-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TZBslqinRBOIcCxU/dscCgfgPdjWFeyPHzIhsgCMf73rY371opjY/TPcvv0ezOjh ckYUsZD+jRmNSZjcYPusgw== /in/edgar/work/0000950120-00-000282/0000950120-00-000282.txt : 20001023 0000950120-00-000282.hdr.sgml : 20001023 ACCESSION NUMBER: 0000950120-00-000282 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000929 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20001020 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PPL CORP CENTRAL INDEX KEY: 0000922224 STANDARD INDUSTRIAL CLASSIFICATION: [4911 ] IRS NUMBER: 232758192 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-11459 FILM NUMBER: 743635 BUSINESS ADDRESS: STREET 1: TWO N NINTH ST CITY: ALLENTOWN STATE: PA ZIP: 18101 BUSINESS PHONE: 6107745151 MAIL ADDRESS: STREET 1: TWO N NINTH ST CITY: ALLENTOWN STATE: PA ZIP: 18101-1179 FORMER COMPANY: FORMER CONFORMED NAME: PP&L RESOURCES INC DATE OF NAME CHANGE: 19941123 8-K 1 0001.txt FORM 8-K FOR PPL CORPORATION SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): September 29, 2000 PPL Corporation --------------- (Exact Name of Registrant as Specified in Its Charter) Pennsylvania 1-11459 23-2758192 ------------ ------- ---------- State or other jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) Two North Ninth Street, Allentown, Pennsylvania 18101-1179 ---------------------------------------------------------- (Address of principal executive offices) Registrant's Telephone Number, including Area Code: (610) 774-5151 -------------- ITEM 5. OTHER EVENTS ------------ Hyder Transaction - ----------------- On September 29, Western Power Distribution Limited (WPDL), which is jointly owned by subsidiaries of PPL Corporation (PPL) and The Southern Company (Southern), closed on the purchase of 110,156,041 shares of Hyder plc (Hyder), for a total purchase price of 394,879,954 pounds sterling ($583,830,012 based on current exchange rates). When combined with WPDL's existing ownership interest in Hyder, this purchase gave WPDL approximately 70% of Hyder's total outstanding shares. Subsequent to September 29, WPDL has purchased approximately an additional 5% of Hyder's shares bringing its total shareholding to approximately 75%. WPDL's offer to purchase the remaining shares of Hyder at 365 pence per share will remain outstanding until October 25, 2000. Hyder is the owner of South Wales Electricity plc, an electric distribution company serving approximately 980,000 customers in Wales. Hyder also owns Welsh Water and other service-oriented businesses. PPL's current equity interest in WPDL is 60%, and Southern's current equity interest is 40%. Under an arrangement between the two companies, PPL's equity interest in WPDL may decrease to 51% and Southern's equity interest may increase to 49% depending upon the execution of a call option by Southern. PPL and Southern share control of WPDL equally. PPL's share of the acquisition cost was made from existing resources and facilities, of which $75 million is expected to be repaid by the end of the first quarter of 2001. Based on a 60% ownership interest in WPDL, PPL's share of the total investment, which is not expected to exceed $155 million, would be refinanced with a combination of debt and equity securities. PPL does not plan to issue common stock to finance this acquisition. The assets of Hyder's water business would be managed independently from the electric operations. WPDL is reviewing a range of options with respect to Hyder's water business. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS --------------------------------- (c) Exhibits 99.1 Audited Consolidated Financial Information of Hyder plc 99.2 Unaudited Pro Forma Consolidated Financial Information of PPL Corporation 99.3 Consent of PricewaterhouseCoopers LLP SIGNATURE --------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. PPL CORPORATION By: /s/ Joseph J. McCabe --------------------- Joseph J. McCabe Vice President and Controller Dated: October 20, 2000 EX-99 2 0002.txt EXHIBIT 99.1 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 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 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 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 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:
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
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 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 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 HYDER PLC CONSOLIDATED PROFIT AND LOSS ACCOUNTS FOR THE YEARS ENDED 31 MARCH
1999 1998 NOTE 2000 RESTATED RESTATED ------ -------- -------- -------- LM LM LM 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
F-7 HYDER PLC CONSOLIDATED PROFIT AND LOSS ACCOUNTS FOR THE YEARS ENDED 31 MARCH -- (CONTINUED)
1999 1998 NOTE 2000 RESTATED RESTATED ------ -------- -------- -------- LM LM LM 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 ======== ======= =======
F-8 HYDER PLC BALANCE SHEETS AT 31 MARCH 2000
GROUP COMPANY ------------------- ------------------- NOTE 2000 1999 2000 1999 ----- -------- -------- -------- -------- LM LM LM LM 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 ======== ======== ======== ========
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 HYDER PLC CONSOLIDATED CASH FLOW STATEMENTS FOR THE YEARS ENDED 31 MARCH
NOTE 2000 1999 1998 ---- ------ ------ ------ LM LM LM 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) ====== ====== ======
F-10 HYDER PLC CONSOLIDATED CASH FLOW STATEMENTS FOR THE YEARS ENDED 31 MARCH -- (CONTINUED)
NOTE 2000 1999 1998 ---- ------ ------ ------ LM LM LM 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) ====== ====== ======
F-11 HYDER PLC STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEARS ENDED MARCH
2000 1999 1998 ------- ----- ------ LM LM LM 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) ======= ===== ======
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS FOR THE YEARS ENDED 31 MARCH
2000 1999 1998 ------- ----- ------ LM LM LM 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 ======= ===== ======
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 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
INTRA INTER TOTAL SEGMENT SEGMENT EXTERNAL TURNOVER TURNOVER TURNOVER TURNOVER -------- -------- -------- -------- LM LM LM LM 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
F-13
INTRA INTER TOTAL SEGMENT SEGMENT EXTERNAL TURNOVER TURNOVER TURNOVER TURNOVER -------- -------- -------- -------- LM LM LM LM 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 ======= ==== ===== =======
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 (B) PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
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 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 ====== ====== =====
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 (C) NET ASSETS
2000 1999 1998 -------- -------- -------- LM LM LM 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 ======== ======== ========
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
2000 1999 1998 ------- ------- ------- LM LM LM 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 ======= ======= =======
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 (B) PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION
1999 1998 2000 RESTATED RESTATED ------ -------- -------- LM LM LM 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 ====== ====== =====
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
2000 1999 1998 -------- -------- -------- LM LM LM 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 ======== ======== ========
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
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 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
F-17
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 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 ===== ===== ======= ===== ===== ==== =====
F-18 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
2000 1999 1998 ----- ---- ---- LM LM LM 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 ===== === ====
The tax credit attributable to these exceptional items is L9.7m (1999 Lnil; 1998 L1.6m). F-19 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 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 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 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
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 ------- ------- ------- ----------- ------- -------- ----------- ---------- ---------- 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) ====== ====== ======= ====== ======= ======= ======= === ==========
- ------------------------- * 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 (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:
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 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
- ------------------------- * 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 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:
2000 1999 1998 ----- ----- ----- L000 L000 L000 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 ===== ===== =====
F-26 The directors' emoluments, excluding pension contributions, were as follows:
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 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 ===== ===== == === == == ===== ===== =====
- ------------------------- (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 HIGHEST PAID DIRECTOR
G A HAWKER G A HAWKER G A HAWKER 2000 1999 1998 ---------- ---------- ---------- L000 L000 L000 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 === === ===
(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:
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 ------------- ------------- ------------- ------------- -------- ------------- -------- 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 ====== ======= ====== ====== ====== ====== ======
- ------------------------- * 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 (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.
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 ------------ ------- ------- ------- --------- -------- ------- -------- ----------- 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 ======== ====== ====== == === ======
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 (I) STAFF COSTS
2000 1999 1998 ----- ----- ----- LM LM LM 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 ===== ===== =====
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)
2000 1999 1998 NUMBER NUMBER NUMBER ------ ------ ------ 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 ===== ===== =====
7. GROUP INCOME FROM INVESTMENTS
1999 1998 2000 RESTATED RESTATED ---- -------- -------- LM LM LM 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 === === ===
F-30 8. PROFIT ON DISPOSAL OF INTERESTS IN INVESTMENTS
2000 1999 1998 ---- ---- ---- LM LM LM 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 === ==== ===
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
2000 1999 1998 ----- ----- ----- LM LM LM 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 ===== ===== =====
F-31 10. TAXATION (A) ORDINARY TAXATION
1999 1998 2000 RESTATED RESTATED ----- -------- -------- LM LM LM 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 ===== ===== =====
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 11. DIVIDENDS (A) DIVIDENDS ON EQUITY SHARES:
2000 1999 1998 ---- ---- ---- LM LM LM 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 ==== ==== ====
(B) DIVIDENDS ON NON-EQUITY SHARES:
2000 1999 1998 ---- ---- ---- LM LM LM Dividends of 7.875p (net) per preference share (1999 7.875p (net); 1998 7.875p (net))................................. 16.4 16.4 16.4 ==== ==== ====
12. EARNINGS PER SHARE
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 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 ===== ===== ===== ===== ===== ===== ====== ===== =====
EARNINGS PER SHARE HAVE BEEN CALCULATED BASED UPON:
2000 1999 1998 ---------------- ---------------- ---------------- BASIC DILUTED BASIC DILUTED BASIC DILUTED NUMBER NUMBER NUMBER NUMBER NUMBER NUMBER ------ ------- ------ ------- ------ ------- (IN MILLIONS) Weighted average ordinary shares in issue................................. 149.3 149.4 146.7 147.7 143.9 146.0 ===== ===== ===== ===== ===== =====
F-33 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
GOODWILL GOODWILL FISHING RIGHTS (POSITIVE) (NEGATIVE) TOTAL -------------- ---------- ---------- ----- LM LM LM LM 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 ==== === ==== ====
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 14. TANGIBLE FIXED ASSETS GROUP
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 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 ==== ==== ======= ======= ===== ===== =======
(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 (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
VEHICLES, PLANT, EQUIPMENT AND COMPUTER HARDWARE & FREEHOLD LAND CAPITALISED AND BUILDINGS SOFTWARE TOTAL ------------- ---------------- ----- LM LM LM 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 === === ===
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 16. FIXED ASSET INVESTMENTS GROUP
INTERESTS IN INTERESTS IN OWN JOINT ASSOCIATED LISTED UNLISTED SHARES VENTURES UNDERTAKINGS INVESTMENTS INVESTMENTS TOTAL ------ ------------ ------------ ----------- ----------- ----- LM LM LM LM LM LM 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 ==== ==== ==== ==== ==== =====
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 COMPANY
INTERESTS IN GROUP UNLISTED OWN SHARES UNDERTAKINGS INVESTMENTS TOTAL ---------- ------------ ----------- ------- LM LM LM LM 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 ==== ======= === =======
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 18. DEBTORS
GROUP COMPANY ------------- ------------- 2000 1999 2000 1999 ----- ----- ----- ----- LM LM LM LM 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 ===== ===== ===== =====
19. CURRENT ASSET INVESTMENTS MANAGEMENT OF LIQUID RESOURCES
GROUP COMPANY ------------- ------------- 2000 1999 2000 1999 ----- ----- ----- ----- LM LM LM LM 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 ===== ===== ===== =====
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 20. CREDITORS (A) AMOUNTS FALLING DUE WITHIN ONE YEAR:
GROUP COMPANY ----------------- ----------------- NOTE 2000 1999 2000 1999 ----- ------- ------- ------- ------- LM LM LM LM 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 ======= ======= ======= =======
F-40 21. LOANS (A) STERLING BONDS
INTEREST NOMINAL PREMIUM ISSUE NET NET COSTS CARRYING MATURITY DATE RATE VALUE ON ISSUE COSTS PROCEEDS AMORTISED VALUE - ------------- -------- ------- -------- ----- -------- --------- -------- % LM LM LM LM LM LM 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 ======= ==== ===== ======= ==== =======
(B) US$ BONDS
INTEREST NOMINAL PREMIUM ISSUE NET NET COSTS CARRYING MATURITY DATE RATE VALUE ON ISSUE COSTS PROCEEDS AMORTISED VALUE - ------------- -------- ------- -------- ----- -------- --------- -------- % LM LM LM LM LM LM 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 ===== === ==== ===== === =====
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 (C) OTHER LOANS
GROUP COMPANY 2000 1999 2000 1999 ----- ----- ------- ---- LM LM LM LM 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 ===== ===== ==== ====
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 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 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 (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 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:
TOTAL FIXED RATE FLOATING RATE ----------------- ----------------- ------------- CURRENCY 2000 1999 2000 1999 2000 1999 - -------- ------- ------- ------- ------- ----- ----- LM LM LM LM LM LM 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 ======= ======= ======= ======= ===== =====
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 - 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
FIXED RATE FINANCIAL LIABILITIES WEIGHTED WEIGHTED AVERAGE AVERAGE PERIOD INTEREST FOR WHICH RATE RATE IS FIXED ----------- ------------- CURRENCY 2000 1999 2000 1999 - -------- ---- ---- ----- ----- % % YEARS YEARS Sterling: Borrowings................................................ 8.0 8.0 12.9 13.8 Preference shares......................................... 7.9 7.9 13.3 14.3 === === ==== ====
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 (K) CURRENCY AND INTEREST RATE PROFILE OF FINANCIAL ASSETS
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 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 ==== ===== ===== ==== ===== =====
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 and combined interest rate and forward foreign currency swaps are based on market prices of comparable investments.
BOOK FAIR BOOK FAIR VALUE VALUE VALUE VALUE NOTE 2000 2000 1999 1999 ----- -------- -------- -------- -------- LM LM LM LM 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) ======== ======== ======== ========
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 (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
LAND AND BUILDINGS OTHERS ----------- ----------- 2000 1999 2000 1999 ---- ---- ---- ---- LM LM LM LM 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 === === === ====
F-50 COMPANY
LAND AND BUILDINGS OTHERS ----------- ----------- 2000 1999 2000 1999 ---- ---- ---- ---- LM LM LM LM Within one year............................................. 0.2 0.2 -- -- After five years............................................ 0.1 0.1 -- -- --- --- -- -- 0.3 0.3 -- -- === === == ==
27. PROVISIONS FOR LIABILITIES AND CHARGES
GROUP COMPANY ------------ ----------- NOTE 2000 1999 2000 1999 ---- ---- ----- ---- ---- LM LM LM LM 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 ==== ===== === ===
(A) DEFERRED TAXATION Group
AMOUNT AMOUNTS PROVIDED UNPROVIDED ------------ -------------- 2000 1999 2000 1999 ---- ---- ----- ----- LM LM LM LM 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 ==== == ===== =====
F-51 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
NOTE GROUP COMPANY ---- ----- ------- LM LM 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 ===== ====
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 (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
NOTE GROUP COMPANY ---- ----- ------- LM LM 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............................................ -- -- ===== ==
(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 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 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:
NUMBER OF 120P ORDINARY DATE OPTION PRICE SHARES OPTION NORMAL DATE OF PER SHARE --------------------- GRANTED EXERCISE (PENCE) 2000 1999 --------- --------------------- ------------ --------- --------- 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 ========= =========
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 (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 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 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
2000 1999 1998 ----- ----- ----- LM LM LM 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 --
F-58
2000 1999 1998 ----- ----- ----- LM LM LM 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 ===== ===== =====
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
CASH LESS CURRENT DEBT AND BANK ASSET FINANCE OVERDRAFTS INVESTMENTS LEASES TOTAL ---------- ----------- -------- -------- LM LM LM LM 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) ==== ====== ======== ========
(B) YEAR END RECONCILIATION
NOTE 2000 1999 ----- -------- -------- LM LM 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) ======== ========
F-59 36. ANALYSIS OF CHANGES IN FINANCING IN THE YEAR
SHARE CAPITAL LOANS & FINANCE (INCLUDING PREMIUM) LEASE OBLIGATIONS -------------------- ---------------------- 2000 1999 2000 1999 ------ ------ ------- ------- LM LM LM LM 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 ===== ===== ======= =======
37. RECONCILIATION OF NET CASH FLOW TO INCREASE IN NET DEBT
NOTE 2000 1999 ----- -------- -------- LM LM 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) ======== ========
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 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 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 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 44. PRINCIPAL GROUP UNDERTAKINGS
COUNTRY OF INCORPORATION, SHAREHOLDING REGISTRATION --------------------- AND OPERATION DIRECTLY INDIRECTLY ----------------- -------- ---------- % % 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
F-64 JOINT VENTURES AND ASSOCIATED UNDERTAKINGS
TOTAL JOINT VENTURE COUNTRY OF /ASSOCIATE GROUP INCORPORATION COMPANY'S EQUITY SHAREHOLDING ----------------- ------------------- ------------ 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%
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 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
EXPLANATION REFERENCE 2000 1999 ----------- ------ ------ LM LM 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 ====== ======
F-66
EXPLANATION REFERENCE 2000 1999 ----------- ------ ----- LM LM 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 ====== =====
EARNINGS PER SHARE
EXPLANATION REFERENCE 2000 1999 ----------- ------- ------- (PENCE) (PENCE) 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
F-67 RECONCILIATION OF SHAREHOLDERS' EQUITY
EXPLANATION REFERENCE 2000 1999 ----------- ------- ------- LM LM 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 ======= =======
(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 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 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 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. F-71 (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. F-72 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. F-73 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 ====== ====== F-74 EX-99 3 0003.txt EXHIBIT 99.2 Exhibit 99.2 PPL CORPORATION AND SUBSIDIARIES Unaudited Pro Forma Consolidated Information -------------------------------------------- The pro forma information that follows is presented to give effect to the acquisition of Hyder plc (Hyder) by Western Power Distribution Limited (WPDL) on the balance sheet and income statements of PPL Corporation. WPDL is jointly owned by PPL Global LLC (PPL Global, a subsidiary of PPL Corporation) and Southern Energy, Inc. (Southern). The ownership interests in WPDL are 60% and 40% for PPL Global and Southern , respectively. Under an arrangement between the two companies, PPL Global's equity interest in WPDL may decrease to 51%, and Southern's equity interest may increase to 49% depending on the execution of a call option by Southern. The pro forma results are based on assumptions set forth below, as well as in the Notes to Unaudited Pro Forma Consolidated Financial Information, and are not necessarily indicative of the results of operations which would actually have occurred if the transactions had occurred in such periods, or which may exist or occur in the future. The Hyder acquisition is described in Item 5 of this Current Report on Form 8-K, of which this Exhibit 99.2 is a part. Pro forma adjustments are provided to the consolidated income statements of PPL Corporation for the six months ended June 30, 2000, and for the twelve months ended December 31, 1999. The adjustments are to the income statements filed in PPL Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, and in its Annual Report on Form 10-K for the year ended December 31, 2000. The pro forma adjustments assume that the acquisition was consummated at the beginning of the income statement periods. The PPL Corporation pro forma income statement for the six months ended June 30, 2000 includes the operating results of Hyder for the six months ended March 31, 2000. The PPL Corporation pro forma income statement for the twelve months ended December 31, 2000 includes the operating results of Hyder for the twelve months ended March 31, 2000. As such, Hyder's results for the six months ended March 31, 2000 are included in the pro forma results for both periods. The PPL Corporation pro forma balance sheet is presented as if the Hyder acquisition was made on June 30, 2000. The adjustments are applied to the consolidated balance sheet of PPL Corporation at June 30, 2000, as set forth in PPL Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000. The Notes to Unaudited Pro Forma Consolidated Financial Information provide additional descriptions of the adjustments to the income statements and balance sheet. The pro forma financial information should be read in conjunction with the reports of PPL Corporation as noted above, as well as the audited financial statements of Hyder for the year ended March 31, 2000. These financial statements are included as Exhibit 99.1 in this Current Report on Form 8-K. The pro forma information includes the results of Hyder's services and industrial businesses, which are expected to be sold. During the twelve months ended March 31, 2000, these businesses provided about 6% of Hyder's income from operations. The pending sales of these businesses is not expected to have a material effect on Hyder's results of operations. However, there can be no assurance that these sales will be consummated. PPL CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2000 (Millions of Dollars)
PRO FORMA NOTE AS REPORTED ADJUSTMENTS REF AS ADJUSTED ----------- ----------- ---- ----------- OPERATING REVENUES Electric.................................................... $1,472 $1,472 Natural gas and propane..................................... 94 94 Wholesale energy marketing and trading...................... 943 943 Energy related businesses................................... 201 $13 1) 214 ---------- ----------- ----------- Total....................................................... 2,710 13 2,723 ---------- ----------- ----------- OPERATING EXPENSES Operation Electric fuel............................................. 216 216 Natural gas and propane................................... 38 38 Energy purchases for retail load and wholesale............ 947 947 Other..................................................... 304 304 Amortization of recoverable transition costs.............. 109 109 Maintenance................................................. 120 120 Depreciation and amortization .............................. 138 138 Taxes, other than income ................................... 109 109 Energy related businesses................................... 168 168 ---------- ----------- ----------- Total ...................................................... 2,149 0 2,149 ---------- ----------- ----------- OPERATING INCOME ............................................. 561 13 574 Other Income.................................................. 7 7 ---------- ----------- ----------- INCOME BEFORE INTEREST, INCOME TAXES AND MINORITY INTEREST.... 568 13 581 Interest Expense.............................................. 180 7 2) 187 ---------- ----------- ----------- INCOME BEFORE INCOME TAXES AND MINORITY INTEREST ............. 388 6 394 Income Taxes ................................................. 140 (2) 3) 138 Minority Interest............................................. 1 1 ---------- ----------- ----------- INCOME BEFORE DIVIDENDS ON PREFERRED STOCK.................... 247 8 255 Preferred Stock Dividend Requirements......................... 13 13 ---------- ----------- ----------- INCOME FROM CONTINUING OPERATIONS............................. $234 $8 $242 ========== =========== =========== Earnings Per Share of Common Stock from Continuing Operations $1.63 $0.05 $1.68 (Basic and Diluted) Average Common Shares Outstanding (thousands) 144,137 144,137
See Notes to Unaudited Pro Forma Consolidated Financial Information. PPL CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1999 (Millions of Dollars)
PRO FORMA NOTE AS REPORTED ADJUSTMENTS REF AS ADJUSTED ----------- ----------- ---- ----------- OPERATING REVENUES Electric.................................................... $2,758 $2,758 Natural gas and propane..................................... 109 109 Wholesale energy marketing and trading...................... 1,446 1,446 Energy related businesses................................... 277 ($1) 1) 276 ---------- ----------- ----------- Total....................................................... 4,590 (1) 4,589 ---------- ----------- ----------- OPERATING EXPENSES Operation Electric fuel............................................. 446 446 Natural gas and propane................................... 46 46 Energy purchases for retail load and wholesale............ 1,518 1,518 Other..................................................... 686 686 Amortization of recoverable transition costs.............. 172 172 Maintenance................................................. 215 215 Depreciation and amortization .............................. 257 257 Taxes, other than income ................................... 161 161 Energy related businesses................................... 217 217 ---------- ----------- ----------- Total ...................................................... 3,718 0 3,718 ---------- ----------- ----------- OPERATING INCOME ............................................. 872 (1) 871 Other Income.................................................. 97 97 ---------- ----------- ----------- INCOME BEFORE INTEREST, INCOME TAXES AND MINORITY INTEREST.... 969 (1) 968 Interest Expense.............................................. 277 13 2) 290 ---------- ----------- ----------- INCOME BEFORE INCOME TAXES AND MINORITY INTEREST ............. 692 (14) 678 Income Taxes ................................................. 174 (5) 3) 169 Minority Interest............................................. 14 14 ---------- ----------- ----------- INCOME BEFORE DIVIDENDS ON PREFERRED STOCK.................... 504 (9) 495 Preferred Stock Dividend Requirements......................... 26 26 ---------- ----------- ----------- INCOME FROM CONTINUING OPERATIONS............................. $478 ($9) $469 ========== =========== =========== Earnings Per Share of Common Stock from Continuing Operations $3.14 ($0.06) $3.08 (Basic and Diluted) Average Common Shares Outstanding (thousands) 152,287 152,287
See Notes to Unaudited Pro Forma Consolidated Financial Information. PPL CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET JUNE 30, 2000 (Millions of Dollars)
PRO FORMA NOTE AS REPORTED ADJUSTMENTS REF AS ADJUSTED ----------- ----------- ---- ----------- Assets CURRENT ASSETS Cash and cash equivalents .................................. $215 $215 Accounts receivable, net ................................... 482 482 Unbilled revenues .......................................... 360 360 Fuel, materials and supplies - at average cost ............. 190 190 Prepayments ................................................ 135 135 Unrealized energy trading gains ............................ 106 106 Other ...................................................... 125 77 2) 202 ---------- ----------- ----------- 1,613 77 1,690 ---------- ----------- ----------- INVESTMENTS Nuclear plant decommissioning trust fund ................... 269 269 Investment in unconsolidated affiliate at equity ........... 580 126 1) 706 Other ...................................................... 14 14 ---------- ----------- ----------- 863 126 989 ---------- ----------- ----------- PROPERTY, PLANT AND EQUIPMENT Electric utility plant in service - net Transmission and distribution ............................ 2,470 2,470 Generation ............................................... 2,465 2,465 General .................................................. 277 277 ---------- ----------- ----------- 5,212 0 5,212 Construction work in progress - at cost .................... 221 221 Nuclear fuel owned and leased - net ........................ 123 123 ---------- ----------- ----------- Electric utility plant - net ............................. 5,556 0 5,556 Gas and oil utility plant - net ............................ 171 171 Other property - net ....................................... 69 69 ---------- ----------- ----------- 5,796 0 5,796 ---------- ----------- ----------- REGULATORY ASSETS AND OTHER NONCURRENT ASSETS Recoverable transition costs ............................... 2,538 2,538 Other ...................................................... 1,059 1,059 ---------- ----------- ----------- 3,597 0 3,597 ---------- ----------- ----------- $11,869 $203 $12,072 ========== =========== ===========
See Notes to Unaudited Pro Forma Consolidated Financial Information. PPL CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET JUNE 30, 2000 (Millions of Dollars)
PRO FORMA NOTE AS REPORTED ADJUSTMENTS REF AS ADJUSTED ----------- ----------- ---- ----------- LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term debt ............................................ $985 $203 3) $1,188 Long-term debt ............................................. 356 356 Above market NUG contracts ................................. 96 96 Accounts payable ........................................... 422 422 Taxes and interest accrued ................................. 151 151 Dividends payable .......................................... 45 45 Unrealized energy trading losses ........................... 105 105 Other ...................................................... 113 113 ---------- ----------- ----------- 2,273 203 2,476 ---------- ----------- ----------- LONG-TERM DEBT ............................................... 4,329 4,329 ---------- ----------- ----------- DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES Deferred income taxes and investment tax credits ........... 1,529 1,529 Above market NUG purchases ................................. 627 627 Other....................................................... 933 933 ---------- ----------- ----------- 3,089 0 3,089 COMMITMENTS AND CONTINGENT LIABILITIES ....................... MINORITY INTEREST ............................................ 55 55 COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF SUBSIDIARY TRUST HOLDING SOLELY COMPANY DEBENTURES .......................... 250 250 PREFERRED STOCK With sinking fund requirements ............................. 47 47 Without sinking fund requirements .......................... 50 50 ---------- ----------- ----------- 97 0 97 ---------- ----------- ----------- SHAREOWNER'S COMMON EQUITY Common stock ............................................... 2 2 Capital in excess of par value ............................. 1,873 1,873 Treasury stock ............................................. (836) (836) Earnings reinvested ........................................ 812 812 Accumulated other comprehensive income ..................... (63) (63) Capital stock expense and other ............................ (12) (12) ---------- ----------- ----------- 1,776 0 1,776 ---------- ----------- ----------- $11,869 $203 $12,072 ========== =========== ===========
See Notes to Unaudited Pro Forma Consolidated Financial Information. PPL CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (Millions of Dollars) INCOME STATEMENT ADJUSTMENTS: - ---------------------------- 1) Adjustment to record PPL Global's share of the equity earnings or loss from Hyder. These equity results reflect the impact of purchase accounting adjustments in accordance with US GAAP. The equity earnings were derived as follows:
Six Twelve Mos. Ended Mos. Ended June 30, 2000 Dec. 31, 1999 ------------- ------------- Hyder US GAAP loss from continuing operations (a) $ (662) $ (669) Eliminate impairment loss (b) 700 700 ------------- ------------- Adjusted Hyder US GAAP income from continuing operations 38 31 Purchase accounting adjustments [income / (expense)]: Interest expense (c) (24) (49) Goodwill amortization (d) (2) (3) Depreciation expense (e) 2 5 UK income tax on purchase accounting adjustments (f) 7 14 ------------- ------------- Adjusted Hyder US GAAP income (loss) from continuing operations after 21 (2) purchase accounting adjustments PPL Global ownership interest in Hyder (g) 60% 60% ------------- ------------- PPL Global equity in income (loss) of Hyder $ 13 $ (1) ============= =============
(a) Reflects the net loss reported by Hyder for the six and twelve months ended March 31, 2000, respectively. Average interbank exhange rates of 1.62 and 1.61 were used to convert the results of these periods from British Pounds Sterling to US dollars. (b) Hyder recorded an impairment loss in December 1999. As this impairment was comprehended in the purchase and asset valuation, it is excluded from results of continuing operations for purposes of calculating equity earnings. (c) Assumed that WPDL issued $672 million of debt at 7.25% to acquire Hyder. (d) The excess of the $847 million purchase price over the fair value of the net assets acquired is preliminarily estimated at $120 million. PPL Global expects to amortize this goodwill over a 40 year period. (e) Reductions in depreciation expense from amounts included in Hyder's operating results are anticipated, based on the initial asset valuation. Depreciable lives of fixed assets are not expected to change. (f) A UK tax rate of 30% was applied to the purchase accounting adjustments. (g) This assumes that WPDL acquires 100% of the outstanding shares of Hyder, and that Southern does not exercise its option to increase its equity interest from 40% to 49%. At 60% equity interest, each 5% reduction in shares acquired would reduce PPL Global's share of equity earnings for the six months ended June 30, 2000 by about $600,000. If all of the outstanding shares of Hyder were acquired, but Southern exercised its option to increase its equity ownership to 49%, PPL Global's share of equity earnings for the six months ended June 30, 2000 would be $11 million. 2) PPL Global's portion of the Hyder acquisition, $126 million, and temporary financing to WPDL of $77 million, were financed through commercial paper issued by an affiliate of PPL Corporation. For purposes of calculating the pro froma information, an interest rate of 6.5% was assumed for the six months ended June 30, 2000 as well as for the twelve months ended December 31, 1999. 3) Additional US income taxes of 5% was provided on the equity earnings or loss, and income taxes of 40% were applied to interest expense on commerical paper. BALANCE SHEET ADJUSTMENTS: - ------------------------- 1) Adjustment to record PPL Global's equity investment in Hyder, as if the investment were made on June 30, 2000. 2) Adjustment to record a note receivable for temporary financing provided to WPDL, expected to be repaid upon sale of the businesses identified as held for sale. 3) Adjustment to give effect to the commerical paper issued by an affiliate of PPL Corporation to finance PPL Global's acquisition of its 60% interest in Hyder, and to provide temporary financing to WPDL. EX-99 4 0004.txt EXHIBIT 99.3 Exhibit 99.3 Consent of PricewaterhouseCoopers As independent public accountants, we hereby consent to the incorporation in this Form 8-K of PPL Corporation of our report dated 12 July 2000 included in the financial statements of Hyder plc as required by regulation S-X 210.3-05 for the year ended 31 March 2000. /s/ PricewaterhouseCoopers PricewaterhouseCoopers Cardiff, United Kingdom 19 October 2000 -----END PRIVACY-ENHANCED MESSAGE-----