Bristol Water PLC 08 December 2005 BRISTOL WATER plc Announcement of interim dividend and interim results for six months ended 30 September 2005 Bristol Water plc is a subsidiary of Bristol Water Group plc (BWG), which is also reporting its results today. For further information: Alan Parsons, Chief Executive Jonathan Gillen Andy Nield, Finance Director City Profile Bristol Water plc Tel: 020 7448 3244 Tel: 020 7448 3244 (8th December) Jeremy Williams, Corporate Affairs Tel: 0117 953 6407 (thereafter) Bristol Water plc Tel: 0117 953 6470 / 07831 453924 or contact: Bristol Water Corporate Affairs on 0117 953 6470 during office hours or 07831 453924 or 07831 518964 at any time HIGHLIGHTS Six months ended 30 September 2005 2004 (unaudited) (unaudited) (restated) £m £m % change Turnover 41.1 35.3 +17% Operating profit 13.3 9.2 +44% Profit before tax 10.8 6.4 +70% Profit after tax 7.4 5.2 +42% Regulatory Capital Value (RCV)* 235 229 Net debt as percentage of RCV 71% 62% Earnings per ordinary share 113.8p 77.7p +46% • PBT £10.8m - 70% increase reflecting K factor of 13.8% • Net capital investment of £7.7m in period • Net debt of £167.3m - approximately 71% of forecast Regulatory Capital Value for 2005/06 • Results are reported under UK GAAP. Parent company has announced consolidated group results under IFRS • Results for the previous period are restated to reflect full adoption of FRS17 and FRS21 * Forecast year end RCV; 2004 RCV represents opening PR04 value Bristol Water plc supplies water to over one million people and businesses in an area of almost 2,400 square kilometres, centred on Bristol. CHAIRMAN'S STATEMENT Introduction The company is in the first year of the new regulatory period covering the five years 2005-10 and is making good progress towards delivery of the required outputs and efficiency targets for the five-year period specified by Ofwat in its determination of the new price limits. Financial performance in 2004/05 was adversely affected by a combination of expenses being incurred that were not provided for within allowed price limits, together with a provision for restructuring costs. The price limits for the new five-year period provide for most of these additional costs together with the financing of a substantial capital investment programme. The allowed price limit increase of 17.3% for the year, together with efficiency gains from the restructuring programme, has resulted in operating profit increasing by 44% to £13.3m. During 2004/05 we initiated a programme to further improve the operational efficiency of the company. Over the past six months we have implemented a number of redundancies and arranged for the outsourcing of our laboratory services. We are continuing to seek further potential savings, where consistent with the maintenance of service standards and appropriate levels of risk. Capital investment net of grants and contributions in the period amounted to £7.7m. A major focus during the period has been planning and initiation of projects for the five-year period and we anticipate a significant increase in net capital expenditure during the second half year. A key scheme is the £20m project to improve the security of supply for customers in the northern part of our area. The first stages of this are progressing well and the overall scheme should be completed during 2007/08. We have also been working on two schemes to deal with deteriorating sources of raw water and are finalising two innovative solutions that will allow us to achieve the quality related objectives and also to streamline existing processes at two of our treatment plants. Levels of service to customers remain extremely high, as reflected in Ofwat's assessment of levels of service and customer surveys. At a national level there has been considerable publicity about drought conditions during the summer and the potential restriction of water supplies. In the Bristol area we suffered from low rainfall during both the important 2004/05 winter period and during this summer. This has led to reservoir levels being lower than normal, but still within normal control parameters. Heavy rainfall during October and early November meant that by the end of November reservoir levels had improved significantly to above normal levels. We are continuing, as always, to encourage customers to minimise the waste of water wherever possible, but have not sought to impose restrictions on use. The next 2-3 month's rainfall remains important to ensure an adequate recharge of the reservoirs. Accounting standards Bristol Water Group plc, the ultimate parent company, is also reporting its consolidated interim results today. These are being reported under International Financial Reporting Standards (IFRS). As previously indicated Bristol Water plc does not currently intend to adopt IFRS and therefore will continue to report under UKGAAP. There have been a number of changes to UKGAAP in the period. The two significant changes for the company are FRS17 (Pension costs) and FRS21 (Events after the balance sheet date). The new standards have been adopted for the interim results and comparative figures for the previous year have been restated accordingly. Financing arrangements Additional long-term index linked debt of £57m was successfully raised through the Artesian programmes arranged by The Royal Bank of Scotland. £21.5m was used to provide an intercompany loan to the ultimate parent company and £7m to make a special contribution to the defined benefit pension scheme. The remainder will be used to finance capital expenditure and debt maturities over the next two years. This 'pre-funding' is reflected in the relatively high cash at bank and on deposit of £39.4m at 30 September 2005. The parent company then used the £21.5m loan plus other cash balances to finance a return of approximately £30m to shareholders, which was completed during July. At 30 September 2005 the net debt was £167.3m representing approximately 71% of the forecast Regulatory Capital Value (RCV) at 31 March 2006. We anticipate maintaining a debt to RCV ratio in the range of 75% to 80% over the remainder of the five year regulatory period. Pensions Pension arrangements for the majority of the company's employees are provided through the group's membership of the Water Companies Pension Scheme (WCPS), which provides defined benefits based on final pensionable pay. The pension sections were closed to new entrants a number of years ago and all new employees are offered stakeholder pension arrangements. At 30 September 2005 the gross deficit, under FRS17 and included within the balance sheet, was £1.5m. This is £10.4m lower than the equivalent figure at 31 March 2005 reflecting the additional contribution of £7.0m made during the period together with favourable actuarial movements. The company has also agreed to make further additional contributions of £1.0m in each of the four years beginning April 2006 and £0.9m in 2010/11. Dividends The company plans to pay an annual level of ordinary dividends comprising: • A base level of dividend reflecting the cost of capital allowed by Ofwat in the determination of price limits, adjusted to reflect actual gearing levels and where appropriate actual performance relative to Ofwat's assumptions. • An amount equal to the post-tax interest receivable from the ultimate parent company in respect of intercompany loans. The Board declared a first interim dividend of £1.2m in respect of intercompany loan interest for the six months to 30 September 2005. This was paid in October. The Board has now declared a second interim dividend of £2.3m in respect of the base level of dividend for the six months to 30 September 2005, which will be paid on 8 December 2005. Conclusions The company is well placed for the future. Moger Woolley Chairman 8 December 2005 PROFIT AND LOSS ACCOUNT For the six months ended 30 September 2005 Six months to Six months to Year to 30 September 30 September 31 March 2005 2004 2005 (unaudited) (unaudited) (restated) (restated) Note £m £m £m Turnover 2 41.1 35.3 70.6 Operating costs (27.8) (26.1) (52.6) Exceptional operating costs - - (1.7) -------------------------------------------------------------------------------- 3 (27.8) (26.1) (54.3) -------------------------------------------------------------------------------- Operating profit 13.3 9.2 16.3 Net interest payable 4 (2.9) (3.2) (6.6) Interest in respect of retirement benefit obligations 4 0.4 0.4 0.8 -------------------------------------------------------------------------------- Profit on ordinary activites before taxation 10.8 6.4 10.5 Taxation on profit on ordinary activities 5 (3.4) (1.2) (1.4) -------------------------------------------------------------------------------- Profit on ordinary activities after taxation 7.4 5.2 9.1 -------------------------------------------------------------------------------- Dividends - 6 On irredeemable preference shares (non-equity) (0.5) (0.5) (1.1) On ordinary shares (equity) (6.5) (4.5) (7.3) -------------------------------------------------------------------------------- Total dividends (7.0) (5.0) (8.4) -------------------------------------------------------------------------------- Profit retained 0.4 0.2 0.7 -------------------------------------------------------------------------------- Earnings per ordinary share 7 113.8p 77.7p 133.3p -------------------------------------------------------------------------------- Dividend per ordinary share 6 - declared or proposed in respect of the period 58.30p 47.15p 135.15p -------------------------------------------------------------------------------- - charged in the profit and loss account during the period 107.62p 74.27p 121.42p -------------------------------------------------------------------------------- All activities above relate to the continuing operations of the company. STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES For the six months ended 30 September 2005 Six months to Six months to Year to 30 September 30 September 31 March 2005 2004 2005 (unaudited) (unaudited) (restated) (restated) Note £m £m £m Profit attributable to Bristol Water plc ordinary shareholders 6.9 4.7 8.0 Actuarial gains/(losses) recognised in respect of retirement benefit obligations 11 2.7 (0.6) 1.7 Attributable deferred taxation 11 (0.7) 0.2 (0.3) -------------------------------------------------------------------------------- Total recognised gains for the period 8.9 4.3 9.4 -------------------------------------------------------------------------------- BALANCE SHEET 30 September 2005 At At At 30 September 30 September 31 March 2005 2004 2005 (unaudited) (unaudited) (restated) (restated) Note £m £m £m Fixed assets 8 194.5 194.5 195.6 Investment - Loans to ultimate holding company 68.5 47.0 47.0 Current assets Stocks 0.7 0.6 0.6 Debtors 21.4 20.8 18.5 Cash at bank and on deposit 9 39.4 11.9 12.0 -------------------------------------------------------------------------------- 61.5 33.3 31.1 -------------------------------------------------------------------------------- Creditors: amounts falling due within one year Short term borrowings 9 (4.0) (5.4) (3.7) Other creditors (19.5) (17.6) (17.6) -------------------------------------------------------------------------------- (23.5) (23.0) (21.3) -------------------------------------------------------------------------------- Net current assets 38.0 10.3 9.8 -------------------------------------------------------------------------------- Total assets less current liabilities 301.0 251.8 252.4 Creditors: amounts falling due after more than one year 9 (202.7) (149.3) (148.4) Deferred income (9.5) (8.5) (8.6) Provisions for liabilities and charges 10 (18.2) (15.6) (16.8) Retirement benefit obligations 11 (1.5) (14.0) (11.9) -------------------------------------------------------------------------------- Net assets 69.1 64.4 66.7 -------------------------------------------------------------------------------- Capital and reserves Called up share capital 18.5 18.5 18.5 Share premium 4.4 4.4 4.4 Other reserves 5.8 5.8 5.8 Profit and loss account 40.4 35.7 38.0 -------------------------------------------------------------------------------- Total shareholders' funds 12 69.1 64.4 66.7 -------------------------------------------------------------------------------- Analysed as attributable to: Equity interests 56.6 51.9 54.2 Non-equity interests 12.5 12.5 12.5 CASH FLOW STATEMENT For the six months ended 30 September 2005 Six months to Six months to Year to 30 September 30 September 31 March 2005 2004 2005 (unaudited) (unaudited) (restated) (restated) Note £m £m £m Net cash inflow from operating activities 13 11.4 15.6 34.1 -------------------------------------------------------------------------------- Returns on investments and servicing of finance Net interest paid (3.2) (2.9) (5.3) Non-equity dividends paid (0.6) (0.6) (1.7) Net costs of issue of new loans (1.1) - - -------------------------------------------------------------------------------- (4.9) (3.5) (7.0) -------------------------------------------------------------------------------- Corporation tax paid (0.4) (1.6) (1.9) -------------------------------------------------------------------------------- Capital expenditure and investing activities Purchase of fixed assets (8.9) (10.1) (20.1) Contributions received 1.8 2.0 3.7 Proceeds on disposal of fixed assets - 0.1 - Loan advanced to ultimate holding company (21.5) - - -------------------------------------------------------------------------------- (28.6) (8.0) (16.4) -------------------------------------------------------------------------------- Equity dividends paid (5.3) (4.5) (7.3) -------------------------------------------------------------------------------- Cash (outflow)/inflow before management of liquid resources and financing (27.8) (2.0) 1.5 Management of liquid resources being (increase) / decrease in short term deposits (27.8) 4.5 5.4 -------------------------------------------------------------------------------- (55.6) 2.5 6.9 Financing New term loans 57.0 - - Capital element of loan and lease repayments (1.8) (3.5) (6.9) -------------------------------------------------------------------------------- 55.2 (3.5) (6.9) -------------------------------------------------------------------------------- Decrease in cash 13 (0.4) (1.0) - Cash, beginning of period 1.6 1.6 1.6 -------------------------------------------------------------------------------- Cash, end of period 1.2 0.6 1.6 -------------------------------------------------------------------------------- NOTES TO THE INTERIM RESULTS For the six months ended 30 September 2005 Note 1: Accounting policies The financial information contained in this interim announcement does not constitute statutory accounts within the meaning of s.240 of the Companies Act 1985. The interim results, which have not been audited but have been reviewed by the company's auditors, have been prepared on the basis of the new accounting standards outlined below and where there are no changes, those accounting policies adopted by Bristol Water plc for the year ended 31March 2005 as set out in the Annual Report and Accounts. Those accounts (on which the auditors gave an unqualified report) have been delivered to the Registrar of Companies. During this period the company has adopted the following new Financial Reporting Standards (FRS) in its financial statements, insofar as they are applicable to the affairs of the company: FRS 17 - Retirement benefits FRS 20 - Share based payments FRS 21 - Events after the balance sheet date FRS 22 - Earnings per share FRS 23 - Effects of changes in foreign exchange rates FRS 24 - Financial reporting in hyperinflationary economies FRS 25 - Financial Instruments: Disclosure and presentation FRS 26 - Financial Instruments: Measurement The main effects of these changes are as follows: FRS 17: Full provision is made in these accounts for the deficit arising in the company's share of the Water Companies' Pension Scheme (WCPS), as further described in note 12. The effect of the change in accounting policy is: • to increase profit after tax by £0.1m (six months ended 30 September 2004: £0.2m; year ended 31 March 2005: £0.3m) • to increase / (decrease) total recognised gains and losses for the period by £2.1m (six months ended 30 September 2004: £(0.2)m; year ended 31 March 2005: £1.7m) • to increase / (decrease) net assets as at 30 September 2005 by £1.7m (as at 30 September 2004: £(9.4)m; as at 31 March 2005: £(7.5)m) FRS 21: Dividends are now recognised, and charged against profits, at the time they are declared, rather than at the time they are proposed, or in respect of the years to which they relate. This decreases retained profit at 30 September 2005 by £3.0m (at 30 September 2004 by £1.6m and increases retained profit at 31 March 2005 by £0.8m). It also increases net assets as at 30 September 2005 by £2.3m (as at 30 September 2004: £2.8m; as at 31 March 2005: £5.3m). As outlined in the company's Annual Report and Accounts for the year ended 31 March 2005, the company will not be adopting IFRS for its financial statements for the year ended 31 March 2006. As a result of changes made in the Water Act 2003, revenue deficit contributions received on or after 1 April 2005 are credited to deferred income and amortised over a three year period. Note 2: Turnover Six months to Six months to Year to 30 September 30 September 31 March 2005 2004 2005 (unaudited) (unaudited) £m £m £m Turnover comprises - Metered water supply 15.7 13.1 26.2 Unmetered water supply 22.0 19.8 39.7 Other services 3.4 2.4 4.7 -------------------------------------------------------------------------------- 41.1 35.3 70.6 -------------------------------------------------------------------------------- Note 3: Operating costs (including exceptional operating costs) Six months to Six months to Year to 30 September 30 September 31 March 2005 2004 2005 (unaudited) (unaudited) (restated) (restated) £m £m £m Operating costs comprise - Payroll cost, net of recharges to fixed assets, and including retirement benefit costs arising under FRS 17 6.2 5.7 13.1 Other operating expenses 13.1 13.2 26.6 Depreciation, net of amortisation of 8.5 7.2 14.6 deferred income -------------------------------------------------------------------------------- 27.8 26.1 54.3 -------------------------------------------------------------------------------- The depreciation charge for the six months to 30 September 2005 is stated after charging £0.2m accelerated depreciation in respect of plant planned to be taken out of service early as part of a capital project to meet quality obligations and streamlining of treatment processes (six months to 30 September 2004 and year to 31 March 2005: £Nil). Exceptional operating costs of £1.7m related to a restructuring programme to improve the operating efficiency of the company are included in the total for 31 March 2005. Note 4: Net interest payable Six months to Six months to Year to 30 September 30 September 31 March 2005 2004 2005 (unaudited) (unaudited) (restated) (restated) £m £m £m Net interest payable and similar charges comprise - Interest payable and similar charges 5.5 5.0 10.1 Interest income (2.6) (1.8) (3.5) -------------------------------------------------------------------------------- 2.9 3.2 6.6 Net finance income in respect of retirement benefit obligations (0.4) (0.4) (0.8) -------------------------------------------------------------------------------- 2.5 2.8 5.8 -------------------------------------------------------------------------------- Note 5: Taxation on profit on ordinary activities Six months to Six months to Year to 30 September 30 September 31 March 2005 2004 2005 (unaudited) (unaudited) (restated) (restated) £m £m £m The charge for taxation comprises - Current tax: Corporation Tax at 30% 1.9 1.0 1.0 Advance Corporation Tax written back - (0.6) (1.5) Adjustment to prior periods - 0.6 1.7 Receipts in respect of group relief - - 1.0 -------------------------------------------------------------------------------- Total current tax 1.9 1.0 2.2 -------------------------------------------------------------------------------- Deferred tax: Current period movement 1.7 1.0 1.1 Adjustment to prior periods - (0.6) (1.8) Effect of discounting (0.2) (0.2) (0.1) -------------------------------------------------------------------------------- Total deferred tax 1.5 0.2 (0.8) -------------------------------------------------------------------------------- Total taxation on profit on ordinary 3.4 1.2 1.4 activities -------------------------------------------------------------------------------- Note 6: Dividends Six months to Six months to Year to 30 September 30 September 31 March 2005 2004 2005 (unaudited) (unaudited) (restated) (restated) £m £m £m 8.75% Cumulative Preference Shares Interim dividend paid 30 September 0.5 0.5 0.5 Final dividend paid 31 March - - 0.6 -------------------------------------------------------------------------------- 0.5 0.5 1.1 -------------------------------------------------------------------------------- Ordinary shares Dividend in respect of 2003/04: Final dividend of 74.27 pence per share, approved at the Annual General Meeting on 19 July 2004 - 4.5 4.5 Dividend in respect of 2004/05: Interim dividend of 47.15 pence per share, approved by the Board on 7 December 2004 - - 2.8 Final dividend of 88.00 pence per share, approved at the Annual General Meeting on 18 July 2005 5.3 - - Dividend in respect of 2005/06: First interim dividend of 19.62 pence per share, approved by the Board on 29 September 2005 1.2 - - -------------------------------------------------------------------------------- 6.5 4.5 7.3 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Total dividend 7.0 5.0 8.4 -------------------------------------------------------------------------------- The Board has declared a second interim dividend of 38.68 pence per share, totalling £2.3m, in respect of the six months ended 30 September 2005. This will be paid on 8 December 2005. In accordance with FRS21 the second interim dividend is not recognised in these accounts as a liability. Note 7: Earnings per share attributable to ordinary shares Six months to Six months to Year to 30 September 30 September 31 March 2005 2004 2005 (unaudited) (unaudited) (restated) (restated) m m m Earnings per share have been calculated as follows: Earnings £6.9 £4.7 £8.0 Weighted average number of ordinary shares in issue 6.0 6.0 6.0 -------------------------------------------------------------------------------- Note 8: Movement in fixed assets Six months to Six months to Year to 30 September 30 September 31 March 2005 2004 2005 (unaudited) (unaudited) (restated) (restated) £m £m £m The movement in fixed assets comprises - Net book value, beginning of period 195.6 193.8 193.8 Additions 9.1 10.1 20.3 Disposals - - 0.1 Grants and contributions (1.4) (2.0) (3.7) Depreciation (8.8) (7.4) (14.9) -------------------------------------------------------------------------------- Net book value, end of period 194.5 194.5 195.6 -------------------------------------------------------------------------------- Note 9: Net debt At At At 30 September 30 September 31 March 2005 2004 2005 (unaudited) (unaudited) £m £m £m Net debt comprises - Debt due after one year 202.7 149.3 148.4 Debt due within one year 4.0 5.4 3.7 Less cash balances and short term deposits (39.4) (11.9) (12.0) -------------------------------------------------------------------------------- Net debt 167.3 142.8 140.1 -------------------------------------------------------------------------------- Note 10: Provisions for liabilities and charges At At At 30 September 30 September 31 March 2005 2004 2005 (unaudited) (unaudited) (restated) (restated) £m £m £m Restructuring costs 0.9 - 1.7 Deferred tax (see below) 17.3 15.6 15.1 -------------------------------------------------------------------------------- 18.2 15.6 16.8 -------------------------------------------------------------------------------- Deferred taxation provision Deferred tax liability 31.1 29.3 28.7 Effect of discounting (13.8) (13.7) (13.6) -------------------------------------------------------------------------------- Net provision 17.3 15.6 15.1 -------------------------------------------------------------------------------- Note 11: Pensions Pension arrangements Pension arrangements for the majority of the company's employees are provided through the company's membership of the Water Companies' Pension Scheme (WCPS), which provides defined benefits based on final pensionable pay. Bristol Water plc'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 section has been closed to new entrants and all new eligible employees are offered stakeholder pensions. In addition to providing benefits to employees and ex-employees of Bristol Water plc, the section provides benefits to employees and ex-employees of Bristol Water Holdings plc and former Bristol Water plc employees who transferred to Bristol Wessex Billing Services Ltd. The majority of the section assets and liabilities relate to Bristol Water plc employees and ex-employees. The company made a contribution of £7.0m to WCPS in July 2005. It has also agreed to make additional contributions of £1.0m in each of the four years beginning 1 April 2006 and a further £0.9m in 2010/11. The amounts are in addition to the normal pension contributions required by the WCPS trustee. A triennial actuarial valuation of the section as at 1 April 2005 is currently being finalised by the scheme actuary. Accounting under FRS17 Retirement Benefits FRS17 became mandatory for accounting periods starting on or after 1 January 2005, which for the company is the current year ending 31 March 2006. In accordance with FRS 17 actuarial gains and losses are recognised immediately in the Statement of Total Recognised Gains and Losses. Prior years have been restated accordingly. In summary assets and liabilities were: 30 September 30 September 31 March 2005 2004 2005 £m £m £m Total fair value of assets 116.0 91.6 98.2 FRS 17 value of liabilities (117.5) (105.6) (110.1) -------------------------------------------------------------------------------- Gross retirement benefit liability before attributable deferred taxation (1.5) (14.0) (11.9) -------------------------------------------------------------------------------- Note 12: Total shareholders' funds Six months to Six months to Year to 30 September 30 September 31 March 2005 2004 2005 (unaudited) (unaudited) (restated) (restated) £m £m £m Movement in shareholders' funds - At beginning of period as previously reported: 68.9 69.3 69.3 Effect of adoption of FRS17 (7.5) (9.2) (9.2) Effect of adoption of FRS21 5.3 4.5 4.5 -------------------------------------------------------------------------------- At beginning of period as now restated 66.7 64.6 64.6 Profit on ordinary activities after taxation for the period 7.4 5.2 9.1 Actuarial gains / (losses) related to retirement benefit obligations 2.7 (0.6) 1.7 Deferred tax attributable to actuarial gains / losses (0.7) 0.2 (0.3) Dividends (7.0) (5.0) (8.4) -------------------------------------------------------------------------------- End of period 69.1 64.4 66.7 -------------------------------------------------------------------------------- Note 13: Supplementary cashflow information Six months to Six months to Year to 30 September 30 September 31 March 2005 2004 2005 (unaudited) (unaudited) (restated) (restated) £m £m £m a) Reconciliation of operating profit to net cash inflow from operating activities - Operating profit 13.3 9.2 16.3 Depreciation net of amortisation of deferred income 8.5 7.2 14.6 -------------------------------------------------------------------------------- Cash flow from operations 21.8 16.4 30.9 Working capital movements (3.4) (0.8) 3.2 Additional contributions to pension scheme (7.0) - - -------------------------------------------------------------------------------- Net cash inflow from operating activities 11.4 15.6 34.1 -------------------------------------------------------------------------------- Six months to Six months to Year to 30 September 30 September 31 March 2005 2004 2005 (unaudited) (unaudited) £m £m £m b) Reconciliation of net cash flow to movement in net debt - Decrease in cash in the period (0.4) (1.0) - Cash used to repay borrowings 1.8 3.5 6.9 Cash from new borrowings (57.0) - - Costs of issue of new loans 1.1 - - Increase / (decrease) in short term deposits 27.8 (4.5) (5.4) -------------------------------------------------------------------------------- (Increase) / decrease in net borrowings (26.7) (2.0) 1.5 Movement in net debt not affecting cash flow - indexation of existing debt (0.5) (0.5) (1.3) Net debt, beginning of period (140.1) (140.3) (140.3) -------------------------------------------------------------------------------- Net debt, end of period (167.3) (142.8) (140.1) -------------------------------------------------------------------------------- Note 14: Circulation This interim announcement is being sent to all shareholders and debenture holders. Copies are available to the public from the company's registered office at PO Box 218, Bridgwater Road, Bristol, BS99 7AU and on the Bristol Water web site: http://www.bristolwater.co.uk. INDEPENDENT REVIEW REPORT TO BRISTOL WATER PLC For the six months ended 30 September 2005 Introduction We have been instructed by the company to review the financial information, which comprises the Profit and Loss Account, Statement of Total Recognised Gains and Losses, Balance Sheet, Cash Flow Statement and related notes, for the six months ended 30 September 2005. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Listing Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 September 2005. PricewaterhouseCoopers LLP Chartered Accountants Bristol 8 December 2005 Notes: (a) The maintenance and integrity of the Bristol Water website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim report since it was initially presented on the website. (b) Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions. This information is provided by RNS The company news service from the London Stock Exchange