Annual report and financial statement 2009 - United Utilities

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FINANCIAL STATEMENTSNotes to the financial statementscontinued7 TAXATIONContinuing Continuing Discontinuedoperations operations operations Total2009 2008 2008 2008£m £m £m £mCurrent taxationUK corporation tax 147.0 108.9 28.4 137.3Foreign tax 2.1 2.7 – 2.7Prior year adjustments (10.0) (23.0) (0.1) (23.1)139.1 88.6 28.3 116.9Deferred taxation (see note 21)Current year (0.5) 37.5 12.4 49.9Prior year adjustments 4.2 17.6 (4.6) 13.03.7 55.1 7.8 62.9Abolition of industrial buildings allowances 206.4 – – –Change in taxation rate – (81.7) (21.7) (103.4)210.1 (26.6) (13.9) (40.5)Total tax charge for the year 349.2 62.0 14.4 76.4The tables below reconcile the notional tax charge at the UK corporation tax rate to the effective tax rate for the year:ContinuingDiscontinuedoperations operations Total2009 2009 2009 2009 2009 2009£m % £m % £m %Profit/(loss) before taxation 529.8 (1.2) 528.6Tax at the UK corporation tax rate of 28 per cent (2008: 30 per cent) 148.3 28.0 (0.3) 28.0 148.0 28.0Adjustments in respect of prior periods (5.8) (1.1) – – (5.8) (1.1)Abolition of industrial buildings allowances 206.4 39.0 – – 206.4 39.1Net (income)/expense not (taxable)/deductible 0.3 – 0.3 (28.0) 0.6 0.1Total tax charge and effective tax rate for the year 349.2 65.9 – – 349.2 66.1ContinuingDiscontinuedoperations operations Total2008 2008 2008 2008 2008 2008£m % £m % £m %Profit before taxation 478.3 141.9 620.2Tax at the UK corporation tax rate of 30 per cent (2007: 30 per cent) 143.5 30.0 42.6 30.0 186.1 30.0Adjustments in respect of prior periods (5.4) (1.1) (4.7) (3.3) (10.1) (1.6)Change in taxation rate (81.7) (17.1) (21.7) (15.3) (103.4) (16.7)Net (income)/expense not (taxable)/deductible 5.6 1.2 (1.8) (1.3) 3.8 0.6Total tax charge and effective tax rate for the year 62.0 13.0 14.4 10.1 76.4 12.3Following Royal Assent of the 2008 Finance Act on 21 July 2008, the abolition of industrial buildings allowances was formally enacted.The financial impact as a consequence of this legislation is a one-off deferred tax charge of £206.4 million, which is included in thecurrent year deferred tax charge; however the cash impact will be spread over a period of approximately 20 years.A tax credit of £5.8 million (2008: £5.4 million) arose in the year in relation to prior year tax returns for continuing operations.A deferred tax credit of £81.7 million on continuing operations arose in the prior year due to the change in taxation rate due to thereduction in the mainstream corporation tax rate from 30 per cent to 28 per cent from 1 April 2008.60 unitedutilities.com
8 DISCONTINUED OPERATIONSDuring the prior year, in line with its declared strategy of concentrating on its core skills of managing water, wastewater, electricityand gas networks, the group completed the disposal of United Utilities Electricity (UUE) to North West Electricity Networks Limitedon 19 December 2007 for a total enterprise value of £1,782 million.The group continues to look for opportunities to apply its core skills in its non-regulated business where it identifies opportunitiesto generate additional shareholder value with little impact on the risk profile of the group. In line with this strategy, the group soldits industrial liquid waste and facilities management operations and made its final exit from the telecoms sector during the prior year.On 26 October 2007, the group sold its industrial liquid waste operations to Group Tradebe for consideration of £3.7 million and on22 February 2008, the group completed the sale of its facilities management operations to Europa Facility Holdings Limited forconsideration of £9.0 million.The group sold its 22.63 per cent stake in THUS Group plc on 19 June 2007 for consideration of £75.8 million, which completed UnitedUtilities’ exit from the telecoms sector. The sale is treated as an adjustment to consideration arising on the disposal of Your Communicationsand, as such, both the loss on disposal and the group’s share of THUS’ results prior to the disposal are disclosed within discontinuedoperations in 2008.The results of UUE, the group’s industrial liquid waste and facilities management operations and its share of results from its associatehave been disclosed, along with the profit/(loss) on disposal, as discontinued operations in the group’s financial statements in 2008.The detailed trading results and the profit/(loss) on disposal of each discontinued operation are shown below. Cashflows in relationto discontinued operations are separately disclosed in the group’s cashflow statement in 2008.Revenue from the discontinued operations was derived principally from customers located in the United Kingdom, the related net assetswere also primarily located in the United Kingdom.There is no tax charged on the profits resulting from the disposal of the discontinued operations during the year ended 31 March 2008as these were tax exempt sales of shares.2009 2008£m £mUnited Utilities Electricity (1.2) 493.0Industrial liquid waste – (5.0)Facilities management – 10.4Telecoms (including loss on disposal of THUS Group plc shares of £10.0 million) – (5.5)(Loss)/profit for the year/period from discontinued operations (1.2) 492.9United Utilities Industrial FacilitiesElectricity liquid waste managementPeriod ended Period ended Period ended19 December 26 October 22 February2007 2007 2008£m £m £mRevenueExternal sales 223.7 5.3 5.7Intra-group sales – – 21.6Total revenue 223.7 5.3 27.3Depreciation and amortisation (10.0) (0.2) (0.1)Other operating expenses (60.4) (5.2) (26.4)Operating profit/(loss) 153.3 (0.1) 0.8Investment income and finance expense (17.1) – 0.5Profit/(loss) before taxation 136.2 (0.1) 1.3Taxation on profit/(loss) (14.4) – –Profit/(loss) for the period from discontinued operations 121.8 (0.1) 1.3Profit/(loss) on disposal of discontinued operations 371.2 (4.9) 9.1Total profit/(loss) for the period from discontinued operations 493.0 (5.0) 10.4Financial statementsProfit before taxation from facilities management includes profit generated from intercompany trading of £0.2 million in the periodended 22 February 2008.unitedutilities.com 61
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UNITED UTILITIES GROUP PLC ANNUAL R
Page 3 and 4:
Business reviewPerformance against
Page 5 and 6:
In the 2005-2010 period, UUW is inv
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Business reviewTogether with the in
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FINANCIAL REVIEWUnited Utilities ha
Page 11: cash resources. Cash and short-term
Page 15 and 16: Non-regulated activitiesand other a
Page 17 and 18: BUSINESS REVIEW: EMPLOYEESEmployees
Page 19 and 20: RISKCURRENT CAPITAL MARKET CONDITIO
Page 21 and 22: RISKMATERIAL LITIGATIONNOSS Consort
Page 23 and 24: GovernanceTim Weller (45)Chief fina
Page 25 and 26: In addition, resolutions will be pr
Page 27 and 28: Corporate governance reportThe Comb
Page 29 and 30: The letters of appointment of the n
Page 31 and 32: group are required to complete and
Page 33 and 34: eporting or other matters. Historic
Page 35 and 36: The chart below sets out the summar
Page 37 and 38: Table 5: Operational performance me
Page 39 and 40: ii) Matching share award planDetail
Page 41 and 42: The committee will apply such mitig
Page 43 and 44: Statement of directors’ responsib
Page 45 and 46: Independent auditors’ reportIndep
Page 47 and 48: Balance sheetsat 31 MarchGroupCompa
Page 49 and 50: Cashflow statementsfor the year end
Page 51 and 52: asset (or disposal group) is availa
Page 53 and 54: economy) are translated into sterli
Page 55 and 56: estimates, which would result in op
Page 57 and 58: Notes to the financial statements1
Page 59 and 60: Remuneration of key management pers
Page 61: 5 INVESTMENT INCOME2009 2008£m £m
Page 65 and 66: Basic earnings per share are calcul
Page 67 and 68: 14 INVESTMENTSOtherAssociate invest
Page 69 and 70: A full list of the company’s subs
Page 71 and 72: Trade and other receivables is spli
Page 73 and 74: Terms and debt repayment schedule c
Page 75 and 76: The counterparties in respect of tr
Page 77 and 78: Market riskMarket risk is the risk
Page 79 and 80: More1 year 1-2 2-3 3-4 4-5 than 5Gr
Page 81 and 82: Fair valuesThe fair values of finan
Page 83 and 84: The main financial assumptions used
Page 85 and 86: Defined contribution pension costsU
Page 87 and 88: 24 SHAREHOLDERS’ EQUITYShareCumul
Page 89 and 90: 27 SHARE-BASED PAYMENTSOn 28 July 2
Page 91 and 92: The movement in total outstanding o
Page 93 and 94: 28 RELATED PARTY TRANSACTIONSGroupT
Page 95 and 96: Useful information for shareholders
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Annual report and financial statement 2009 - United Utilities

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