Financial Express (Holdings) Limited (“we”, “our”, “us” and derivatives) are committed to protecting and respecting your privacy. This Privacy Policy, together with our Terms of Use, sets out the basis on which any personal data that we collect from you, or that you provide to us, will be processed by us relating to your use of any of the below websites (“sites”).


For the purposes of the Data Protection Act 1998, the data controller is Trustnet Limited of 2nd Floor, Golden House, 30 Great Pulteney Street, London, W1F 9NN. Our nominated representative for the purpose of this Act is Kirsty Witter.


We collect information about you when you register with us or use any of our websites / services. Part of the registration process may include entering personal details & details of your investments.

We may collect information about your computer, including where available your operating system, browser version, domain name and IP address and details of the website that you came from, in order to improve this site.

You confirm that all information you supply is accurate.


In order to provide personalised services to and analyse site traffic, we may use a cookie file which is stored on your browser or the hard drive of your computer. Some of the cookies we use are essential for the sites to operate and may be used to deliver you different content, depending on the type of investor you are.

You can block cookies by activating the setting on your browser which allows you to refuse the setting of all or some cookies. However, if you use your browser settings to block all cookies (including essential cookies) you may not be able to access all or part of our sites. Unless you have adjusted your browser setting so that it will refuse cookies, our system will issue cookies as soon as you visit our sites.


We store and use information you provide as follows:

  • to present content effectively;
  • to provide you with information, products or services that you request from us or which may interest you, tailored to your specific interests, where you have consented to be contacted for such purposes;
  • to carry out our obligations arising from any contracts between you and us;
  • to enable you to participate in interactive features of our service, when you choose to do so;
  • to notify you about changes to our service;
  • to improve our content by tracking group information that describes the habits, usage, patterns and demographics of our customers.

We may also send you emails to provide information and keep you up to date with developments on our sites. It is our policy to have instructions on how to unsubscribe so that you will not receive any future e-mails. You can change your e-mail address at any time.

In order to provide support on the usage of our tools, our support team need access to all information provided in relation to the tool.

We will not disclose your name, email address or postal address or any data that could identify you to any third party without first receiving your permission.

However, you agree that we may disclose to any regulatory authority to which we are subject and to any investment exchange on which we may deal or to its related clearing house (or to investigators, inspectors or agents appointed by them), or to any person empowered to require such information by or under any legal enactment, any information they may request or require relating to you, or if relevant, any of your clients.

You agree that we may pass on information obtained under Money Laundering legislation as we consider necessary to comply with reporting requirements under such legislation.


We want to ensure that the personal information we hold about you is accurate and up to date. You may ask us to correct or remove information that is inaccurate.

You have the right under data protection legislation to access information held about you. If you wish to receive a copy of any personal information we hold, please write to us at 3rd Floor, Hollywood House, Church Street East, Woking, GU21 6HJ. Any access request may be subject to a fee of £10 to meet our costs in providing you with details of the information we hold about you.


The data that we collect from you may be transferred to, and stored at, a destination outside the European Economic Area (“EEA”). It may be processed by staff operating outside the EEA who work for us or for one of our suppliers. Such staff may be engaged in, amongst other things, the provision of support services. By submitting your personal data, you agree to this transfer, storing and processing. We will take all steps reasonably necessary, including the use of encryption, to ensure that your data is treated securely and in accordance with this privacy policy.

Unfortunately, the transmission of information via the internet is not completely secure. Although we will do our best to protect your personal data, we cannot guarantee the security of your data transmitted to our sites; any transmission is at your own risk. You will not hold us responsible for any breach of security unless we have been negligent or in wilful default.


Any changes we make to our privacy policy in the future will be posted on this page and, where appropriate, notified to you by e-mail.


Our sites contain links to other websites. If you follow a link to any of these websites, please note that these websites have their own privacy policies and that we do not accept any responsibility or liability for these policies. Please check these policies before you submit any personal data to these websites.


If you want more information or have any questions or comments relating to our privacy policy please email [email protected] in the first instance.

 Information  X 
Enter a valid email address

Pennon Group PLC (PNN)

  Print      Mail a friend       Annual reports

Thursday 08 December, 2005

Pennon Group PLC

Interim Results

Pennon Group PLC
08 December 2005

PENNON GROUP PLC                                                 8 December 2005


Pennon Group announces its unaudited results for the half year ended 30
September 2005.

A presentation for City audiences will be held today, Thursday 8 December 2005,
at 09:00 at The Great Eastern Hotel, Liverpool Street, London, EC2.


     • Operating profit up 14.8% to £93.7m.*

          • South West Water up 15.4% to £77.8m.

          • Viridor Waste up 15.1% to £16.8m before amortisation of intangibles.

     • Profit before tax up 21.6% to £60.8m. *

     • Earnings per share (before deferred tax) up 13.5% to 41.3p. *
       *Before exceptional item in 2004/05 of £2.0m for costs incurred relating 
        to abortive acquisition in 2003/04.


     • Proposed capital return of £200m through :

          • B Share scheme of approximately £145m, equivalent to 110p per share

               • with income or capital alternatives

               • associated ordinary share consolidation

          • Share buyback of approximately £55m

     • Proposed rebased dividend per share post consolidation.

               • 20% increase in full year dividend per share reflected in:

               • 20% increase in interim dividend per share to 16.5p.

               • 3% per annum real dividend increases thereafter until 2009/10.

     • £20 per South West Water customer one-off payment from balance sheet

     • South West Water :

          • Delivery under way of 2005 - 2010 Regulatory Contract.

          • Profit increase reflecting strong growth in Regulatory Asset Value 
            (RAV) in 2005.

          • Length of water mains rehabilitated up 17%.

          • Highest increase in Overall Performance Assessment (OPA) score of 
            any of the water and sewerage companies in England and Wales in 

          • Record 2005 bathing water compliance.

   • Viridor Waste :

          • Continued strong growth in profits, particularly from landfill and 
            power generation.

          • Brett Waste acquired June 2005 - now successfully integrated.

          • Lakeside energy from waste plant joint venture signed September 
            2005 - now fully financed and under construction.

          • New landfill opened in Cornwall.

          • Partnership with John Laing plc for Greater Manchester integrated 
            waste PFI bid.

          • Viridor negotiating preferred bidder status for Somerset integrated 
            waste contract/Local Authority Waste Disposal Company (LAWDC).

Ken Harvey, Chairman, said, 'I am pleased to report another half year of
excellent results which clearly affirm our strategy of focusing on our two key
businesses, South West Water and Viridor Waste. Following an extensive review by
the Board of the capital structure of the Group, the Board has decided, subject
to shareholder approval, to move South West Water to a more highly geared
structure to enhance the Group's capital efficiency. As a consequence of this,
the Board is pleased to announce proposals to effect a return to its
shareholders of 110 pence per share (being approximately £145m), with an
associated share consolidation, a share buyback of £55m and a one-off £20 per
South West Water customer payment from balance sheet restructuring. The Board
also intends to step up the interim and full year Group dividend per share by
20% after the share consolidation and to grow it by 3% per annum in real terms
thereafter until 2009/10.'

For further information today, 8 December 2005, please contact :

David Dupont           Group Director of Finance          0207 251 3801
Mark Harris            Finsbury Group                 


All numbers contained herein are now published in accordance with International
Financial Reporting Standards (IFRS) with prior year figures restated. Pennon
Group, like all European Union listed companies, is required to produce its
results under IFRS from 1 April 2005 in accordance with IFRS issued by the
International Accounting Standards Board (IASB), and which have either been, or
are reasonably expected to be, endorsed by the European Union for application to
the financial year ending 31 March 2006. The IASB is still developing these
standards and further standards, amendments and interpretations could become
applicable to the Group's accounts as practice and interpretation continue to
evolve. Consequently, the Group's accounting policies may change prior to the
publication of financial statements for the year ending 31 March 2006.

The principal differences between UK Generally Accepted Accounting Principles
(UK GAAP) and IFRS and their indicative impact on the Group were detailed in the
Group's 2005 Annual Report.

Full information relating to the restatement from UK GAAP to IFRS has been
published today, principally comprising the consolidated balance sheet at 1
April 2004, half year results to 30 September 2004 and the full year results to
31 March 2005. Details of these results, together with reconciliations between
previously published UK GAAP reported results and those reported under IFRS, are
available on the Group's website


     • Revenue rose by 16.6% to £328.2m.

     • Operating profit rose by 14.8% to £93.7m.*

     • Profit before tax was up 21.6% to £60.8m *

     • Earnings per share before the exceptional item and deferred tax increased 
       by 13.5% to 41.3p. Earnings per share after the exceptional item and 
       deferred tax rose by 8.9% to 29.3p.

     • Capital expenditure was £93.1m (2004 - £86.0m).

     • Brett Waste Management Limited was acquired during the half year for
       £44.5m (£47.2m inclusive of debt).

     • Net borrowings were £1,199m, an increase of £81m since 31 March 2005.
       Gearing, being net borrowings to shareholders' funds plus net borrowings, 
       was 63% (2004 - 62%). Interest cover was 2.8 times for the half year to 
       30 September 2005 (2004 - 2.6 times).

       *Before exceptional item in 2004/05 of £2.0m for costs incurred relating 
        to abortive acquisition.


     • The Board has decided to increase the level of gearing in its regulated 
       water and sewerage business to increase the efficiency of the Group's 
       capital structure.

     • As a consequence, the Board proposes a capital return to shareholders of 

     • The capital return is to be achieved through a B Share scheme of 
       approximately £145m (equivalent to 110p per share) and an on-market share 
       buyback programme of approximately £55m.

     • The B Share scheme is intended to provide shareholders with the choice of 
       receiving the return either as income or capital. In order to maintain 
       comparability of the share price after the B Share scheme, the Board 
       proposes to consolidate the ordinary share capital of the Group 
       immediately following the issue of the new B shares.

     • The on-market share buyback programme of approximately £55m represents 
       approximately 4% of the Group's issued share capital at the current share 

     • Following the ordinary share consolidation, the Board proposes to step up 
       the interim and full year dividend per share by 20% to 16.5p and then 
       grow it by 3% per annum in real terms up to 2009/10.

     • Following the gearing up, we expect March 2006 South West Water pro forma 
       net debt to Regulatory Asset Value (RAV) of around 66%.

     • £20 will be paid to each South West Water customer following the 
       restructuring as a one-off payment.

     • The proposals to return capital through a B Share scheme and to 
       consolidate the ordinary share capital are conditional on shareholder 
       approval. A circular setting out explanatory details on the B Share 
       scheme and associated share consolidation, and containing the notice of 
       the Extraordinary General Meeting at which shareholders approval will be 
       sought, is expected to be posted early in 2006. The proposals to increase 
       the 2005/06 interim and final dividend by 20% and to make a one-off 
       payment to customers will be implemented if shareholders approve the 
       proposed B Share scheme and associated share consolidation.

     • The Return is to be funded from existing facilities.

     • In addition, the Company is proposing the retirement of its existing 2012 
       £150m 10.625% Bonds on recommended terms supported by an ABI Special 


South West Water turnover rose by £20.4m to £177.3m. Approved tariff increases,
including the 12.5% K factor, amounted to £25.0m. Customers switching from
unmeasured to metered charging caused a reduction of £4.4m in turnover. 4,100
new customer connections contributed £1.4m. Other factors, including a small
decrease in measured demand, reduced turnover by £1.6m.

South West Water's operating profit rose 15.4% to £77.8m. Operating costs,
including depreciation, increased by £10.0m to £99.5m. Additional costs from new
capital schemes of £4.0m, inflation of £3.8m and £4.1m of other cost increases
were offset by £1.9m of efficiency savings. Detailed plans are in place and
actions are being taken which are anticipated to achieve the operating cost
targets set by the Director General of Water Services for the period up to

The company has made a positive start to its K4 capital programme with 'Early
Start' schemes due for delivery as early as January 2006. Capital expenditure in
the half year increased by £1.2m to £69.2m. £41.2m was invested in water supply
improvements including water mains renovation, water treatment works enhancement
and leakage control. Ofwat's latest report on leakage confirms that South West
Water is one of the leading companies in managing water leakage and continues to
deliver results in line with Ofwat's leakage target. Water resources remain
secure. A record length of almost 350km of water mains were laid, replaced or
refurbished during the half year, in line with the Drinking Water Inspectorate's
agreed programme for completion by 2010. Drinking water quality and river water
quality are at an all time high and the region features the highest proportion
of high quality rivers in England. During the half year Ofwat reported that
South West Water in 2004/05 achieved the largest Overall Performance Assessment
score improvement of the water and sewerage companies.

Waste water investment expenditure totalled £28.0m for the half year. All of the
major projects in the Company's 15 year original 'Clean Sweep' coastal sewage
treatment programme have been completed and the region is now attaining record
levels of bathing water quality compliance. In the South West Water region, 142
of the 143 designated bathing waters met the mandatory EU quality standards,
with 88.8% meeting the more stringent guideline level. Cornwall's bathing waters
achieved an exceptionally high standard, with a 100% pass rate at mandatory
level and a 96.4% pass rate at the guideline level.

During the K3 regulatory period the company grew its RAV ahead of net debt. RAV
is predicted to grow by 33% over the K4 period to £2.6bn by March 2010 - the
highest forecast percentage increase of any quoted UK water company. After
adjusting for the growth in gearing highlighted above, the company again expects
its growth in RAV to outstrip significantly the anticipated growth in net


Viridor Waste (Viridor) has continued to trade strongly in the six months ended
30 September 2005, building further on the growth achieved over the past several
years. Revenue was up 20.0% to £152.0m, including a £5.6m contribution from the
Brett Waste Management Limited (Brett Waste) acquisition and £9.2m from
increased landfill tax.

Viridor operating profit before intangibles for the half year rose by 15.1% to
£16.8m (£16.0m after intangibles), including the benefit of some one-off
business, compared to £14.6m in 2004/05 (£13.8m after intangibles). Operating
profit rose 13.7% excluding this year's acquisition. Earnings before interest,
tax, depreciation and amortisation (EBITDA) rose 10.8% from £28.7m to £31.8m.
Capital expenditure for the half year was £23.9m (2004 - £18.0m).

In June Viridor acquired Brett Waste, a landfill and power generation business,
for a cash consideration of £44.5m (£47.2m inclusive of debt in the company).
The company comprises strategically located landfill sites in Kent and Essex
with approximately 11m cubic metres of consented capacity, landfill gas power
generation schemes totalling 6 MW capacity and associated waste transfer station
and collection activities. The acquisition is now fully integrated into Viridor
Waste's south east region and is expected to be earnings enhancing before
amortisation of intangibles in its first full year.

Total landfill disposal volumes excluding acquisitions remained unchanged
compared to the previous half year after adjusting for non-recurring volumes:

  i)  in the first quarter of 2004/05, in advance of the banning of the disposal
      of hazardous waste to landfill and
  ii) in the first half of 2005/06 a significant one-off sludge contract at

Increased landfill inputs from Viridor's own collection fleet offset the impact
of an overall market decline.

Gate fees rose by 12%, reflecting inputs of stabilised non-reactive hazardous
waste and the underlying tightness of UK landfill capacity. Viridor currently
has 89 million cubic metres of landfill capacity.

Viridor's power generation prices, (excluding acquisitions), rose 19% to £59 per
megawatt hour, reflecting the increasing underlying brown energy price and the
ongoing shortage of renewable energy in the UK which is driving the premium
price achieved by renewables. The Government is targeting 10% of electricity
from renewable energy sources by 2010 and 15% by 2015, with an aspiration of 20%
by 2020. Only around 4% of electricity in the UK is currently generated from
renewable sources. Excluding the Brett Waste acquisition, output increased a
further 3% in the half year. Viridor's current capacity (including the
contribution from Brett Waste) increased to 58 megawatts, around half of which
is eligible for Renewable Obligation Certificates (ROCs).

In August, Viridor opened the first new landfill disposal site to be developed
in Cornwall for about 20 years. With a capacity of 3m cubic metres, the Lean
Quarry integrated waste management facility near Liskeard in Cornwall also
provides a Materials Recycling Facility, a waste transfer station and a
collection services depot.

In September, Viridor joined forces with Grundon Waste Management Ltd and set up
a joint venture company, Lakeside Energy From Waste Limited, to build and
operate an energy from waste plant near Slough. The 50 : 50 joint venture is in
line with Viridor strategy of capitalising on opportunities arising from the
Government's developing waste strategy and will assist local authority customers
in meeting their landfill diversion targets and avoiding penalties under the
Landfill Allowance Trading Scheme (LATS). A number of these councils are
existing waste disposal customers of Viridor or Grundon. The plant will have a
capacity of 400,000 tonnes per annum and it will also provide power generation
capacity of 32 megawatts of electricity which will be fed into the national
grid. The plant will be built at Grundon's strategically located site at
Colnbrook near Slough, which has the relevant permissions and permits. Total
investment is projected to be £160m, 86% of which is non-recourse debt financing
which is now in place. The total project IRR is within normal project finance
parameters. The plant is scheduled to be commissioned in mid-2008 and
preliminary infrastructure works have already started.

Municipal landfill diversion creates new opportunities as councils seek to let
long-term integrated waste management contracts in order to meet their diversion
targets and avoid penalties. These contracts will often attract Private Finance
Initiative (PFI) funding. Viridor believes there may be significant
opportunities in these contracts, subject to a fair sharing of risk between
councils and contractors, and is pursuing them in a selective manner. Viridor
announced today that it is in partnership with John Laing plc to submit a joint
bid for the Greater Manchester PFI. Viridor is also negotiating preferred bidder
status for the Somerset integrated waste management contract/LAWDC.

The new Pennon Group balance sheet capital structure allows for the continuation
of the current growth strategy in Viridor.


During August 2005 the Company made a pension contribution prepayment for the
period to 2010 of £44m (£32m net of tax).


The mainstream corporation tax charge for the half year to September 2005 was
£8.1m (2004 - £4.6m).

The deferred tax charge for the half year to 30 September 2005 was £15.3m. (2004
- £9.8m).


The total interest charge increased from £31.6m to £32.9m. The average interest
rate on net debt has reduced to 5.7% (2004/05 5.8%).

The Group funding strategy utilises a mix of fixed and floating rate borrowings.
To reduce the risk of adverse interest rate movements, South West Water has
extended its swap arrangements to fix the interest rate on some 75% of its debt
for the period up to March 2006 and on around 60% of its debt up to March 2010.
During the half year a new £114m finance lease facility was put in place for
long-life assets.

The proposed capital return will be funded from cash on deposit and existing


The Board's priority continues to be the creation of shareholder value through
its strategic focus on water, sewerage and waste management. The interim results
are testament to the Board's strategy of focusing on these key business areas.
The move to a more highly geared structure will allow the Group to return value
to shareholders and customers and provide an enhanced dividend. The Board has
confidence that South West Water will successfully deliver the new K4 regulatory
contract and significantly grow its Regulatory Asset Value up to 2010. Viridor
Waste's successful strategy of creating long-term sustainable profit growth is
expected to continue through capitalising on its landfill asset base, exploiting
its landfill gas power generation potential and pursuing profitable
opportunities in line with the Government's developing waste strategy.

Ken Harvey
8 December 2005


Consolidated income statement for the half year ended 30 September 2005

                                                Half year ended Half year ended    Year ended 
                                                   30 September    30 September      31 March 
                                                           2005            2004          2005
                                                                     (restated)    (restated)
Continuing operations             Note                       £m              £m            £m
Revenue                                                   328.2           281.5         551.4
                                                         --------        --------      --------

Operating costs
Manpower costs                                            (39.2)          (34.7)        (68.3)
Raw materials and
consumables used                                          (19.4)          (14.7)        (32.8)
Depreciation                                              (49.3)          (45.2)        (90.7)
of intangibles                                             (0.8)           (0.8)         (1.4)
Other operating expenses                                 (125.8)         (104.5)       (207.3)
Abortive acquisition costs           4                        -            (2.0)         (1.5)
Business restructuring
costs                                5                        -               -          (3.4)
                                                         --------        --------      --------
Operating profit                                           93.7            79.6         146.0
Operating profit before
depreciation, amortisation
and exceptional items                                     143.8           127.6         243.0

Operating profit before
exceptional items                                          93.7            81.6         150.9
Abortive acquisition costs           4                        -            (2.0)         (1.5)
Business restructuring
costs                                5                        -               -          (3.4)
                                                         --------        --------      --------
Operating profit                                           93.7            79.6         146.0

Interest payable and similar
charges                                                   (48.4)          (44.8)        (89.3)
Interest receivable                                        15.5            13.2          27.3
Share of post-tax profit 
from joint venture                                            -               -           0.1
                                                         --------        --------      --------
Profit before tax                                          60.8            48.0          84.1

Tax on profit on ordinary
activities                           6                    (23.4)          (14.4)        (23.5)
                                                         --------        --------      --------
Profit for the period from
continuing operations                                      37.4            33.6          60.6

Discontinued operations
Post-tax business disposal
profit                               7                        -               -           5.0
                                                         --------        --------      --------
Profit for the period                                      37.4            33.6          65.6
                                                         ========        ========      ========

Profit attributable to equity
shareholders                                               37.4            33.6          65.6
                                                         ========        ========      ========

Earnings per share (pence
per share)                           8
   -   Basic                                               29.3            26.9          52.1
   -   Diluted                                             29.1            26.8          51.7

Earnings per share from
continuing operations
   -   Basic                                               29.3            26.9          48.1
   -   Diluted                                             29.1            26.8          47.8

Dividend per share (pence
per share)                           9                     16.5            13.8          43.0
Dividend proposed for the 
period (£m)                          9                     19.4            17.7          55.1

2004/05 comparatives have been restated to IFRS.


Consolidated statement of recognised income and expense for the half year ended 
30 September 2005

                                                Half year ended  Half year ended     Year ended 
                                                   30 September     30 September       31 March 
                                                           2005             2004           2005
                                                                      (restated)     (restated)
                                                             £m               £m             £m

Profit for the period                                      37.4             33.6           65.6

Actuarial (losses)/gains on
defined benefit schemes
  (net of tax)                                             (1.5)            (2.9)           1.3

Cash flow hedges 
Net fair value losses (net of tax)                         (6.3)               -              -
                                                         --------         --------       --------
Net (losses)/gains not recognised
directly in income statement                               (7.8)            (2.9)           1.3
                                                         --------         --------       --------

Total recognised income for the
period                                                     29.6             30.7           66.9

Adjustments on adoption of IAS 32/39 
1 April 2005                                               13.9                -              -
                                                         --------         --------       --------
                                                           43.5             30.7           66.9
                                                         ========         ========       ========

Attributable to equity shareholders                        43.5             30.7           66.9
                                                         ========         ========       ========

2004/05 comparatives have been restated to IFRS.


Consolidated balance sheet at 30                                    Unaudited
September 2005                                                 --------------------
                                                Half year ended  Half year ended     Year ended
                                                   30 September     30 September       31 March
                                                           2005             2004           2005
                                                                      (restated)     (restated)
                                                             £m               £m             £m
Non-current assets
Goodwill                                                   95.3             61.8           64.4
Intangible assets                                          10.3              6.4            6.0
Property, plant and
equipment                                               2,283.3          2,167.7        2,218.5
Trade and other
receivables                                                 4.1              3.0            3.3
Investments accounted for
using equity method                                         1.2                -              -
                                                         --------         --------       --------
                                                        2,394.2          2,238.9        2,292.2
                                                         --------         --------       --------
Current assets
Inventories                                                 5.3              4.9            4.7
Trade and other
receivables                                               121.1            104.7           99.6
Financial assets
  Derivative financial                                      
  instruments                                               0.4                -              -
Cash and cash
equivalents                                               215.8            296.9          303.4
                                                         --------         --------       --------
                                                          342.6            406.5          407.7
                                                         --------         --------       --------
Current liabilities
Financial liabilities
  Borrowings                                              (53.7)          (107.2)         (54.8)
  Derivative financial                                     
  instruments                                              (7.6)               -              -
Trade and
other payables                                           (195.7)          (174.8)        (127.8)
Current tax
liabilities                                               (32.8)           (19.9)         (23.6)
Provisions for
and charges                                                (7.5)            (6.8)          (8.4)
                                                         --------         --------       --------
                                                         (297.3)          (308.7)        (214.6)
                                                         --------         --------       --------
Net current assets                                         45.3             97.8          193.1
                                                         --------         --------       --------

Non-current liabilities
Financial liabilities
  Borrowings                                           (1,360.9)        (1,278.1)      (1,366.8)
Other non-current
liabilities                                                (3.5)           (17.4)         (19.1)
Retirement benefit
obligations                                               (39.6)           (82.7)         (79.8)
Deferred tax
liabilities                                              (299.9)          (275.2)        (282.8)
Provisions for
and charges                                               (34.0)           (28.2)         (27.9)
                                                         --------         --------       --------
                                                       (1,737.9)        (1,681.6)      (1,776.4)
                                                         --------         --------       --------
Net assets                                                701.6            655.1          708.9
                                                         ========         ========       ========

Shareholders' equity
Share capital                                             142.6            139.5          142.0
Share premium account                                     155.8            156.1          153.7
Retained earnings and
other reserves                                            403.2            359.5          413.2
                                                         --------         --------       --------
Total shareholders'
equity                                                    701.6            655.1          708.9
                                                         ========         ========       ========

2004/05 comparatives have been restated to IFRS.


Consolidated cash flow statement                                   Unaudited
for the half year ended 30                                    --------------------
September 2005
                                                Half year ended  Half year ended     Year ended
                                                   30 September     30 September       31 March
                                                           2005             2004           2005
                                                                      (restated)     (restated)
                                  Note                       £m               £m             £m
Cash flows from operating
Cash generated from
operations                          10                     82.2            129.4          242.4
Interest paid                                             (33.9)           (23.7)         (68.5)
Forward interest rate swap
settlement                                                    -             (3.4)          (3.4)
Tax paid                                                   (0.3)               -           (0.4)
                                                         --------         --------       --------
Net cash generated from
operating activities                                       48.0            102.3          170.1
                                                         --------         --------       --------

Cash flows from investing
Interest received                                          15.6              4.6           12.8
Acquisition of subsidiaries
(net of cash acquired)                                    (44.5)           (28.5)         (28.6)
Investment in joint venture                                (1.0)               -              -
Proceeds of business disposal                               5.0                -              -
Proceeds from sale of available 
for sale investments                                          -              4.2            4.2
Purchase of intangible
assets                                                        -                -           (0.2)
Purchase of property, plant and
equipment                                                 (86.4)           (77.9)        (167.1)
Proceeds from sale of property,
plant and equipment                                         1.5              0.9            2.3
                                                         --------         --------       --------
Net cash used in investing
activities                                               (109.8)           (96.7)        (176.6)
                                                         --------         --------       --------

Cash flows from financing
Net proceeds from issue of
ordinary share capital                                      1.5              0.7            0.8
Net proceeds from new borrowing                            77.5             55.0          150.0
Repayment of borrowings                                   (93.1)           (46.6)        (130.2)
Finance lease drawdowns                                     1.5             26.4           57.3
Finance lease principal
repayments                                                 (5.1)            (3.6)          (5.4)
Dividends paid                                            (16.1)           (10.6)         (28.3)
                                                         --------         --------       --------
Net cash used in financing
activities                                                (33.8)            21.3           44.2
                                                         --------         --------       --------

Net (decrease)/increase in cash
and cash equivalents                                      (95.6)            26.9           37.7

Cash and cash equivalents at
beginning of period                                       120.6             82.9           82.9
                                                         --------         --------       --------
Cash and cash equivalents at
end of period                                              25.0            109.8          120.6
                                                         ========         ========       ========

2004/05 comparatives have been restated to IFRS.


1.   Basis of preparation

     These unaudited interim financial statements are the first interim 
     financial statements following adoption of International Financial 
     Reporting Standards (IFRS). The accounting policies adopted and the 
     reconciliations from net assets and equity under UK Generally Accepted 
     Accounting Principles (UK GAAP) at transition to IFRS on 1 April 2004 and 
     for the half year ended 30 September 2004 and for the year ended 31 March 
     2005 are set out in a separate document published today 'Adoption of 
     International Financial Reporting Standards' (IFRS).

     All accounting policies have been consistently applied except where the 
     Group has taken advantage of the exemption in IFRS 1 'First-time Adoption 
     of IFRS' from the requirement to restate comparative information for IAS 32 
     'Financial Instruments : disclosure and presentation' and IAS 39 'Financial 
     Instruments : recognition and measurement'. These standards have been 
     applied with effect from 1 April 2005.

     The financial information has been prepared in accordance with all IFRS and
     interpretations of the Internal Financial Reporting Interpretations 
     Committee (IFRIC) expected to be applicable for the year ended 31 March 
     2006 and have been determined in accordance with IFRS in issue that are 
     either endorsed by the European Union (EU) and effective at 31 March 2006 
     or are expected to be endorsed and effective at 31 March 2006.
2.   Financial information

     The financial information for the year ended 31 March 2005 does not 
     constitute full financial statements within the meaning of section 240 of 
     the Companies Act 1985. The full financial statements for that year, which 
     were prepared under UK GAAP, have been delivered to the Registrar of 
     Companies. The independent auditors' report on those financial statements 
     was unqualified and did not contain a statement under section 237 (2) or 
     (3) of the Companies Act 1985.


NOTES (Continued)

   3.  Segmental reporting
                                                Half year ended  Half year ended     Year ended
                                                   30 September     30 September       31 March
                                                           2005             2004           2005
                                                                      (restated)     (restated)
                                                             £m               £m             £m
       Continuing operations
       Water and sewerage                                 177.3            156.9          307.0
       Waste management                                   152.0            126.7          248.3
       Other                                                3.9              3.4            6.9
       Less intra-segment trading                          (5.0)            (5.5)         (10.8)
                                                         --------         --------       --------
                                                          328.2            281.5          551.4
                                                         --------         --------       --------
       Segment result
       Earnings before depreciation and
       amortisation of intangibles *
       Water and sewerage                                 112.3             98.6          186.4
       Waste management                                    31.8             28.7           56.4
       Other                                               (0.3)             0.3            0.2
                                                         --------         --------       --------
                                                          143.8            127.6          243.0
                                                         --------         --------       --------

       Earnings before amortisation of
       intangibles *
       Water and sewerage                                  77.8             67.4          122.2
       Waste management                                    16.8             14.6           30.0
       Other                                               (0.1)             0.4            0.1
                                                         --------         --------       --------
                                                           94.5             82.4          152.3
                                                         --------         --------       --------

       Operating profit *
       Water and sewerage                                  77.8             67.4          122.2
       Waste management                                    16.0             13.8           28.6
       Other                                               (0.1)             0.4            0.1
                                                         --------         --------       --------
                                                           93.7             81.6          150.9
                                                         --------         --------       --------

       Discontinued operations
       Other                                                  -                -            5.0
                                                         --------         --------       --------

       * Before the exceptional items comprising abortive acquisition costs and 
         business restructuring costs.
4.   Abortive acquisition costs

     The abortive acquisition costs arise from negotiations to acquire the UK 
     landfill and landfill gas operations of Shanks Group Plc where discussions 
     were terminated on 25 May 2004.

5.   Business restructuring costs

     The business restructuring costs arise in the water and sewerage segment.


NOTES (Continued)
6.   Tax on profit on ordinary activities                         Unaudited
                                                September         September               March
                                                     2005              2004                2005
                                                                 (restated)          (restated)
       Tax on profit on ordinary activities            £m                £m                  £m

       United Kingdom corporation tax                 8.1               4.6                 7.9
       Deferred tax                                  15.3               9.8                15.6
                                                  ---------         ---------           ---------
                                                     23.4              14.4                23.5
                                                  ---------         ---------           ---------

     The tax charge for September 2005 and September 2004 has been derived by 
     applying the anticipated effective annual tax rate to the first half year 
     profit before tax.

7.   Discontinued operations

     The business disposal profit relates to the balance of proceeds due from 
     the 1998 arrangement to dispose of the Group's interest in Societa Italo 
     Britannica dell'Acqua Srl.

     The tax charge was not affected by the business disposal profit.

8.   Basic and diluted earnings per share

     Reconciliation of earnings and weighted average number of shares in issue 
     during the period.

     All share options with an exercise price lower than the average market 
     price of the Company's shares during the period have been included in the 
     calculation of diluted earnings per share.

     The reconciliation of the earnings and weighted average number of shares 
     used in the calculations is set out below.
                                                September         September               March
                                                     2005              2004                2005
                                                                 (restated)          (restated)

       Weighted average number of ordinary

       For basic earnings per share                 127.5             124.7               126.0

       Effect of dilutive potential ordinary
       shares :
           Share options                              1.1               0.9                 0.9
                                                  ---------         ---------           ---------
       For diluted earnings per share               128.6             125.6               126.9
                                                  =========         =========           =========

       Earnings per share from discontinued
       (in pence per share)

       -   Basic                                        -                 -                 4.0
       -   Diluted                                      -                 -                 3.9


NOTES (Continued)
8.   Basic and diluted earnings per share (Continued)

     Adjusted basic and diluted earnings per share

     Adjusted earnings per share have been calculated to exclude the impact of 
     the exceptional items and deferred tax on the results, as these items can 
     have a distorting effect on earnings from year to year and therefore 
     warrant separate consideration. Adjusted earnings have been calculated as 
     follows :

                              September            September                            March
                                 2005                 2004                               2005
                             (unaudited)          (unaudited)                         (unaudited)
                         Earnings per share      Earnings per share              Earnings per share
               Earnings   Basic     Diluted   Earnings   Basic   Diluted   Earnings        Basic     Diluted
                     £m       p           p         £m       p         p         £m            p           p
per share
  Operations       37.4    29.3        29.1       33.6    26.9      26.8       60.6         48.1        47.8

items                 -       -          -         2.0     1.6       1.6        4.9          3.9         3.8

Deferred tax       15.3    12.0       11.9         9.8     7.9       7.7       15.6         12.3        12.3
                 ------  ------     ------      ------  ------    ------     ------       ------      ------

  per share
  continuing       52.7    41.3       41.0        45.4    36.4      36.1       81.1         64.3        63.9
                 ======  ======     ======      ======  ======    ======     ======       ======      ======

   9.  Dividends                                                  Unaudited
                                                September         September               March
                                                     2005              2004                2005
                                                                 (restated)          (restated)
                                                       £m                £m                  £m

       Interim dividend paid for the year
       ended 31 March 2005 :
          13.8p (2004 13.2p) per share               17.7              16.4                16.4
       Final dividend approved for the year
       ended 31 March 2005 : 
          29.2p (2004 27.8p) per share               37.4              34.7                34.7
                                                  ---------         ---------           ---------
                                                     55.1              51.1                51.1
                                                  =========         =========           =========

                                                September         September               March
                                                     2005              2004                2005
                                                                 (restated)          (restated)
                                                       £m                £m                  £m

       Proposed interim dividend for the
          ended 31 March 2006 of 16.5p
          (2005 13.8p) per share                     19.4              17.7                17.7
                                                  =========         =========           =========

     The proposed interim dividend has not been included as a liability in these 
     financial statements in accordance with IFRS.


NOTES (Continued)
10.  Cash flow from operating activities

     Reconciliation of operating profit to net cash inflow from operating 

       Cash generated from operations           September         September               March
                                                     2005              2004                2005
                                                                 (restated)          (restated)
                                                       £m                £m                  £m

       Profit for the period                         37.4              33.6                60.6
       Adjustments for:
         Employee share schemes                       0.9               0.9                 1.5
         Deferred income released to                 
         profits                                     (0.4)                -                (0.2)
         Profit on disposal of property,             
         plant and equipment                         (0.7)             (0.3)               (1.4)
         Depreciation charge                         49.3              45.2                90.7
         Amortisation of intangible assets            0.8               0.8                 1.4
         Share of post-tax loss from joint              
         ventures                                       -                 -                (0.1)
         Interest payable and similar                
         charges                                     48.4              44.8                89.3
         Interest receivable                        (15.5)            (13.2)              (27.3)
         Taxation                                    23.4              14.4                23.5

       Changes in working capital (excluding
       the effect of acquisition of subsidiaries)
       Increase in stocks                            (0.2)             (0.4)               (0.2)
       Increase in trade and other                  
       receivables                                  (23.3)             (5.3)               (0.9)
       Decrease in long-term deposits                (2.9)             (2.9)               (3.5)
       Increase in trade and other payables           8.2              12.3                 8.5
       (Decrease)/increase in retirement            
       benefit obligations                          (42.4)              0.4                 2.9
       Decrease in provisions for
       liabilities and charges                       (0.8)             (0.9)               (2.4)
                                                  ---------         ---------           ---------
       Net cash generated from operations            82.2             129.4               242.4
                                                  =========         =========           =========

11.  Net borrowings                                                 Unaudited
                                                     2005              2004                2005
                                                                 (restated)          (restated)
                                                       £m                £m                  £m

       Cash and cash equivalents                    215.8             296.9               303.4

       Borrowings - current
       Bank overdraft                               (10.2)            (10.0)               (5.1)
       Other current borrowings                     (14.5)            (70.7)              (20.4)
       Finance lease obligations                    (29.0)            (26.5)              (29.3)
                                                  ---------         ---------           ---------
       Total current borrowings                     (53.7)           (107.2)              (54.8)
                                                  ---------         ---------           ---------

       Borrowings - non-current
       Bank loans                                  (247.7)           (185.4)             (255.3)
       Other non-current borrowings                (314.4)           (323.5)             (316.4)
       Finance lease obligations                   (798.8)           (769.2)             (795.1)
                                                  ---------         ---------           ---------
       Total non-current borrowings              (1,360.9)         (1,278.1)           (1,366.8)
                                                  ---------         ---------           ---------
       Total net borrowings                      (1,198.8)         (1,088.4)           (1,118.2)
                                                  =========         =========           =========


NOTES (continued)
12.  Acquisitions

     On 21 June 2005 the entire issued share capital of Brett Waste Management 
     Limited, (now renamed Viridor Waste Kent Limited), was purchased by Viridor 
     Waste Management Limited for a cash consideration of £44.5 million before 
     costs. The acquisition has been accounted for using the acquisition method 
     and provisional goodwill of £30.9 million and intangible fixed assets of 
     £5.2 million have been capitalised. The intangible fixed assets are being
     amortised evenly over the Directors' estimate of useful economic life.

     On 30 September 2005 Viridor Waste Management Limited acquired 50% of the 
     entire issued share capital of Lakeside Energy From Waste Limited for an 
     investment of £1.0 million. The joint venture has been accounted for using 
     the equity method.

13.  The interim dividend record and payment dates will be set out in the 
     Circular to shareholders relating to the proposed return of capital, which 
     is expected to be posted to shareholders towards the end of January 2006. 
     The interim report will be posted to shareholders at the same time and will 
     also be available from the Company's registered office.

Pennon Group Plc
Registered Office: Peninsula House
Rydon Lane

Registered in England No 2366640

                      This information is provided by RNS
            The company news service from the London Stock Exchange

a d v e r t i s e m e n t