Bristol Wtr.8t% Regulatory News (BWRA)

29 Nov 2007 07:00

Bristol Water PLC29 November 2007 BRISTOL WATER plc Announcement of interim results for the six months ended 30 September 2007 Bristol Water plc is a subsidiary of Sociedad General de Aguas de Barcelona S.A. For further information:Alan Parsons, Managing DirectorBristol Water plc Tel: 0117 953 6407 or contact: Bristol Water Corporate Affairs on 0117 953 6470 during office hours or 07831453924 or 07831 518964 at any time HIGHLIGHTS - REPORTED UNDER UK GAAP Six months ended 30 September 2007 2006 (unaudited) (unaudited) £m £m Turnover 46.0 43.3 Operating profit 14.2 14.0 Profit before taxation 10.6 12.1 Profit after taxation 9.9 9.7 Regulatory Capital Value (RCV) - forecast year end 275 256 Net debt (excluding 8.75% irredeemable cumulativepreference shares) as percentage of forecast RCV at year end 68% 67% • Operating profit £14.2m - 1% increase • Profit before taxation £10.6m - 12% decrease reflecting higher interest costs • Capital investment of £26.3m in period • Net debt, excluding irredeemable cumulative preference shares, of £185.6m - approximately 68% of projected RCV at 31 March 2008 Bristol Water plc supplies water to over one million people and businesses in anarea of almost 2,400 square kilometres, centred on Bristol. CHAIRMAN'S STATEMENT Introduction The summer floods in Gloucestershire were the focus of considerable mediaattention. Services to our customers were not affected by the events and we werepleased that we were able to provide considerable practical support to SevernTrent who were at the centre of the crisis. This event clearly demonstrates how important it is for the water industry tohave robust and resilient infrastructure and operating systems. This will be animportant factor in the next Ofwat price review, which will result in thesetting of price limits for the 5-year period 2010/11 to 2014/15. The firstmajor milestone in the process is the submission to Ofwat in December 2007 of astrategic direction statement setting out our vision and outline plans for thenext 25 years. Operational performance We are now at the mid point of the current 5 year regulatory period 2005-10 andare continuing to make good progress in the delivery of the outputs required byOfwat's determination of price limits for the period. Three major capitalschemes are nearing completion: • A £24m project to improve the security of supply for a population of almost 200,000 in the northern and eastern parts of Bristol and surrounding areas. This scheme would have helped to deal with the types of problems experienced in Gloucestershire during this summer's flooding. • A £11m project to upgrade our Banwell treatment works to improve its effectiveness in dealing with a range of different raw water qualities. • A £7m project to construct a new treatment works to treat water from the River Axe. In total, we invested £26m in capital projects during the period. We currentlyanticipate a total investment programme for the 5-year regulatory period ofabout £172m (in current prices, before grants and contributions). This isbroadly in line with Ofwat's assumptions. Our customer service performance remains at high levels with customer surveysconsistently showing high satisfaction levels. Application for an interim determination of K (IDOK) In 2004 Ofwat set price limits for all English and Welsh water companies forfive years ended 31 March 2010. The price limits were based on a very detailedanalysis of the costs and investments that companies were expected to incur todeliver services to customers. When setting price limits, Ofwat identified a number of uncertainties where, ifthe original assumptions proved to be wrong, price limits could be reviewed byan interim determination. In three of these areas Bristol Water is experiencingsignificant increases in costs arising from: • A higher number of domestic customers opting for a free meter • An increase in the level of bad debts i.e. customers not paying their bills • Water abstraction charges levied by the Environment Agency During September we therefore applied to Ofwat for a change to the originalprice limits for the next two years. Ofwat have considered our application and issued their draft determination atthe beginning of November. There is now a period of public consultation anddiscussion between Ofwat and the company. Ofwat has stated it will issue itsfinal determination by no later than 14 December. Ofwat's draft determination proposes real price increases (K's) of 4.6% for 2008/09 and minus 2.0% for 2009/10 compared to the original price limits of 0.7% in2008/09 and minus 2.3% in 2009/10. We are pleased that Ofwat have recognised that we are experiencing extra costs in specific areas beyond our control. We have confirmed to Ofwat that in overallterms the draft determination is acceptable but have proposed an alternative profile achieving the same recovery of costs with real price increases of approximately 3.6% in 2008/09 and nil in 2009/10. Our current average annual domestic water supply bill is some 6% lower than theaverage bill for English and Welsh companies and significantly lower than theaverage bills of some of our nearest neighbours. Even with the new proposedprice limits our average bill would increase in real terms to only around £144 by 2009/10 and represents excellent value for the services we provide tocustomers. Financial performance Operating profit for the period increased by £0.2m to £14.2m. The average 5.4%increase in charges to customers under the approved price limits was more thanoffset by inflation on operating costs including the impact of increased energycost and additional depreciation related to the capital investment programme. Energy costs increased by £1.1m reflecting the impact of a price increase inline with general market movements of approximately 65% in October 2006. Newcontracts apply from October 2007 and prices are approximately 20% lower thanthose for October 2006. Net interest charges, excluding those related to retirement benefits and thepreference share dividend, increased by £1.3m to £3.6m. This mainly reflects theincrease in net debt resulting from the financing of the capital expenditureprogramme and an increase in the inflation element of the charge related to ourindexed linked debt. Profit before tax reduced by £1.5m to £10.6m. The tax charge of £0.7m represents an effective tax rate of 7% (2006: 20%). Thecharge is net of a £1.7m gain due to a reduction in deferred tax liabilities(after discounting) following the reduction in corporation tax rates from April2008 and other changes confirmed in the Finance Act 2007. Net debt, excluding the irredeemable preference shares, increased to £185.6m (31March 2007 £176.3m) and represents approximately 68% of forecast RegulatoryCapital Value at 31 March 2008. As previously indicated we currently anticipatethat this ratio will increase to between 70% and 80% for the remainder of the5-year regulatory period ending in March 2010. Prospects In the Directors' report and business review within the company's Annual Report and Accounts 2007 we set out a summary of the key risks and uncertainties that the company faces. The main risk areas are operational problems and performance,regulatory requirements and developments and financial factors. The results for the second half of the year will include the following: • A reduction in energy costs in line with new contracts. • An increase in interest charges reflecting increased net debt and higher indexation charges related to our index linked debt (1.6% in the six months to 30 September 2007, 2.2% in the six months to 31 March 2008). • Increased debt to finance the continuing planned high levels of capital investment. Dividends The company policy is to pay an annual level of ordinary dividends comprising: • A base level reflecting the cost of capital allowed by Ofwat in the 5-year determination of price limits, adjusted to reflect actual gearing levels and where appropriate actual performance relative to Ofwat's assumptions. • An amount equal to the post-tax interest receivable from Bristol Water Group Ltd (the ultimate UK parent company) in respect of intercompany loans. During the period an interim ordinary dividend for 2007/08 in respect of theintercompany loan interest element of £1.4m was paid. A final dividend of £6.0m in respect of 2006/07 was approved at the AnnualGeneral Meeting and accrued in these statements. It was paid on 25 October 2007. A second interim ordinary dividend for 2007/08 in respect of the base leveldividend of £3.1m was approved by the Board on 29 November 2007 and will be paidduring the first quarter of 2008. Board membership In September, Tony Harding joined the Board as a non-executive director. Tony isa senior executive with Suez Environment (the largest shareholder in Agbar) andhas extensive water sector experience including previous positions as ManagingDirector of Northumbrian Water and Essex & Suffolk Water. Andy Nield leaves the Board as these interim accounts are issued. He has made asubstantial contribution to the development of the company and the wider BristolWater Group. He has been involved in all major corporate transactions in hisseven years with us. We thank him for his excellent contribution and wish himwell for the future. Stefano Pellegri has been appointed to take his place asFinance Director. Moger WoolleyChairman29 November 2007 PROFIT AND LOSS ACCOUNTFor the six months ended 30 September 2007 Six months to Six months to Year to 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) Note £m £m £m Turnover 2 46.0 43.3 86.3 Operating costs 3 (31.8) (29.3) (61.1) -------- ------- ------- Operating profit 14.2 14.0 25.2 Dividends on 8.75% irredeemablecumulative preference shares (0.5) (0.5) (1.1)Interest in respect of retirementbenefit surplus 0.5 0.9 1.5Other net interest payable 4 (3.6) (2.3) (6.7) -------- ------- ------- (3.6) (1.9) (6.3) -------- ------- ------- Profit on ordinary activitiesbefore taxation 10.6 12.1 18.9 Taxation on profit on ordinaryactivities 5 (0.7) (2.4) (2.5) -------- ------- -------Profit on ordinary activitiesafter taxation 9.9 9.7 16.4 -------- ------- ------- Earnings per ordinary share -basic and diluted 6 164.5p 160.5p 273.0p -------- ------- ------- Dividend per ordinary share 12 - declared or proposed in respect of the period 75.28p 23.60p 147.10p -------- ------- ------- - paid during the period 23.60p 81.62p 105.09p -------- ------- ------- All activities above relate to the continuing operations of the company. STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESFor the six months ended 30 September 2007 Six months to Six months to Year to 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) Note £m £m £m Profit attributable toBristol Water plc ordinary shareholders 9.9 9.7 16.4 Actuarial gains recognised inrespect of retirement benefitsurplus 10,11 2.3 1.1 4.8Attributable deferred taxation 10,11 (0.7) (0.3) (1.3) Deferred tax asset reversalupon closure of equity-settledshare based payment scheme - - (0.6) -------- ------- -------Total recognised gains forthe period 11.5 10.5 19.3 -------- ------- ------- The accompanying notes to the accounts form an integral part of thesestatements. BALANCE SHEET30 September 2007 At At At 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) Note £m £m £m Fixed assets 7 232.8 207.2 218.7 Investment - Loans to ultimate UKholding company 68.5 68.5 68.5 Current assetsStocks 0.9 0.7 0.8Debtors 24.5 23.0 20.8Other investments 8 17.5 31.9 28.0Cash at bank 8 3.8 1.6 2.8 -------- ------- ------- 46.7 57.2 52.4 -------- ------- ------- Creditors: amounts falling due within one year Short term borrowings 8 (11.7) (2.4) (2.5)Ordinary dividends approved butnot paid at period end 12 (6.0) - - Other creditors (25.7) (21.9) (24.1) -------- ------- ------- (43.4) (24.3) (26.6) -------- ------- ------- Net current assets 3.3 32.9 25.8 -------- ------- ------- Total assets less current liabilities 304.6 308.6 313.0 Creditors: amounts falling dueafter more than one year 8 (195.2) (203.1) (204.6) 8.75% irredeemable cumulativepreference shares 8 (12.5) (12.5) (12.5) Deferred income (9.7) (10.0) (9.4) Provision for deferred tax 9 (18.8) (19.8) (19.7) Retirement benefit surplus, netof attributable deferred taxation 10 10.8 4.5 8.3 -------- ------- -------Net assets 79.2 67.7 75.1 -------- ------- ------- Capital and reservesCalled up share capital 6.0 6.0 6.0Share premium 4.4 4.4 4.4Other reserves 5.8 5.8 5.8Profit and loss account 63.0 51.5 58.9 -------- ------- -------Shareholders' funds 11 79.2 67.7 75.1 -------- ------- ------- The accompanying notes to the accounts form an integral part of this statement. CASH FLOW STATEMENTFor the six months ended 30 September 2007 Six months to Six months to Year to 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) Note £m £m £m Net cash inflow from operatingactivities 13 20.6 18.0 42.6 -------- ------- ------- Returns on investments and servicingof financeInterest received 2.8 3.1 6.0Interest paid on term loans anddebentures (4.5) (3.8) (8.7)Interest paid on finance leases (0.5) (1.2) (1.0)Dividends paid on 8.75%irredeemable cumulative preferenceshares (0.5) (0.5) (1.1) -------- ------- ------- (2.7) (2.4) (4.8) -------- ------- ------- Corporation tax paid (0.4) (0.3) (1.0) -------- ------- ------- Capital expenditure and investingactivitiesPurchase of fixed assets (26.6) (17.3) (41.2)Contributions received 2.6 1.6 3.5 -------- ------- ------- (24.0) (15.7) (37.7) -------- ------- ------- Equity dividends paid (1.4) (4.9) (6.3) -------- ------- -------Cash outflow before management (7.9) (5.3) (7.2)of liquid resources and financing Management of liquid resourcesBeing decrease in otherinvestments 10.5 7.6 11.5 -------- ------- ------- FinancingCapital element of leaserepayments (1.6) (1.4) (2.2)Payments in respect of swapliability - (0.3) (0.3) -------- ------- ------- (1.6) (1.7) (2.5) -------- ------- ------- Increase in cash 13 1.0 0.6 1.8 Cash, beginning of period 2.8 1.0 1.0 -------- ------- -------Cash, end of period 3.8 1.6 2.8 -------- ------- ------- The accompanying notes to the accounts form an integral part of this statement. NOTES TO THE INTERIM RESULTSFor the six months ended 30 September 2007 Note Accounting policies1: The financial information contained in this interim announcement does not constitute statutory accounts within the meaning of section 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 2007 as set out in the Annual Report and Accounts. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors' report on those accounts was not qualified and did not contain statements under S.237(2) or (3) of the Companies Act 1985. As outlined in the company's Annual Report and Accounts for the year ended 31 March 2007, the company does not currently intend to adopt IFRS until UK GAAP and IFRS are fully harmonised. Note Turnover2: Turnover 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. Note Operating costs3: Six months to Six months to Year to 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) £m £m £m Operating costs comprise - Payroll cost, net of recharges to fixed assets, and including retirement benefit costs and equity-settled share based payments 6.1 5.7 11.2 Other operating costs 15.8 14.6 31.0 Depreciation, net of amortisation of deferred income 9.9 9.0 18.9 ------- ------- ------- 31.8 29.3 61.1 ------- ------- ------- Note Other net interest payable4: Six months to Six months to Year to 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) £m £m £m Other net interest payable relates to - Bank borrowings 0.8 0.8 1.6 Term loans and debentures - interest charges 3.6 3.5 7.1 - indexation of principal 1.5 0.5 2.9 Finance leases 0.5 0.5 1.0 ------- ------- ------- 6.4 5.3 12.6 ------- ------- ------- Less: Interest receivable from loan to Bristol Water Group Ltd (2.0) (2.0) (4.0) Other external investments and deposits (0.8) (1.0) (1.9) ------- ------- ------- (2.8) (3.0) (5.9) ------- ------- ------- Total other net interest 3.6 2.3 6.7 ------- ------- ------- Note Taxation on profit on ordinary activities5: Six months to Six months to Year to 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) £m £m £m The charge for taxation comprises - Current tax: Corporation tax at 30% 1.6 1.9 2.4 Advanced Corporation Tax (ACT) previously recovered now written off - - 0.5 Adjustments to prior periods - (0.2) (1.1) ------- ------- ------- Total current tax 1.6 1.7 1.8 ------- ------- ------- Deferred tax: Current period movement 1.5 1.8 2.7 Adjustment to prior periods following changes made in Finance Act 2007 (3.5) - - Other adjustments to prior periods - - 0.7 Effect of discounting 1.1 (1.1) (2.7) ------- ------- ------- Total deferred tax (0.9) 0.7 0.7 ------- ------- ------- Total taxation on profit on ordinary activities 0.7 2.4 2.5 ------- ------- ------- The overall tax charge represents 7% (six months to 30 September 2006: 20%; year ended 31 March 2007: 13%) of the profit before taxation. The charge is net of a £1.7m discounted gain (£3.5m gain before discounting) due to a reduction in deferred tax liabilities following the reduction in corporation tax rates from April 2008 and the removal of the industrial buildings allowance clawback provisions. Both of the changes were confirmed in the Finance Act 2007. Note Earnings per ordinary share - basic and diluted6: Six months to Six months to Year to 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) m m m Earnings per share have been calculated as follows - Earnings £9.9 £9.7 £16.4 Weighted average number of ordinary shares in issue 6.0 6.0 6.0 ------- ------- ------- Note Fixed assets7: Six months to Six months to Year to 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) £m £m £m The movement in fixed assets comprises - Net book value, beginning of period 218.7 197.0 197.0 Additions 26.3 20.8 45.5 Grants and contributions (2.1) (1.2) (4.9) Depreciation (10.1) (9.4) (18.9) ------- ------- ------- Net book value, end of period 232.8 207.2 218.7 ------- ------- ------- Note Net borrowings8: At At At 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) £m £m £m Net borrowings comprise - Debt due after one year, excluding 8.75% irredeemable cumulative preference shares 195.2 203.1 204.6 Current portion of debt 11.7 2.4 2.5 ------- ------- ------- 206.9 205.5 207.1 Cash at bank and other investments (21.3) (33.5) (30.8) ------- ------- ------- Net borrowings excluding 8.75% 185.6 172.0 176.3 irredeemable cumulative preference shares 8.75% irredeemable cumulative preference 12.5 12.5 12.5 shares ------- ------- ------- Net borrowings 198.1 184.5 188.8 ------- ------- ------- Note Provision for deferred tax9: At At At 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) £m £m £m Deferred tax liability 37.6 36.0 38.7 Effect of discounting (15.1) (14.3) (16.0) ------- ------- ------- Net provision, including deferred tax on retirement benefit surplus 22.5 21.7 22.7 Less, attributable to retirement benefit surplus (3.7) (1.9) (3.0) Net provision, excluding deferred ------- ------- ------- tax on retirement benefit surplus 18.8 19.8 19.7 ------- ------- ------- Note Retirement benefits10: Pension arrangements for the majority of the company's employees are provided through the company's membership of the Water Companies' Pension Scheme (WCPS), which provides defined benefits based on final pensionable pay. Bristol Water plc's membership of WCPS is through a separate section of the scheme. The assets of the section are held separately from those of the company and are invested by discretionary fund managers appointed by the trustees of the scheme. The section has been closed to new entrants and all new eligible employees are offered stakeholder pensions. In addition to providing benefits to employees and ex-employees of Bristol Water plc, the section provides benefits to employees and ex-employees of Bristol Water Holdings Limited and former Bristol Water plc employees who transferred to Bristol Wessex Billing Services Ltd. The majority of the section assets and liabilities relate to Bristol Water plc employees and ex-employees. The company made a contribution of £7.0m to WCPS in July 2005 and also agreed to make additional contributions of £1.0m in each of the four years beginning 1 April 2006 and a further £0.9m in 2010/11. The amounts are in addition to the normal pension contributions required by the WCPS trustees. In accordance with FRS 17 actuarial gains and losses are recognised immediately in the Statement of Total Recognised Gains and Losses. In summary assets and liabilities under FRS 17 were: 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) £m £m £m Market value of section assets 135.4 126.3 131.3 Present value of liabilities (112.3) (119.9) (120.0) ------- ------- ------- Surplus in the section 23.1 6.4 11.3 Restriction of surplus due to asset limit under FRS 17 (8.6) - - ------- ------- ------- 14.5 6.4 11.3 Deferred taxation (3.7) (1.9) (3.0) ------- ------- ------- Net retirement benefit surplus 10.8 4.5 8.3 ------- ------- ------- Note Shareholders' funds11: Six months to Six months to Year to 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) £m £m £m Movement in shareholders' funds - At beginning of period 75.1 62.1 62.1 Profit for the period 9.9 9.7 16.4 Actuarial gains recognised in respect of retirement benefit surplus 2.3 1.1 4.8 Attributable deferred taxation (0.7) (0.3) (1.3) Ordinary dividends (note 12) (7.4) (4.9) (6.3) Deferred tax asset written off upon closure of equity-settled share based payment scheme - - (0.6) ------- ------- ------- End of period 79.2 67.7 75.1 ------- ------- ------- Note 12: Ordinary dividends Six months to Six months to Year to 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) £m £m £m • Dividends in respect of 2005/06: Fourth interim and final dividend of 58.02 pence per share, approved by the Board on 16 May 2006 - 3.5 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 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 at the Annual General Meeting 6 August 2007 6.0 - - • Dividend in respect of 2007/08: First interim dividend of 23.60 pence per share, approved by the Board on 27 September 2007 1.4 - - -------- ------- ------- 7.4 4.9 6.3 --------- ------- ------- A final dividend in respect of 2006/07 of 100.03 pence per share, totalling £6.0m, was approved at the Annual General Meeting on 6 August 2007 and paid on 25 October 2007. A second interim ordinary dividend for 2007/08 of 51.68 pence per share totalling £3.1m was approved by the Board on 29 November 2007 and will be paid in the first quarter of 2008. In accordance with FRS 21 this dividend is not recognised in these accounts as a liability. Note Supplementary cash flow information13: Six months to Six months to Year to 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) £m £m £m a) Reconciliation of operating profit to net cash inflow from operating activities - Operating profit 14.2 14.0 25.2 Depreciation net of amortisation of deferred income 9.9 9.0 18.9 Difference between pension charges and normal contributions 0.2 0.4 0.5 ------- ------- ------- Cash flow from operations 24.3 23.4 44.6 Working capital movements Stocks (0.1) - (0.1) Debtors (3.7) (4.0) (1.8) Creditors and provisions 0.6 (1.0) 0.9 Additional contributions to pension scheme, including payments in respect of staff retiring early due to restructuring programme (0.5) (0.4) (1.0) ------- ------- ------- Net cash inflow from operating activities 20.6 18.0 42.6 ------- ------- ------- Six months to Six months to Year to 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) £m £m £m b) Reconciliation of net cash flow to movement in net borrowings - Increase in cash in the period 1.0 0.6 1.8 Cash used to repay borrowings 1.6 1.7 2.5 Decrease in other investments (10.5) (7.6) (11.5) ------- ------- ------- Increase in net borrowings (7.9) (5.3) (7.2) Movement in net debt not affecting cash flow (1.4) (0.5) (2.9) Net borrowings, beginning of period, including 8.75% irredeemable cumulative preference shares (188.8) (178.7) (178.7) ------- ------- ------- Net borrowings, end of period, including 8.75% irredeemable cumulative preference shares (198.1) (184.5) (188.8) ------- ------- ------- Note 14: Costs related to a director leaving will be reimbursed by the ultimate UK parent company. Note Suez / La Caixa acquisition of Abgar15: At 31 March 2007 approximately 49.7% of the share capital of Agbar was controlled by the French group Suez and the Spanish bank La Caixa. In April 2007 Suez, La Caixa and their joint venture Hisusa undertook to make a bid for the entire share capital of Agbar. They had secured a further 6.7% through an irrevocable undertaking; this 6.7% interest was acquired on 21 November, giving Suez and La Caixa a 56.4% stake in Agbar, at which time Suez and La Caixa declared that as a consequence of the mandatory bid they would excercise joint control over Agbar. The corresponding mandatory bid over 100% of shares in Agbar still requires authorisation by the Spanish Securities Regulator. The outcome of this acquisition and the subsequent mandatory bid may change the identity of Bristol Water plc's ultimate holding company, which is currently considered to be Agbar for the purposes of the Condition P of Bristol Water's Instrument of Appointment. Ofwat are being kept informed of material developements. Note Circulation16: 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. DIRECTORS' RESPONSIBILITIES FOR THE PREPARATION OF INTERIM FINANCIAL STATEMENTS We confirm that to the best of our knowledge: • the condensed set of financial statements has been prepared in accordance with UK GAAP: • the Chairman's statement includes a fair review of the information required to indicate important events during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of principal risks and uncertainties for the remaining six months of the financial year. By order of the BoardS C RobsonSecretary29 November 2007 INDEPENDENT REVIEW REPORT TO BRISTOL WATER PLC We have been engaged by the company to review the condensed set of financialstatements in the half-yearly financial report for the six months ended 30September 2007 which comprises the profit and loss account, the statement oftotal recognised gains and losses, the balance sheet, the cash flow statementand related notes 1 to 15. We have read the other information contained in thehalf-yearly financial report and considered whether it contains any apparentmisstatements or material inconsistencies with the information in the condensedset of financial statements. This report is made solely to the company in accordance with InternationalStandard on Review Engagements 2410 issued by the Auditing Practices Board. Ourwork has been undertaken so that we might state to the company those matters weare required to state to them in an independent review report and for no otherpurpose. To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the company, for our review work, for thisreport, or for the conclusions we have formed. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approvedby, the directors. The directors are responsible for preparing the half-yearlyfinancial report in accordance with the Disclosure and Transparency Rules of theUnited Kingdom's Financial Services Authority. As disclosed in note 1, the annual financial statements of the company areprepared in accordance with United Kingdom Generally Accepted AccountingPractice. The condensed set of financial statements included in this half-yearlyfinancial report have been prepared in accordance with the accounting policiesthe group intends to use in preparing its next annual financial statements. Our responsibility Our responsibility is to express to the Company a conclusion on the condensedset of financial statements in the half-yearly financial report based on ourreview. Scope of Review We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, "Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity" issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making inquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly, wedo not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believethat the accompanying interim financial information is not prepared, in allmaterial respects, in accordance with the Disclosure and Transparency Rules ofthe United Kingdom's Financial Services Authority. Deloitte & Touche LLPChartered Accountants and Registered Auditor29 November 2007Bristol, UK This information is provided by RNS The company news service from the London Stock Exchange