Bristol Wtr.8t% Regulatory News (BWRA)

£m

Profit after taxation for 6 months to 30 September 2015

10.2

Significant changes between periods:

Decrease in revenue

(0.6)

Decrease in operational expenditure

0.6

Decrease in depreciation

0.1

Increase in debt indexation charge

(0.7)

Decrease in other interest charges

0.2

(0.4)

Decrease in taxation due to reinstated capital allowances previously waived

0.3

Decrease in taxation due to tax rate change

3.3

Profit after taxation for 6 months to 30 September 2016

13.4

Six months to

30 September

2016

(unaudited)

Six months to

30 September

2015

 (unaudited)

Year to

31 March

2016

Note

£m

£m

£m

Revenue

3.2,5

55.0

55.6

110.9

Operating expenses

6

(38.4)

(39.1)

(74.8)

Operating profit

16.6

16.5

36.1

Other net interest payable and similar charges

7

(3.6)

(3.1)

(7.2)

Dividends on 8.75% irredeemable cumulative preference

Shares

7

(0.5)

(0.5)

(1.1)

Net interest payable and similar charges

(4.1)

(3.6)

(8.3)

Profit on ordinary activities before taxation

12.5

12.9

27.8

Taxation on profit on ordinary activities

8

0.9

(2.7)

0.8

Profit for the period

13.4

10.2

28.6

Earnings per ordinary share

11

223.3p

170.0p

476.7p

Six months to

30 September

2016

(unaudited)

Six months to

30 September

2015

(unaudited)

Year to

31 March

2016

Note

£m

£m

£m

Profit attributable to Bristol Water plc shareholders

13.4

10.2

28.6

Other comprehensive income:

Items that will not be reclassified to profit and loss

Actuarial (losses) / gains on retirement benefit surplus

(0.9)

5.9

(2.2)

Attributable current taxation

8

(0.1)

-

1.1

Change in the fair value of the interest rate swaps

(1.0)

0.4

(0.3)

Deferred taxation

8

0.3

(1.3)

(7.9)

Other comprehensive (expense) / income for the year, net of tax

(1.7)

5.0

(9.3)

Total comprehensive income for the period

11.7

15.2

19.3

30 September

2016

(unaudited)

30 September

2015

(unaudited)

 31 March

2016

Note

£m

£m

£m

Fixed assets

Property, plant and equipment

9

560.7

552.6

556.6

Intangible assets

10

4.9

5.7

5.0

Other investments - Loans to a UK holding company

68.5

68.5

68.5

634.1

626.8

630.1

Current assets

Inventories

1.3

1.3

1.3

Trade and other receivables

33.2

31.4

30.7

Cash and cash equivalents

16

18.0

11.2

18.0

52.5

43.9

50.0

Creditors: amounts falling due within one year

Current portion of borrowings

12

(0.4)

(0.4)

(0.4)

Other creditors

(30.8)

(32.9)

(33.0)

(31.2)

(33.3)

(33.4)

Net current assets

21.3

10.6

16.6

Total assets less current liabilities

655.4

637.4

646.7

Creditors: amounts falling due after more than one year

Borrowings and derivatives

12

(309.8)

(306.2)

(308.4)

8.75% irredeemable cumulative preference shares

12

(12.5)

(12.5)

(12.5)

Deferred income

14

(72.9)

(70.2)

(71.7)

Provision for liabilities

15

(55.9)

(77.3)

(59.1)

Net assets excluding retirement benefit surplus

204.3

171.2

195.0

Retirement benefit surplus

16

31.7

53.2

31.9

Net assets including retirement benefit surplus

236.0

224.4

226.9

Equity

Called-up share capital

6.0

6.0

6.0

Share premium account

4.4

4.4

4.4

Other reserves

3.3

4.6

4.1

Retained earnings

222.3

209.4

212.4

Total Equity

236.0

224.4

226.9

Called up share capital

Share premium

Capital redemption

Hedging reserve

Retained earnings

Total

£m

£m

£m

£m

£m

£m

Balance at 1 April 2015

6.0

4.4

5.8

(1.5)

196.1

210.8

-

-

-

-

Profit for the year

28.6

28.6

Other comprehensive income for the year:

Actuarial gains recognised in respect

of retirement benefit obligations

-

-

-

-

(2.2)

(2.2)

Attributable current taxation

-

-

-

-

1.1

1.1

Fair value of interest rate swap

-

-

-

(0.3)

-

(0.3)

Deferred taxation

-

-

-

0.1

(8.0)

(7.9)

Total comprehensive income for the year

-

-

-

(0.2)

19.5

19.3

Ordinary dividends

-

-

-

-

(3.2)

(3.2)

Balance as at 31 March 2016

6.0

4.4

5.8

(1.7)

212.4

226.9

Balance as at 1 April 2016

6.0

4.4

5.8

(1.7)

212.4

226.9

Profit for the period

-

-

-

-

13.4

13.4

Other comprehensive income for the period:

Actuarial gains recognised in

-

-

-

-

respect of retirement benefit obligations

(0.9)

(0.9)

Attributable current taxation

-

-

-

-

(0.1)

(0.1)

Fair value of interest rate swaps

-

-

-

(1.0)

-

(1.0)

Deferred taxation

-

-

-

0.2

0.1

0.3

Total comprehensive income for the period

-

-

-

(0.8)

12.5

11.7

Ordinary dividends

-

-

-

-

(2.6)

(2.6)

Balance as at 30 September 2016

6.0

4.4

5.8

(2.5)

222.3

236.0

Six months to

30 September

2016

(unaudited)

Six months to

30 September

2015

 (unaudited)

Year to

31 March

2016

Note

£m

£m

£m

Cashflows from operating activities

Profit before taxation

12.5

12.9

27.8

Adjustments for:

Depreciation, net of amortisation of deferred income

6

8.5

8.6

17.2

Amortisation of intangibles

6

1.0

1.0

2.0

Difference between pension charges and normal

contributions

0.3

-

(2.9)

Interest income

7

(2.1)

(2.0)

(4.2)

Interest expense

7

7.0

6.3

14.0

Pension interest income

7

(0.8)

(0.7)

(1.5)

(Increase) / decrease in trade and other receivables

(3.2)

3.1

4.5

Decrease in trade and other creditors and provisions

(2.2)

(2.0)

(5.6)

Additional contributions to pension scheme

(0.1)

(0.2)

(0.4)

Cash generated from operations

20.9

27.0

50.9

Interest paid

(5.9)

(5.8)

(11.6)

Corporation taxes paid

0.7

(1.6)

(2.2)

Net cash inflows from operating activities

15.7

19.6

37.1

Cash flows from investing activities

Purchase of property plant and equipment

(16.4)

(20.4)

(33.5)

Contributions received

2.1

1.8

4.2

Proceeds from sale of fixed assets

-

0.1

0.1

Interest received

2.1

2.0

4.2

Net cash used in investing activities

(12.2)

(16.5)

(25.0)

Cash flows from financing activities

Proceeds from long-term borrowings

-

-

-

Repayment of long-term borrowings

-

-

-

Payment of finance lease liabilities

(0.4)

(0.3)

(0.3)

Preference dividends paid

(0.5)

(0.5)

(1.1)

Equity dividends paid

(2.6)

(1.6)

(3.2)

Net cash used in financing activities

(3.5)

(2.4)

(4.6)

Net increase in cash and cash equivalents

-

0.7

7.5

Cash and cash equivalents, beginning of period

18.0

10.5

10.5

Cash and cash equivalents, end of period

16

18.0

11.2

18.0

1

General Information

Bristol Water plc ("the company") is one of eight 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.

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, 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.

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

3

Accounting policies

The following are the significant accounting policies applied by the Company 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 should be able to operate within the level of its current cash reserves and borrowing facilities. After making enquiries, the directors have a reasonable 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 notes 3.13 and 12.

3.2

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.

3.3

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. Borrowing costs are capitalised using a weighted average interest rate of applicable borrowings.

3

Accounting policies (continued)

3.3

Property, plant and equipment and depreciation (continued)

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

23 to 213 years

Operational properties and structures

3 to 100 years

Plant and equipment comprising:

Treatment, pumping and general plant

2 to 30 years

Computer hardware, software, communications, meters and telemetry equipment

4 to 15 years

Vehicles and mobile plant

4 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 fixed 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.

3.4

Intangible assets

Intangible assets acquired separately are measured on initial recognition as cost. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is reflected in the income statement in the year which the expenditure is incurred.

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

Computer software

3 to 10 years

Assets under construction are not amortised

Intangible assets with finite lives are amortised over their useful lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite life is reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates.

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.

3.5

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.

3

Accounting policies (continued)

3.6

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 costs of running the Scheme in the period is charged to operating profit.

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. Past service costs arising on a plan settlement or a curtailment are included immediately within operating costs.

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.

3.7

Research and development

Research and development expenditure is charged to the Income Statement as incurred. Development expenditure is not capitalised as it does not meet the criteria of IAS 38.

3.8

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.

3.9

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.

3.10

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.

3

Accounting policies (continued)

3.11

Cash and cash equivalents

Cash and cash equivalents in the Statement of Finanical 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 defined above, net of outstanding bank overdrafts.

3.12

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.

3.13

Financial instruments

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised costs.

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.

3.14

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.

3.15

Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

3.16

Creditors

Creditors are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

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.

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 9 for the carrying amount of the property plant and equipment and note 3.3 for the useful economic lives for each class of assets.

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 10 for the carrying amount of the intangible assets and note 3.4 for the useful economic lives of the assets.

4

Critical accounting estimates and judgments (continued)

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 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 16 for the disclosures of the defined benefit pension scheme.

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 2016

(unaudited)

Six months to

 30 September 2015

(unaudited)

Year to

31 March 2016

£m

£m

£m

Operating expenses include -

Payroll cost, net of recharges to fixed assets and

including retirement benefit costs

7.0

7.3

12.2

Depreciation and amortisation, net of deferred income amortisation

9.5

9.6

19.2

7

Net interest payable and similar charges

Six months to

30 September 2016

(unaudited)

Six months to

30 September 2015

(unaudited)

Year to

31 March 2016

£m

£m

£m

Interest payable and similar charges relate to:

Bank borrowings

1.2

1.1

2.3

Term loans and debentures:

interest charges

4.7

4.7

9.4

indexation and amortisation of fees and premium

on loans

0.8

0.1

1.7

Finance leases

-

0.1

-

Capitalisation of borrowing cost

(0.2)

(0.2)

(0.5)

Dividends on 8.75% irredeemable cumulative

preference shares

0.5

0.5

1.1

7.0

6.3

14.0

Less interest receivable and similar income:

Interest income in respect of retirement

benefit scheme

(0.8)

(0.7)

(1.5)

Loan to Bristol Water Holdings UK Ltd - interest

receivable

(2.0)

(2.0)

(4.0)

Other external investments and deposits income

(0.1)

-

(0.2)

(2.9)

(2.7)

(5.7)

Total net interest payable and similar charges

4.1

3.6

8.3