6th Dec 2006 07:02
Northumbrian Water Group PLC06 December 2006 6 December 2006 NORTHUMBRIAN WATER GROUP PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2006 Northumbrian Water Group plc (NWG or the Group) announces its interim resultsfor the six months ended 30 September 2006. HIGHLIGHTS 2006 Financial highlights Six months to Six months to 30.9.2006 30.9.2005 Change Change £m £m £m %Continuing operations Revenue 315.9 295.3 20.6 7.0 Profit on ordinary activities before interest 129.5 116.8 12.7 10.9Profit before tax 75.5 64.3 11.2 17.4Profit before tax and FV debt amortisation(1) 71.1 58.3 12.8 22.0Profit after tax 56.8 47.2 9.6 20.3Net debt 2,053.4 1,869.3 184.1 9.8Continuing operations Basic EPS 10.97p 9.11p 1.86p 20.4% Adjusted EPS(1,2) 11.34p 9.30p 2.04p 21.9% Ordinary dividend proposed 3.75p 3.52p 0.23p 6.5% Notes: (1) Excludes fair value debt amortisation £4.4 million (2005: £6.0 million) (2) Excludes deferred tax £8.3 million (2005: £7.0 million), IAS 39 credit £2.0 million (2005: nil) • Revenue increase mainly due to the uplift in water and sewerage charges to support continuing high capital investment • Capital programme on track to deliver regulatory outputs for drinking water quality and environmental improvements • Financial position strengthened by the issue of two £100 million index linked Eurobonds to finance capital investment through to 2010 • Levels of customer service and satisfaction remain high • Water supplies maintained without restrictions • Leakage targets outperformed • Excellent bathing water quality results • Ordinary interim dividend of 3.75 pence per share to be paid on 2 February 2007 Managing Director John Cuthbert said, "The Group has delivered a goodoperational and financial performance in the first six months. Looking forward,we have successfully secured funding for the high levels of investment plannedto 2010. This investment programme will meet not only the UK and EU legislationrequirements, but also the priorities identified by our customers, the ConsumerCouncil for Water and our stakeholders. The relationship with our stakeholders is important to us; we have built areputation for providing value for money and our customer research shows highlevels of satisfaction with our services. As a result, customers have respondedpositively to our appeals to use water carefully, particularly in areasexperiencing low levels of rainfall. We do not take this co-operation forgranted and we are committed to delivering levels of service our customers cancontinue to value". For further information contact: Northumbrian Water 0191 301 6419John Cuthbert, Managing DirectorChris Green, Finance DirectorAlistair Baker, Communications & PR Manager Pelham PR 020 7743 6670James HendersonChelsea HayesPolly Fergusson MANAGING DIRECTOR'S STATEMENT NWG's financial performance Revenue for the six months to 30 September 2006 was £315.9 million (2005: £295.3million). This 7% increase is mainly due to the uplift in water and seweragecharges at Northumbrian Water Limited (NWL), the Group's principal subsidiary. Profit on ordinary activities before interest for the six months was £129.5million (2005: £116.8 million). Operating costs increased by £7.9 million (4%)to £186.4 million with upward pressure on costs partially mitigated by ongoingefficiencies. The net interest charge was £54.2 million (2005: £52.4 million) which includes acredit of £4.4 million (2005: £6.0 million) in respect of the amortisation ofthe debt fair value and a gain of £2.9 million (2005: nil) in respect of thecancellation of a financial instrument. Profit on ordinary activities before tax for the six months was £75.5 million(2005: £64.3 million). The tax charge of £18.7 million (2005: £17.1 million)reflects increased profitability and changes in tax rules on capitalisedmaintenance expenditure offset by tax relief for the prepayment of pensioncontributions to 2010. The effective tax rate for the six months to 30 September2006 is 25% (2005: 27%). The Group's gearing remains stable with net debt increasing by £43.0 million,since 31 March 2006, to £2,053.4 million. Cash interest cover for the Groupimproved from 2.7x, at 31 March 2006, to 3.1x. Capital structure In June 2006, NWL's finance subsidiary took advantage of low market rates toissue two £100 million index linked Eurobonds bearing, respectively, a realcoupon of 1.7118% due 2049 and 1.7484% due 2053. This will fund NWL's capitalinvestment programme for the current regulatory period. On 28 June 2006, the Group redeemed the remaining £172 million 8.625% Eurobondsusing five year committed bank facilities of £125 million and cash resources. The debt portfolio now comprises 67% with an average fixed rate of 6.2%, 19% ofindex linked funding at an average real rate of 1.851% and 14% on a variablerate basis. Northumbrian Water Limited Revenue was £293.6 million for the six months to 30 September 2006 (2005: £277.2million). The 5.9% increase is mainly due to the uplift in water and seweragecharges to support the continuing high capital investment programme agreed aspart of the regulatory price review. Operating costs increased from £161.7 million to £169.4 million, principallyreflecting increased power prices and additional pension costs. The impact ofinflation has been partially offset by efficiency savings. Profit on ordinary activities before interest for the period was £124.2 million(2005: £115.5 million). Capital investment for the period was £100.5 million (2005: £96.6 million). NWLcontinues to perform well and is on target to achieve its regulatory outputs. Customers will benefit from investment in technology as part of a new workmanagement system. This three year investment programme to cut costs, improvecustomer service and communication, will be used extensively across thebusiness. Water quality remains high. NWL improved its already high standards ofperformance against the Drinking Water Inspectorate (DWI) indices and thequality of drinking water in both the northern and southern areas remains amongthe best in the country. NWL is continuing to develop a risk based approach tosecure water supplies as efficiently and effectively as possible. Improvements to Whittle Dene water treatment works in Northumberland werecompleted at the end of September, meeting the commitment given to the DWI.These improvements included an additional process to remove trace herbicides andpesticides from raw water. The upgrading of Horsley water treatment works, alsoin Northumberland, is due to be completed by the end of December. Bothtreatment works are important to the supply network for the Newcastleconurbation. Good progress has been made on the programme of work to reline or renew watermains and to flush the network to reduce discoloured water. Planning for a majorproject to refurbish 180km of large diameter trunk mains supplying Newcastle iswell advanced. The southern operating areas are in the driest part of the country. There hasbeen a continuous period of around 20 months of below average rainfall in thisarea, resulting in drought conditions throughout much of the south east. Despitethis, average water resource levels were maintained in the Essex supply area andno restrictions on use were necessary. The availability of water from Norfolkvia the Ely Ouse to Essex Transfer Scheme and water from the innovative LangfordRecycling Scheme helped maintain reservoir levels. Demand management has alsoplayed its part in maintaining water resource levels. Leakage levels are amongthe lowest in the country and the benefits of promoting water efficiency tocustomers over the last 10 years led to a positive response from them during thesummer with a 15% reduction in demand. NWL continues to meter new houses and promotes the option to have a meterinstalled free of charge to all customers. In the southern operating area,meters are now installed on change of occupier. Current household meteringlevels are 15.7% and 39% in the northern and southern operating areasrespectively. Planning proposals to enlarge Abberton Reservoir in Essex are due to besubmitted in spring 2007. With an anticipated completion date of 2014, theproject will enlarge the capacity of the reservoir by around 60%. Research continues to confirm that levels of customer satisfaction and value formoney remain high, at around 90%. NWL continues to score well on Ofwat'smeasures of customer service and achieved five stars out of seven in its 2005/06Levels of Service Report. It did not receive the two stars relating to sewerflooding. Its ranking in the Overall Performance Assessment score was affectedby one failure at a large sewage treatment works. Investment to remedy this islargely complete. Sewer flooding as a consequence of severe storms in the summerof 2005 also affected the score. Good progress has also been made on the major programme to reduce the impact ofintermittent discharges and pollution incidents. Compliance with dischargeconsent standards at sewage treatment works continues to be good and significantinvestment to meet tighter standards and all major projects have been deliveredon time. Where problems were the result of illegal discharges, NWL has initiateda number of successful prosecutions. Investment in new instrument technology is underway, installing continuous levelmonitoring across the sewer network. Data from these monitors improves proactivemanagement of the network, providing early warning of flooding, reducingdischarges and informing investment decisions. Last year NWL had no category 1pollution incidents (the most environmentally damaging) and significantlyreduced the number of category 2 and 3 incidents. The Environment Agency hascommended NWL for achieving above average compliance with its standards. Bathing water quality results in the north east were the best ever in 2006. Allthe bathing waters achieved the mandatory compliance standard and nearly 90% metthe higher guideline standards. NWL is a major user of energy for its water and waste water processes and isaccredited under the Carbon Trust's Energy Efficiency Accreditation Scheme. Thesubstantial rise in energy costs over the last two years has increased furtherthe importance of reducing overall energy use. NWL monitors power consumptionclosely and has implemented several initiatives including extensive audits ofenergy use and pump efficiency. These help to identify improved plant operatingprocedures and efficiency improvements to reduce consumption. Ultra violet (UV) disinfection, as a third level of treatment, is utilised atthe larger coastal waste water plants throughout the year. This process uses alarge amount of energy, contributing to significant CO2 emissions. Afterdetailed consultation with the Environment Agency, NWL commissioned independentresearch to examine the environmental impact of not using UV disinfectionoutside the bathing season of 1 May to 30 September. The research concluded thatthis would reduce the carbon footprint of the coastal works without any adverseimpact on the marine environment or compliance with bathing water standards. NWLhas, therefore, proposed to the Environment Agency that UV disinfection beapplied at the six major coastal works only in the bathing season. This wouldreduce energy costs and carbon emissions as part of the carbon reductionprogramme. There is a need to reduce the use of energy generated from fossil fuel sources.Currently, energy needs are met from a mix of renewable sources at water andwaste water facilities and from external supplies generated from green and highefficiency sources such as hydro, wind and high quality combined heat and power.Last year a flexible electricity purchasing programme was introduced. NWL hasbought 100% of power requirements for 2006/07 and 35.0% for 2007/08. Energycosts for 2006/07 are likely to be around £10 million higher than in theprevious year. However, prevailing rates for 2007/08 are lower than these veryhigh levels. Water and waste water contracts Revenue for the Group's water and waste water contracts was £17.9 million forthe six months to 30 September 2006 (2005: £13.0 million) and profit on ordinaryactivities before interest was £4.5 million (2005: £1.0 million). All contractscontinue to perform satisfactorily. As a consequence of increasing theshareholdings in Ayrshire (see below), turnover and profit before interestcontributed a further £3.6 million and £2.1 million, respectively, during thissix months. The Group is a 75% shareholder in two project companies delivering privatefinance initiative contracts with Scottish Water for waste water treatment atLevenmouth and Ayrshire. At Ayrshire, the Group acquired an additional 25%interest in the project and operating companies on 23 December 2005, taking theGroup's interest to 75% in the project company and 100% in the operatingcompany. Following this acquisition, the project company is fully consolidatedinto the Group's results. In Ireland, the Group is part of a contractual consortium that designed andbuilt a €70 million waste water treatment plant for Cork City Council. Under theconsortium agreement, the Group has full responsibility for the operation andmaintenance of the plant. AquaGib Limited, in which the Group owns two thirds of the equity with thebalance owned by the Government of Gibraltar, operates Gibraltar's dual drinkingwater and sea water supply systems. Related services The Group's non-water companies' revenue was £12.7 million (2005: £39.3 millionof which £26.3 million was in respect of discontinued operations). Profit onordinary activities before interest was £0.2 million (2005: £1.7 million ofwhich £1.4 million was in respect of discontinued operations). Pensions The Group operates both a final salary defined benefit and a definedcontribution pension scheme. In common with many other final salary schemes,pressure on the funding of the scheme has grown over recent years. Improved lifeexpectancy and volatile investment returns have increased the cost of providinga final salary pension. The scheme is currently well funded but the risksassociated with funding such a scheme are well documented. An internal workinggroup has been formed to review sustainable pension options for the future andthe Board will consider these early in 2007. At 30 September 2006, the Group's defined benefit scheme had a surplus of £17.0million (31 March 2006: deficit of £3.7 million). This reflects the advanceemployer and employee contributions of £10 million and £26.1 million paid inMarch and April 2006, respectively. The Group will make a further payment of£23.3 million by April 2007, being the final instalment of employer and employeecontributions to 31 December 2010. Dividend The Board has declared an interim dividend for the period of 3.75 pence pershare (2005: 3.52 pence). This dividend will be paid on 2 February 2007 toshareholders on the register at the close of business on 22 December 2006. Thedividend cover for the period is 2.9x, and 3.1x excluding deferred tax and theamortisation of debt fair value. The dividend is consistent with the policy announced by the Board in June 2005to maintain a progressive dividend policy with real increases of around 3% p.a.during the current regulatory period. Board appointments Sir Derek Wanless succeeded Sir Frederick Holliday as Chairman of both NWG andNWL on 27 July 2006, following Sir Fred's retirement. Alex Scott-Barrett, a non-executive director of NWL, was appointed as anindependent non-executive director of NWG on 26 September 2006. Alex isnon-executive Chairman of Suffolk Life Group plc, a specialist pensionadministration business and a non-executive director of General Capital Groupplc. On 26 September 2006, Dr Simon Lyster was appointed as an independentnon-executive director of NWL. Simon is Executive Director of LEADInternational, an international non-profit training organisation whose missionis to inspire leadership for sustainable development. On 17 November 2006, the Board announced the appointment of Claude Lamoureux asa non-executive director of NWG and NWL with effect from 1 December 2006. Claudeis President and CEO of the Ontario Teachers' Pension Plan Board (OTPP). OTPPholds 25% of the issued share capital of NWG and Claude is, therefore, notregarded as an independent director. Ron Lepin resigned as a non-executive director of NWG and NWL with effect from 1December 2006. Outlook The Group intends to maintain the focus on its core business of water and wastewater operations. The Board believes this strategy will continue to delivervalue and this view seems to be held increasingly by others in the sector. TheGroup has a secure financial structure able to support the high levels ofinvestment required not only to meet its regulatory and contractual obligationsbut also to sustain strong operational performance. Key financial ratios will remain stable over the current regulatory period.Energy cost management continues to be an important focus in both the short andmedium term even though current 2007/08 prices are lower than those in 2006/07. The Group will continue to drive for efficiency in all operations. John CuthbertManaging Director5 December 2006 Consolidated income statementSix months ended 30 September 2006 Six months to Six months Year to 30.9.2006 to 30.9.2005 31.3.2006 Notes £m £m £mContinuing operations Revenue 2 315.9 295.3 591.5 Operating costs (186.4) (178.5) (355.3)Profit on ordinary activities before interest 2 129.5 116.8 236.2 Finance costs payable (60.0) (54.3) (112.7)Finance income receivable 5.8 1.9 6.7Share of profit after tax of associates and jointly controlled 0.2 (0.1) 0.1entitiesProfit on ordinary activities before taxation 2 75.5 64.3 130.3- current taxation 3 (10.4) (10.1) (15.6)- deferred taxation 3 (8.3) (7.0) (23.6)- overseas tax 3 - - (0.1)Profit for the period from continuing operations 56.8 47.2 91.0 Discontinued operations Profit for the period from discontinued operations 4 - 15.5 15.4Profit for the period 56.8 62.7 106.4 Attributable to:Equity shareholders of the company 56.7 62.9 105.9Minority interests 0.1 (0.2) 0.5 56.8 62.7 106.4 Basic earnings per share for profit attributable to ordinaryequity holders of the parent 6 10.97p 12.11p 20.55p Diluted earnings per share for profit attributable to ordinaryequity holders of the parent 6 10.95p 12.11p 20.52p Basic earnings per share for profit from continuing operationsattributable to ordinary equity holders of the parent 6 10.97p 9.11p 17.57p Diluted earnings per share for profit from continuing operationsattributable to ordinary equity holders of the parent 6 10.95p 9.11p 17.55p Adjusted earnings per share for profit from continuing operationsattributable to ordinary equity holders of the parent (excludingdeferred tax, amortisation of debt fair value and IAS 39adjustments) 6 11.34p 9.30p 19.62p Ordinary final dividend proposed per share 5 3.75p 3.52p 7.04pSpecial dividend paid per share 5 - - 2.82pDividend paid per share 5 7.04p 7.13p 10.65p Consolidated statement of recognised income and expenseSix months ended 30 September 2006 Six months to Six months Year to 30.9.2006 to 30.9.2005 31.3.2006 £m £m £m Actuarial (losses)/gains (2.4) (4.3) 52.7Cash flow hedges (1.0) (3.8) (2.8)Tax on items charged or credited to equity 0.7 1.3 (15.6)Profit for the period 56.8 62.7 106.4Total recognised income and expense 54.1 55.9 140.7 Consolidated balance sheetAs at 30 September 2006 30.9.2006 30.9.2005 31.3.2006 Note £m £m £mNon-current assetsGoodwill 3.7 0.1 3.7Other intangible assets 64.2 64.2 64.2Property, plant and equipment 3,041.0 2,850.0 2,985.6Investments in jointly controlled entities 3.2 3.7 3.6Investments in associates - 0.8 -Pension asset 17.0 - -Financial assets 21.2 22.2 22.2Other investments 0.3 0.4 0.3 3,150.6 2,941.4 3,079.6Current assetsInventories 3.6 4.0 3.3Trade and other receivables 113.3 107.0 109.5Cash and cash equivalents 247.4 194.2 176.6 364.3 305.2 289.4TOTAL ASSETS 3,514.9 3,246.6 3,369.0Non-current liabilities Interest bearing loans and borrowings 2,295.1 1,858.1 1,972.9Provisions 3.0 3.6 3.1Deferred income tax liabilities 503.3 456.7 495.6Pension liability - 81.6 3.7Other payables 10.2 15.7 10.6Grants 186.3 171.2 179.3 2,997.9 2,586.9 2,665.2Current liabilitiesInterest bearing loans and borrowings 22.9 232.9 236.7Provisions 0.3 - 0.3Trade and other payables 158.7 166.3 156.3Income tax payable 16.4 11.0 9.7 198.3 410.2 403.0TOTAL LIABILITIES 3,196.2 2,997.1 3,068.2 NET ASSETS 318.7 249.5 300.8 Capital and reservesIssued capital 51.9 51.9 51.9Share premium reserve 446.5 446.5 446.5Cash flow hedge reserve 0.5 0.5 1.5Treasury shares (1.7) (0.9) (1.7)Retained earnings (180.1) (249.3) (198.9)Equity shareholders' funds 317.1 248.7 299.3Minority interest 1.6 0.8 1.5TOTAL CAPITAL AND RESERVES 7 318.7 249.5 300.8 Consolidated cash flow statementSix months ended 30 September 2006 Six months to Six months Year to 30.9.2006 to 30.9.2005 31.3.2006 £m £m £mOperating activitiesReconciliation of profit before interest to net cash flows fromoperating activitiesProfit on ordinary activities before interest 129.5 116.8 236.2Profit before interest on discontinued operations - 1.4 1.2Depreciation and other similar non-cash charges 43.1 40.6 83.6Net charge for provisions, less payments (0.1) (0.3) (0.5)Movements in working capital (6.9) 4.7 (5.5)Cash generated from operations 165.6 163.2 315.0Special contributions paid in respect of retirement benefits (26.1) - (22.8)Net interest paid (54.9) (55.6) (119.7)Income taxes paid (4.4) (0.1) (6.5)Net cash flows from operating activities 80.2 107.5 166.0 Investing activitiesInterest received 2.5 1.7 4.1Capital grants received 9.5 11.0 21.4Purchase of subsidiary undertaking (net of cash acquired) - - 2.4Proceeds on disposal of subsidiary undertakings - 18.7 18.6Proceeds on disposal of property, plant and equipment 0.8 1.0 2.0Dividends received from jointly controlled entities 0.6 0.4 0.8Purchase of property, plant and equipment (99.3) (93.0) (206.7)Other cash items - 0.2 0.2Net cash flows from investing activities (85.9) (60.0) (157.2) Financing activitiesNew borrowings 325.1 150.0 210.2New loans issued - - (2.1)Maturity of investments 1.0 0.8 2.0Settled hedge instruments 2.9 (3.7) (3.7)Issue costs of new borrowings (0.4) (1.1) (1.4)Own shares purchased - - (0.8)Dividends paid to minority interests - - (0.3)Dividends paid to equity shareholders (36.4) (36.8) (69.7)Repayment of borrowings (193.7) (22.1) (46.6)Payment of principal under hire purchase contracts and finance leases (3.5) (3.1) (4.7)Net cash flows from financing activities 95.0 84.0 82.9 Increase in cash and cash equivalents 89.3 131.5 91.7Cash and cash equivalents at start of period 153.9 62.2 62.2 Cash and cash equivalents at end of period 243.2 193.7 153.9 Net cash flow in respect of discontinued operationsCash consideration - 29.8 29.8Cash and cash equivalents disposed - (11.0) (11.1)Expenses paid in connection with disposals - (0.1) (0.1) - 18.7 18.6 Notes to the financial statements 1. Basis of preparation The results for the six months to 30 September 2006 have been prepared using theaccounting policies expected to be applied in the annual report and financialstatements for 31 March 2007 and are consistent with the accounting policiesapplied in the annual report and financial statements for the year ended 31March 2006. The results for the year ended 31 March 2006 have been extracted from thefinancial statements, which have been delivered to the Registrar of Companies.The independent auditors' report on those financial statements was unqualifiedand did not contain a statement under section 237 (2) or (3) of the CompaniesAct 1985. The financial information contained in the interim financialstatements does not constitute statutory accounts as defined in Section 240 ofthe Companies Act 1985. The figures for the above periods are unaudited and do not constitute statutoryaccounts. However, the auditors have carried out a review of the figures to 30September 2006 and their report is set out in the independent review report. The interim report was approved by the Board of Directors on 5 December 2006. 2. Segmental analysis of revenue and profit on ordinaryactivities before interest Revenue Total revenue Northumbrian Water & from Water waste water Related Discontinued continuing Limited contracts services Total operations operations £m £m £m £m £m £m Six months ended 30 September 2006 Segment revenue 293.6 17.9 12.7 324.2 - 324.2Inter segment revenue - (0.4) (7.9) (8.3) - (8.3)Revenue to external customers 293.6 17.5 4.8 315.9 - 315.9 Six months ended 30 September 2005 Segment revenue 277.2 13.0 39.3 329.5 (26.3) 303.2Inter segment revenue - (0.6) (16.6) (17.2) 9.3 (7.9)Revenue to external customers 277.2 12.4 22.7 312.3 (17.0) 295.3 Year ended 31 March 2006 Segment revenue 555.5 28.4 53.3 637.2 (28.5) 608.7Inter segment revenue - (2.0) (24.5) (26.5) 9.3 (17.2)Revenue to external customers 555.5 26.4 28.8 610.7 (19.2) 591.5 Profit on ordinary activities beforeinterest Total revenue from Northumbrian Water & continuing Water waste water Related Discontinued operations Limited contracts services Total operations £m £m £m £m £m £m Six months ended 30 September 2006 Segment profit before interest 124.2 4.5 0.2 128.9 - 128.9Central unallocated costs andprovisions 0.6 Profit on ordinary activitiesbefore interest 129.5 Net finance costs (54.2)Share of profit from associatesand jointly controlled entities 0.2 Profit on ordinary activitiesbefore taxation 75.5 Six months ended 30 September 2005 Segment profit before interest 115.5 1.0 1.7 118.2 (1.4) 116.8Central unallocated costs andprovisions - Profit on ordinary activitiesbefore interest 116.8 Net finance costs (52.4)Share of profit from associatesand jointly controlled entities (0.1) Profit on ordinary activitiesbefore taxation 64.3 The trading profit disclosed as discontinued operations is part of related services. Profit on ordinaryactivities before interest for related services, includes the profit on disposal of £14.6 million for 2006. Year ended 31 March 2006 Segment profit before interest 234.6 1.8 16.4 252.8 (15.8) 237.0Central unallocated costs andprovisions (0.8) Profit on ordinary activitiesbefore interest 236.2 Net finance costs (106.0)Share of profit from associatesand jointly controlled entities 0.1 Profit on ordinary activitiesbefore taxation 130.3 3. Taxation Six months to Six months Year to 30.9.2006 to 30.9.2005 31.3.2006 £m £m £mCurrent tax: UK corporation tax - continuing operations 10.4 10.1 15.6 - discontinued operations (note 4) - 0.6 0.6 - overseas tax - - 0.1Total current tax 10.4 10.7 16.3 Deferred tax:Deferred tax - continuing operations 8.3 7.0 23.6 - discontinued operations (note 4) - 0.1 0.1Total deferred tax 8.3 7.1 23.7 Tax charge in the income statement 18.7 17.8 40.0 The tax charge in the income statement is disclosed as follows:Tax expense on continuing operations 18.7 17.1 39.3Tax expense on discontinued operations (note 4) - 0.7 0.7 18.7 17.8 40.0 4. Discontinued operations The Group disposed of Fastflow Pipeline Services Limited (FPS) on 8 July 2005,Entec UK Limited (Entec) on 5 October 2005 and ULG Northumbrian Limited (ULG) on10 April 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: Six months to Six months Year 30.9.2006 to 30.9.2005 to 31.3.2006 £m £m £m Revenue - 26.3 28.5Inter segment - (9.3) (9.3)External revenue - 17.0 19.2Operating costs - (15.6) (18.0)Profit on ordinary activities before interest - 1.4 1.2Profit on disposal of discontinued operations - 14.6 14.6Profit before interest on discontinued operations - 16.0 15.8Net finance costs - 0.2 0.3Profit on ordinary activities before taxation - 16.2 16.1Current tax - (0.6) (0.6)Deferred tax - (0.1) (0.1)Profit for the period from discontinued operations - 15.5 15.4 The tax charge is analysed as follows:On profit on ordinary activities for the period - (0.7) (0.7) 5. Dividends paid and proposed The Board has declared an ordinary interim dividend for the period of 3.75 penceper share (2005/06: 3.52 pence). The dividend will be paid on 2 February 2007 toshareholders on the register at the close of business on 22 December 2006. Six months to Six months Year to 30.9.2006 to 30.9.2005 31.3.2006 £m £m £mDeclared and approved during the period:Equity dividends on ordinary shares:Interim dividend for 2005/06: 3.52p - - 18.2Final dividend for 2005/06: 7.04p (2004/05: 7.13p) 36.4 36.9 36.9Special dividend for 2005/06: 2.82p - - 14.6Dividends paid 36.4 36.9 69.7 Proposed dividend for the period:Interim dividend for 2006/07: 3.75p (2005/06: 3.52p) 19.4 18.2 18.2Special dividend for 2006/07: nil (2005/06: 2.82p) - 14.6 14.6Final dividend for 2005/06: 7.04p - - 36.4 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 period. Treasury shares held are excludedfrom the weighted average number of shares for basic EPS. EPS for continuingoperations is also disclosed. Weighted Weighted average average number of Earnings number of Earnings Earnings shares per share Earnings shares per share 30.9.2006 30.9.2006 30.9.2006 30.9.2005 30.9.2005 30.9.2005 £m million pence £m million pence Net profit attributable to equity holders ofthe parent - continuing operations 56.8 517.6 10.97 47.2 517.9 9.11 Net profit attributable to equity holders ofthe parent - discontinued operations - - 15.5 3.00 Basic EPS 56.8 517.6 10.97 62.7 517.9 12.11 The weighted average number of shares for diluted EPS is calculated by includingthe treasury shares held. Weighted Weighted average average number of Earnings number of Earnings Earnings shares per share Earnings shares per share 30.9.2006 30.9.2006 30.9.2006 30.9.2005 30.9.2005 30.9.2005 £m million pence £m million pence Net profit attributable to equity holders ofthe parent - continuing operations 56.8 518.6 10.95 47.2 518.6 9.11 Net profit attributable to equity holders ofthe parent - discontinued operations - - 15.5 3.00 Diluted EPS 56.8 518.6 10.95 62.7 518.6 12.11 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 average number of Earnings number of Earnings Earnings shares per share Earnings shares per share 30.9.2006 30.9.2006 30.9.2006 30.9.2005 30.9.2005 30.9.2005 £m million pence £m million pence Basic EPS 56.8 517.6 10.97 47.2 517.9 9.11 Deferred tax 8.3 1.60 7.0 1.35Amortisation of debt fair value (4.4) (0.84) (6.0) (1.16)IAS 39 derivatives (net of tax) (2.0) (0.39) - -Adjusted EPS 58.7 517.6 11.34 48.2 517.9 9.30 Weighted average number of Earnings Earnings shares per share 31.3.2006 31.3.2006 31.3.2006 £m million pence Net profit attributable to equity holders ofthe parent - continuing operations 91.0 517.9 17.57 Net profit attributable to equity holders ofthe parent - discontinued operations 15.4 2.98 Basic EPS 106.4 517.9 20.55 Net profit attributable to equity holders ofthe parent - continuing operations 91.0 518.6 17.55 Net profit attributable to equity holders ofthe parent - discontinued operations 15.4 2.97 Diluted EPS 106.4 518.6 20.52 Basic EPS 91.0 517.9 17.57 Deferred tax 23.6 4.55Amortisation of debt fair value (13.0) (2.50)Adjusted EPS 101.6 517.9 19.62 7. Reconciliation of movements in equity Six months to Six months Year to 30.9.2006 to 30.9.2005 31.3.2006 £m £m £m At start of period 300.8 230.3 230.3Actuarial (losses)/gains (2.4) (4.3) 52.7Cash flow hedges (1.0) (3.8) (2.8)Tax on items charged or credited to equity 0.7 1.3 (15.6)Dividends paid (36.4) (37.0) (69.8)Share-based payment 0.2 0.1 0.2Refund of share issue costs - 0.2 0.2Shares purchased - - (0.8)Profit for the period 56.8 62.7 106.4Total recognised income and expense 318.7 249.5 300.8 INDEPENDENT REVIEW REPORT TO NORTHUMBRIAN WATER GROUP PLC Introduction We have been instructed by the company to review the financial information forthe six months ended 30 September 2006 which comprises the Consolidated IncomeStatement, Consolidated Statement of Recognised Income and Expense, ConsolidatedBalance Sheet, Consolidated Cash Flow Statement and the related notes 1 to 7. Wehave read the other information contained in the interim report and consideredwhether it contains any apparent misstatements or material inconsistencies withthe financial information. This report is made solely to the company in accordance with guidance containedin Bulletin 1999/4 'Review of interim financial information' issued by theAuditing Practices Board. To the fullest extent permitted by law, we do notaccept or assume responsibility to anyone other than the company, for our work,for this report, or for the conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4'Review of interim financial information' issued by the Auditing Practices Boardfor use in the United Kingdom. A review consists principally of making enquiriesof Group management and applying analytical procedures to the financialinformation and underlying financial data and, based thereon, assessing whetherthe accounting policies and presentation have been consistently applied, unlessotherwise disclosed. A review excludes audit procedures such as tests ofcontrols and verification of assets, liabilities and transactions. It issubstantially less in scope than an audit performed in accordance withInternational Standards on Auditing (UK and Ireland) and therefore provides alower level of assurance than an audit. Accordingly we do not express an auditopinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 September 2006. Ernst & Young LLPNewcastle upon Tyne6 December 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Natwest