8th Jun 2005 07:01
Northumbrian Water Group PLC08 June 2005 8 June 2005 PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2005 NORTHUMBRIAN WATER GROUP PLC Northumbrian Water Group plc is pleased to announce its preliminary results forthe year ended 31 March 2005. HIGHLIGHTS • Turnover of £578.6 million for the year to 31 March 2005 (ten months to 31 March 2004: £442.1 million; 2003/04 pro forma: £520.8 million). This increase principally reflects the successful application to the Office of Water Services (Ofwat) for an interim increase of price limits (IDoK) at NWL. • Profit before tax of £108.8 million; (ten months to 31 March 2004 before exceptionals: £56.5 million; 2003/04 pro forma before exceptionals: £65.0 million). Interest charges include a credit of £14.1 million amortisation of debt fair value (ten months and pro forma to 31 March 2004: £5.3 million). • Proposed final dividend of 7.13 pence per share, giving a total dividend of 10.00 pence per share for the year (2003/04: 6.95 pence per share, for the ten month period and 8.34 pence per share on a pro forma basis). Dividends from the core business, NWL, are in line with Ofwat final determination assumptions. • Dividend policy of around 3% real growth p.a. for the regulatory period 2005-10. • Financial position strengthened by Kielder securitisation, IDoK, improved ratings and £100 million issue to 2033 Eurobond. • Continuing high levels of drinking water quality, customer service and environmental protection. • Periodic review of price limits by Ofwat concluded. This removes uncertainty and sets the increase in NWL's price limits for 2005-10 at 15% before inflation. John Cuthbert, Managing Director, said today: "Northumbrian Water has built onthe performance for the first half of 2004 to deliver strong full year results.We have further improved our operating performance and strengthened ourfinancial position, which led to S&P's upgrade in January this year. Ourproposed dividend policy reflects the confidence of the Board following thissubstantial financial restructuring. As well as delivering value toshareholders, the Group has continued to provide customers with an excellentlevel of service and remains committed to environmental protection." For further information contact: Northumbrian Water 0191 301 6419John Cuthbert, Managing DirectorChris Green, Finance DirectorAlistair Baker, Communications & PR ManagerFinsbury 020 7251 3801Rollo HeadMark HarrisSally Hogan Notes to Editors Northumbrian Water Group plc (the Company or NWG) is the holding company ofNorthumbrian Services Limited (NSL), which in turn owns a number of companies(together the Group). Of these, the largest are Northumbrian Water Limited(NWL), Entec UK Limited (Entec) an environmental and engineering consultancy,Analytical & Environmental Services Limited (AES) an environmental monitoringcompany and Fastflow Pipeline Services Limited (Fastflow) which provides waterand gas network renewal and refurbishment services. Northumbrian WaterInternational (NWI), a division of NSL, manages waste water treatment plants inScotland and the Republic of Ireland, and water operations in Gibraltar. NWL, the largest company within the Group, is a regulated water and seweragecompany operating in the north east and south east of England (trading asNorthumbrian Water and Essex & Suffolk Water respectively), and is committed tomaintaining its excellent reputation for customer service and environmentalprotection. NWL currently provides water and sewerage services to 2.6 millionpeople in north east England, and water services to 1.7 million people in southeast England. NWG was incorporated on 12 May 2003 but did not trade in the period from 12 May2003 to 23 May 2003. The financial statements for 2003/04 included the tenmonths trading figures to 31 March 2004, together with a pro forma statementcomprising the actual ten months trading results and eight weeks ofpre-acquisition profits. The 2003/04 pro forma results are provided here forcomparison purposes. GROUP FINANCIAL PERFORMANCE The Group's turnover was £578.6 million for the year to 31 March 2005 (tenmonths to 31 March 2004: £442.1 million; 2003/04 pro forma: £520.8 million),largely reflecting NWL's successful application to Ofwat for an IDoK for 2004/05. Operating profit for the year was £204.7 million (ten months to 31 March 2004:£143.6 million; 2003/04 pro forma: £164.3 million). At NWL, operating costs haveincreased by a net £4.5 million, although operating costs for the appointedbusiness in 2004/05 are £7.6 million lower than those in the 1999 finaldetermination (see water section for further detail). Net interest payable was £99.1 million for the year (ten months to 31 March 2004before exceptionals: £92.8 million; 2003/04 pro forma before exceptionals:£105.3 million) and includes £14.1 million amortisation of debt fair value (tenmonths and pro forma to 31 March 2004: £5.3 million) and £3.8 million of one-offgains from the cancellation of interest rate hedging and settlement ofoutstanding tax claims. The tax charge for the year was £10.4 million (ten months to 31 March 2004:£14.0 million credit; 2003/04 pro forma: £13.5 million credit) comprisingcorporation tax of £1.5 million (ten months to 31 March 2004: £9.1 millioncredit; 2003/04 pro forma: £8.8 million credit) and deferred tax of £8.9 million(ten months to 31 March 2004: £4.9 million credit; 2003/04 pro forma: £4.7million credit). The corporation tax charge was offset by modest prior year credits compared to2004 and, unlike 2004, there are no exceptional items. The deferred tax chargewas offset by prior year credits but increased by approximately £4.0 million dueto a reduction in discount resulting from a decrease in long term gilt yieldsover the year. Profit on ordinary activities after tax for the year to 31 March 2005 was £98.4million (ten months to 31 March 2004: £59.5 million; 2003/04 pro forma: £67.5million), largely reflecting increased price limits at NWL and the interestcredits noted above. CAPITAL STRUCTURE In excess of 88% of the Group debt is arranged on a fixed interest basis and hasan average maturity of 18 years. The Group seeks to mitigate the risk andexposure it does have to changes in interest rates by matching long term assetswith long term liabilities, such as long term bonds. Since flotation of the Group in May 2003, the Group has taken a number ofactions to strengthen the capital structure. The first of these occurred beforethe current period, in December 2003, when Ofwat responded favourably to anapplication by NWL to increase its price limits in real terms in 2004/05. On 12 May 2004, the Group announced the securitisation of NWL's contract withthe Environment Agency (EA) to operate the Kielder Water transfer scheme. Thenet proceeds of £212.1 million arising from a 30 year bond were used to repayshort term acquisition debt of £205.0 million. The European Investment Bank (EIB) confirmed, on 12 May 2004, its intention toremain as a lender to NWL following the Group's change of ownership. Ofwat issued a position paper on 12 July 2004, which concluded that NWL hadtaken adequate measures to demonstrate, both to the regulator and to the capitalmarkets, that it was able to raise finance and to fund investment programmes. In December 2004, NWL's finance subsidiary issued a £100 million increase to its2033 Eurobond. The proceeds were used to repay short term working capitalfacilities, thereby extending the profile of the debt maturity and funding theongoing capital programme. The all-in cost of this additional issue (5.75%) wassimilar to the all-in cost of the original £250 million raised in December 2002. Working capital facilities of £125 million have been arranged for a five yearterm by NSL in May 2005, to part refinance the NSL bond when it matures in June2006. The balance required will be covered by available cash at NSL. Similarfacilities, with 364 day and five year maturities, were also arranged for NWL,totalling £150 million, to provide additional working capital during the initialphase of the 2005-10 capital investment programme. NWG's net debt increased by £11.5 million to £1,881.0 million compared with 31March 2004. The Group's gearing at 31 March 2005, based on its net debt dividedby NWL's Regulatory Capital Value (RCV) at 31 March 2005 of £2,468.3 million,was 76% (73% excluding the unamortised debt fair value). Cash interest cover forthe Group is 2.7 times, reflecting the better trading performance. Gearing for NWL's appointed business at 31 March 2005, based on its net debtdivided by its RCV at that date was 59% (2004: 59%), whilst cash interest coverimproved to 3.4 times. CREDIT RATING Moody's initiated coverage of NWL with a credit rating of Baa1 on 8 April 2004,consistent with the Fitch rating of BBB+ announced on 11 December 2003. Standard& Poor's (S&P's) improved its rating outlook for NWL from BBB stable to BBBpositive on 16 April 2004 and increased its rating to BBB+ stable on 25 January2005. OFWAT FINAL DETERMINATION Ofwat published its final determination for NWL on 2 December 2004, allowing NWLto raise its price limits by 15% above the rate of inflation over the years2005-10. This was a significant increase on the draft determination of 7.8%. NWGannounced on 15 December 2004 that the NWL board had accepted the review. Thefinal determination includes allowances for increases to base operatingexpenditure for energy costs and pension contributions, and takes into accountthe impact of new Inland Revenue tax rules on the business. It also sets theinvestment programme and outputs that NWL must deliver over the next five years.The regulator's final determination was more balanced than the draftdetermination announced earlier in the year, but it still contains tough andchallenging efficiency targets. WATER Turnover was £508.2 million for the year to 31 March 2005 (ten months to 31March 2004: £386.2 million; 2003/04 pro forma: £454.6 million). The increasedturnover during the year is mainly due to price increases following an IDoK byOfwat. NWL successfully applied for an increase in its price limits to fundunanticipated additional costs caused by increased customer bad debt, waterquality monitoring and new obligations requiring capital expenditure. Inaddition, a separate determination compensated for loss of revenue arising fromthe actual demand for water being lower than that allowed for by Ofwat at its1999 price review. Operating costs for the period were £306.4 million (ten months to 31 March 2004:£252.8 million; 2003/04 pro forma: £301.9 million). Depreciation increased by£9.8 million due to further capital investment. Other cost increases reflectinggeneral inflationary price rises have been offset by operational efficiencysavings and the non-recurrence of exceptional costs from 2003/04. Operatingcosts for the appointed business in 2004/05 are £7.6 million lower than those inthe 1999 final determination, despite incurring additional costs not funded inthat determination. This reflects the continual drive in the business toidentify and deliver efficiencies. Operating profit for the year was £201.8 million (ten months to 31 March 2004:£133.4 million; 2003/04 pro forma: £152.7 million), which reflects an increasein turnover of £53.6 million, offset slightly by a net increase in operatingcosts of £4.5 million. Net capital investment excluding inter group costs, at NWL, for the year was£208.8 million (ten months to 31 March 2004: £156.7 million; 2003/04 pro forma:£161.6 million). NWL has met its regulatory outputs required to meet qualityobjectives and delivered the capital efficiencies assumed by Ofwat. Capitalmaintenance investment has remained in line with the Ofwat forecast. Lowercustomer demand has resulted in lower investment relating to the supply demandbalance and has meant that the regulated business has invested less than theOfwat forecast for 2000-05. To safeguard the quality of its water supplies, NWL's investment in new andrefurbished assets continued. The new water treatment works at Wearhead inCounty Durham was commissioned, serving the Wear Valley and Sunderland areas. Anextension to the water treatment works at Lound, serving the Lowestoft area inSuffolk, was also completed. Work began at Horsley and Whittle Dene inNorthumberland to provide additional treatment facilities to remove minutetraces of pesticides occasionally present in the water. Further progress has been made with the long term project to increase waterresources in Essex by enlarging Abberton reservoir. An allowance for the costsof the project during the next five years was made in NWL's final determination. During the year, capital investment projects were also completed at Marske andSkinningrove on the Cleveland coast. New underground storm water storage tankswere constructed at Marske to protect the quality of the adjacent designatedbathing water. At Skinningrove, the new sewage treatment works will improve thequality of the local watercourse and the sea. Preparations were made for theprovision of storm water storage tanks at Redcar. NWL continues to provide its customers with excellent levels of service and isstill the only water and sewerage company to have achieved a star rating for allaspects of its service standards by Ofwat. However, for the third year runningits performance was affected by exceptional adverse weather conditions. Severesummer storms in August 2004 resulted in sewer flooding, and torrential rainfallin January 2005 increased the flow in the River Tyne to such an extent that theriver washed away water mains serving Hexham, which is unprecedented, and thetown was without water for several days. A customer relations disaster was avoided because of the efforts of our employees and their speed of response to what was a major emergency. The investment allowed in the Ofwat final determination towards the cost oftackling discoloured water will bring improvements for affected customers overthe next five years and should also improve NWL's future score in the Ofwatperformance measures. The same is true of the investment allowed to reduce sewerflooding. The number of companies taking advantage of NWL's innovative effluent treatmentservice at Bran Sands on Teesside was increased with the signing of a 25 yearcontract to treat effluent from fine chemicals company Degussa. Following a successful pilot trial, a contract was signed with Lafarge for theuse of the sewage sludge pellets produced by NWL's sludge driers at Bran Sandsas a fuel in the manufacture of cement. The contract reduces NWL's disposalcosts and provides a secure and sustainable outlet for the sludge. NWL was alsosuccessful in a bid to supply water services to the new racecourse being builtat Great Leighs, to the north of Chelmsford. NWL gained certification to ISO 14001, a framework of control for anEnvironmental Management System for the whole of its business in December 2004.This was a significant achievement, which builds on the pioneering certificationof its sewage treatment and recreation activities. In 2004, NWL's sewage treatment works continued to perform to the highest levelsand all met their consents during the year. Compliance is measured by the EA andreported by Ofwat against standards set by the Urban Waste Water TreatmentDirective and the Water Resources Act. In 2004, works achieved 100% compliance. August 2004 was the wettest August in the UK since 1956, with more than twicethe normal average rainfall for that month. This rainfall was widespread, heavyand prolonged, with only eight dry days recorded in some areas. Flooding wasexperienced in Hartlepool, Darlington and Bishop Auckland. As a result, NWL isunlikely to achieve the highest levels of service in Ofwat's sewer floodingcategories when its results for 2004/05 are published. NWI is the trading division of NSL responsible for managing the Group'sinterests in contracts in Scotland, Ireland and Gibraltar. Turnover was £23.1million in 2004/05 (ten months to 31 March 2004: £17.6 million; 2003/04 proforma: £20.7 million), reflecting the commissioning and subsequent operation ofthe Cork plant. Operating profit for the year was £2.3 million (ten months to 31March 2004: £2.1 million; 2003/04 pro forma: £2.2 million). RELATED SERVICES The Group's non-water companies' turnover was £87.7 million for the year (tenmonths to 31 March 2004: £70.2 million; 2003/04 pro forma: £82.1million) andoperating profit was £4.8 million (ten months to 31 March 2004: £3.2 million;2003/04 pro forma: £3.4 million). The related services companies continue tobuild their businesses and to expand their client bases. Entec is one of the UK's largest environmental and engineering consultancycompanies, employing around 600 people delivering projects to both the Group anda range of external organisations in the public and private sectors. Over thelast five years it has grown strongly to reach a turnover of £41.5 million forthe year, up 5% on the previous year (ten months to 31 March 2004: £33.8million), with 77% of revenue now being generated outside the Group. Fastflow is the Group's specialist underground asset management business,providing water, sewer and gas network renewal and refurbishment services.During 2004/05 it employed an average of around 220 people. Turnover was £15.6million during the year 2004/05, representing a reduction of 3% compared proforma with 2003/04 (ten months to 31 March 2004: £13.4 million), due to thecyclical nature of water industry asset management programmes. AES is a leading environmental monitoring company providing high qualitymonitoring services, analysis and technical consultancy to major industrialgroups, environmental regulators and local authorities throughout the UK andIreland. AES employs over 300 people in eight locations. Although turnover fromNWL decreased, total turnover for the year increased marginally to £13.2 millioncompared to the pro forma figures (ten months to 31 March 2004: £10.9 million)reflecting strong growth in external markets. AES expanded in Wales after setting up a new office in Cwmbran as a base for itsteam of air quality scientists and occupational hygienists and will continue toextend its range of services during the coming year by offering a range ofhealth and safety training courses. EARNINGS PER SHARE AND DIVIDENDS Basic and diluted earnings per share were 19.1 pence (ten months to 31 March2004: 11.5 pence; 2003/04 pro forma: 14.4 pence). Earnings per share, adjustedfor deferred tax and the amortisation of debt fair value were 18.1 pence (tenmonths to 31 March 2004: 11.2 pence, before exceptionals, deferred tax and theamortisation of debt fair value; 2003/04 pro forma: 14.2 pence). A final dividend of 7.13 pence per share for the year ended 31 March 2005 willbe recommended by the Board to the AGM on 28 July 2005 and, if approved, will bepaid on 16 September 2005 to shareholders on the register at the close ofbusiness on 19 August 2005. Together with the interim dividend of 2.87 pence pershare, the dividend for the year will be 10.00 pence per share (ten months to 31March 2004: 6.95 pence per share). This represents an increase of 20% on thedividend for the 2003/04 pro forma trading period. The dividend cover for theyear is 1.9 times and 1.8 excluding deferred tax and the amortisation of debtfair value. The proposed dividend reflects increased confidence following the substantialimprovements made to the Group's balance sheet over the last year and theremoval of uncertainty following the Ofwat Periodic Review of prices. The board of our main subsidiary, NWL, has proposed a dividend policy consistentwith the underlying assumptions adopted by Ofwat in its recent finaldetermination. Looking to the end of the current regulatory period, NWG expects to be able tomaintain a progressive dividend policy with real increases of around 3% p.a. The Board believes this provides shareholders with a sustainable policyconsistent with the regulatory environment within which NWL operates andreflects the ongoing benefits at the Group from refinancing. The policy is alsoconsistent with maintaining Group and NWL gearing at around current levels overthe medium term (excluding the unamortised fair value adjustment, due toacquisition debt at 23 May 2003). INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) The Group will publish its results under IFRS for the six months to 30 September2005 and for the year ending 31 March 2006. The Group does not currentlyanticipate adopting IFRS at subsidiary level within the Group. The major differences in accounting policies expected to have an impact on theGroup are deferred tax, retirement benefits, fixed asset accounting, businesscombinations and intangible assets. The adoption of IFRS will have no impact oncash flow or dividends for the Group. The full impact of the adoption of IFRS on the financial statements will becommunicated in a presentation to analysts and investors, planned for September2005. BOARD APPOINTMENTS As we announced last year, Jenny Williams and Bernard Guirkinger joined theBoard on 27 May 2004, Jenny as an independent non-executive director and Bernardas a Suez representative. Alain Chaigneau, the second Suez representative, whostood down from the Board on 17 March 2005, was replaced by Christophe Cros onthe same day. Following the disposal by Suez of its 25% shareholding in NWG,both Bernard and Christophe resigned on 28 April 2005. OUTLOOK We retain the focus on our core water and waste water competence. That focusunderpins our expectation that we will continue to build upon the track recordof service delivery, environmental performance and stakeholder value on whichour reputation is based. Our proposed dividend policy reflects the confidence of the Board following thesubstantial financial restructuring and of the regulatory review of prices. Itis consistent with the regulatory expectations of our core business and theBoard believes it provides a sustainable return to shareholders. John CuthbertManaging Director8 June 2005 GROUP PROFIT AND LOSS ACCOUNT Year to Period to 31.3.2005 31.3.2004 £m £m-------------------------------------------------------------------------------- Turnover: Group and share of joint ventures 585.5 448.6Less share of joint ventures' turnover (6.9) (6.5) ------------------------Group turnover 578.6 442.1Operating costs- operating costs before exceptional costs (373.9) (296.3)- exceptional costs - (2.2) ------------------------Operating profit 204.7 143.6Share of associated undertakings' operating profit 2.2 2.5Share of joint ventures' operating profit 1.0 1.0Interest and similar charges- net interest payable and similar charges (99.1) (92.8)- exceptional amortisation of financing costs - (8.8) ------------------------Profit on ordinary activities before taxation 108.8 45.5Taxation on profit on ordinary activities- current taxation (1.3) 9.4- deferred taxation (8.9) 4.9- share of associates'and joint ventures' tax (0.2) (0.3) ------------------------Profit on ordinary activities after taxation 98.4 59.5Minority interests 0.5 (0.1) ------------------------Profit attributable to shareholders 98.9 59.4Dividends paid and proposed (51.8) (36.0) ------------------------Retained profit for the financial year 47.1 23.4 ------------------------ Basic earnings per share 19.1p 11.5p ------------------------Adjusted earnings per share (excludingdeferred tax, amortisation of debt fair valueand exceptionals) 18.1p 11.2p ------------------------Diluted earnings per share 19.1p 11.5p ------------------------Dividend per share 10.00p 6.95p ------------------------ All the above results relate to continuing activities. GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Year to Period to 31.3.2005 31.3.2004 £m £m--------------------------------------------------------------------------------Profit for the financial yearGroup 98.8 58.7Associates (0.4) -Joint ventures 0.5 0.7 ------------------------Profit for the financial year attributable tothe members of the parent company 98.9 59.4Exchange differences 0.4 - ------------------------Total recognised gains and losses relating tothe year 99.3 59.4 ------------------------ GROUP BALANCE SHEET 31.3.2005 31.3.2004 £m £m--------------------------------------------------------------------------------Fixed assetsIntangible assets 64.3 64.4Tangible assets 2,806.6 2,692.8--------------------------------------------------------------------------------Investments in joint ventures: share of gross assets 12.1 12.5 share of gross liabilities (8.5) (9.1) -------------------------------------------------------------------------------- 3.6 3.4Investments in associates 1.4 1.8Other investments 0.4 0.4 ------------------------ 2,876.3 2,762.8 ------------------------Current assetsStocks 4.5 4.8Debtors: amounts receivable within one year 121.9 118.1Debtors: amounts receivable after more than one year 13.0 14.3Cash at bank and short term deposits 118.0 44.8 ------------------------ 257.4 182.0Creditors: amounts falling due within one year (280.6) (247.5) ------------------------Net current liabilities (23.2) (65.5) ------------------------Total assets less current liabilities 2,853.1 2,697.3Creditors: amounts falling due after more than oneyear (1,946.3) (1,866.4)Provisions for liabilities and charges (172.9) (165.1)Accruals and deferred income (164.5) (142.8) ------------------------Net assets 569.4 523.0 ------------------------ Capital and reservesCalled up share capital 51.9 51.9Share premium account 446.3 446.3Other reserve (0.9) (0.5)Profit and loss account 71.0 23.4 ------------------------Equity shareholders' funds 568.3 521.1Minority equity interests 1.1 1.9 ------------------------Total capital and reserves 569.4 523.0 ------------------------ GROUP CASH FLOW STATEMENT Year to Period to 31.3.2005 31.3.2004 £m £m-------------------------------------------------------------------------------- Reconciliation of total operating profit to net cashinflow from operating activities--------------------------------------------------------------------------------Total operating profit 204.7 143.6Depreciation 92.6 72.9Loss/(profit) on disposal of tangible fixed assets 1.3 (0.5)Other non-cash movements 0.1 -Amortisation of goodwill 0.1 -Movement in provisions (1.1) (1.5)Amortisation of capital grants (3.9) (3.2)Decrease in stocks 0.3 1.2(Increase)/decrease in debtors (9.2) 15.5Decrease in creditors (1.5) (9.5) ---------------------Net cash inflow from operating activities 283.4 218.5 --------------------- --------------------------------------------------------------------------------Cash flow statement--------------------------------------------------------------------------------Net cash inflow from operating activities 283.4 218.5Net cash inflow from dividends received fromjoint ventures 0.3 -Net cash outflow from returns on investmentsand servicing of finance (111.0) (101.9)Net cash inflow from taxation 6.7 -Net cash outflow on capital expenditure andfinancial investments (173.1) (148.4)Acquisition of business (net of expenses) - (789.2)Equity dividends paid (38.9) (12.0) ---------------------Net cash outflow before management of liquidresources and financing (32.6) (833.0) ---------------------Management of liquid resources (19.7) 293.6 ---------------------Issue of new shares - 368.5Purchase of own shares (0.4) (0.5)Other financing net cash inflow 90.5 184.7 ---------------------Net cash inflow from financing 90.1 552.7 ---------------------Increase in cash in the year 37.8 13.3 --------------------- --------------------------------------------------------------------------------Reconciliation of net cash flow to movement in net debt --------------------------------------------------------------------------------Increase in cash in the year 37.8 13.3Cash inflow from increase in net borrowings (90.5) (184.7)Cash outflow/(inflow) from management of liquid resources 19.7 (293.6)Issue costs on new borrowings 11.7 - ----------------------Increase in net debt resulting from cash flows (21.3) (465.0)Other non-cash items 14.9 5.3Inception of new finance lease contracts (5.1) (5.2) ----------------------Increase in net debt in the year (11.5) (464.9)Net borrowings at the start of the year (1,869.5) -Loans and finance leases acquired withsubsidiaries net of short term deposits - (1,404.6) ----------------------Net debt at the end of the year (1,881.0) (1,869.5) ---------------------- Notes to the financial statements 1 Basis of preparation The results for NWG and its subsidiaries (together the Group) cover the year to31 March 2005. The comparative results cover the period from incorporation ofNWG (12 May 2003) to 31 March 2004. NWG did not trade in the period from 12 May2003 to 23 May 2003. To provide comparative figures, the pro forma figures forthe 12 months ended 31 March 2004 are included (see note 6), which include the10 months trading results of NSL to 31 March 2004, with the addition of the NWGacquisition accounting from 23 May 2003. The pro forma figures include 8 weeksof pre-acquisition profits. The results for the year ended 31 March 2005 have been prepared on the basis ofaccounting policies consistent with those set out in the financial statements ofthe Group for the year ended 31 March 2005. 2 Segmental analysis of turnover and operating profit Year to Period to 31.3.2005 31.3.2004 £m £m --------------------------------------------------------------------------------TurnoverUK water 508.2 386.2Water international 23.1 17.6 ------------------------ 531.3 403.8Related services 87.7 70.2Joint ventures 6.9 6.5 ------------------------Total turnover 625.9 480.5Inter segment (40.4) (31.9) ------------------------Total: Group and share of joint ventures 585.5 448.6 ------------------------ Group 578.6 442.1Joint ventures 6.9 6.5 ------------------------ 585.5 448.6 ------------------------ Operating profit UK water 201.8 133.4Water international 2.3 2.1 ------------------------ 204.1 135.5Related services 4.8 3.2 ------------------------ 208.9 138.7Central unallocated costs and provisions (4.2) 4.9 ------------------------Group operating profit 204.7 143.6Share of associated undertakings' profit 2.2 2.5Share of joint ventures' profit 1.0 1.0Net interest payable and investment income (99.1) (101.6) ------------------------Profit on ordinary activities before taxation 108.8 45.5 ------------------------ 3 Dividends A final dividend payment of 7.13 pence per ordinary share will be recommended bythe Board to shareholders at the AGM scheduled for 28 July 2005. If approved,the final dividend will be paid on 16 September 2005 to shareholders whose namesappear on the Company's Register of Members at the close of business on 19August 2005. Together with the interim dividend of 2.87 pence per ordinaryshare, paid on 4 February 2005, the total dividend for the year will be 10.00pence per ordinary share. Year to Period to 31.3.2005 31.3.2004 £m £m--------------------------------------------------------------------------------Interim paid of 2.87 pence (2004: 2.32 pence)per 10 pence ordinary share 14.9 12.0Final proposed of 7.13 pence (2004: 4.63 pence) per 10 pence ordinary share 36.9 24.0 ----------------------- 51.8 36.0 ----------------------- 4 Earnings per share Basic and diluted earnings per share are calculated using a weighted averagenumber of shares of 518.6 million. Adjusted earnings per share is considered by the directors to give a betterindication of the Group's underlying performance. Adjusted earnings per sharehave been calculated as follows: Year to Period to 31.3.2005 31.3.2004 £m £m--------------------------------------------------------------------------------Adjusted earningsProfit attributable to shareholders 98.9 59.4Deferred tax 8.9 (4.9)Amortisation of debt fair value (14.1) (5.3)Exceptional current tax - (2.3)Exceptional operating costs - 2.2Exceptional amortisation of financing costs - 8.8 -----------------------Adjusted earnings 93.7 57.9 -----------------------Basic and diluted EPS 19.1p 11.5p -----------------------Adjusted EPS 18.1p 11.2p ----------------------- 5 Taxation Year to Period to 31.3.2005 31.3.2004 £m £m--------------------------------------------------------------------------------Current taxUK corporation tax charge/(credit)- current tax 3.0 1.4- prior periods (1.8) (10.9)Overseas tax 0.1 0.1 ------------------------- 1.3 (9.4) -------------------------Deferred tax charge/(credit)Undiscounted- current year 26.7 17.9- prior periods (7.6) (1.3) ------------------------ 19.1 16.6Discount (10.2) (21.5) ------------------------ 8.9 (4.9) ------------------------ Share of associates' tax (credit)/charge (0.1) 0.2Share of joint ventures' tax charge 0.3 0.1 ------------------------ 0.2 0.3 ------------------------ Total tax charge/(credit) on profit on ordinaryactivities 10.4 (14.0) ------------------------ The current tax and undiscounted deferred tax charge are calculated at theestimated effective tax rates for the year. Deferred tax discount reflects theimpact of applying factors based on the returns on the relevant UK Governmentgilts to forecast reversals of the undiscounted liability. 31.3.2005 31.3.2004 £m £m--------------------------------------------------------------------------------Deferred tax provisionUndiscounted 448.6 429.5Discount (280.9) (270.7) -----------------------------Discounted deferred tax 167.7 158.8 ----------------------------- 6 Pro forma results The Group has disclosed the comparative pro forma figures for the acquiredgroup, NSL, for the year ending 31 March 2004. This includes eight weeks ofpre-acquisition trading results and the accounting effect of the acquisition on23 May 2003. GROUP PROFIT AND LOSS ACCOUNT Year to 31.3.2004 (Pro forma) ------------------------------------ Before Year to exceptional Exceptional 31.3.2005 items items Total £m £m £m £m------------------------------------------------------------------------------- Turnover: Group and shareof joint ventures 585.5 528.3 - 528.3Less share of jointventures' turnover (6.9) (7.5) - (7.5) ------------------------------------------- Group turnover 578.6 520.8 - 520.8Operating costs- operating costs beforeexceptional costs (373.9) (354.3) - (354.3)- exceptional costs - - (2.2) (2.2) ------------------------------------------- Operating profit 204.7 166.5 (2.2) 164.3Share of associatedundertakings' operating profit 2.2 2.5 - 2.5Share of joint ventures'operating profit 1.0 1.3 - 1.3Interest and similar charges- net interest payable andsimilar charges (99.1) (105.3) - (105.3)- exceptional amortisationof financing costs - - (8.8) (8.8) -------------------------------------------Profit on ordinaryactivities before taxation 108.8 65.0 (11.0) 54.0Taxation on profit on ordinaryactivities- current taxation (1.3) 6.6 2.3 8.9- deferred taxation (8.9) 4.0 0.7 4.7- share of associates' andjoint ventures' tax (0.2) (0.1) - (0.1) -------------------------------------------Profit on ordinaryactivities after taxation 98.4 75.5 (8.0) 67.5Minority interests 0.5 (0.6) - (0.6) -------------------------------------------Profit attributable to shareholders 98.9 74.9 (8.0) 66.9Dividends paid and proposed (51.8) (36.0) - (36.0) -------------------------------------------Retained profit for the period 47.1 38.9 (8.0) 30.9 ------------------------------------------- Basic earnings per share 19.1p 14.4p -------------------------------------------Adjusted earnings per share(excluding deferred tax,amortisation of debt fairvalue and exceptionals) 18.1p 14.2p -------------------------------------------Diluted earnings per share 19.1p 14.4p -------------------------------------------Dividends per share 10.00p 8.34p ------------------------------------------- The Group has also presented the comparative pro forma cash flow figures for theacquired group, NSL, for the year ending 31 March 2004. This includes eightweeks of pre-acquisition cash flows and the accounting effect of the acquisitionon 23 May 2003. GROUP CASH FLOW STATEMENT Year to Period to 31.3.2005 31.3.2004 £m £m Pro forma--------------------------------------------------------------------------------Reconciliation of total operating profit to net cashinflow from operating activities--------------------------------------------------------------------------------Total operating profit 204.7 164.3Depreciation 92.6 88.4Loss/(profit) on disposal of tangible fixed assets 1.3 (0.7)Amortisation of goodwill 0.1 -Other non-cash movements 0.1 0.1Movement in provisions (1.1) (1.1)Amortisation of capital grants (3.9) (3.2)Decrease in stocks 0.3 0.8(Increase)/decrease in debtors (9.2) 4.3(Decrease)/increase in creditors (1.5) 2.5 --------------------Net cash inflow from operating activities 283.4 255.4 -------------------- --------------------------------------------------------------------------------Cash flow statement--------------------------------------------------------------------------------Net cash inflow from operating activities 283.4 255.4Net cash inflow from dividends received from joint ventures 0.3 -Net cash outflow from returns oninvestments and servicing of finance (111.0) (102.5)Net cash inflow from taxation 6.7 -Net cash outflow on capital expenditure (173.1) (177.6)Acquisition of business (net of expenses) - (877.2)Equity dividends paid (38.9) (43.2) --------------------Net cash outflow before use of liquid resources and financing (32.6) (945.1) --------------------Management of liquid resources (19.7) 408.0 --------------------Issue of new shares - 368.5Purchase of own shares (0.4) (0.5)Other financing net cash inflow 90.5 182.4 --------------------Net cash inflow from financing 90.1 550.4 --------------------Increase in cash in the period 37.8 13.3 -------------------- --------------------------------------------------------------------------------Reconciliation of net cash flow to movement in net debt --------------------------------------------------------------------------------Increase in cash in the period 37.8 13.3Cash inflow from increase in net borrowings (90.5) (182.4)Cash outflow/(inflow) from management of liquid resources 19.7 (408.0)Issue costs on new borrowings 11.7 - ----------------------Increase in net debt resulting from cash flows (21.3) (577.1)Other non-cash items 14.7 5.3Inception of new finance lease contracts (5.1) (5.5) ----------------------Increase in net debt in the year (11.5) (577.3)Net borrowings at the start of the year (1,869.5) -Loans and finance leases acquiredwith subsidiaries net of short term deposits - (1,292.2) ----------------------Net debt at the end of the year (1,881.0) (1,869.5) ---------------------- 7 The Board approved the preliminary statement covering the year ended 31 March 2005 on 7 June 2005. The financial information set out abovedoes not constitute the Group's statutory financial statements for the yearended 31 March 2005 nor for the period ended 31 March 2004 within the meaning ofSection 240 of the Companies Act 1985. The financial information is based on theaudited statutory financial statements for both periods, upon which the auditorshave issued unqualified audit opinions. The financial statements for the periodended 31 March 2004 have been delivered to the Registrar of Companies. Thefinancial statements for the year ended 31 March 2005 will be sent toshareholders and delivered to the Registrar of Companies in due course. Theywill also be available at the Registered Office of the company, NorthumbrianWater Group plc, Northumbria House, Abbey Road, Pity Me, Durham, DH1 5FJ. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Natwest