Interim Management Statement

RNS Number : 1176Q

Northumbrian Water Group PLC

29 July 2010

 



29 July 2010

Northumbrian Water Group plc

(the Company or the Group)

Interim Management Statement

The Company today publishes its Interim Management Statement for the period 1 April 2010 to 28 July 2010.  The Board confirms that trading has been in line with expectations and that there have been no material events or transactions during the period.

Water and sewerage charges at the Group's principal subsidiary, Northumbrian Water Limited, have increased by 5.3% for 2010/11 (in line with the application of the K factor of 5% and 0.3% in respect of the November 2009 Retail Price Index).

Operating costs for the 12 months to 31 March 2011 are forecast to increase by around 4% (excluding restructuring costs in 2009/10).  This reflects increased depreciation, rates, hired services and pension costs, offset by savings on power, which is bought forward to March 2015.  We remain focused on the delivery of high operational standards and continue to identify and drive further efficiencies throughout the business.

At 31 March 2010, the Group's debt structure included £455m of index-linked borrowings whose principal grows in line with the July Retail Price Index (RPI).  The RPI adjustment for July 2009 was negative (at 1.4%) and current forecasts for the July 2010 RPI indicate a positive range of 4.6 to 4.9%.  This increase, coupled with reduced interest receivable on surplus cash, is partially offset by a credit for the defined benefit pension scheme and a £4.6m credit in respect of the acquisition of the remaining 25% subordinated loan stock in Caledonian Environmental Services, which results in a year on year increase in the interest charge for 2010/11 of around £20m.

The Emergency Budget announced by the Government on 22 June contained changes to the rates of UK corporation tax and capital allowances.   The changes will have no impact on the Group's current tax in 2010/11 as they do not begin to take effect until April 2011.  Over the remainder of the period to 31 March 2015, it is estimated that the changes will be broadly neutral.  In the current year, it will be necessary to restate deferred tax using a tax rate of 27%.  It is expected that the Group's deferred tax liability at 31 March 2010 of £606m (based on a rate of 28%) will be reduced by around £21m.  Further restatements will be necessary on an annual basis if, as stated in the Budget, the tax rate falls to 24% by April 2014.

Capital investment in the regulated business is progressing in line with the final determination.  A £12m contract has been awarded for the Wormingford to Abberton pipeline associated with the Abberton reservoir expansion scheme. Contracts for the remaining section of the pipeline and the pumping stations will be awarded in 2010/11 according to programme requirements.  In addition to Abberton, we have also awarded a number of major Framework Agreements associated with the water distribution and maintenance networks. These cover work in both our operating areas and will cover all our water networks requirements to 31 March 2015.

The Group continues to have a strong funding position with sufficient resources to meet all the requirements of the business to the end of 2011.  Discussions with the European Investment Bank for a new loan facility of £150m are at an advanced stage.  The Group's cash position at 30 June 2010 was £200m.  Net debt is expected to be around £2.3bn at 31 March 2011 and gearing levels are not forecast to be materially different from the position reported in June.

At the Annual General Meeting to be held later today, we are proposing a final dividend of 8.85p per share, giving a full year ordinary dividend of 13.24 pence per share (an increase of 3.5%), which will be payable on 10 September 2010 to shareholders on the register as at 13 August 2010.

The half-yearly results for the six months ending 30 September 2010 will be announced on 30 November 2010.

Note:

Information in this announcement is based upon unaudited management accounts.  This announcement includes certain forward looking statements which are based on current expectations and are subject to uncertainties and risks that could cause actual results to differ materially from any expected future events or results referred to in these forward looking statements.  Unless otherwise required  by applicable law, regulation or accounting standard, we do not undertake any obligation to update or revise any forward looking statements, whether as a result of new information, future developments or otherwise.

For further information contact:

Northumbrian Water Heidi Mottram, Chief Executive Officer Chris Green, Finance Director	0191 301 6462 0191 301 6419
Pelham Bell Pottinger Archie Berens Zoe Sanders	020 7861 3112 020 7861 3887

 

END

 

 

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