RNS Number:3677E
Bristol Water PLC
28 November 2002
BRISTOL WATER plc
INTERIM RESULTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2002
Bristol Water plc is a subsidiary of Bristol Water Holdings plc
which is also reporting its results today
HIGHLIGHTS
PROGRESSING ACCORDING TO PLAN
Six months ended 30 September 2002 2001 % change
Restated
(unaudited) (unaudited)
#m #m
Turnover 35.0 34.0 3 %
Operating profit 10.1 10.0 1 %
Profit before tax 7.4 8.0 (6)%
Profit after tax 4.5 5.7 (21)%
Earnings per ordinary share 65.7p 85.1p (23)%
Before application of FRS19 deferred tax:
Profit after tax 6.1 6.4 (5)%
Earnings per ordinary share 91.9p 97.2p (5)%
Interim dividend per ordinary share 27.73p 26.40p 5 %
* Turnover increased by 3% reflecting impact of RPI + K price formula
* Profit before tax down by 6% - as anticipated due to
relatively low RPI+K price increase of 1.9% together with increased financing
and depreciation costs from continuing capital programme
* Joint billing with Wessex Water now fully operational
* Net capital expenditure #9.1m
* High service levels maintained - rated third overall by Ofwat for 2001/02
* Effective tax rate of 40%, including non-cash adverse impact of discounting
rate changes on deferred tax compared to positive impact in 2001/ 02 full
year
* Interim ordinary dividend increased by 5%
The company is one of the largest independent water supply companies in the
country, providing an average of 300 million litres of water each day through
6,500 kilometres of mains.
It is responsible for supplying over one million people and businesses in an
area of almost 2,400 square kilometres, centred on Bristol.
The area served covers Bristol and surrounding parts of Somerset,
Gloucestershire and Wiltshire.
CHAIRMAN'S STATEMENT
I am pleased to announce another good performance - the company has delivered a
good financial result in line with expectations whilst maintaining high levels
of service to customers.
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.
During the period we have continued to consolidate the considerable 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 unmetered customers were issued in April 2002 with the
first metered bills currently being issued. With the billing system now fully
operational this will allow us to achieve the significant planned efficiency
savings during 2003, together with the provision of a simplified and improved
service to customers. High standards of service to customers have been
maintained throughout this complex process.
Operating profits increased by 1% to #10.1m reflecting the permitted increase in
charges to customers offset by the impact of inflation on costs.
In the next six months, operating costs are expected to increase during the
winter operating conditions. Depreciation and interest costs will also increase
further as a result of the continuing investment programme.
Capital investment, including infrastructure renewals, net of grants and
contributions in the period, totalled #9.1m. Key projects included the
installation of a barrier to remove cryptosporidium oocysts at the Chelvey water
treatment works, bringing the total of smaller 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 March 2004. 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
standard that comes into force in 2013.
The results include a total effective tax charge of some 40%. This includes a
deferred tax charge of #1.6m (2001 - #0.7m) in addition to the underlying
current tax charge of #1.4m. The deferred tax element is unusually high because
of a reduction in the discount rates used to calculate our overall 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 has
been spread in relation to the expected total tax charge for the year, and
essentially reverses a corresponding gain made in the second half of the
previous year when discount rates increased. Before deferred tax, net profits
declined by 5% to #6.1m.
Earnings per share for the six months were 65.7p (2001 - 85.1p), the equivalent
figure before deferred tax was 91.9p (2001 - 97.2p).
Net debt increased by #3.6m in the period to #75.1m, this represents
approximately 43% of the average Regulatory Capital Value for 2002/03. Net
gearing before the deferred tax provision increased to 81% compared to 80% at 31
March 2002. Taking the deferred tax provision into account net gearing
increased to 99% from 97% at 31 March 2002.
We have received the provisional results of the April 2002 actuarial review of
our defined benefit pension schemes. As at April 2002, these show, measured on
an ongoing actuarial basis, a surplus of #6.3m. These schemes are closed to new
entrants.
We have declared a 5% increase in the interim ordinary dividend. This reflects
the good underlying performance of the business.
Ofwat have 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 of course be important to the
business.
We were pleased by our ranking in the recent Ofwat report on service levels by
water companies in 2001/02. We were ranked third of all water companies in
England and Wales. We 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.
Summary
The business has continued to deliver high quality services to customers while
making further operational efficiency gains and putting in place key initiatives
that will form the basis of future success. The full year result is expected to
reflect an increase in operating costs during the winter operating conditions.
Depreciation and interest costs will also increase further as a result of the
continuing investment programme.
As previously highlighted the continued progressive build up of the capital
programme together with the low level of permitted increases under the RPI+K
price limits, with K's of 0% in 2003/04 and -1.9% in 2004/05, will have a
significant impact on profits for those years.
Alan Parsons
Chairman
28 November 2002
PROFIT & LOSS ACCOUNT
Six months to Six months to Year to
30 September 30 September 31 March
2002 2001 2002
(unaudited) (unaudited)
Restated
Note #000 #000 #000
Turnover 2 35,038 34,025 68,013
Operating costs 3 (24,963) (24,030) (50,272)
Operating profit 10,075 9,995 17,741
Profit on disposals of tangible fixed assets 27 303 760
Net interest payable 4 (2,664) (2,344) (4,598)
Profit on ordinary activities before taxation 7,438 7,954 13,903
Taxation 5 (2,950) (2,304) (3,622)
Profit on ordinary activities after taxation 4,488 5,650 10,281
Dividends - 6
On irredeemable preference shares (547) (547) (1,094)
On ordinary shares (1,663) (1,583) (5,512)
Total dividends (2,210) (2,130) (6,606)
Profit retained 2,278 3,520 3,675
Earnings per share 7 65.7p 85.1p 153.2p
Earnings per share before application of
FRS19 deferred tax 91.9p 97.2p 174.5p
Dividend per ordinary share 6 27.73p 26.40p 91.9p
The profit on ordinary activities after taxation includes all recognised gains
and losses.
Details of restatements are set out in Note 1.
SUMMARISED BALANCE SHEET
At 30 September At 30 September At 31 March
2002 2001 2002
(unaudited) (unaudited)
Restated Restated
Note #000 #000 #000
Tangible fixed assets 8 181,216 175,263 179,426
Current assets
Stocks 609 566 437
Debtors 13,805 12,448 12,311
Cash and term deposits 9 8,496 13,844 14,454
22,910 26,858 27,202
Creditors: amounts falling due within one year
Short term borrowings 9 1,630 1,756 3,133
Other creditors 19,075 21,193 23,092
20,705 22,949 26,225
Net current assets 2,205 3,909 977
Total assets less current liabilities 183,421 179,172 180,403
Creditors: amounts falling due after more
than one year 9 (81,955) (83,253) (82,825)
Deferred income (8,434) (8,428) (8,396)
Provisions for liabilities and charges 10 (16,808) (13,700) (15,236)
Net operating assets 76,224 73,791 73,946
Shareholders' funds
Called up share capital 18,498 18,498 18,498
Share premium account 4,415 4,415 4,415
Other reserves 5,770 5,770 5,770
Profit and loss account 47,541 45,108 45,263
Total shareholders' funds 11 76,224 73,791 73,946
Analysed as:
Equity shareholders' funds 63,724 61,291 61,446
Non-equity shareholders' funds 12,500 12,500 12,500
Details of restatements are set out in Note 1
SUMMARISED CASH FLOW STATEMENT
Six months to Six months to Year to
30 September 30 September 31 March
2002 2001 2002
(unaudited) (unaudited)
Restated Restated
Note #000 #000 #000
Net cash inflow from operating activities 12 14,927 13,149 28,869
Returns on investments and servicing of finance
Net interest paid (3,192) (2,881) (4,615)
Dividends paid on preference (non-equity) shares (547) (547) (1,094)
(3,739) (3,428) (5,709)
Taxation paid (1,553) (989) (1,995)
Capital expenditure and investing activities
Purchase of tangible fixed assets (10,586) (14,166) (26,237)
Contributions received 1,808 912 2,588
Proceeds from disposal of tangible fixed assets 146 384 888
(8,632) (12,870) (22,761)
Dividends paid on ordinary (equity) shares (3,929) (3,568) (5,151)
Net cash outflow before management
of liquid resources and financing (2,926) (7,706) (6,747)
Management of liquid resources
Decrease/(increase) in short term deposits 5,500 (5,200) (5,200)
Financing
New loans and leases - 13,159 13,159
Capital element of loan and lease repayments (3,032) (1,078) (1,427)
(3,032) 12,081 11,732
Decrease in cash 12 (458) (825) (215)
Cash, beginning of period 454 669 669
Cash, end of period (4) (156) 454
Details of restatements are set out in Note 1.
NOTES TO THE INTERIM RESULTS
Note 1: Accounting policies
The financial information contained in this interim announcement does
not constitute statutory accounts within the meaning of s.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 2002 as set out in the Annual Report and
Accounts. Those accounts (on which the auditors gave an unqualified
report) have been delivered to the Registrar of Companies.
The accounts for the six months ended 30 September 2001 have been
restated to reflect a change in the basis of recognition of turnover
from metered supplies which was incorporated for the first time into
the results for the year ended 31 March 2002. The impact of the
restatement is to increase turnover by #234,000, increase profit after
tax by #209,000, increase accrued income in the balance sheet by
#2,199,000 and increase net assets after provision for tax by
#1,979,000.
The 31 March 2002 results have been restated in respect of a bank
overdraft of #222,000 previously reported within short term
borrowings. This has now been offset against cash balances held at
the same bank to give a net cash position.
The 30 September 2001 results have been restated to treat capital
expenditure of #433,000, payable on deferred terms, as a loan not
affecting cash flow, in accordance with the treatment adopted for the
31 March 2002 results, rather than as working capital.
Note 2: Turnover
Six months to Six months to Year to
30 September 30 September 31 March
2002 2001 2002
(unaudited) (unaudited)
Restated
#000 #000 #000
Turnover comprises -
Metered water supply 12,450 11,884 23,865
Unmetered water supply 20,325 20,200 40,765
Other services 2,263 1,941 3,383
35,038 34,025 68,013
Note 3: Operating costs
Operating costs comprise -
Payroll cost, net of recharges to fixed assets 4,743 5,227 10,078
Other operating expenses 13,208 12,153 26,464
Depreciation, net 7,012 6,650 13,730
24,963 24,030 50,272
Note 4: Net interest payable
Net interest payable and similar charges comprise -
Interest payable and similar charges 2,934 2,791 5,441
Interest receivable and similar income (270) (447) (843)
2,664 2,344 4,598
Note 5: Taxation
Six months to Six months to Year to
30 September 30 September 31 March
2002 2001 2002
(unaudited) (unaudited)
Restated
#000 #000 #000
The charge for taxation comprises -
Current tax:
Corporation Tax at 30% 1,157 2,291 4,202
Less Advance Corporation Tax set off - (717) (473)
Adjustment to prior periods 221 - (1,389)
Total current tax 1,378 1,574 2,340
Deferred tax:
Current year movement 821 (67) (176)
Advance Corporation Tax movement 110 717 -
Adjustment to prior periods 291 - 2,851
Effect of discounting 350 80 (1,393)
Total deferred tax 1,572 730 1,282
Total tax on profit on ordinary activities 2,950 2,304 3,622
Included within the effect of discounting charge for the six months to
30 September 2002 is #796,000 relating to the effect of the change in
discount rates since 31 March 2002, offset by other discounting
movements of #446,000.
Note 6: Dividends
The dividend on the 8.75% Irredeemable Preference Shares for the first
half of the financial year was paid on 1 October 2002 and amounted to
#547,000. The Board has declared an interim dividend of 27.73 pence
(2001 - 26.40 pence) on each Ordinary share amounting to #1,663,000
(2001 - #1,583,000), payable on 28 November 2002.
Note 7: Earnings per share
Earnings per share attributable to ordinary shares have been
calculated as follows:
Six months to Six months to Year to
30 September 30 September 31 March
2002 2001 2002
(unaudited) (unaudited)
Restated
000 000 000
On average number of shares in issue:
Earnings #3,941 #5,103 #9,187
Earnings before application of FRS19
deferred tax #5,513 #5,833 #10,469
Number of ordinary shares in issue 5,998 5,998 5,998
Note 8: Movement in tangible fixed assets
Six months to Six months to Year to
30 September 30 September 31 March
2002 2001 2002
(unaudited) (unaudited)
#000 #000 #000
The movement in tangible fixed assets comprises -
Net book value, beginning of period 179,426 170,029 170,029
Additions 10,873 12,987 26,076
Disposals (119) (51) (78)
Grants and contributions (1,808) (912) (2,588)
Depreciation (7,156) (6,790) (14,013)
Net book value, end of period 181,216 175,263 179,426
Note 9: Net debt
Six months to Six months to Year to
30 September 30 September 31 March
2002 2001 2002
(unaudited) (unaudited) Restated
#000 #000 #000
Net debt comprises -
Debt due after one year 81,955 83,253 82,825
Debt due within one year 1,630 1,756 3,133
Less cash balances and short term
deposits (8,496) (13,844) (14,454)
Net debt 75,089 71,165 71,504
Note 10: Provisions for liabilities and charges
Six months to Six months to Year to
30 September 30 September 31 March
2002 2001 2002
(unaudited) (unaudited)
#000 #000 #000
Deferred taxation provision
Deferred tax liability 30,661 26,430 29,439
Effect of discounting (13,853) (12,730) (14,203)
16,808 13,700 15,236
Note 11: Shareholders' funds
Six months to Six months to Year to
30 September 30 September 31 March
2002 2001 2002
(unaudited) (unaudited)
Restated
#000 #000 #000
Movement in shareholders' funds -
Beginning of period 73,946 70,271 70,271
Profit for the period 4,488 5,650 10,281
Dividends (2,210) (2,130) (6,606)
End of period 76,224 73,791 73,946
Note 12: Supplementary cashflow information
Six months to Six months to Year to
30 September 30 September 31 March
2002 2001 2002
(unaudited) (unaudited)
Restated Restated
#000 #000 #000
a) Reconciliation of operating profit to net
cash inflow from operating activities
Operating profit 10,075 9,995 17,741
Depreciation, net 7,012 6,650 13,730
Cashflow from operations 17,087 16,645 31,471
Working capital movements (2,160) (3,496) (2,602)
Net cash inflow from operating activities 14,927 13,149 28,869
b) Reconciliation of net cashflow to
movement in net debt -
(Decrease) in cash in the period (458) (825) (215)
Cash used to repay borrowings 3,032 1,078 1,427
Cash from new borrowings - (13,159) (13,159)
Cash (inflow)/outflow from management
of liquid resources (5,500) 5,200 5,200
Increase in net debt in period (2,926) (7,706) (6,747)
New debt not affecting cash flow (659) (433) (1,731)
Net debt, beginning of period (71,504) (63,026) (63,026)
Net debt, end of period (75,089) (71,165) (71,504)
Note 13: Pensions
We have received provisional results of the April 2002 actuarial
review of our defined benefit schemes. As at April 2002, these show,
measured on an ongoing actuarial basis, a surplus of #6.3m. These
schemes are closed to new entrants.
We will be making the appropriate disclosures under FRS17, the new
accounting standard on pensions, in the full year accounts and
following recent ASB announcements we are reviewing the timing of the
full adoption of the standard.
Note 14: Circulation
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.
INDEPENDENT REVIEW REPORT TO BRISTOL WATER PLC
Introduction
We have been instructed by the company to review the financial information, for
the six months ended 30 September 2002, set out on pages 4 to 10. We have read
the other information contained in the interim report and considered whether it
contains any apparent misstatements or material inconsistencies with the
financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly we do not
express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 September 2002.
PricewaterhouseCoopers
Chartered Accountants
Bristol
28 November 2002
Notes:
(a) The maintenance and integrity of the Bristol Water group website is the
responsibility of the directors; the work carried out by the auditors does
not involve consideration of these matters and, accordingly, the auditors
accept no responsibility for any changes that may have occurred to the
interim report since it was initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation and
dissemination of financial information may differ from legislation in other
jurisdictions.
This information is provided by RNS
The company news service from the London Stock Exchange
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