Exhibit 99.1
AUDITED CONSOLIDATED FINANCIAL INFORMATION OF HYDER PLC
INDEX TO FINANCIAL STATEMENTS
HYDER PLC
Report of Independent Accountants...........................................F-1
Principal Accounting Policies...............................................F-2
Consolidated Profit and Loss Accounts for the Years Ended 31
March 2000, 1999 and 1998.................................................F-7
Balance Sheets at 31 March 2000 and 1999....................................F-9
Consolidated Cash Flow Statements for the Years Ended 31
March 2000, 1999 and 1998................................................F-10
Statement of Total Recognised Gains and Losses for the Year
Ended March 2000, 1999 and 1998..........................................F-12
Reconciliation of Movements in Shareholders' Funds for the
Year Ended 31 March 2000, 1999 and 1998..................................F-12
Notes to the Financial Statements..........................................F-13
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS OF
HYDER PLC
AS REQUIRED BY REGULATION S-X 210.3-05
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Hyder plc
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of profit and loss account, cash flows, total
recognized gains and losses, and reconciliation of movements in shareholders'
funds, present fairly, in all material respects, the financial position of Hyder
plc and its subsidiaries at March 31, 2000 and March 31, 1999, and the results
of their operations and their cash flows for each of the three years in the
period ended March 31, 2000, in conformity with accounting principles which are
generally accepted in the United Kingdom. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards in the United States and United Kingdom, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
Accounting principles generally accepted in the United Kingdom vary in
certain significant respects from accounting principles generally accepted in
the United States. The application of the latter would have affected the
determination of consolidated net income expressed in British Pounds Sterling
for each of the three years in the period ended March 31, 2000 and the
determination of consolidated shareholders' equity and consolidated financial
position also expressed in British Pounds Sterling at March 31, 2000 and 1999 to
the extent summarized in Note 45 to the consolidated financial statements.
PricewaterhouseCoopers
Cardiff, United Kingdom
July 12, 2000, except for the contents of Note 45
which is as of August 18, 2000
F-1
<PAGE>
HYDER PLC
PRINCIPAL ACCOUNTING POLICIES
The financial statements have been prepared in accordance with Accounting
Standards applicable in the United Kingdom and, except for the treatment of
investment properties and certain grants and customer contributions, comply with
the Companies Act 1985. An explanation of these departures from the requirements
of the Companies Act 1985 are given in the "Grants, customer contributions and
infrastructure charges" and "Investment properties" sections below and notes
14(d) and 15 respectively. A summary of the principal group accounting policies,
which have been consistently applied, is shown below.
CHANGES IN PRESENTATION OF FINANCIAL INFORMATION
Since the previous directors' report and financial statements, the
Accounting Standards Board has issued Financial Reporting Standard (FRS) 16 --
Current tax. In addition the Urgent Issues Task Force (UITF) has issued a number
of abstracts in the year. FRS 15 -- Tangible fixed assets became mandatory in
respect of the year ended 31 March 2000. In preparing the accounts for the year
ended 31 March 1999, only the section of FRS 15 on infrastructure maintenance
accounting had been adopted. Where relevant these financial statements comply
with the new standards and UITF abstracts and have adopted in full FRS 15. Where
appropriate comparative figures have been restated.
BASIS OF ACCOUNTING
These financial statements have been prepared in accordance with the
historical cost convention, as modified by the inclusion of an external
professional valuation of the group's interest in certain investment properties.
BASIS OF CONSOLIDATION
The group financial statements comprise a consolidation of the financial
statements of Hyder plc and all its subsidiary undertakings and include the
group's share of the profits or losses and net assets of joint venture and
associated undertakings. The financial statements of the holding company and
each subsidiary company are prepared to 31 March. Uniform accounting policies
are adopted throughout the group.
ACQUISITIONS AND DISPOSALS
The results of companies and businesses acquired or disposed of during the
year are dealt with in the consolidated financial statements from the date of
acquisition or until the date of disposal. Where appropriate, adjustments are
made to bring different accounting policies of newly acquired companies into
line with the existing group accounting policies.
Goodwill arising from the purchase of subsidiary undertakings and
investments in associated undertakings prior to the introduction of FRS 10 --
Goodwill and intangible fixed assets, representing the excess of the fair value
of the purchase consideration (including costs of acquisition) over the fair
value of net assets acquired, was written off against consolidated reserves in
the year of acquisition. Goodwill, positive and negative, arising on
acquisitions after 1 April 1997 is treated in accordance with FRS 10 and, where
appropriate, is capitalised and amortised over its expected useful economic
life.
The profit or loss on the disposal of a previously acquired business is
derived after adjusting for the attributable amount of purchased goodwill
relating to that business not already charged to the profit and loss account.
F-2
<PAGE>
TURNOVER
Turnover represents the income receivable in the ordinary course of
business for services provided and excludes value added tax.
JOINT VENTURES AND ASSOCIATED UNDERTAKINGS
The group's share of results of joint ventures and associated undertakings
is included in the consolidated financial statements based on the latest audited
accounts for each joint venture or associated undertaking and the management
accounts for the relevant period up to 31 March.
EXCEPTIONAL ITEMS
Exceptional items are those that need to be disclosed by virtue of their
size and incidence. Such items are included within operating profit unless they
represent profits or losses on the sale or termination of an operation, costs of
a fundamental reorganisation or restructuring having a material effect on the
nature and focus of the group, or profits or losses on the disposal of fixed
assets. In these cases, separate disclosure is provided on the face of the
profit and loss account after operating profit.
INTANGIBLE FIXED ASSETS
Intangible fixed assets are included at cost and are amortised over their
estimated useful economic lives.
TANGIBLE FIXED ASSETS AND DEPRECIATION
Tangible fixed assets comprise:
(i) water and sewerage infrastructure assets (being mains and sewers,
impounding and pumped raw water storage reservoirs, dams, sludge pipelines
and sea outfalls); and
(ii) other assets (including properties, overground water and sewerage
operational structures, electricity distribution networks, equipment and
fixtures and fittings).
WATER AND SEWERAGE INFRASTRUCTURE ASSETS
Infrastructure assets comprise a network of systems. Expenditure on
infrastructure assets relating to increases in capacity or enhancements of the
network and on maintaining the operating capability of the network in accordance
with defined standards of service, is treated as additions which are included at
cost after deducting grants and contributions.
The depreciation charge on infrastructure assets is the level of annual
expenditure required to maintain the operating capability of the network which
is based on the independently certified asset management plan.
F-3
<PAGE>
OTHER ASSETS
Other assets are included at cost less accumulated depreciation. Freehold
land is not depreciated. Other assets are depreciated over their estimated
useful economic lives, which are principally as follows:
<TABLE>
<CAPTION>
<S> <C>
Freehold buildings.......................................... 30-60 years
Leasehold properties........................................ over the period of the lease
Water and sewerage operational structures................... 40-80 years
Electricity distribution network assets..................... 40 years
Fixed plant................................................. 20-40 years
Vehicles, mobile plant, equipment, computer hardware &
capitalised software...................................... 3-10 years
</TABLE>
Assets in the course of construction are not depreciated until
commissioned.
Electricity distribution network assets are depreciated at 3% per year for
the first 20 years and 2% per year thereafter. All other assets are depreciated
evenly over their estimated economic life.
LEASED ASSETS
Where assets are financed by leasing arrangements which transfer
substantially all the risks and rewards of ownership of an asset to the lessee
(finance leases), the assets are treated as if they had been purchased and the
corresponding capital cost is shown as an obligation to the lessor. Leasing
payments are treated as consisting of a capital element and finance costs, the
capital element reducing the obligation to the lessor and the finance charges
being written off to the profit and loss account over the period of the lease in
reducing amounts in relation to the written down amount. The assets are
depreciated over the shorter of their estimated useful life and the lease
period. All other leases are regarded as operating leases. Rental costs arising
under operating leases are charged to the profit and loss account in the year to
which they relate.
Operating lease income receivable as lessor is recognised on a
straight-line basis over the term of the lease.
GRANTS, CUSTOMER CONTRIBUTIONS AND INFRASTRUCTURE CHARGES
Grants and customer contributions receivable relating to water and sewerage
infrastructure assets have been deducted from the cost of fixed assets. This is
not in accordance with the Companies Act 1985 which requires tangible fixed
assets to be shown at cost and hence grants and contributions 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 as while a provision is made for depreciation of
infrastructure assets, these assets do not have determinable finite lives and
therefore no basis exists on which to recognise grants and customer
contributions as deferred income. The effect of this treatment on the value of
tangible fixed assets is disclosed in note 14(d).
Grants and customer contributions in respect of expenditure on other fixed
assets are treated as deferred income and recognised in the profit and loss
account over the expected useful economic lives of the related assets.
Certain contributions noted above are wholly or partially refundable to
electricity customers if an agreed volume of electricity is distributed to them.
Such contributions are included in creditors until there is no further liability
to make refunds.
F-4
<PAGE>
INVESTMENT PROPERTIES
In accordance with Statement of Standard Accounting Practice No. 19
"Accounting for Investment Properties", investment properties are included in
the balance sheet at open market value. Depreciation is not applied, except
where properties are held by the group on leasehold with an unexpired term of 20
years or less. This treatment departs from the general requirement of the
Companies Act 1985 to provide depreciation on any asset which has a limited
useful economic life. The directors consider that, as these properties are not
held for consumption but for investment, to depreciate them would not give a
true and fair view and thus it is necessary to adopt SSAP 19 in order to give a
true and fair view (note 15).
Profits and losses on the disposal of investment properties are calculated
as the difference between the net sale proceeds and the net carrying value in
the accounts (ie the value at the latest valuation). Any revaluation surplus or
deficiency held within a revaluation reserve relating to the asset disposed of
is released to profit and loss as a movement on reserves, and therefore does not
impact on the statement of recognised gains and losses.
INVESTMENTS
Long term investments held as fixed assets are stated at cost less amounts
written off or provided to reflect impairments in value. Those held as current
assets are stated at the lower of cost and net realisable value.
Long term investments in infrastructure projects are recognised at the
total committed amounts for equity and loan stock with outstanding commitments
being disclosed as amounts due to associated undertakings and joint ventures.
STOCKS AND WORK IN PROGRESS
Stocks are stated at the lower of cost and net realisable value which takes
account of any provision necessary to recognise damage and obsolescence. Work in
progress is valued at the lower of cost and net realisable value. Cost includes
labour, materials, transport and directly attributable overheads.
AMOUNTS RECOVERABLE ON LONG TERM CONTRACTS
Amounts recoverable on long term contracts represent work undertaken but
not yet invoiced to customers. These amounts, which are included in debtors, are
stated at cost plus attributable profit, to the extent that such profit is
reasonably certain and after making provision for any foreseeable losses in
completing contracts, less payments on account. For this purpose, cost comprises
the direct costs of providing the service, together with directly attributable
overheads.
PENSION COSTS
Contributions are charged to the profit and loss account so as to spread
the cost of pensions over employees' working lives with the group. Contribution
rates are based on the advice of a professionally qualified actuary. Any
difference between the charge to the profit and loss account and contributions
paid is shown as an asset or liability in the balance sheet.
FOREIGN CURRENCIES
On consolidation, balance sheets and profit and loss accounts of subsidiary
undertakings are translated into sterling at closing rates of exchange. Exchange
differences resulting from the translation at closing rates of net investments
F-5
<PAGE>
in subsidiary and associated undertakings are dealt with in the statement of
total recognised gains and losses.
Fixed asset investments denominated in foreign currencies which are hedged
by related currency borrowings are translated into sterling at the rate of
exchange ruling at the end of the financial year. The gains or losses arising
from the retranslation of these investments at each year end are offset against
those gains and losses arising on the retranslation of the related foreign
exchange borrowings. Those fixed asset investments which are not hedged by
related foreign currency borrowings are translated into sterling at the rate of
exchange ruling at the date of acquisition.
All other exchange gains or losses on settlement or translation at closing
rates of exchange of monetary assets and liabilities are included in the
determination of profit for the year.
FINANCIAL INSTRUMENTS
Derivative instruments utilised by the group are currency swaps, currency
forward exchange contracts, and interest rate swaps. Derivative instruments are
used for hedging purposes to alter the risk profile of existing underlying
exposures within the group. Currency swap agreements and currency forward
exchange contracts are translated at the rates ruling in the agreements and
contracts.
Interest differentials, under interest swap arrangements used to manage
interest rate exposure on borrowings and current asset investments, are
recognised by adjusting interest payable or receivable as appropriate.
RESEARCH AND DEVELOPMENT
Research and development expenditure is charged to the profit and loss
account in the year in which it is incurred.
DEFERRED TAXATION
Provision is made for deferred taxation, using the liability method, on all
material timing differences to the extent that it is probable that a liability
or asset will crystallise.
QUALIFYING EMPLOYEE SHARE OPTION TRUST (QUEST)
The consolidated accounts include the shares in the company held by the
group's Quest (note 30(c)). The shares held are included as fixed asset
investments and are stated at cost less amounts provided to reflect impairment
in value. Under the rules of the Quest dividends have been waived by the
trustee. The expenses of the Quest which are borne by the group are expensed as
incurred.
LONG TERM INCENTIVE PLAN (L-TIP)
The consolidated accounts include the shares in the company held by the
group's L-Tip (note 30(b)). Whilst the L-Tips are capable of vesting to the
directors the cost of the ordinary shares are written off against profits over
the three year performance period to which the conditional allocation relates.
The cost of shares which have lapsed under the L-Tip criteria are credited to
profits. The shares held are included in fixed assets investments and are stated
at cost less amounts provided to reflect impairment in value.
F-6
<PAGE>
HYDER PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
FOR THE YEARS ENDED 31 MARCH
<TABLE>
<CAPTION>
1999 1998
NOTE 2000 RESTATED RESTATED
------ -------- -------- --------
LM LM LM
<S> <C> <C> <C> <C>
TURNOVER:
Group and share of joint ventures -- continuing
operations......................................... 810.8 709.7 664.3
Less: share of joint ventures........................ (30.9) (7.9) (6.9)
-------- ------- -------
Group turnover -- continuing operations.............. 779.9 701.8 657.4
Group turnover -- discontinued operations............ 506.0 592.6 527.7
-------- ------- -------
Group turnover....................................... 2&3 1,285.9 1,294.4 1,185.1
-------- ------- -------
NET OPERATING COSTS:................................. 4
Continuing operations................................ (615.8) (431.2) (417.8)
Discontinued operations.............................. (509.7) (566.6) (522.6)
-------- ------- -------
(1,125.5) (997.8) (940.4)
-------- ------- -------
GROUP OPERATING PROFIT:
Continuing operations................................ 164.1 270.6 239.6
Discontinued operations.............................. (3.7) 26.0 5.1
-------- ------- -------
160.4 296.6 244.7
-------- ------- -------
GROUP OPERATING PROFIT BEFORE EXCEPTIONAL ITEMS:
Continuing operations................................ 274.8 270.6 279.6
Discontinued operations.............................. 14.2 26.0 5.1
-------- ------- -------
289.0 296.6 284.7
EXCEPTIONAL ITEMS:................................... 5
Continuing operations................................ (110.7) -- (40.0)
Discontinued operations.............................. (17.9) -- --
-------- ------- -------
(128.6) -- --
-------- ------- -------
GROUP OPERATING PROFIT AFTER EXCEPTIONAL ITEMS:
Continuing operations................................ 164.1 270.6 239.6
Discontinued operations.............................. (3.7) 26.0 5.1
-------- ------- -------
160.4 296.6 244.7
-------- ------- -------
SHARE OF OPERATING PROFIT IN:
Joint ventures -- continuing operations.............. 6.0 2.6 2.6
Associates -- continuing operations.................. 0.8 1.9 1.8
-------- ------- -------
167.2 301.1 249.1
</TABLE>
F-7
<PAGE>
HYDER PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
FOR THE YEARS ENDED 31 MARCH -- (CONTINUED)
<TABLE>
<CAPTION>
1999 1998
NOTE 2000 RESTATED RESTATED
------ -------- -------- --------
LM LM LM
<S> <C> <C> <C> <C>
TOTAL OPERATING PROFIT -- GROUP AND SHARE OF JOINT
VENTURES AND ASSOCIATES:
Continuing operations................................ 170.9 275.1 244.0
Discontinued operations.............................. (3.7) 26.0 5.1
-------- ------- -------
167.2 301.1 249.1
Group income from investments -- continuing
operations......................................... 7 3.5 9.9 9.3
Profit on disposal of interests in investments....... 8 5.7 18.6 5.5
Profit on disposal of group operations............... 39 47.0 -- --
-------- ------- -------
Profit on ordinary activities before interest........ 223.4 329.6 263.9
Interest receivable.................................. 24.2 20.5 17.8
INTEREST PAYABLE:
Group................................................ 9 (166.3) (143.4) (113.5)
Joint ventures....................................... (4.6) (0.7) --
-------- ------- -------
Profit on ordinary activities before taxation........ 76.7 206.0 168.2
Ordinary taxation.................................... 10(a) (1.9) (8.6) (13.6)
-------- ------- -------
Profit on ordinary activities after ordinary
taxation........................................... 74.8 197.4 154.6
Exceptional taxation -- windfall tax................. 10(b) -- -- (281.9)
-------- ------- -------
Profit/(loss) on ordinary activities after
taxation........................................... 74.8 197.4 (127.3)
Equity minority interests............................ (0.2) -- --
Dividends on preference shares and appropriations.... 11 (16.4) (16.4) (16.4)
-------- ------- -------
Profit/(loss) attributable to ordinary
shareholders....................................... 58.2 181.0 (143.7)
Dividends on ordinary shares......................... 11 (10.1) (74.5) (73.3)
-------- ------- -------
Retained profit/(loss) for the year.................. 32 48.1 106.5 (217.0)
======== ======= =======
EARNINGS/(LOSS) PER ORDINARY SHARE:
-- Basic............................................. 12 39.0p 123.4p (99.8)p
-- Diluted........................................... 12 39.0p 122.5p (98.4)p
EARNINGS PER ORDINARY SHARE BEFORE EXCEPTIONAL ITEMS,
PROFIT ON DISPOSAL OF GROUP OPERATIONS AND WINDFALL
TAX:
-- Basic............................................. 12 97.2p 123.4p 122.7p
-- Diluted........................................... 12 97.1p 122.5p 120.9p
======== ======= =======
Dividends per ordinary share......................... 11 6.7p 50.4p 50.4p
======== ======= =======
</TABLE>
F-8
<PAGE>
HYDER PLC
BALANCE SHEETS AT 31 MARCH 2000
<TABLE>
<CAPTION>
GROUP COMPANY
------------------- -------------------
NOTE 2000 1999 2000 1999
----- -------- -------- -------- --------
LM LM LM LM
<S> <C> <C> <C> <C> <C>
FIXED ASSETS:
Intangible assets................................ 13 3.5 3.8 -- --
Tangible assets.................................. 14 2,951.1 2,832.4 2.2 2.4
Investment properties............................ 15 10.9 9.4 -- --
Investments in:.................................. 16
Joint ventures:
Share of gross assets....................... 217.2 150.2 -- --
Share of gross liabilities.................. (179.4) (129.8) -- --
37.8 20.4 -- --
Associates..................................... 10.4 9.8 -- --
Others......................................... 52.2 62.1 1,536.5 1,548.6
Own shares..................................... 10.3 21.7 10.3 21.7
-------- -------- -------- --------
3,076.2 2,959.6 1,549.0 1,572.7
-------- -------- -------- --------
CURRENT ASSETS:
Stocks and work in progress...................... 17 16.9 16.0 -- --
Debtors.......................................... 18 238.0 314.2 364.5 423.4
Current asset investments........................ 19 433.3 591.3 354.7 464.4
Cash at bank and in hand......................... 34.0 21.0 0.3 0.4
-------- -------- -------- --------
722.2 942.5 719.5 888.2
CURRENT LIABILITIES:
Creditors: amounts falling due within one year... 20(a) (363.6) (556.3) (113.3) (177.4)
-------- -------- -------- --------
Net current assets............................... 358.6 386.2 606.2 710.8
-------- -------- -------- --------
Total assets less current liabilities............ 3,434.8 3,345.8 2,155.2 2,283.5
-------- -------- -------- --------
Creditors: amounts falling due after more than
one year....................................... 20(b) (2,143.5) (2,147.0) (1,304.9) (1,302.2)
Provisions for liabilities and charges........... 27 (79.9) (143.1) (2.4) (2.4)
Accruals and deferred income..................... 28 (159.8) (155.3) -- --
-------- -------- -------- --------
Net assets....................................... 1,051.6 900.4 847.9 978.9
======== ======== ======== ========
CAPITAL AND RESERVES:
Called up share capital.......................... 29 392.8 388.4 392.8 388.4
Share premium account............................ 31 133.0 137.4 133.0 137.4
Reserves......................................... 32 525.1 372.0 322.1 453.1
Equity shareholders' funds....................... 844.3 691.2 641.3 772.3
Non-equity shareholders' funds................... 206.6 206.6 206.6 206.6
Total shareholders' funds........................ 1,050.9 897.8 847.9 978.9
Equity minority interests........................ 33 0.7 2.6 -- --
-------- -------- -------- --------
1,051.6 900.4 847.9 978.9
======== ======== ======== ========
</TABLE>
The financial statements above pages were approved by the Board of
directors on 12 July 2000 and were signed on its behalf by:
J V H Robins P J Twamley
Chairman Group Finance Director
F-9
<PAGE>
HYDER PLC
CONSOLIDATED CASH FLOW STATEMENTS
FOR THE YEARS
ENDED 31 MARCH
<TABLE>
<CAPTION>
NOTE 2000 1999 1998
---- ------ ------ ------
LM LM LM
<S> <C> <C> <C> <C>
NET CASH INFLOW FROM OPERATING ACTIVITIES:
-- Continuing operations................................. 34 368.7 382.5 318.6
-- Discontinued operations............................... 34 7.9 1.3 6.4
------ ------ ------
376.6 383.8 325.0
====== ====== ======
Dividends received from joint ventures and associated
undertakings............................................. 0.7 -- 0.9
====== ====== ======
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE:
Interest received.......................................... 22.9 14.5 19.8
Interest paid.............................................. (144.8) (115.5) (96.0)
Preference dividend paid................................... (16.4) (16.4) (16.3)
Interest element of finance lease rental payments.......... (16.2) (9.7) (3.9)
Dividends received and other investment income............. 3.5 12.8 12.3
------ ------ ------
(151.0) (114.3) (84.1)
====== ====== ======
TAXATION:
UK corporation tax paid.................................... (0.9) (15.5) (21.8)
Windfall tax paid.......................................... -- (141.0) (140.9)
Overseas tax (paid)/repaid................................. (1.1) (0.2) 0.1
------ ------ ------
(2.0) (156.7) (162.6)
====== ====== ======
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT:
Sale of intangible fixed assets............................ 0.4 -- --
Purchase of tangible fixed assets.......................... (353.1) (447.4) (412.3)
Sale of tangible fixed assets.............................. 4.7 5.5 5.3
Purchase of fixed asset investments........................ (1.7) (5.7) (0.4)
Sale of fixed asset investments............................ 12.5 61.3 6.7
Grants and contributions received.......................... 14.3 19.0 29.4
------ ------ ------
(322.9) (367.3) (371.3)
====== ====== ======
ACQUISITIONS AND DISPOSALS:
Purchase of additional interest in subsidiary
undertakings............................................. 38 (1.5) (4.3) --
Net cash acquired with subsidiaries........................ -- 1.9 --
Investments in joint ventures and associated
undertakings............................................. (3.9) (11.9) (6.8)
Sale of group operations................................... 39 103.9 -- --
------ ------ ------
98.5 (14.3) (6.8)
====== ====== ======
Equity dividends paid...................................... (98.4) (18.5) (32.0)
------ ------ ------
Cash outflow before use of liquid resources and
financing................................................ (98.5) (287.3) (330.9)
====== ====== ======
MANAGEMENT OF LIQUID RESOURCES:
Purchase of commercial paper............................... (323.0) (467.0) (569.9)
Sale of commercial paper................................... 412.0 446.5 538.6
Net decrease/(increase) in deposits........................ 73.0 (269.2) (1.1)
------ ------ ------
162.0 (289.7) (32.4)
====== ====== ======
</TABLE>
F-10
<PAGE>
HYDER PLC
CONSOLIDATED CASH FLOW STATEMENTS
FOR THE YEARS
ENDED 31 MARCH -- (CONTINUED)
<TABLE>
<CAPTION>
NOTE 2000 1999 1998
---- ------ ------ ------
LM LM LM
<S> <C> <C> <C> <C>
FINANCING:
Issue of ordinary shares................................... 36 -- 0.5 4.9
New loans, finance leases and bonds........................ 2.0 621.5 482.8
Expenses of issuing bonds.................................. 36 -- (6.6) (3.5)
Loan repayments............................................ 36 (57.5) (9.0) (150.1)
Capital element of finance lease rental payments........... 36 (0.2) (0.5) (0.5)
------ ------ ------
(55.7) 605.9 333.6
====== ====== ======
Increase/(decrease) in cash in the year.................... 37 7.8 28.9 (29.7)
====== ====== ======
</TABLE>
F-11
<PAGE>
HYDER PLC
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEARS ENDED MARCH
<TABLE>
<CAPTION>
2000 1999 1998
------- ----- ------
LM LM LM
<S> <C> <C> <C>
Profit/(loss) for the financial year attributable to
ordinary shareholders..................................... 58.2 181.0 (143.7)
Currency translation differences on foreign currency net
investments............................................... (1.3) 0.2 (3.2)
Surplus on revaluation of investment properties............. 1.5 1.0 (0.2)
------- ----- ------
Total recognised gains/(losses) for the year...... 58.4 182.2 (147.1)
======= ===== ======
</TABLE>
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS FOR THE YEARS ENDED
31 MARCH
<TABLE>
<CAPTION>
2000 1999 1998
------- ----- ------
LM LM LM
<S> <C> <C> <C>
Total recognised gains/(losses) for the year................ 58.4 182.2 (147.1)
Ordinary dividends.......................................... (10.1) (74.5) (73.3)
New ordinary share capital issued........................... 4.4 2.0 7.5
Premium on ordinary share capital issued.................... -- 0.4 39.5
Scrip dividend issued in lieu of cash dividend.............. 21.5 14.6 14.9
Utilisation of share premium account for the nominal value
of ordinary shares issued under the scrip dividend........ (4.4) (1.9) (1.5)
Goodwill written off........................................ -- -- (0.3)
Goodwill written back on disposal........................... 84.0 2.0 --
Charge to reserves arising on issue of shares to qualifying
employee share ownership trust............................ -- -- (18.7)
Adjustment to reserves on increased shareholding in
subsidiary................................................ (0.7) (0.5) --
------- ----- ------
Net increase in shareholders' funds......................... 153.1 124.3 (179.0)
At 1 April.................................................. 897.8 773.5 952.5
------- ----- ------
At 31 March................................................. 1,050.9 897.8 773.5
======= ===== ======
</TABLE>
There is no material difference between the results disclosed in the profit
and loss account and the results on an unmodified historical cost basis.
F-12
<PAGE>
HYDER PLC
NOTES TO THE FINANCIAL STATEMENTS
1. COMPANY PROFIT AND LOSS ACCOUNT
As permitted by section 230 of the Companies Act 1985, the profit and loss
account of the company has not been included in these financial statements. The
loss after taxation for the year dealt with in the financial statements of the
company was L125.8m (1999 profit of L74.7m; 1998 profit of L298.1m).
2. SEGMENTAL ANALYSIS BY CLASS OF BUSINESS
(A) TURNOVER
<TABLE>
<CAPTION>
INTRA INTER
TOTAL SEGMENT SEGMENT EXTERNAL
TURNOVER TURNOVER TURNOVER TURNOVER
-------- -------- -------- --------
LM LM LM LM
<S> <C> <C> <C> <C>
YEAR ENDED 31 MARCH 2000:
Continuing operations:
Regulated water and sewerage activities.............. 472.7 -- 1.5 471.2
Regulated electricity distribution activities........ 199.1 -- 124.2 74.9
Infrastructure activities:
-- Group.......................................... 237.3 2.1 28.9 206.3
-- Joint ventures................................. 30.9 -- -- 30.9
Managed services activities.......................... 164.0 6.0 136.2 21.8
Other activities..................................... 21.6 -- 15.9 5.7
------- ---- ----- -------
1,125.6 8.1 306.7 810.8
Discontinued operations:
Energy supply activities............................. 501.9 -- 6.0 495.9
Infrastructure activities............................ 10.1 -- -- 10.1
------- ---- ----- -------
1,637.6 8.1 312.7 1,316.8
======= ==== ===== =======
Total:
-- Group.......................................... 1,606.7 8.1 312.7 1,285.9
-- Joint ventures................................. 30.9 -- -- 30.9
======= ==== ===== =======
YEAR ENDED 31 MARCH 1999:
Continuing operations:
Regulated water and sewerage activities.............. 456.0 -- 1.5 454.5
Regulated electricity distribution activities........ 195.4 -- 153.3 42.1
Infrastructure activities
-- Group.......................................... 225.8 4.6 33.4 187.8
-- Joint ventures................................. 7.9 -- -- 7.9
Managed services activities.......................... 176.1 4.4 162.1 9.6
Other activities..................................... 10.7 -- 2.9 7.8
------- ---- ----- -------
1,071.9 9.0 353.2 709.7
</TABLE>
F-13
<PAGE>
<TABLE>
<CAPTION>
INTRA INTER
TOTAL SEGMENT SEGMENT EXTERNAL
TURNOVER TURNOVER TURNOVER TURNOVER
-------- -------- -------- --------
LM LM LM LM
<S> <C> <C> <C> <C>
Discontinued operations:
Energy supply activities.......................... 588.9 -- 6.7 582.2
Infrastructure activities......................... 10.4 -- -- 10.4
------- ---- ----- -------
1,671.2 9.0 359.9 1,302.3
======= ==== ===== =======
Total:
-- Group.......................................... 1,663.3 9.0 359.9 1,294.4
-- Joint ventures................................. 7.9 -- -- 7.9
======= ==== ===== =======
YEAR ENDED 31 MARCH 1998:
Continuing operations:
Regulated water and sewerage activities.............. 440.7 -- 1.2 439.5
Regulated electricity distribution activities........ 190.4 -- 146.6 43.8
Infrastructure activities
-- Group.......................................... 200.2 1.2 35.1 163.9
-- Joint ventures................................. 6.9 -- -- 6.9
Managed services activities.......................... 145.4 12.7 126.7 6.0
Other activities..................................... 4.3 -- 0.1 4.2
------- ---- ----- -------
987.9 13.9 309.7 664.3
Discontinued operations:
Energy supply activities.......................... 534.2 -- 17.5 516.7
Infrastructure activities......................... 11.0 -- -- 11.0
------- ---- ----- -------
1,533.1 13.9 327.2 1,192.0
======= ==== ===== =======
Total:
-- Group.......................................... 1,526.2 13.9 327.2 1,185.1
-- Joint ventures................................. 6.9 -- -- 6.9
======= ==== ===== =======
</TABLE>
Turnover is derived from the following sources:
- External: transactions between group companies and external customers.
- Intra segment: transactions between group companies trading within the
same segment.
- Inter segment: transactions between group companies trading in different
segments.
F-14
<PAGE>
(B) PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
<TABLE>
<CAPTION>
2000 2000 1998 1998
BEFORE EXCEPTIONAL 1999 BEFORE EXCEPTIONAL 1998
EXCEPTIONAL ITEMS 2000 RESTATED EXCEPTIONAL ITEMS RESTATED
ITEMS (NOTE 5) TOTAL TOTAL ITEMS (NOTE 5) TOTAL
----------- ----------- ------ -------- ----------- ----------- --------
LM LM LM LM LM LM LM
<S> <C> <C> <C> <C> <C> <C> <C>
CONTINUING OPERATIONS:
Regulated water and sewerage
activities..................... 186.0 (34.1) 151.9 166.6 178.3 (28.0) 150.3
Regulated electricity
distribution activities........ 87.5 (60.7) 26.8 96.0 86.1 (9.0) 77.1
Infrastructure activities........ 11.4 (4.4) 7.0 24.8 20.2 (5.2) 15.0
Managed services activities...... 6.7 (1.0) 5.7 22.2 21.9 3.3 25.2
Other activities................. 5.1 -- 5.1 5.4 4.5 -- 4.5
----- ------ ------ ------ ----- ----- -----
296.7 (100.2) 196.5 315.0 311.0 (38.9) 272.1
DISCONTINUED OPERATIONS:
Energy supply activities......... 14.9 (17.9) (3.0) 26.3 4.2 -- 4.2
Infrastructure activities........ (0.7) -- (0.7) (0.3) 0.9 -- 0.9
----- ------ ------ ------ ----- ----- -----
310.9 (118.1) 192.8 341.0 316.1 (38.9) 277.2
Business development costs and
corporate overheads............ (3.9) (10.5) (14.4) (7.6) (8.6) (1.1) (9.7)
Elimination of intercompany
operating profit capitalised... (2.0) -- (2.0) (3.8) (3.6) -- (3.6)
Profit on disposal of group
operations..................... 47.0 -- 47.0 -- -- --
----- ------ ------ ------ ----- ----- -----
Profit before interest........... 352.0 (128.6) 223.4 329.6 303.9 (40.0) 263.9
===== ====== ===== =====
Net interest payable............. (146.7) (123.6) (95.7)
------ ------ -----
Profit before taxation........... 76.7 206.0 168.2
====== ====== =====
</TABLE>
Infrastructure activities and Other activities include L9.2m (1999 L28.5m;
1998 L14.8m) in respect of income from investments (including profit on disposal
of investments) (notes 7 and 8 below) and L6.8m (1999 L4.5m; 1998 L4.4m) in
respect of share of operating profit of joint ventures and associates as this
reflects the management control of those investments.
F-15
<PAGE>
(C) NET ASSETS
<TABLE>
<CAPTION>
2000 1999 1998
-------- -------- --------
LM LM LM
<S> <C> <C> <C>
CONTINUING OPERATIONS:
Regulated water and sewerage activities..................... 1,991.3 1,825.9 1,643.2
Regulated electricity distribution activities............... 505.2 471.7 403.4
Regulated electricity distribution activities -- windfall
tax....................................................... -- -- (44.8)
Infrastructure activities................................... 146.9 152.8 154.1
Managed services activities................................. 67.2 81.1 58.3
Other activities............................................ 15.1 (44.0) (5.9)
Other activities -- windfall tax............................ -- -- (96.2)
-------- -------- --------
2,725.7 2,487.5 2,112.1
Discontinued operations:
Energy supply activities.................................... -- (19.6) (61.6)
Infrastructure activities................................... -- 6.6 5.2
-------- -------- --------
2,725.7 2,474.5 2,055.7
Net debt............................................... (1,674.1) (1,574.1) (1,282.2)
-------- -------- --------
1,051.6 900.4 773.5
======== ======== ========
</TABLE>
Infrastructure activities includes L48.2m (1999 L30.2m; 1998 L29.6m) in
respect of share of net assets of joint ventures and associates as this reflects
the management control of those investments.
3. SEGMENTAL ANALYSIS BY GEOGRAPHICAL AREA BY DESTINATION
(A) TURNOVER
<TABLE>
<CAPTION>
2000 1999 1998
------- ------- -------
LM LM LM
<S> <C> <C> <C>
United Kingdom and Europe:
-- Group.................................................. 1,223.6 1,223.7 1,120.7
-- Joint ventures......................................... 30.9 7.9 6.9
Asia Pacific................................................ 38.2 48.5 38.7
Rest of the World........................................... 24.1 22.2 25.7
------- ------- -------
Total:
-- Group.................................................. 1,285.9 1,294.4 1,185.1
-- Joint ventures......................................... 30.9 7.9 6.9
======= ======= =======
</TABLE>
Included in United Kingdom and Europe turnover by destination is turnover
of L506.0m (1999 L592.6m; 1998 L527.7m) relating to the discontinued energy
supply and infrastructure activities.
F-16
<PAGE>
(B) PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION
<TABLE>
<CAPTION>
1999 1998
2000 RESTATED RESTATED
------ -------- --------
LM LM LM
<S> <C> <C> <C>
United Kingdom and Europe................................... 195.0 339.2 277.7
Asia Pacific................................................ (3.4) 0.6 (2.5)
Rest of the World........................................... 1.2 1.2 2.0
------ ------ -----
192.8 341.0 277.2
Business development costs and corporate overheads.......... (14.4) (7.6) (9.7)
Elimination of intercompany operating profit capitalised.... (2.0) (3.8) (3.6)
Profit on disposal of group operations...................... 47.0 -- --
------ ------ -----
Profit before interest...................................... 223.4 329.6 263.9
Net interest payable........................................ (146.7) (123.6) (95.7)
------ ------ -----
Profit before taxation...................................... 76.7 206.0 168.2
====== ====== =====
</TABLE>
United Kingdom and Europe include L9.2m (1999 L28.5m; 1998 L14.8m) in
respect of income from investments (including profit on disposal of investments)
(notes 7 and 8 below) and L6.8m (1999 L4.5m; 1998 L4.4m) in respect of share of
operating profit of joint ventures and associates as this reflects the
management control of those investments.
(C) NET ASSETS
<TABLE>
<CAPTION>
2000 1999 1998
-------- -------- --------
LM LM LM
<S> <C> <C> <C>
United Kingdom and Europe................................... 2,690.1 2,450.4 2,035.0
Asia Pacific................................................ 7.0 4.6 8.4
Rest of the World........................................... 27.1 19.5 12.3
-------- -------- --------
2,724.2 2,474.5 2,055.7
Net debt (note 35(b))....................................... (1,674.1) (1,574.1) (1,282.2)
-------- -------- --------
1,050.1 900.4 773.5
======== ======== ========
</TABLE>
United Kingdom and Europe includes L48.2m (1999 L30.2m; 1998 L29.6m) in
respect of share of net assets of joint ventures and associates as this reflects
the management control of those investments. Turnover and profit before taxation
by origin are not materially different from that by destination.
4. NET OPERATING COSTS
<TABLE>
<CAPTION>
2000 2000 1998 1998
BEFORE EXCEPTIONAL BEFORE EXCEPTIONAL
EXCEPTIONAL ITEMS 2000 1999 EXCEPTIONAL ITEMS 1998
NOTE ITEMS (NOTE 5) TOTAL TOTAL ITEMS (NOTE 5) TOTAL
---- ----------- ----------- ------- ----- ----------- ----------- -----
LM LM LM LM LM LM LM
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONTINUING OPERATIONS:
Change in stocks and work in
progress..................... (0.6) -- (0.6) (1.9) (0.6) -- (0.6)
Staff costs.................... 6(b) 253.5 -- 253.5 236.4 224.7 -- 224.7
Severance and redundancy
costs........................ -- 21.9 21.9 2.0 -- 25.0 25.0
</TABLE>
F-17
<PAGE>
<TABLE>
<CAPTION>
2000 2000 1998 1998
BEFORE EXCEPTIONAL BEFORE EXCEPTIONAL
EXCEPTIONAL ITEMS 2000 1999 EXCEPTIONAL ITEMS 1998
NOTE ITEMS (NOTE 5) TOTAL TOTAL ITEMS (NOTE 5) TOTAL
---- ----------- ----------- ------- ----- ----------- ----------- -----
LM LM LM LM LM LM LM
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DEPRECIATION:
-- Own assets.................. 126.5 -- 126.5 117.8 100.4 -- 100.4
-- Assets held under finance
leases....................... 10.3 -- 10.3 5.0 4.9 -- 4.9
Amounts written off fixed
assets....................... -- 51.0 51.0 7.1 0.1 1.5 1.6
Amounts written off fixed asset
investments.................. 1.1 -- 1.1 2.0 1.4 -- 1.4
Amounts written off own
shares....................... -- 10.0 10.0 -- -- -- --
Research and development....... 0.7 -- 0.7 0.7 1.3 -- 1.3
RENTALS UNDER OPERATING LEASES:
-- Hire of plant and
equipment.................... 9.0 -- 9.0 1.3 1.3 -- 1.3
-- Other....................... 5.0 -- 5.0 3.2 6.1 -- 6.1
FEES PAID TO AUDITORS:
-- Audit services.............. 0.7 -- 0.7 0.7 0.7 -- 0.7
-- Taxation services........... 0.1 -- 0.1 0.1 0.2 -- 0.2
-- Consultancy services........ -- 1.4 1.4 0.1 0.1 -- 0.1
-- Other services.............. 0.4 -- 0.4 -- 0.4 -- 0.4
Year 2000 costs................ 2.8 -- 2.8 7.0 1.5 -- 1.5
Other operating charges........ 178.1 26.4 204.5 132.3 117.0 13.5 130.5
Amortisation of grants and
contributions................ (6.0) -- (6.0) (5.9) (5.5) -- (5.5)
Loss/(profit) on disposal of
fixed assets................. 0.5 -- 0.5 -- (0.8) -- (0.8)
Own work capitalised........... (74.7) -- (74.7) (76.0) (75.0) -- (75.0)
Net rents receivable........... (2.3) -- (2.3) (0.7) (0.4) -- (0.4)
----- ----- ------- ----- ----- ---- -----
Net continuing operating
costs.................... 505.1 110.7 615.8 431.2 377.8 40.0 417.8
----- ----- ------- ----- ----- ---- -----
DISCONTINUED OPERATIONS:
Change in stocks and work in
progress..................... (0.3) -- (0.3) -- -- -- --
Staff costs.................... 6(b) 9.2 -- 9.2 9.3 7.2 -- 7.2
Severance and redundancy
costs........................ -- 0.5 0.5 -- -- -- --
DEPRECIATION:
-- Own assets.................. 3.6 -- 3.6 1.6 0.9 -- 0.9
Amounts written off fixed
assets....................... -- 16.3 16.3 -- -- -- --
Research and development....... 0.2 -- 0.2 0.1 0.1 -- 0.1
Rentals under operating leases:
-- Other....................... -- -- -- 0.5 0.4 -- 0.4
FEES PAID TO AUDITORS:
-- Consultancy services........ -- 0.1 0.1 0.4 -- -- --
Year 2000 costs................ 0.1 -- 0.1 1.7 0.6 -- 0.6
Energy purchases............... 287.1 -- 287.1 329.6 305.3 -- 305.3
Power purchase provision....... (6.4) -- (6.4) (7.3) -- -- --
Other operating charges........ 198.3 1.0 199.3 230.7 208.1 -- 208.1
----- ----- ------- ----- ----- ---- -----
Net discontinued operating
costs.................... 491.8 17.9 509.7 566.6 522.6 -- 522.6
----- ----- ------- ----- ----- ---- -----
Total operating costs...... 996.9 128.6 1,125.5 997.8 900.4 40.0 940.4
===== ===== ======= ===== ===== ==== =====
</TABLE>
F-18
<PAGE>
Other fees paid to the auditors and capitalised were L91,500 (1999
L104,000; 1998 Lnil). Included in audit services is L9,250 (1999 L9,000; 1998
L8,650) in respect of audit fees incurred by the company.
Fees of L7,000 and L44,000 were paid to the auditors in 2000 for services
provided in respect of the disposal of the investment in UK Data Collection
Services Limited and the energy supply business respectively. These costs have
been deducted in arriving at the profit on disposal.
5. EXCEPTIONAL ITEMS
<TABLE>
<CAPTION>
2000 1999 1998
----- ---- ----
LM LM LM
<S> <C> <C> <C>
CONTINUING OPERATIONS:
Restructuring costs:
Regulated water and sewerage activities................... 14.1 -- 25.8
Regulated electricity distribution activities............. 12.7 -- 8.8
Infrastructure activities................................. 2.8 -- 1.2
Managed services activities............................... 4.5 -- --
Other activities.......................................... -- -- 2.0
Business development costs and corporate overheads........ 0.5 -- 0.4
----- -- ----
34.6 -- 38.2
Restructuring credits
Regulated electricity distribution activities............. (6.7) -- --
Managed services activities............................... (3.5) -- (3.3)
----- -- ----
24.4 -- (3.3)
Computer system development costs:
Regulated electricity distribution services............... 54.7 -- --
AMOUNTS WRITTEN OFF OWN SHARES:
Business development costs and corporate overheads.......... 10.0 -- --
BAD AND DOUBTFUL DEBT PROVISIONS:
Regulated water and sewerage activities..................... 20.0 -- --
LEASEHOLD PROPERTY PROVISIONS:
Regulated water and sewerage activities..................... -- -- 2.2
Regulated electricity distribution activities............... -- -- 0.2
Business development costs and corporate overheads.......... -- -- 0.7
Infrastructure activities................................... 1.6 -- 2.0
----- -- ----
1.6 -- 5.1
----- -- ----
110.7 -- 40.0
----- -- ----
DISCONTINUED OPERATIONS:
Restructuring costs:
Energy supply activities............................... 0.5 -- --
Computer systems development costs:
Energy supply activities............................... 17.4 -- --
----- -- ----
17.9 -- --
----- -- ----
128.6 -- 40.0
===== === ====
</TABLE>
The tax credit attributable to these exceptional items is L9.7m (1999 Lnil;
1998 L1.6m).
F-19
<PAGE>
Restructuring costs of L35.1m (1999 Lnil; 1998 L38.2m) principally relate
to job reductions in the regulated water and electricity distribution
businesses. Surplus provisions of L10.2m (1999 Lnil; 1998 L3.3m) relating to
prior year manpower reduction programmes were released after reappraisal of
obligations and were offset against the L35.1m (1999 Lnil; 1998 L38.3m) charge
in the year.
Computer system development costs written off amounting to L43.5m related
to the cancellation of a new utility billing system which did not meet the needs
of the rapidly developing and sophisticated multi purpose product offerings.
Computer system development costs of L24.1m were also written off following
the electricity distribution price review whereby the costs of systems developed
before the opening of the electricity competitive market were not remunerated by
the regulator. The carrying value of these computer systems were written down to
L8.8m. Costs of L4.5m relating to new electricity metering obligations,
effective from April 2000, have also been charged as an exceptional item.
The bad and doubtful debt provision of L20m arose from a reassessment of
our ability to collect domestic water and sewerage debt following the
Government's decision to ban disconnection of domestic water supplies, combined
with the ruling on the watercard and the High Court decision that the "Two in
One" budget scheme was not authorised under the Electricity Act.
The write down of own shares of L10.0m reflects the reduction of in value
of Hyder shares held by the company under the Qualifying employee share option
schemes and the directors' long term incentive scheme.
Property provisions of L1.6m (1999 Lnil; 1998 L5.1m) related to the
directors' assessment of the future cost of unoccupied leasehold properties and
amounts written off freehold properties.
6. DIRECTORS AND EMPLOYEES
DIRECTORS' EMOLUMENTS AND INTERESTS
(A) STATEMENT OF COMPLIANCE
Throughout the year the company complied with Schedule A and has given full
consideration to Schedule B of the Best Practice Provisions on Remuneration
committees as annexed to the Financial Services Authority Listing Rules.
(B) REMUNERATION COMMITTEE
The committee consists of the non-executive directors, other than the Group
Chairman, under the chairmanship of D G Hawkins. None of the committee has any
personal financial interests in the group (other than as a shareholder or
bondholder), has any conflict of interests arising from cross-directorships or
otherwise, or has day-to-day involvement in running the business. The committee
consults the Group Chairman and the Group Chief Executive about its proposals
and the performance of executive directors and has access to professional advice
from inside and outside the company.
(C) NON-EXECUTIVE DIRECTORS
The remuneration of the non-executive directors is determined by the Board
within the limits set out in the Articles of Association and based upon
independent advice in respect of fees paid to non-executive directors of similar
companies.
Since his appointment as Group Chairman in 1998 J V H Robins has been paid
fees at the rate of L125,000 per annum.
F-20
<PAGE>
The fee paid to each non-executive director, excluding the chairman, was
L28,000 (1999 L28,000). Non-executive directors cannot participate in any of the
company's share option or incentive schemes and are not eligible to join the
company's pension scheme. The terms of office of the non-executive directors,
which are subject to renewal by agreement, expire not later than at the
conclusion of the annual general meeting in the following calendar years:
J V H Robins................................................ 2001
D G Hawkins................................................. 2001
R B Salmon.................................................. 2002
R H Sellier................................................. 2000
However, save in respect of J V H Robins, where twelve months' written
notice is required to be given, appointments may be terminated earlier (without
compensation) by the company giving six months' notice in writing or in certain
other circumstances pursuant to the Articles of Association (including
retirement by rotation) or legislation.
(D) EXECUTIVE DIRECTORS
Executive remuneration packages are designed to attract, motivate and
retain executive directors, and to reward them for enhancing value to
shareholders. The performance measurement of the executive directors and the
determination of their annual remuneration package is undertaken by the
committee. No director attends during any decision about his own remuneration.
The committee discusses with the Group Chief Executive and the Group Chairman
the remuneration of the other executive directors.
There are currently four main elements in the remuneration package for
executive directors:
(a) basic annual salary;
(b) annual bonus payments;
(c) long term incentive arrangements; and
(d) pension arrangements.
Executive directors may accept non-executive appointments outside the
company, subject to the permission of the Board. Fees earned are retained by
each director.
(i) Basic Annual Salary
Each executive director's basic salary is determined by the Remuneration
committee at the beginning of each year and when an individual changes position
or responsibility. Following a review on 1 April 2000 basic salaries remain
unchanged from those agreed, and reported previously, and are set out below.
G A Hawker.................................................. L267,800
M P Brooker................................................. L150,380
J M James................................................... L195,700
P J Twamley................................................. L195,700
(ii) Annual Bonus Payments
The committee establishes the objectives that must be met for each
financial year if a bonus is to be paid. The committee believes that any
incentive compensation awarded should be tied to the interests of the company's
shareholders. In respect of the year ended 31 March 2000 the principal measures
for annual bonus payments were, firstly, the profitability of the group,
secondly a specific set of personal objectives for each director and, where
F-21
<PAGE>
applicable, the performance of that part of the business for which the executive
director was responsible. The maximum annual performance related bonus that can
currently be paid is 40% of basic salary of which a maximum of 10% of basic
salary can be paid in relation to achievement of personal objectives, other than
in the case of J M James where 30% of basic salary can be paid in relation to
the achievement of personal objectives.
No incentive payments have been paid in respect of the year ended 31 March
2000. In 1999 incentive payments varied between 32% and 37%.
Subsequent to the financial year end the committee determined that a bonus
of L50,000 be awarded to JM James. This award was previously disclosed in the
circular issued to Hyder shareholders on 28 April 2000. By way of clarification
of the disclosure set out in the circular, this conditional award is payable
only on successful completion of the Hyder strategic review and is therefore
made in respect of the financial year ending 31 March 2001.
(iii) Long Term Incentive Arrangements
The long term incentive plan for executive directors was approved by the
annual general meeting on 26 July 1996. A second long term incentive plan
specifically for JM James, which is in all essential terms identical to the plan
approved by shareholders, except that a time related proportion of the shares
earned up to the date of JM James' retirement will be vested and released at
that date, was approved by the Board with effect from 1 April 1998.
The long term incentive plans provide for the conditional award in each
year of ordinary shares in the company worth up to 50% of basic salary. The
ordinary shares in respect of each conditional award only become available to
executive directors to the extent that the performance targets, set at the
outset by the Remuneration committee, have been met over the three year period,
commencing with the conditional award. The performance targets relate to the
total shareholder return, over the three year period commencing with the
effective date of the conditional award, relative to the companies comprising
the 250 top companies by market capitalisation derived from the FTSE 100 and the
FTSE mid 250 indices.
The rules of the long term incentive plans provide that if the company's
ranking, by total shareholder return, in the FTSE mid 250 index at the end of
the performance period is lower than ranking position 125 (adjusted as
appropriate if any of the original comparator companies have dropped out of the
top 250 companies), the participants are entitled to no shares.
The ordinary shares for use under the long term incentive plans are
purchased in the market by an employee benefit trust with funds allocated by the
company. The trust conditionally allocated 51,052 ordinary shares to the
participating executive directors at 792.9p per share on 7 July 1999. Of the
51,052 ordinary shares allocated in the year, 46,936 ordinary shares were
reallocated from previously lapsed conditional allocations and 4,116 ordinary
shares were purchased in the market. The additional cost of the 51,052 ordinary
shares allocated in the year was L0.03m. The market value on 31 March 2000 of
the 137,850 shares held by the trust was L0.3m and the original cost was L1.23m.
The cost of the shares is written off over the period of the relevant
conditional allocation. Shares available from lapsed allocations are held by the
trust for conditional allocation in future years.
The table below lists conditional allocations of ordinary shares to each
director under the long term incentive plans, shares which have crystallised for
future vesting in each director pursuant to the scheme rules and lapsed shares
during the year.
On 8 March 2000 the FTSE Equity Indices Committee announced that the market
capitalisation of Hyder was below that necessary to maintain its status as part
of the FTSE mid 250 index.
F-22
<PAGE>
Accordingly interests under the Hyder LTIP which would ordinarily vest in April
2001 and April 2002 would not, if present circumstances were to continue, be
capable at those future dates of meeting the performance criteria for these
awards to crystallise. The remuneration committee does not regard it appropriate
at this time to consider exercising its powers under the rules of the long term
incentive plans to modify the exercise criteria.
F-23
<PAGE>
<TABLE>
<CAPTION>
PRICE PER
CONDITIONAL SHARES SHARE OF
1 APRIL 1 APRIL 1 APRIL ALLOCATION LAPSED 31 MARCH INCAPABLE ALLOCATION VESTING
1997 1998 1999 IN YEAR IN YEAR 2000 OF VESTING* (PENCE) DATE
------- ------- ------- ----------- ------- -------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
G A Hawker........... 15,162 15,162 4,664 -- -- 4,664 -- 742 April 1999
-- 15,400 15,400 -- (15,400) -- -- 779 April 2000
-- -- 13,279 -- -- 13,279 (13,279) 978 April 2001
-- -- -- 16,887 16,887 (16,887) 793 April 2002
------ ------ ------- ------ ------- ------- ------- --- ----------
15,162 30,562 33,343 16,887 (15,400) 34,830 (30,166)
====== ====== ======= ====== ======= ======= ======= === ==========
M P Brooker.......... -- 8,663 8,663 -- (8,663) -- -- 779 April 2000
-- -- 7,457 -- -- 7,457 (7,457) 978 April 2001
-- -- -- 9,483 -- 9,483 (9,483) 793 April 2002
------ ------ ------- ------ ------- ------- ------- --- ----------
-- 8,663 16,120 9,483 (8,663) 16,940 (16,940)
====== ====== ======= ====== ======= ======= ======= === ==========
J M James............ -- -- 9,704 -- -- 9,704 (9,704) 978 April 2001
-- -- -- 12,341 -- 12,341 (12,341) 793 April 2002
------ ------ ------- ------ ------- ------- ------- --- ----------
-- -- 9,704 12,341 -- 22,045 (22,045)
====== ====== ======= ====== ======= ======= ======= === ==========
J E Roberts**........ 11,455 11,455 3,524 -- -- 3,524 -- 742 April 1999
-- 11,294 11,294 -- (11,294) -- -- 779 April 2000
-- -- 10,215 -- (10,215) -- -- 978 April 2001
------ ------ ------- ------ ------- ------- ------- --- ----------
11,455 22,749 25,033 (21,509) 3,524 --
====== ====== ======= ====== ======= ======= ======= === ==========
S J Doughty***....... 10,107 -- -- -- -- -- -- 742 April 1999
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
------ ------ ------- ------ ------- ------- ------- --- ----------
10,107 -- -- -- -- -- --
====== ====== ======= ====== ======= ======= ======= === ==========
P J Twamley.......... 10,107 10,107 3,109 -- -- 3,109 -- 742 April 1999
-- 11,294 11,294 -- (11,294) -- -- 779 April 2000
-- -- 9,704 -- -- 9,704 (9,704) 978 April 2001
-- -- -- 12,341 -- 12,341 (12,341) 793 April 2002
------ ------ ------- ------ ------- ------- ------- --- ----------
10,107 21,401 24,107 12,341 (11,294) 25,154 (22,045)
====== ====== ======= ====== ======= ======= ======= === ==========
46,831 83,375 108,307 51,052 (56,866) 102,493 (91,196)
====== ====== ======= ====== ======= ======= ======= === ==========
</TABLE>
-------------------------
* these interests at 31 March 2000 were incapable of vesting because at that
time the market capitalisation of Hyder was below that necessary to maintain
its status as part of the FTSE mid 250 index.
** resigned on 25 May 1999 as a result of which the 21,509 ordinary shares,
conditionally allocated but not yet crystallised, lapsed.
*** resigned on 2 October 1997. All ordinary shares, conditionally allocated but
not yet crystallised, lapsed.
Subsequent to the introduction of the long term incentive plan executive
directors are no longer eligible to participate in the company's discretionary
executive share option scheme, although the executive directors can participate
in the employee sharesave scheme which is open to all employees. The
Remuneration committee determines the maximum number of options granted under
the employee sharesave scheme which is an Inland Revenue approved scheme.
F-24
<PAGE>
(iv) Pension Arrangements
Executive directors are members of the company pension scheme which is
detailed in note 41 to the financial statements. Normal retirement age for
executive directors is 60. Each executive director has been notified on an
individual basis of the estimated pension payable on retirement at 60. The total
pension at 60, including benefits in respect of previous employment, will be
restricted in all cases to a maximum of two-thirds of pensionable pay. Pensions
accrue uniformly between the date of joining the scheme and the normal
retirement date.
Normally an actuarial reduction applies if pensions are paid before the
normal retirement age but there is a discretion to pay pensions unreduced. The
pension for each director is based on his service with the company, together
with service transferred into the company's pension scheme from the director's
previous employers. The pension arrangements provide for a pension on retirement
based on salary alone. Post retirement pension increases are payable in line
with increases in the retail prices index, subject to a maximum of 5% per annum.
Retail prices increases in excess of 5% per annum are paid, providing the
actuary to the Hyder Water Pension Scheme certifies that the scheme's resources
are sufficient. Executive directors' dependants are eligible for dependant's
pensions and the payment of a lump sum in the event of a director's death in
service.
In the case of J M James (who has agreed to continue service for a further
18 months beyond attaining the age of 60) his pension will continue to accrue
during his extended period of service on an uniform basis.
Pension contributions are made on behalf of the executive directors at the
rate of 12.0% (1999 12.0%; 1998 12.0%) of pensionable pay.
To the extent that their benefits from the company scheme are restricted by
Inland Revenue limits, J M James, P J Twamley and J E Roberts have been granted
unfunded pension arrangements which have been set up to provide that part of
each director's pension entitlement which exceeds Inland Revenue limits.
The directors' pension benefits were as follows:
<TABLE>
<CAPTION>
TRANSFER
VALUE
EQUIVALENT
TOTAL INCREASE/ OF INCREASE/
ACCRUED (DECREASE) IN (DECREASE)
AGE AT PENSION AT ACCRUED IN ACCRUED CONTRIBUTIONS COMPANY
31 MARCH 31 MARCH PENSION IN PENSION OVER PAID BY EACH PENSION
2000 2000 THE YEAR THE YEAR DIRECTOR COST
-------- ---------- ------------- ------------ ------------- -------
L000 P.A. L000 P.A. L000 L000 L000
<S> <C> <C> <C> <C> <C> <C>
G A Hawker.................. 52 153 (3) (49) 16 (65)
M P Brooker................. 52 80 2 25 9 16
J M James................... 60 48 4 77 12 65
P J Twamley................. 53 54 4 62 12 50
J E Roberts *............... 54 17 1 19 3 16
</TABLE>
-------------------------
* resigned on 25 May 1999
The total accrued pension shown is the annual pension which would be
payable from age 60 to which each director would have been entitled, based on
service up to 31 March 2000 and based on 31 March 2000 pay levels. The
F-25
<PAGE>
increase/(decrease) in accrued pension in the year excludes any increase for
inflation during the year ended 31 March 2000.
The transfer value figures have been calculated on the basis of actuarial
advice in accordance with Actuarial Guidance Note GN11.
The company pension cost is the transfer value equivalent of the increase
in accrued pension less contributions paid by each director. The transfer values
shown make no allowance for the cost of death in service or private health
insurance benefits. Paragraph 4.19 of the Report of Committee on Corporate
Governance (Hampel Report published January 1998) states that the transfer value
represents a liability of the company but not a sum paid or due to the
individual. Accordingly it cannot meaningfully be added to annual remuneration.
The figures for J M James, P J Twamley and J E Roberts include their
unapproved pensions.
Retirement benefits are accruing to four directors under defined benefit
schemes. No directors have benefits accruing under defined contribution schemes.
(E) REMUNERATION POLICY, SERVICE CONTRACTS AND COMPENSATION
In performing its duties, the committee has considered the provisions of
Schedule B of the Combined Code annexed to the London Stock Exchange Listing
Rules.
Directors' service contracts are on a one year rolling basis. In certain
circumstances the company may be obliged to pay compensation for the unexpired
portion of the contract, if it is terminated early. No other payments are made
for compensation for loss of office, and mitigation would normally be applied,
although mitigation does not apply in the event of a change in control. The
executive directors' service contracts will be available for inspection at the
annual general meeting.
(F) REMUNERATION
The combined emoluments of the directors for their services as directors of
the company and its subsidiaries are set out below:
<TABLE>
<CAPTION>
2000 1999 1998
----- ----- -----
L000 L000 L000
<S> <C> <C> <C>
Fees........................................................ 218 215 222
Salary payments (including benefits in kind)................ 929 1,056 1,106
Performance related bonus................................... -- 345 355
----- ----- -----
1,147 1,616 1,683
Compensation for loss of office............................. -- -- 403
----- ----- -----
1,147 1,616 2,086
===== ===== =====
</TABLE>
F-26
<PAGE>
The directors' emoluments, excluding pension contributions, were as follows:
<TABLE>
<CAPTION>
PERFORMANCE
RELATED BENEFITS
SALARY/FEES BONUS IN KIND TOTAL
------------- ----------- ----------- ---------------------
2000 1999 2000 1999 2000 1999 2000 1999 1998
----- ----- ---- ---- ---- ---- ----- ----- -----
L000 L000 L000 L000 L000 L000 L000 L000 L000
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
G A Hawker..................... 268 260 -- 95 13 10 281 365 345
M P Brooker.................... 150 146 -- 47 14 13 164 206 181
B H Charles(v)................. -- -- -- -- -- -- -- -- 64
S J Doughty(vi)................ -- -- -- -- -- -- -- -- 98
J M James...................... 196 190 -- 64 19 19 215 273 250
J E Roberts(iv)................ 52 200 -- 69 4 12 56 281 259
P J Twamley.................... 196 190 -- 70 17 16 213 276 263
----- ----- -- --- -- -- ----- ----- -----
862 986 -- 345 67 70 929 1,401 1,460
===== ===== == === == == ===== ===== =====
J V H Robins(i)................ 125 113 -- -- -- -- 125 113 14
I R Evans...................... -- 15 -- -- -- -- -- 15 126
A J Hales(vii)................. -- -- -- -- -- -- -- -- 8
D G Hawkins.................... 28 28 -- -- -- -- 28 28 25
T Knowles(ii).................. 9 28 -- -- -- -- 9 28 25
R B Salmon(iii)................ 28 3 -- -- -- -- 28 3 --
R H Sellier.................... 28 28 -- -- -- -- 28 28 25
----- ----- -- --- -- -- ----- ----- -----
218 215 -- -- -- -- 218 215 223
===== ===== == === == == ===== ===== =====
1,080 1,201 -- 345 67 70 1,147 1,616 1,683
===== ===== == === == == ===== ===== =====
</TABLE>
-------------------------
(i) appointed Group Chairman from 15 May 1998
(ii) retired as a non-executive director on 23 July 1999
(iii) appointed as non-executive director on 24 February 1999
(iv) resigned on 25 May 1999
(v) resigned 25 July 1997
(vi) resigned 2 October 1997, and as a result received the compensation for
loss of office referred to above
(vii) resigned 25 July 1997
F-27
<PAGE>
HIGHEST PAID DIRECTOR
<TABLE>
<CAPTION>
G A HAWKER G A HAWKER G A HAWKER
2000 1999 1998
---------- ---------- ----------
L000 L000 L000
<S> <C> <C> <C>
Aggregate emoluments................................. 281 365 345
Gains on share options exercised..................... -- -- 9
--- --- ---
281 365 354
=== === ===
Accrued pension at end of the year under defined
benefit pension schemes............................ 153 153 139
=== === ===
</TABLE>
(G) DIRECTORS' INTERESTS IN SHARES
The beneficial interests of the directors in the ordinary shares,
preference shares and options to subscribe for ordinary shares of the company at
31 March 2000, 31 March 1999 and 31 March 1998 were as follows:
<TABLE>
<CAPTION>
CUMULATIVE REDEEMABLE OPTIONS OVER ORDINARY
PREFERENCE SHARES OF L1 SHARES OF 120P
ORDINARY SHARES OF 120P ------------------------ ------------------------
--------------------------------------------- 31 MARCH 31 MARCH
31 MARCH 31 MARCH 31 MARCH 31 MARCH 1999 AND 31 MARCH 1999 AND
2000 1999 1998 2000 1998 2000 1998
------------- ------------- ------------- ------------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
J V H Robins......... 1,109 1,016 1,000 -- -- -- --
G A Hawker........... 14,212 *14,212 13,932 13,408 13,408 894 894
M P Brooker.......... 13,158 13,158 13,158 14,408 14,408 794 794
J M James............ 13,084 20,584 28,284 450 450 41,070 41,070
P J Twamley.......... 5,202 4,538 4,354 2,070 2,070 14,839 15,076
D G Hawkins.......... 577 528 502 -- -- -- --
R B Salmon........... 4,500 -- -- -- -- -- --
R H Sellier.......... 294 268 255 252 252 -- --
T Knowles(i)......... n/a 5,415 5,415 n/a 5,850 n/a --
J E Roberts(ii)...... n/a 1,034 1,000 n/a -- n/a 2,484
------ ------- ------ ------ ------ ------ ------
52,136 60,753 67,900 30,588 36,438 57,597 60,318
====== ======= ====== ====== ====== ====== ======
</TABLE>
-------------------------
* The interest of GA Hawker has been revised from that previously reported
following notification of an under-reporting of his PEP interest in a
previous financial period
(i) Retired 23 July 1999
(ii) Resigned 25 May 1999
In addition, at 31 March 2000 R H Sellier was beneficially interested in
7.125% Sterling bonds redeemable in 2004 issued by Welsh Water Utilities Finance
PLC with a nominal value of L9,000 (1999 L9,000).
The above table does not include conditional allocations of shares under
the long term incentive plan, details of which are set out in note 6(c)(iii).
F-28
<PAGE>
(H) SHARE OPTIONS
No director was granted any share options during the period 1 April 1999 to
31 March 2000.
Options held by each of the directors over the ordinary shares of the
company are as below. Options are held under the terms of the employee sharesave
scheme, except as marked sec. which were under the terms of the executive share
option scheme.
<TABLE>
<CAPTION>
SHARE
PRICE ON
OPTION DATE OF
1 APRIL 1 APRIL 1 APRIL GRANTED EXERCISED 31 MARCH PRICE EXERCISE DATE
1997 1998 1999 IN YEAR IN YEAR 2000 (PENCE) (PENCE) EXERCISABLE
------------ ------- ------- ------- --------- -------- ------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
G A Hawker........... 1,550 894 894 -- -- 894 650 -- Sept 2000
======== ====== ====== == === ====== === === =========
M P Brooker.......... 2,481 164 164 -- -- 164 521 -- Oct 2001
-- 630 630 -- -- 630 650 -- Sept 2000
-------- ------ ------ -- --- ------ --- --- ---------
2,481 794 794 -- -- 794
======== ====== ====== == === ======
J M James............ sec.44,938 41,070 41,070 -- -- 41,070 563 -- Jul 1996
======== ====== ====== == === ====== === === =========
P J Twamley.......... sec.18,707 14,839 14,839 -- -- 14,839 563 -- Jul 1996
237 237 237 -- 237 -- 523 544 Oct 1999
-------- ------ ------ -- --- ------ --- --- ---------
18,944 15,076 15,076 -- 237 14,839
======== ====== ====== == === ======
</TABLE>
EXPIRY
DATE
--------
G A Hawker........... Feb 2001
========
M P Brooker.......... Mar 2002
Feb 2001
--------
J M James............ Jul 2003
========
P J Twamley.......... Jul 2003
Mar 2000
--------
In 1998 the directors exercised options which resulted in gains on exercise
of options of L246,000.
On 1 October 1999 PJ Twamley exercised 237 options under the sharesave
scheme. This resulted in a gain on exercise of options by directors during the
year of L48 (1999: nil). The gain is the difference between the share option
price and the share price on the date the share options are exercised.
No other director exercised any options during the 2000 year.
SJ Doughty resigned on 2 October 1997. As at 1 April 1997 he held 57,673
share options, all of which were exercised prior to 31 March 1998.
JE Roberts resigned as a director on 25 May 1999 and subsequently 2,484
options held under the sharesave scheme lapsed.
Executive share option prices are fixed at the closing mid market value on
the day preceding the date of grant. Employee sharesave options are fixed at the
closing mid market value on the day preceding the date of grant less 20%
discount.
All executive share options are exercisable between three and ten years
from the date of grant. Options granted under the employee sharesave scheme are
exercisable within six months after the expiry of a three, five or seven year
save as you earn savings contract. All options may be exercisable earlier in
certain circumstances (such as retirement or redundancy).
The middle market price of an ordinary share at the close of business on 31
March 2000 was 221.75p (1999: 786p; 1998: 978p) and the range during the year to
that date was 179p to 789.5p (1999: 748p to 1,040p; 1998: 774p to 1,049p).
F-29
<PAGE>
(I) STAFF COSTS
<TABLE>
<CAPTION>
2000 1999 1998
----- ----- -----
LM LM LM
<S> <C> <C> <C>
Wages and salaries.......................................... 231.5 215.3 202.8
Social security costs....................................... 16.5 15.9 14.8
Pension costs............................................... 14.7 14.5 14.3
----- ----- -----
262.7 245.7 231.9
===== ===== =====
</TABLE>
Of the above, L38.4m (1999 L43.9m; 1998 L47.3m) has been charged to
capital.
(J) AVERAGE MONTHLY NUMBER OF EMPLOYEES DURING THE YEAR (INCLUDING EXECUTIVE
DIRECTORS)
<TABLE>
<CAPTION>
2000 1999 1998
NUMBER NUMBER NUMBER
------ ------ ------
<S> <C> <C> <C>
Continuing operations:
Regulated water and sewerage activities................... 1,737 1,906 2,071
Regulated electricity distribution activities............. 994 1,129 1,279
Infrastructure activities................................. 4,161 3,700 3,454
Managed services activities............................... 2,008 1,910 1,536
Other activities.......................................... 199 214 199
----- ----- -----
9,099 8,859 8,539
Discontinued operations:
Energy supply activities.................................. 193 236 126
Infrastructure activities................................. 254 287 279
----- ----- -----
9,546 9,382 8,944
===== ===== =====
</TABLE>
7. GROUP INCOME FROM INVESTMENTS
<TABLE>
<CAPTION>
1999 1998
2000 RESTATED RESTATED
---- -------- --------
LM LM LM
<S> <C> <C> <C>
Fixed asset investment income -- continuing operations:
Infrastructure activities................................. 3.0 6.5 8.9
Other activities.......................................... 0.5 3.4 0.4
--- --- ---
3.5 9.9 9.3
=== === ===
</TABLE>
F-30
<PAGE>
8. PROFIT ON DISPOSAL OF INTERESTS IN INVESTMENTS
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
LM LM LM
<S> <C> <C> <C>
Infrastructure activities:
Profit on disposal of investments......................... 2.3 18.6 --
Profit on the grant of option in Transurban Link
Limited................................................ -- -- 3.9
--- ---- ---
2.3 18.6 3.9
Other activities:
Profit on disposal of investments......................... 3.4 -- 1.6
--- ---- ---
5.7 18.6 5.5
=== ==== ===
</TABLE>
On 21 January 2000 the group disposed of 50% of its interest in Transurban
City Link for L7.3m realising a profit on disposal of L1.3m.
On 25 February 2000 the group received L1.6m in respect of a part disposal
by the Asian Infrastructure Fund of its shares in FLAG (Fibre Optic Cable
Company) following its listing on the New York Stock Exchange, realising a
profit of L1.0m.
On 4 August 1999 the group disposed of its interest in EA Technology
Limited for L0.4m realising a profit of L0.3m.
On 9 August 1999 the group disposed of its interest in UK Data Collection
Services Limited for L3.2m realising a profit of L3.1m.
On 5 May 1998 the group disposed of its interest in National
Telecommunications Inc for L45.3m realising a profit on disposal of L15.3m.
On 13 November 1998 the group disposed of the majority of its interest in
Severoceske Vcodovody a Kanalizace a.s. for L16.0m realising a profit on
disposal of L3.3m after writing back goodwill previously written off directly to
reserves of L2.0m.
On 5 November 1997 the group disposed of its interest in National Grid
Group Plc for L2.8m realising a profit on disposal of L1.6m.
9. GROUP INTEREST PAYABLE
<TABLE>
<CAPTION>
2000 1999 1998
----- ----- -----
LM LM LM
<S> <C> <C> <C>
On bank loans and overdrafts................................ 1.7 2.0 1.5
On other loans.............................................. 152.4 127.8 99.8
On finance leases........................................... 12.2 13.6 12.2
----- ----- -----
166.3 143.4 113.5
===== ===== =====
</TABLE>
F-31
<PAGE>
10. TAXATION
(A) ORDINARY TAXATION
<TABLE>
<CAPTION>
1999 1998
2000 RESTATED RESTATED
----- -------- --------
LM LM LM
<S> <C> <C> <C>
Based on the results for the year:
UK corporation tax at 30% (1999 31%; 1998 31%)............ -- 66.4 10.9
Advance corporation tax (written back)/written off........ -- (40.3) 5.9
Deferred taxation......................................... 15.0 -- --
Overseas taxation......................................... 1.0 0.4 (0.1)
Share of joint ventures taxation.......................... 0.3 0.7 0.8
Share of associated undertakings taxation................. -- 0.4 0.5
----- ----- -----
16.3 27.6 18.0
Prior year adjustments:
Corporation tax........................................... (14.4) (16.8) 2.8
Overseas taxation......................................... -- (0.1) --
Consortium relief......................................... -- (2.1) (7.2)
----- ----- -----
1.9 8.6 13.6
===== ===== =====
</TABLE>
The tax charge on the profit for the year has been reduced by L12.2m (1999
increased by L9.0m; 1998 reduced by L32.8m) in respect of timing differences for
which no deferred tax provision is made, and by L9.7m (1999 Lnil; 1998 L1.6m) in
respect of exceptional items incurred in the year (note 5).
The cumulative amount of advance corporation tax written off of L51.2m
(1999 L35.3m; 1998 L64.5m) is available for relief against future tax
liabilities in very limited circumstances and therefore has not been treated as
reducing the unprovided amount of deferred taxation as disclosed in note 27(a).
There are losses within the group of approximately L1.0m (1999 L5.0m; 1998
L5.0m) available to carry forward against future profits of those companies
which incurred the losses.
(B) EXCEPTIONAL TAXATION -- WINDFALL TAX
The exceptional taxation charge relates to the windfall tax levied on
privatised utility companies. The liability was L281.9m in respect of the two
privatised utility businesses (L192.3m for Hyder plc and L89.6m for South Wales
Electricity plc). The first instalment of L140.9m was paid on 1 December 1997
and the balance of the liability was paid on 1 December 1998.
F-32
<PAGE>
11. DIVIDENDS
(A) DIVIDENDS ON EQUITY SHARES:
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
LM LM LM
<S> <C> <C> <C>
Interim paid of 6.7p per ordinary share (1999 16.8p; 1998
16.2p).................................................... 10.1 24.8 23.4
Final proposed of nil pence per ordinary share (1999 33.6p;
1998 34.2p including 1.5p per share compensation for
delayed payment).......................................... -- 49.7 49.9
---- ---- ----
Total paid and proposed 6.7p per ordinary share (1999 50.4p;
1998 50.4p)............................................... 10.1 74.5 73.3
==== ==== ====
</TABLE>
(B) DIVIDENDS ON NON-EQUITY SHARES:
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
LM LM LM
<S> <C> <C> <C>
Dividends of 7.875p (net) per preference share (1999 7.875p
(net); 1998 7.875p (net))................................. 16.4 16.4 16.4
==== ==== ====
</TABLE>
12. EARNINGS PER SHARE
<TABLE>
<CAPTION>
2000 1999 1998
------------------------------ ------------------------------ -------------------------------
PROFIT EARNINGS PER PROFIT EARNINGS PER (LOSS)/PROFIT (LOSS)/EARNINGS
ATTRIBUTABLE SHARE ATTRIBUTABLE SHARE ATTRIBUTABLE PER SHARE
TO ORDINARY --------------- TO ORDINARY --------------- TO ORDINARY ---------------
SHAREHOLDERS BASIC DILUTED SHAREHOLDERS BASIC DILUTED SHAREHOLDERS BASIC DILUTED
------------ ----- ------- ------------ ----- ------- ------------- ----- -------
LM PENCE PENCE LM PENCE PENCE LM PENCE PENCE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Profit attributable to
ordinary shareholders....... 58.2 39.0 39.0 181.0 123.4 122.5 (143.7) (99.8) (98.4)
Adjusting items:
Exceptional items (net of
taxation)................. 118.9 79.6 79.5 -- -- -- 38.4 26.7 26.3
Windfall tax................ -- -- -- -- -- -- 281.9 195.8 193.0
Profit on disposal of group
operations (net of
taxation)................. (32.0) (21.4) (21.4) -- -- -- -- -- --
----- ----- ----- ----- ----- ----- ------ ----- -----
Adjusted profit attributable
to ordinary shareholders.... 145.1 97.2 97.1 181.0 123.4 122.5 176.6 122.7 120.9
===== ===== ===== ===== ===== ===== ====== ===== =====
</TABLE>
EARNINGS PER SHARE HAVE BEEN CALCULATED BASED UPON:
<TABLE>
<CAPTION>
2000 1999 1998
---------------- ---------------- ----------------
BASIC DILUTED BASIC DILUTED BASIC DILUTED
NUMBER NUMBER NUMBER NUMBER NUMBER NUMBER
------ ------- ------ ------- ------ -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Weighted average ordinary shares in
issue................................. 149.3 149.4 146.7 147.7 143.9 146.0
===== ===== ===== ===== ===== =====
</TABLE>
F-33
<PAGE>
The weighted average number of shares disclosed above is stated after
excluding the 3.5m (1999 3.7m; 1998 3.9m) weighted average ordinary shares held
by the qualifying employee share options trust and under the executive
directors' long term incentive plan, the shares in which are treated as held by
the company until they vest. The difference between the basic and diluted
weighted average number of ordinary shares in issue is wholly attributable to
outstanding share options.
13. INTANGIBLE FIXED ASSETS
GROUP
<TABLE>
<CAPTION>
GOODWILL GOODWILL
FISHING RIGHTS (POSITIVE) (NEGATIVE) TOTAL
-------------- ---------- ---------- -----
LM LM LM LM
<S> <C> <C> <C> <C>
COST
At 1 April 1999................................... 0.9 5.2 (1.8) 4.3
Additions......................................... -- 0.3 0.1 0.4
Disposals......................................... (0.9) -- -- (0.9)
---- --- ---- ----
At 31 March 2000.................................. -- 5.5 (1.7) 3.8
==== === ==== ====
AMOUNTS PROVIDED
At 1 April 1999................................... 0.5 -- -- 0.5
Provided in the year.............................. -- 0.3 -- 0.3
Disposals......................................... (0.5) -- -- (0.5)
---- --- ---- ----
At 31 March 2000.................................. -- 0.3 -- 0.3
==== === ==== ====
NET BOOK VALUE
At 31 March 2000.................................. -- 5.2 (1.7) 3.5
==== === ==== ====
At 31 March 1999.................................. 0.4 5.2 (1.8) 3.8
==== === ==== ====
</TABLE>
Goodwill is amortised over a period of 20 years being the directors'
estimate of the useful economic life of these assets. Negative goodwill has
resulted from acquisitions where net assets are acquired at a discount to the
book value of net assets and is amortised between 2.5 years and 20 years.
F-34
<PAGE>
14. TANGIBLE FIXED ASSETS
GROUP
<TABLE>
<CAPTION>
VEHICLES, PLANT,
LEASEHOLD WATER & EQUIPMENT,
PROPERTIES SEWERAGE ELECTRICITY COMPUTER
FREEHOLD AND INFRA- DISTRIBUTION HARDWARE &
LAND AND IMPROVE- STRUCTURE OPERATIONAL NETWORK CAPITALISED
BUILDINGS MENTS ASSETS STRUCTURES ASSETS SOFTWARE TOTAL
--------- ---------- --------- ----------- ------------ ---------------- -------
LM LM LM LM LM LM LM
<S> <C> <C> <C> <C> <C> <C> <C>
COST OR VALUATION
At 1 April 1999.................... 76.9 6.7 1,060.0 1,425.5 902.4 435.8 3,907.3
Exchange difference................ (0.5) (0.1) -- -- -- (0.1) (0.7)
Additions.......................... 1.8 0.2 137.8 119.6 62.5 41.5 363.4
Grants and contributions........... -- -- (6.6) (1.4) -- -- (8.0)
Amounts written off................ (3.1) -- -- -- -- (80.2) (83.3)
Disposals.......................... (0.4) (3.9) (1.0) -- (1.8) (18.6) (25.7)
Sale of group operations........... -- -- -- -- -- (20.9) (20.9)
---- ---- ------- ------- ----- ----- -------
At 31 March 2000................... 74.7 2.9 1,190.2 1,543.7 963.1 357.5 4,132.1
==== ==== ======= ======= ===== ===== =======
ACCUMULATED DEPRECIATION
At 1 April 1999.................... 21.3 2.2 240.4 315.0 275.7 220.3 1,074.9
Exchange difference................ (0.1) -- -- -- -- -- (0.1)
Charge for the year................ 1.7 0.3 34.7 39.1 25.1 39.5 140.4
Amounts written off................ (1.0) -- -- -- -- (5.7) (6.7)
Disposals.......................... (0.1) (1.0) (1.0) -- (1.4) (17.0) (20.5)
Sale of group operations........... -- -- -- -- -- (7.0) (7.0)
---- ---- ------- ------- ----- ----- -------
At 31 March 2000................... 21.8 1.5 274.1 354.1 299.4 230.1 1,181.0
==== ==== ======= ======= ===== ===== =======
NET BOOK VALUE
At 31 March 2000................... 52.9 1.4 916.1 1,189.6 663.7 127.4 2,951.1
==== ==== ======= ======= ===== ===== =======
At 31 March 1999................... 55.6 4.5 819.6 1,110.5 626.7 215.5 2,832.4
==== ==== ======= ======= ===== ===== =======
ANALYSIS OF NET BOOK VALUE AT 31
MARCH 2000
Owned.............................. 52.9 0.8 916.1 964.1 663.7 127.0 2,724.6
Held under finance leases.......... -- 0.6 -- 225.5 -- 0.4 226.5
---- ---- ------- ------- ----- ----- -------
52.9 1.4 916.1 1,189.6 663.7 127.4 2,951.1
==== ==== ======= ======= ===== ===== =======
</TABLE>
(a) Tangible fixed assets at 31 March 2000 include L428.1m (1999 L429.5m)
of assets in the course of construction, which are not depreciated until
commissioned.
(b) The net book value of leasehold properties and improvements comprise:
2000 1999
---- ----
LM LM
Long leasehold.............................................. 1.4 0.6
Short leasehold............................................. -- 3.9
--- ---
Total leasehold............................................. 1.4 4.5
=== ===
(c) Electricity distribution network assets include assets leased to third
parties under operating leases. The cost of these was L3.8m (1999 L3.8m) and
accumulated depreciation amounted to L1.1m (1999 L0.9m) at 31 March 2000.
F-35
<PAGE>
(d) The accounting treatment for grants and customer contributions in respect of
infrastructure assets is set out in the principal accounting policies. This
treatment is not in accordance with schedule 4 to the Companies Act 1985. As a
consequence the net book value of fixed assets and deferred income is L156.3m
(1999 L140.2m) lower than it would have been had this treatment not been
adopted.
COMPANY
<TABLE>
<CAPTION>
VEHICLES, PLANT,
EQUIPMENT
AND COMPUTER
HARDWARE &
FREEHOLD LAND CAPITALISED
AND BUILDINGS SOFTWARE TOTAL
------------- ---------------- -----
LM LM LM
<S> <C> <C> <C>
COST
At 1 April 1999........................................ 0.8 2.4 3.2
Additions.............................................. -- 0.1 0.1
--- --- ---
At 31 March 2000....................................... 0.8 2.5 3.3
=== === ===
ACCUMULATED DEPRECIATION
At 1 April 1999........................................ -- 0.8 0.8
Charge for the year.................................... -- 0.3 0.3
--- --- ---
At 31 March 2000....................................... -- 1.1 1.1
=== === ===
NET BOOK VALUE
At 31 March 2000....................................... 0.8 1.4 2.2
=== === ===
At 31 March 1999....................................... 0.8 1.6 2.4
=== === ===
</TABLE>
15. INVESTMENT PROPERTIES
GROUP
LM
At 1 April 1999............................................. 9.4
Adjustment to open market value............................. 1.5
----
At 31 March 2000............................................ 10.9
====
Investment properties were valued at 31 March 2000 by Cooke & Arkwright, a
firm of Chartered Surveyors, on the basis of open market value. These properties
are rented to third parties under operating leases. Investment properties
comprise L10.9m (1999 L9.4m) of freehold properties.
The accounting treatment for investment properties is set out in the
principal accounting policies. This treatment is not in accordance with schedule
4 to the Companies Act 1985. As a consequence the profit before interest for the
year is L0.2m (1999 L0.2m) higher than it would have been had this treatment
been adopted.
F-36
<PAGE>
16. FIXED ASSET INVESTMENTS
GROUP
<TABLE>
<CAPTION>
INTERESTS IN INTERESTS IN
OWN JOINT ASSOCIATED LISTED UNLISTED
SHARES VENTURES UNDERTAKINGS INVESTMENTS INVESTMENTS TOTAL
------ ------------ ------------ ----------- ----------- -----
LM LM LM LM LM LM
<S> <C> <C> <C> <C> <C> <C>
COST
At 1 April 1999................ 21.7 20.4 9.9 46.5 19.4 117.9
Exchange differences........... -- (0.1) 0.1 -- (0.1) (0.1)
Additions...................... -- 16.5 -- 1.8 -- 18.3
Disposals...................... (1.4) -- -- (6.6) (0.2) (8.2)
Share of retained profits...... -- 0.9 0.6 -- -- 1.5
Reclassification............... -- 0.1 (0.1) (4.3) -- (4.3)
---- ---- ---- ---- ---- -----
At 31 March 2000............... 20.3 37.8 10.5 37.4 19.1 125.1
==== ==== ==== ==== ==== =====
AMOUNTS PROVIDED
At 1 April 1999................ -- -- 0.1 3.0 0.8 3.9
Disposals...................... -- -- -- (1.1) -- (1.1)
Provided in the year........... 10.0 -- -- 1.6 -- 11.6
---- ---- ---- ---- ---- -----
At 31 March 2000............... 10.0 -- 0.1 3.5 0.8 14.4
==== ==== ==== ==== ==== =====
NET BOOK VALUE
At 31 March 2000............... 10.3 37.8 10.4 33.9 18.3 110.7
==== ==== ==== ==== ==== =====
At 31 March 1999............... 21.7 20.4 9.8 43.5 18.6 114.0
==== ==== ==== ==== ==== =====
</TABLE>
The market value of the listed investments, excluding the group's L27.9m
(1999 L27.1m) investment in the Asian Infrastructure Fund, is L15.4m (1999
L31.1m).
The directors consider that the market value of the group's investment in
the Asian Infrastructure Fund, which is a closed end fund with no ready market
for the shares, is not materially different from the carrying value of that
investment.
The listed investment of L4.3m has been reclassified as a current asset
investment (note 19).
Own shares relate to ordinary shares purchased under the qualifying
employee share option trust (note 30(c)) and the executive directors' long term
incentive plan (note 30(b)). The nominal value of these shares is L4.1m (1999
L4.3m).
F-37
<PAGE>
COMPANY
<TABLE>
<CAPTION>
INTERESTS
IN GROUP UNLISTED
OWN SHARES UNDERTAKINGS INVESTMENTS TOTAL
---------- ------------ ----------- -------
LM LM LM LM
<S> <C> <C> <C> <C>
COST
At 1 April 1999............................... 21.7 1,549.9 0.4 1,572.0
Additions..................................... -- 64.0 -- 64.0
Disposals..................................... (1.4) -- -- (1.4)
---- ------- --- -------
At 31 March 2000.............................. 20.3 1,613.9 0.4 1,634.6
==== ======= === =======
AMOUNTS PROVIDED
At 1 April 1999............................... -- 1.4 0.3 1.7
Provided in the year.......................... 10.0 76.1 -- 86.1
---- ------- --- -------
At 31 March 2000.............................. 10.0 77.5 0.3 87.8
==== ======= === =======
NET BOOK VALUE
At 31 March 2000.............................. 10.3 1,536.4 0.1 1,546.8
==== ======= === =======
At 31 March 1999.............................. 21.7 1548.5 0.1 1,570.3
==== ======= === =======
</TABLE>
Principal group undertakings are listed in note 44.
17. STOCKS AND WORK IN PROGRESS
GROUP
2000 1999
---- ----
LM LM
Raw materials and consumables............................... 7.8 8.8
Work in progress............................................ 9.0 6.5
Finished goods and goods for resale......................... 0.1 0.7
---- ----
16.9 16.0
==== ====
The replacement cost of stocks is not materially different from their
carrying value.
F-38
<PAGE>
18. DEBTORS
<TABLE>
<CAPTION>
GROUP COMPANY
------------- -------------
2000 1999 2000 1999
----- ----- ----- -----
LM LM LM LM
<S> <C> <C> <C> <C>
AMOUNTS FALLING DUE WITHIN ONE YEAR:
Trade debtors............................................... 101.6 145.2 -- --
Amounts recoverable on contracts............................ 29.2 26.1 -- --
Amounts owed by subsidiary undertakings..................... -- -- 353.8 410.9
Amounts owed by associated undertakings..................... 0.7 0.5 -- --
Net investment in finance leases............................ 0.2 0.1 -- --
Other debtors............................................... 29.6 40.1 0.6 3.2
Prepayments and accrued income.............................. 62.1 91.8 10.1 9.3
Amounts due on sale of group operations (note 39)........... 11.2 -- -- --
----- ----- ----- -----
234.6 303.8 364.5 423.4
AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR:
Net investment in finance leases............................ 1.6 1.0 -- --
Other debtors............................................... 1.8 9.4 -- --
----- ----- ----- -----
238.0 314.2 364.5 423.4
===== ===== ===== =====
</TABLE>
19. CURRENT ASSET INVESTMENTS
MANAGEMENT OF LIQUID RESOURCES
<TABLE>
<CAPTION>
GROUP COMPANY
------------- -------------
2000 1999 2000 1999
----- ----- ----- -----
LM LM LM LM
<S> <C> <C> <C> <C>
INVESTMENTS IN:
Sterling fixed term and call deposits....................... 397.2 470.5 339.8 381.9
Sterling denominated commercial papers...................... 31.8 120.8 14.9 82.5
----- ----- ----- -----
429.0 591.3 354.7 464.4
Listed investment held for resale........................... 4.3 -- -- --
----- ----- ----- -----
433.3 591.3 354.7 464.4
===== ===== ===== =====
AMOUNTS BECOMING DUE:
Within one year............................................. 433.3 591.3 354.7 464.4
===== ===== ===== =====
</TABLE>
The fixed asset investment held for resale is the group's 20% interest in
the issued share capital of Severoceske Vodovody a Kanalizace a.s. ("ScVK")
which is held at cost. The market value of the ScVK investment is L2.6m (1999
L1.9m). The company has not reduced the carrying value of this investment as the
company has a put option which requires a third party to purchase this
investment at a price greater than the carrying value. The directors do not
consider that the group's 20% interest in ScVK gives them significant influence
over the operations of that company to include the investment as an associate.
F-39
<PAGE>
20. CREDITORS
(A) AMOUNTS FALLING DUE WITHIN ONE YEAR:
<TABLE>
<CAPTION>
GROUP COMPANY
----------------- -----------------
NOTE 2000 1999 2000 1999
----- ------- ------- ------- -------
LM LM LM LM
<S> <C> <C> <C> <C> <C>
Bank loans and overdrafts....................... 5.8 0.6 -- --
Loan notes...................................... 21(d) 4.2 6.3 3.4 6.3
Other loans..................................... 21(c) 8.1 54.7 -- 6.4
Obligations under finance leases................ 22 0.3 0.3 -- --
Payments received on account on contracts....... 19.9 18.1 -- --
Trade creditors................................. 115.6 145.1 -- --
Amounts owed to subsidiary undertakings......... -- -- 0.2 1.0
Loans from subsidiary undertakings.............. -- -- 50.0 --
Dividends payable............................... 2.7 112.5 2.7 112.5
Corporation tax................................. 12.8 28.0 -- 3.0
Other taxation and social security.............. 13.0 12.3 -- 0.1
Other creditors................................. 89.1 88.0 -- --
Accruals and deferred income.................... 86.4 90.4 57.0 48.1
Capital commitments due to joint ventures and
associates.................................... 5.7 -- -- --
------- ------- ------- -------
363.6 556.3 113.3 177.4
======= ======= ======= =======
(B) AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR:
Sterling bonds.................................. 21(a) 1,024.9 1,024.5 678.7 678.4
US$ bonds....................................... 21(b) 615.4 615.2 615.4 615.2
Other loans..................................... 21(c) 212.9 219.1 10.8 8.6
Obligations under finance leases................ 22 265.5 265.7 -- --
Creditors between one and five years:........... -- --
Capital commitments due to joint ventures and
associates................................. 17.7 10.3 -- --
Refundable customer contributions............. 4.0 4.9 -- --
Other......................................... 3.1 7.3 -- --
------- ------- ------- -------
2,143.5 2,147.0 1,304.9 1,302.2
======= ======= ======= =======
</TABLE>
F-40
<PAGE>
21. LOANS
(A) STERLING BONDS
<TABLE>
<CAPTION>
INTEREST NOMINAL PREMIUM ISSUE NET NET COSTS CARRYING
MATURITY DATE RATE VALUE ON ISSUE COSTS PROCEEDS AMORTISED VALUE
------------- -------- ------- -------- ----- -------- --------- --------
% LM LM LM LM LM LM
<S> <C> <C> <C> <C> <C> <C> <C>
GROUP
2002............................... 10.750 75.0 -- (1.0) 74.0 0.8 74.8
2004............................... 7.125 100.0 1.1 (2.0) 99.1 0.5 99.6
2006............................... 8.750 200.0 3.2 (2.3) 200.9 (0.1) 200.8
2014............................... 7.625 100.0 0.8 (2.6) 98.2 0.5 98.7
2016............................... 9.500 200.0 6.8 (1.9) 204.9 (0.3) 204.6
2020............................... 9.250 150.0 1.7 (3.9) 147.8 0.1 147.9
2020............................... 7.000 200.0 -- (1.6) 198.4 0.1 198.5
------- ---- ----- ------- ---- -------
1,025.0 13.6 (15.3) 1,023.3 1.6 1,024.9
======= ==== ===== ======= ==== =======
COMPANY
2002............................... 10.750 75.0 -- (1.0) 74.0 0.8 74.8
2006............................... 8.750 200.0 3.2 (2.3) 200.9 (0.1) 200.8
2016............................... 9.500 200.0 6.8 (1.9) 204.9 (0.3) 204.6
2020............................... 7.000 200.0 -- (1.6) 198.4 0.1 198.5
------- ---- ----- ------- ---- -------
675.0 10.0 (6.8) 678.2 0.5 678.7
======= ==== ===== ======= ==== =======
</TABLE>
(B) US$ BONDS
<TABLE>
<CAPTION>
INTEREST NOMINAL PREMIUM ISSUE NET NET COSTS CARRYING
MATURITY DATE RATE VALUE ON ISSUE COSTS PROCEEDS AMORTISED VALUE
------------- -------- ------- -------- ----- -------- --------- --------
% LM LM LM LM LM LM
<S> <C> <C> <C> <C> <C> <C> <C>
GROUP & COMPANY
2004............................... 6.750 120.0 0.8 (1.4) 119.4 0.2 119.6
2007............................... 6.875 120.0 0.8 (1.4) 119.4 0.1 119.5
2008............................... 6.500 136.0 1.9 (2.1) 135.8 -- 135.8
2017............................... 7.250 60.0 0.4 (0.7) 59.7 -- 59.7
2028............................... 7.375 181.0 2.6 (2.9) 180.7 0.1 180.8
----- --- ---- ----- --- -----
617.0 6.5 (8.5) 615.0 0.4 615.4
===== === ==== ===== === =====
</TABLE>
Fixed interest rates on the sterling/US$ cross currency interest rate swaps
used to cover the US$ bonds referred to above range between 6.8% and 8.1%. The
full nominal value of US$1,025m was simultaneously swapped for sterling to match
the future US$ repayment liabilities at maturity.
F-41
<PAGE>
(C) OTHER LOANS
<TABLE>
<CAPTION>
GROUP COMPANY
2000 1999 2000 1999
----- ----- ------- ----
LM LM LM LM
<S> <C> <C> <C> <C>
REPAYABLE AS FOLLOWS:
Within one year............................................. 8.1 54.7 -- 6.4
Between one and two years................................... 18.3 7.4 10.8 --
Between two and five years.................................. 24.2 24.5 -- --
After more than five years.................................. 170.4 187.2 -- 8.6
----- ----- ---- ----
221.0 273.8 10.8 15.0
===== ===== ==== ====
Repayable wholly within five years.......................... 11.2 49.0 10.8 6.4
Repayable wholly after five years........................... 140.0 148.6 -- 8.6
Repayable by instalments after five years................... 69.8 76.2 -- --
----- ----- ---- ----
221.0 273.8 10.8 15.0
===== ===== ==== ====
THESE LOANS ARE DENOMINATED IN THE FOLLOWING CURRENCIES:
Sterling.................................................... 206.4 243.7 -- --
Australian $................................................ -- 11.7 -- --
US$......................................................... 10.0 8.6 10.0 8.6
Canadian $.................................................. -- 6.4 -- 6.4
German marks................................................ 3.8 3.4 -- --
Euros....................................................... 0.8 -- 0.8 --
----- ----- ---- ----
221.0 273.8 10.8 15.0
===== ===== ==== ====
</TABLE>
Fixed interest rates on these loans range between 6.5% and 10.2% (1999 5.2%
and 10.2%) and variable interest rates varied between 1.0% below to 0.2% above
LIBOR (1999 1.0% below to 0.2% above LIBOR) (London Interbank offer rate).
(D) LOAN NOTES
The loan notes were issued in lieu of all or part of the cash consideration
due under the offer for South Wales Electricity plc to those of its shareholders
who elected as such. The notes bear interest, payable half yearly in arrears, at
the rate of 1% below six month LIBOR.
F-42
<PAGE>
22. FINANCE LEASES
GROUP
2000 1999
----- -----
LM LM
AMOUNTS DUE UNDER FINANCE LEASES ARE PAYABLE AS FOLLOWS:
Within one year............................................. 0.3 0.3
Between one and two years................................... 0.1 0.2
Between two and five years.................................. -- 0.1
After more than five years.................................. 265.4 265.4
----- -----
265.8 266.0
===== =====
A long dated interest rate swap was arranged on 1 April 1994 which has the
effect of fixing the rate of interest at 7.8% on floating rate sterling finance
lease obligations of L57.9m (1999 L59.3m). The obligations under the swap and
the finance lease reduce over a remaining period of 14 years.
23. MATURITY OF FINANCIAL LIABILITIES
The maturity profile of the group's gross borrowings, preference shares and
other financial liabilities, excluding bank overdrafts, was as follows:
2000 1999
------- -------
LM LM
GROSS BORROWINGS:
In one year or less, or on demand........................... 12.6 61.3
In more than one year but not more than two years........... 94.8 7.6
In more than two years but not more than five years......... 249.8 198.7
In more than five years..................................... 1,774.1 1,918.2
------- -------
2,131.3 2,185.8
PREFERENCE SHARES:
In more than five years..................................... 206.6 206.6
OTHER FINANCIAL LIABILITIES:
In more than one year but not more than two years........... 3.0 7.7
In more than two years but not more than five years......... 17.5 5.8
In more than five years..................................... 4.3 9.0
------- -------
2,362.7 2,414.9
======= =======
24. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
(A) TREASURY MANAGEMENT AND FINANCIAL INSTRUMENTS
Group treasury activities are managed centrally within a formal set of
treasury policies and objectives which are regularly reviewed and approved by
the Board. The group's policy specifically prohibits any transactions of a
speculative nature and does not envisage the use of complex financial
instruments. The treasury team uses financial instruments including derivatives,
to raise finance and to manage risk from its operations. Surplus cash is
invested in short to medium term sterling financial investments. The Board
F-43
<PAGE>
annually establishes the investment criteria which is restricted to banks or
other institutions meeting required standards assessed by reference to the major
credit rating agencies.
The main treasury management risks faced relate to interest rate risk,
liquidity risk and foreign currency risk. The Board reviews and agrees policies
for managing these risks as summarised below.
(B) FINANCE AND INTEREST RATE RISK
The group's policy is to finance operating subsidiaries by a mixture of
retained profits, bank borrowings, finance leases and long term loans.
The group's policy is to keep the greater proportion of gross borrowings at
fixed rates of interest. Derivatives, predominately interest rate swaps and
forward rate agreements, are used to help manage the mix of fixed and floating
rate debt. At the year end, after taking account of interest rate swaps 89%
(1999 87%) of gross borrowings of L2,131m, were at long term fixed interest
rates, fixed for an average period of 12.9 years (1999 13.8 years). The
remaining 11% (1999 13%) were at floating rates of interest.
Exposure to floating rate debt of L244m (1999 L291m) is hedged against
interest rate movements by cash balances and deposits of L457m (1999 L612m).
Decisions on fixing interest rates on the floating rate loans will continue to
be considered as cash and deposit balances are utilised. The net effect of an
average increase in interest rates of 1% on the variable rate components of the
group's short term floating rate loans and cash balances during the year would
have resulted in an increase in profit before tax of L2.1m (1999 L0.5m).
(C) LIQUIDITY RISK
The group's objective is to maintain a balance between continuity of
funding and flexibility through the use of borrowings with a range of maturity
dates. The group's policy is to ensure that the maturity profile does not place
an excessive strain on the group's ability to repay loans. Currently no more
than 17% (1999 16%) of our borrowings mature in any twelve month period. In
addition, to preserve continuity of funding, at least 83% of borrowings will
mature in more than five years and at least 53% in more than ten years.
At the year end, 1% (1999 2%) of gross borrowings were due to mature in the
next twelve months; 16% (1999 10%) will mature in the following four years and
83% (1999 88%) thereafter.
In addition, the group's practice is to maintain adequate undrawn committed
facilities of at least 10% of borrowings in order to provide flexibility in the
management of the group's liquidity. At the year end we had multicurrency
committed facilities of L450m with ten banks of which L10.8m (1999 L14.7m) had
been utilised. The L10.8m utilisation relates to foreign currency loans required
for overseas investments thus creating a natural hedge. The weighted average
period until maturity of these facilities was 2.4 years.
Short term flexibility is achieved by managing an investment portfolio of
short term money market deposits and commercial paper purchases.
F-44
<PAGE>
(D) FOREIGN CURRENCY RISK
Cumulative US Bond issues amounting to US$1,025m have been converted into
sterling as L617m.
The group has entered into US dollar swaps which ensure that the group is
not exposed to any currency exposure when the dollar repayments fall due.
The group has also entered into cross currency interest rate swaps whereby
the dollar coupon rates were exchanged for sterling interest rates.
The group has a number of overseas subsidiaries, joint venture and
associate entities reporting in local currencies and in order to protect the
group's sterling balance sheet from the movements in the respective
currency/sterling exchange rate, the group finances certain net investments in
subsidiary, joint ventures and associate entities by means of related currency
borrowings.
The group also has transactional currency exposures which arise from sales
and purchases by operating units in currencies other than the group's reporting
currency. All operating units are required to notify the treasury team of all
material currency contracts and commitments which potentially create currency
exposure on either a transaction or translation basis in order that the currency
exposure can be minimised.
At the year end, after taking into account the effects of forward foreign
exchange contracts, the group had foreign currency exposures with a net
unrealised loss of L1m (1999 L1m) in respect of unhedged foreign currency fixed
asset investments.
On average, foreign currencies relating to group activities did not move
materially against sterling during the year. Shareholders' funds were however
reduced by L1.3m at 31 March 2000 (1999 L0.2m increase) due to foreign exchange
movements affecting overseas debt, cash balances and other assets.
(E) CONTRACTS FOR DIFFERENCES
Contracts for differences (CFDs) existed within the energy supply business
prior to the disposal of the business to British Energy on 17 February 2000. The
CFDs largely insulated the group against the effects of variability of
electricity pool prices.
Any obligations arising under the CFDs were taken over by British Energy
when they acquired the energy supply businesses. No residual risk resides within
Hyder and as a consequence the unutilised power purchase provision of L59.3m
(note 27(e)) on 17 February 2000 was released to the profit and loss account as
part of the profit on disposal of group operations (note 39).
(F) SHORT TERM DEBTORS AND CREDITORS
Short term debtors and creditors have been excluded from the following
disclosures, other than the currency risk disclosures.
(G) INTEREST RATE SWAPS
The group and company have entered into interest rate swap arrangements in
order to manage the interest rate exposure of the group and the company and not
for trading or speculative purposes.
F-45
<PAGE>
Group
The group's outstanding interest rate swap arrangements had a notional
principal balance of L724.9m (1999 L755.5m), with termination dates ranging
between December 2004 and December 2028 (1999 December 1999 and December 2028),
and interest rates ranging between 6.8% and 8.3% (1999 6.0% and 8.4%).
Company
At 31 March 2000 the company's outstanding interest rate swap arrangements
had a notional principal balance of L617.0m (1999 L617.0m) with termination
dates ranging between December 2004 and December 2028 (1999 December 2004 and
December 2028), and interest rates ranging between 6.8% and 8.1% (1999 6.9% and
8.2%).
(H) CURRENCY AND INTEREST RATE PROFILE OF FINANCIAL LIABILITIES
After taking into account the various interest rate and forward foreign
currency swaps entered into by the group, the fixed and floating interest rate
profile of the group's financial liabilities by currency was as follows:
<TABLE>
<CAPTION>
TOTAL FIXED RATE FLOATING RATE
----------------- ----------------- -------------
CURRENCY 2000 1999 2000 1999 2000 1999
-------- ------- ------- ------- ------- ----- -----
LM LM LM LM LM LM
<S> <C> <C> <C> <C> <C> <C>
Gross borrowings:
Sterling.................................. 2,116.7 2,155.7 1,887.7 1,894.9 229.0 260.8
US$....................................... 10.0 8.6 -- -- 10.0 8.6
Australian $.............................. -- 11.7 -- -- -- 11.7
Canadian $................................ -- 6.4 -- -- -- 6.4
German marks.............................. 3.8 3.4 -- -- 3.8 3.4
Euros..................................... 0.8 -- -- -- 0.8 --
------- ------- ------- ------- ----- -----
2,131.3 2,185.8 1,887.7 1,894.9 243.6 290.9
Preference shares:
Sterling.................................. 206.6 206.6 206.6 206.6 -- --
Other financial liabilities:
Sterling.................................. 19.8 15.4 -- -- -- --
Australian $.............................. 4.6 5.1 -- -- -- --
German marks.............................. 0.4 -- -- -- -- --
Finnish marks............................. -- 2.0 -- -- -- --
------- ------- ------- ------- ----- -----
2,362.7 2,414.9 2,094.3 2,101.5 243.6 290.9
======= ======= ======= ======= ===== =====
</TABLE>
The floating rate borrowings comprise:
- loans from the European Investment Bank that bear interest based on
sterling LIBOR rates;
- sterling denominated bank borrowings that bear interest based on sterling
LIBOR rates;
- finance leases;
F-46
<PAGE>
- loan notes that bear interest based on sterling LIBOR rates; and,
- foreign currency denominated bank borrowings that bear interest based on
prevailing interbank borrowing rates.
No interest is paid on the other financial liabilities.
All overseas currency borrowings set out in the above table are fully
hedged against assets denominated in those currencies.
(I) INTEREST RATE PROFILE OF FINANCIAL LIABILITIES
<TABLE>
<CAPTION>
FIXED RATE
FINANCIAL
LIABILITIES
WEIGHTED
WEIGHTED AVERAGE
AVERAGE PERIOD
INTEREST FOR WHICH
RATE RATE IS FIXED
----------- -------------
CURRENCY 2000 1999 2000 1999
-------- ---- ---- ----- -----
% % YEARS YEARS
<S> <C> <C> <C> <C>
Sterling:
Borrowings................................................ 8.0 8.0 12.9 13.8
Preference shares......................................... 7.9 7.9 13.3 14.3
=== === ==== ====
</TABLE>
No interest is paid on the other financial liabilities. The figures in the
above table take into account the interest rate and forward foreign currency
swaps used to manage the group's fixed interest rate profile.
(J) BORROWING FACILITIES
Undrawn committed borrowing facilities were:-
2000 1999
----- -----
LM LM
Committed borrowing facilities available.................... 450.0 450.0
Drawn down as at 31 March................................... (10.8) (14.7)
----- -----
Expiring after more than two years.......................... 439.2 435.3
===== =====
F-47
<PAGE>
(K) CURRENCY AND INTEREST RATE PROFILE OF FINANCIAL ASSETS
<TABLE>
<CAPTION>
2000 1999
-------------------------------- --------------------------------
SHORT SHORT
CASH NET TERM CASH NET TERM
OF DEPOSITS OF DEPOSITS
OVERDRAFTS (NOTE 19) TOTAL OVERDRAFTS (NOTE 19) TOTAL
----------- ---------- ----- ----------- ---------- -----
LM LM LM LM LM LM
<S> <C> <C> <C> <C> <C> <C>
CURRENCY:
Sterling......................... 8.6 428.7 437.3 10.7 568.1 578.8
US Dollars....................... 4.1 0.1 4.2 1.6 -- 1.6
EU currencies (other than
Sterling)...................... 13.6 0.2 13.8 2.2 5.3 7.5
Other currencies................. 1.9 -- 1.9 5.9 17.9 23.8
---- ----- ----- ---- ----- -----
28.2 429.0 457.2 20.4 591.3 611.7
LONG TERM DEBTORS:
Sterling......................... -- -- 3.4 -- -- 10.4
---- ----- ----- ---- ----- -----
At 31 March...................... 28.2 429.0 460.6 20.4 591.3 622.1
==== ===== ===== ==== ===== =====
CURRENCY:
Floating rate.................... 28.2 0.6 28.8 20.4 -- 20.4
Fixed rate....................... -- 428.4 428.4 -- 591.3 591.3
LONG TERM DEBTORS:
Nil interest rate................ -- -- 3.4 -- -- 10.4
---- ----- ----- ---- ----- -----
At 31 March...................... 28.2 429.0 460.6 20.4 591.3 622.1
==== ===== ===== ==== ===== =====
</TABLE>
The sterling money market deposits above comprise deposits placed on money
markets from overnight to four months. All the investments in commercial paper
are at fixed interest rates. The weighted average interest rate on commercial
paper and money market deposits is 5.7% (1999 5.5%) and the weighted average
time for which they are held is 55 days (1999 71 days). These assets are held as
part of the financing arrangements of the group.
Cash generated from operating activities and from long term loan drawdowns
in advance of future capital expenditure obligations is invested on a daily
basis in money market investments. These investments include term deposits,
government securities and corporate bonds and papers rated at not less than AA.
(L) FAIR VALUES OF FINANCIAL INSTRUMENTS
In the table below the fair value of short term borrowings, current asset
investments, cash at bank and in hand and bank loans and overdrafts approximates
to book values due to the short maturity of these instruments. The fair value of
long term borrowings has been determined by reference to prices available from
the financial markets on which these borrowings are traded. The fair value
fundamentally represents the change in anticipated future interest rates and
foreign exchange rates, to the dates of maturity of the borrowings, between the
date those long term borrowings were raised and the year end. The preference
shares are listed on the London Stock Exchange and the fair value has been
quoted at the listed price. The fair value of interest rate swaps
F-48
<PAGE>
and combined interest rate and forward foreign currency swaps are based on
market prices of comparable investments.
<TABLE>
<CAPTION>
BOOK FAIR BOOK FAIR
VALUE VALUE VALUE VALUE
NOTE 2000 2000 1999 1999
----- -------- -------- -------- --------
LM LM LM LM
<S> <C> <C> <C> <C> <C>
PRIMARY FINANCIAL INSTRUMENTS HELD OR ISSUED
TO FINANCE THE GROUP'S OPERATIONS:
Short term borrowings........................ (12.6) (12.6) (61.3) (61.3)
Long term borrowings......................... (2,118.7) (2,188.7) (2,124.5) (2,321.0)
Preference shares............................ (206.6) (157.5) (206.6) (254.8)
Other financial liabilities.................. (24.8) (24.8) (22.5) (22.5)
Long term debtors............................ 3.4 3.4 10.4 10.4
Current asset investments.................... 19 429.0 429.0 591.3 591.3
Cash at bank and in hand..................... 34.0 34.0 21.0 21.0
Bank loans and overdrafts.................... 20(a) (5.8) (5.8) (0.6) (0.6)
-------- -------- -------- --------
(1,902.1) (1,923.0) (1,792.8) (2,037.5)
DERIVATIVE FINANCIAL INSTRUMENTS HELD TO
MANAGE THE INTEREST RATE AND CURRENCY
PROFILE AND MATCHED BY PRIMARY FINANCIAL
INSTRUMENTS:
Interest rate swaps.......................... -- (6.3) -- (10.5)
Combined interest rate and forward foreign
currency swaps............................. -- (59.2) -- (51.1)
-------- -------- -------- --------
(1,902.1) (1,988.5) (1,792.8) (2,099.1)
DERIVATIVE FINANCIAL INSTRUMENTS HELD TO
MANAGE THE INTEREST RATE PROFILE AND
NOT MATCHED BY A PRIMARY FINANCIAL INSTRUMENT:
Interest rate swaps.......................... -- (3.5) -- (8.1)
-------- -------- -------- --------
(1,902.1) (1,992.0) (1,792.8) (2,107.2)
======== ======== ======== ========
</TABLE>
The fair value of derivative financial instruments matched by primary
financial instruments relates to long term borrowings with a book value of
L673.4m (1999 L674.5m) which have been included within the primary financial
instruments issued to finance the group's operations at a fair value of L637.6m
(1999 L676.3m), which is the redemption value of those borrowings.
F-49
<PAGE>
(M) LOSSES ON DERIVATIVE FINANCIAL INSTRUMENTS
The fair value of losses on derivative financial instruments are not
recognised in the financial statements. These instruments are held to manage the
group's interest rate and currency exposures and the resultant fixed interest
charges are made in the accounting periods to which they relate. The table below
analyses the composition of the fair value losses (note 24(l)).
UNRECOGNISED
TOTAL NET
GAINS/LOSSES
2000
------------
LM
Losses on hedges at 1 April 1999............................ (69.7)
Gains not included in 1999/2000 income...................... 0.7
-----
Losses on hedges at 31 March 2000........................... (69.0)
=====
Of which:
Losses expected to be included in 2000/01 income............ (0.6)
Losses expected to be included in 2001/02 income or later
years..................................................... (2.9)
Losses not expected to be included in 2001/02 income or
later years............................................... (65.5)
-----
(69.0)
=====
25. CAPITAL COMMITMENTS
GROUP
2000 1999
----- -----
LM LM
Contracted for but not provided in the financial
statements................................................ 155.4 182.5
===== =====
In order to meet additional quality and service standards, together with
growth and new demands, the group has capital investment obligations over the
next five years amounting to approximately L1.13 billion at current prices in
the regulated water and sewerage business and approximately L250 million at
current prices, within the regulated electricity distribution business.
26. LEASING COMMITMENTS
At 31 March 2000 there were revenue commitments, in the ordinary course of
business in the next year relating to the payment of rentals on non-cancellable
operating leases expiring:
GROUP
<TABLE>
<CAPTION>
LAND AND
BUILDINGS OTHERS
----------- -----------
2000 1999 2000 1999
---- ---- ---- ----
LM LM LM LM
<S> <C> <C> <C> <C>
Within one year............................................. 0.5 0.9 2.9 4.7
Between two and five years.................................. 1.4 2.8 4.2 2.6
After five years............................................ 3.5 2.6 0.3 3.0
--- --- --- ----
5.4 6.3 7.4 10.3
=== === === ====
</TABLE>
F-50
<PAGE>
COMPANY
<TABLE>
<CAPTION>
LAND AND
BUILDINGS OTHERS
----------- -----------
2000 1999 2000 1999
---- ---- ---- ----
LM LM LM LM
<S> <C> <C> <C> <C>
Within one year............................................. 0.2 0.2 -- --
After five years............................................ 0.1 0.1 -- --
--- --- -- --
0.3 0.3 -- --
=== === == ==
</TABLE>
27. PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
GROUP COMPANY
------------ -----------
NOTE 2000 1999 2000 1999
---- ---- ----- ---- ----
LM LM LM LM
<S> <C> <C> <C> <C> <C>
Deferred taxation.......................................... (a) 15.0 -- -- --
Group insurance funds...................................... (b) 15.1 12.9 -- --
Reorganisation provision................................... (c) 26.9 47.9 0.4 0.7
Pensions provision......................................... (d) 2.8 2.8 1.5 1.2
Power purchase provision................................... (e) -- 65.7 -- --
Other provisions........................................... (f) 20.1 13.8 0.5 0.5
---- ----- --- ---
79.9 143.1 2.4 2.4
==== ===== === ===
</TABLE>
(A) DEFERRED TAXATION
Group
<TABLE>
<CAPTION>
AMOUNT AMOUNTS
PROVIDED UNPROVIDED
------------ --------------
2000 1999 2000 1999
---- ---- ----- -----
LM LM LM LM
<S> <C> <C> <C> <C>
Tax effect of timing differences:
Excess of tax allowances over depreciation............ -- -- 371.3 355.3
Other timing differences.............................. -- -- (8.7) (20.5)
---- -- ----- -----
-- -- 362.6 334.8
Capital gains rolled over............................... 15.0 -- 7.7 0.2
Earnings retained overseas.............................. -- -- 4.3 3.3
---- -- ----- -----
15.0 -- 374.6 338.3
==== == ===== =====
</TABLE>
F-51
<PAGE>
Company
AMOUNT
UNPROVIDED
------------
2000 1999
---- ----
LM LM
Tax effect of timing differences:
Excess of tax allowances over depreciation................ 0.2 0.2
Other timing differences.................................. (0.6) (0.4)
---- ----
(0.4) (0.2)
==== ====
(B) GROUP INSURANCE FUNDS
GROUP COMPANY
----- -------
LM LM
At 1 April 1999............................................. 12.9 --
Premiums.................................................... 5.7 --
Claims...................................................... (3.1) --
Released to profit and loss account......................... (0.4) --
---- --
At 31 March 2000............................................ 15.1 --
==== ==
Cover against certain risks is provided by Brecon Insurance Company
Limited, a wholly owned subsidiary undertaking of the group.
(C) REORGANISATION PROVISION
<TABLE>
<CAPTION>
NOTE GROUP COMPANY
---- ----- -------
LM LM
<S> <C> <C> <C>
At 1 April 1999............................................. 47.9 0.7
Charged to profit and loss account.......................... 5 35.1 0.5
Released to profit and loss account......................... 5 (10.2) --
Utilised.................................................... (45.9) (0.8)
----- ----
At 31 March 2000............................................ 26.9 0.4
===== ====
</TABLE>
The reorganisation provision includes severance, related pension costs and
property costs for restructuring initiatives which will be completed within the
next 24 months.
F-52
<PAGE>
(D) PENSIONS PROVISION
GROUP COMPANY
----- -------
LM LM
At 1 April 1999............................................. 2.8 1.2
Charged to profit and loss account.......................... 0.4 0.3
Utilised.................................................... (0.4) --
---- ---
At 31 March 2000............................................ 2.8 1.5
==== ===
This provision relates to unfunded directors pensions (note 6 (d)(iv)) and
the "Barber" provisions which are expected to be utilised within the next 24
months.
(E) POWER PURCHASE PROVISION
<TABLE>
<CAPTION>
NOTE GROUP COMPANY
---- ----- -------
LM LM
<S> <C> <C> <C>
At 1 April 1999............................................. 65.7 --
Utilised.................................................... 4 (6.4) --
Released to profit and loss account on disposal of supply
business.................................................. 39 (59.3) --
----- --
At 31 March 2000............................................ -- --
===== ==
</TABLE>
(F) OTHER PROVISIONS
GROUP COMPANY
----- -------
LM LM
At 1 April 1999............................................. 13.8 0.5
Charged to profit and loss account.......................... 10.1 --
Utilised.................................................... (3.8) --
---- ---
At 31 March 2000............................................ 20.1 0.5
==== ===
These provisions principally relate to leasehold property provisions,
onerous contracts, uninsured losses and other claims arising which are expected
to be utilised within the next 16 years.
28. ACCRUALS AND DEFERRED INCOME
GROUP
LM
At 1 April 1999............................................. 155.3
Receivable during the year.................................. 10.5
Released to profit and loss account......................... (6.0)
-----
At 31 March 2000............................................ 159.8
=====
F-53
<PAGE>
Deferred income represents grants and customer contributions received in
respect of investment in non-infrastructure fixed assets. These grants are
amortised to the profit and loss account over the estimated useful economic life
of the related assets.
29. CALLED UP SHARE CAPITAL
2000 1999
----- -----
LM LM
AUTHORISED:
166,666,667 ordinary shares of 120p each (1999
166,666,667).............................................. 200.0 200.0
209,000,000 cumulative redeemable preference shares (7.875%
net) of L1 each (redeemable 31 July 2013) (1999
209,000,000).............................................. 209.0 209.0
----- -----
409.0 409.0
===== =====
ALLOTTED, CALLED UP AND FULLY PAID:
154,710,591 ordinary shares of 120p each (1999
151,018,332).............................................. 185.6 181.2
207,181,776 cumulative redeemable preference shares (7.875%
net) of L1 each (redeemable 31 July 2013) (1999
207,181,776).............................................. 207.2 207.2
----- -----
392.8 388.4
===== =====
All cumulative redeemable preference shares are redeemable at par on 31
July 2013. These shares are non-voting and have a preferential right to return
of capital on a winding up.
Ordinary shares were issued in the year resulting from the exercise of
share options under the Hyder and South Wales Electricity plc employee sharesave
and executive share option schemes at prices between 354p and 676p per share.
In total 3,692,259 ordinary shares, with an aggregate nominal value of
L4.4m were issued in the year. The cash consideration received in respect of the
issue of 5,957 ordinary shares was L37,000. Included within the total are
3,686,302 ordinary shares with an aggregate nominal value of L4.4m issued in
relation to the scrip dividend plan for which no cash consideration was
received.
30. EMPLOYEE SHARE SCHEMES
(A) HYDER PLC SHARE SCHEMES
The company has four Inland Revenue approved share option schemes for its
employees and those of subsidiary undertakings. There is also an unapproved
scheme (the Hyder overseas share plan) which extends share scheme arrangements
for the benefit of overseas employees resident outside of the United Kingdom.
The employee sharesave scheme is savings related and the share options are
exercisable within six months of completion of a three, five or seven year save
as you earn contract. Employee sharesave options are fixed at the closing mid
market value on the day preceding the date of grant less 20% discount. The
executive share option scheme is a discretionary scheme for senior employees
under which options are granted at fixed prices at the closing mid market value
on the day preceding the date of grant. Executive share options granted after
July 1993 are performance related and can only be exercised if the increase in
the share price of an ordinary share exceeds the increase in the Retail
F-54
<PAGE>
Prices Index plus 2% per annum compound (pro rata for any period of less than
one year) in the period between the date of grant and the exercise date. All
executive share options are exercisable between three and ten years from the
date of grant. No new options may be granted to executive directors under this
scheme.
Options granted but not yet exercised under these schemes at 31 March 2000
together with their exercise prices and dates are shown below:
<TABLE>
<CAPTION>
NUMBER OF 120P
ORDINARY
DATE OPTION PRICE SHARES
OPTION NORMAL DATE OF PER SHARE ---------------------
GRANTED EXERCISE (PENCE) 2000 1999
--------- --------------------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
EMPLOYEE SHARESAVE
SCHEME................. Dec 1992 Mar 2000 - Aug 2000 425 - 427 103,830 321,180
Sept 1994 Oct 1999 - Mar 2000 522 - 525 -- 358,333
Sept 1994 Oct 2001 - Mar 2002 522 - 525 143,096 165,911
Dec 1994 Feb 2000 - Aug 2000 522 - 525 55,240 243,724
Dec 1994 Feb 2002 - Aug 2002 522 - 525 87,153 107,021
Jul 1997 Sep 2000 - Feb 2001 650 525,180 734,208
Jul 1997 Sep 2002 - Feb 2003 650 1,780,396 2,477,291
--------- ---------
2,694,895 4,407,668
--------- ---------
EXECUTIVE SHARE OPTION
SCHEME.............. Jul 1991 Jul 1994 - Jul 2001 354 23,021 24,049
Jul 1993 Jul 1996 - Jul 2003 563 55,909 55,909
Aug 1993 Aug 1996 - Aug 2003 648 13,937 21,146
Jan 1994 Jan 1997 - Jan 2004 716 151,442 151,442
Jan 1995 Jan 1998 - Jan 2005 676 16,928 21,857
--------- ---------
261,237 274,403
--------- ---------
OVERSEAS SHARE PLAN.... Oct 1997 Nov 2000 - Apr 2001 841 38,749 67,280
Oct 1997 Nov 2002 - Apr 2003 841 14,424 32,910
--------- ---------
53,173 100,190
--------- ---------
3,009,305 4,782,261
========= =========
</TABLE>
No options were granted during the year ended 31 March 2000. All options
and rights over Hyder plc ordinary shares held under Inland Revenue approved
share schemes can be exercised early in certain exceptional circumstances such
as retirement or redundancy.
During the year ended 31 March 1999 two Inland Revenue approved profit
sharing schemes were established, one for the benefit of staff employed by Hyder
Utilities (the utilities scheme) and a separate scheme for the benefit of
employees of Hyder plc (the plc scheme). The number of Hyder ordinary shares
appropriated under these schemes in July 1998 and held in trust at 31 March 2000
were 146,263 (1999 72,211) ordinary shares under the utilities scheme and 3,748
(1999 1,688) ordinary shares under the plc scheme. All shares are held in trust
under the rules of the schemes. A further appropriation of shares will take
place in July 2000 subject to scheme targets and eligibility criteria being met.
F-55
<PAGE>
(B) HYDER PLC LONG TERM INCENTIVE PLAN (L-TIP)
The company L-Tip is available to executive directors and selected senior
executives. Full details of this scheme are set out in note 6. The ordinary
shares which are conditionally allocated under the L-Tip are purchased in the
market by an employee benefit trust with funds allocated by the company. The
trustees have waived dividends on the shares held.
A second L-Tip was established in 1999 for the benefit of a director, J M
James, who does not participate in the main L-Tip. Details are disclosed in note
6.
(C) QUALIFYING EMPLOYEE SHARE OPTION TRUST (QUEST)
In March 1998 the company established a qualifying employee share option
trust (Quest) as a vehicle to procure ordinary shares in Hyder plc to meet in
part the obligations of the company pursuant to valid exercises of options under
the rules of the Hyder and South Wales Electricity sharesave schemes. At 31
March 2000 Hyder Share Scheme Trustee (2) Limited, as trustee, held 3,261,565
ordinary shares (1999 3,437,499) with a value, based on the average closing
price of the shares in the thirty days up to 7 July, being the latest
practicable date prior to the directors' approving the financial statements, of
L10.4m (1999 market value L27.0m). If the shares are transferred at this value
otherwise than for a qualifying purpose of the Quest, an income tax charge of
L5.3m will be payable by Hyder Share Scheme Trustees (2) Limited.
The accounts include the shares held by the Quest, which are included as
fixed asset investments. Under the rules of the Quest dividends have been waived
by the trustee. The expenses of Quest which are borne by the group are expensed
as incurred. The purchase of shares by Hyder Share Scheme Trustee (2) Limited as
trustee was financed by loans from Hyder plc.
Details of share options outstanding under the sharesave schemes are stated
in notes 30(a) above.
31. SHARE PREMIUM ACCOUNT
GROUP COMPANY
----- -------
LM LM
At 1 April 1999............................................. 137.4 137.4
Nominal value of ordinary shares issued under scrip dividend
in lieu of cash dividend (note 29)........................ (4.4) (4.4)
----- -----
At 31 March 2000............................................ 133.0 133.0
===== =====
F-56
<PAGE>
32. RESERVES
(A) PROFIT AND LOSS ACCOUNT
GROUP COMPANY
----- -------
LM LM
At 1 April 1999............................................. 370.8 443.5
Profit/(loss) retained for the year......................... 48.1 (152.3)
Goodwill written back on disposal........................... 84.0 --
Scrip dividend issued in lieu of cash dividend.............. 21.5 21.5
Foreign currency translation losses......................... (1.3) (0.2)
Reserves adjustment on acquisition of additional interest in
subsidiary................................................ (0.7) --
----- ------
At 31 March 2000............................................ 522.4 312.5
===== ======
The cumulative goodwill written off directly to reserves is L544.3m (1999
L628.3m).
In accordance with the group's accounting policy, Lnil of net exchange
differences (1999 L0.2m net gains) on foreign currency loans which match
investments have been offset in reserves.
(B) CAPITAL RESERVE
GROUP COMPANY
----- -------
LM LM
At 1 April 1999 and 31 March 2000........................... -- 9.6
== ===
The capital reserve arose on the acquisition of South Wales Electricity plc
and comprised the fair value of the options granted by the company to South
Wales Electricity plc share option holders less the option price to be received
by the company on the exercise of those options.
(C) INVESTMENT REVALUATION RESERVE
GROUP COMPANY
----- -------
LM LM
At 1 April 1999............................................. 1.2 --
Revaluations (note 15)...................................... 1.5 --
--- --
At 31 March 2000............................................ 2.7 --
=== ==
(D) CAPITAL REDEMPTION RESERVE
On 30 December 1994 the group and company created a capital redemption
reserve of L1 following the redemption at par of the special rights redeemable
preference share of L1.
F-57
<PAGE>
33. EQUITY MINORITY INTEREST
GROUP COMPANY
----- -------
LM LM
At 1 April 1999............................................. 2.6 --
Adjustment to fair value of assets.......................... (0.4) --
Purchase of minority interest............................... (1.5) --
Recognition of results for the year......................... 0.2 --
Currency translation differences............................ (0.2) --
---- --
At 31 March 2000............................................ 0.7 --
==== ==
34. NET CASH INFLOW FROM OPERATING ACTIVITIES
<TABLE>
<CAPTION>
2000 1999 1998
----- ----- -----
LM LM LM
<S> <C> <C> <C>
Continuing operations:
Operating profit............................................ 164.1 270.6 239.6
Non cash element of exceptional items (excluding
reorganisation costs)..................................... 73.3 -- --
Depreciation of tangible fixed assets....................... 136.8 122.8 100.4
Amounts written off tangible fixed assets................... -- 7.1 1.5
Amounts provided on intangible fixed assets and fixed asset
investments............................................... 1.1 2.0 1.5
Amortisation of grants and contributions.................... (6.0) (5.9) (5.5)
Loss/(profit) on sale of fixed assets....................... 0.5 -- (0.8)
Net increase in stocks...................................... (1.7) (1.9) (0.6)
Net (increase)/decrease in debtors.......................... (34.0) 1.2 (12.2)
Net increase/(decrease) in creditors........................ 46.5 4.0 (13.0)
Contribution from/(to) insurance fund....................... 2.3 0.1 (2.8)
Reorganisation provisions................................... (20.5) (11.2) 10.6
Contributions to pension fund............................... -- (0.2) (0.1)
Other provisions -- storm damage............................ -- (6.5) --
Other provisions............................................ 6.3 0.4 --
----- ----- -----
Net cash inflow from continuing operating activities........ 368.7 382.5 318.6
----- ----- -----
Discontinued operations:
Operating (loss)/profit..................................... (3.7) 26.0 5.1
Non cash element of exceptional items (excluding
reorganisation costs)..................................... 12.8 -- --
Depreciation of tangible fixed assets....................... 3.6 1.6 0.9
Net increase in stocks...................................... (0.3) -- --
Net decrease/(increase) in debtors.......................... 1.1 (29.0) (11.5)
Net increase in creditors................................... 1.9 9.9 12.8
Contribution (to)/from insurance fund....................... (0.1) 0.1 --
</TABLE>
F-58
<PAGE>
<TABLE>
<CAPTION>
2000 1999 1998
----- ----- -----
LM LM LM
<S> <C> <C> <C>
Reorganisation provisions................................... (0.5) -- (0.9)
Power purchase provision release............................ (6.4) (7.3) --
Other provisions............................................ (0.5) -- --
----- ----- -----
Net cash inflow from discontinued operating activities...... 7.9 1.3 6.4
----- ----- -----
Net cash inflow from operating activities................... 376.6 383.8 325.0
===== ===== =====
</TABLE>
Debtors have increased in the continuing operations in 2000 principally due
to amounts owing to the electricity distribution business by the energy supply
business which in 1999 and 1998 were intercompany balances and eliminated in the
group accounts.
35. ANALYSIS OF NET DEBT
(A) MOVEMENTS IN THE YEAR
<TABLE>
<CAPTION>
CASH LESS CURRENT DEBT AND
BANK ASSET FINANCE
OVERDRAFTS INVESTMENTS LEASES TOTAL
---------- ----------- -------- --------
LM LM LM LM
<S> <C> <C> <C> <C>
At 1 April 1999.................................. 20.4 591.3 (2,185.8) (1,574.1)
Consolidated cashflow statement.................. 7.8 (162.0) 55.7 (98.5)
Bond issue costs written back.................... -- -- (0.6) (0.6)
Currency translation differences................. -- (0.3) (0.6) (0.9)
---- ------ -------- --------
At 31 March 2000................................. 28.2 429.0 (2,131.3) (1,674.1)
==== ====== ======== ========
</TABLE>
(B) YEAR END RECONCILIATION
<TABLE>
<CAPTION>
NOTE 2000 1999
----- -------- --------
LM LM
<S> <C> <C> <C>
Loans and finance lease obligations:
Amounts falling due within one year......................... 20(a) (12.6) (61.3)
Amounts falling due after more than one year................ 20(b) (2,118.7) (2,124.5)
-------- --------
35(a) (2,131.3) (2,185.8)
Current asset investments................................... 19 429.0 591.3
Cash at bank and in hand.................................... 34.0 21.0
Bank loans and overdrafts................................... 20(a) (5.8) (0.6)
-------- --------
35(a) (1,674.1) (1,574.1)
======== ========
</TABLE>
F-59
<PAGE>
36. ANALYSIS OF CHANGES IN FINANCING IN THE YEAR
<TABLE>
<CAPTION>
SHARE CAPITAL LOANS & FINANCE
(INCLUDING PREMIUM) LEASE OBLIGATIONS
-------------------- ----------------------
2000 1999 2000 1999
------ ------ ------- -------
LM LM LM LM
<S> <C> <C> <C> <C>
At 1 April.................................. 525.8 525.3 2,185.8 1,575.1
New loans and bonds......................... -- -- 2.0 529.4
New finance leases.......................... -- -- -- 92.1
Loans acquired with subsidiaries............ -- -- -- 3.4
Loan notes issued on acquisition of
subsidiaries.............................. -- -- -- 1.7
Loan repayments............................. -- -- (57.5) (9.0)
Finance lease repayments.................... -- -- (0.2) (0.5)
Bond issue costs written back............... -- -- 0.6 0.1
Proceeds from the issue of ordinary
shares.................................... -- 0.5 -- --
Expenses of issuing bonds................... -- -- -- (6.6)
Currency translation difference............. -- -- 0.6 0.1
----- ----- ------- -------
At 31 March................................. 525.8 525.8 2,131.3 2,185.8
===== ===== ======= =======
</TABLE>
37. RECONCILIATION OF NET CASH FLOW TO INCREASE IN NET DEBT
<TABLE>
<CAPTION>
NOTE 2000 1999
----- -------- --------
LM LM
<S> <C> <C> <C>
Increase in cash as per cashflow statement.................. 7.8 28.9
Decrease/(increase) in loans and finance lease
obligations............................................... 35(a) 55.7 (605.4)
(Decrease)/increase in liquid resources held as current
asset investments......................................... 35(a) (162.0) 289.7
-------- --------
Increase in net debt resulting from cash flows.............. (98.5) (286.8)
Acquired with subsidiaries.................................. -- (3.4)
Issued on acquisition of subsidiaries....................... -- (1.7)
Bond issue costs written back............................... (0.6) (0.1)
Currency translation differences............................ 35(a) (0.9) 0.1
-------- --------
Increase in net debt........................................ (100.0) (291.9)
At 1 April.................................................. (1,574.1) (1,282.2)
-------- --------
At 31 March................................................. (1,674.1) (1,574.1)
======== ========
</TABLE>
38. ACQUISITION
During the year the group increased its shareholding in AcerPlan GmbH from
56% to 89%. These operations have been integrated into the continuing activities
of the group. The additional shareholding of 33% resulted from a further
consideration of L1.7m, of which L0.2m is deferred consideration.
F-60
<PAGE>
39. DISPOSALS OF GROUP OPERATIONS
On 17 February 2000 the group sold SWALEC Gas Limited and the electricity
supply business of South Wales Electricity plc for a consideration of L106.8m.
On 31 March 2000 the group also disposed of Environmental Laboratories, an
unincorporated division of Hyder Consulting Limited, for a consideration of
L11.4m of which the final payment of L11.2m was received on 7 April 2000. The
values of the assets disposed of were as follows:
LM
Tangible fixed assets....................................... 13.9
Debtors..................................................... 102.7
Work in progress............................................ 1.1
Cash........................................................ 1.0
Creditors................................................... (84.1)
Provisions arising on disposal.............................. 1.3
Tangible fixed assets written off........................... 8.5
Transaction costs........................................... 2.1
Goodwill previously written off to reserves................. 84.0
Power purchase provision released on disposal............... (59.3)
-----
71.2
Profit on disposal.......................................... 47.0
-----
118.2
=====
CONSIDERATION:
Cash received in the year................................... 107.0
Cash received on 7 April 2000............................... 11.2
-----
118.2
=====
The net inflow of cash arising from the above disposals was as follows:
LM
Cash received............................................... 107.0
Cash released............................................... (1.0)
Transaction costs........................................... (2.1)
-----
103.9
=====
The amounts included in the consolidated profit and loss account and
cashflows up to the date of disposal in respect of the energy supply business
and Environmental Laboratories are shown in notes 2, 4 and 34.
The deferred tax charge of L15.0m in respect of the above disposals relates
to capital gains rolled over (note 27(a)).
40. DIRECTORS' AND OFFICERS' LOANS AND TRANSACTIONS
No loans or credit transactions with any directors, officers or connected
persons subsisted during the year or were outstanding at the end of the year.
F-61
<PAGE>
41. PENSION SCHEMES
The group operates a number of pension schemes both in the UK and overseas.
The assets of each pension scheme are held separately from the assets of the
group and are administered by trustees. The principal schemes are defined
benefit schemes in the UK -- the Hyder Water Pension Scheme (HWPS), the Water
Mirror Image Pension Scheme (WMIS), the Electricity Supply Pension Scheme (ESPS)
and the Acer Group Pension Scheme (AGPS).
The employer's contributions and pension cost under the accounting standard
Statement of Standard Accounting Practice No. 24 "Accounting for Pension Costs"
(SSAP24) for the HWPS and WMIS has been assessed in accordance with the advice
of William M. Mercer Limited, consulting actuaries, using the projected unit
method for HWPS and the attained age method for WMIS. For this purpose the
actuarial assumptions adopted are based upon investment growth of 6.5% per
annum, pay growth of 4.5% per annum and increases to pensions in payment and
deferred pensions of 3% per annum.
The last actuarial valuations for HWPS and WMIS were carried out as at 31
March 1998 with the market values being L324.6m and L99.9m respectively. Using
the assumptions adopted for SSAP 24, the actuarial value of assets represented
113% for HWPS and 118% for WMIS of the value of the accrued benefits after
allowing for expected future earnings increases. In deriving the pension cost
under SSAP24 the surpluses in HWPS and WMIS are spread over the future working
lifetime of employees.
The employer's contributions and pension cost for the South Wales section
of the ESPS has been assessed in accordance with advice from Bacon and Woodrow,
consulting actuary, at 31 March 1998, using the attained age actuarial method.
For this purpose the principal actuarial assumptions adopted were an investment
growth of 8.5% per annum, pay growth of 6% per annum and increases to pensions
in payment of 4.5% per annum.
The latest actuarial valuation was carried out at 31 March 1998, with the
market value of the assets being L526.3m. Using the assumptions adopted for
SSAP24 the actuarial value of the assets represented 110% of the value of the
accrued benefits after allowing for expected future earnings increases. In
deriving the pension cost under SSAP24 the surplus in the scheme is being
recognised as a reduction to pension cost over the future working lifetime of
the employees and to cover short term early retirement costs.
The employer's contributions and pension cost for AGPS, being the principal
UK scheme for Hyder Consulting Group Limited, has been assessed in accordance
with the advice of Buck Consultants Limited using the projected unit method. For
this purpose the main actuarial assumptions used are based upon investment
growth of 7.5% per annum, pay growth of 4.5% per annum, and increases to
pensions in payment of 3.5% per annum.
The latest actuarial valuation was carried out as at 1 May 1999 with the
market value of the assets being L55.0m. Using the assumptions adopted for
SSAP24 the actuarial value of the assets represented 94% of the value of the
accrued benefits after allowing for expected future earnings increases. In
deriving the pension cost under SSAP24 the deficit in the scheme is being spread
over the future working lifetime of employees by way of increased employer's
contribution rates.
The total group pension cost for the period was L14.7m (1999 L14.5m). A
prepayment of pension costs of L8.5m (1999 L6.6m) is included in note 18 within
prepayments and accrued income.
F-62
<PAGE>
As a consequence of changes made by the Finance Act 1989 the group is unable to
provide fully for approved pension for some executive directors who have joined
the group since 1989. The group has therefore made alternative arrangements in
these cases. Provision for the cost of unfunded pension is included in the
charge for the period on a basis consistent with SSAP 24. These arrangements
will not result in any individual executive director receiving any greater
benefit than would have applied if the full approved provision had been
possible.
42. CONTINGENT LIABILITIES
GROUP
In accordance with normal commercial practice, various group companies have
provided a number of third party guarantees in relation to trading or investment
obligations arising from contracts entered into in the normal course of
business. In addition guarantees of L12m (1999 Lnil) have been provided in
respect of third party debt obligations.
COMPANY
The company has provided guarantees in respect of finance lease and loan
facilities granted to its subsidiary Dwr Cymru Cyfyngedig amounting to L464.8m
(1999 L500.4m). The loan and finance lease facilities are fully drawn down and
therefore no further guarantees are required.
The company is a participant in a cash pooling arrangement operated by
National Westminster Bank Plc in the United Kingdom. The company has guaranteed
the bank overdraft balances of the participating companies, all of which are
subsidiaries of the company, subject to a maximum amount equal to the company's
own cash balance with the bank. At 31 March 2000 the overdrafts in subsidiary
companies in the cash pooling arrangement amounted to L29.9m (1999 L29.8m).
The company, as ultimate holding company, has provided third party
guarantees of L35.5m (1999 L18.8m) in relation to investment obligations entered
into by subsidiary companies. The company has also provided a number of third
party guarantees in relation to contractual obligations entered into by
subsidiary companies in the normal course of business.
43. ELAN AQUEDUCT
In 1984 Welsh Water Authority entered into a conditional sale and purchase
agreement with Severn Trent Water Authority for the sale of the aqueduct and
associated works by which the bulk supply to Severn Trent reservoirs is
conveyed.
The sum of L31.7m, representing the consideration for the conditional sale,
has been invested in a trust fund. The principal function of the fund was to
provide an income to Welsh Water Authority, whilst preserving the capital value
of the fund in real terms. Welsh Water Authority's interest in this fund was
vested in Dwr Cymru Cyfyngedig under the provisions of the Water Act 1989. The
assets of the fund are not included in these financial statements.
F-63
<PAGE>
44. PRINCIPAL GROUP UNDERTAKINGS
<TABLE>
<CAPTION>
COUNTRY OF
INCORPORATION, SHAREHOLDING
REGISTRATION ---------------------
AND OPERATION DIRECTLY INDIRECTLY
----------------- -------- ----------
% %
<S> <C> <C> <C>
SUBSIDIARY UNDERTAKINGS
UTILITY ACTIVITIES
Hyder Utilities (Holdings) Limited.................. England and Wales 100
REGULATED WATER AND SEWERAGE ACTIVITIES
Dwr Cymru Cyfyngedig.............................. England and Wales 100
Welsh Water Utilities Finance PLC.............. England and Wales 100
Hyder Utilities (Operations) Limited........... England and Wales 50
REGULATED ELECTRICITY DISTRIBUTION ACTIVITIES
South Wales Electricity plc (distribution
business)...................................... England and Wales 100
Hyder Utilities (Operations) Limited........... England and Wales 50
MANAGED SERVICES ACTIVITIES
Hyder Services Limited............................ England and Wales 100
INFRASTRUCTURE ACTIVITIES
Hyder Consulting Group Limited...................... England and Wales 100
Hyder Consulting Limited.......................... England and Wales 100
Hyder Consulting (Pte) Limited.................... Singapore 100
Hyder Australia Pty Limited....................... Australia 100
Hyder Consulting Limited.......................... Hong Kong 100
Freeman Fox Group Limited......................... Hong Kong 100
Hyder Industrial Group Limited...................... England and Wales 100
Hyder Industrial Limited.......................... England and Wales 100
Hyder Holdings Inc................................ USA 100
Hyder Investments Limited........................... England and Wales 100
Hyder Overseas Investments Limited................ England and Wales 100
Hyder Infrastructure Management Limited............. England and Wales 100
Phoenix Electrical Company Limited................ England and Wales 100
OTHER ACTIVITIES
Brecon Insurance Co Limited......................... Guernsey 100
</TABLE>
F-64
<PAGE>
JOINT VENTURES AND ASSOCIATED UNDERTAKINGS
<TABLE>
<CAPTION>
TOTAL JOINT VENTURE
COUNTRY OF /ASSOCIATE GROUP
INCORPORATION COMPANY'S EQUITY SHAREHOLDING
----------------- ------------------- ------------
<S> <C> <C> <C>
JOINT VENTURES
UK Highways M40 (Holdings) plc........... England and Wales
Ordinary shares of L1 each............. L11.0m 44.0%
UK Highways A55 (Holdings) Limited....... England and Wales
Ordinary shares of L1 each............. L0.5m 45.0%
Subordinated loan stock................ L9.3m 45.0%
City Greenwich Lewisham Link Rail plc.... England and Wales
Ordinary shares of L1 each............. L1.5m 40.0%
Loan stock............................. L11.0m 40.0%
Tieyhtio Nelostie Oy..................... Finland
Shares of Fmk 100 each................. Fmk 50,000 43.0%
Loan stock............................. Fmk 50m 43.0%
Laing Hyder plc.......................... England and Wales
Ordinary shares of L1 each............. L4.0m 50.0%
Loan stock............................. L0.5m 50.0%
CountyRoute Limited...................... England and Wales
Ordinary shares........................ L0.5m 50.0%
Loan stock............................. L9.4m 50.0%
Citylink Telecommunications (Holdings)
Limited................................ England and Wales
Ordinary shares........................ L10.7m 19.5%
Loan stock............................. L32.2m 19.5%
Coastal Clearwater (Holdings) Limited.... England and Wales
Ordinary shares........................ L0.1m 50.0%
Loan stock............................. L0.9m 50.0%
ASSOCIATED UNDERTAKINGS
The China Water Co Ltd................... Cayman Islands
Shares of US$0.50 each................. US$64.8m 20.0%
</TABLE>
The above companies are franchise operators within the highways, railways
and telecommunications sectors, with the exception of The China Water Co Ltd and
Coastal Clearwater (Holdings) Limited which are infrastructure investment
businesses operating in the Chinese and UK water and waste water sectors and
Laing Hyder plc, which is an infrastructure investment business operating in the
UK Public Private Partnership accommodation sector.
All the above companies are, in the opinion of the directors, material to
the group. A complete list of all subsidiary, joint venture and associate
companies is available from the Company Secretary.
F-65
<PAGE>
45. SUMMARY OF DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES ("GAAP")
The Group's consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United Kingdom
("UK GAAP"). Such principles differ in certain respects from generally accepted
accounting principles in the United States ("US GAAP"). A summary of principal
differences applicable to the group is set out below. While this is not a
comprehensive summary of all differences between UK and US GAAP, other
differences would not have a significant effect on the consolidated net income
or shareholders equity of the group.
RECONCILIATION OF PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION UNDER UK GAAP
TO NET INCOME UNDER US GAAP
<TABLE>
<CAPTION>
EXPLANATION
REFERENCE 2000 1999
----------- ------ ------
LM LM
<S> <C> <C> <C>
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION UNDER UK
GAAP........................................................ 74.8 197.4
Less: Equity minority interest.............................. (xi) (0.2) (--)
: Dividend on redeemable preferred stock................ (x) (16.4) (16.4)
------ ------
NET INCOME BEFORE US GAAP ADJUSTMENTS....................... 58.2 181.0
US GAAP adjustments:
Depreciation of infrastructure assets..................... (i) (13.0) (11.5)
Pensions.................................................. (ii) 19.9 40.9
Goodwill amortization - continuing operations............. (iii) (20.0) (19.9)
Goodwill amortization - discontinued operations........... (iii) (1.8) (2.1)
Profit on disposal of business and investments in
associates............................................. (iv) 8.6 0.6
Impairment of goodwill.................................... (v) (432.0) --
Deferred taxation -- application of FAS 109............... (vi) (17.6) (3.6)
Investment properties -- depreciation..................... (vii) (0.2) (0.2)
Capitalised interest...................................... (viii) 33.5 31.0
Depreciation on capitalised interest...................... (viii) (5.5) (4.4)
Own shares -- impairment in value......................... (xii) 10.0 --
Business development costs................................ (xiii) (3.3) (0.8)
Deferred compensation..................................... (xv) (1.5) (1.6)
Restructuring costs....................................... (xvi) (5.8) (5.0)
Financial instruments..................................... (xvii) 4.6 1.4
Deferred tax on US GAAP adjustments....................... (6.4) (14.7)
------ ------
NET (LOSS)/INCOME UNDER US GAAP............................. (372.3) 191.1
====== ======
</TABLE>
F-66
<PAGE>
<TABLE>
<CAPTION>
EXPLANATION
REFERENCE 2000 1999
----------- ------ -----
LM LM
<S> <C> <C> <C>
RECONCILIATION OF NET (LOSS)/INCOME IN ACCORDANCE WITH US
GAAP
Net (loss)/income from continuing operations.............. (413.1) 172.4
Net (loss)/income from discontinued operations (net of tax
benefit and expense: L0.7m and L8.4m, respectively).... (xviii) (1.5) 18.7
Net income from sale of discontinued operations (net of
tax expense: L13.3m)................................... (xviii) 42.3 --
------ -----
Net (loss)/income under US GAAP........................... (372.3) 191.1
====== =====
</TABLE>
EARNINGS PER SHARE
<TABLE>
<CAPTION>
EXPLANATION
REFERENCE 2000 1999
----------- ------- -------
(PENCE) (PENCE)
<S> <C> <C> <C>
AMOUNTS IN ACCORDANCE WITH US GAAP
Basic earnings per ordinary share:.......................... (xix)
Continuing operations..................................... (276.6) 117.5
Discontinued operations................................... 27.3 12.7
Net (loss)/income........................................... (249.3) 130.2
Diluted earnings per ordinary share:........................ (xix)
Continuing operations..................................... (276.6) 116.7
Discontinued operations................................... 27.3 12.6
Net (loss)/income........................................... (249.3) 129.3
</TABLE>
F-67
<PAGE>
RECONCILIATION OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
EXPLANATION
REFERENCE 2000 1999
----------- ------- -------
LM LM
<S> <C> <C> <C>
NET ASSETS UNDER UK GAAP.................................... 1,051.6 900.4
Less: Equity minority interests............................. (xi) (0.7) (2.6)
------- -------
SHAREHOLDERS' FUNDS UNDER UK GAAP........................... 1050.9 897.8
US GAAP adjustments:
Infrastructure assets....................................... (i) (83.5) (70.5)
Pensions.................................................... (ii) 189.0 169.1
Goodwill.................................................... (iii) 7.5 536.7
Deferred taxation........................................... (vi) (457.1) (433.4)
Investment properties....................................... (vii) (3.6) (1.9)
Capitalised interest........................................ (viii) 182.3 148.8
Depreciation on capitalised interest........................ (viii) (21.7) (16.2)
Ordinary dividends.......................................... (ix) -- 49.7
Redeemable preferred stock.................................. (x) (206.6) (206.6)
Own shares.................................................. (xii) (10.3) (21.7)
Business development costs.................................. (xiii) (4.1) (0.8)
Listed investments.......................................... (xiv) 6.4 16.7
Deferred compensation -- cumulative expense................. (xv) 4.8 3.3
Deferred compensation -- unrecognized expense............... (xv) 2.4 3.9
Deferred compensation -- increase to share premium.......... (xv) (7.2) (7.2)
Restructuring costs......................................... (xvi) 2.0 7.8
Financial instruments....................................... (xvii) (3.5) (8.1)
------- -------
SHAREHOLDERS' FUNDS UNDER US GAAP........................... 647.7 1,067.4
======= =======
</TABLE>
(I) DEPRECIATION OF INFRASTRUCTURE ASSETS
Under UK GAAP, depreciation is not provided on infrastructure assets which
increases capacity or enhances the network because the network of systems is
required to be maintained in perpetuity and therefore has no finite economic
life. Expenditures on maintaining the operating capability of the network in
accordance with defined standards of service are capitalized as fixed asset
additions and depreciated each year based on the level of annual expenditures
required to maintain the operating capability of the network based on the
independently certified asset management plan. Under US GAAP, depreciation is
required to be charged on all assets, excluding land, and infrastructure assets
are written off in equal annual installments over 85 years, being the estimated
economic life under US GAAP. The difference between amounts depreciated under UK
GAAP for capitalized maintenance and amounts which would be expensed under US
GAAP for maintenance are not material.
(II) PENSIONS
Under UK GAAP the cost of providing pension benefits under defined benefit
pension schemes is expensed over the average expected service lives of eligible
employees and is aimed to produce an estimate of cost based on long-term
F-68
<PAGE>
actuarial assumptions. Variations from the regular pension cost arising from,
for example, experience deficiencies or surpluses, are charged or credited to
the profit and loss account over the expected average remaining service lives of
current employees in the schemes.
Under US GAAP the annual pension cost for such schemes comprises the
estimated cost of benefits accruing in the period as determined in accordance
with SFAS 87, which requires readjustment of the significant actuarial
assumptions annually to reflect current market and economic conditions.
(III) GOODWILL, CAPITALISATION AND AMORTISATION
Both UK GAAP and US GAAP require purchase consideration to be allocated to
the net assets acquired at their fair value on the date of acquisition, with the
difference between the consideration paid and the fair value of the identifiable
net assets acquired recognized as goodwill. Under applicable UK GAAP, goodwill
and negative goodwill arising on acquisitions subsequent to April 1, 1997 are
capitalised and amortised over their useful economic lives, not to exceed 20
years. Goodwill arising on acquisitions prior to that date were written off
against reserves. Under US GAAP, goodwill is capitalised and amortised over its
estimated useful life, not to exceed 40 years. Prior to 1 April 1997, Hyder
acquired South Wales Electricity plc, an electricity supply and distribution
business, and the Acer Group Limited, an engineering consultancy business.
A summary of the movements in the goodwill balance during fiscal year 2000
is as follows:
Goodwill, net of amortization, at December 31, 1999......... 536.7
Amortization of goodwill -- continuing operations........... (20.0)
Amortization of goodwill -- discontinued operations......... (1.8)
Goodwill allocated to sale of discontinued operations....... (75.4)
Impairment of goodwill(v)................................... (432.0)
-------
Goodwill, net of amortization, at December 31, 2000......... 7.5
=======
(IV) PROFITS ON DISPOSAL OF BUSINESSES AND INVESTMENTS IN ASSOCIATES
Under UK GAAP, on the subsequent disposal or termination of a previously
acquired business, the profit or loss on disposal is calculated after charging
the amount of any related goodwill previously taken directly to reserves for UK
GAAP. Under US GAAP, unamortized goodwill is taken into account in calculating
profits or losses on disposal.
(V) GOODWILL IMPAIRMENT
Under UK GAAP, goodwill previously written off to reserves is not charged
to profit and loss account if impaired. Under US GAAP, Hyder reviews long-lived
assets for potential impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets held for use is measured by comparing the carrying
amount of an asset to the undiscounted estimated future cash flows expected to
be generated by the asset. In estimating expected future cash flows for
determining whether an asset is impaired, assets are grouped at the lowest level
for which there are identifiable cash flows that are largely independent of
F-69
<PAGE>
the cash flows of other groups of assets. If any such assets are considered to
be impaired, the impairment to be recognized is the amount by which the carrying
amount of the assets exceeds its fair value.
Following the electricity price review, effective from 1 April 2000, the
Group reviewed its long lived assets and goodwill for impairment. The impairment
review resulted in identification of an impairment of the goodwill associated
with the acquisition of South Wales Electricity plc.
(VI) DEFERRED TAXATION
Under UK GAAP deferred taxation is calculated, using the liability method,
in respect of timing differences arising from the difference between accounting
and taxable profits. Provision is made for deferred taxation only to the extent
that it is probable that a liability or asset will crystallize in the
foreseeable future.
Under US GAAP deferred tax is provided for on a full liability basis. Under
the full liability method deferred tax assets or liabilities are recognized for
differences between the financial and tax basis of assets and liabilities and
for tax loss carry forwards at the statutory rate at each reporting date. A
valuation allowance is established when it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The deferred
income tax adjustment presented reflects the application of the full liability
method to the UK GAAP financial statements as well as temporary differences
arising from the US GAAP adjustments.
(VII) INVESTMENT PROPERTIES
Under UK GAAP, Hyder values investment properties at fair market value.
Depreciation is not applied, except where properties are held on leasehold with
an unexpired term of 20 years or less. Under US GAAP, investment properties are
valued at cost less accumulated depreciation.
(VIII) CAPITALISED INTEREST
As permitted under UK GAAP, the company expenses interest incurred in
respect of specific or general borrowings to finance the construction of
tangible fixed assets. US GAAP requires that, subject to specific criteria, such
interest should be capitalized and amortized over the useful life of the related
asset.
(IX) ORDINARY DIVIDENDS
Under UK GAAP the proposed and paid ordinary dividends are recognized in
the financial year to which they relate. Under US GAAP such dividends are not
recognized until the period in which they are formally approved.
(X) REDEEMABLE PREFERRED STOCK
Under UK GAAP, redeemable preferred stock is accounted for in equity and
the fixed rate coupon on the preferred stock is treated as dividends.
F-70
<PAGE>
Under US GAAP all issues of mandatorily redeemable stock are excluded from the
shareholders' equity section of the balance sheet and are presented separately
as long-term debt. Dividends on such stock are treated as interest and deducted
from net income.
(XI) EQUITY MINORITY INTERESTS
Under UK GAAP, minority interests in Hyder group subsidiaries are treated
as an element of equity. Under US GAAP, minority interests are accounted for
outside of equity.
(XII) OWN SHARES -- IMPAIRMENT IN VALUE
Under UK GAAP, the company's own shares reacquired are held as fixed asset
investments and are stated at cost less amounts provided to reflect impairment
in value.
Under US GAAP, own shares are classified as treasury stock, which is
recognized as a reduction in shareholders' equity and no impairment is
recognized.
(XIII) BUSINESS DEVELOPMENT COSTS
Under UK GAAP, internal business development costs and contract tendering
costs, in certain circumstances, are capitalized and expensed against future
income streams. Under US GAAP, internal business development costs and contract
tendering costs are expensed as incurred.
(XIV) LISTED INVESTMENTS
Under UK GAAP, listed investments are investments in companies which are
listed on an internationally recognized stock exchange. Under US GAAP, these
investments are classified as available for sale and unrealized holding gains
and losses are excluded from earnings and included as a component of other
comprehensive income within shareholders' funds.
(XV) DEFERRED COMPENSATION
Under US GAAP the difference between market price and grant price of shares
issued under the Employee Sharesave Schemes is recorded in the balance sheet as
deferred compensation and is amortized over the vesting period. Under UK GAAP,
no compensation expense is recognized under the schemes.
(XVI) RESTRUCTURING COSTS
The Company has recorded a provision for planned restructuring costs. Under
US GAAP, certain specific criteria must be met before costs can be included in a
restructuring provision. If these criteria fail to be met, the costs must be
expensed in the financial year in which the costs are incurred. In 1999, under
UK GAAP, Hyder adopted the provisions of FRS 12 which sets forth criteria for
the recognition of restructuring reserves which are substantially consistent
with US GAAP.
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(XVII) FINANCIAL INSTRUMENTS
Under UK GAAP, gains and losses on hedges are deferred and recognized in
income when they have crystallised.
Under US GAAP, the applicable accounting practice for financial instruments
depends on management's intention for their disposition and may require
adjustments to their market or fair value. Under US GAAP, the following
conditions must be met for an item to be accounted for as a hedge: (a) the item
to be hedged must expose the company to price or interest rate risk; (b) it must
be probable that the results of the futures contracts will substantially offset
the effects of price or interest rate changes on the hedged item; and (c) the
futures contracts must be designated by management as a hedge of the item. For
futures contracts that are accounted for as a hedge of items reported at the
lower of cost or market, gains and losses on futures contracts are deferred and
recognized in income when costs related to the hedged item are recognized in
income. Derivative financial instruments held by Hyder which manage the interest
rate profile and are not matched by a primary financial instrument do not
qualify for hedge accounting and changes in their fair value are required to be
recorded as a gain or loss in the period.
(XVIII) DISCONTINUED OPERATIONS
During the year ended March 31, 2000, the Group sold its energy supply
business and its environmental laboratories business. Under UK GAAP, both of
these businesses qualify as discontinued operations. Under US GAAP, only the
energy supply business is considered a segment of the Group and qualifies as a
discontinued operation.
(XIX) NET INCOME PER ORDINARY SHARE
Under UK GAAP basic earnings per share is based on the weighted average number
of ordinary shares outstanding during the period after excluding the weighted
average ordinary shares held by the qualifying share option trusts and the
directors' long term incentive plan. Earnings per share is the profit in pence
attributable to each equity share, based on the profit after tax, minority
interests, dividend on preferred stock and exceptional items, divided by the
number of equity shares issued and ranking for dividend in respect of period.
This method is also used for basic earnings per share under US GAAP.
Under UK GAAP, the calculation of fully diluted earnings per ordinary share
is based on the profit after tax, minority interests, dividend on preferred
stock and exceptional items, plus notional interest on outstanding share
options. Under US GAAP, diluted earnings per share must also be disclosed.
Diluted earnings or loss per share is determined by dividing the net earnings or
loss by the sum of (1) the weighted average number of common shares outstanding
and (2) if not anti-dilutive, the effect of outstanding warrants and stock
options determined utilising the treasury stock method. Under this method, the
funds that would be received from the exercise of options are assumed to be
utilised in reacquiring shares. The potential dilution caused by the exercise of
share options therefore represents the difference between the number of shares
that would be issued on the exercise of the option and the theoretical number of
shares that could be reacquired utilising the funds received.
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Earnings per share computed in accordance with US GAAP has been based on
the following number of shares:
FOR THE YEAR
ENDED MARCH 31
---------------
2000 1999
------ ------
NUMBER NUMBER
(M) (M)
Weighted average number of shares under US GAAP -- basic
EPS....................................................... 149.3 146.7
Common stock equivalents -- dilutive share options.......... 0.0 1.0
----- -----
Weighted average number of shares under US GAAP -- diluted
EPS....................................................... 149.3 147.7
----- -----
For the year ended March 31, 2000, 0.1 million common stock equivalents
were excluded from the calculation as inclusion of these shares would have been
anti-dilutive.
(XX) CASH FLOW STATEMENTS
The consolidated cash flow statements have been prepared under UK GAAP in
accordance with FRS 1 (revised) and present substantially the same information
as required under SFAS 95. However, there are certain differences between FRS 1
(revised) and SFAS 95 with regard to classification of items within the cash
flow statement.
In accordance with FRS 1 (revised), cash flows are prepared separately for
operating activities, returns on investments and servicing of finance, taxation,
capital expenditure and financial investment, acquisitions and disposals, equity
dividends paid, management of liquid resources and financing. Under SFAS 95,
cash flows are classified under operating activities, investing activities and
financing activities.
Under FRS 1 (revised), cash is defined as cash in hand and deposits
repayable on demand, less overdrafts repayable on demand. Under SFAS 95, cash
and cash equivalents are defined as cash and investments with original
maturities of three months or less. Bank overdrafts have been included within
financing activities under US GAAP.
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A summary of the group's cash flows from operating, investing and financing
activities classified in accordance with SFAS 95 is presented below.
2000 1999
------ ------
LM LM
Net cash provided by operating activities................... 257.8 143.8
Net cash used in investing activities....................... (257.9) (412.6)
Net cash provided by financing activities................... 22.1 339.1
------ ------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 22.0 70.3
Effect of exchange rate changes on cash..................... (0.3) 0.2
Cash and cash equivalents at beginning of year.............. 316.8 246.3
------ ------
CASH AND CASH EQUIVALENTS AT END OF YEAR.................... 338.5 316.8
------ ------
CASH AND CASH EQUIVALENTS AT THE END OF YEAR ARE:
Cash at bank and in hand.................................... 34.0 21.0
Current asset investments................................... 304.5 295.8
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