehensive income for the period

-

-

-

0.3

14.9

15.2

Ordinary dividends

-

-

-

-

(1.6)

(1.6)

Balance as at 30 September 2015

6.0

4.4

5.8

(1.2)

209.4

224.4

Six months to

30 September

2015

(unaudited)

Six months to

30 September

2014

restated

(unaudited)

Year to

31 March

2015

restated

(unaudited)

Note

£m

£m

£m

Cashflows from operating activities

Profit before taxation

12.9

20.1

37.2

Adjustments for:

Depreciation, net of amortisation of deferred income

9.6

9.0

18.8

Difference between pension charges and normal

contributions

-

(0.1)

(0.2)

Gain on disposal of assets

-

-

(0.3)

Interest income

6

(2.0)

(2.0)

(4.1)

Interest expense

6

6.3

7.7

15.2

Pension interest income

6

(0.7)

(0.6)

(1.2)

Decrease / (Increase) in trade and other receivables

3.1

(6.4)

(2.6)

Increase / (Decrease) in trade and other creditors and provisions

(2.0)

(0.1)

2.4

Additional contributions to pension scheme

(0.2)

(0.2)

(0.4)

Cash generated from operations

27.0

27.4

64.8

Interest paid

(5.8)

(5.7)

(11.3)

Corporation taxes paid

(1.6)

(1.2)

(2.6)

Net cash inflows from operating activities

19.6

20.5

50.9

Cash flows from investing activities

Purchase of property plant and equipment

(20.4)

(31.8)

(57.0)

Contributions received

1.8

1.7

3.6

Proceeds from sale of fixed assets

0.1

0.2

0.5

Interest received

2.0

2.1

4.1

Net cash used in investing activities

(16.5)

(27.8)

(48.8)

Cash flows from financing activities

Proceeds from long-term borrowings

-

11.0

60.6

Repayment of long-term borrowings

-

-

(50.0)

Payment of finance lease liabilities

(0.3)

(0.3)

(0.3)

Preference dividends paid

(0.5)

(0.5)

(1.1)

Equity dividends paid

(1.6)

(7.2)

(13.5)

Net cash used in financing activities

(2.4)

3.0

(4.3)

Net increase / (decrease) in cash and cash equivalents

0.7

(4.3)

(2.2)

Cash and cash equivalents, beginning of period

10.5

12.7

12.7

Cash and cash equivalents, end of period

13

11.2

8.4

10.5

1

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, which have not been audited but have been reviewed by the Company's auditors, 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.

For all periods up to and including the year ended 31 March 2015, the Company prepared its financial statements in accordance with the then applicable financial reporting standards under the United Kingdom Generally Accepted Accounting Practices (UK GAAP). With effect from 1 January 2015 the Financial Reporting Council revised the financial reporting standards in the United Kingdom and Republic of Ireland and replaced them with new Financial Reporting Standards. Accordingly, from 1 April 2015 the Company has adopted FRS 101 "Reduced disclosure framework - Disclosure exemptions from EU-adopted IFRS for qualifying entities", the impact of adopting FRS 101 is set out in note 3.

2

Accounting policies

The following are the significant accounting policies applied by the Company in preparing these interim accounts:

2.1

Revenue

Revenue comprises charges to customers 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 whose meters were not read at the reporting date. The estimate covers the period between the last meter reading and the reporting dates and 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.

2.2

Property, plant and equipment and depreciation

Tangible assets are stated at historic purchase cost less accumulated depreciation and comprise infrastructure assets and other assets.

The cost of assets includes their purchase cost together with incidental expenses of acquisition and any directly attributable labour costs which are incremental to the Company.

Capitalisation of borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

Depreciation

Depreciation is charged, where appropriate, on a straight-line basis on the original cost of assets over their expected economic lives. Freehold land is not depreciated. Depreciation of long-life assets commences when the assets are brought into use.

Assets are depreciated after commissioning over the following estimated economic lives:

Infrastructure assets

5 to 210 years

Operational properties and structures

15 to 100 years

Plant and equipment comprising:

Treatment, pumping and general plant

20 to 24 years

Computer hardware, software, communications, meters and telemetry equipment

3 to 15 years

Vehicles and mobile plant

5 to 7 years

Assets under construction are not depreciated.

The assets' remaining useful lives are reviewed periodically and adjusted prospectively, where appropriate.

Impairment

The values of tangible assets are reviewed annually to determine whether their carrying amounts exceed their fair values in use. Where such an excess is believed to exist it is treated as an impairment loss and charged to the Income Statement.

Disposal

An asset is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the Income Statement when the asset is derecognised.

2.3

Grants and contributions

Grants and contributions received in respect of network and other assets are recognised in line with the provisions of International Financial Reporting Interpretations Committee ("IFRIC") 18: Transfer of Assets from Customers.

Contributions are shown within deferred income on the Statement of Financial Position and the related amortisation is recognised in the Income Statement over the useful life of the relevant assets.

Grants and contributions in respect of expenditure charged to the Income Statement are recognised when the related rechargeable expenditure is incurred.

2.4

Pension costs

The Company operates both defined benefit and defined contribution pension arrangements. Defined benefit pension arrangements are provided through the Company's membership of the Water Companies' Pension Scheme (WCPS) via a separate section.

Defined benefit scheme

Defined benefit scheme liabilities are measured by an independent actuary using the projected unit method and discounted at the current rate of return on high quality corporate bonds of equivalent term and currency to the liability. The increase in the present value of the liabilities of the Company's defined benefit pension scheme expected to arise from employee service in the period is charged to operating profit together with the Scheme running costs.

Past service costs are recognised in profit or loss on a straight-line basis over the vesting period or immediately if the benefits have vested. When a settlement or a curtailment occurs, the change in the present value of the scheme liabilities and the fair value of the plan assets reflects the gain or loss which is recognised in the Income Statement. Losses are measured at the date that the Company becomes demonstrably committed to the transaction, and gains are measured when all parties whose consent is required are irrevocably committed to the transaction.

The amount charged or credited to finance costs is a net interest amount calculated applying the liability discount rate to the net defined benefit liability or asset.

Actuarial gains and losses arising from experience adjustments, changes in actuarial assumptions and amendments to pension plans are immediately recognised in the period in which they occur in other comprehensive income.

Defined contribution schemes

Costs of defined contribution pension schemes are charged to the Income Statement in the period in which they fall due. Administration costs of defined contribution schemes are borne by the Company.

2.5

Research and development

Research and development expenditure is charged to the Income Statement as incurred.

2.6

Distributions to shareholders

Dividends and other distributions to shareholders are reflected in financial statements when approved by shareholders in a general meeting, except for interim dividends which are included in financial statements when paid by the Company. Accordingly, proposed dividends are not included as a liability in the financial statements.

2.7

Leased assets

Assets financed by leasing agreements that transfer substantially all the risks and rewards of ownership of an asset to the lessee are capitalised and depreciated over the shorter of their estimated useful lives and the lease term. The capital portion of the lease commitment is included in current or non-current creditors as appropriate. The capital element of the lease rental is deducted from the obligation to the lessor as paid. The interest element of lease rentals and the depreciation of the relevant assets are charged to the Income Statement.

Operating lease rental payments are charged to the Income Statement as incurred over the term of the lease.

2.8

Taxation

Current tax, including UK corporation tax, is provided at amounts expected to be paid (or recovered) for the year, and any adjustment to tax payable or receivable in respect of the prior years, using the tax rates and laws that have been enacted or substantively enacted by the reporting date.

Advance Corporation Tax ("ACT") in respect of dividends in previous years is written off to the Income Statement unless it can be recovered against mainstream corporation tax in the financial year or with reasonable assurance in the future. Credit is taken for ACT previously written off when it is recovered against mainstream corporation tax liabilities.

Deferred tax is recognised in respect of all timing temporary differences arising between the carrying amount of assets for financial reporting purposes and the amounts used for taxation purposes. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised.

Deferred tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the reporting date.

The carrying amount of deferred tax assets is reviewed at each reporting date. Deferred tax assets and liabilities are offset only if a legal enforcement right exists to that effect, the deferred taxes relate to the same taxation authority and that authority permits the Company to make a single net payment.

Tax is charged or credited to other comprehensive income if it relates to items that are charged or credited to other comprehensive income. Similarly, tax is charged or credited directly to equity if it relates to items that are credited or charged directly to equity. Otherwise tax is recognised in the Income Statement.

2.9

Cash and cash equivalents

Cash and cash equivalents in the Statement of Financial Position comprise cash at banks and on hand and short-term deposits with a maturity of three months or less.

For the purpose of the Cash Flow Statement, cash and cash equivalents consist of cash and short-term deposits as defined above, net of outstanding bank overdrafts.

2.10

Inventory

Inventory is valued at the lower of cost and net realisable value. Inventory valuation is determined using the weighted average cost method. Following established practice in the water industry, no value is included in the financial statements for water held in store.

2.11

Financial instruments

The net costs of issue of loans (being expenses incurred less premiums received) where material are amortised over the lives of the respective loans and disclosed within net borrowings. Immaterial amounts are written off as incurred. Index-linked loans are considered to be effective economic hedges and are valued at cost plus accrued indexation.

In accordance with the provisions of IAS 32, 'Financial Instruments: Presentation', and IAS 39, 'Financial Instruments: Recognition and Measurement', the Company fair values its interest-rate swaps on the Statement of Financial Position.

Hedge accounting

The Company documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking a hedge transaction. The Company also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair value or cash flows of hedged items.

The effective portion of the swaps' fair value movements is recognised in the other comprehensive income. Should there be any ineffectiveness; the ineffective portion of the fair value movements would be recognised immediately in the Income Statement within finance charges.

Hedge accounting is discontinued when the Company revokes the hedging relationship, the hedging instrument expires, is terminated or exercised, or no longer qualifies for hedge accounting. Accordingly the cumulative gains/losses previously recognised in the Statement of Comprehensive Income are reclassified immediately to the Income Statement.

2.12

Provisions

A provision is recognised when the Company has a legal or constructive obligation as a result of past event and it is probable that an outflow of economic benefits will be required to settle the obligation. Per the requirements of FRS 101 the deferred taxation provision is not discounted. Other provisions are not discounted as the effect of the time value of money is not considered material.

3

First-time adoption of FRS 101

As disclosed in note 1, these financial statements, for the period ended 30 September 2015, are the first the Company has prepared using FRS 101 framework and FRS 104. Accordingly the comparative information for the period ended 30 September 2014, and for the year ended 31 March 2015 have also been restated. In preparing these financial statements, the Company's opening Statement of Financial Position was prepared as at 1 April 2014. This note explains the principal adjustments made by the Company in restating its UK GAAP statement of financial position as at 1 April 2014 and its previously published UK GAAP financial statements as at 30 September 2014 and for the year ended 31 March 2015. The Company has elected to apply full retrospective accounting for FRS 101.

Reconciliation of equity as at 1 April 2014

UK GAAP

(audited)

Remeasurements

FRS 101

restated

(unaudited)

Notes

£m

£m

£m

Fixed assets

Property, plant and equipment

A,B,C

345.9

170.7

516.6

Other investments - Loans to a UK holding company

68.5

-

68.5

Current assets

Inventory

1.3

-

1.3

Trade and other receivables

31.9

-

31.9

Cash and cash equivalents

12.7

-

12.7

45.9

-

45.9

Creditors: amounts falling due within one year

Current portion of borrowings

(0.4)

-

(0.4)

Other creditors

(42.9)

-

(42.9)

(43.3)

-

(43.3)

Net current assets

2.6

-

2.6

Total assets less current liabilities

417.0

170.7

587.7

Creditors: amounts falling due after more than one year

Borrowings and derivatives

(292.1)

-

(292.1)

8.75% irredeemable cumulative preference shares

(12.5)

-

(12.5)

Deferred income

B

(8.3)

(58.9)

(67.2)

Provision for liabilities

A,B,C,D,E

(21.3)

(34.8)

(56.1)

Net assets excluding retirement benefit surplus

82.8

77.0

159.8

Retirement benefit surplus

D,E

9.0

13.4

22.4

Net assets including retirement benefit surplus

91.8

90.4

182.2

Equity

Called-up share capital

6.0

-

6.0

Share premium account

4.4

-

4.4

Other reserves

4.8

-

4.8