7th Jun 2006 07:02
Northumbrian Water Group PLC07 June 2006 7 June 2006 NORTHUMBRIAN WATER GROUP PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2006 Northumbrian Water Group plc (NWG or the Group) is pleased to announce itspreliminary results for the year ended 31 March 2006. HIGHLIGHTS 2006 Financial highlights Year to Year to Change Change 31.3.2006 31.3.2005 £m % £m £m--------------------------------------------------------------------------------Continuing operations Revenue 591.5 541.6 49.9 9.2Profit on ordinary activitiesbefore interest 236.2 196.1 40.1 20.4Profit before tax 130.3 96.3 34.0 35.3Profit before tax and FV debtamortisation 1 117.3 82.2 35.1 42.7Profit after tax 91.0 76.2 14.8 19.4Net debt 2,010.4 1,881.0 129.4 6.9--------------------------------------------------------------------------------Continuing operationsBasic EPS 17.57p 14.71p 2.86p 19.4%Adjusted EPS 1,2 19.62p 16.44p 3.18p 19.3%Ordinary dividends paid and proposed 3 10.56p 10.00p 0.56p 5.6%-------------------------------------------------------------------------------- Notes: 1 Excludes fair value debt amortisation £13.0 million (2005: £14.1 million)2 Excludes deferred tax £23.6 million (2005: £21.0 million)3 Ordinary interim dividends paid 3.52p (2005: 2.87p), final proposed 7.04p(2005: 7.13p) • Strong financial and operating performance - a good start to the five year period • Revenue increase mainly due to the price increase on water and sewerage charges to support the continuing high capital investment programme • Capital expenditure of £211.9 million in Northumbrian Water Limited(NWL) - on track to deliver the investment programme of nearly £1 billion to 2010 • Leakage targets and environmental standards either met or exceeded • Disposal of three non-regulated businesses during the year reinforces the focus on the core water and waste water business • Financial position further strengthened - funding secured for investment programme to 2010 • Proposed final dividend of 7.04 pence per share, giving a full year ordinary dividend of 10.56 pence per share (2005: 10.00 pence per share) Managing Director John Cuthbert said, "We are pleased to be reporting a strongset of results and a good start to this regulatory period. Disposals during thecourse of the year, and reorganisation at board level, have reinforced our focuson the core water business. We have maintained a high level of operationalperformance, meeting our regulatory targets and delivering high levels of waterquality, customer service and environmental standards." For further information contact: Northumbrian Water 0191 301 6419John Cuthbert, Managing DirectorChris Green, Finance DirectorAlistair Baker, Communications & PR Manager Finsbury 020 7251 3801Rollo HeadAndrew MitchellSally Hogan MANAGING DIRECTOR'S STATEMENT This year has seen further development of NWG and highlights include: • a good start with the delivery of the investment programme of nearly £1 billion over five years to 2010;• increased focus on the core water and waste water business with the sale of three subsidiaries; and• continuing high levels of water quality, customer service and environmental standards. Sir Fred Holliday will retire as Chairman at the AGM on 27 July. Sir Fred hasguided the Group wisely since he became Chairman in 1993. We welcome Sir Derek Wanless, who joined the board in December 2003, as incomingChairman. NWG's financial performance Revenue from continuing operations was £591.5 million for the year to 31 March2006 (2005: £541.6 million). This increase is mainly due to the price increaseon water and sewerage charges to support the continuing high capital investmentprogramme. Profit on ordinary activities before interest from continuing operations for theyear was £236.2 million (2005: £196.1 million). Operating costs increased by£9.8 million (3%) to £355.3 million with upward pressure on costs mitigated byongoing efficiencies. The net interest charge from continuing operations was £106.0 million (2005:£99.9 million) and includes a credit of £13.0 million (2004: £14.1 million) inrespect of the amortisation of the debt fair value. Profit on ordinary activities before tax for the year was £130.3 million (2005:£96.3 million). The tax charge of £39.3 million (2005: £20.1 million) reflectsincreased profitability and changes in tax rules on capitalised maintenanceexpenditure. The effective tax rate for the year to 31 March 2006 is 30% (2005:21%). The sale of subsidiaries contributed £14.6 million to the results for the yearand this is included in the profit from discontinued operations of £15.4 million(see note 4 for further analysis). The Group's gearing has remained stable with net debt increasing by £129.4million to £2,010.4 million over the year. Cash interest cover for the Group at2.7x is unchanged from last year. Sale of subsidiaries In line with the strategy to focus on the core water and waste water business,and following the receipt of several expressions of interest, the Group disposedof Fastflow Pipeline Services Limited (FPS) on 8 July 2005, Entec UK Limited(Entec) on 5 October 2005 and ULG Northumbrian Limited (ULG) on 10 April 2006. FPS, which provides infrastructure replacement and rehabilitation services, wassold to a management buy-in for a cash consideration of £0.8 million. The total consideration for the sale of Entec to its management was £30.0million, satisfied by £29.0 million in cash and £1.0 million of loan notes.Entec provides environmental and engineering consultancy services. ULG provides overseas aid funded project work through a number of fundingagencies and was sold, to PMTC International Limited, for a consideration equalto its net assets of £26,642. In the results for the year to 31 March 2006, the Group profit on the disposalof Entec and FPS was £14.0 million and £0.6 million respectively. No tax ariseson either disposal due to the availability of the substantial shareholdingsexemption. A payment of £11.0 million was made into the defined benefit schemeto meet the Section 75 liabilities of both FPS and Entec. There was no profit or loss on the sale of ULG and no defined benefit schemeliability. Capital structure In September 2005, Northumbrian Water Finance plc (NWF), the finance subsidiaryof NWL, issued £150 million index linked 2.033% Eurobonds due in 2036. Theproceeds were used to repay short term loans and fund the continuing capitalprogramme. This was the Group's first index linked debt issue and NWL willbenefit from the cash flow advantage from this type of debt. In November 2005, the EIB entered into a new £100 million facility with NWL.This offers NWL attractive funding and will be drawn on an index linked basismid 2006, with a 10 year maturity. On 20 April 2005, NWL effectively completed the early redemption of sixdebenture stocks amounting to £3.7 million. On 6 September 2005, NWL gave formalnotice of redemption to the holders of the 11.2% redeemable debenture stock(£3.5 million) and the 12% redeemable debenture stock (£2.0 million) and bothwere redeemed at par on 31 December 2005. On 31 January 2006, NWF issued a further £60 million index linked 1.6274%Eurobonds due in 2041. On 31 March 2006, the bondholders of the £350 million 6.875% Eurobonds due in2023 agreed to the substitution of NWF as issuer, in place of NorthumbrianServices Limited, with the retention of the guarantee from NWL. On 28 June 2006, the Group will redeem the remaining £172 million 8.625%Eurobonds utilising five year committed bank facilities of £125 million, withthe balance to be paid from existing cash resources. NWL has agreed the terms of two issues of index linked Eurobonds amounting to£200 million with a real coupon of c.1.75% and an average maturity of 45 years.Subject to the finalisation and terms of customary documentation, these indexlinked bonds are expected to be issued in mid June 2006. This will takeadvantage of the current low cost of funds and secure sufficient resources tomeet the needs of the capital investment programme until 2010. When issued, theGroup's debt portfolio will comprise c.75% on a fixed interest rate basis andaverage maturity will extend to about 20 years. Pensions The Group operates a defined benefit pension scheme providing benefits based onpensionable remuneration. The scheme remains open to existing members and to newemployees of NWL. The most recent actuarial valuation, as at 31 December 2004, reported that thescheme was 97.6% funded and new employer contributions were recommended by thescheme actuary. The Group agreed an alternative proposal to make capitalpayments of £36.1 million by April 2006 and £23.3 million by April 2007,covering both employee and employer contributions to 31 December 2010. The Groupalso launched a salary sacrifice arrangement, on 1 April 2006, under whichsavings in employer national insurance contributions are also paid into thescheme. The deficit under IAS 19 at 31 March 2006, was £3.7 million (2005: £76.4 million). NORTHUMBRIAN WATER LIMITED Revenue was £555.5 million for the year to 31 March 2006 (2005: £508.2 million).The revenue increase is mainly due to the price increase on water and seweragecharges to support the continuing high capital investment programme agreed aspart of the recent regulatory price review. Operating costs have increased from £310.5 million to £320.9 million,principally reflecting additional depreciation charges from the commissioning ofnew assets, the impact of inflation plus increases in market prices for power.These increases have been partially offset by efficiency savings. Operatingcosts for the appointed business in 2005/06 are in line with those estimated inthe 2004 final determination. Profit on ordinary activities before interest for the period was £234.6 million(2005: £197.7 million). Domestic customers We are committed to providing a good service to all our customers. Once again,drinking water and environmental standards have been met or exceeded. Thequality of drinking water supplied in both our regions is very high and remainsamong the best in the country. Our own independently commissioned researchrecords that the number of domestic customers believing we provide value formoney was the highest for six years and overall levels of customer satisfactionremain high. The results from our surveys of commercial and institutionalcustomers were equally positive. However, we are not complacent and continue towork hard to improve the quality of the service we offer to all our customers. Ofwat has set tough and challenging efficiency targets for the next five yearsand NWL is working hard to meet these. NWL has established new consultant andcontractor frameworks to improve the delivery of the capital investmentprogramme and has extended the use of the Six Sigma approach across thebusiness. This statistically-based business management tool was piloted at theregional sludge treatment centre at Bran Sands, where it produced excellentresults, and it is anticipated that it will prove equally valuable throughoutthe business. The number of properties suffering unplanned interruptions to water suppliesreturned to normal low levels in 2005/06 after the major interruption caused byunprecedented storms at Hexham in January 2005. The major scheme to replace thetwo pipes crossing the River Tyne that were washed away is progressing well. Thepipe network in Hexham has also been strengthened to improve the security ofsupplies in the area. Managing the amount of water lost from our networks is a key priority for NWL.The leakage targets agreed with Ofwat for 2005/06 were 157.5 megalitres per day(ml/d) in the north and 69.0 ml/d in the south, and both of these targets havebeen met. In the south, where resources are scarce, this is, by most comparativemeasures, amongst the lowest leakage levels in the country. NWL has committed tomake further reductions in both the north and the south. This will be achievedby further increasing the coverage and intensity of district metering, furtheroptimisation of pressure management, improved methods for leak detection andbetter use of new technology, together with our ongoing programme of renewal ofold pipes. NWL has performed very well on Ofwat's new method of measuring customertelephone service which takes into account a combination of all lines busy,calls abandoned and customer satisfaction. The underlying reason for this goodperformance is that the company has always aimed to answer customer calls inperson rather than use automated telephone answering systems. The number of properties flooded from sewers increased significantly in 2005/06.This was a consequence of an increased number of intense, local storms thataffected some of our most densely populated urban areas. For example, a storm on19 June 2005 was measured as a once in 500 year event. NWL is very aware of the impact flooding has on customers and is working withother stakeholders in the region to attempt to reduce the incidence of floodingand improve the way flooding is dealt with in the immediate and longer term.Regular formal liaison meetings with external bodies, such as local authorities,(most notably Newcastle City, South Tyneside and North Tyneside whose areas wereworst affected) the EA and local residents groups, have proven invaluable inensuring the most up to date information is fed back to the wider community. Commercial customers NWL has continued to develop its commercial business with major companies and,in particular, has successfully negotiated three major water and waste waterservices contracts, with John Baarda Limited, Biofuels Corporation plc and CorusUK Limited. Water resources NWL has sufficient water reserves in its northern area, largely due to KielderWater and the ability to top up its major rivers during periods of drought. Itssouthern area is in one of the driest parts of the UK and rainfall has been lowsince November 2004. In Suffolk, both groundwater and river levels are at aboutaverage for the time of year. The situation in Essex is currently lesschallenging than that facing water companies further south and NWL continues toensure there is enough water available for customers' needs. Over the years, NWL has carefully designed its systems in Essex to take accountof the limited availability of water in summer. Consequently, our reservoirs arefull at the time of preparing this report. The Langford Recycling Scheme wascommissioned some two years ago to improve the security of water supply. Thisscheme is designed to treat up to 40 ml/d of water during the summer months. Theresource position is further enhanced by our industry-leading work to managedemand and control leakage. Customer responses to our long standing programmesto encourage the wise use of water have also helped to reduce demand. NWL has now entered the pre-planning submission stage of the major project toenlarge its Abberton reservoir for water supply in Essex. Ten years have alreadybeen spent carefully preparing this major scheme which involves changes toexisting abstraction licences, providing new pipelines, raising the reservoir'sexisting dam by 3.2 metres and constructing four additional small dams. Theplanning application is due to be submitted in 2006 and, provided the planningprocess proceeds smoothly, construction will begin in 2010. Once filled in 2014,the capacity of the enlarged reservoir will be increased by some 60% and it willbe an important part of our plans to secure water supplies for our customers inone of Britain's driest regions. Investment NWL made a good start with the new investment programme and expenditure isbroadly in line with the requirements set out in the regulatory settlement. Capital expenditure for the period was £211.9 million. NWL has established newconsultant and contractor frameworks aimed at improving the delivery of thecapital investment programme. Within our investment programme we completed major environmental capitalinvestment projects at Birtley in Tyne and Wear, Hustledown, Sedgefield andKnitsley in County Durham and Hexham and Cramlington in Northumberland. Each ofthese will improve the quality of local watercourses. We have also replaced orimproved 91 unsatisfactory storm water overflows and 591 kilometres of watermains have been renewed or relined. NWL has also continued to invest in new and refurbished assets to protectdrinking water supplies. The water treatment works at Horsley in Northumberlandis currently being upgraded to safeguard further the quality of water suppliedto the Tyneside area. Investment schemes to improve the sewerage system have removed nearly 99properties from our register for properties at risk of flooding from sewers. Employees We have introduced health screening for all employees, whether it is criticalfor their job or not, and provide all employees with access to private medicalinsurance cover for work related conditions. NWL has continued to reduce thelevel of sickness absence which is now down to 3.1%. Water and waste water contracts Revenue for the Group's water and waste water contracts was £26.4 million forthe year to 31 March 2006 (2005: £22.4 million) and profit on ordinaryactivities before interest was £1.8 million (2005: £2.1 million). The Group is a member of two consortiums delivering private finance initiativecontracts with Scottish Water for waste water treatment. At Levenmouth, wherethe Group has a 75% shareholding in both project and operating companies, theeffluent treatment plant is meeting discharge consent conditions. Practicalcompletion of the odour treatment and sludge drying facilities has been achievedand commissioning and performance testing is underway. At Ayrshire, the Group acquired Degremont Limited's interest in the project andoperating companies on 23 December 2005, taking the Group's interest to 75% inthe project company and 100% in the operating company. The three effluenttreatment plants continue to perform satisfactorily. In Ireland, Northumbrian Water Projects Limited (NWP), is part of a consortiumthat designed and built a €70 million waste water treatment plant for Cork CityCouncil. NWP commenced the 20 year operation and maintenance contract inSeptember 2004, following commissioning, and the plant was formally opened inJune 2005. Related services The Group's non-water companies' revenue was £28.8 million (2005: £48.0 million)of which £19.2 million (2004: £37.0 million) was in respect of discontinuedoperations. Profit on ordinary activities before interest was £16.4 million(2005: £4.3 million), of which £15.8 million (2005: £1.8 million) was in respectof discontinued operations (i.e. FPS, Entec and ULG). Earnings per share and dividends Basic and diluted earnings per share were 20.55 pence (2005: 14.94 pence) and20.52 pence (2005: 14.92 pence) respectively. Earnings per share from continuingoperations, adjusted for IAS 39, deferred tax and the amortisation of debt fairvalue were 19.62 pence (2005: 16.44 pence). A final dividend of 7.04 pence per share for the year ended 31 March 2006 willbe recommended by the Board to shareholders at the AGM on 27 July 2006 and, ifapproved, will be paid on 15 September 2006 to shareholders on the register atthe close of business on 18 August 2006. Together with the ordinary interimdividend of 3.52 pence per share, the ordinary dividends paid and proposed forthe year will be 10.56 pence per share (2005: 10 pence per share). Thisrepresents an increase of 5.6% on the dividend for the previous year and isconsistent with the Board's decision to maintain a progressive dividend policywith real increases of around 3% p.a. The board of our main subsidiary, NWL, hasproposed a dividend policy consistent with the underlying assumptions adopted byOfwat in its recent final determination. A special dividend of 2.82 pence per share was paid in the year, in respect ofthe profit on disposal of subsidiaries of £14.6 million. The dividend cover, including the special dividend, for the year is 1.5x, and1.7x excluding deferred tax and the amortisation of debt fair value. Theordinary dividend cover from continuing operations for the year is 1.7x, and1.9x excluding deferred tax and the amortisation of debt fair value. Financial calendar 200627 July AGM16 August Ex-dividend date18 August Record date15 September Final dividend payment6 December Interim results announcement20 December Ex-dividend date22 December Record date 20072 February Interim dividend payment Board appointments Ron Lepin was appointed to the NWG Board as a non-executive director on 24October 2005. He is Vice President of the Infrastructure division of OntarioTeachers Pension Plan Board which holds 25% of the issued share capital of NWG.Ron is, therefore, not regarded as an independent director. The Chairman, Sir Frederick Holliday, will retire from the Board at the AGM on27 July 2006. Sir Derek Wanless will succeed Sir Fred as Chairman of NWG andalso of NWL. Following the retirement of Richard Allan in July 2005, Alex Scott-Barrett wasappointed an independent non-executive director to the board of NWL on 1November 2005. The NWL board agreed to appoint the non-executive directors of NWG, Sir PatrickBrown, Ron Lepin, Martin Negre, Sir Derek Wanless and Jenny Williams, to theboard of NWL on 1 January 2006. Outlook NWG will maintain its focus on delivering a solid performance in this regulatoryperiod. We will continue to deliver efficiencies against a backdrop of upwardcost pressure from energy prices, abstraction licences and other costs. In Essex, where water resources are most constrained, we are in a relativelystrong position and do not anticipate the need for restrictions. However, we arenot complacent and continue to monitor the situation. In the medium term, wewill implement our programme to increase security of supply through the Abbertonreservoir scheme. Delivery of our capital investment programme will reinforce our strongoperational performance and high level of customer service and water quality. John CuthbertManaging Director6 June 2006 Consolidated income statementFor the year ended 31 March 2006 Year to Year to 31.3.2006 31.3.2005 Notes £m £m--------------------------------------------------------------------------------Continuing operationsRevenue 2 591.5 541.6Operating costs (355.3) (345.5)--------------------------------------------------------------------------------Profit on ordinary activities before interest 2 236.2 196.1Finance costs payable (112.7) (107.7)Finance income receivable 6.7 7.8Share of profit after tax of associates andjointly controlled entities 0.1 0.1--------------------------------------------------------------------------------Profit on ordinary activities before taxation 2 130.3 96.3- current taxation 3 (15.6) 1.0- deferred taxation 3 (23.6) (21.0)- overseas tax 3 (0.1) (0.1)--------------------------------------------------------------------------------Profit for the year from continuing operations 91.0 76.2 Discontinued operationsProfit for the year from discontinued operations 4 15.4 1.2 --------------------------------------------------------------------------------Profit for the year 106.4 77.4-------------------------------------------------------------------------------- Attributable to:Equity shareholders of the company 105.9 77.9Minority interests 0.5 (0.5)-------------------------------------------------------------------------------- 106.4 77.4-------------------------------------------------------------------------------- Basic earnings per share for profitattributable to ordinary equity holders of the parent 5 20.55p 14.94pDiluted earnings per share for profitattributable to ordinary equity holders of the parent 5 20.52p 14.92pBasic earnings per share for profit fromcontinuing operations attributable toordinary equity holders of the parent 5 17.57p 14.71pDiluted earnings per share for profit fromcontinuing operations attributable to ordinaryequity holders of the parent 5 17.55p 14.69pAdjusted earnings per share for profit fromcontinuing operations attributable to ordinaryequity holders of the parent (excludingdeferred tax, amortisation of debt fair valueand IAS 39 adjustments) 5 19.62p 16.44pOrdinary final dividend proposed per share 5 7.04p 7.13pSpecial dividend paid per share 5 2.82p -Dividend paid per share 5 10.65p 7.50p-------------------------------------------------------------------------------- Consolidated statement of recognised income and expenseFor the year ended 31 March 2006 Year to Year to 31.3.2006 31.3.2005 £m £m--------------------------------------------------------------------------------Actuarial gains 52.7 21.2Cash flow hedges (2.8) 7.2Tax on items charged or credited to equity (15.6) (7.3)Translation differences - 0.4Profit for the year 106.4 77.4--------------------------------------------------------------------------------Total recognised income and expense 140.7 98.9-------------------------------------------------------------------------------- Consolidated balance sheetAs at 31 March 2006 Notes 31.3.2006 31.3.2005 £m £m--------------------------------------------------------------------------------Non-current assetsGoodwill 3.7 0.1Other intangible assets 64.2 64.2Property, plant and equipment 2,985.6 2,800.3Investments in jointly controlled entities 3.6 3.6Investments in associates - 1.4Financial assets 22.2 27.6Other investments 0.3 0.4-------------------------------------------------------------------------------- 3,079.6 2,897.6--------------------------------------------------------------------------------Current assetsInventories 3.3 4.5Trade and other receivables 109.5 117.3Cash and cash equivalents 176.6 95.0-------------------------------------------------------------------------------- 289.4 216.8--------------------------------------------------------------------------------TOTAL ASSETS 3,369.0 3,114.4--------------------------------------------------------------------------------Non-current liabilitiesInterest bearing loans and borrowings 1,972.9 1,929.7Provisions 3.1 2.7Deferred income tax liabilities 495.6 450.4Pension liability 3.7 76.4Other payables 10.6 16.6Grants 179.3 161.3-------------------------------------------------------------------------------- 2,665.2 2,637.1--------------------------------------------------------------------------------Current liabilitiesInterest bearing loans and borrowings 236.7 73.9Provisions 0.3 2.5Trade and other payables 156.3 169.4Income tax payable 9.7 1.2-------------------------------------------------------------------------------- 403.0 247.0--------------------------------------------------------------------------------TOTAL LIABILITIES 3,068.2 2,884.1--------------------------------------------------------------------------------NET ASSETS 300.8 230.3-------------------------------------------------------------------------------- Capital and reservesIssued capital 7 51.9 51.9Share premium reserve 7 446.5 446.3Cash flow hedge reserve 7 1.5 4.3Treasury shares 7 (1.7) (0.9)Retained earnings 7 (198.9) (272.4)--------------------------------------------------------------------------------Equity shareholders'funds 299.3 229.2Minority interest 7 1.5 1.1--------------------------------------------------------------------------------TOTAL CAPITAL AND RESERVES 300.8 230.3-------------------------------------------------------------------------------- Consolidated cash flow statementFor the year ended 31 March 2006 Year to Year to 31.3.2006 31.3.2005 £m £m--------------------------------------------------------------------------------Operating activitiesReconciliation of profit before interest to net cashflows from operating activitiesProfit on ordinary activities before interest 236.2 196.1Profit before interest on discontinued operations 1.2 1.8Depreciation and other similar non-cash charges 83.6 78.9Net charge for provisions, less payments (0.5) (1.1)Movements in working capital (5.5) (7.7)--------------------------------------------------------------------------------Cash generated from operations 315.0 268.0Special contributions paid in respect of retirementbenefits (22.8) -Net interest paid (119.7) (113.6)Income taxes (paid)/received (6.5) 6.7--------------------------------------------------------------------------------Net cash flows from operating activities 166.0 161.1-------------------------------------------------------------------------------- Investing activitiesInterest received 4.1 10.1Capital grants received 21.4 21.3Purchase of subsidiary undertaking (net of cashacquired) 2.4 -Proceeds on disposal of subsidiary undertakings 18.6 -Proceeds on disposal of property, plant and equipment 2.0 2.7Dividends received from jointly controlled entities 0.8 0.3Purchase of property, plant and equipment (206.7) (181.7)Other cash items 0.2 ---------------------------------------------------------------------------------Net cash flows from investing activities (157.2) (147.3)-------------------------------------------------------------------------------- Financing activitiesNew borrowings 210.2 348.2New loans issued (2.1) -Maturity of/(deposits into) investments 2.0 (23.0)Settled hedge instruments (3.7) 4.3Issue costs of new borrowings (1.4) (11.7)Own shares purchased (0.8) (0.4)Dividends paid to minority interests (0.3) (0.1)Dividends paid to equity shareholders (69.7) (38.9)Repayment of borrowings (46.6) (253.7)Payment of principal under hire purchase contracts andfinance leases (4.7) (4.0)--------------------------------------------------------------------------------Net cash flows from financing activities 82.9 20.7-------------------------------------------------------------------------------- Increase in cash and cash equivalents 91.7 34.5Cash and cash equivalents at start of year 62.2 27.7-------------------------------------------------------------------------------- Cash and cash equivalents at end of year 153.9 62.2-------------------------------------------------------------------------------- Net cash flow in respect of discontinued operationsCash consideration 29.8 -Cash and cash equivalents disposed (11.1) -Expenses paid in connection with disposals (0.1) --------------------------------------------------------------------------------- 18.6 --------------------------------------------------------------------------------- Notes to the financial statements The Board approved the preliminary statement covering the year ended 31 March2006 on 6 June 2006. The financial information set out above does not constitutethe Group's statutory financial statements for the year ended 31 March 2006 norfor the year ended 31 March 2005 within the meaning of Section 240 of theCompanies Act 1985. The financial information is based on the audited statutoryfinancial statements for the year ended 31 March 2006, upon which the auditorshave issued an unqualified audit opinion. The financial statements for the year ended 31 March 2005 have been delivered tothe Registrar of Companies. The financial statements for the year ended 31 March2006 will be sent to shareholders and delivered to the Registrar of Companies indue course. They will also be available at the Registered Office of the company,Northumbrian Water Group plc, Northumbria House, Abbey Road, Pity Me, Durham,DH1 5FJ. 1. Basis of preparation The consolidated financial statements have been prepared in accordance with IFRSas adopted for use in the European Union and as applied in accordance with theprovisions of the Companies Act 1985. The accounting policies selected bymanagement and applied to the results for the year ended 31 March 2006 werepublished by the Company on 28 November 2005, and are available on the Company'website www.nwg.co.uk. 2. Segmental analysis of revenue and profit on ordinary activities before interest Revenue Northumbrian Water & Total revenue Water waste water Related Discontinued from continuing Limited contracts services Total operations operations £m £m £m £m £m £m ---------------------------------------------------------------------------------------------------Year ended 31 March2006Segment revenue 555.5 28.4 53.3 637.2 (28.5) 608.7Inter segmentrevenue - (2.0) (24.5) (26.5) 9.3 (17.2)---------------------------------------------------------------------------------------------------Revenue toexternalcustomers 555.5 26.4 28.8 610.7 (19.2) 591.5--------------------------------------------------------------------------------------------------- Year ended 31 March2005Segment revenue 508.2 23.1 87.7 619.0 (60.5) 558.5Inter segmentrevenue - (0.7) (39.7) (40.4) 23.5 (16.9)---------------------------------------------------------------------------------------------------Revenue toexternalcustomers 508.2 22.4 48.0 578.6 (37.0) 541.6--------------------------------------------------------------------------------------------------- Profit on ordinary activities before interest Northumbrian Water & Related Discontinued Total revenue Water waste water services Total operations from continuing Limited contracts operations £m £m £m £m £m £m -------------------------------------------------------------------------------------------------Year ended 31 March2006 Segment profitbefore interest 234.6 1.8 16.4 252.8 (15.8) 237.0Centralunallocatedcosts andprovisions (0.8)-------------------------------------------------------------------------------------------------Profit onordinaryactivitiesbefore interest 236.2Net financecosts (106.0) Share ofprofit fromassociates andjointlycontrolledentities 0.1------------------------------------------------------------------------------------------------Profit onordinaryactivitiesbeforetaxation 130.3------------------------------------------------------------------------------------------------ The trading profit disclosed as discontinued operations is part of related services. Profiton ordinary activities before interest for related services, includes the profit on disposalof £14.6 million for 2006. Year ended 31 March 2005Segment profitbefore interest 197.7 2.1 4.3 204.1 (1.8) 202.3Centralunallocatedcosts andprovisions (6.2)-------------------------------------------------------------------------------------------------Profit onordinaryactivitiesbeforeinterest 196.1Net financecosts (99.9)Share ofprofit fromassociates andjointlycontrolledentities 0.1-------------------------------------------------------------------------------------------------Profit onordinaryactivitiesbeforetaxation 96.3------------------------------------------------------------------------------------------------- 3. Taxation Year to Year to 31.3.2006 31.3.2005 £m £m--------------------------------------------------------------------------------Current tax: UK corporation tax - continuing operations 15.6 (1.0) - discontinued operations (note 4) 0.6 0.9 - overseas tax 0.1 0.1--------------------------------------------------------------------------------Total current tax 16.3 --------------------------------------------------------------------------------- Deferred tax:Deferred tax - continuing operations 23.6 21.0 - discontinued operations (note 4) 0.1 ---------------------------------------------------------------------------------Total deferred tax 23.7 21.0----------------------------------------------------------------------------------------------------------------------------------------------------------------Tax charge in the income statement 40.0 21.0-------------------------------------------------------------------------------- The tax charge in the income statement is disclosed asfollows:Tax expense on continuing operations 39.3 20.1Tax expense on discontinued operations (note 4) 0.7 0.9-------------------------------------------------------------------------------- 40.0 21.0--------------------------------------------------------------------------------- 4. Discontinued operations The Group disposed of FPS on 8 July 2005, Entec on 5 October 2005 and ULG on 10April 2006. The results of the discontinued operations are disclosed withinrelated services. No tax arises on the disposals due to the availability of thesubstantial shareholdings exemption. The results of FPS, Entec and ULG for theperiod to their date of disposal are presented below: Year to Year to 31.3.2006 31.3.2005 £m £m--------------------------------------------------------------------------------Revenue 28.5 60.5Inter segment (9.3) (23.5)--------------------------------------------------------------------------------External revenue 19.2 37.0Operating costs (18.0) (35.2)--------------------------------------------------------------------------------Profit on ordinary activities before interest 1.2 1.8Profit on disposal of discontinued operations 14.6 ---------------------------------------------------------------------------------Profit before interest on discontinued operations 15.8 1.8Net finance costs 0.3 0.3--------------------------------------------------------------------------------Profit on ordinary activities before taxation 16.1 2.1Current tax (0.6) (0.9)Deferred tax (0.1) ---------------------------------------------------------------------------------Profit for the year from discontinued operations 15.4 1.2-------------------------------------------------------------------------------- The tax charge is analysed as follows:--------------------------------------------------------------------------------On profit on ordinary activities for the year (0.7) (0.9)-------------------------------------------------------------------------------- 5. Dividends paid and proposed A final ordinary dividend payment of 7.04 pence per ordinary share will berecommended by the Board to shareholders at the AGM scheduled for 27 July 2006.If approved, the final dividend will be paid on 15 September 2006 toshareholders whose names appear on the Company's Register of Members at theclose of business on 18 August 2006. Together with the ordinary interim dividendof 3.52 pence per ordinary share, the total ordinary dividend for the year willbe 10.56 pence per ordinary share. Year to Year to 31.3.2006 31.3.2005 £m £m--------------------------------------------------------------------------------Declared and paid during the year:Equity dividends on ordinary shares:Final dividend for 2004/05: 7.13p (2003/04: 4.63p) 36.9 24.0Interim dividend for 2005/06: 3.52p (2004/05: 2.87p) 18.2 14.9Special dividend for 2005/06: 2.82p (2004/05: nil) 14.6 ---------------------------------------------------------------------------------Dividends paid 69.7 38.9-------------------------------------------------------------------------------- Proposed for approval by shareholders at the AGM:Final dividend for 2005/06: 7.04p (2004/05: 7.13p) 36.5 36.9-------------------------------------------------------------------------------- 6. Earnings per share Basic earnings per share (EPS) is calculated by dividing the profit attributableto ordinary equity holders of the parent by the weighted average number ofordinary shares in issue during the year. Treasury shares held are excluded fromthe weighted average number of shares for basic EPS. EPS for continuingoperations is also disclosed. Weighted Weighted average number Earnings per average number Earnings per Earnings of shares share Earnings of shares share 31.3.2006 31.3.2006 31.3.2006 31.3.2005 31.3.2005 31.3.2005 £m million pence £m million pence------------------------------------------------------------------------------------------------------------------Net profitattributableto equityholders of theparent -continuingoperations 91.0 517.9 17.57 76.2 518.1 14.71Net profitattributableto equityholders of theparent -discontinuedoperations 15.4 2.98 1.2 0.23------------------------------------------------------------------------------------------------------------------Basic EPS 106.4 517.9 20.55 77.4 518.1 14.94------------------------------------------------------------------------------------------------------------------ The weighted average number of shares for diluted EPS is calculated by includingthe treasury shares held. Weighted Weighted average number Earnings per average number Earnings per Earnings of shares share Earnings of shares share 31.3.2006 31.3.2006 31.3.2006 31.3.2005 31.3.2005 31.3.2005 £m million pence £m million pence------------------------------------------------------------------------------------------------------------------Net profitattributableto equityholders of theparent -continuingoperations 91.0 518.6 17.55 76.2 518.6 14.69Net profitattributableto equityholders of theparent -discontinuedoperations 15.4 2.97 1.2 0.23-----------------------------------------------------------------------------------------------------------------Diluted EPS 106.4 518.6 20.52 77.4 518.6 14.92----------------------------------------------------------------------------------------------------------------- Adjusted EPS is considered by the directors to give a better indication of theGroup's underlying performance and is calculated as follows: Weighted Weighted average number Earnings per average number Earnings per Earnings of shares share Earnings of shares share 31.3.2006 31.3.2006 31.3.2006 31.3.2005 31.3.2005 31.3.2005 £m million pence £m million pence-----------------------------------------------------------------------------------------------------------------Basic EPS 91.0 517.9 17.57 76.2 518.1 14.71Deferred tax 23.6 4.55 21.0 4.05Amortisationof debt fairvalue (13.0) (2.50) (14.1) (2.72)IAS 39derivatives - - 2.1 0.40-----------------------------------------------------------------------------------------------------------------Adjusted EPS 101.6 517.9 19.62 85.2 518.1 16.44----------------------------------------------------------------------------------------------------------------- 7. Reconciliation of movements in equity Equity share Share premium Cash flow hedge Treasury Retained Total Minority capital reserve reserve shares earnings equity interests TotalGroup £m £m £m £m £m £m £m £m------------------------------------------------------------------------------------------------------------------At 1 April 2005 51.9 446.3 4.3 (0.9) (272.4) 229.2 1.1 230.3Sharespurchased - - - (0.8) - (0.8) - (0.8)Refund ofshare issuecosts - 0.2 - - - 0.2 - 0.2Totalrecognisedincome andexpense forthe year - - (2.8) - 143.0 140.2 0.5 140.7Share-basedpayment - - - - 0.2 0.2 - 0.2Equitydividends paid - - - - (69.7) (69.7) (0.1) (69.8)-------------------------------------------------------------------------------------------------------------------At 31 March2006 51.9 446.5 1.5 (1.7) (198.9) 299.3 1.5 300.8------------------------------------------------------------------------------------------------------------------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Natwest