Financial performance
Earnings per share and dividend cover
Basic and diluted loss per share for the year were 2.45 pence. In 2008, basic and diluted earnings per share were 30.52 pence and 30.48 pence respectively. Earnings per share from continuing operations, adjusted for deferred tax and the amortisation of debt fair value, were 22.05 pence (2008: 26.72 pence).
A final dividend of 8.50 pence per share for the year ended 31 March 2009 will be recommended by the Board to shareholders at the AGM on 30 July 2009 and, if approved, will be paid on 11 September 2009 to shareholders on the Company’s Register of Members at the close of business on 14 August 2009. Together with the ordinary interim dividend of 4.29 pence per share, the ordinary dividends paid and proposed for the year will be 12.79 pence per share (2008: 12.07 pence per share). This represents an increase of 6%, based on average inflation over the year of 3%, on the ordinary dividend for the previous year and is consistent with the Board’s decision to maintain a progressive dividend policy with real increases of around 3% per annum. The board of our main subsidiary, NWL, has proposed a dividend policy consistent with the underlying assumptions adopted by Ofwat at its price review in 2004.
The dividend cover for the year, excluding deferred tax and the amortisation of debt fair value, was 1.8x (2008: 2.3x). The cover level has reduced principally as a consequence of the application of higher RPI to the index linked bonds and a significant increase in energy costs.
Northumbrian Water Share Scheme Trustees Limited, which at the date of this report held 1,038,252 shares to be used in the future to satisfy the vesting and exercise of awards under the Company’s Long Term Incentive Plan (LTIP), has waived the right to all dividends on the shares it holds. Further details of the LTIP can be found in the directors’ remuneration report.
Accounting policies
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). This is consistent with IFRS as adopted by the European Union as it applies to the financial statements of the Group for the year ended 31 March 2009.
Capital structure
On 19 September 2008, a further European Investment Bank (EIB) facility of £120 million was drawn by NWL on a fixed rate basis with a 17 year maturity and an amortising principal repayment profile.
On 29 September 2008, a £50 million lease facility was fully drawn by way of a further tranche of £20.8 million. The lease was for renewed infrastructure assets and is at a variable rate linked to RPI with a final maturity in March 2043.
In October 2008, a variable rate EIB loan of £100 million maturing in March 2022 was swapped to a fixed rate of 4.98%.
In January 2009, £125 million variable rate debt at Northumbrian Services Limited was fixed at a rate of 2.80% to its maturity in May 2011.
As stated, the Group has converted £225 million of variable rate borrowing to fixed rate. As a consequence, the Group’s and NWL’s regulated business debt structure has changed to 75% (NWL: 71%) fixed at an average rate of 5.80% (NWL: 5.99%), 19% (NWL: 22%) index linked at an average real rate of 1.85% (all NWL) and 6% (NWL: 7%) on a variable rate basis.
Total cash and short term cash deposits available to meet the requirements of the business through to 2011 amounted to £252.9 million at 31 March 2009.