Financial performance
Financial results and dividends
| Year to 31.3.2009 £m |
|
|---|---|
| Profit before tax | 152.7 |
| Loss for the year | (11.9) |
| Interim dividend paid (ordinary – 4.29 pence per share) | 22.2 |
| Final dividend proposed (ordinary – 8.50 pence per share) | 44 |
Revenue for the year to 31 March 2009 was £694.1 million (2008: £670.4 million). This 3.5% increase is mainly due to the Retail Price Index (RPI) (4.28%) to water and sewerage charges, partially offset by a small overall reduction in demand for both water and sewerage services and a reduction in other services related to the housing market. The difficult economic climate continues to have an impact on industrial and commercial customers where volumes are down by c.4% compared to the prior year.
Profit on ordinary activities before interest for the year was £273.6 million (2008: £277.8 million). Operating costs increased by £27.9 million (7.1%) to £420.5 million. At NWL, operating costs have increased from £356.0 million to £380.1 million. This increase principally reflects the impact of inflation, increases in energy costs and bad debt charges. These increases have been partially offset by efficiencies including lower manpower costs following the changes made to our defined benefit pension scheme where, from 1 January 2008, the scheme was closed to new entrants, the benefit structure amended and employee contribution rates were increased.
Energy costs at NWL for 2008/09 (£38.8 million) are over 50% higher than both last year and the level assumed by the regulator at the last price review. Although energy prices have softened recently, we expect them to remain volatile for the future. NWL has procured all its requirements for 2009/10, at prices c.5% lower than 2008/09, and procured 44% for the following year. This has been purchased in small tranches, in accordance with its risk management policy, to mitigate energy price movements.
Interest charges increased by £13.7 million within which, cash interest charges decreased by £0.6 million. The non-cash elements of the increase reflect inflation on the index linked bonds (£6.2 million), a reduction in the expected return on pension assets (£4.1 million), an increase in the interest cost of pension plan obligations (£3.3 million) and an increase in other non-cash movements of £0.7 million.
At 31 March 2008, the Group’s debt structure included £440 million of index linked bonds which increase in line with the July RPI. The RPI adjustment for July 2008 was 5.05% and, therefore, the principal accretion and interest charge for the year ending 31 March 2009 increased by £22 million. Current forecasts for the July 2009 RPI indicate a negative adjustment, in which case the interest charge for 2009/10 would be reduced significantly.
Profit on ordinary activities before tax for the year was £152.7 million, 10.3% lower than the previous year (2008: £170.3 million). The current tax charge of £32.1 million (2008: £25.6 million) has increased, despite a reduction in profitability, mainly due to changes in the tax rules on capitalised maintenance expenditure, the phased abolition of industrial buildings allowances and the timing of relief for prepaid pension contributions, offset by a 2% reduction in the corporation tax rate.
The deferred tax charge of £132.5 million (2008: credit, £13.6 million) includes a one-off charge of £117.2 million following the withdrawal of industrial buildings allowances in the Finance Act 2008. NWL included the impact of reduced allowances in its Final Business Plan submission to Ofwat for the period 2010-2015. The deferred tax credit in 2008 reflected the change in the tax rate from 30% to 28% and resulted in a credit of £35.4 million.
Excluding the one-off charge of £117.2 million attributable to the Finance Act 2008, the effective tax rate for the period was 31% (2008: 28% excluding the credit of £35.4 million).