TIDMBWRA
RNS Number : 2400Z
Bristol Water PLC
13 December 2017
Announcement of interim results for the six months ended 30
September 2017
Bristol Water plc is ultimately owned by iCON Infrastructure
Partners III, LP (80%) and Itochu Corporation of Japan (20%).
Bristol Water plc supplies water to over 1.2 million people and
businesses in an area of almost 2,400 square kilometres centred on
Bristol.
For further information
contact:
Mel Karam, Chief Executive
Officer
Mick Axtell, Chief
Financial Officer
Bristol Water plc
Tel 0117 953 6470
Or contact: Bristol Water Corporate Affairs on 0117 953
6470 during office hours or 07554 771538
at any time.
LEI: 549300V0DVQGSADLDB82
FINANCIAL HIGHLIGHTS
GBPm
Profit after taxation for 6 months to
30 September 2016 13.4
------
Significant changes between periods:
Increase in revenue 3.1
Increase in operational expenditure (1.5)
Increase in profit on disposal of assets 2.2
Impairment of fixed assets (4.7)
Increase in debt indexation charge (1.4)
(2.3)
Decrease in taxation due to lower year-end
forecast profits 0.2
Increase in taxation due to tax rate
change benefit recognised last year (3.3)
Profit after taxation for 6 months to
30 September 2017 8.0
------
Summary
-- Increased revenue reflecting K-factor of 0.5% plus RPI increase
-- Continued stable underlying financial and operational
performance except for increased costs in the current period
relating to the Periodic Review 2019 process.
-- Impairment of fixed assets arose following the Board's
decision not to continue with the construction of the Cheddar 2
Reservoir
-- Profit on disposal of assets of GBP2.2m relating to
non-household activities sold to Water 2 Business Limited.
-- 1% reduction in deferred tax rate enacted last year resulted
in a GBP3.3m credit to profit and loss in the 6 months to September
2016
-- Significant level of capital investment continued with a
GBP29.7m investment during the period
-- Increase in debt indexation charge due to higher RPI
CHAIRMANS STATEMENT
This period has been marked by an overall strong financial
performance and we continue to focus on delivering for customers,
however we enter the last half of the year with further efficiency
and operational challenges. The organisation welcomed Mel Karam as
our new CEO in April and we are now working through structural
changes to support ambitious future plans.
Our employee health & safety performance continues to
improve, with Accident Frequency Rate showing a downward trend,
currently at 1.55 accidents per 100,000 hours worked for the first
six months of the year, a reduction from 2.4 accidents per 100,000
for the same period last year.
The retail market for non-household (NHH) customers opened
successfully on the 1st April 2017 following 3 years of extensive
preparation by our NHH Retail project and Wholesale Services teams.
Just over 53,000 NHH customers, mostly national chains, have opted
to switch their supplier nationally so far, with around 500 within
our wholesale area of supply. We now have 22 wholesale contracts
signed with retailers, with 15 of those retailers already active in
our area of supply. Our strong performance against market activity
measures has positioned us at the top of the industry at the end of
the first half of the year.
Operational performance has been close to our targets over the
last six months. Looking at providing our customers with high
quality drinking water, customer contacts relating to taste and
smell of water have reduced year on year, and whilstour water
quality compliance index continues to be high, it fell slightly
below the level of performance last year. We have managed our water
resources well over the first half of the year and as we enter the
winter period, total water stored in our reservoirs is maintained
at a healthy level. We continue to focus on reducing leakage from
our network below the levels achieved last year, and whilst we
suffered two large scale disruptions to water supplies earlier in
the year as a result of burst water mains, the commitment of our
staff and contracting partners, and improved customer
communications, meant that we were able to restore water supplies
quickly. As we move to the second half of the year and into winter
months, leakage from the network and response to burst water mains
become much more challenging and will be the focus of more
attention.
In order to better manage demand for water, our metering
programme is ramping up and we have a number of initiatives in
place that will contribute to improved water metering, such as
selective metering of properties following a change in occupancy, a
radio marketing campaign, and our 'Beat the Bill' initiative.
Our main capital investment programme is progressing well. The
Southern Resilience Scheme is one of the Company's biggest
infrastructure projects to date and involves work on a 30km trunk
main that will improve security of supply to 280,000 customers in
Somerset. The scheme also includes upgrades to the pumping station
at Cheddar. We are working closely with multiple agencies and
stakeholders to reduce the impact of this significant project, and
are committed as always to our high principals in corporate
citizenship to do our best for people, communities and the
environment.
We have continued our investment in our community supporting
activities such as the Water Bar at local festivals, branded water
fountains in the city centre and partnerships with Refill Bristol
and Sugar Smart. The Water Bar has won a number of awards this year
including the Community Project of the Year and Outstanding
Innovation Awards at the Water Industry Achievement Awards and the
Big Bang Award for Innovation at the Utility Week Stars Awards.
Our work continues in readiness to submit our business plan to
our regulator Ofwat in September 2018. We have been carrying out
extensive customer research and operational reviews which will
contribute to the development of future service levels and
investment requirements for the period 2020 - 2025. The plan will
be realistic, delivers to customer expectations but will also be
ambitious and reflects our passion to push the boundaries of
innovation in the water sector.
Finally I would like to thank all Bristol Water staff for their
commitment and hard work, who despite the challenges, continue to
deliver for our customers.
Keith Ludeman
Chairman
23 November 2017
INCOME STATEMENT
For the six months ended 30 September 2017
Six months to Six months to Year to
30 September 30 September 31 March
2017 2016 2017
(unaudited) (unaudited)
Note GBPm GBPm GBPm
Revenue 3.2,5 58.1 55.0 111.0
Operating costs 6 (42.4) (38.4) (79.7)
-------------- -------------- ----------
Operating profit 15.7 16.6 31.3
Other net interest payable and similar charges 7 (5.0) (3.6) (9.3)
Dividends on 8.75% irredeemable cumulative preference
shares 7 (0.5) (0.5) (1.1)
-------------- ----------
Net interest payable and similar charges (5.5) (4.1) (10.4)
-------------- -------------- ----------
Profit on ordinary activities before taxation 10.2 12.5 20.9
Taxation on profit on ordinary activities 8 (2.2) 0.9 (0.9)
Profit for the period /year 8.0 13.4 20.0
-------------- -------------- ----------
Earnings per ordinary share 9 133.3p 223.3p 333.3p
-------------- -------------- ----------
All activities above relate to the continuing activities of the
Company.
STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 September 2017
Six months to Six months to Year to
30 September 30 September 31 March
2017 2016 2017
(unaudited) (unaudited)
Note GBPm GBPm GBPm
Profit for the period / year 8.0 13.4 20.0
Other comprehensive income:
Items that will not be reclassified to profit and loss
Actuarial losses on retirement benefit surplus (5.6) (0.9) (0.6)
Attributable current taxation 8 - (0.1) (0.1)
Re-measurement of defined benefit pension scheme 8 1.8 0.1 (0.2)
Items that may be subsequently reclassified to profit and
loss
Change in the fair value of the interest rate swaps 0.9 (1.0) 0.2
Attributable deferred taxation 8 (0.2) 0.2 -
Other comprehensive expense for the period / year, net of
tax (3.1) (1.7) (0.7)
-------------- -------------- ----------
Total comprehensive income for the period / year 4.9 11.7 19.3
STATEMENT OF FINANCIAL POSITION
As at 30 September 2017
30 September 30 September 31 March
2017 2016 2017
(unaudited) (unaudited)
Note GBPm GBPm GBPm
Non-current assets
Property, plant and equipment 10 588.5 560.7 573.4
Intangible assets 11 4.5 4.9 5.1
Investments 68.5 68.5 68.5
Deferred tax assets 12 4.9 5.0 5.1
Retirement benefit surplus 13 28.9 31.7 32.3
--------------- -------------- -----------
695.3 670.8 684.4
--------------- -------------- -----------
Current assets
Inventory 1.5 1.3 1.1
Trade and other receivables 27.6 33.2 22.3
Cash and cash equivalents 16.1 18.0 16.1
--------------- -------------- -----------
45.2 52.5 39.5
--------------- -------------- -----------
Assets classified as
held for sale 14 1.4 - 8.1
Total assets 741.9 723.3 732.0
--------------- -------------- -----------
Non-current liabilities
Borrowings and derivatives 15 (301.6) (309.8) (290.9)
8.75% irredeemable cumulative
preference shares 15 (12.5) (12.5) (12.5)
Deferred income 17 (72.9) (71.2) (72.1)
Deferred tax liabilities 12 (62.1) (60.9) (61.4)
--------------- -------------- -----------
(449.1) (454.4) (436.9)
Current liabilities
Trade and other payables (34.2) (30.8) (34.6)
Borrowings and derivatives 15 (20.6) (0.4) (20.8)
Deferred income 17 (1.7) (1.7) (1.7)
(56.5) (32.9) (57.1)
--------------- -------------- -----------
Liabilities classified
as held for sale 14 - - (1.0)
Total liabilities (505.6) (487.3) (495.0)
--------------- -------------- -----------
Net assets 236.3 236.0 237.0
--------------- -------------- -----------
Equity
Called-up share capital 6.0 6.0 6.0
Share premium account 4.4 4.4 4.4
Other reserves 5.0 3.3 4.3
Retained earnings 220.9 222.3 222.3
Total Equity 236.3 236.0 237.0
--------------- -------------- -----------
The financial statements of Bristol Water plc,
registered number 2662226 on pages 3-15, were approved
by the Board of directors on 23 November 2017 and
signed on its behalf by:
Mel Karam, Director, CEO Mick Axtell, Director, CFO
STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 September 2017
Called up Share Capital Hedging Retained Total
share capital premium redemption reserve earnings
GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 April
2016 6.0 4.4 5.8 (1.7) 212.4 226.9
------------- ------------- ------------- ------------- ------------- ----------
- - - -
Profit for the year 20.0 20.0
Other comprehensive
income for the year:
Actuarial gains
recognised in
respect of (0.6) (0.6)
of retirement - - - -
benefit obligations
Attributable
current taxation - - - - (0.2) (0.2)
Re-measurement of
defined benefit
scheme (0.1) (0.1)
Fair value of
interest rate swap - - - 0.2 - 0.2
Attributable - - - - - -
deferred taxation
Total comprehensive
income for the year - - - 0.2 19.1 19.3
------------- ------------- ------------- ------------- ------------- ----------
Ordinary dividends - - - - (9.2) (9.2)
Balance as at 31
March 2017 6.0 4.4 5.8 (1.5) 222.3 237.0
------------- ------------- ------------- ------------- ------------- ----------
Balance as at 1
April 2017 6.0 4.4 5.8 (1.5) 222.3 237.0
------------- ------------- ------------- ------------- ------------- ----------
Profit for the
period - - - - 8.0 8.0
Other comprehensive
income for the
period:
Actuarial gains
recognised in
respect of - - - - (5.6) (5.6)
retirement benefit
obligations
Attributable - - - - - -
current taxation
Re-measurement of
defined benefit
scheme - - - - 1.8 1.8
Fair value of
interest rate
swaps - - - 0.9 - 0.9
Attributable
deferred taxation - - - (0.2) - (0.2)
Total comprehensive
income for the
period - - - 0.7 4.2 4.9
------------- ------------- ------------- ------------- ------------- ----------
Ordinary dividends - - - - (5.6) (5.6)
Balance as at 30
September 2017 6.0 4.4 5.8 (0.8) 220.9 236.3
------------- ------------- ------------- ------------- ------------- ----------
The Board has proposed an interim dividend on the ordinary
shares of GBP1.6m in respect of the period ended 30 September 2017
(2016: GBP1.6m). This dividend will be used to pay the intercompany
loan interest due from Bristol Water Holdings UK Limited.
CASH FLOW STATEMENT
For the six months ended 30 September 2017
Six months to Six months to Year to
30 September 30 September 31 March
2017 2016 2017
(unaudited) (unaudited)
Note GBPm GBPm GBPm
Cashflows from operating activities
Profit before taxation 10.2 12.5 20.9
Adjustments for:
Depreciation, net of amortisation of deferred
income 6 8.5 8.5 17.2
Amortisation of intangible assets 6 1.0 1.0 2.0
Impairment of tangible assets 6 4.7 - -
Difference between pension charges and normal
contributions 0.2 0.3 0.5
Loss on disposal of assets - - 0.3
Profit on sale of held for sale assets 6 (2.2) - -
Interest income 7 (2.0) (2.1) (4.1)
Interest expense 7 8.1 7.0 16.1
Pension interest income 7 (0.6) (0.8) (1.6)
(Increase) / decrease in inventory (0.4) - 0.2
Decrease / (increase) in trade and other
receivables 1.0 (3.2) 0.2
Decrease in trade and other creditors and
provisions (2.1) (2.2) (1.7)
Additional contributions to pension scheme - (0.1) (0.1)
-------------- --------------- -----------
Cash generated from operations 26.4 20.9 49.9
Interest paid (5.8) (5.9) (11.8)
Corporation taxes (paid) / received (1.6) 0.7 (1.4)
Net cash inflows from operating activities 19.0 15.7 36.7
-------------- --------------- -----------
Cash flows from investing activities
Purchase of property plant and equipment (28.5) (16.4) (35.7)
Contributions received 1.7 2.1 3.8
Proceeds from sale of fixed assets 0.1 - 0.1
Proceeds from disposal of held for sale assets 2.6 - -
Interest received 2.0 2.1 4.1
Net cash used in investing activities (22.1) (12.2) (27.7)
-------------- ---------------- ----------
Cash flows from financing activities
Transaction costs related to loans and borrowings (0.2) - (0.3)
Proceeds from long-term borrowings 9.9 - -
Payment of finance lease liabilities (0.4) (0.4) (0.3)
Preference dividends paid (0.6) (0.5) (1.1)
Equity dividends paid (5.6) (2.6) (9.2)
Net cash used in financing activities 3.1 (3.5) (10.9)
-------------- ---------------- ----------
Net decrease in cash and cash equivalents - - (1.9)
Cash and cash equivalents, beginning of period 16.1 18.0 18.0
Cash and cash equivalents, end of period 16.1 18.0 16.1
============== ================ ==========
NOTES TO THE INTERIM ACCOUNTS
For the six months ended 30 September 2017
1 General Information
Bristol Water plc ("the Company") is one of six regulated Water only supply companies ("WOCs")
in England and Wales. The company is the licensed monopoly provider of water services in the
Bristol area, and as such is regulated by the Water Services Regulation Authority - Ofwat.
The Company is incorporated and domiciled in the UK. The address of its registered office
is Bridgwater Road, Bristol, BS13 7AT, England.
2 Basis of preparation
The financial information contained in this interim announcement does not constitute statutory
accounts within the meaning of section 435 of the Companies Act 2006.The interim accounts
have been prepared in accordance with Financial Reporting Standard 104 "Interim Financial
Reporting" issued by the Financial Reporting Council and the Disclosure Rules and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
The Company has adopted FRS 101 "Reduced disclosure framework - Disclosure exemptions from
EU-adopted IFRS for qualifying entities".
The Company has adopted a statement of financial position presentation which is in line with
the financial statements produced by its parent company under IFRS. The September 2016 comparative
figures have been represented accordingly.
3 Accounting policies
With the exception of the revenue policy noted below which has been updated to reflect revenue
received from retailers, the same accounting policies and methods of computation used in preparing
the annual financial statements as at 31 March 2017 have been used in preparing these interim
accounts.
3.1 Going concern
The Company meets its day-to-day working capital requirements through its cash reserves and
borrowings. The Company's forecasts and projections show that the Company will be able to
operate within the level of its current cash reserves and borrowing facilities. After making
enquiries, the Directors have an expectation that the Company has adequate resources to continue
in operational existence for the foreseeable future. The Company therefore continues to adopt
the going concern basis in preparing its financial statements. Further information on the
Company's borrowings is given in note5.
3.2 Revenue
Revenue comprises charges to customers and retailers for water and other services, exclusive
of VAT.
Revenue from metered water supply is based on water consumption, and is recognised upon delivery
of water. Revenue from metered water supply includes an estimate of the water consumption
for customers of both the Company and retailers whose meters were not read at the reporting
date. For customers the estimate covers the period between the last meter reading and the
reporting dates and for retailers the last month of the period. The estimate is recorded within
accrued income.
Revenue from unmetered water supply is based on either the rateable value of the property
or on an assessed volume of water supplied, and is recognised over the period to which the
bill relates.
Revenue from other services is recognised upon completion of the related services.
4 Critical accounting estimates and judgments
Estimates and judgments are continually evaluated and are based on historical experience and
other factors, including expectations of future events that are believed to be reasonable
under the circumstances
Critical accounting estimates and assumptions
The company makes estimates and assumptions concerning the future. The resulting accounting
estimates will, by definition, seldom equal the related actual results. The estimates and
assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are addressed below.
Revenue Recognition
An estimate of water consumption by metered customers since the date of the last bill and
the corresponding income that remains not billed (accrued income) is required to be made each
year. The accrual is based on metered volumes, and consumption already billed and tariffs.
Classification of costs between operating expenditure and capital expenditure
Expenditure on assets can be for repairs, maintenance or enhancement, and judgement is required
to determine whether it should be classified as operating expenditure or capital expenditure.
The Company incurs a high level of infrastructure maintenance expenditure. Each infrastructure
scheme is reviewed to determine the accounting treatment as either capital or operating expenditure,
depending on the nature of the scheme. Consideration is given to a range of factors, including
the degree of upgrade which results from the maintenance project, the frequency of the maintenance
relative to the overall life of the underlying asset, whether the maintenance is likely to
result in increased useful life or enhanced working standard or capacity of the asset, and
if the maintenance is expected to result in a separate component of infrastructure asset.
The results are assessed against the requirements of accounting standards.
Classification of costs between operating expenditure and capital expenditure (continued)
Payroll costs are allocated to cost centres that reflect the nature of activity being undertaken.
A judgement is applied, based on the activity for each cost centre, of an appropriate proportion
to capitalise. This is a formal procedure under which figures are reviewed and assessed to
ensure they meet the required criteria (directly attributable to an asset, probable future
economic benefit and can be measured reliably).
Useful economic lives of property, plant and equipment
The annual depreciation charge for property, plant and equipment is sensitive to changes in
the estimated useful economic lives and residual values of the assets. These are amended when
necessary to reflect current estimates, based on technological advancement, future investments,
economic utilisation and the physical condition of the assets. See note 10 for the carrying
amount of the property plant and equipment.
Useful economic lives of intangible assets
The annual amortisation for computer software is sensitive to changes in the estimated useful
economic lives of the assets. These are amended when necessary to reflect current estimates,
based on technological advancement, future investments and economic utilisation. See note
11 for the carrying amount of the intangible assets.
Impairment of trade receivables
The company makes an estimate of the recoverable value of trade and other receivables. When
assessing impairment of trade and other receivables, management considers factors including
the credit rating of the receivable, the aging profile of the receivables and historical experience.
Defined benefit pension scheme
The Company has an obligation to pay pension benefits to certain employees. The cost of these
benefits and the present value of the obligation depends on a number of factors, including;
life expectancy, asset valuations and the discount rate on corporate bonds. Management estimates
these factors and receives advice from the pension scheme administrators in determining the
net pension obligation in the balance sheet. The assumptions reflect historical experience
and current trends.
In March 2016 the scheme closed to future benefit accrual and as a result any surplus on the
scheme would only be available to the Company as refund rather than as a reduction in future
contributions. Under current UK tax legislation an income tax deduction of 35% is applied
to a refund from a UK pension scheme, before it is passed to the employer which is shown as
a restriction to the value of the net pension scheme asset.
See note 13 for the disclosures of the defined benefit pension scheme.
Fair value of derivatives
The fair value of financial instruments that are not traded in an active market is determined
by using valuation techniques. The Company uses the services of third party experts to provide
the valuation. See note 16 for details of the Company's interest rate swaps.
5 Revenue
Revenue is wholly derived from water supply and related activities in the United Kingdom.
The maximum level of prices the Company may levy for the majority of water charges is controlled
by the Water Services Regulation Authority (Ofwat) through the RPI +/- K price formula.
6 Operating expenses
Six months to Six months to Year to
30 September 2017 30 September 2016 31 March 2017
(unaudited) (unaudited) (restated)
GBPm GBPm GBPm
Operating expenses include -
Payroll cost, net of recharges to
fixed assets and
including retirement benefit costs 8.0 7.3 15.1
Depreciation and amortisation, net of
deferred income amortisation 9.5 9.5 19.2
Impairment of fixed assets 4.7 - -
Profit on sale of disposal group (2.2) - -
The impairment of fixed assets arose following the Board's decision not to continue with the
construction of the Cheddar 2 Reservoir.
7 Net interest payable and similar charges
Six months to Six months to Year to
30 September 2017 30 September 2016 31 March 2017
(unaudited) (unaudited)
GBPm GBPm GBPm
Interest payable and similar charges relate
to:
Bank borrowings 1.1 1.2 2.3
Term loans and debentures:
interest charges 4.8 4.7 9.5
indexation and amortisation of fees and
premium
on loans 2.2 0.8 3.5
Finance leases - - 0.1
Capitalisation of borrowing cost (0.5) (0.2) (0.4)
Dividends on 8.75% irredeemable cumulative
preference shares 0.5 0.5 1.1
------------------- ------------------- ---------------
8.1 7.0 16.1
Less interest receivable and similar income:
Interest income in respect of retirement
benefit scheme (0.6) (0.8) (1.6)
Loan to Bristol Water Holdings UK Ltd -
interest
receivable (2.0) (2.0) (4.0)
Other external investments and deposits
income - (0.1) (0.1)
------------------- ------------------- ---------------
(2.6) (2.9) (5.7)
Total net interest payable and similar
charges 5.5 4.1 10.4
------------------- ------------------- ---------------
The rate used to determine the amount of borrowing costs eligible for capitalisation was 5.9%
(30 September 2016: 4.7%), which is the weighted average interest rate of applicable borrowings
Dividends on the 8.75% irredeemable cumulative preference shares are payable at a fixed rate
of 4.375% on 1 April and 1 October each year. Payment by the Company to the share registrars
is made two business days earlier. The payments are classified as interest in accordance with
IAS 39 "Financial Instruments - Recognition and Measurement".
8 Taxation Six months to Six months to Year to
30 September 30 September 31 March 2017
2017 2016
(unaudited) (unaudited)
GBPm GBPm GBPm
Tax expense / (income) included in Income Statement
Current tax:
Corporation tax on profits for the period / year 1.4 1.7 3.3
Adjustment in respect of prior period - 0.1 0.2
-------------- -------------- ---------------
Total current tax 1.4 1.8 3.5
Deferred tax:
Origination and reversal of timing differences 0.8 0.7 0.9
Adjustment to prior periods - (0.1) (0.2)
Effect of change in rate - (3.3) (3.3)
-------------- -------------- ---------------
Total deferred tax 0.8 (2.7) (2.6)
Tax expense / (income) on profit 2.2 (0.9) 0.9
-------------- -------------- ---------------
Tax (income) / expense (included in other comprehensive
income
Current tax:
Prior period adjustment on defined benefit plan - 0.1 0.1
Deferred tax:
Remeasurement of swap liability 0.2 (0.2) -
Effect of corporation tax change in rate - - -
Effect of pension change in rate - - -
Remeasurement of post-employment benefit liability (1.8) (0.1) 0.2
Total tax (income) / expense included in other
comprehensive income (1.6) (0.2) 0.3
-------------- -------------- ---------------
9 Earnings per ordinary share
At At At
30 September 2017 30 September 2016 31 March 2017
(unaudited) (unaudited)
m m m
Basic earnings per ordinary share have been
calculated as follows -
Earnings attributable to ordinary shares GBP8.0 GBP13.4 GBP20.0
Weighted average number of ordinary shares 6.0 6.0 6.0
As the Company has no obligation to issue further shares, disclosure of earnings per share
on a fully diluted basis is not relevant.
10 Property, plant and equipment
Six months to Six months to Year to
30 September 2017 30 September 2016 31 March 2017
(unaudited) (unaudited)
GBPm GBPm GBPm
Net book value, beginning of period 573.4 556.6 556.6
Additions 29.2 13.5 36.4
Disposals - - (0.4)
Depreciation charge for the period (9.4) (9.4) (18.9)
Impairment charge * (4.7) - -
Transferred to assets classified as held
for sale - - (0.3)
Net book value, end of period 588.5 560.7 573.4
------------------- ------------------- ---------------
The net book value of property, plant and equipment includes GBP5.3m (30 September 2016: GBP4.9m)
of borrowing costs capitalised in accordance with IAS 23. During the six months ended 30 September
2017 GBP0.5m was capitalised using 5.9% prorated annual capitalisation rate (30 September
2016 GBP0.2m, 4.7%).
* The impairment charge arose following the Board's decision not to continue with the construction
of the Cheddar 2 Reservoir.
11 Intangible assets
Six months to Six months to Year to
30 September 2017 30 September 2016 31 March 2017
(unaudited) (unaudited)
GBPm GBPm GBPm
Net book value, beginning of
period 5.1 5.0 5.0
Additions 0.5 0.9 2.4
Disposals (0.1) - -
Depreciation charge for the
period (1.0) (1.0) (2.0)
Transferred to assets
classified as held for sale - - (0.3)
Net book value, end of period 4.5 4.9 5.1
------------------- ----------------------------- ---------------
12 Deferred Taxation
At At At
30 September 2017 30 September 2016 31 March 2017
(unaudited) (unaudited)
GBPm GBPm GBPm
Provision for
deferred taxation
comprises:
Accelerated
capital
allowances
and capital
element of
finance
leases 62.1 60.9 61.4
Deferred
income (4.7) (4.5) (4.6)
Short-term
timing
differences - - (0.1)
Interest rate
swaps (0.2) (0.5) (0.4)
Net deferred
taxation liability 57.2 55.9 56.3
------------------- --------------------- -------------------
Reflected in the statement of
financial position as follows:
Deferred
taxation
asset (4.9) (5.0) (5.1)
Deferred
taxation
liability 62.1 60.9 61.4
------------------- ----------------------------- -------------------
Deferred
taxation
liabilities
net 57.2 55.9 56.3
------------------- ----------------------------- -------------------
13 Retirement benefits
Pension arrangements for employees are partly provided through the Company's membership of
the Water Companies' Pension Scheme (WCPS), which provides defined benefits based on final
pensionable pay. The Company's membership of WCPS is through a separate section of the scheme.
The assets of the section are held separately from those of the Company and are invested by
discretionary fund managers appointed by the trustees of the scheme. The employees in the
section stopped earning additional defined benefit pensions on 31 March 2016. All eligible
employees were offered membership of a stakeholder pension scheme.
In addition to providing benefits to employees and ex-employees of the Company, the section
provides benefits to former employees of the Company who transferred to BWBSL. The majority
of the section assets and liabilities relate to the Company employees and ex-employees. The
financial position of the section is determined by an independent actuary (Lane, Clark & Peacock
LLP).
The latest triennial valuation of the pension scheme was completed as at 31 March 2014. The
total deficit as at 31 March 2014 measured on a long-term scheme funding basis was GBP2.8m,
representing a funding level of 98.4%.
An updated estimate of the scheme's funding position at 31 March 2015 indicated a funding
surplus of GBP3.2m. The improvement in the funding position since the triennial valuation
at 31 March 2014 reflects primarily higher than expected asset returns, lower than expected
inflationary pension increases and deficit contributions paid over the year, largely offset
by the reduction in the real yields available on long-dated gilts (which serves to increase
the technical provisions).
The funding surplus of GBP3.2m and the accounting surplus of GBP44.5m are not comparable because:
* the approach for valuation of scheme liabilities is
significantly different between the two valuation
methods and
* the funding surplus is based on a position at 31
March 2015 and the accounting surplus is based on a
position at 30 September 2017.
Pension assets and liabilities are recognised in the accounts in accordance with IAS 19 'Employee
benefits' as disclosed in note 3.6.
In summary, assets and liabilities under IAS 19 were:
At At At
30 September 2017 30 September 2016 31 March 2017
(unaudited) (unaudited)
GBPm GBPm GBPm
Fair value of section assets 223.2 240.5 233.9
Present value of liabilities (178.7) (191.8) (184.3)
------------------- ------------------- ---------------
Surplus in the section 44.5 48.7 49.6
Less: restriction of surplus (15.6) (17.0) (17.3)
Net pension asset on IAS 19 basis 28.9 31.7 32.3
------------------- ------------------- ---------------
The triennial valuation of the pension scheme as at 31 March 2017 is currently being completed
and is expected to be finalised by 1 April 2018.
14 Assets and liabilities classified as held for sale
30 September 2017 30 September 31 March 2017
(unaudited) 2016
(unaudited)
GBPm GBPm GBPm
(a) Non-current assets classified as
held for sale
Property, plant and equipment 0.2 - 0.2
------------------ ------------- --------------
0.2 - 0.2
------------------ ------------- --------------
Land and property which is being actively marketed for sale has been classified as held for
sale. The sale is expected to complete early in the 2018/19 financial year.
30 September 2017 30 September 31 March 2017
(unaudited) 2016
(unaudited)
GBPm GBPm GBPm
(b) Assets of disposal group
classified as held for sale
Property, plant and equipment - - 0.1
Intangible assets - - 0.3
Trade receivables - - 3.4
Accrued income 1.2 - 4.1
------------------ ------------- --------------
1.2 - 7.9
------------------ ------------- --------------
14 Assets and liabilities classified as held for sale (continued)
30 September 2017 30 September 31 March 2017
(unaudited) 2016
(unaudited)
GBPm GBPm GBPm
(c) Liabilities of
disposal group
classified as held
for sale
Trade creditors - - 1.0
------------------------ ------------------- ------------- ------- --------------
- - 1.0
------------------------------------ ------------------- ------------- ------- --------------
The disposal group has been classified as held for sale following the decision by management
and shareholders on 2 February 2017 to sell the assets and liabilities relating to non-household
activities to Water 2 Business Limited. The disposal was executed on 3 April 2018. The remaining
accrued income is expected to be settled by 31 March 2018.
15 Net borrowings
At At At
30 September 2017 30 September 2016 31 March 2017
(unaudited) (unaudited)
GBPm GBPm GBPm
Net borrowings comprise -
Debt due after one year,
excluding 8.75%
irredeemable
cumulative
preference shares 301.6 309.8 290.9
Current portion of
borrowings 20.6 0.4 20.8
322.2 310.2 311.7
Cash and cash equivalents (16.1) (18.0) (16.1)
------------------ ------------------- -------
Net borrowings excluding 8.75%
irredeemable
cumulative preference shares 306.1 292.2 295.6
8.75% irredeemable cumulative
preference shares 12.5 12.5 12.5
Net borrowings 318.6 304.7 308.1
------------------ ------------------- -------
Borrowing facilities
The Company currently has unutilised borrowing facilities of GBP85.1m.
16 Financial Risk Management
Financial risk factors
The Company's main financial instruments comprise:
* borrowings and cash;
* 8.75% irredeemable cumulative preference shares;
* various items, such as trade receivables and trade
creditors, that arise directly from its operations;
and
* two long-term loans made to Bristol Water Holdings UK
Limited.
The Company has also entered into interest rate swaps to manage the interest rate risk arising
from its sources of finance. It is the Company's policy not to trade in financial instruments.
The Company's significant debt financing exposes it to a variety of financial risks that include
the effect of changes in debt market prices, credit risks, liquidity and interest rates. The
Company has in place a risk management programme that seeks to limit the adverse effects on
the financial performance of the Company.
The Board is responsible for setting the financial risk management policies applied by the
Company. The policies are implemented by the finance department. The finance department has
a policies and procedures manual that sets out specific guidelines to manage interest rate
risk, credit risk and the use of financial instruments to manage these risks.
(a) Interest rate risk of financial assets
The financial assets include cash at bank and cash deposits which are all denominated in sterling.
During the year cash and cash deposits were placed with banks for either a fixed term or repayable
on demand earning interest at market rates. There are also interest-bearing fixed rate loans
totaling GBP68.5m (2016/17: GBP68.5m) to Bristol Water Holdings UK Limited.
Financial Risk Management (continued)
Financial risk factors (continued)
(b) Interest rate risk and inflation risk of financial liabilities
The financial liabilities consist of interest-bearing loans, debentures, finance leases and
8.75% irredeemable cumulative preference shares. The Company uses interest-rate swaps as hedging
instruments to hedge cash flows in respect of future interest payments, which has the effect
of increasing the proportion of fixed interest debt.
The Company's practice is to maintain the majority of its net debt on a fixed rate or a fixed
margin above movements in RPI basis. At the year-end 39%* (2016/17: 39%*) of the Company's
gross financial liabilities, excluding the 8.75% irredeemable cumulative preference shares,
were at fixed rates. 95% (2016/17: 96%) of the Company's gross financial liabilities, excluding
the 8.75% irredeemable cumulative preference shares, were at fixed or index-linked rates.
The residues were at floating rates.
The Company's current intention is to maintain a future interest rate management profile consisting
of financial liabilities at either fixed or index-linked rates amounting to 70% or more of
such liabilities. The balance between fixed or index-linked, and floating interest rate liabilities
will be kept under review, and is dependent on the availability of such resources in the financial
markets
The carrying value of the Company's index-linked borrowings is exposed to changes in RPI.
The Company's RCV and water charges are also linked to RPI. Accordingly index-linked debt
partially hedges the exposure to changes in RPI and delivers a cash flow benefit, as compensation
for the indexation is provided through adjustment to the principal rather than in cash.
* Variable interest rate loans totaling GBP60m, covered by interest rate swaps, have been
considered as fixed interest rate loans for the calculation of this percentage.
(c) Credit risk
The Company is required by the Water Industry Act 1991 to supply water to all potential customers
in its licensed area. In the event of non-payment by commercial customers, but not domestic
customers, the Company has a right of disconnection. For all customers the Company has implemented
policies and procedures designed to assess the risk of further non-payment and recoup debts.
Under the terms of the Security Trust and Inter-creditor Deed (STID), cash at bank and cash
deposits are placed with banks with a minimum of Moody's P-1 and Standard & Poors A-1 credit
ratings.
There is no collateral held as security in respect of the above financial assets.
(d) Liquidity risk
It is the Company policy to maintain continuity of funding. At the year-end 75%
(2016/17:
77%) of its financial liabilities, including 8.75% irredeemable cumulative
preference shares,
mature after five years or are irredeemable.
The Company actively maintains a mixture of long-term and short-term committed
facilities
that are designed to provide sufficient funds for operations.
The Company has a GBP20m and a GBP15m facility expiring in December 2019 and a
GBP35m and
GBP25m facility expiring in December 2021. All the facilities are floating rate and
incur
non-utilisation fees at market rates. At the year-end GBP85.1 of these facilities
remain undrawn.
Under the terms of the STID the Company is required to maintain sufficient funds in
a nominated
account to cover estimated debt service payments arising during the following year.
These
funds, currently amounting to approximately GBP6.1m (2016/17: GBP6.1m), are
therefore not
available for other operational use or distribution to shareholders.
Derivative financial instruments and hedge accounting
The Company has entered into two interest rate swaps with notional values of GBP10m and GBP50m.
These were effective from 22 October 2008 and 3 December 2014 respectively. The Company has
also entered into a forward starting swap to hedge expected future borrowings up to a notional
value of GBP67.5m. The effective date of the forward starting swap is 24 April 2018. The Company
uses interest-rate swaps as hedging instruments to hedge cash flows in respect of future interest
payments, and accordingly hedge accounting is applied as mentioned in note 3.13.
(e) Covenants compliance risk
Under the terms of its principal debt agreements the Company is required to comply with covenants
relating to minimum levels of interest cover and to maximum levels of net debt in relation
to regulatory capital value. Failure to comply may result in various restrictions being imposed
upon the Company. Risk is minimised through continuous monitoring of the relevant ratios in
both emerging and forecast results, and by close control of operating cash flows and capital
investment programmes
Fair value of financial assets and liabilities measured at amortised cost.
The fair value of borrowings are as follows:
Six months to Six months to Year to
30 September 2017 30 September 2016 31 March 2017
(unaudited) (unaudited)
GBPm GBPm GBPm
Non-current 451.6 488.9 460.1
Current 20.6 0.4 20.8
------------------------- ------------------------- ---------------
472.2 489.3 480.9
------------------------- ------------------------- ---------------
17 Deferred Income
Six months to Six months to Year to
30 September 2017 30 September 2016 31 March 2017
(unaudited) (unaudited)
GBPm GBPm GBPm
Carrying value, beginning of period 73.8 71.7 71.7
Additions 1.7 2.1 3.8
Amortisation credit for the period (0.9) (0.9) (1.7)
Carrying value, end of period 74.6 72.9 73.8
------------------- ------------------- ---------------
Current 1.7 1.7 1.7
Non-current 72.9 71.2 72.1
------------------- ------------------- ---------------
74.6 72.9 73.8
------------------- ------------------- ---------------
18 Commitments
Capital commitments at 30 September 2017 contracted
for but not provided were GBP10.8m (2016: GBP6.9m)
19 Ultimate parent company and controlling party
The immediate parent company for this entity
is Bristol Water Core Holdings Limited, a company
incorporated in England and Wales.
The directors consider iCON Infrastructure Partners
III, L.P. ("iCON III"), acting through its Managing
General Partner, iCON Infrastructure Management
III Limited ("iIML III"), to be the ultimate
parent and controlling party of the Company.
The smallest and largest group in which the Company
is consolidated is CSE Water UK Limited and copies
of its consolidated annual report are available
from Suite 1, 3(rd) floor, 11-12 St James's Square,
London, SW1Y 4LB.
20 Related party transactions
During the six months to 30 September 2017 the
Company spent GBP1.5m (2016: GBP1.8m) on the
purchase of customer related services from BWBSL,
a joint venture company between Bristol Water
Holdings Limited and Wessex Water Services Limited.
At 30 September 2017 GBPnil (2016: GBP1.4m) was
receivable from BWBSL and GBP1.7m (GBP1.4m) was
payable to BWBSL.
During the six months to 30 September 2017 the
Company recognised sales of GBP11.9m (2016 GBPnil)
to Water 2 Business Limited (W2B), an associate
company within the CSE Water UK Limited Group.
During the same period the Company sold assets
with a book value of GBP6.9m to W2B for a purchase
price of GBP9.1m. The assets sold include non-household
customer lists, tangible and intangible assets,
debtors and accrued income. At 30 September 2017
GBP1.8m (2016: GBPnil) was receivable from W2B.
21 Circulation
This interim announcement is available on the
Bristol Water web site: http://www.bristolwater.co.uk.
Paper copies are also available from the Company's
registered office at Bridgwater Road, Bristol,
BS13 7AT.
Bristol Water plc - Interim Accounts
DIRECTORS' RESPONSIBILITIES FOR THE PREPARATION OF INTERIM
ACCOUNTS
The directors' confirm that these condensed interim financial
statements have been prepared in accordance with FRS104 'Interim
Financial Reporting', and that the interim management report
includes a fair review of the information required by DTR 4.2.7 and
DTR 4.2.8, namely:
-- an indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- material related-party transactions in the first six months
and any material changes in the related-party transactions
described in the last annual report.
The directors of Bristol Water Plc are listed in the Bristol
Water Plc Annual Report for 31 March 2017. A list of current
directors is maintained on the Bristol Water plc website:
www.bristolwater.co.uk
Going concern
The directors have a reasonable expectation that the Company has
adequate resources available to it to continue in operational
existence for the foreseeable future and have therefore continued
to adopt the going concern policy in preparing the interim
accounts. This conclusion is based upon, amongst other matters, a
review of the Company's financial projections together with a
review of the GBP16.1m cash and GBP85.1m unutilised committed
borrowing facilities available to the Company as well as
consideration of the Company's capital adequacy.
By order of the Board
C Jones
Secretary
This information is provided by RNS
The company news service from the London Stock Exchange
END
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