Registered Number 2127283
Veolia Water UK PLC (formerly: Vivendi Water UK PLC)
Annual Report
for the year ended 31 December 2003
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Contents
Page Directors and Officers
1
Directors’ Report
2
Independent Auditors’ Report to the Shareholders
8
Consolidated Profit and Loss Account
9
Consolidated Balance Sheet
10
Company Balance Sheet
11
Consolidated Cash Flow Statement
12
Notes to the Consolidated Cash Flow Statement
13
Notes to the Financial Statements
15
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Directors and Officers Directors The Lord Borrie of Abbots Morton, QC J S Gummer J C Banon R A Bienfait M J E Butcher F Darley J B Mangion G Mohr C Roger-Lacan
(Resigned as Chairman and Director 25 September 2003) (Appointed Chairman 25 September 2003) (Managing Director) (Appointed 1 January 2004)
(Resigned 30 November 2003) (Resigned 30 June 2003) (Appointed 15 July 2003)
Secretary R G Castle
Registered Office 37-41 Old Queen Street London SW1H 9JA
Auditors Ernst & Young LLP 1 More London Place London SE1 2AF
Registered Number 2127283
1
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Directors’ Report The Directors submit their report and the audited financial statements of Veolia Water UK PLC for the year ended 31 December 2003. The Company changed its name from Vivendi Water UK PLC on 1 May 2003. Principal activities The principal activities of the Group are the investment in and management of long-term interests in the water industry in the United Kingdom and Ireland. Dividends and transfers to reserves The consolidated profit after taxation and minority interests amounted to £48.0m (2002: £135.8m). An interim dividend of £6.25m has been paid during the year (2002: £7m), and the Directors propose a final dividend of £18.75m (2002: £21.5m) in respect of the year ending 31 December 2003. Retained profits of £21.2m (2002: £107.3m) will be transferred to reserves. Review of business and future developments Turnover at £203.8m for the twelve months compares to £191.7m for the previous year. Profit before tax for the twelve months was £65.8m compared to £155m for the previous year. The previous year’s results include the disposal of the investments in Bristol Water Holdings plc and South Staffordshire Group Plc which realised a pre-tax profit of £92.4m. The Group’s turnover and profit before tax is largely generated by the Group’s regulated water businesses: Three Valleys Water PLC, Tendring Hundred Water Services Limited and Folkestone and Dover Water Services Limited. After excluding the cost of acquiring an associate of £55.9m, net funds before financing of £10.8m were generated during the year. Net funds at 31 December 2003 were £72.6m compared to £117.7m last year. Capital expenditure for the twelve months to December, net of contributions from third parties, was £61.2m, compared to £78.5m for the previous year. During the year the Group continued to develop its activities in the industrial markets with Veolia Water Industrial Outsourcing Limited, formerly Vivendi Water Industrial Outsourcing Limited. On 23rd December 2003 the Company acquired the balance of the share capital of the company from its former joint venture partner, an associate company, Veolia Water Systems Limited.
Directors’ Report (continued) 2
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Review of business and future developments (continued) Southern Water During the year the Company entered into an agreement with a group of institutional investors led by the Royal Bank of Scotland to acquire an indirect minority interest in Southern Water Services Limited (SWS), a UK water and wastewater operator. This agreement received all the necessary regulatory approvals and closed on 7th May 2003. In February 2003 the Company entered into an agreement with Southern Water Capital Limited (SWC) relating to the acquisition of First Aqua (JVCo) Limited (FA(JVCo)), pursuant to which, Southern Water Investments Limited (SWI), a newly created subsidiary of the Company, acquired FA(JVCo) in accordance with the terms of an agreement dated May 2002 with First Aqua Holdings Limited (FAH) and immediately issued new capital to SWC, which is held by The Royal Bank of Scotland and other investors, such that SWC now holds 80.1% of SWI and the Company holds 19.9%. SWC, which now controls SWS through SWI, granted the Company an option to acquire an additional 5.1% stake in SWI. Pursuant to this agreement, FA (JVCo) also redeemed £374m preferred shares issued to financial investors in March 2002. On April 28th 2003, the UK Competition Commission approved the transaction on the condition that we agree to not hold more than 25% of SWI and to refrain from appointing more than two members of SWI’s board of directors and more than three members of SWS’s board of directors. The agreement with SWC closed on 7th May 2003. The Company has invested £50m in SWI and SWS through ordinary and preference share subscriptions. In addition, in connection with SWS’ issuance of preferred shares to several investors for £220m, Veolia Environnement SA has agreed to grant these investors put options which may require it to purchase the preferred shares held by them after five years. SWC has invested £273m in various equity and loan instruments. The SWI Group completed the refinancing of its bridge facilities through a securitisation of its regulated activities involving the issuance of debt instruments using a “ring-fencing” technique commonly used in financings in the water sector and at the same time implemented a corporate reorganisation to simplify the group structure. Having regard to the equity and non-equity interests held by the Company and the other contractual terms surrounding the Company’s investment in SWI and its subsidiaries, the Company has treated SWI as an associate in its consolidated accounts for the year ending 31st December 2003.
Directors’ Report (continued)
3
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Research and development In addition to the Group's own research and development activities, the Group's water company subsidiaries are committed to participate in research programmes operated by UK Water Industry Research Limited, which undertakes research nationally into all aspects of water industry operations. The Group also participates in and benefits from research undertaken by other companies within the Veolia Environnement SA Group (formerly Vivendi Environnement SA Group). Expenditure in the year was £646,000 (2002: £506,000). Corporate social responsibility In addition to delivering economic growth, the Directors recognise the importance of achieving high standards of environmental and social performance within the Group. Management of the environmental and social dimensions of the business has been incorporated under the banner of corporate social responsibility. Responsibility for environmental and social performance within each subsidiary lies with each respective Board of Directors. These and the main Board are advised by a Corporate Social Responsibility Advisory Committee. As the Group's policies and programmes develop and are interwoven, it is the Board's intention to comply with the Association of British Insurers' disclosure guidelines on corporate social responsibility. In March 2004 it was announced that the Company had scored 95.89% in the “Business in the Community (BitC) Corporate Responsibility Index 2003”, positioning it fourth overall and making it leader of the water sector. The BitC index provides a framework for comparing the management processes and performance of a range of companies in different sectors. It also acts as a benchmark for companies to assess and compare how they integrate responsible practices throughout their organisation. Details of the Group's environmental and social programme, together with performance and targets, can be found in the Veolia Water UK Environmental and Social Report 2003. Copies of the report may be obtained by writing to the Environment Department, Veolia Water UK PLC, 37-41 Old Queen Street, London SW1H 9JA.
4
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Directors’ Report (continued) Creditor payment policy The Directors are aware of the need for timely payment for goods and services received. It is Company policy to settle the terms of payment with suppliers when agreeing terms of business and to pay in accordance with contractual and other legal obligations. The payment policy applies to all payments to creditors for revenue and capital supplies of goods and services. Trade creditors (excluding inter-group) at 31 December 2003 represent 44 days (2002: 34 days) of purchases during the year for the Group. Market value of land and buildings The major part of land and buildings included within tangible fixed assets are used for the purpose of providing potable water to the consumer. A significant portion of the Group’s buildings and installations are highly specialised and have a market value only in the context of the provision of a potable water supply. Charitable donations Donations for charitable purposes made by Group companies during the year amounted to £34,864 (2002: £40,367), together with £79,010 (2002: £49,490) of sponsorship. No political contributions were made by the Group. Employee information Group companies consult their staff on matters of concern in the context of their employment. All Group companies continued to carry out their obligations arising from the Health & Safety at Work Act 1974 through consultative committees consisting of management and employee representatives. The Group gives every consideration to applications for employment from disabled persons where the requirements of the job may be covered adequately by a handicapped or disabled person. With regard to existing employees and those who have become disabled during the year, the Group has continued to examine ways and means of providing training and career development wherever appropriate.
5
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Directors’ Report (continued) Directors and their interests The Directors’ interests in the share capital of the ultimate parent company, Veolia Environnement SA, were as follows: At 31 December 2003 Number of ordinary shares 109 -
J C Banon M J E Butcher F Darley J S Gummer C Roger-Lacan
At 31 December 2002 Number of ordinary shares 109 -
Veolia Environnement SA operates a share option scheme by which Executive Directors and other executives are able to subscribe for ordinary shares in the ultimate parent company. The interests of the Directors in options over the ordinary shares of Veolia Environnement SA were as follows : Number of options At 1 January 2003
Granted
Exercised
At 31 December 2003
Exercise Price
Date from which exercisable
Expiry date
(€) J C Banon
5,000 20,000
8,000
-
5,000 20,000 8,000
42.00 37.53 22.50
08.02.04 25.01.05 24.03.06
07.02.09 25.01.10 24.03.11
M J E Butcher
1,550
-
-
1,550
42.00
08.02.04
07.02.09
F Darley
1,550 3,100
3,300
-
1,550 3,100 3,300
42.00 37.53 22.50
08.02.04 25.01.05 24.03.06
07.02.09 25.01.10 24.03.11
23,600 25,000
25,000
-
23,600 25,000 25,000
42.00 37.53 22.50
08.02.04 25.01.05 24.03.06
07.02.09 25.01.10 24.03.11
C RogerLacan
During the year the ordinary shares of Veolia Environnement SA traded between €14.75 and €24.90. The price at the end of the year was €21.63. The €/£ exchange rate was €1.419/£ at 31 December 2003 with an average during the year of €1.4459/£.
6
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Directors’ Report (continued) Statement of Directors’ responsibilities for the Annual Report Company law requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing those financial statements, the Directors are required to: ·
select suitable accounting policies and then apply them consistently;
·
make judgements and estimates that are reasonable and prudent; and
·
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors confirm that they have complied with these requirements and, having a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future, continue to adopt the going concern basis in preparing the accounts. Auditors On 22 September 2003, RSM Robson Rhodes LLP resigned from their position as the Company’s auditors. Ernst & Young LLP were subsequently appointed as the Company’s auditors.
By order of the Board
R G Castle Secretary
22 July 2004
7
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Independent Auditors’ Report to the Shareholders of Veolia Water UK PLC We have audited the financial statements which comprise the consolidated proft and loss account, the consolidated balance sheet, the company balance sheet, the consolidated cash flow statement, and notes 1 to 33. This report is made solely to the Company’s shareholders, as a body, in accordance with Section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the Company’s shareholders those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of Directors and auditors As described in the Statement of Directors' Responsibilities the Company's Directors are responsible for the preparation of the financial statements in accordance with United Kingdom law and accounting standards. Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and United Kingdom Auditing Standards. We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies Act 1985. We also report to you if, in our opinion, the Directors' Report is not consistent with the financial statements, if the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding Directors' remuneration and transactions with the Company is not disclosed. We read the Directors' Report and consider the implications for our report if we become aware of any apparent misstatements within it. Basis of audit opinion We conducted our audit in accordance with United Kingdom Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Company’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. Opinion In our opinion the financial statements give a true and fair view of the state of affairs of the Company and the Group as at 31 December 2003 and of the Group’s profit for the year then ended and have been properly prepared in accordance with the Companies Act 1985. Ernst & Young LLP Registered Auditors London
8
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Consolidated Profit and Loss Account Notes
Turnover Cost of sales Gross profit Administrative expenses Other operating income Group operating profit
2
Share of operating profit in: -joint venture -associate Income from other participating interests Preference dividend income from associate Profit on the disposal of fixed assets Profit on the disposal of investments Profit on ordinary activities before interest and taxation Interest receivable and similar income Interest payable and similar charges: -Group -associate Profit on ordinary activities before taxation Tax on profit on ordinary activities
Year ended 31 December 2002 £’000
3
203,831 (112,437) 91,394 (36,293) 2,199
191,705 (100,106) 91,599 (40,505) 1,969
4
57,300
53,063
24,513 180 701 163 535 83,392
28 3,658 6,488 92,439 155,676
7
8,255
5,433
8
(6,375) (19,460) 65,812
(6,080) 155,029
9
(17,139)
(18,177)
48,673 (711) (5)
136,852 (1,045) (5)
47,957 (25,000) (1,722) 21,235
135,802 (28,534) 107,268
Profit on ordinary activities after taxation Equity minority interests Non-equity minority interests Profit on ordinary activities after taxation and minority interests Dividends Non-equity dividends on associates Retained profit for the year
Year ended 31 December 2003 £’000
10 25
There is no difference between profit on ordinary activities before taxation, retained profit for the year stated above, and their historical cost equivalents. All recognised gains and losses have been included in the profit and loss account. No separate statement of recognised gains and losses is required. There were no material acquisitions or disposals of subsidiaries during the year. All material activities relate to continuing operations. The notes on pages 15 to 54 form part of these financial statements.
9
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Consolidated Balance Sheet Notes
Fixed assets Intangible assets Tangible Assets Investments Investments in associate
11 12a 13 14
Current assets Stocks Debtors Investments Short term deposits Cash at bank and in hand
16 17 15
18
Creditors: amounts falling due within one year Net current assets Total assets less current liabilities Creditors: amounts falling due after more than one year Provisions for liabilities and charges
19 20
Net assets
31 December 2003 £’000
31 December 2002 £’000
229 549,080 58,632
527,088 50 -
607,941
527,138
1,799 175,967 814 1,006 2,016
1,536 245,633 3,491 7,965
181,602 (154,962)
258,625 (170,878)
26,640
87,747
634,581
614,885
(51,141) (54,874)
(60,229) (47,242)
528,566
507,414
Capital and reserves Called up share capital Other reserves Profit and loss account
24 25 25
500 86,632 437,671
500 86,632 416,436
Equity shareholders’ funds Equity minority interests Non-equity minority interests
27 23 23
524,803 3,716 47
503,568 3,799 47
528,566
507,414
The notes on pages 15 to 54 form part of these financial statements. The financial statements on pages 9 to 54 were approved by the Board of Directors on 22 July2004 and were signed on its behalf by:
J C Banon Director
R Bienfait Director
10
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Company Balance Sheet Notes
31 December 2003 £’000
31 December 2002 £’000
12b 13
6,283 268,337
6,544 212,821
274,620
219,365
207,410 1,006 3,651
258,905 146
212,067 (60,263)
259,051 (68,048)
Net current assets
151,804
191,003
Total assets less current liabilities
426,424
410,368
Fixed assets Tangible assets Investments
Current assets Debtors Short term deposits Cash at bank and in hand
17
18
Creditors: amounts falling due within one year
20
Provisions for liabilities and charges Net assets
(1,479)
(1,509)
424,945
408,859
Capital and reserves Called up share capital Other reserves Profit and loss account
24 25 25
500 159,315 265,130
500 159,315 249,044
Equity shareholders’ funds
27
424,945
408,859
The notes on pages 15 to 54 form part of these financial statements. The financial statements on pages 9 to 54 were approved by the Board of Directors on 22 July 2004 and were signed on its behalf by:
J C Banon Director
R Bienfait Director
11
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Consolidated Cash Flow Statement Notes*
Year ended 31 December 2003 £’000
Year ended 31 December 2002 £’000
123,312
87,963
a
Net cash inflow from operating activities Returns on investments and servicing of finance Interest received Interest paid Interest element of finance lease rentals Dividends received from investments Dividends received from associate Dividends paid to minorities Net cash inflow from returns on investments and servicing of finance
8,257 (3,881) (3,755) 180 311
5,497 (2,984) (1,899) 3,658 -
(617)
(634)
495
3,638
Taxation paid
(12,261)
(12,074)
Capital expenditure and financial investment Purchase of fixed assets Contributions to fixed assets received Disposal of fixed assets Purchase of investments Overdraft acquired on investment Cost of investment in associate Disposal of investments
(80,737) 7,236 301 (353) (2,355) (55,944) 2,946
(87,169) 8,010 6,697 (49) 99,192
(128,906)
26,681
Equity dividends paid
(27,768)
(28,534)
Cash (outflow)/inflow before management of liquid resources and financing
(45,128)
77,674
Net cash (outflow)/inflow from capital expenditure and financial investment
Net cash inflow/(outflow) from management of liquid resources
b
44,133
(62,063)
Net cash outflow from financing
b
(14,817)
(6,167)
(Decrease)/Increase in cash
c
(15,812)
9,444
*Notes to the consolidated cash flow statement are on pages 13 and 14.
12
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Consolidated Cash Flow Statement a.
Reconciliation of operating profit to net cash flow from operating activities Year ended 31 December 2003 £’000
Group operating profit Depreciation Amortisation of deferred credit Ammortisation of goodwill (Increase)/decrease in stocks Decrease/(increase) in debtors Increase in creditors and provisions
57,300 40,853 (414) 12 (263) 21,117 4,707
Net cash inflow from operating activities
123,312
Year ended 31 December 2002 £’000 53,063 37,509 (406) 663 (29,427) 26,561 87,963
b.
Analysis of cash flows for headings netted in the consolidated cash flow statement At At 31 December 31 December 2003 2002 £’000 £’000 Management of liquid resources Cash on short-term deposit (1,006) Short-term loans from/(to) Group Undertakings (62,063) 45,139 Net cash inflow/(outflow) from management of liquid resources Financing Financing of assets operated by other parties Capital elements of finance leases Repayments of short-term borrowing Net cash outflow from financing
44,133
(62,063)
(930) (5,467) (8,420)
(695) (3,892) (1,580)
(14,817)
(6,167)
Veolia Water UK PLC includes term deposits and inter-group loans of less than one year as liquid resources.
13
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Consolidated Cash Flow Statement (continued) c.
Analysis of net funds At 31 December 2002 £’000
Net funds: Cash at bank and in hand Bank overdrafts
7,965 (69) 7,896
Liquid resources: Short-term loans to Group Undertakings Cash on short term deposit
Cash flow £’000 (5,949) (9,863) __ (15,812)
At 31 December 2003 £’000 2,016 (9,932) (7,916)
(45,139) 1,006 __ (44,133)
131,543 1,006
8,420 5,467 930 __ 14,817 __
(24,974) (4,667) (22,418)
(45,128)
72,574
Year ended 31 December 2002 £’000
Year ended 31 December 2002 £’000
(Decrease)/increase in cash in the year Cash (outflow)/inflow from increase in liquid resources Cash inflow from decrease in debt and lease financing
(15,812) (44,133) 14,817
9,444 62,063 6,167
Movement in net funds in the year
(45,128)
77,674
Opening net funds
117,702
40,028
Closing net funds
72,574
117,702
176,682 176,682
Debt: Bank loans Finance leases (including sale and leaseback) Debentures Financing of assets operated by third parties
(8,420) (30,441) (4,667) (23,348) (66,876)
Net funds
d.
117,702
132,549
(52,059)
Reconciliation of net cash flow to movement in net funds
14
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Financial Statements 1.
Accounting policies a)
Accounting convention
The financial statements have been prepared under the historical cost convention in accordance with applicable Accounting Standards in the United Kingdom and, except for the treatment of certain grants and contributions described below, in accordance with the Companies Act 1985. b)
New accounting standards
FRS 17 “Retirement Benefits� need not be applied in full until financial statements with periods ending on or after 1 January 2005, and as such, the Group has only disclosed those items required under the standard in respect of periods ending on or after 22 June 2002. Planning is in progress to ensure correct and appropriate adoption of new International Accounting Standards in 2005. c)
Basis of consolidation
The financial statements include the accounts of Veolia Water UK PLC and its subsidiaries from their respective dates of acquisition. In 1998 the water companies entered into a partnership arrangement. Under FRS 9 this has been accounted for as a joint arrangement and not as a separate entity. An interest in an associate acquired in 2003, has been accounted for using the equity method in accordance with FRS 9. The interest in a joint venture held in 2002 has been included in the consolidated financial statements using the gross equity method in accordance with FRS 9. d)
Goodwill
Goodwill arising on acquisitions prior to 31 March 1998, which represents the amounts by which the consideration paid for acquisitions exceeded the fair value of identifiable assets and liabilities, has been written off directly against reserves in the year of acquisition. In the event of a future disposal, this will be charged or credited in the profit and loss account of the business to which it related. Goodwill arising on acquisitions is capitalised and amortised in accordance with FRS 10. Goodwill is amoritsed over a life of not greater than 20 years. e)
Interest and dividends
Bank and short term deposit interest receivable is dealt with on an accruals basis. Income from fixed asset investments is treated as receivable by reference to the date on which the dividend is declared ex-dividend, or in the case of subsidiaries, from the date of recognition in their financial statements. In accordance with FRS 16, UK dividend income is recorded net of tax credits.
15
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Financial Statements (continued) 1.
Accounting policies (continued) f)
Tangible fixed assets and depreciation
Tangible fixed assets comprise: Infrastructure assets - mains and associated underground pipework. Other assets – land and buildings, operational structures, fixed plant, motor vehicles and mobile plant. Infrastructure assets comprise a network of systems. Expenditure on infrastructure assets, including renewals is treated as an addition and included at cost after deducting grants and contributions. The depreciation charge for infrastructure assets is the estimated level of annual expenditure required to maintain the operating capability of the network which is based on the Company’s independently certified asset management plan. Disposals of infrastructure assets are calculated based on the estimated lives of the assets before they are replaced. Depreciation is provided on all other tangible fixed assets except freehold land and is calculated to write off their cost over their estimated useful lives on a straight line basis. Assets acquired under finance leases are depreciated over the shorter of their useful life or the lease term. The performance of assets is continually monitored and where impairment is identified, fixed assets are written down to their recoverable amount. Any such write down would be charged to operating profit. Tangible fixed assets are reviewed for impairment at the end of each reporting period when the estimated remaining useful economic life of the assets exceeds 50 years. The estimated useful lives of tangible fixed assets are: Buildings Operational structures Fixed plant and machinery Mobile plant and motor vehicles g)
40 - 100 years 15 - 100 years 3 - 30 years 4 - 10 years
Capital contributions
Infrastructure charges received in respect of connections to the mains network are allocated to fixed assets, surface and infrastructure, in accordance with the basis on which the charges are calculated. Grants and contributions receivable relating to infrastructure assets have been deducted from the cost of tangible fixed assets. This is not in accordance with the Companies Act 1985, which requires fixed assets to be stated at their purchase price or production cost, without deduction of grants, and contributions which are accordingly accounted for as deferred income. This departure from the requirements of the Companies Act 1985 is, in the opinion of the Directors, necessary for the financial statements to show a true and fair view because, whilst a provision is made for the depreciation of infrastructure assets, they do not have determinable finite lives and therefore no basis exists upon which to recognise grants and contributions as deferred income. The effect of the departure on the value of tangible fixed assets is disclosed in Note 11.
Notes to the Financial Statements (continued) 16
VEOLIA WATER UK PLC
1.
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Accounting policies (continued) g)
Capital contributions (continued)
Capital contributions received in respect of tangible fixed assets, other than infrastructure assets, are deferred and credited to the profit and loss account by instalments over the expected useful lives of the related assets. h)
Fixed and current asset investments
Fixed asset investments are stated at cost less any provisions in respect of permanent diminution in value. Current asset investments are recorded at the lower of cost and net realisable value. Where net realisable value is lower than cost a provision is made in the profit and loss account for the diminution in value. i)
Stocks and work in progress
Stocks and work in progress are valued at the lower of cost or net realisable value. In accordance with established practice in the water industry no value is placed upon the water in reservoirs, mains or in the course of treatment. j)
Taxation
Deferred tax is provided, except as noted below, on timing differences that have arisen but not reversed by the balance sheet date, where the timing differences result in an obligation to pay more tax, or a right to pay less tax, in the future. Timing differences arise because of differences between the treatment of certain items for accounting and taxation purposes. In accordance with FRS 19 deferred tax is not provided on timing differences arising from: a)
gains on the sale of non-monetary assets, where on the basis of all available evidence it is more likely than not that the taxable gain will be rolled over into replacement assets.
Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. Deferred tax is measured at the tax rates that are expected to apply in the periods when the timing differences are expected to reverse, based on tax rates and law enacted or substantively enacted at the balance sheet date. Where law or accounting standards require gains and losses to be recognised in the statement of total recognised gains and losses, the related taxation is also taken directly to the statement of total recognised gains and losses in due course.
17
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Financial Statements (continued) 1.
Accounting policies (continued) j)
Taxation (continued)
The Group has adopted a policy of discounting deferred tax assets and liabilities to reflect the time value of money. Deferred tax assets and liabilities are discounted using a discount rate equivalent to the post tax yield that could be obtained at the balance sheet date on government bonds with similar maturity dates and currencies. The increase or decrease in the discount deducted in arriving at the deferred tax balance is included in the deferred tax charge or credit in the profit and loss account. k)
Leased assets
An asset acquired under a finance lease is capitalised in the balance sheet and depreciated over the shorter of the lease term and the asset’s useful life. Future instalments under the lease, net of finance charges, are included within creditors. Rentals payable are apportioned between the finance element, which is charged to the profit and loss account as interest, and the capital, which reduces the outstanding obligation for future instalments. Rentals paid under an operating lease are charged against profits on a straight line basis over the life of the lease. l)
Pension costs
Employer’s contributions towards the costs of benefits arising from the past and present service of employees are charged to the profit and loss account over the average working lives of employees in accordance with the recommendations of qualified actuaries. Any funding surplus or deficit that may arise from time to time is amortised over the average remaining working lives of employees as per SSAP 24. The Group has adopted the disclosure requirements of FRS 17. l)
m)
Research and development
The costs of research and development are written off in the period in which they are incurred. n)
Financial Instruments
Income and expenditure arising on financial instruments is recognised on an accruals basis, and credited or charged to the profit and loss account in the financial period in which it arises.
18
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Financial Statements (continued) 2.
Turnover and segmental analysis
Turnover represents income, net of VAT, from the supply of water and its related activities, arising wholly within the United Kingdom and Ireland. Overseas operations are not considered material. The Directors consider this to be one class of business. Turnover relating to unmeasured supplies comprises amounts due to the Group for the accounting period. Amounts received in advance are included in deferred income in the balance sheet. Year ended 31 December 2003 £’000
Year ended 31 December 2002 £’000
Turnover Water supply and related activities: Group and share of joint venture Less share of joint venture
203,831 -
192,565 (860)
Group turnover
203,831
191,705
Year ended 31 December 2003 £’000
Year ended 31 December 2002 £’000
Operating profit Water supply and related activities: Group and share of joint venture Less: share of joint venture
57,300 -
53,091 (28)
Group operating profit
57,300
53,063
3.
Other operating income
Commission income Rents and sundry income
19
Year ended 31 December 2003 £’000
Year ended 31 December 2002 £’000
1,593 606
1,399 570
2,199
1,969
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Financial Statements (continued) 4.
Operating profit
This is stated after charging / (crediting):
Auditors’ remuneration - for audit services (Ernst & Young LLP) - for audit services (RSM Robson Rhodes LLP) - for regulatory returns (Ernst & Young LLP) - for regulatory returns (RSM Robson Rhodes LLP) - for non-audit services (Ernst & Young LLP) - for non-audit services (RSM Robson Rhodes LLP) Depreciation of tangible fixed assets - infrastructure - owned - leased Operating lease rentals - land and buildings - other Hire of plant and machinery Amortisation of goodwill Amortisation of contributions to capital expenditure Provision against current asset investment 5.
Year ended 31 December 2003 £’000
Year ended 31 December 2002 £’000
190 86 26 80 10
235 94 371
17,239 19,589 4,025
16,040 17,343 4,126
580 1,911 274 12 (414) 250
549 2,128 183 (406) 2,662
Year ended 31 December 2003 £’000
Year ended 31 December 2002 £’000
1,324
965
Directors’ remuneration
Aggregate emoluments of the Directors
No Directors exercised share options over ordinary shares in Veolia Environnement SA in the year. Retirement benefits are accruing to one Director (who is not the highest paid Director) under a defined benefits scheme.
Highest paid Director Aggregate emoluments and benefits (excluding gains on exercise of share options)
20
Year ended 31 December 2003 £’000
Year ended 31 December 2002 £’000
488
319
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Financial Statements (continued) 6.
Staff costs Year ended 31 December 2003 £’000
Year ended 31 December 2002 £’000
36,336 3,149 4,514 9
33,832 2,747 1,638 61
44,008
38,278
Wages and salaries Social security costs Pension costs Other benefits
The average number of employees of the Group during the year was as follows: Year ended 31 December 2003 Number
Year ended 31 December 2002 Number
1,311 33
1,217 34
1,344
1,251
Water supply and related activities Central services
7.
Interest receivable and similar income
Year ended 31 December 2003 £’000
Year ended 31 December 2002 £’000
4,630 2,930 695
5,284 149
8,255
5,433
Interest receivable from - Group Undertakings - Convertible Debt - Other
Interest receivable includes income from short term treasury investments. Interest on convertible debt arises from the Group holding convertible debt in SWIL for a period during the year. Interest receivable from Group Undertakings is based upon interest rates linked to LIBOR.
21
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Financial Statements (continued) 8.
Interest payable and similar charges
Bank interest Finance leases Finance costs of assets used by the Group and operated by other parties Interest payable to Group Undertakings Other
Year ended 31 December 2003 £’000
Year ended 31 December 2002 £’000
671 2,091
596 2,595
2,454 648 511
2,491 398
6,375
6,080
Year ended 31 December 2003 £’000
Year ended 31 December 2002 £’000
16,106 1,033
18,177 -
17,139
18,177
9. Taxation
Taxation relates to the following: - Group Undertakings - Associate
Notes to the Financial Statements (continued) 22
VEOLIA WATER UK PLC
9.
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Taxation (continued)
Taxation charge
Year ended 31 December 2003 £’000
Year ended 31 December 2002 £’000
UK corporation tax at 30% (2002: 30%)
14,584
14,585
Over provision in prior years
(3,504)
Current taxation Share of joint venture current taxation Total current taxation Deferred taxation Net origination and reversal of timing differences for the period Decrease/(increase) in discounting Deferred tax charge for the period Share of joint venture deferred taxation Total deferred taxation Total Group taxation
Tax on associates Tax on profit on ordinary activities
23
(676)
11,080 ______ 11,080 ______
13,909 (6) ______ 13,903 ______
4,709 317 ______ 5,026 ______ 5,026 ______ 16,106 ______
7,167 (2,897) ______ 4,270 4 ______ 4,274 ______ 4,274 ______
1,033 ______ 17,139
______ 18,177
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Financial Statements (continued) 9.
Taxation (continued)
Current taxation reconciliation Year ended 31 December 2003 £’000
Year ended 31 December 2002 £’000
Profit on ordinary activities before taxation excluding associate
60,058
155,029
Theoretical tax at UK corporation tax rate of 30% (2002: 30%) Effects of: - adjustment to tax in respect of prior years - disposal of investments - other expense/(income) that is not tax deductible - accelerated capital allowances - Group relief transactions - short term timing differences - other timing differences
18,017
46,509
(3,504) (161) 1,449 (4,758) 48 (11) ______ 11,080
(676) (24,416) (21) (5,425) (326) (1,742) ______ 13,903
Actual current taxation charge
10.
Dividends
Interim dividend paid of £12.50 per share (2002: £14.032 per share) Final dividend proposed of £37.50 per share (2002: £43.036 per share)
Notes to the Financial Statements (continued)
24
Year ended 31 December 2003 £’000
Year ended 31 December 2002 £’000
6,250
7,016
18,750 ______
21,518 ______
25,000
28,534
VEOLIA WATER UK PLC
11.
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Intangible Assets
Group
Positive goodwil £’000
Cost At 1 January 2003 On acquisition of subsidiary
241 ______ 241
At 31 December 2003 Amortisation At 1 January 2003 Charge for the period At 31 December 2003
12 ______ 12
Net book value At 31 December 2003
229
At 31 December 2002
-
Positive goodwill arose on the acquistion of 50% of Veolia Water Industrial Outsourcing Limited on 23 December 2003. After the acquisition the Group owned 100% of Veolia Water Industrial Outsourcing Limited. The goodwill is amortised over its estimated life of 20 years.
25
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Financial Statements (continued) 12a.
Tangible fixed assets – Group
Group
Cost At 1 January 2003 Additions On acquisition of a subsidiary Transfers Transferred to assets held exclusively for resale Capital contributions Disposals
Short Leasehold Property
Freehold land, buildings and reservoirs
Mains and other Infrastructure Assets
Vehicles Plant and Machinery
Assets in Course of Construction
Total
£’000
£’000
£’000
£’000
£’000
£’000
82 -
127,387 2,252
384,696 40,695
330,693 4,887
43,694 21,984
886,552 69,818
-
2,172
1,208
298 24,435
1,531 (27,815)
1,829 -
(1,444)
(1,444)
-
(4)
(7,206) (286)
(2,798)
-
(7,206) (3,088)
At 31 December 2003
82
131,807
419,107
357,515
37,950
946,461
Depreciation At 1 January 2003 Charge for the year On acquisition of a subsidiary
82 -
34,445 3,136
161,253 17,344
163,684 20,373
-
359,464 40,853
-
14
(286)
23 (2,687)
-
23 (2,959)
At 31 December 2003
82
37,595
178,311
181,393
-
397,381
Net book value At 31 December 2003
-
94,212
240,796
176,122
37,950
549,080
At 31 December 2002
-
92,942
223,443
167,009
43,694
527,088
Disposals
The net book value of infrastructure assets is stated after the deduction of grants and contributions amounting to £89,917,000 (2002: £82,516,000) in order to give a true and fair view. Included in the above at 31 December 2003 are fixed assets held under finance leases, as follows: Group
Cost Depreciation Net book value
Freehold land, buildings and reservoirs £’000
Mains and other infrastructure assets £’000
8,693 (5,673)
23,165 (9,695)
68,434 (51,746)
100,292 (67,114)
3,020
13,470
16,688
33,178
26
Vehicles plant and machinery
Total
£’000
£’000
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Financial Statements (continued) 12a.
Tangible fixed assets – Group (continued)
Included in the above at 31 December 2002 are fixed assets held under finance leases, as follows: Group
Cost Depreciation
Freehold land, buildings and reservoirs £’000
Mains and other infrastructure assets £’000
Vehicles plant and machinery
Total
£’000
£’000
8,693 (5,399)
23,165 (9,558)
68,434 (48,134)
100,292 (63,091)
3,294
13,607
20,300
37,201
Short leasehold property
Freehold property
Total £’000
Net book value
12b.
Tangible fixed assets – Company
£’000
£’000
Vehicles, plant and machinery £’000
Company Cost At 1 January 2003 Additions Disposals
82 -
7,528 -
1,275 87 (147)
8,885 87 (147)
At 31 December 2003
82
7,528
1,215
8,825
Depreciation At 1 January 2003 Charge for the year Disposals
82 -
1,284 151 -
975 115 (65)
2,341 266 (65)
At 31 December 2003
82
1,435
1,025
2,542
Net Book Value At 31 December 2003
-
6,093
190
6,283
At 31 December 2002
-
6,244
300
6,544
The leasehold property is the only leased asset held by the Company.
27
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Financial Statements (continued) 13.
Fixed asset investments Investment in joint venture £’000
Group
At 1 January 2003 Transfer of status to subsidiary
50 (50) ____ -
At 31 December 2003
The Group purchased the remaining share of the joint venture on 23 December 2003, and consequently the entity has been accounted for as a subsidiary undertaking. Subsidiary Undertakings £’000
Loans to Group Undertakings £’000
Company At 1 January 2003 Acquisitions Release of impairment provision Payments
34,123 10,303 64 -
178,698 45,149
212,821 10,303 64 45,149
At 31 December 2003
44,490
223,847
268,337
28
Total £’000
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Financial Statements (continued) 13.
Fixed asset investments (continued)
Details of investments in which the Group or the Company holds more than 10% of the nominal value of any class of share capital are as follows: Name of company
Type of holding
Proportion of voting rights and shares held
Principal subsidiary undertakings: Water supply and related activities: Veolia Water Capital Funds PLC (formerly * Vivendi Water Capital Funds PLC) Three Valleys Water PLC North Surrey Water Limited **
Ordinary shares
100%
*
Ordinary shares Ordinary shares Ordinary non-voting shares 10% preference shares Ordinary shares Ordinary non-voting shares 10% preference shares Ordinary shares Ordinary non-voting shares 14% preference shares Ordinary shares
100% 99% 99% 99% 99% 87% 98% 74% 92% 77% 100%
*
Ordinary shares
100%
* *
Ordinary shares Ordinary shares
100% 100%
*
Ordinary shares
100%
Tendring Hundred Water Services Limited
Folkestone and Dover Water Services Limited
Veolia Water Operations Ireland Limited (formerly Vivendi Water Operations Ireland Limited) Veolia Water Projects Limited (formerly Vivendi Water Projects Limited) General Utilities Holdings Limited Veolia Water Investment Limited (formerly Vivendi Water Investment Limited) Veolia Water Industrial Outsourcing Limited (formerly Vivendi Water Industrial Outsourcing Limited) * held directly by Veolia Water UK PLC
** following the sale of all the Company’s assets and liabilities to Three Valleys Water PLC on 1 October 2000, the Company’s main activity is to manage its financial resources to maximise returns to the Company’s shareholders. All the above companies are incorporated in Great Britain, except Veolia Water Operations Ireland Limited, which is incorporated in the Republic of Ireland. Veolia Water Capital Funds PLC is the holding company for the water supply interests of Veolia Water UK PLC.
29
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Financial Statements (continued) 14. Investment in associate The investment in associate represents the Group’s share in SWIL. The accounting period for SWIL is the period ending 31 March 2004. SWIL is an investor in the British water supply and wastewater operations sector. The Group’s investment in SWIL, which is based on provisional estimates of net tangible assets, comprises: Share of net tangible assets
Loans to subsidiaries
£’000
£’000
9,950
40,000 (40,000) -
At 1 January 2003 On acquisition Redemption of Loan Subscription for Preference Shares Share of Associate Profit
At 31 December 2003
2,692
11,642
-
Preference shares in SWS £’000
Goodwill
Total
£’000
£’000
-
5,990
40,000
-
55,940 (40,000) 40,000
-
-
2,692
40,000
5,990
58,632
The following additional disclosures for SWIL are provided to comply with the requirements of the 25 per cent threshold rule as set out in paragraph 58 of FRS 9. Group share of associate
Group share of associate £’000
Share of profit and loss account headings Turnover Operating Profit Profit before tax Taxation Profit after tax
58,174 24,513 5,053 1,033 4,020
Share of assets Fixed assets Current assets
553,023 40,954 593,977
Share of liabilities Liabilities due within one year or less Liabilities due after more than one year
(92,037) (450,298) (542,335)
Share of net assets
51,642
The Company has been granted an option to acquire an additional 5.1% stake in SWIL.
30
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Financial Statements (continued) 15. Current asset investments Group
Listed investments £’000
Cost At 1 January 2003 Additions Disposals
6,153 (4,302) ______ 1,851
At 31 December 2003 Amounts provided At 1 January 2003 Provided in year Eliminated on disposal At 31 December 2003
2,662 250 (1,890) ______ 1,037
Net book value At 31 December 2003
814
At 31 December 2002
3,491
The net book value of listed investments at 31 December 2003 relates to a 1.85% shareholding in Ecofin Water & Power Opportunities plc, a company incorporated in Great Britain. The market value of the listed current asset investment held at 31 December 2003, was £0.814m (2002: £3.491m). The market value of the investment in Ecofin Water & Power Opportunities plc held at 31 December 2003 based on market prices at 30 June 2004 was £1.203m. The Company has no current asset investments.
31
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Financial Statements (continued) 16.
Stocks and work in progress Group 31 December 31 December 2003 2002 £’000 £’000
Work in progress Raw materials and consumables
320 1,479
119 1,417
1,799
1,536
The Company has no stocks. 17.
Debtors Group 31 December 31 December 2003 2002 £’000 £’000
Trade debtors Loans to Group Undertakings Amounts due from Group Undertakings Amounts due from Joint Venture Assets held exclusively for resale Other debtors Prepayments and accrued income Corporation tax recoverable
Company 31 December 31 December 2003 2002 £’000 £’000
29,720 131,543 1,909
28,196 176,682 3,088
219 174,085 31,563
327 176,682 51,757
1,444 4,082 6,707 562
276 5,079 32,310 2
779 764 -
245 897 28,997 -
175,967
245,633
207,410
258,905
32
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Financial Statements (continued) 18.
Creditors: amounts falling due within one year Notes
Bank loans and overdraft Payments received on account Obligations under finance leases Financing of assets operated by other parties Debentures Trade creditors Loans from Group Undertakings Amounts owed to Group Undertakings Amounts owed to Joint Venture Corporation tax Other taxes and social security Other creditors Dividends Accruals Deferred income
21
Group 31 December 31 December 2003 2002 £’000 £’000
Company 31 December 31 December 2003 2002 £’000 £’000
9,932
8,489
11,204
17,720
6,394
5,009
-
-
22
5,227
5,635
-
-
22
1,094
879
-
-
21
2,500 7,436 -
8,104 -
121 11,168
359 -
8,337
7,049
2,635
1,795
-
516
-
498
20,453 1,896
20,903 3,111
9,022 933
8,992 2,279
9,044 19,273 31,554 31,822
8,699 22,020 49,786 30,678
748 18,750 5,682 -
294 21,518 14,593 -
154,962
170,878
60,263
68,048
33
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Financial Statements (continued) 19.
Creditors: amounts falling due after more than one year Notes
Debentures Obligations under finance leases Accruals and deferred income Financing of assets operated by other parties Amounts owed to Group Undertakings
20.
Group 31 December 31 December 2003 2002 £’000 £’000
21 22
22
Company 31 December 31 December 2003 2002 £’000 £’000
2,167 19,747
4,667 24,806
-
-
7,067
7,451
-
-
21,324
22,469
-
-
836
836
-
-
51,141
60,229
-
-
Provisions for liabilities and charges
Group
Deferred Tax £’000
Insurance
Pensions
Other
£’000
£’000
£’000
Balance at 1 January 2003 Amount used Amount provided
40,499 5,026
1,070 (321) -
1,857 2,978
2,330 5
Balance at 31 December 2003
45,525
749
4,835
2,335
Company
Balance at 31 December 2003
34
1,486 (56) ______ 1,430
£’000
Leasehold Property £’000
23 26 ______ 49
1,486 (56) ______ 1,430
Pensions
Balance at 1 January 2003 Amount used Amount provided
Leasehold Property £’000
Total £’000 47,242 (377) 8,009 54,874
Total £’000 1,509 (56) 26 1,479
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Financial Statements (continued) 20.
Provisions for liabilities and charges (continued)
Deferred taxation (see Note 9) Group 31 December 31 December 2003 2002 £’000 £’000
Company 31 December 31 December 2003 2002 £’000 £’000
Accelerated capital allowances Other timing differences
107,325 (551)
102,567 (502)
-
-
Undiscounted provision for deferred tax Discount
106,774 (61,249)
102,065 (61,566)
-
-
45,525
40,499
-
-
Discounted provision for deferred tax
The insurance provision represents the amount of liability in respect of excesses on individual claims. This is based on information provided by loss adjusters to insurers on levels of reserve and is calculated on settlement experience. The pension provision represents the difference between the existing funding rate and the maximum liability set out within the actuarial valuation in accordance with the requirements of SSAP 24. The "Other" provision relates to potential claims against a Group company. The information required by FRS 12 is not disclosed on the grounds that it might prejudice the outcome of the claims. The provision for leasehold property is made against anticipated costs incurred on the property being in excess of rental income receivable on existing lease contracts. The release in the year reflects the partial letting of the property.
35
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Financial Statements (continued) 21.
Borrowings analysis
Loans and bank overdrafts outstanding at the year end comprise: Group 31 December 31 December 2003 2002 £’000 £’000 Amounts repayable within one year Overdrafts Bank loans Debentures
Amounts repayable after one year Debentures
Company 31 December 31 December 2003 2002 £’000 £’000
9,932 2,500
69 8,420 -
11,204 -
9,300 8,420 -
12,432
8,489
11,204
17,720
2,167
4,667
-
-
14,599
13,156
11,204
17,720
Loans and bank overdrafts are repayable as follows: Group 31 December 31 December 2003 2002 £’000 £’000
Company 31 December 31 December 2003 2002 £’000 £’000
Bank loans and overdrafts Repayable: Within one year
9,932
8,489
11,204
17,720
Other borrowings Repayable: Within one year After five years
2,500 2,167
2,500 2,167
-
-
4,667
4,667
-
-
14,599
13,156
11,204
17,720
Details of the security given for bank loans and overdrafts are provided within Note 31.
36
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Financial Statements (continued) 21.
Borrowings analysis (continued)
Loans not wholly repayable within five years comprise: Group 31 December 31 December 2003 2002 £’000 £’000 Irredeemable debenture stock carrying interest of between 3.25% and 5.25%
2,167 _______
2,167 _____
The Company has no loans not wholly repayable within five years. 22.
Lease and other financial commitments
Obligations under finance leases are payable as follows: Group 31 December 31 December 2003 2002 £’000 £’000 Within one year In the second to fifth years inclusive After five years
5,227 13,954 5,793
5,635 17,853 6,953
24,974
30,441
Obligations for financing of assets operated by third parties are payable as follows: Group 31 December 31 December 2003 2002 £’000 £’000 Within one year In the second to fifth years inclusive After five years
The Company has no finance lease obligations.
37
1,094 4,830 16,494
879 4,418 18,051
22,418
23,348
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Financial Statements (continued) 22.
Lease and other financial commitments (continued)
The annual levels of commitments under non-cancellable operating leases are detailed in the table below: Land and buildings 31 December 31 December 2003 2002 £’000 £’000 Group Operating leases which expire: Within one year In the second to fifth years inclusive After five years
Company Operating leases which expire: Within one year In the second to fifth years inclusive After five years
23.
Other 31 December 31 December 2003 2002 £’000 £’000
333 248
27 248
150 2,964 -
226 2,062 -
581
275
3,114
2,288
15 248
27 248
5 22 -
12 17 -
263
275
27
29
Minority interests
In the case of holdings in ordinary stock the minority interests are stated as a relevant proportion of net assets. Non-equity interests primarily represent irredeemable preference shares which hold no voting rights. 24.
Share capital 31 December 2003 £’000
31 December 2002 £’000
Authorised 500,000 ordinary shares of £1 each
500
500
Issued, allocated and fully paid 500,000 ordinary shares of £1 each
500
500
38
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Financial Statements (continued) 25.
Profit and loss account and reserves Group Profit and loss £’000
Group Other reserves £’000
Group Total reserves £’000
As at 1 January 2003 Retained profit for the period
416,436 21,235
86,632 -
503,068 21,235
As at 31 December 2003
437,671
86,632
524,303
Company Profit and loss £’000
Company Other reserves £’000
Company Total reserves £’000
As at 1 January 2003 Retained profit for the period
249,044 16,086
159,315 -
408,359 16,086
As at 31 December 2003
265,130
159,315
424,445
The total amount of goodwill arising on acquisitions which has been written off against Group reserves is £74,483,000 (2002: £74,483,000). 26.
Profit for the period
As permitted by section 230 of the Companies Act 1985, the parent company’s profit and loss account has not been included in the financial statements. The parent company’s profit for the year after tax and minority interests was £41,086,000 (2002: profit £77,268,000).
39
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Financial Statements (continued) 27.
Reconciliation of movements in equity shareholders’ funds Group 31 December 31 December 2003 2002 £’000 £’000
Company 31 December 31 December 2003 2002 £’000 £’000
Profit for the year Dividends
46,235 (25,000)
135,802 (28,534)
41,086 (25,000)
77,268 (28,534)
Opening equity shareholders’ funds
21,235 503,568
107,268 396,300
16,086 408,859
48,734 360,125
Closing equity shareholders’ funds
524,803
503,568
424,945
408,859
28.
Capital commitments
Capital expenditure commitments not provided for in these financial statements are: Group 31 December 31 December 2003 2002 £’000 £’000 Contracted
29.
16,120
19,454
Company 31 December 31 December 2003 2002 £’000 £’000 -
-
Financial instruments
The Group’s financial instruments comprise borrowings, debentures, cash and liquid resources, and various items, such as trade debtors and trade creditors that arise directly from its operations. The main purpose of these financial instruments is to raise finance for the Group’s operations. It is, and has been throughout the year under review, the Group’s policy that no trading in financial instruments shall be undertaken. The main risks arising from the Group’s financial instruments are interest rate risk and liquidity risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below. These policies have remained unchanged since the beginning of the current year.
40
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Financial Statements (continued) 29.
Financial instruments (continued)
The Group finances its operations through a mixture of retained profits, bank borrowings and finance leases. Treasury policies are agreed by the parent company with the individual Group companies (including liquidity and interest rate risks). The Group does not undertake speculative transactions. Interest rate exposure is managed by using a mixture of fixed and floating rate borrowings. Liquidity is managed by utilisation of a mixture of bank overdrafts and short-term borrowings. Further disclosures are included in Notes 18, 19, 21 and 22. Total
Floating rate financial liabilities
Fixed rate financial Liabilities
£’000
£’000
£’000
Financial liabilities on which no interest is paid £’000
As at 31 December 2003
61,991
34,906
27,085
-
As at 31 December 2002
66,945
30,510
36,435
-
The total liabilities include loans, overdrafts, finance leases, debentures and financing of assets operated by other parties. All financial liabilities and assets are denominated in Sterling. Fixed rate financial liabilities include loans, irredeemable debentures and the financing of assets used by a Group company and operated by other parties.
Fixed rate financial liabilities Weighted average interest rate
Financial liabilities on which no interest is paid Weighted average period until Maturity
%
Weighted average period for which rate is fixed Years
As at 31 December 2003
8.5
26
-
As at 31 December 2002
8.5
27
-
Years
The weighted average period of fixed rate liabilities was calculated without giving effect to £2,167,000 of irredeemable debentures.
41
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Financial Statements (continued) 29.
Financial instruments (continued)
Floating rate borrowings and cash bear interest based on relevant LIBOR equivalents. The maturity profile for the Group’s financial liabilities is:
In one year or less or on demand In more than one year but not more than two years In more than two years but not more than five years In more than five years
31 December 2003 £'000
31 December 2002 £'000
18,753 5,361 13,423 24,454 61,991
15,003 5,103 19,668 27,171 66,945
The Group has various undrawn committed borrowing facilities. The facilities available, in respect of which all conditions precedent had been met, are:
Expiring in one year or less
31 December 2003 £'000
31 December 2002 £'000
35,000
41,580
31 December 2003 £'000
31 December 2002 £'000
2,016 131,543 814 134,373
7,965 176,682 3,491 188,138
The Group's financial assets are as follows:
Cash Loans to Group Undertakings Listed Investments
Loans to Group undertakings bear interest based on relevant LIBOR equivalents. Fair values of financial assets and liabilities Other than the fixed rate liability in respect of the financing of assets by the Group and operated by other parties, the fair values calculated by market interest rates of the financial instruments are not materially different from book values. It is not practical to estimate the fair value of the financing of assets used by the Group and operated by other parties as there is no market in such a liability.
42
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Financial Statements (continued) 30.
Pension commitment
Composition of the schemes Veolia Water Supply Companies’ Pension Plan (formerly Vivendi Water Supply Companies’ Pension Plan) Until 31 March 1996, the Group’s water subsidiaries participated in The Water Companies’ Association Pension Scheme, which provided benefits based on final pensionable pay. On 1 April 1996 the assets and liabilities of the Group’s water subsidiaries which participated in the Water Companies’ Association Scheme were transferred to a “mirror image” plan called the Veolia Water Supply Companies’ Pension Plan (formerly the Vivendi Water Supply Companies’ Pension Plan) which was closed to new members. This Plan continues to provide benefits on a no less favourable basis than those previously provided for existing members of the Scheme. The assets of the Plan are held separately to those of the Group, being invested by independent fund managers. Contributions to the Plan are charged to the profit and loss account so as to spread the cost of pensions over the employees’ working lives with the Group. The most recent triennial valuation of the Plan for the Company, determined by an independent qualified actuary, was at 31 December 2001. The valuation was made on the “attained age” funding method. The actuarial valuation made the following assumptions: Rate of investment return Rate of increase in remuneration Rate of pension increase
6.5% (pre-retirement), 5.5% (post retirement) 4.5% 2.5%
The valuation as at 31 December 2001 stated the market valuation of the Plan’s assets to be £209.8m and showed a surplus of £13.7m. Contributions to the Plan over the year ended 31 December 2003 were paid by members in accordance with the Rules of the Plan and by the Companies in the Group in the range of 0% to 20% of Pensionable Salary. Veolia UK Pension Plan (formerly Vivendi UK Pension Plan) A new Scheme was inaugurated as at 1 April 1996, the Générale des Eaux UK Retirement Benefits Scheme. This scheme was merged with the Générale des Eaux UK Pension Plan on 1 April 1998, now known as the Veolia UK Pension Plan which is open to all employees. The Plan provides a selection of benefits based upon final pensionable pay or money purchase according to the members’ wishes. Contributions to the Veolia UK Pension Plan over the year ending 31 December 2003 were paid by members in accordance with the Rules of the Plan and by the Company of between 10% and 27% of Pensionable Salary. .
43
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Financial Statements (continued) 30.
Pension commitment (continued)
The latest formal valuation of the Plan for the Company, determined by an independent qualified actuary, was at 31 December 2002. The valuation was made on the “projected unit credit” funding method. The actuarial valuation made the following assumptions: Rate of investment return Rate of increase in remuneration Rate of pension increase
6.5% 3.8% 2.3%
The valuation as at 31 December 2002 stated the market valuation of the Plan’s assets was £4,965,000 and showed a surplus of £1,075,000. SSAP 24 The total pensions charge on a SSAP 24 basis for the year ended 31 December 2003 was £4,499,000 (year ended 31 December 2002 £1,348,000), of which employer’s contributions were £1,591,000 (year ended 31 December 2002 £983,000). The profit and loss account charge for pension costs, the accounting policies and the disclosures above are given on the basis of SSAP 24. SSAP 24 is going to be replaced by FRS 17. The additional disclosures which follow are given in preparation for FRS 17 being adopted. They are based on the aforementioned full actuarial reviews, projected forward to 31 December 2003 by a qualified independent actuary. a) Profit and loss reserve and net assets Profit and Loss Reserve at 31 December 2003
Profit and Loss Reserve at 31 December 2002
Net assets At 31 December 2003
Net assets At 31 December 2002
£000
£000
£000
£000
Group
As reported on SSAP 24 basis Net SSAP 24 pensions creditor (net of deferred tax) Excluding SSAP 24 balance FRS 17 pension (liability)/asset (net of deferred tax) On FRS 17 basis Company As reported on SSAP 24 basis Net SSAP 24 pensions creditor (net of deferred tax) Excluding SSAP 24 balance FRS 17 pension liability (net of deferred tax) On FRS 17 basis
437,671
416,436
528,566
507,414
3,086
1,051
3,086
1,051
___________
___________
___________
___________
440,757
417,487
531,652
508,465
(395)
2,848
(395)
2,848
___________
___________
___________
___________
440,362
420,335
531,257
511,313
___________
___________
___________
___________
265,130
249,044
424,945
408,859
34
16
34
16
___________
___________
___________
___________
265,164
249,060
424,979
408,875
(942)
(357)
(942)
(357)
___________
___________
___________
___________
264,222
248,703
424,037
408,518
___________
___________
___________
___________
44
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Financial Statements (continued) 30.
Pension commitment (continued)
Supplementary pension disclosures under FRS 17 for the Veolia Water Supply Companies’ Pension Plan b)
Contributions
Under the projected unit method used for FRS 17, the current service cost under the Veolia Water Supply Companies’ Pension Plan will increase as members of the Plan approach retirement. c)
FRS 17 balance sheet information
Group Equities Bonds Gilts/Cash
At 31 December 2003
Value
Split of fund
£’000
% of fund
117,450 24,118 54,510
59.9 12.3 27.8
_________
Fair value of assets Present value of scheme liabilities
196,078 (193,029)
At 31 December 2002 Value
Split of fund
£’000
% of fund
100,483 25,772 53,436
55.9 14.3 29.8
______
__________
______
100.0
179,691 (174,625)
100.0
Long term rate of return expected (% pa)
7.7 5.4 4.8
_________
Actuarial surplus Deferred tax
7.5 5.6 4.5
__________
3,049 (915)
5,066 (1,520)
_________
Actuarial surplus after tax
Long term rate of return expected (% pa)
_________
2,134
3,546
_________
_________
The balance sheet asset would be £2,134,000 (2002: £3,546,000). At 31 December 2003
Company Equities Bonds Gilts/Cash
Value
Split of fund
£’000
674 139 314
Value
Split of fund
% of fund
Long term rate of return expected (% pa)
£’000
% of fund
59.8 12.3 27.9
7.7 5.4 4.8
501 128 266
_________
Fair value of assets Present value of scheme liabilities Actuarial deficit Deferred tax Actuarial deficit after tax
At 31 December 2002
1,127 (1,283)
______
______
______
100.0
895 (1053)
100.0
______
______
(156) 47
(158) 47
______
______
(109)
(111)
______
______
45
56.0 14.3 29.7
Long term rate of return expected (% pa)
7.5 5.6 4.6
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Financial Statements (continued) 30.
Pension commitment (continued)
c)
FRS 17 balance sheet information (continued)
The balance sheet liability would be £109,000 (2002: £111,000). d)
Assumptions
The present value of pension liabilities are estimated by discounting pension commitments, including salary growth, at an AA corporate bond yield. In calculating the liabilities of the Plans, the following financial assumptions have been used: Group and Company
At 31 December 2003
At 31 December 2002
Discount rate Salary growth Retail price index Pension-in payment increases
5.4% pa 4.6% pa 2.6% pa 2.6% pa
5.6% pa 4.3% pa 2.3% pa 2.3% pa
Deferred pensions are re-valued to retirement age in line with the RPI assumption of 2.6% pa (2002: 2.3% pa) unless otherwise prescribed by statutory requirements or the Plan Rules. e)
Analysis of the amount charged to operating profit Year ended 31 December 2003 £’000
Year ended 31 December 2002 £’000
Group Current service cost
2,417
2,207
Total operating charge
2,417
2,207
Year ended 31 December 2003 £’000
Year ended 31 December 2002 £’000
f)
Analysis of the amount credited to other finance income
Group Expected return on pension scheme assets Interest on pension scheme liabilities Net return
Notes to the Financial Statements (continued) 46
11,071 (9,626)
14,172 (10,575)
1,445
3,597
VEOLIA WATER UK PLC
30.
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Pension commitment (continued)
g)
Analysis of amount recognised in statement of total recognised gains and losses (STRGL) Year Year ended ended 31 December 31 December 2003 2002 £’000 £’000 Group Actual return less expected return on the pension schemes’ (32,750) 12,687 assets Experience gains and losses arising on the pension schemes’ 11,910 (315) liabilities Changes in assumptions underlying the present value of the (5,160) (14,020) pension schemes’ liabilities Actual loss recognised in STRGL (26,000) (1,648)
h)
Movement in surplus during the year
Group Surplus in scheme at beginning of the year Movement in year: Current service cost Contributions Other finance income Surplus capital restriction Actuarial loss Surplus in scheme at end of the year
47
Year ended 31 December 2003 £’000
Year ended 31 December 2002 £’000
5,066
29,548
(2,417) 523 1,445 80 (1,648)
(2,207) 128 3,597 (26,000)
3,049
5,066
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Notes to the Financial Statements (continued) 30.
Pension commitment (continued)
h)
Movement in surplus during the year (continued) Year ended 31 December 2003 £’000
Company Deficit in scheme at beginning of the year Movement in year: Current service cost Contributions Other finance charges Actuarial loss Deficit in scheme at end of the year
i)
Year ended 31 December 2002 £’000
(158)
(127)
(27) 96 (67)
(30) 24 (6) (19)
(156)
(158)
History of experience gains and losses Year ended 31 December 2003 £’000
Group Difference between the expected and actual return on schemes’ assets: Amount (£’000) Percentage of schemes’ assets Experience gains and losses on schemes’ liabilities: Amount (£’000) Percentage of the present value of the schemes’ liabilities Total amount recognised in statement of total recognised gains and losses: Amount (£’000) Percentage of the present value of the schemes’ liabilities
Notes to the Financial Statements (continued) 48
12,687 6%
Year ended 31 December 2002 £’000
(32,750) (18%)
(315) 0%
11,910 7%
(1,641) (1%)
(26,000) (15%)
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
30.
Pension commitment (continued)
i)
History of experience gains and losses (continued) Year ended 31 December 2003 £’000
Company Difference between the expected and actual return on schemes’ assets: Amount (£’000) Percentage of schemes’ assets
61 5%
(23) (3%)
1 0%
50 5%
(67) (5%)
(19) (2%)
Experience gains and losses on schemes’ liabilities: Amount (£’000) Percentage of the present value of the schemes’ liabilities Total amount recognised in statement of total recognised gains and losses: Amount (£’000) Percentage of the present value of the schemes’ liabilities
Year ended 31 December 2002 £’000
Supplementary pension disclosures under FRS 17 for the Veolia UK Pension Plan j)
Contributions
Future Company contributions under the Veolia UK Pension Plan are subject to review at the actuarial valuation due as at 31 December 2003. k)
FRS 17 balance sheet information
Group Equities Gilts Fair value of assets Present value of scheme liabilities
At 31 December 2003 Value
Split of fund
£’000
% of fund
6,311 1,559
80.2 19.8
_________
______
7,870 (11,483)
100.0
Long term rate of return expected (% pa)
_________
Actuarial deficit Deferred tax
7.7 4.8
Value
Split of fund
£’000
% of fund
4,046 1,082
78.9 21.1
__________
______
5,128 (6,125) __________
(3,613) 1,084 _________
Actuarial deficit after tax
At 31 December 2002
(997) 299 _________
(2,529) _________
(698) _________
Notes to the Financial Statements (continued)
49
100.0
Long term rate of return expected (% pa)
7.5 4.6
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
30.
Pension commitment (continued)
k)
FRS 17 balance sheet information (continued)
The balance sheet liability would be £2,529,000 (2002: £698,000). At 31 December 2003
Company Equities Gilts
Value
Split of fund
£’000
2,208 545
Value
Split of fund
% of fund
Long term rate of return expected (% pa)
£’000
% of fund
80.2 19.8
7.7 4.8
1,321 354
_________
Fair value of assets Present value of scheme liabilities
At 31 December 2002
2,753
______
______
100.0
1,675
100.0
______
Actuarial deficit
Actuarial deficit after tax
7.5 4.6
(2,026) ______
(1,190)
Deferred tax
78.9 21.1
______
(3,943)
Long term rate of return expected (% pa)
(351)
357
105
______
______
(833)
(246)
______
______
The balance sheet liability would be £833,000 (2002: £246,000). l) Assumptions The present value of pension liabilities are estimated by discounting pension commitments, including salary growth, at an AA corporate bond yield. In calculating the liabilities of the Plans, the following financial assumptions have been used: Group and Company
At 31 December 2003
At 31 December 2002
Discount rate Salary growth RPI Pension-in payment increases
5.4% pa 4.6% pa 2.6% pa 2.6% pa
5.6% pa 4.3% pa 2.3% pa 2.3% pa
Deferred pensions are re-valued to retirement age in line with the RPI assumption of 2.6% pa (2002: 2.3% pa) unless otherwise prescribed by statutory requirements or the Plan Rules.
Notes to the Financial Statements (continued) 30.
Pension commitment (continued)
50
VEOLIA WATER UK PLC
m)
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Analysis of the amount charged to operating profit Year ended 31 December 2003 £’000
Year ended 31 December 2002 £’000
Group Current service cost
1,206
854
Total operating charge
1,206
854
Year ended 31 December 2003 £’000
Year ended 31 December 2002 £’000
n)
Analysis of the amount credited to other finance income
Group Expected return on pension scheme assets Interest on pension scheme liabilities Net return
o)
416 (461)
303 (249)
(45)
54
Analysis of amount recognised in statement of total recognised gains and losses (STRGL) Year Year ended ended 31 December 31 December 2003 2002 £’000 £’000 Group Actual return less expected return on the pension schemes’ (692) 441 assets Experience gains and losses arising on the pension schemes’ (151) (1,452) liabilities Changes in assumptions underlying the present value of the (251) (1,421) pension schemes’ liabilities Actual loss recognised in STRGL (1,094) (2,432)
Notes to the Financial Statements (continued) 30.
Pension commitment (continued)
51
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
p) Movement in surplus during the year Year ended 31 December 2003 £’000
Year ended 31 December 2002 £’000
Group (Deficit)/surplus in scheme at beginning of the year Movement in year: Current service cost Contributions Other finance (expense)/income Actuarial loss
(1,206) 1,067 (45) (2,432)
(854) 854 54 (1,094)
Deficit in scheme at end of the year
(3,613)
(997)
(997)
Year ended 31 December 2003 £’000 Company Deficit in scheme at beginning of the year Movement in year: Current service cost Contributions Other finance (expense)/income Actuarial loss Deficit in scheme at end of the year
Notes to the Financial Statements (continued) 30.
Pension commitment (continued)
q) History of experience gains and losses
52
43
Year ended 31 December 2002 £’000
(351)
(5)
(278) 250 (16) (795)
(184) 184 12 (358)
(1,190)
(351)
VEOLIA WATER UK PLC
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Year ended 31 December 2003 £’000 Group Difference between the expected and actual return on schemes’ assets: Amount (£’000) Percentage of schemes’ assets
441 6%
Year ended 31 December 2002 £’000
(692) (13%)
Experience gains and losses on schemes’ liabilities: Amount (£’000) Percentage of the present value of the schemes’ liabilities
(1,452) (13%)
(151) (2%)
Total amount recognised in statement of total recognised gains and losses: Amount (£’000) Percentage of the present value of the schemes’ liabilities
(2,432) (21%)
(1,094) (18%)
Year ended 31 December 2003 £’000
Year ended 31 December 2002 £’000
Company Difference between the expected and actual return on schemes’ assets: Amount (£’000) Percentage of schemes’ assets
195 7%
(174) (10%)
Experience gains and losses on schemes’ liabilities: Amount (£’000) Percentage of the present value of the schemes’ liabilities
(585) (15%)
(100) (5%)
Total amount recognised in statement of total recognised gains and losses: Amount (£’000) Percentage of the present value of the schemes’ liabilities
(795) (20%)
(358) (18%)
Notes to the Financial Statements (continued) 31.
Overdraft facility
The Company acts, with certain other Group companies, as joint and several guarantor of the bank overdraft at Barclays Bank PLC.
53
VEOLIA WATER UK PLC
32.
ANNUAL REPORT FOR THE YEAR ENDING 31 DECEMBER 2003
Related party transactions
In accordance with the exemption in FRS 8, the Company has not disclosed transactions with other entities, for which 90% or more of the voting rights are controlled by the parent company, Veolia Environnement SA. 33.
Ultimate holding and controlling company
Veolia Environnement SA, a company incorporated in France, is the parent undertaking of the smallest group to consolidate the financial statements of Veolia Water UK PLC, and the ultimate parent and controlling company. Copies of the group financial statements are available from the Head Office at 36-38 avenue KlĂŠber, 75116 Paris, France.
54