Northumbrian Water Group Plc (NWG.L) reported Monday a rise in pre-tax profit for the first half, helped by higher water and sewerage prices, despite lower non-household revenue due to the current economic downturn. On an after-tax basis, the company turned to a profit reflecting the absense of last year's one-off deferred tax charge. The UK-based supplier of water and waste water services also declared higher interim dividend.
The company's first-half profit before taxation rose 12.8% to GBP 87 million from GBP 77.1 million in the same period a year ago.
Profit for the period, on an after tax basis, attributable to equity shareholders of the parent company was GBP 62.9 million compared to a loss of GBP 64.5 million in the year-ago period. Earnings per share were 12.13 pence against last year's loss of 12.44 pence per share.
The latest first-half results included deferred tax charge of GBP 3.6 million or 0.70 pence per share, while prior year's deferred tax charge was GBP 123.5 million or 23.83 pence per share mainly due to GBP 117.2 million one-off charge, following the withdrawal of industrial buildings allowances in the Finance Act 2008.
Excluding the tax charge, adjusted earnings grew 18.3% to GBP 66.5 million or 12.85 pence per share from GBP 56.2 million or 10.84 pence per share a year ago.
The company's six-month profit on ordinary activities before interest edged up 0.5% to GBP 139.3 million from GBP 138.6 million a year earlier.
Revenue for the first half rose 1% to GBP 351.2 million from GBP 347.7 million in the prior year period. The company noted that its revenue continues to be affected by the economic downturn.
The revenue growth was attributed to a 3% rise in water and sewerage charges at the company's principal subsidiary, Northumbrian Water Limited, partially offset by reductions in non-household revenue, as a consequence of the current economic downturn.
Northumbrian Water Limited generated revenues of GBP 328.5 million, up 0.7% from last year's GBP 326.1 million, mainly on higher water and sewerage charges, partially offset by reductions in demand for both services. The unit's profit on ordinary activities before interest for the period was GBP 136.3 million, compared to prior year's GBP 136.0 million.
Revenue for the company's water and waste water contracts, meanwhile, dropped to GBP 18.9 million from GBP 19.1 million, a year ago, while profit on ordinary activities before interest grew to GBP 4.4 million from GBP 3.9 million last year. The company noted that all contracts are performing well, in line with expectations.
Commenting on the results, Managing Director John Cuthbert said, "Over the last six months the Group has produced good financial and operational results against a difficult economic background. Group companies continue to deliver against regulatory and contractual obligations. Income and costs at Northumbrian Water Limited have been adversely affected in the period by business closures in the north east and this has partially offset the growth from tariff increases."
First-half pro forma Group Regulatory Capital Value, or RCV, comprising Northumbrian Water Limited's RCV plus the net debt in respect of the PFI contracts and the Kielder securitisation, was GBP 3.339 billion compared to last year's GBP 3.340 billion.
Further, Northumbrian Water said its Board declared an interim dividend for the period of 4.39 pence per share, up 2.3% from last year's 4.29 pence per share. The dividend will be paid on January 29, 2010 to shareholders on the register at the close of business on December 18, 2009.
Looking ahead, the company said that it "continues to emphasise the efficient delivery of high standards of operational and service performance. Funding to support that emphasis, for both our operational and capital investment needs, is in place for the next two years. Current economic conditions continue to be challenging and, with efficiency initiatives such as advanced anaerobic digestion and our work management programme, we are well placed to respond."
Northumbrian Water expects to recieve Ofwat's final determination for its main unit on November 26. Cuthbert said, "Following the draft determination published in July, representations have been made to the industry regulator, Ofwat, and the final determination on the price limits to apply for the five years from April 2010 will be published on 26 November."
Ofwat's draft determination proposals allow average annual household bills to rise, in real terms, by GBP 3 over the five year period with an investment programme of GBP 1.2 billion.
On the London Stock Exchange, NWG.L is currently trading at 244.30 pence, up 0.30 pence or 0.12%, on a volume of 142 thousand shares.
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