RNS Number:6123L
Bristol Water Holdings PLC
29 May 2003
BRISTOL WATER HOLDINGS plc
PRELIMINARY RESULTS FOR THE YEAR ENDING 31 MARCH 2003
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STRONG FINANCIAL AND OPERATIONAL PERFORMANCE
Year ended 31 March 2003 2002 % change
#m #m %
Group turnover -
Regulated water business 70.0 68.0 3
Other businesses 42.3 61.1 (31)
Total 112.3 129.1 (13)
Profit before tax -
Regulated water business 14.6 13.9 5
Other businesses 1.5 1.7 (8)
Total 16.1 15.6 3
Profit after tax 9.6 12.1 (20)
Earnings per ordinary share
- Shares in issue 115.5p 148.7p (22)
- Fully diluted 114.5p 147.5p (22)
Dividend per ordinary share 70.6p 67.2p 5
Results stated before application of FRS19 Deferred Tax
Profit after tax 13.4 13.3 0
Earnings per ordinary share
- Shares in issue 166.3p 166.3p 0
- Fully diluted 164.9p 164.9p 0
* Regulated water business
- PBT up by 5% to #14.6m
- Debt restructured in May 2003, providing future flexibility
- Excellent service standards maintained
* Other businesses
- PBT contribution of #1.5m after further development costs
- Board considering sale of Lawrence
- Watergrid success - with AWG selected as British Waterways partner
* Group results and corporate developments
- Increasing concentration on core water skills
- EPS down because of high deferred tax charge
- 5% increase in dividends for full year
- 5 for 1 share split to improve marketability and liquidity of shares
For further information:
Alan Parsons, Chief Executive Lulu Bridges
Andy Nield, Group Finance Director Tavistock Communications
Bristol Water Holdings plc Tel: 0207 600 2288
Tel: 0117 953 6407
or contact:
Bristol Water Corporate Affairs on 0117 953 6470 during office hours or
07831 453924 at any time
CHAIRMAN'S STATEMENT
The group has delivered another strong performance and has achieved excellent
financial results from the regulated water company and a positive contribution
from other businesses.
Regulated water business
In last year's Annual Report, we signalled that the progressive build up of the
regulated business's capital programme, with its consequent additional
financing, depreciation and operating costs, together with the relatively low
level of increase in charges under the RPI+K price limits of 1.9% would have a
significant impact on profits. Given this background, the result achieved of a
profit before tax of #14.6m compared to #13.9m in the previous year represents
an excellent outcome. This is due to a combination of factors including a real
terms reduction in operating costs and the effects of a lower than expected
level of capital expenditure.
During the year, we commenced a #12m project for a major upgrade of Barrow, our
second largest water treatment plant, with completion planned for Spring 2004.
We continued to deliver high levels of service to customers. This is reflected
by our position in the latest Ofwat report on service levels for 2001/02, which
ranked us third of all water companies in England and Wales.
We have developed a new financing package for the regulated water business.
This was completed shortly after the year end. Prior to completion, the
business had a relatively short debt maturity profile. The new structure will
provide a better mix of financing and a considerably longer maturity profile,
more appropriate to the long-term nature of its asset base. The new facilities
offer flexibility for the future including the ability to substantially increase
the financial gearing of the company. However, it is not the Board's current
intention to do so.
The key issue for the water sector is the Periodic Review process through which
Ofwat will set price limits for the 5 years 2005-10. It is much too early to
forecast the outcome, but we are encouraged that the approach Ofwat are taking
in the early stages of the process is intended to lead to an appropriate balance
between the interests of customers and shareholders.
Other businesses
Our other businesses made a good contribution to profits with profit before tax
of #1.5m compared to #1.7m in the previous year. The small reduction reflects
improved performance offset by start up costs associated with three new
developments; Gas Design Consultancy (GDC), a design business linked very
closely to Lawrence; establishing our new leakage consultancy company in the
USA; and the Watergrid project start-up costs.
Lawrence, the contracting division, has built on last year's result and recorded
an increase in profit before tax to #1.4m (2002 - #1.1m). During the year we
reviewed the strategic fit of Lawrence within the group and concluded that its
contracting base was inconsistent with our business focus on core water skills.
Accordingly, we are considering the potential sale of Lawrence, together with
its sister company GDC.
Our international division (BWS) continues to make progress. We are now three
years into the nine-year Selangor project in Malaysia. This project for the
reduction of water losses, which is being carried out by our joint venture
company PABW, has met all its performance targets.
During 2002, we established a new BWS company in the USA, which we see as an
attractive future market for our water loss reduction skill base. The company
has already secured a number of small contracts.
We are pleased that the Bristol Water Holdings/AWG consortium has been selected
as British Waterways' partner for the Watergrid project. With our long
experience as the largest user of canal water for the purpose of water supply in
the UK, this fits well with our core water skills based strategy. Watergrid
offers an opportunity for us to work with our partners to use our expertise in a
wider market, outside the Bristol area.
Financial result and dividends
Profit before tax for the year increased to #16.1m compared to #15.6m in the
previous year. The high deferred tax charge means that earnings per share have
fallen.
We have declared a 6% increase in the final dividend, bringing the total
dividend for the year to 70.6p, a 5% increase over 2001/02. The final dividend
of 49.8p will be paid on 1 October 2003.
Higgs Report
The Board already follows many of the proposals contained within the Higgs
Report and will review this matter further once the recommendations are
finalised.
Corporate changes
We are proposing, subject to shareholder approval, at the Annual General
Meeting, to make some changes to the share capital structure of the company and
the Articles of Association.
We currently have 2% of the ordinary shares in a separate non-voting class. We
propose to convert these to voting shares thus removing an historical anomaly.
At the same time, given the current share price, we propose a share split on the
basis of five new ordinary shares for each existing share. We believe that this
will be a benefit to shareholders by increasing the marketability and liquidity
of the company's shares. The share split, if approved, is expected to take
effect from 28 July 2003.
We are proposing a general power for the Board to make market purchases for up
to 10% of the issued share capital. The Board has no current intention to
utilise this authority, but believes it appropriate to obtain this flexibility.
The Board proposes to redesignate the 5,839,250 authorised but unissued 6.75%
Cumulative Convertible Redeemable Preference Shares as Ordinary Shares.
We also propose some further amendments to the Articles of Association of the
company to update them in line with current practice.
Full details of the proposed changes, which will require approval at an
extraordinary class meeting of the non-voting shareholders, in respect of the
proposed conversion to voting status, and as special business at the Annual
General Meeting of the company will be set out in the formal notices for those
meetings.
Outlook
The continued progressive build up of the regulated business's capital
programme, with its consequent additional financing, depreciation and operating
cost implications, together with the relatively low level of increase in charges
under the RPI+K price limits to customers for 2003/04 of 2.7%, including a K
factor of 0%, and a negative K factor of 1.9% in 2004/05 will constrain profits
over the next two years.
The progress that the group made during the year together with the two key
initiatives of refinancing the regulated water business and the potential sale
of Lawrence will place the group in a strong position.
My thanks go to all our employees who have contributed to the success of the
group.
Moger Woolley
Chairman
29 May 2003
CHIEF EXECUTIVE'S REPORT
Bristol Water plc - the regulated business
During the year, we have continued to consolidate the considerable operating
cost reductions made in recent years.
A major focus has been the continued development of the joint venture with
Wessex Water to enable the two companies to issue combined bills to customers.
The first joint bills for unmeasured customers were issued at the beginning of
the year with the first metered bills being issued in November. With the
billing system now fully operational, this will allow us to progressively
realise the planned efficiency gains from the new arrangement together with the
provision of a simplified and improved service to customers. High levels of
service to customers have been maintained throughout this complex process.
During the year, we achieved certification to the new ISO 9001:2000 quality
standard, upgrading from our previous ISO 9001:1994 assessment. The scope of
our quality management system covers all aspects of the production and
distribution of water, technical design and the procurement of related products
and services.
We have initiated a major review of the processes and cost structure in the
business. Our objective is to identify the potential scope for further
efficiency gains. The exercise will take a further few months to complete.
Throughout the process we are evaluating carefully the trade-offs between cost
reductions and the associated risks.
We were pleased by our ranking in the latest Ofwat report on service levels by
water companies in 2001/02. We were ranked third of all water companies in
England and Wales and have been the most consistently highly-rated company over
the past few years. This recognises our commitment to the delivery of high
levels of service to customers.
Our capital programme for the five years to 2005, as set out in the Final
Determination, amounts to #125m (May 1999 prices). In accordance with the
Drinking Water Inspectorate's protocol we have not yet commenced the lead pipe
replacement programme that was incorporated in Ofwat's price determination,
pending the results of orthophosphate dosing trials currently in progress.
These are currently demonstrating substantial compliance with the lead standard
that comes into force in 2013 and it is increasingly likely that the actual
spend on lead pipe replacement during the five year period will be at a
relatively low level.
Capital investment, including infrastructure renewals, net of grants and
contributions, for the year totalled #20.0m. Key projects included the
completion of our 30 month, #12m mains renovation programme, which has involved
the renovation of some 250km of mains throughout our area. We also completed
the installation of a barrier to remove cryptosporidium oocysts at the Chelvey
water treatment works, bringing the total of treatment works with such barriers
to eight.
We have recently commenced a #12m project for a major upgrade of our Barrow
treatment plant, with completion planned for Spring 2004. Expenditure on the
project at some #1.7m during the year was lower than originally expected
reflecting a revised project plan and delays in obtaining relevant planning
approvals. This is a complex project and is progressing well.
Ofwat has set out details of the planned Periodic Review process that will set
price limits for the 5 years from 2005 to 2010. Ofwat's process will take
almost two years to complete and the outcome will be extremely important to the
business. The first major milestone is the submission of our draft business
plan to Ofwat during August 2003.
The refinancing arrangements explained in the Chairman's statement effectively
apply a financial ringfencing to the regulated water business and provide
flexibility to increase its debt levels significantly in the future. We have no
current plans to substantially increase gearing levels, but believe that in
arranging long term financing it was appropriate to create this type of
flexibility.
As noted in the Chairman's statement, profits for the next two years will be
influenced by a range of additional costs, in particular the financing,
depreciation and operating cost implications of the continuing capital
programme. As outlined above, we will continue to seek further operational
efficiency gains whilst ensuring that we do not compromise our high standards of
service.
Other businesses
Lawrence
Despite the anticipated reduction in turnover from its pipeline division,
Lawrence consolidated the turnaround achieved over the last three years with an
increase in profit before tax to #1.4m (2002 - #1.1m).
During the year we established a sister company to Lawrence, Gas Design
Consultancy (GDC). GDC is a design house for gas pipeline projects. Trading
losses during its start up year amounted to #0.3m. GDC has considerable
synergies with Lawrence and we believe that it will add value either within the
group or in the event of a sale of Lawrence.
Lawrence does not fit well with our core water skill based strategy. During the
year we concluded that the turnaround process, as demonstrated by Lawrence's
financial performance, had progressed sufficiently that it was appropriate to
consider a sale of both Lawrence and GDC.
Bristol Water Services(BWS)
BWS is our international division providing network management services,
specialising in leakage reduction.
Together with our joint venture partner, Premier Ayer Sdn Bhd, we are now three
years into the nine-year phase 2 Selangor project in Malaysia. This project for
non-revenue water reduction is being carried out by our joint venture company
PABW and continues to meet all performance targets, making a useful contribution
to satisfying the increasing demands for water in Kuala Lumpur and surrounding
areas.
The consultancy project that BWS and its consortium partners was awarded earlier
this year, to identify performance indicators and best practice methodologies
for leakage reduction across North America, is now well under way. Given our
success in securing both this contract and further contracts in the region we
have now established a new subsidiary company in the USA.
BWS is taking the lead role in a #1m, eighteen-month project for the European
Agency for Reconstruction to assist in the restructuring and development of the
water industry within Kosovo.
Overall the division achieved a break-even position (2002 - #0.1m profit before
tax), after continued investment in marketing and business development,
including the establishment of a presence in the USA.
Watergrid
The Watergrid project is a unique opportunity to apply our experience of using
canal water to supply customers in a wider market. A new company, Watergrid
Ltd, has been established as a national joint venture between the public and
private sectors. Using the extensive canal and river network for the movement
of water, Watergrid Ltd is seeking to serve multiple customer bases with bespoke
water services and wastewater treatment facilities.
Watergrid Ltd has been formed between the Bristol Water Holdings/AWG consortium,
British Waterways and the Government's PPP facilitator, Partnerships UK. Both
Bristol Water and AWG have effective 22.5% equity interests in the new venture.
Alan Parsons
Chief Executive
29 May 2003
OPERATING AND FINANCIAL REVIEW
2003 2002
#m #m
Group turnover
Regulated water business 70.0 68.0
Other businesses 42.3 61.1
Total 112.3 129.1
Profit before tax
Regulated water business 14.6 13.9
Other businesses 1.5 1.7
Total 16.1 15.6
Taxation
Current tax 2.7 2.2
Deferred tax 3.8 1.3
Total 6.5 3.5
Profit after tax 9.6 12.1
Results Overview
Group turnover reduced from #129.1m to #112.3m. As anticipated, this reflects a
reduction in turnover for Lawrence from the high levels reported in the previous
year.
The results represent a strong underlying performance with profit before tax
increasing by #0.5m to #16.1m compared to #15.6m in 2002, despite a reduction in
net gains from asset disposals of #0.4m.
The group results include a total tax charge of some 40% compared to 23% in the
previous year, which accounts for the reduction in earnings per share. This
includes a deferred tax charge of #3.8m (2002 - #1.3m) in addition to the
underlying current tax charge of #2.7m. The deferred tax element is unusually
high because of a reduction in the discount rates used to calculate the deferred
tax liability. As required by FRS19, the discount rates applied are based on
government gilts for relevant periods. The effect of the change in rates
essentially reverses a corresponding gain made in the second half of 2001/02
when discount rates increased.
The Board proposes a total dividend for the year of 70.6p, a 5% increase over
2002. As a result, a final dividend of 49.8p is being recommended. It will be
paid on 1 October 2003 to shareholders on the register on 18 July 2003. Our
shares will go ex dividend on 16 July 2003. Ordinary dividend cover is 1.6
times compared to 2.2 times last year.
In the statutory accounts the appropriate transitional disclosures required
under FRS17, the new accounting standard on pensions, are made. Note 12 to this
statement shows that the group's sections within the Water Companies' Pension
Scheme would be represented on the balance sheet as a deficit net of tax of
#14.8m, this compares to an asset net of tax of #10.1m in 2002 under FRS17. The
change reflects the adverse movements of the equity markets.
An actuarial review of the pension sections as at 1 April 2002 has recently been
completed and shows combined net surpluses on an actuarial basis of #5.6m. The
sections are currently invested primarily in equities. In consultation with
both the trustees and the actuary, we have carefully examined the investment
strategy and concluded that the appropriate long-term strategy is to reduce the
proportion of equities with a corresponding increase in investments in bonds and
other fixed income securities. Given the current equity market position we have
delayed the implementation of this change until we see some further recovery in
equity market values.
We have agreed a significant increase in cash contributions to the pension funds
effective from 1 April 2003. The total cash contributions will be broadly in
line with the SSAP24 charge of #1.6m reflected in these accounts for 2002/03.
Regulated activities - Bristol Water plc
In November 1999, Ofwat issued the Periodic Review Final Determination. This
set maximum price limits for charges to customers for the five years 2000-05.
The limits, known as K factors, plus movements in the RPI index, determine the
allowed increase or decrease in overall charges each year. For 2002/03 the K
factor was 1%, which together with an RPI movement of 0.9% meant an average
increase in charges to customers of some 1.9%.
Overall turnover increased by some #2.0m, mainly due to the RPI+K increase.
Operating costs before depreciation were #36.6m, slightly above the #36.5m
recorded in 2002. After taking the effect of inflation into account, this
represents a reduction in real terms.
Net depreciation increased by #0.3m to #14.0m reflecting the commissioning of
new assets offset by the non-recurrence of an accelerated depreciation charge of
#0.4m for other assets in the previous year.
Overall profit before tax of #14.6m represents a #0.7m improvement from 2002.
Net capital investment in the year after grants and contributions from
developers was #20.0m, compared to #23.5m in 2002.
Other businesses
Our other businesses made a good contribution to profits with profit before tax
of #1.5m compared to #1.7m in the previous year. The small reduction largely
reflects start-up costs associated with Gas Design Consultancy (GDC), a design
business linked very closely to Lawrence; establishing our new company in the
USA; and the Watergrid project start-up costs.
Lawrence: Turnover reduced to #47.8m compared to the very high level of #63.5m
in 2002. As anticipated, this reflects a reduction in the value of major gas
pipeline projects carried out for Transco, both on a sole basis and through a
joint arrangement with a Dutch contractor, NACAP. Profit before tax was #1.4m
compared to #1.1m in 2002.
Gas Design Consultancy: GDC is a design house for gas pipeline projects with
considerable synergies with Lawrence. Start-up losses during the year amounted
to #0.3m.
Bristol Water Services: After further investment in business development
activities, the division recorded a breakeven result, compared to a profit of
#0.1m in 2002.
Watergrid: Our contribution to initial development costs, via our 50% interest
in Waternet Ltd, amounted to #0.1m in the year.
Purton Carbons: We provided against the cost of our investment in this joint
venture in 2000 due to the difficult market conditions it faced. These
conditions continue to prevail. This year our share of profits amounted to
#0.1m.
Treasury
Group net cash inflow from operating activities was #28.5m (2002 - #29.7m), net
cash outflows from investments and servicing of finance totalled #6.4m (2002 -
#5.3m) and net capital expenditure amounted to #16.1m (2002 - #22.9m). Total
cash outflows before management of liquid resources and financing were #1.8m
(2002 - #5.4m).
Net borrowings increased from #61.5m to #64.9m during the year. Net debt in
Bristol Water plc, the regulated water business, at 31 March 2003 was #74.8m and
represented approximately 41% of Regulatory Capital Value.
At the year end, net gearing (net debt/equity) was 73% compared to 72% in 2002.
Net debt and gearing levels are expected to increase during 2003/04 as the level
of capital investment in the regulated business increases.
A major post balance sheet event is the finalisation of a new financing
arrangement for Bristol Water plc. Prior to the refinancing, we had a
relatively short debt maturity profile and the new structure provides a better
mix and considerably longer maturity profile appropriate to the long term nature
of the assets being financed. The new facilities provide for the repayment of
#20m of existing bank debt and to finance the ongoing capital expenditure
programme. #15m of index-linked debt was drawn through the existing Artesian
Finance plc monoline wrapped bond programme arranged by the Royal Bank of
Scotland, previously used by three other water companies. An equivalent #30m
financing was also drawn on a fixed interest basis through a new bond programme
issued by Artesian Finance II plc. The facilities extend to 2032 and 2033
respectively.
The new financing is based on a ringfenced structure and some existing lenders
have entered into an intercreditor arrangement to share the ringfencing security
package. It is expected that all new senior debt will also become part of the
intercreditor arrangement.
The intercreditor structure is governed by two key financial ratio covenants:
debt to regulated asset value and a cash interest cover ratio. The structure
would enable a substantial increase in gearing of the ringfenced business should
it be concluded that this is appropriate, in which case it is expected that
Ofwat would seek changes, in line with those recently adopted by more highly
geared water companies, to Bristol Water plc's licence of appointment as a water
undertaker.
The group uses interest rate derivatives to manage exposures to fluctuations in
interest rates. Positions on hedges are deferred and matched to appropriate
underlying transactions. As part of the refinancing arrangement for Bristol
Water plc, the group has redesignated a #20m interest rate swap, which swaps
variable rate LIBOR to fixed rate. This was previously matched to the #20m bank
loan now repaid. The redesignation matches it to a #10m variable rate bank loan
and to #10m of variable rate leases.
Net interest charges in the year totalled #4.9m (2002 - #4.2m) and were covered
4.2 times (2002 - 4.5 times).
The net interest charge is expected to increase during 2003/04. This reflects
the additional net debt resulting from planned capital expenditure for the
regulated business together with an increase in the effective average interest
rate following the refinancing. The average interest rate is expected to
increase as the Artesian borrowing is subject to long term interest rate margins
and the investment returns on temporary cash surpluses will be lower than
borrowing costs. We maintain temporary cash surpluses to provide pre-funding
for future capital expenditure and working capital requirements and to provide
financial flexibility.
Strategy/Objectives
The group's strategy is focussed around the regulated water business of Bristol
Water plc, and the development of complementary businesses/activities that build
on this core skill base.
As explained in the Chairman's Statement, during the year we reviewed the
strategic fit of Lawrence within the group and concluded that its contracting
base was inconsistent with this focus. Accordingly we are considering the
potential sale of Lawrence, together with its sister company GDC.
Monitoring the business
A number of systems are used to monitor the financial and operational
performance of the group including:
* Monthly management accounts and budgetary control
* Monthly key performance indicators
* Ad hoc internal audits of business processes
* Detailed Quality Assurance systems
Outlook
The continued progressive build up of the regulated business's capital
programme, with its consequent additional financing, depreciation and operating
cost implications, together with the relatively low level of increase in charges
under the RPI+K price limits to customers for 2003/04 of 2.7%, including a K
factor of 0%, and a negative K factor of 1.9% in 2004/05, will constrain profits
over the next two years.
GROUP PROFIT AND LOSS ACCOUNT
for the year ended 31 March 2003
2003 2002
#000 #000
Note
Turnover including share of joint ventures 120,836 136,015
Less: share of turnover of joint ventures (8,504) (6,897)
Group turnover 112,332 129,118
Operating costs 2 (92,087) (110,252)
Group operating profit 20,245 18,866
Share of operating profit of joint ventures 164 157
Total operating profit: group and
share of joint ventures 20,409 19,023
Profit on disposal of tangible fixed assets 3 402 753
Profit on disposal of businesses 3 143 23
Net interest payable and similar charges (4,861) (4,224)
Profit on ordinary activities
before taxation 16,093 15,575
Taxation on profit on ordinary activities 4 (6,448) (3,525)
Profit on ordinary activities after taxation 9,645 12,050
Minority shareholders' non-equity interest (1,094) (1,094)
Profit attributable to Bristol Water
Holdings plc shareholders 8,551 10,956
Dividends 5 (5,230) (4,965)
Profit retained for the year 3,321 5,991
Earnings per share -
On average number of ordinary shares in issue 6 115.5p 148.7p
On fully diluted basis 6 114.5p 147.5p
All of the turnover and operating costs above relate to continuing operations.
GROUP BALANCE SHEET
at 31 March 2003
2003 2002
Note #000 #000
Fixed assets
Intangible fixed assets 6 23
Tangible fixed assets 7 185,769 180,770
Investments in joint ventures -
Share of gross assets 6,878 6,289
Share of gross liabilities (6,477) (5,957)
Total 401 332
Total fixed assets 186,176 181,125
Current assets
Stocks 683 512
Debtors 26,199 21,447
Cash at bank and on deposit 8 19,658 24,513
46,540 46,472
Creditors: amounts falling due within one year
Short term borrowings 8 6,760 3,138
Other creditors 32,136 33,249
38,896 36,387
Net current assets 7,644 10,085
Total assets less current liabilities 193,820 191,210
Creditors: amounts falling due after more than one year 8 (77,771) (82,825)
Deferred income (8,429) (8,396)
Provisions for liabilities and charges 9 (19,189) (14,926)
Net assets 88,431 85,063
Capital and reserves
Called up share capital 7,404 7,397
Share premium 6,080 6,023
Other non-distributable reserves 4,024 4,024
Profit and loss account 58,423 55,119
Total equity shareholders' funds 10 75,931 72,563
Minority shareholders' non-equity interest 12,500 12,500
88,431 85,063
GROUP CASH FLOW STATEMENT
for the year ended 31 March 2003
Note 2003 2002
#000 #000
Net cash inflow from operating activities 11(a) 28,537 29,671
Dividends received from joint ventures 129 -
Returns on investments and servicing of finance
Interest received 903 1,282
Interest paid (4,830) (4,233)
Interest paid on finance leases (1,354) (1,287)
Dividends paid to minorities (1,094) (1,094)
(6,375) (5,332)
Taxation
Corporation tax paid (2,978) (2,183)
Capital expenditure
Purchase of tangible fixed assets (20,748) (26,444)
less contributions received 3,409 2,588
Proceeds from disposal of tangible fixed assets 1,215 957
(16,124) (22,899)
Acquisitions and disposals
Proceeds on disposal of subsidiary 93 173
Cash eliminated on disposal of subsidiary - (60)
Investment in joint venture (80) -
13 113
Dividends paid on equity shares (5,020) (4,786)
Cash outflow before management of liquid resources and financing (1,818) (5,416)
Management of liquid resources
being decrease/(increase) in short term deposits 5,500 (295)
Financing
Issue of shares 64 345
New term loans 47 5,000
Cash inflow from refinancing assets under new finance leases - 8,159
Capital element of lease repayments (1,585) (1,430)
Capital element of loan repayments (1,563) (3,223)
(3,037) 8,851
Increase in cash 645 3,140
Cash, beginning of year 5,513 2,373
Cash, end of year 6,158 5,513
SEGMENTAL ANALYSIS
for the year ended 31 March 2003
2003 2002
#000 #000
Turnover -
Water supply and related activities 69,974 68,013
Contracting and other services
Group 53,146 70,005
Joint ventures 8,504 6,897
Intra-group sales (10,788) (8,900)
Turnover including share of joint ventures 120,836 136,015
Turnover of #7,186,000 (2002 - #6,023,000) was derived from services provided outside the United Kingdom,
primarily South East Asia. The maximum level of prices the principal subsidiary, Bristol Water plc, may levy
for the majority of water charges is controlled by the Director General of the Office of Water Services.
2003 2002
#000 #000
Operating profit of group and
share of joint ventures -
Water supply and related activities 19,361 17,741
Contracting and other services 1,048 1,282
Group total 20,409 19,023
Profit on ordinary activities
before taxation -
Water supply and related activities 14,563 13,903
Contracting and other services 1,530 1,672
Group total 16,093 15,575
Net assets employed -
Water supply and related activities 65,534 73,946
Contracting and other services 22,897 11,117
Group total 88,431 85,063
2003 2002
Number of employees (average full time equivalents) -
Water supply and related activities 422 430
Contracting and other services 396 510
Group total 818 940
The number of employees for water supply and related activities in 2002 excluded approximately 50 full time
equivalent former employees of Bristol Water plc, transferred during 2002 to Bristol Wessex Billing Services
Limited, whose costs were recorded within the payroll costs set out in note 2, during transitional financial
arrangements and are now included in other operating costs for 2003.
NOTES
1. BASIS OF PREPARATION AND CIRCULATION
These preliminary statements do not constitute the statutory accounts for the year ended 31 March 2003. The
statutory accounts have been reported on by the auditors without qualification but have not yet been
delivered to the Registrar of Companies. The comparative figures for 2002 have been extracted from the
accounts of Bristol Water Holdings plc for the year ended 31 March 2002 upon which the auditors' report was
unqualified and which have been delivered to the Registrar of Companies.
The Annual Report and Accounts will be posted to shareholders on or before 19 June 2003. Copies will be
available to the public from the registered office at PO Box 218, Bridgwater Road, Bristol BS99 7AU. The
Annual General Meeting will be held at The Holiday Inn, Victoria Street, Bristol, on Monday 21 July 2002 at
11.00 am.
2. OPERATING COSTS
2003 2002
#000 #000
Net payroll cost 23,691 26,796
Other operating expenses 54,109 69,463
Net depreciation 14,287 13,993
Total operating costs 92,087 110,252
3. PROFITS ON DISPOSALS
Profits on disposals comprise the following -
2003 2002
#000 #000
Profit on disposal of tangible fixed assets 402 753
Profit on disposal of trading division of a subsidiary - Lazer 20 20
Engineering.
The division was sold in 2002. The #20,000 profit in 2003 is the second
and final instalment under the sale contract
Profit on disposal of Operational (UK) Ltd 123 3
The company was sold in 2002. The #123,000 profit in 2003 reflects the
release of warranty reserve of #50,000 and receipt of additional monies
under the sale agreement
143 23
The profit on disposal of tangible fixed assets is mainly from vehicles and property sold by Bristol Water
plc amounting to #386,000 (2002 - #760,000).
4. TAXATION ON PROFIT ON ORDINARY ACTIVITIES
Analysis of the charge for the year -
2003 2002
#000 #000
Current tax:
UK Corporation tax at 30% (2002 - 30%) 3,005 4,984
Advance Corporation Tax written off/(back) 1,699 (1,027)
Adjustment to prior periods (2,068) (1,813)
UK Corporation tax liability 2,636 2,144
Foreign taxation 53 89
Total current tax 2,689 2,233
Deferred tax:
Current year movement 1,360 (176)
Adjustment to prior periods 1,204 2,851
Effect of discounting 1,195 (1,383)
Total deferred tax 3,759 1,292
Total tax on profit on ordinary activities 6,448 3,525
The adjustments to prior periods mainly relate to the effects of an agreement with the Inland Revenue to
accelerate certain capital allowances. This has reduced the mainstream Corporation Tax charge, but reduced
the recovery of Advance Corporation Tax.
5. DIVIDENDS
2003 2002
#000 #000
On ordinary (equity) shares -
Interim dividend paid - 20.8p (2002 - 20.2p) 1,543 1,488
Proposed final dividend - 49.8p (2002 - 47.0p) 3,687 3,477
5,230 4,965
The Board is recommending a final dividend of 49.8 pence per ordinary share to be paid on 1 October 2003 to
shareholders on the Register as 18 July 2003.
6. EARNINGS PER SHARE
Earnings per share have been calculated as follows -
2003 2002
000 000
On average number of ordinary shares in issue during the year -
Earnings attributable to ordinary shares #8,551 #10,956
Weighted average number of ordinary shares 7,402 7,365
On fully diluted basis -
Earnings attributable to ordinary shares #8,551 #10,956
Weighted average number of fully diluted ordinary shares 7,465 7,426
7. TANGIBLE FIXED ASSETS
2003 2002
#000 #000
Net book value, beginning of year 180,770 171,554
Additions 23,783 26,264
Disposals (813) (201)
Contributions (3,409) (2,588)
Depreciation (14,562) (14,259)
Net book value, end of period 185,769 180,770
8. NET BORROWINGS
2003 2002
#000 #000
Cash and short term deposits 19,658 24,513
Debt due within one year (6,760) (3,138)
Debt due after one year (77,771) (82,825)
Net borrowings (64,873) (61,450)
9. PROVISION FOR LIABILITIES AND CHARGES
2003 2002
#000 #000
Deferred Taxation
Analysis of deferred taxation liability -
Accelerated capital allowances and capital element
of finance leases 35,173 32,840
Deferred income (2,529) (2,519)
Short term timing differences (456) (698)
Unrelieved Advanced Corporation Tax - (504)
32,188 29,119
Effect of discounting (12,999) (14,193)
Net provision for Deferred Taxation 19,189 14,926
10 MOVEMENT IN SHAREHOLDERS' FUNDS
2003 2002
#000 #000
Beginning of the year 72,563 66,227
Issue of new shares 64 345
Profit for the year 8,551 10,956
Dividends (5,230) (4,965)
Foreign currency translation difference (17) -
End of year 75,931 72,563
The share capital of the company at 31 March 2003 comprised 7,262,987 ordinary shares and 141,430 non-voting
ordinary shares.
11. ADDITIONAL CASHFLOW INFORMATION
(a) Reconciliation of operating profit to net cash inflow from operating activities -
2003 2002
#000 #000
Operating profit 20,245 18,866
Depreciation and amortisation 14,287 13,993
Cash flow from operations 34,532 32,859
Working capital movements -
Stocks (171) 146
Debtors (4,775) (6,660)
Creditors (1,049) 3,639
Provisions - (313)
Net cash inflow from operating activities 28,537 29,671
(b) Reconciliation of net cash flow to movement in net borrowings -
2003 2002
#000 #000
Increase in cash in year 645 3,140
Cash used to repay leases 1,585 1,430
Cash used to repay loans 1,563 3,223
Cash from new borrowings (47) (13,159)
Cash from (decrease)/increase in liquid resources (5,500) 295
Increase in net borrowings resulting from cash flows (1,754) (5,071)
New loans not affecting cash flow* (1,669) (1,731)
Net borrowings, beginning of year (61,450) (54,648)
Net borrowings, end of year (64,873) (61,450)
* Represents deferred payment terms for capital expenditure relating to the joint billing arrangements
established with Wessex Water
12. PENSIONS
These accounts are prepared on a SSAP 24 basis. An analysis of the group's pension assets and liabilities under
FRS 17 is set out below:
2003 2002
#000 #000
Market value of assets 78,239 103,208
Present value of liabilities (99,250) (88,831)
(Deficit)/surplus (21,011) 14,377
Deferred taxation 6,253 (4,313)
Net pension (liability)/asset under FRS 17 (14,758) 10,064
13. POST BALANCE SHEET EVENTS
During May 2003, Bristol Water plc entered into a new financing structure. Details are set out in the Operating
and Financial Review.
This information is provided by RNS
The company news service from the London Stock Exchange
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