28th Nov 2007 12:15
Northumbrian Water Group PLC28 November 2007 This announcement is being re-released for onward transmission. 28 November 2007 NORTHUMBRIAN WATER GROUP PLC HALF-YEARLY FINANCIAL REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007 Northumbrian Water Group plc (NWG or the Group) presents its half-yearly reportfor the six months ended 30 September 2007. HIGHLIGHTS 2007 Financial highlights Six months to Six months to 30.9.2007 30.9.2006 Change Change £m £m £m %Continuing operations Revenue 333.8 315.9 17.9 5.7 Profit on ordinary activities before interest 148.1 129.5 18.6 14.4Profit before tax 88.0 75.5 12.5 16.6Profit before tax and FV debt amortisation1 85.0 71.1 13.9 19.5Profit after tax2 98.2 56.8 41.4 72.9Net debt 2,128.1 2,053.4 74.7 3.6Continuing operations Basic EPS2 18.94p 10.95p 7.99p 73.0% Adjusted EPS1,3 13.19p 11.32p 1.87p 16.5% Ordinary dividend proposed 4.00p 3.75p 0.25p 6.7% Notes: 1 Excludes amortisation of debt fair value £3.0 million (2006: £4.4 million) 2 Includes deferred tax credit £26.8 million (2006: charge, £8.3 million) 3 Excludes deferred tax credit £26.8 million (2006: charge, £8.3 million), IAS 39 £nil (2006: credit, £2.0 million) • Revenue increase mainly reflects the uplift in tariffs to support continuing high capital investment • Regulated capital investment in the period of £117 million (2006: £100.5 million) • Funding secured for capital programme to 2010 • Highest levels of customer satisfaction in England and Wales • Leakage targets achieved • 100% bathing water compliance • Ordinary interim dividend of 4.00 pence (2006: 3.75 pence) per share to be paid on1 February 2008 Managing Director John Cuthbert said, "The Group has delivered strongoperational and financial performance in the first six months. As announcedpreviously, NWL has successfully raised the finance for its investment programmethrough to 2010 and will not be increasing prices to customers by the fullamount allowed. NWL has today published 'Looking to the future', strategic direction statementsfor its operating areas in the north east and south east of England. Theseconsultation documents set out ambitions for the next 25 years and beyond.Stakeholders have already made an important contribution to these documents andwe have also drawn on our extensive customer research. We aim to use thisconsultation process to ensure our future plans meet not only UK and EUlegislative requirements, but also the priorities of our customers, CCWater andother key stakeholders." For further information contact: Northumbrian Water 0191 301 6419 John Cuthbert, Managing Director Chris Green, Finance Director Alistair Baker, Communications & PR Manager Pelham PR 020 7743 6670 James Henderson Chelsea Hayes Archie Berens INTERIM MANAGEMENT REPORT NWG's financial performance Revenue for the six months to 30 September 2007 was £333.8 million (2006: £315.9million). This 5.7% increase is mainly due to the uplift in water and seweragetariffs at Northumbrian Water Limited (NWL), the Group's principal subsidiary. Profit on ordinary activities before interest for the six months was £148.1million (2006: £129.5 million). Operating costs decreased slightly by £0.7million to £185.7 million largely reflecting lower energy prices. The net interest charge was £60.3 million (2006: £54.2 million). This includesa credit of £3.0 million (2006: £4.4 million) from the amortisation of the debtfair value and a gain of £2.9 million in 2006 from the cancellation of afinancial instrument. Profit on ordinary activities before tax for the six months was £88.0 million(2006: £75.5 million). The current tax charge of £16.6 million (2006: £10.4million) reflects increased profitability and the effect of the 2005 changes intax rules on capitalised maintenance expenditure, offset by tax relief for theprepayment of pension contributions. The deferred tax credit was £26.8 million (2006: charge, £8.3 million). Duringthe period, the tax rate change from 30% to 28% was enacted and this results ina one-off credit to the income statement of £35.4 million. As disclosed in the Group's 2007 annual report and financial statements, the2007 Budget also proposed changes to capital allowances. These changes areexpected in the 2008 Finance Act and, accordingly, no adjustment has yet beenmade. Capital structure The Group's capital structure and gearing ratios remain largely unchanged fromthose reported on 6 June 2007. Based on an estimated mid-year Regulated CapitalValue (RCV) of £2,879 million (March 2007: £2,817 million) gearing for theGroup was 74% of RCV at 30 September 2007 (March 2007: 74%). Gearing at NWL,including the Kielder securitisation, remained at 65%, whilst gearing for theregulated business of NWL increased slightly to 58% (March 2007: 57%). NWG net debt increased by £48.5 million to £2,128.1 million, whilst that forNWL's regulated business increased by £50.5 million to £1,658.6 million. The Group's debt structure remains largely unchanged with 64% fixed at anaverage rate of 6.18%, 19% index linked at an average real rate of 1.85% and 17%on a variable rate basis. Current funding is sufficient to meet NWL's capital programme to March 2010. Cash interest cover for the Group improved from 2.9x at March 2007 to 3.5xreflecting the impact of the index linked bonds. Definitions of gearing, net debt and cash interest cover are disclosed in theMarch 2007 annual report and financial statements, a copy of which is availableon the Company's website at www.nwg.co.uk. Northumbrian Water Limited Revenue was £313.5 million for the six months to 30 September 2007 (2006: £296.2million). The 5.8% 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 in 2004. In addition, the revenue includes£2.7 million (2006: £2.6 million) from the scientific services businesstransferred into NWL from Analytical & Environmental Services Limited (AES) at31 March 2007. Operating costs increased from £171.8 million to £173.1 million, principallyreflecting the impact of inflation, increased depreciation charges from capitalinvestment and costs relating to the scientific services income referred toabove. These have been partially offset by lower energy costs and efficiencysavings. Energy prices for 2007/08 are significantly lower than those for the previousyear and are closer to the level assumed by the regulator at the last pricereview. However, energy prices remain volatile and it is already evident thatsubstantial increases in energy costs will be experienced in 2008/09, largelyremoving the benefit gained this year. Profit on ordinary activities before interest for the period was £140.4 million(2006: £124.4 million). Capital investment for the period was £117.0 million (2006: £100.5 million).For the regulated business, forecast capital investment by 2007/08 on acumulative basis is within 2% of the capital programme approved by Ofwat for theperiod from 2005 to 2010. At 30 September 2007, NWL has capital expenditurecontracted of £130.8 million. NWL continues to score very well on measures of customer service and marketsurvey results confirm that customer satisfaction remains high. CCWater's inaugural Annual Tracking Survey 2006 showed that 96% of NWL customersare satisfied with their water supply and 93% with their sewerage services. Inthe same survey, 80% of NWL customers are satisfied with the value for money oftheir water services and 86% with the value for money of the sewerage services.These were the highest levels recorded in England and Wales and confirmindependent research commissioned by NWL: over 91% of customers are satisfiedwith the service and 87% consider their bills value for money. Water quality results remain good. Drinking water quality is at an all timehigh and the high quality of rivers and bathing waters has been maintained.This year all 33 bathing waters passed the required mandatory standard and 82%passed the more demanding guideline standard. Although our area was not as badly affected by flooding during the period asother parts of the country, sewer flooding incidents have increasedsubstantially to 816 as a consequence of severe storms (2006: 212). Capitalinvestment was accelerated after the storms in 2005 and several major schemeswere completed recently. The largest of these schemes, at Shiremoor in NorthTyneside, has removed 71 properties from the "At Risk of Flooding Register" andthe Acomb Crescent Scheme in Newcastle has removed a further 57. Major improvements to the water treatment works at Warkworth in Northumberlandwere completed on time in August 2007. They incorporate an additional treatmentprocess to remove pesticides from raw water. Work to reduce discoloured wateris on target to lay 17 km of large diameter pipes in the initial phase of theprogramme to improve over 150 km of pipes in the next three years. Managing leakage helps meet our customers' demand for water. It also reducesthe energy used to treat and pump the water, which lowers carbon emissions andhelps combat climate change. We agreed leakage targets with Ofwat of 156 Ml/din the northern operating area and 68.3 Ml/d in the south for 2006/07 and, onceagain, both have been met. Our efforts have resulted in leakage levels in Essex& Suffolk being among the lowest in the country over a number of years.Reducing leakage in our southern operating area is particularly important, giventhe forecast growth in population, and is a key part of the work to findsustainable ways of meeting the increasing demand for water. NWL continues toplay a leading role in the review of leakage methodologies with the EnvironmentAgency and Ofwat. NWL's southern operating areas are in the driest part of the country.Nevertheless, NWL has avoided restrictions on the use of water and hasmaintained average water resource levels in the Essex supply area by managingdemand and achieving leakage levels that are among the lowest in the country.Customers have also contributed by responding positively to our water efficiencypromotions over the last ten years. The pre-planning submission stage of the project to increase the capacity of theAbberton reservoir in Essex is drawing to a close and the planning applicationwill be submitted in early December. When the project is completed in 2014, thecapacity of the reservoir will be increased by around 60%. NWL has extended its effluent treatment plant at Bran Sands on Teesside toprovide its first anaerobic treatment facility which will reduce the amount ofwaste going to landfill. This significant investment is designed to treat 96tonnes of chemical oxygen demand a day. Construction of a second plant has alsocommenced at Bran Sands and this will convert sludge into green energy that willmeet half the electricity requirement for the entire treatment works. The pilot stages of our innovative Work Management programme have been completedsuccessfully with the hardware installed in all vehicles, ready for the roll outwhich is now underway. Work Management uses the latest satellite andcommunications technology to transfer data electronically between mobile andoffice based employees. This three year investment programme will improvecustomer service, reduce costs and improve communications across the business.It will also make a major contribution to improving our environmental impact byreducing journeys and is predicted to reduce our mileage by around 30%. We have successfully created a new scientific services division within NWL bymerging the business of AES with NWL's water and waste water compliance teams.AES continues to operate as a trading division of NWL, providing services toblue chip clients such as Marks & Spencer, the Ministry of Defence, CastleCement, Northern Ireland Water and National Grid Property Limited (a subsidiaryof National Grid Transco plc). In April this year NWL, in conjunction with Carillion Water, won the RobertStephenson Award for the Civil Engineering Contract of the Year. The award,from the Institution of Civil Engineers North East, recognised the quality ofthe work at Seahouses sewage treatment works and associated pumping stations atBeadnell and Bamburgh. In November, the former waterworks building at Easington Colliery in CountyDurham was re-opened as Healthworks. This is the culmination of a uniquepartnership between Northumbrian Water, County Durham Primary Care Trust,Easington District Council and Horden and Easington Colliery NeighbourhoodManagement and will provide a range of dedicated health improvement andcommunity regeneration services. Healthworks will be a focal point for serviceproviders and community groups to address the health and social issues facing one of the most deprived areas of England. This project is part of NWL's commitment to corporate responsibility tocontribute to the long term sustainability of the communities served. Withinthe partnership we have been able to use our own 'Water for health' campaign tosupport the Primary Care Trust's Healthy Living agenda to make a lastingcontribution to the local community. Water and waste water contracts Revenue for the Group's water and waste water contracts was £16.9 million forthe six months to 30 September 2007 (2006: £17.5 million) and profit on ordinaryactivities before interest was £3.4 million (2006: £4.5 million). The decreasein profit on ordinary activities before interest is principally due to a one-offcredit in respect of gas indexation on tariffs. All contracts continue toperform satisfactorily. The Group is a shareholder in two consortia delivering private financeinitiative contracts with Scottish Water. In Ireland, the Group is part of acontractual consortium that designed and built a waste water treatment plant forCork City Council, which the Group also operates and maintains. AquaGib Limited, in which the Group owns two thirds of the equity, with thebalance owned by the Government of Gibraltar, continues to operate Gibraltar'sdual drinking water and sea water distribution systems. In June 2007, AquaGibplaced a contract for additional reverse osmosis units which will complementexisting units and replace less efficient processes used to produce potablewater from sea water. The project will cost £3.3 million and is due to becompleted in Spring 2008. Financial calendar 2007 19 December Ex-dividend date21 December Record date 2008 1 February Interim dividend payment6 February Interim Management Statement4 June Preliminary results announcement31 July AGM31 July Interim Management Statement13 August Ex-dividend date15 August Record date12 September Final dividend payment Principal risks and uncertainties In considering the next six months there are no material changes to theprincipal risks and uncertainties affecting the business activities of the Groupas described in the March 2007 annual report and financial statements, a copy ofwhich is available on the Company's website at www.nwg.co.uk. Pensions The Group operates both a final salary defined benefit and a contract-basedcontribution pension scheme. Following an extensive review and consultation,the defined benefit scheme will close to new members at the end of 2007.Contributions from members who remain in the defined benefit scheme willincrease from 1 April 2008. From 1 January 2008, new employees will have the opportunity to join a newoccupational trust-based defined contribution arrangement. At 30 September 2007, the surplus (under IAS19) of the defined benefit schemehad increased from £42.7 million, at 31 March 2007, to £74 million. Thisreflects the third and final tranche of £23.3 million paid to the scheme inApril 2007. A total of £59.4m, representing both employee and employercontributions for the 5 years to 31 December 2010, has now been invested in thescheme's assets. The surplus also reflects the latest assumption on scheme mortality which willform the basis of the next actuarial valuation as at 31 December 2007. Dividend The Board has declared an interim dividend for the period of 4.00 pence pershare (2006: 3.75 pence). This dividend will be paid on 1 February 2008 toshareholders on the register at the close of business on 21 December 2007. Thedividend cover for the period is 4.7x, and 3.3x 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. Outlook The Company's operating and financial performance remains strong. By continuingto concentrate on our core water and waste water competencies we will maintainour high levels of customer satisfaction and our ability to deliver value to ourstakeholders. We will continue to focus on managing energy costs and take positive steps toreduce the environmental impact of our business. We are consulting with all our stakeholders on our plans for the medium and longterm and will endeavour to continue to manage the business to meet ourregulatory obligations, provide value for our stakeholders and to be aresponsible business in the communities we serve. John Cuthbert Managing Director 27 November 2007 Interim consolidated income statement Six months ended 30 September 2007 Six months to Six months Year to 30.9.2007 to 30.9.2006 31.3.2007 £m £m £m Notes Continuing operations Revenue 2 333.8 315.9 633.5 Operating costs (185.7) (186.4) (375.3)Profit on ordinary activities before interest 2 148.1 129.5 258.2 Finance costs payable (68.8) (60.0) (127.0)Finance income receivable 8.5 5.8 15.8Share of profit after tax of associates and jointly controlled 0.2 0.2 0.8entitiesProfit on ordinary activities before taxation 2 88.0 75.5 147.8- current taxation 3 (16.6) (10.4) (8.6)- deferred taxation 3 26.8 (8.3) (28.0)Profit for the period 98.2 56.8 111.2 Attributable to:Equity shareholders of the company 98.1 56.7 110.9Minority interests 0.1 0.1 0.3 98.2 56.8 111.2 Basic earnings per share for profit attributable to ordinaryequity holders of the parent 5 18.94p 10.95p 21.42pDiluted earnings per share for profit attributable to ordinaryequity holders of the parent 5 18.92p 10.93p 21.38pAdjusted earnings per share for profit attributable to ordinaryequity holders of the parent (excluding deferred tax, amortisationof debt fair value and IAS 39 adjustments) 5 13.19p 11.32p 24.95pOrdinary dividend proposed per share 4 4.00p 3.75p 7.52pDividend paid per share 4 7.52p 7.04p 10.79p Consolidated statement of recognised income and expense Six months ended 30 September 2007 Six months to Six months Year to 30.9.2007 to 30.9.2006 31.3.2007 £m £m £m Actuarial gains/(losses) 9.2 (2.4) 25.0Gains on cash flow hedges - 1.9 2.4Tax on items charged or credited to equity (2.6) 0.7 (7.5)Translation differences - - (0.2)Total income and expense recognised in equity 6.6 0.2 19.7Transferred to the income statement on cash flow hedges - (2.9) (2.9)Profit for the period 98.2 56.8 111.2Total recognised income and expense 104.8 54.1 128.0 Attributable to:Equity shareholders of the Company 104.7 54.0 127.7Minority interests 0.1 0.1 0.3 104.8 54.1 128.0 Interim consolidated balance sheet As at 30 September 2007 30.9.2007 30.9.2006 31.3.2007 Note £m £m £mNon-current assetsGoodwill 3.6 3.7 3.6Other intangible assets 64.2 64.2 64.2Property, plant and equipment 3,189.4 3,041.0 3,119.9Investments in jointly controlled entities 3.4 3.2 3.6Financial assets 17.2 21.2 18.0Pension asset 74.0 17.0 42.7Other receivables 1.7 1.7 1.7Other investments 0.2 0.3 0.2 3,353.7 3,152.3 3,253.9Current assetsInventories 3.4 3.6 3.7Trade and other receivables 125.6 111.6 122.8Cash and cash equivalents 265.8 247.4 316.9 394.8 362.6 443.4TOTAL ASSETS 3,748.5 3,514.9 3,697.3Non-current liabilities Interest bearing loans and borrowings 2,376.9 2,295.1 2,382.1Provisions 2.8 3.0 2.9Deferred income tax liabilities 507.0 503.3 531.2Other payables 9.5 10.2 10.0Grants 203.1 186.3 193.3 3,099.3 2,997.9 3,119.5Current liabilitiesInterest bearing loans and borrowings 36.0 22.9 34.5Provisions 0.2 0.3 0.2Trade and other payables 163.6 158.7 165.6Income tax payable 10.2 16.4 4.4 210.0 198.3 204.7TOTAL LIABILITIES 3,309.3 3,196.2 3,324.2 NET ASSETS 439.2 318.7 373.1 Capital and reservesIssued capital 51.9 51.9 51.9Share premium reserve 446.5 446.5 446.5Cash flow hedge reserve 1.0 0.5 1.0Treasury shares (1.3) (1.7) (1.3)Currency translation (0.2) - (0.2)Retained earnings (60.5) (180.1) (126.5)Equity shareholders' funds 437.4 317.1 371.4Minority interest 1.8 1.6 1.7TOTAL CAPITAL AND RESERVES 7 439.2 318.7 373.1 Interim consolidated cash flow statement Six months ended 30 September 2007 Six months to Six months Year to 30.9.2007 to 30.9.2006 31.3.2007 £m £m £m Note Operating activitiesReconciliation of profit before interest to net cash flows fromoperating activitiesProfit on ordinary activities before interest 148.1 129.5 258.2Depreciation and other similar non-cash charges 44.8 42.8 92.9Other non-cash charges 0.2 0.3 (6.2)Net charge for provisions, less payments (0.1) (0.1) (0.3)Difference between pension contributions paid and amountsrecognised in the income statement 0.5 2.7 4.4Decrease/(increase) in inventories 0.3 (0.3) (0.4)Increase in trade and other receivables (3.1) (4.2) (13.6)(Decrease)/increase in trade and other payables (0.9) (5.4) 0.9Cash generated from operations 189.8 165.3 335.9Advanced contributions in respect of retirement benefits (22.6) (25.8) (25.8)Net interest paid (57.1) (54.9) (124.7)Income taxes paid (10.8) (4.4) (14.6)Net cash flows from operating activities 99.3 80.2 170.8 Investing activitiesInterest received 6.4 2.5 12.5Capital grants received 12.1 9.5 18.8Proceeds on disposal of property, plant and equipment 1.3 0.8 2.2Dividends received from jointly controlled entities 0.4 0.6 0.9Purchase of property, plant and equipment (120.3) (99.3) (211.4)Net cash flows from investing activities (100.1) (85.9) (177.0) Financing activitiesNew borrowings 3.5 325.1 425.0Maturity of investments 0.9 1.0 2.1Settled hedge instruments - 2.9 3.4Issue costs of new borrowings - (0.4) (0.4)Own shares purchased - - (0.2)Dividends paid to minority interests - - (0.1)Dividends paid to equity shareholders (38.7) (36.4) (55.8)Repayment of borrowings (12.0) (193.7) (201.1)Payment of principal under hire purchase contracts and financeleases (3.9) (3.5) (4.8)Net cash flows from financing activities (50.2) 95.0 168.1 Increase in cash and cash equivalents (51.0) 89.3 161.9Cash and cash equivalents at start of period 315.8 153.9 153.9 Cash and cash equivalents at end of period 6 264.8 243.2 315.8 Notes to the interim financial statements 1. Basis of preparation The interim financial statements for the six months to 30 September 2007 havebeen prepared in accordance with International Accounting Standard (IAS) 34 'Interim Financial Reporting'. The interim financial statements do not includeall the information and disclosures required in the annual report and financialstatements and should be read in conjunction with the Group's annual report andfinancial statements as at 31 March 2007. The annual report and financialstatements of the Group are prepared in accordance with International FinancialReporting Standards (IFRS) as adopted by the European Union. The accounting policies and methods of computation adopted are the same as thoseapplied in the annual report and financial statements for the year ended 31March 2007, except for the adoption of those standards and interpretationslisted below which are required to be followed in the Group's annual report andfinancial statements for the year ending 31 March 2008: - IFRS 7- Financial Instruments: Disclosures - Amendment to IAS 1 - Presentation of Financial Instruments: Capital disclosures - IFRIC 8 - Scope of IFRS 2 - IFRIC 9 - Reassessment of Embedded Derivatives - IFRIC 10 - Interim Financial Reporting and Impairment - IFRIC 11: IFRS 2 - Group and Treasury Share transactions The adoption of these Standards and Interpretations do not have any effect onthe financial position or performance of the Group. The results for the year ended 31 March 2007 have been extracted from the annualreport and financial statements which have been delivered to the Registrar ofCompanies. The independent auditors' report on those financial statements wasunqualified and did not contain a statement under section 237 (2) or (3) of theCompanies Act 1985. The financial information contained in the interimfinancial statements does not constitute statutory accounts as defined inSection 240 of the 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 2007 and their report is set out in the independent review report. The operations of the Group are not subject to material seasonality orcyclicality. There have been no changes in related party transactions since thelast annual report and financial statements for the year ended 31 March 2007that have a material effect on the Group's financial position or performance forthe period. This report was approved by the Board of Directors on 27 November 2007. 2. Segmental analysis of revenue and profit on ordinary activities before interest The 'Other' segment (formerly disclosed as 'Related services') previouslyincluded AES. On 31 March 2007, the business of AES merged with NWL andoperates as a trading division of NWL. Accordingly, the comparatives for the 'Other' and 'Northumbrian Water Limited' segments, for the six months to 30September 2006 and 12 months to 31 March 2007, have been restated by £2.6million and £5.3 million in respect of revenue, and £0.2 million and £0.4million in respect of profit on ordinary activities before interest,respectively. Credits for central unallocated costs and provisions included in profit onordinary activities before interest, for the six months to 30 September 2006 and12 months to 31 March 2007, of £0.6 million and £3.4 million respectively, havealso been restated to be included within the 'Other' segment. Revenue Northumbrian Water & Water waste water Limited contracts Other Total £m £m £m £mSix months ended 30 September 2007 Segment revenue 313.5 16.9 6.2 336.6Inter-segment revenue - - (2.8) (2.8)Revenue to external customers 313.5 16.9 3.4 333.8 Six months ended 30 September 2006 Segment revenue 296.2 17.5 5.7 319.4Inter-segment revenue - - (3.5) (3.5)Revenue to external customers 296.2 17.5 2.2 315.9 Year ended 31 March 2007 Segment revenue 591.8 37.0 11.2 640.0Inter-segment revenue - - (6.5) (6.5)Revenue to external customers 591.8 37.0 4.7 633.5 Profit on ordinary activities before interest Northumbrian Water & Water waste water Limited contracts Other Total £m £m £m £mSix months ended 30 September 2007 Segment profit on ordinary activities before interest 140.4 3.4 4.3 148.1Net finance costs (60.3)Share of profit from associates and jointly controlledentities 0.2Profit on ordinary activities before taxation 88.0Taxation 10.2Profit for the period 98.2 Six months ended 30 September 2006 Segment profit on ordinary activities before interest 124.4 4.5 0.6 129.5Net finance costs (54.2)Share of profit from associates and jointly controlledentities 0.2Profit on ordinary activities before taxation 75.5Taxation (18.7)Profit for the period 56.8 Year ended 31 March 2007 Segment profit on ordinary activities before interest 243.0 11.9 3.3 258.2Net finance costs (111.2)Share of profit from associates and jointly controlledentities 0.8Profit on ordinary activities before taxation 147.8Taxation (36.6)Profit for the year 111.2 3. Taxation Six months to Six months Year to 30.9.2007 to 30.9.2006 31.3.2007 £m £m £mCurrent tax: UK corporation tax - continuing operations 16.6 10.3 21.0 - income tax reported in equity on cash flow hedges - 0.1 0.1 - adjustment in respect of prior periods - - (12.5) Total current tax 16.6 10.4 8.6 Deferred tax:Deferred tax - continuing operations 8.5 11.3 21.0 - impact of rate reduction (35.4) - - - income tax reported in equity on cash flow hedges - (0.1) (0.1) - adjustment in respect of prior periods 0.1 (2.9) 7.1 Total deferred tax (26.8) 8.3 28.0 Tax (credit)/charge in the income statement (10.2) 18.7 36.6 4. Dividends paid and proposed The Board has declared an ordinary interim dividend for the period of 4.00 penceper share (2006/07: 3.75 pence). The dividend will be paid on 1 February 2008to shareholders on the register at the close of business on 21 December 2007. Six months to Six months Year to 30.9.2007 to 30.9.2006 31.3.2007 £m £m £mDeclared and paid during the period:Equity dividends on ordinary shares:Interim dividend for 2006/07: 3.75p - - 19.4Final dividend for 2006/07: 7.52p (2005/06: 7.04p) 38.9 36.4 36.4Dividends paid 38.9 36.4 55.8 Proposed dividend for the period:Interim dividend for 2007/08: 4.00p (2006/07: 3.75p) 20.7 19.4 -Final dividend for 2006/07: 7.52p - - 39.0 5. 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. Weighted Weighted average average number of Earnings number of Earnings Earnings shares per share Earnings shares per share 30.9.2007 30.9.2007 30.9.2007 30.9.2006 30.9.2006 30.9.2006 £m million pence £m million Pence Basic EPS 98.1 517.9 18.94 56.7 517.6 10.95 Diluted EPS 98.1 518.6 18.92 56.7 518.6 10.93 The weighted average number of shares for diluted EPS is calculated by includingthe treasury shares held. 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 30.9.2007 30.9.2007 30.9.2007 30.9.2006 30.9.2006 30.9.2006 £m million pence £m million Pence Basic EPS 98.1 517.9 18.94 56.7 517.6 10.95 Deferred tax (26.8) (5.17) 8.3 1.60Amortisation of debt fair value (3.0) (0.58) (4.4) (0.84)IAS 39 derivatives (net of tax) - - (2.0) (0.39)Adjusted EPS 68.3 517.9 13.19 58.6 517.6 11.32 Weighted average number of Earnings Earnings shares per share 31.3.2007 31.3.2007 31.3.2007 £m million penceYear to: Basic EPS 110.9 517.7 21.42 Diluted EPS 110.9 518.6 21.38 Basic EPS 110.9 517.7 21.42 Deferred tax 28.0 5.41Amortisation of debt fair value (7.7) (1.49)Derivatives (2.0) (0.39)Adjusted EPS 129.2 517.7 24.95 6. Cash and cash equivalents For the purposes of the consolidated cash flow statement, cash and cashequivalents comprise the following: Six months to Six months Year to 30.9.2007 to 30.9.2006 31.3.2007 £m £m £m Cash at bank and in hand 23.7 21.2 53.3Short term deposits 242.1 226.2 263.6Bank overdrafts (1.0) (4.2) (1.1) 264.8 243.2 315.8 7. Reconciliation of movements in equity Equity Share Cash flow share premium hedge capital reserve reserve Treasury Currency Retained Total Minority shares translation earnings equity interests Total £m £m £m £m £m £m £m £m £m At 1 April 2006 51.9 446.5 1.5 (1.7) - (198.9) 299.3 1.5 300.8 Shares purchased - - - (0.2) - - (0.2) - (0.2) Total recognised income and expense for the year - - (0.5) - (0.2) 128.4 127.7 0.3 128.0 Share-based payment - - - - - 0.4 0.4 - 0.4 Exercise of LTIP - - - 0.6 - (0.6) - - - awards Equity dividends paid - - - - - (55.8) (55.8) (0.1) (55.9) At 31 March 2007 51.9 446.5 1.0 (1.3) (0.2) (126.5) 371.4 1.7 373.1 Total recognised income and expense for the period - - - - - 104.7 104.7 0.1 104.8 Share-based payment - - - - - 0.2 0.2 - 0.2 Equity dividends paid - - - - - (38.9) (38.9) - (38.9) At 30 September 2007 51.9 446.5 1.0 (1.3) (0.2) (60.5) 437.4 1.8 439.2 Equity Share Cash flow share premium hedge capital reserve reserve Treasury Retained Total Minority shares earnings equity interests Total £m £m £m £m £m £m £m £m At 1 April 2006 51.9 446.5 1.5 (1.7) (198.9) 299.3 1.5 300.8Total recognised income andexpense for the period - - (1.0) - 55.0 54.0 0.1 54.1Share-based payment - - - - 0.2 0.2 - 0.2Equity dividends paid - - - - (36.4) (36.4) - (36.4)At 30 September 2006 51.9 446.5 0.5 (1.7) (180.1) 317.1 1.6 318.7 Responsibility Statements We confirm that to the best of our knowledge: a) The interim financial statements have been prepared in accordance with IAS34; b) The interim management report includes a fair review of the informationrequired by DTR 4.2.7R (indication of important events during the first sixmonths and description of principal risks and uncertainties for the remainingsix months of the year); and c) The interim management report includes a fair review of the informationrequired by DTR 4.2.8R (disclosure of related party transactions and changestherein). By order of the Board John Cuthbert Chris Green Managing Director Finance Director 27 November 2007 INDEPENDENT REVIEW REPORT TO NORTHUMBRIAN WATER GROUP PLC Introduction We have been engaged by the Company to review the interim set of financialstatements in the half-yearly financial report for the six months ended 30September 2007 which comprise the Consolidated Income Statement, ConsolidatedStatement of Recognised Income and Expense, Consolidated Balance Sheet,Consolidated Cash Flow Statement and the related notes 1 to 7. We have read theother information contained in the half-yearly financial report and consideredwhether it contains any apparent misstatements or material inconsistencies withthe information in the interim set of financial statements. This report is made solely to the Company in accordance with guidance containedin ISRE 2410 (UK and Ireland) "Review of Interim Financial Information Performedby the Independent Auditor of the Entity" issued by the Auditing PracticesBoard. To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the Company, for our work, for this report,or for the conclusions we have formed. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approvedby, the directors. The directors are responsible for preparing the half-yearlyfinancial report in accordance with the Disclosure and Transparency Rules of theUnited Kingdom's Financial Services Authority. As disclosed in note 1, the annual report and financial statements of the Groupare prepared in accordance with IFRS as adopted by the European Union. Theinterim set of financial statements included in this half-yearly financialreport have been prepared in accordance with International Accounting Standard34, "Interim Financial Reporting," as adopted by the European Union. Our Responsibility Our responsibility is to express to the Company a conclusion on the interim setof financial statements in the half-yearly financial report based on our review. Scope of Review We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, "Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity" issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly,we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believethat the interim set of financial statements in the half-yearly financial reportfor the six months ended 30 September 2007 is not prepared, in all materialrespects, in accordance with International Accounting Standard 34 as adopted bythe European Union and the Disclosure and Transparency Rules of the UnitedKingdom's Financial Services Authority. Ernst & Young LLP Registered Auditor Newcastle upon Tyne 27 November 2007 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Natwest