Annual report and financial statement 2009 - United Utilities

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FINANCIAL STATEMENTSNotes to the financial statementscontinued24 SHAREHOLDERS’ EQUITY CONTINUEDShare CapitalShare premium redemption Merger Retainedcapital account reserve reserve earnings TotalCompany £m £m £m £m £m £mOn incorporation at 8 April 2008 – – – – – –Shares issued pursuant to the schemeof arrangement 3,406.9 – – 1,420.9 – 4,827.8Capitalisation of merger reserve 1,420.9 – – (1,420.9) – –Cancellation of A shares pursuantto capital reduction (1,420.9) – – – 1,420.9 –Reduction in nominal value of ordinary sharespursuant to capital reduction (3,372.8) – – – 3,372.8 –Profit for the period attributable to equity holders – – – – 133.0 133.0Dividends – – – – (72.5) (72.5)Redemption of B shares 465.7 – 1,016.6 – (1,482.3) –New share capital issued – 0.7 – – – 0.7Credit to equity for equity-settledshare-based payments – – – – 1.4 1.4At 31 March 2009 499.8 0.7 1,016.6 – 3,373.3 4,890.4104,399 ordinary shares were allotted during the period ended 31 March 2009 for the exercise of options in accordance with the rulesof the employee ShareSave scheme and the executive share option scheme for a total consideration of £0.7 million.As permitted by section 408 of the Companies Act 2006, the company has not presented its own income statement. The amount ofgroup profit for the financial year dealt with in the company’s income statement is £133.0 million after accounting for dividendsreceived from subsidiary undertakings of £172.5 million.25 SHARE CAPITAL2009 2009Company million £mAuthorisedOrdinary shares of 5.0 pence each 1,000.0 50.0Deferred shares of 170.0 pence each 274.0 465.7Redeemable preference shares of 100.0 pence each 0.1 0.1B shares of 170.0 pence each 626.0 1,064.31,900.1 1,580.1Issued, called up and fully paidOrdinary shares of 5.0 pence each 681.5 34.1Deferred shares of 170.0 pence each 274.0 465.7Redeemable preference shares of 100.0 pence each – –B shares of 170.0 pence each 9.8 16.7965.3 516.5Less: B shares designated as borrowings (see note 18) (9.8) (16.7)955.5 499.8Refer to the directors’ report for details of the voting rights of each category of shares.26 OPERATING LEASE COMMITMENTSPlant andPlant andProperty equipment Property equipment2009 2009 2008 2008Group £m £m £m £mCommitments under non-cancellable operating leases dueWithin one year 2.6 1.1 2.2 0.9In the second to fifth years inclusive 7.9 1.7 7.3 1.3After five years 230.1 – 209.9 –240.6 2.8 219.4 2.2In respect of the group’s commitment to significant property leases, there are no contingent rentals payable, or restrictions ondividends, debt or further leasing imposed by these lease arrangements. The group has the right to renew such leases and escalationof rents is via rent reviews over a minimum five-year period.The company has no operating lease commitments.86 unitedutilities.com
27 SHARE-BASED PAYMENTSOn 28 July 2008, a new statutory holding company structure became effective by way of a share exchange between the shareholders ofUnited Utilities PLC and United Utilities Group PLC and the listed parent company became United Utilities Group PLC (UUG), (see note24). At that time all existing share option schemes and previous awards made by the United Utilities PLC schemes were transferred tothe new listed parent company. From this point, all awards made by the group’s schemes are in UUG shares.The company operates several share option schemes. Options are exercisable at a price equal to the average quoted market price of thecompany’s shares on the date of grant. Options are forfeited if the employee leaves the group through resignation or dismissal beforethe options vest.Cash-settled and equity-settled share-based payments are measured at fair value at the date of grant. The fair value determined atthe date of grant of equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based upon thegroup’s estimate of shares that will eventually vest.Fair value is measured by use of both simulation and binomial models according to the relevant measures of performance. The modelsinclude adjustments, based upon management’s best estimate, for the effects of exercise restrictions, behavioural considerationsand expected dividend payments. The option life is derived from the models based upon these assumptions and other assumptionsidentified below.The total expense included within operating profit from continuing operations in respect of equity-settled share-based payments was£1.9 million (2008: £2.6 million) and £nil (2008: £nil) in respect of cash-settled share-based payments.The United Utilities Employee Share Trust was established by a trust deed executed on 21 August 1996. The Trustees hold the trust fundfor the benefit of the beneficiaries (being employees or former employees of the group’s companies and their relatives) to the extentdetermined by the rules of the share schemes. As at 31 March 2009, the Trust held 41,418 (2008: 53,601) shares on trust and theseshares will be used to satisfy awards payable under the group’s performance share plan. All dividends payable on the shares during thecurrent and prior years were waived.Further details of the different types of share-based payments are as follows:Continuing operationsCompany share option scheme 1999The company share option scheme 1999 is for senior executives (excluding, with effect from the introduction of the group’s long-termincentive plan, executive directors and other executives participating in that plan and its successor, the performance share plan).Options under the company share option scheme 1999 are exercisable in a period beginning no earlier than three years (five years fordiscounted options under the former executive share option scheme, which are no longer granted) and ending no later than 10 yearsfrom the date of grant.Employee ShareSave schemeThe employee ShareSave scheme was available to all eligible employees and was based on Save As You Earn (SAYE) savings contractswith options exercisable within a six-month period from the conclusion of a three or five-year period as appropriate from the date ofgrant. Under the terms and conditions of this scheme, for every month (up to no more than six months) an employee fails to contributethe agreed monthly amount determined under the rules of the scheme, the last date exercisable will be delayed by one month. The latestgrant under the ShareSave scheme was made in the year ended 31 March 2004. No further grants have been made under this scheme.Performance share planThe performance share plan (PSP) is for senior executives of the group. Options under the performance share plan are exercisable noearlier than three years from the 31 March preceding the date of grant and have an exercise period of three months. PSP awards grantedprior to 31 March 2008 are subject to a total shareholder return (TSR) performance condition (a market-based measure of performance).PSP awards granted during the year ended 31 March 2009 onwards are 50 per cent subject to a TSR performance condition (a marketbasedmeasure of performance); the remaining 50 per cent of the awards are subject to operational performance conditions.Matching share award planThe matching share award plan (MSAP) is for senior executives of the group. Options under this scheme are exercisable no earlier thanthree years from the 31 March preceding the date of grant and have an exercise period of three months. MSAP awards are 50 per centsubject to a TSR performance condition (a market-based measure of performance); the remaining 50 per cent of the award is subjectto operational performance conditions.Deferred share planThe deferred share plan (DSP) is for the employees at the level below senior executive. An annual award in deferred group shares ismade on the basis of a maximum of 30 per cent of salary, apportioned according to the extent of the employee’s achievement of theannual cash incentive plan maximum for the financial year. A limited number of employees at the next level below senior executive mayalso be nominated to receive a one-off award of a fixed number of deferred group shares in recognition of exceptional performanceduring the year. Shares are released after a three-year holding period and are conditional on continued employment with the groupduring this time.Cash-settled share-based paymentsThe group issued, to certain employees, share appreciation rights (SARs) that require the group to pay the intrinsic value of the SARs tothe employee at the date of exercise. At 31 March 2009, the group has recorded liabilities of £nil (2008: £0.2 million) in respect of SARs.The fair value of the SARs is determined using the Black-Scholes pricing model using the assumptions detailed below. The grouprecorded a total charge of £nil (2008: £0.2 million expense) during the year in respect of SARs. At 31 March 2009, the total intrinsicvalue of the vested SARs was £nil (2008: £nil).Financial statementsunitedutilities.com 87
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UNITED UTILITIES GROUP PLC ANNUAL R
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Business reviewPerformance against
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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
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cash resources. Cash and short-term
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Non-regulated activitiesand other a
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BUSINESS REVIEW: EMPLOYEESEmployees
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RISKCURRENT CAPITAL MARKET CONDITIO
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RISKMATERIAL LITIGATIONNOSS Consort
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GovernanceTim Weller (45)Chief fina
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In addition, resolutions will be pr
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Corporate governance reportThe Comb
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The letters of appointment of the n
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group are required to complete and
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eporting or other matters. Historic
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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 and 62: 5 INVESTMENT INCOME2009 2008£m £m
Page 63 and 64: 8 DISCONTINUED OPERATIONSDuring the
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: 24 SHAREHOLDERS’ EQUITYShareCumul
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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