RNS No 0785w
BRISTOL WATER PLC
25th November 1998
BRISTOL WATER plc
INTERIM RESULTS
for the six months ended 30th September 1998
HIGHLIGHTS
Six months ended
30th September 1998 1997 % change
#'000 #'000
(unaudited)(unaudited)
Turnover 33,467 31,823 5%
Operating profit 10,017 9,132 10%
Pre-tax profit 7,911 7,160 10%
Net profit 7,241 6,133 18%
Earnings per ordinary share 108.9p 89.9p 21%
Interim dividend per ordinary
share, net 19.44p 18.00p 8%
The Company is one of the largest independent water supply companies
in the country providing an average of over 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 the Bristol conurbation and surrounding parts of Somerset,
Gloucestershire and Wiltshire.
The Company's performance in customer service, water quality and
engineering standards is amongst the highest in the water industry.
Bristol Water plc is a subsidiary of Bristol Water Holdings plc.
CHAIRMAN'S STATEMENT
Again, I have pleasure in being able to report continued success for the
Company. Improved profits have enabled shareholders to benefit from an
increased dividend while customers are gaining from both high levels of
investment and service standards at the highest levels in the industry.
We started the year with our reservoirs full. We have had useful rain at
crucial times throughout the spring and summer keeping demand for water at low
levels. Increasing environmental awareness by customers, continued leakage
reduction and other water efficiency measures have contributed to the
position. Demand in the six month period to 30 September was 4% below that in
the previous year, which itself was the lowest for five years. As a result
reservoirs are 30% above our internal guideline figure for this time of year.
Accordingly we are confident of our resource position for next year.
Results
Profitability has increased, reflecting the benefit of a real price rise of 1%
allowed under the current price formula determined by OFWAT and the beneficial
effects on operating costs of the weather conditions.
In total, revenue in the current period has grown by 5% over the comparative
period. Despite the reduction in demand, measured income increased by 12%
which includes the effect of new customers and those who have opted to have a
metered supply. Unmeasured water income increased by 3%.
Operating costs continue to be monitored carefully to achieve efficiency
gains. Benefits have been gained from lower power costs and from having to
repair fewer burst pipes, reflecting the impact of the weather on our
operating environment. Leakage control and other customer service matters
remain a high priority, with work on Year 2000 compliance continuing to
timetable. Total operating costs remained stable in real terms.
Operating profit has improved by 10% to #10.017 million. Although interest
costs are increasing reflecting the scale of the investment programme, pre-tax
profits were 10% higher at #7.911 million.
The changes in tax legislation affecting Advance Corporation Tax provided a
one off benefit to reduce the tax charge to #0.670 million, providing a
substantial boost to the net profit improvement of 18%. Earnings per share
have increased by 21% to 108.9 pence per share.
Investment
The increased rate of investment expenditure that occurred in the second half
of last year has continued with gross investment of #18 million in the first
half of this year. This work has concentrated primarily on the rehabilitation
or replacement of old mains, to provide increased security of supply to
customers, to improve quality and to meet the needs of new developments. The
rate of investment is expected to slow for the balance of the year following
completion of major elements of the current programme.
Capital Structure
On 31 August 1998 the Company's 6.75% redeemable preference shares, which were
all owned by the parent company, Bristol Water Holdings plc, were redeemed at
par providing a more efficient capital structure. The transaction results in
a reduction in the issued share capital of the Company and an increase in net
borrowings of #5.770 million. A similar sum has been transferred from the
profit and loss account to non-distributable reserves.
As a result of the expanded investment programme and the redemption of shares
there was an increase in net debt in the six months of #12 million. An
additional #15 million ten year bank loan at fixed interest of approximately
6.5% pa has been drawn down since the end of the period.
Dividends
The Board declared an interim dividend of #1,166,000 (net) on the ordinary
shares, all of which are owned by Bristol Water Holdings plc. This is an 8%
increase over the previous interim dividend and will be paid on 30 November
1998. The Company provided 91% of group pre-tax profits in the period and this
dividend represents 86% of the ordinary dividend payable by the parent
company.
The dividend on the 8.75% irredeemable preference shares, none of which are
owned by Bristol Water Holdings plc, was paid on 1 October 1998 for the six
months then ended and amounted to #547,000. The final dividend on the
redeemable preference shares amounted to #162,199 and was paid on 30 September
1998.
In total, the level of dividends increased by 3% over those of the previous
year, leaving retained profit of #5.4 million, 24% higher than last year.
Tribute to former directors
It was with deep regret that we learned of the sudden death of Sir John Wills
only five weeks after retiring as the Chairman of the holding company having
served twenty five years as a director. He played an important role in the
Company's development and will be long remembered for his excellent
leadership and wise counsel.
It is also with considerable sadness that I must report the untimely death on
22 October of Stan Bessey at the age of 46. He had been Water Services
Director since 1995 and had established an international reputation for his
work in the field of leakage measurement and control.
Outlook
The Company is heavily involved with the Periodic Review process through which
OFWAT will set price limits beyond 2000. We, in common with the industry,
await resolution of a range of key issues that materially affect the future
for all water companies. The OFWAT proposals in "Prospects for Prices" in
their current form have important implications for the business and will be
taken up with the regulator.
We expect a satisfactory outcome for the year as a whole.
J R Browning , Chairman
PROFIT & LOSS ACCOUNT
Six months to Six months to Year to
30th September 30th September 31st March
1998 1997 1998
(unaudited) (unaudited)
Note #000's #000's #000's
Turnover 2 33,467 31,823 63,955
Operating costs 3 (23,450) (22,691) (46,383)
Operating profit 10,017 9,132 17,572
Profit on disposals 27 19 46
Interest payable 4 (2,133) (1,991) (3,773)
Profit on ordinary activities
before taxation 7,911 7,160 13,845
Taxation 5 (670) (1,027) (1,985)
Profit on ordinary activities
after taxation 7,241 6,133 11,860
Dividends - 6
On irredeemable
preference shares 547 547 1,094
On convertible
preference shares 162 195 389
On ordinary shares 1,166 1,080 3,600
Total dividends 1,875 1,822 5,083
Profit retained 5,366 4,311 6,777
Earnings per share 108.9p 89.9p 173.0p
Dividend per
ordinary share 6 19.44p 18.00p 60.00p
The profit on ordinary activities after taxation includes all recognised gains
and losses.
SUMMARISED BALANCE SHEET
As at As at As at
30th September 30th September 31st March
1998 1997 1998
(unaudited) (unaudited)
Note #000's #000's #000's
Tangible fixed
assets 8 155,726 139,991 147,678
Current assets -
Stocks 1,022 854 1,409
Debtors 9,418 7,828 7,212
Cash and term
deposits 9 - 10,003 5,208
10,440 18,685 13,829
Creditors: amounts falling due
within one year -
Short term
borrowings 9 8,731 1,244 1,385
Other creditors 26,507 22,776 26,292
_______________________________________
35,238 24,020 27,677
_______________________________________
Net current liabilities (24,798) (5,335) (13,848)
Creditors: amounts falling due
after one year 9 (54,165) (54,790) (54,876)
Provisions for
liabilities and
charges 10 (429) (6,026) (2,481)
Accruals and deferred
income (8,160) (7,728) (7,895)
________________________________________
Net assets 68,174 66,112 68,578
________________________________________
Ordinary shares 5,998 5,998 5,998
6.75% redeemable
preference shares - 5,770 5,770
8.75% irredeemable
preference shares 12,500 12,500 12,500
Share premium and
non-distributable
reserves 10,185 4,415 4,415
Profit and loss account 39,491 37,429 39,895
_______________________________________
Shareholders' funds 11 68,174 66,112 68,578
_______________________________________
SUMMARISED CASHFLOW STATEMENT
Six months to Six months to Year to
30th September 30th September 31st March
1998 1997 1998
(unaudited) (unaudited)
Note #000's #000's #000's
Net cash inflow
from operating
activities 12 11,906 10,302 19,847
Returns on investments
and servicing of finance -
Net interest paid (2,387) (2,929) (4,402)
Dividends paid on
preference (non-equity)shares (709) (742) (1,483)
_________________________________________
(3,096) (3,671) (5,885)
_________________________________________
Taxation paid (186) (265) (2,307)
Capital expenditure and investing activities -
Purchase of tangible
fixed assets (13,917) (6,743) (17,885)
Contributions received 1,698 1,585 3,421
Proceeds from disposal
of tangible fixed assets 42 46 121
_________________________________________
(12,177) (5,112) (14,343)
_________________________________________
Dividends paid on
ordinary (equity) shares (2,520) (2,330) (3,410)
_________________________________________
Net cash outflow before
management of liquid
resources and financing (6,073) (1,076) (6,098)
Management of liquid
resources, being decrease
in term deposits - 3,250 11,250
Financing -
New loans and leases 390 948 1,808
Debt and lease repayments (983) (1,220) (1,853)
Redemption of preference
shares (5,770) - -
___________________________________________
(6,363) (272) (45)
___________________________________________
Increase (decrease)
in cash 12 (12,436) 1,902 5,107
___________________________________________
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, have been prepared on the basis of the accounting policies
adopted by Bristol Water plc for the year ended 31 March 1998 as set
out in the Annual Report and Accounts. These accounts (on which the
auditors gave an unqualified report) have been delivered to the
Registrar of Companies. In preparing the interim results regard has
been given to all Financial Reporting Standards up to and including
number 14 except in so far as FRS 12 dealing with provisions relates
to infrastructure renewals accounting. Discussions between the
water industry and the Accounting Standards Board continue to
develop a revised approach. The Directors have continued with the
previously adopted policy in these statements. Details of the
provision are shown in Note 10.
Note 2: Turnover
Six months to Six months to Year to
30th September 30th September 31st March
1998 1997 1998
(unaudited) (unaudited)
#000's #000's #000's
Turnover comprises -
Metered water supply 9,470 8,428 17,353
Unmeasured water supply 22,048 21,446 42,538
Other services 1,949 1,949 4,064
_________________________________________
33,467 31,823 63,955
_________________________________________
Note 3: Operating costs
Operating costs comprise -
Payroll cost, net
of recharges 4,719 4,864 9,228
Other operating expenses 12,501 12,290 25,349
Depreciation, net 3,011 2,730 5,556
Infrastructure renewals
charge 3,219 2,807 6,250
________________________________________
23,450 22,691 46,383
________________________________________
Note 4: Interest payable
Interest payable and similar charges comprise -
Interest payable and
similar charges 2,371 2,462 4,651
Interest income (238) (471) (878)
________________________________________
2,133 1,991 3,773
________________________________________
Note 5: Taxation
Six months to Six months to Year to
30th September 30th September 31st March
1998 1997 1998
(unaudited) (unaudited)
#000's #000's #000's
The charge for taxation
comprises -
Mainstream corporation
tax payable 533 571 714
Advance corporation tax 137 456 1,271
____________________________________________
670 1,027 1,985
____________________________________________
The interim dividend for the current year will be paid to the parent
company under a group election and hence will not require the
additional payment of ACT.
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 1998 and
amounted to #547,000.
The dividend on the 6.75% Convertible Preference Shares for the
period from 1 April 1998 until redemption was paid on 30 September
1998 and amounted to #162,199.
The Board has declared an interim dividend of 19.44pence (net) on
each Ordinary share amounting to #1,166,000, payable on 30 November
1998.
Note 7: Earnings per share
The calculation of earnings per share is based on profit
attributable to holders of Ordinary Shares of #6,532,000 (1997 -
#5,391,000) and the weighted average number of Ordinary Shares in
issue during the period of 5,998,025 (1997 - 5,998,025).
Note 8: Movement in tangible fixed assets
The movement in tangible fixed assets comprises -
Net book value,
beginning of period 147,678 137,531 137,531
Additions 12,507 6,725 18,955
Disposals (15) (27) (75)
Contributions (1,320) (1,390) (2,935)
Depreciation (3,124) (2,848) (5,798)
______________________________
Net book value,
end of period 155,726 139,991 147,678
______________________________
Note 9: Net debt
At 30th September At30th September At 31st March
1998 1997 1998
(unaudited) (unaudited)
#000's #000's #000's
Net debt comprises -
Term deposits - 8,000 -
Cash less overdrafts (7,228) 2,003 5,208
Debt due within one year (1,503) (1,244) (1,385)
Debt due after one year (54,165) (54,790) (54,876)
___________________________________________
Net debt (62,896) (46,031) (51,053)
___________________________________________
Note 10: Movement in provisions for liabilities and charges
Six months to Six months to Year to
30th September 30th September 31st March
1998 1997 1998
(unaudited) (unaudited)
#000's #000's #000's
The movement on maintenance provisions comprises -
Balance, beginning
of period 2,481 6,513 6,513
Charge for the period 3,219 2,807 6,250
Expenditure incurred (5,271) (3,294) (10,282)
___________________________________________
Balance, end of period 429 6,026 2,481
___________________________________________
Note 11: Shareholders' funds
Movement in shareholders' funds -
Beginning of period 68,578 61,801 61,801
Profit for the
period 7,241 6,133 11,860
Dividends (1,875) (1,822) (5,083)
Redemption of preference
shares (5,770) - -
___________________________________________
End of period 68,174 66,112 68,578
___________________________________________
Note 12: Supplementary cashflow information
Six months to Six months to Year to
30th September 30th September 31st March
1998 1997 1998
(unaudited) (unaudited)
#000's #000's #000's
a)Reconciliation of operating profit to net cash inflow from
operating activities -
Operating profit 10,017 9,132 17,572
Depreciation, net 3,011 2,730 5,556
Decrease in provisions (2,052) (487) (4,032)
Cashflow from operations 10,976 11,375 19,096
Working capital movements 930 (1,073) 751
___________________________________________
Net cash inflow from
operating activities 11,906 10,302 19,847
___________________________________________
b)Reconciliation of net cashflow to movement in net debt -
Increase (decrease)
in cash in the period (12,436) 1,902 5,107
Cash used to reduce debt 983 1,220 1,853
Cash from new financing (390) (948) (1,808)
Cash inflow from management
of liquid resources - (3,250) (11,250)
___________________________________________
Increase in net debt
in period (11,843) (1,076) (6,098)
Net debt, beginning
of period (51,053) (44,955) (44,955)
___________________________________________
Net debt, end of period (62,896) (46,031) (51,053)
___________________________________________
Note 13: 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.
END
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