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A N N UA L R E P O R T & A C C O U N TS 2 0 0 6 /0 7
W A T E R W A Y S
G R E AT VALUEF O R T H E N A T I O N
“Over the past few years there has been a very significant rise in the way that people have used our canals and waterways, and British Waterways has done a superb job.” Tony Blair, Prime Minister (1997-2007), December 2006
Front cover: central Birmingham now
Below: central Birmingham before regeneration
BR
ITIS
H W
AT
ER
WA
YS
AN
NU
AL
RE
PO
RT &
AC
CO
UN
TS 2
00
6/07
Waterway Map
ISBN 978-0-9556339-0-4Designed by Honey-Creativewww.honey-creative.co.ukPrinted by Taylor BloxhamJuly 2007
Welsh language version available at www.britishwaterways.co.uk/annualreport
Fersiwn cyfrwng Cymraeg iw gael ar www.britishwaterways.co.uk/annualreport
British WaterwaysWillow GrangeChurch RoadWatfordWD17 4QA
T +44 1923 201120F +44 1923 201300E [email protected]
SA-COC-1487
This document is printed on Revive 50:50 Offset, which is producedusing 50% recovered fibre and 50% virgin wood fibre. Produced at a mill thathas been awarded the ISO14001 certificate for environmental management.The pulp is bleached using an elemental chlorine free (ECF) process.Printed by Taylor Bloxham Ltd who is ISO14001 accredited,using vegetable based inks.
Head Office*Willow Grange, Church Road,Watford WD17 4QAT 01923 226422F 01923 201400
Customer Service Centre*Willow Grange, Church Road,Watford WD17 4QAT 01923 201120F 01923 [email protected]
BW ScotlandCanal House,Applecross Street,Glasgow G4 9SPT 0141 332 6936F 0141 331 [email protected]
North West WaterwaysWaterside House, Waterside Drive,Wigan WN3 5AZT 01942 405700F 01942 [email protected]
Yorkshire WaterwaysFearns Wharf, Neptune Street,Leeds LS9 8PBT 0113 281 6800F 0113 281 [email protected]
Wales & Border Counties WaterwaysNavigation Road,Northwich CW8 1BHT 01606 723800F 01606 [email protected]
* This postal address willchange later this year – seewww.britishwaterways.co.uk/contactfor up-to-date information
East Midlands WaterwaysThe Kiln, Mather Road,Newark NG24 1FBT 01636 704481F 01636 [email protected]
West Midlands WaterwaysPeel’s Wharf, Lichfield Street,Fazeley, Tamworth B78 3QZT 01827 252000F 01827 [email protected]
South West Waterways*Harbour House, West Quay,The Docks, Gloucester GL1 2LGT 01452 318000F 01452 [email protected]
South East WaterwaysElder House510-524 Elder GateCentral Milton Keynes MK9 1BWT 01908 302500F 01908 [email protected]
BW London1 Sheldon Square,Paddington Central,London W2 6TTT 020 7985 7200F 020 7985 [email protected]
Contactdetails
www.waterscape.com, your online guideto Britain’s canals, rivers and lakes.
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"British Waterways has the third largest estate of listedstructures in the country. It is committed to preservingand enhancing the heritagevalue of the waterwayswhilst making them safe and accessible to mil lions of people."
Dr Simon Thurleychief executiveEnglish Heritage
“The waterways are the arteries of the Olympic Park and will be renewed and restored as wecreate one of the largest urban parks in Europe for 150 years, so British Waterways will continueto be a key partner on the roadto 2012.”
David Higginschief executiveOlympic Delivery Authority
“Britain's waterways are one of the nation's great tourism assets.They give travellers unique access to unspoiled countryside as well as an insight into how Britainharnessed its rivers and canals to accelerate the Industrial Revolution. In the world of sustainable tourism, travelling the length and breadth of the country by boat is as rewarding as it is responsible!"
Christopher Rodrigues CBE chairman Visit Britain
"The waterways have been, and continue to be, a vital part ofthe regeneration of Manchester. Their continued restoration andimprovement is key to attractingnew prosperity to the city. We see British Waterways and its joint ventures as majorpartners in our future.”
Sir Howard Bernsteinchief executiveManchester City Council
“I originally came to work here because it was a good next career step… now it’s muchmore than that… it’s a chance to be involved with something I really believe in.”
James Cliftoneconomic & social development managerBritish Waterways
“The Waterways Trust works alongside BW to promote greater public enjoyment of inland waterways.BW’s ability to raise commercial income alongside its government grants ensures that the public receives even greater value and benefit from its waterways.”
Roger Hanburychief executiveThe Waterways Trust
“British Waterways is an importantenvironmental organisation. Not onlydoes it have dedicated programmes in place to enhance the waterways’rich biodiversity, but it is also starting to implement plans which will have a positive impact on reducing its carbon emissions in the future.”
Barbara Youngchief executiveEnvironment Agency
"Scotland's canals have seen a huge transformation over the past few years and nowhere is this more evident than in the Lowlands. Key to thissuccess has been a strongpartnership approach and I lookforward to continuing to workclosely with BW and our otherpartners to ensure that our inland waterways continue to deliver a range of economic,environmental and social benefits for the people of Scotland."
Stuart Oggoperations directorScottish Enterprise Forth Valley & chair of the Scottish Lowland Canals Steering Group
Waterways infrastructure Expanding waterways network Public benefit & appreciation Waterside regeneration The BW team Waterway income Waterway responsibility Scotland review
“The revival of the canal network represents both a commercial and a cultural triumph... British Waterways has proved adept at realising commercial opportunitieswithout destroying the essence of the canals.”The Times, 1 June 2007
1Contents
British Waterways is a public corporation accountable to the Department
for Environment, Food and Rural Affairs (Defra) in England and Wales,
and the Scottish Executive in Scotland. We manage a 2,200-mile long,
200-year-old network of canals and rivers.
Minister for Inland Waterways, England and Wales
Barry Gardiner MP
Minister for Transport, Infrastructure and Climate Change, Scotland
Stewart Stevenson MSP (from May 2007)
Minister for Transport and Telecommunications, Scotland
Tavish Scott MSP (until May 2007)
Consolidated financial highlights £m
2006/07 2005/06
Trading income 96.3 99.9
Restoration and third party income 20.3 14.5
Government grants 72.1 76.1
Total revenue 188.7 190.5
Profit/(loss) on operational activities
before tax 0.6 5.1
after tax (0.1) 3.1
Profit on non-operational property activities
before tax 8.3 15.0
after tax* 5.7 10.2
Group reserves 525.2 472.5
* transferred to capital reserve
Our financialresults
Contents
02 Chairman’s statement
04 Chief executive’s introduction
06 Waterways infrastructure
08 Expanding waterways network
10 Public benefit & appreciation
12 Waterside regeneration
14 The BW team
16 Waterway income
18 Waterway responsibility
22 Scotland review
26 Board members & executive directors
28 Financial review
35 Accounts
Map and contact details
British Waterways
Annual Report and Accounts 2006/07
Annual Report presented to Parliament
by the Secretary of State for Environment,
Food and Rural Affairs in exercise of the
powers conferred by section 24 (3)
and 27 (8) of the Transport Act 1962
I am delighted that British Waterways’ contributionto our society has again been recognised soextensively this year. The Prime Minister hasspoken on a number of occasions of our role in bringing new life and regeneration to our great cities. In a recent survey 94% of people said waterways were an important part of ournational heritage. Safeguarding that heritage but developing it to meet the needs of a new age and a new society is an exciting task.
Last year was a challenging year but neverthelessa year of considerable achievement in which, I believe, the public received great value for theannual government grant. We were disappointed bythe Defra grant cuts but managed the short-termimpact by a rescheduling of the major worksprogramme. Looking to longer term efficiency we reduced our workforce by some 140 people as part of our cost reduction programme.
I would like to thank those who have left for their contribution, as well as our current fine teamfor their goodwill and openness to new ways of working. It will be important to plan for greaterinvestment in major works in future years to securethe long-term infrastructure on which the wholenetwork depends.
There were many positives. As the nation saw one of its warmest summers since records began350 years ago, the network was barely affected.The water monitoring and conservation measuresput in place, including increased backpumping,stood the test well and our 2,200-miles ofwaterways and towpaths were appreciated by millions of people during the year.
Work started on many of our restoration schemesincluding the Liverpool Link to revitalise thewaterfront in time for the City of Culture 2008, andPrescott Lock, on the Bow Back Rivers to restorenavigation to the Olympic waterways, initially tofacilitate the movement of construction materials,but then to provide a focus of vibrant public spaceas part of the legacy of regeneration in EastLondon. In Scotland, the Rt. Hon. Michael MartinMP, Speaker of the House of Commons, openedthe new canal basin at Port Dundas which muchenhances this area of north Glasgow. This was wellsupported by the Scottish Executive which seesBW as a valuable partner in its broader agenda.
Around our waterways, the pace of regeneration in which we are directly involved increased to a value estimated at £7bn. This regenerationbrings great benefit to local communities, it also generates cash to invest back in thewaterways. Much of this regeneration is deliveredthrough our major joint venture partnerships – ISIS, Wood Wharf, Gloucester Quays, City Road Basin, and Edinburgh Quay.
2 Chairman’s statement
Chairman’sstatement
“Last year was a challenging year but nevertheless a year of considerable achievement in which, I believe, the public received great value for the annual government grant.”Tony Hales, chairman, British Waterways
1.
Highlights include major transformationprojects in Edinburgh, Manchester, Leeds,Wakefield, Birmingham, Gloucester and London.When complete, our current regeneration schemeswill provide in the order of 13,500 new homesadjacent to the water.
We currently have planning permission orhave started on site on 18 schemes that willregenerate over 33 hectares of brownfield land,create 4,400 new homes (of which 324 willbe affordable homes) and bring back intoeconomic use eight historic buildings.
Last year was a good year for our commercialincome, upon which we are increasinglydependent for the maintenance of the waterways.Licence fees (partly due to better enforcement),utility income and in particular property income,all grew strongly. Our smaller activities – pubsand marinas – also made a positive contribution.It is not only our desire, but now a clear necessityto continue to drive commercial income in theseand in new ways.
Climate change is one of the biggest threatsto the UK and indeed the world. It is a particularthreat to the waterways but also an opportunity.We already contribute significantly to a betterenvironment, for example by offering a healthyand better way to commute, by offering a wonderfullocal day out, a great alternative to a foreignholiday, by protecting our natural habitatand wildlife and educating our young peopleabout the value of the natural environment.
There will be new ways we can contribute throughnew technology, be it micro-generation, energytransfer, better use of water, or through outstandingsustainable property development schemes.We are determined to play our part in creatinga better future for our children.
In concluding, let me thank our customers of everytype, you have supported us and challenged us toraise our game this year. Let me thank our retiringboard members Helen Gordon, Derek Langslowand Ian Darling for their excellent advice, andour retiring executive directors Derek Cochraneand John Lancaster for their very effectivecontributions. I would also like to take thisopportunity to welcome our new board membersJohn Bridgeman, John Bywater, Nigel Hugill andDuncan Sutherland, who bring with them a wealthof experience, and once again all our peoplefor their commitment to our customersand our waterways.
3Chairman’s statement
1. Tony Hales, chairman
2. People enjoying the canals
of central Birmingham
2.
Tony HalesChairman
4 Chief executive’s introduction
“Inland waterways are great value for the people of this country. We will continue to engage with national, regional and local government to build an even greater understanding of their value and maximise their contribution to society.”Robin Evans, chief executive, British Waterways
British Waterwaysdelivering great value for the nationOur Vision
Our ambition is that by 2012 we will have created an expanded,vibrant, largely self-sufficient waterwaynetwork used by twice as manypeople as in 2002. It will be regarded as one of the nation’s most importantand valued national assets. Visitors will be delighted by the quality of theexperience and as a consequencemany will become active participants.
We will achieve this by an absolute focus on
and commitment to our customers. By researching
and listening to the wide range of people who
visit our waterways, and the many people
who run waterside businesses, we will understand
their needs, and deliver what they want.
Waterway prospectsNo one can doubt the renaissance of our inlandwaterways in recent years, and the benefit thepublic has received from the revival of local canalsand rivers. The challenge however is to maintainthat momentum, secure the long-term future of the inland waterways and deliver increasingvalue to the people of this country.
We must continue to work hard to change attitudes and foster the support andencouragement of our many stakeholders andpartners. Together we continue to create attractive,accessible, enjoyable waterways and watersides.
We must not be complacent. Government fundingis under enormous pressure and we cannot expectto be immune from a general tightening of thepublic belt. What we must all do is ensure thatwhen decisions are made, the exceptional value of the waterways is understood.
Generating the funds to repair and maintain the network properly is the key priority. The cost of looking after 2,200 miles of 200-year-oldinfrastructure requiring constant specialist attentionis considerable. We have been very successful ingrowing our earned income but British Waterwaysstill relies heavily on grants from Defra and theScottish Executive and, to properly conserve thisnational asset in the future, will continue to do so.It is important that government continues toappreciate the value created by our waterways inareas such as regeneration, tourism, flood control,health and wellbeing, environment, heritage, carbon reduction, community engagement and so much more.
Inland waterways are great value for the people of this country. We will continue to engage with national, regional and local government tobuild an even greater understanding of their value and maximise their contribution to society now, and for many years to come.
1.
Robin EvansChief Executive
5Chief executive’s introduction
British Waterways’ strategic aims are to:
1. maintain, enhance and expand our historic waterway network for the benefit of both current and future generations
2. provide a broad range of public benefits includingleisure, environment, heritage, education, health and social inclusion that attract increasing numbers of visits and increasing appreciation by the public
3. be a responsible member of the business communityengaging with our wide stakeholder base on the climatechange agenda, acting with concern for the environmentand focusing on long-term sustainability
4. contribute to the economic vitality of the adjacent urban and rural space by promoting regeneration and by providing a focus of public interest, which contributesto the building of sustainable community activity
5. develop a growing commercial income from relevantentrepreneurial activity, associated with a well-maintainedand well-used waterway network, and in so doing reduce dependence on government grant
6. continuously improve our effectiveness through ourdedicated, experienced and trained teams operating in an open, challenging and customer-focused culture
1. Robin Evans, chief executive
2. Customer service advisor,
Jean Hicks on her historic
boat on the Grand Union
Canal
2.
6 Waterways infrastructure
Britain’s unique waterway network is more than200 years old and was originally built by some of the greatest engineers of the time, famousnames which include Brindley, Rennie and Telford, whose 250th anniversary of his birth is being celebrated this year.
Heritage structures - modern maintenanceMaintaining such an historic network to meetmodern safety and operational standards presentsconsiderable challenges. While looking for the mostefficient methods and technologies for maintainingthe network, we are always conscious of the uniqueheritage of our assets, which often requires a craftapproach and therefore more costly methodologythan would be required in maintaining a purelyfunctional asset. In addition our programmerecognises the ecological importance of thewaterways and the need to encourage biodiversityand protect endangered species such as watervoles. At a time when construction costs arerising at a faster rate than inflation, this means our underlying maintenance costs are rising even faster.
Asset managementOur understanding of the physical waterwaynetwork continues to improve. We have built this knowledge into our ‘steady state’ model. The model analyses our long-term experience of waterway maintenance costs and allows us to allocate maintenance budgets targeting our resources according to the level ofdeterioration of the asset, the degree of risk due to its failure, and the required customer service standard for that part of the waterway.
Inspection programmeA comprehensive inspection programme allows us to keep abreast of the condition of our principalassets, such as locks, bridges, embankments and aqueducts. These are graded A to E, accordingto condition - A being good and E being poor. The table opposite shows the progress we havemade on the most important 11,000 assets andour current target for 2016. It must be noted thatfuture targets cannot be confirmed until theoutcome of the government’s ComprehensiveSpending Review for 2008/09 to 2010/11 is known.
"British Waterways has the third largest estate of listed structures in the country. It is committed to preserving and enhancing the heritage value of the waterways whilst making them safe and accessible to millions of people."Dr Simon Thurley, chief executive, English Heritage
Waterwaysinfrastructure
1.
7Waterways infrastructure
• £105m spent looking after and maintaining the waterways
• 70 bridges and aqueducts repaired
• Over 200 new lock gates installed
• £6m spent on dredging our waterways
• Over £6m spend on vegetation and tree management
• No waterways closed due to water shortages
2,200miles of inland waterways
2,600+listed structures -and the list is growing
90+reservoirs
350miles of conservation areas
Condition of assets 2002 to 2016
2002 2007 2016
actual actual forecast
A - Good 3% 3% 4%
B 22% 22% 25%
C 44% 53% 56%
D 22% 18% 12%
E - Poor 9% 4% 3%
100% 100% 100%
1. Workers enjoy a lunch
time stroll by our historic
waterways
2. 2006/07’s largest planned
engineering works replacing
three sets of gates at
Whitley Lock on the Aire
& Calder Navigation
2.
Replacing lock gates at Offerton Lock on the
Worcester & Birmingham Canal
National ecology manager, Dr Mark Robinson with a water vole on the K&A Canal
Manufacturing lock gatesfrom sustainably sourced timberat our workshop in Bradley
With our key partners, in particular the HeritageLottery Fund, Defra and the Regional DevelopmentAgencies in England and Wales, and the ScottishExecutive in Scotland, further progress has beenmade to expand Britain’s inland waterway network.The volunteer sector also continues to playa vital role in restoration.
The OlympicsIn London, funding was secured for the newPrescott Lock and water control structure whichwill assist navigation on the Bow Back Rivers,in the Olympic Park. This will be supportedby structural improvements to Carpenter’s Lockand the weir, north of Three Mills.
The immediate benefit of this project will be tofacilitate the movement of Olympic constructionfreight in 350-tonnes barges from the Thames,helping to alleviate congestion on the roadsin East London.
Further ahead, the waterways will providean attractive feature to the Games and we aredeveloping innovative ideas to use and showcasethe waterways, including contributionsto the sustainability agenda, while the eyesof the world are focused on the Olympics.They will then provide a lasting amenity legacyto the new communities that will live aroundStratford, East London.
Port Dundas, ScotlandIn Scotland the Port Dundas Basin and extensionto the Forth & Clyde Canal was completed andopened in September by Rt. Hon. Michael Martin MP,Speaker of the House of Commons, and CouncillorElizabeth Cameron, Lord Provost, Glasgow CityCouncil. The basin and its accompanying walkwayshave an important role in making north Glasgowmore accessible to the city centre.
Droitwich CanalsThe Droitwich Canals restoration in Worcestershireis progressing well with the waterway currentlyscheduled to re-open in 2009. Along with the manypartners involved, a planning application for theoverall restoration was submitted in April 2007.Certain land purchases have been secured, withothers to follow, and the initial construction workis due to start before the end of the year.
Cotswold CanalsThe widely supported restoration of the CotswoldCanals would open up navigation once again tothis popular part of the south west. Whilst muchof the funding for the first phase of the projecthas been secured, there is still a significantfunding shortfall. All partners involved areworking hard to bridge the gap.
Manchester, Bolton & Bury CanalAt over 15 miles long it is one of the last majorwaterways in Greater Manchester to requirerestoration. The first phase of the Manchester,Bolton & Bury Canal restoration is progressingto plan and is expected to be completein summer 2008.
The Liverpool LinkThe extension of the Leeds & Liverpool Canalto the Royal Albert Dock, Liverpool, will becentral to the revitalisation of this world heritagesite dominated by the Three Graces of VictorianLiverpool. The programme is on track for completionin time for Liverpool City of Culture 2008 and thestart of the World Tall Ships Race in July of that year.
8 Expanding waterways network
“The waterways are the arteries of the Olympic Park and will be renewed and restored as we create one of the largest urban parks in Europe for 150 years, so British Waterways will continue to be a key partner on the road to 2012.”David Higgins, chief executive, Olympic Delivery Authority
Expandingwaterways network
1.
9Expanding waterways network
• Port Dundas canal basin opened in Glasgow
• Olympic Water City concept launched
• Works began to build Prescott Lock, which willaid navigation on London’s Bow Back Rivers
• Droitwich Canals initial construction work due to start by the end of 2007
• Works began on the Manchester, Bolton & Bury Canal
• Works began on site for the Liverpool Link
• Works began on site for the Montgomery Canal
• Planning work continues in Kendal for Phase One of the Northern Reaches restoration
200milesof new canal opened in the last decade
100+over 100 restorationschemes supported by canalsocieties & trusts around the country
4 projectsconstruction work began on 4 restoration projectsthis year
2006/07 progress
Construction Construction Preparatory completed work started work started
Bow Back Rivers •Cotswold Canals •Droitwich Canals •Liverpool Link •Manchester, Bolton & Bury Canal •Montgomery Canal •Northern Reaches •Port Dundas Basin •
1. Computer-generated
image of the Olympic Park
including the Bow Back
Rivers restoration, part
of a wider regeneration
of East London
2. Hanbury Wharf Locks
the current limit of
navigation on the Droitwich
Junction Canal
2.
Marine controller, Del Hart takes the Prime Minister’s party
round the Olympic site
10 Public benefit & appreciation
In an age when the media pressures for simplesound-bites are intense, the waterways’ contribution to public benefit is multi-faceted and cannot becondensed to one ‘catch all’ phrase.
For some people waterways are a temporary holidayhome, for others a permanent view; for some a placeof quiet escape, for others a focus for vibrant cityliving; for some a gentle walk amongst wonderfulwildlife, for others a fast jog commuting to work; for some an insight into our past industrial heritage,for others the very centrepiece of the world’sgreatest new financial centre at Canary Wharf.
Different people from different communities value the waterways for many reasons. But the public and civic desire for a well-maintained and expandedwaterway system is universal, and supports the casefor continued funding from public funds to encourageaccessibility of this great public space for all.
Increasing visits
During 2006/07 we focused our efforts on
improving our service and the facilities at the
waterside, as well as laying the foundations for
an increase in visit numbers. We expect the delivery
of regeneration projects and the implementation
of our new marketing strategy to have a positive
effect on visit numbers in the next five years.
Service standardsDuring the year we completed market research into the different needs of our customers, includingboaters, walkers and anglers as well as businesscustomers. From this we have developed a set of customer service standards.
These standards are being progressively introduced,supported by comprehensive training for our people.Our updated marketing activity will also support this customer service programme and will focus on growing visit numbers at waterway locations.
Customer satisfactionHaving ‘delighted’ customers is one of our maindrivers, and we measure this throughout the year.During 2006, our survey results revealed thatsatisfaction amongst our customers remained high with: 99% rating ‘overall enjoyment’ at visitordestinations as OK or better (2005: 99%); 95% of hire boaters rating ‘overall upkeep’ as OK or better(2005: 93%); and 99% of towpath users rating‘overall enjoyment’ as OK or better (2005: 98%), see table opposite.
Important national heritage and good places to look aroundAlong with customer satisfaction, we also measurethe public’s perception of the value of canals. In 2006, 94% of the population agreed or strongly agreed that canals are: ‘an importantpart of the nation’s heritage’ (2005: 95%).However, the percentage of people stronglyagreeing with the statement rose significantly to 51% (2005: 44%), showing a very favourableincrease in people with strong positive views on the heritage value of canals.
87% of the population agreed or strongly agreed that: ‘canals are good places to look around’ (2005: 86%), with those strongly agreeing again showing a substantial increase to 35% (2005: 25%).
10
“Britain's waterways are one of the nation's great tourism assets.They give travellers unique access to unspoiled countryside as well as an insight into how Britain harnessed its rivers and canals to accelerate the Industrial Revolution. In the world of sustainabletourism, travelling the length and breadth of the country by boat is as rewarding as it is responsible!" Christopher Rodrigues CBE, chairman, Visit Britain
Public benefit& appreciation
1.
11Public benefit & appreciation
• 99% of towpath visitors rated enjoyment as OK or better
• 94% of the population think that canals are‘an important part of the nation’s heritage’
• Little Venice, West India Quay and The Falkirk Wheelachieved record visit numbers
• 1.5m visits to waterscape.com, up 20% on last year
268mvisits to BW waterways in 2006, that is fourtimes more than thenumber of passengers to pass through Heathrow Airport
30,905record number of boatslicensed on the network
87%of the population agreedthat canals are ‘good placesto look around’
Customer satisfaction OK, good or excellent rating
Type of survey Key measure 2006 2005
Visitor destinations Overall enjoyment 99% 99%
Towpath users Overall enjoyment 99% 98%
Boat owners’ views Overall upkeep 91% 93%
Hire boaters’ views Overall upkeep 95% 93%
Anglers Overall enjoyment 97% 95%
1. Feeding ducks near Watford
on the Grand Union Canal
2. Boaters, cyclists & walkers
alike enjoy canals and rivers
2.
Watching boats go through the locks at Caen Hill on theKennet & Avon Canal
Cruising past Newark
on the River Trent
Getting hooked near Llangynidr on the Monmouthshire
& Brecon Canal
12 Waterside regeneration
Navigable canals and waterways drove the industrialrevolution, and created many of the towns andcities we know today. Having fallen into derelictionand decline in the last century, today we managethe waterways so that once again they are beingrediscovered, and widely used. People want to live,work and spend leisure time by our canals and rivers,they have the power to transform communities,attract investment and create jobs. Britain’s localauthorities are using our waterways to regeneratecommunities in just about every canal town and city.
The map opposite shows some of the exampleswhere we are actively engaged in watersideregeneration developments.
Our involvement in stimulating and participating inthis regeneration also ensures that the developmentenhances the waterways through our input intodesign and planning, and also generates significantincome for reinvestment in the waterways.Through our involvement in these developments,we also seek to ensure best practice is followedto achieve long-term sustainable outcomes.
£7bnBW regeneration activityestimated alongside our
waterways
Partnershipswith AMEC, Ballymore,
Canary Wharf, MillerDevelopments, Morley Fund
Management and PeelHoldings amongst many
others help deliveroutstanding regeneration
schemes
13,500new homesin the order of
13,500 new homes willbe created by our
waterside regenerationschemes
Watersideregeneration
"The waterways have been, and continue to be, a vitalpart of the regeneration of Manchester. Their continuedrestoration and improvement is key to attracting newprosperity to the city. We see British Waterways and its joint ventures as major partners in our future.”Sir Howard Bernstein, chief executive, Manchester City Council.
• Planning permission granted for the £400mredevelopment of Gloucester Quays with Peel Holdings
• Our JV ISIS started construction on the mixed-usewaterside development in central Manchester. To date,over half of the 200 homes have been sold off-plan
• Our Wood Wharf partnership appointed Rogers StirkHarbour & Partners to lead our masterplanning teamand continued its site assembly activities
• The landmark Edinburgh Quay regeneration scheme,which includes 100,000 sq ft of office and leisure space,was named best ‘Mixed-Use Development’ at theScottish Property Awards 2006
1.
1. Computer-generated image
of the New Islington development
in Manchester on the Ashton Canal
2322 21 20
19 18
1716 15
14
12
6
8
11
10
9
7
5
43
2 1
13
13Waterside regeneration
£7Billion of regeneration
This map represents only part of
our involvement in regenerating
waterside areas. We are influencing
and enabling an estimated £7 billion of
regeneration, with development in
almost every major city and town our
waterways pass through.
1. Wood Wharf, London Docklands Leisure, retail and office space, anda new canal link at this 20-acre sitein the heart of London’s Docklands
2. Brentford, London*
£315m-720,000 sq ft of residentialblocks, commercial space, doctors’surgery, health centre, crècheand bus depot and new mooringsand boaters’ facilities
3. Grand Union Village, Northolt700 new homes, a new basin with some 20 moorings, facilities andcar parking, foot and cycle paths,and a residents’ car share scheme
4. City Road Basin, London£180m - planning consentobtained for 295 new homes, 93 being affordable. Civic area,moorings and a new location for the boat club also planned
5. Gloucester Quays£400m - 60 acres of land will be redeveloped into residential,leisure, business facilities, and openspace areas whilst conserving thewaterside frontage
6. Diglis Basin, Worcester £70m - mixed-use developmentscheme including improved pubic access to waterspace, boat moorings, a community centre, 380 private dwellings and 69 affordable dwellings, withimprovements to wildlife habitats
7. Stourport-on-Severn Residential and leisureredevelopment, a new pub, andwide heritage conservation
8. Central Birmingham*
27 acres of mixed-usedevelopment including 1,000 newhomes, hotel, business and leisurefacilities as well as new mooringsand towpath
9. Leicester New student campus, publicwaterside access, moorings,facilities and residentialdevelopment
10. Loughborough Basin works completed inNovember 2006. Studentaccommodation and restaurantsunder construction and due forcompletion August 2007
11. Nottingham*
1.2 million sq ft for 1,500 new family homes and apartments,business and leisure facilities, and a public open space andriverside walk
12. Planet Wharf, Stoke-on-TrentWaterside public space with 27homes. Primary Healthcare facilitycurrently under construction anddue for completion in March 2008
13. Tower Wharf, Chester£30m - redevelopment includesapartments (with affordablehousing), offices and bars. Thescheme has already delivered abasin and will provide new boaterfacilities and refurbish a listedbuilding in poor condition
14. Northwich Marina-based development with new apartments and family homes
15. New Islington, Manchester*
£110m - more than 500 homes, hotel, retail and business space, andthe reopening of the Islington Arm of the Ashton Canal minutes from the city centre
16. WiganRedevelopment of Wigan Pier for residential, leisure, and 29,000 sq ft of office space,includes a BW office with a drop-in customer service area
17. Wakefield Waterfront £100m scheme - removing aGrade II listed building from EnglishHeritage’s buildings at risk register.A landmark sculpture gallery,commercial and residential space,boat moorings and high qualitypublic realm
ISIS Waterside Regeneration schemes*
18. Clarence Dock, Leeds£200m - originally for the RoyalArmouries Museum, Clarence Dock has become a watersidedevelopment, incorporating hotel,bars, casino, exhibition spacerestaurants, offices and apartments
19. Granary Wharf, Leeds*
£65m - 283 apartments,commercial and businessopportunities and a City Inns Hotel. Ground works started in March 2007
20. Edinburgh Quay£27m - Quay2 consists of 57,791 sq ft of Grade-A officeaccommodation and 4,399 sq ft of retail space
21. FalkirkResidential development with20,000 sq ft of office space and a new pub/restaurant
22. Auchinstarry New mooring basin, pub and hotel development underway
23. North Glasgow*
£40m - residential and leisuredevelopment, green space, moorings,and new canal link, in a 1,000 acrescheme
14 The British Waterways team
We know that in 2006/07 we have drawnheavily on the professionalism and dedicationof our workforce. Our people continuedto improve the upkeep of the waterways, theymaintained good customer service and workedto improve our occupational safety record stillfurther. They delivered excellent financial returnswhilst also planning and delivering a restructuringof the business which brought about greaterefficiency with an improved customer focus.
Occupational safetyWith the safety of our people and contractorsparamount, we have continued to drive forwardour safety transformation programme and weachieved the top quartile performance in safetywhen benchmarked against major contractors.
Throughout the year we have made steadyprogress in our headline target to reduce thenumber of reportable incidents involving BWemployees (see graph opposite). Almost 500worksite safety inspections were carried outby members of our senior management team.We also have an external verification processeswhich assess levels of supervision requiredfor our contractors, and in 2006/07 onlytwo reportable incidents involved a contractor.
Customer serviceOur aggregated customer service satisfactionresults are set out on page 11, but we neverforget that overall customer service resultsare made up of individual actions.
Just two examples of good customer servicerewarded during the year include: waterwayoperatives Aaron Farnworth and Ian Stanworthon the Leeds & Liverpool Canal who, having beencalled out late in the evening to a stricken boat,took additional action to ensure the two strandedfamilies had food for the evening; and administratorVicki Fulleylove who travelled from home oneweekend to open our Hatton offices for a groupof visiting cub scouts to shelter from a storm whilethey ate their lunches and completed their canalworksheets.
RestructuringIn October we reduced the number of waterwayunits from ten to nine, with Central Shires andWest Midlands waterway units being amalgamated.With the help of our workforce and working closelywith trades unions, we reviewed our waterway unitsand all of our central functions. As a result morethan 140 posts were made redundant during theyear. Most of the redundancies were amongst officebased staff. These reductions together with a movetowards hot-desking have reduced the need foroffice space. The changes will cut our annual costsby more than £5m from 2007/08 onwards.
At the same time, the restructure createdan improved focus in the waterway units.The role of business development manager hasbeen created to concentrate on increasing revenue.The new role of customer operations manageris designed to ensure delivery of improved customerservice, whilst the asset & programme manageris the member of the team responsible for securingthe infrastructure. We will continue to drive forgreater efficiencies, seeking best practices and newtechnology at every opportunity to compensatefor the rising construction costs we face.
“I originally came to work here because it was a good next career step… now it’s much more than that… it’s a chance to be involved with something I really believe in.” James Clifton, economic & social development manager, British Waterways
The British Waterwaysteam
1.
15The British Waterways team
800around 800 of ourworkforce are employeddirectly on the canal bank.
10%of our people own a boat
• 79 customer service awards made
• Over 600 of our people completed our new ‘Talking to customers’ training
• Lock keeper, Barry Whitelock awarded an MBE for services to waterways
• Les Sumpter, lock keeper at Lapworth in Warwickshire voted ‘best lock keeper in the UK’
• 56% reduction in reportable incidents amongst our people and contractors
5
10
15
20
25
30
04/05-03/06
05/05-04/06
06/05-05/06
07/05-06/06
08/05-07/06
09/05-08/06
10/05-09/06
11/05-10/06
12/05-11/06
01/06-12/06
02/06-01/07
03/06-02/07
04/06-03/07
No.
1. Team leader, Dan Barnett
and maintenance operative,
Alan Houston, catch-up
on the latest BW news
2. Events & volunteer
executive, Jessica Black,
helps a customer at Fradley
Junction, Trent & Mersey
Canal
2.
Total reportable staff incidents (Rolling 12 month totals)
Lock Keeper of the Year, Les Sumpter
When it comes to our people, safety is our top priority
16 Waterway income
Our unique ability to optimise the commercialpotential of the waterways and to deliver publicbenefit combine to give excellent value to thetaxpayer. At a time when government fundingoverall is declining, we have been able to maintainand improve our network with the help of increasedcontribution from commercial income.
The 2,200-mile waterway network remainsone of the nation’s best value public assets withsome 268m visits made in 2006/07. The networkcosts around 2p per person per week.
NavigationBoats remain central to our activity and providea distinctive and living appeal to the waterways.Demand for boating continues to rise and we nowhave a record 30,905 boats on our waterways(see page 29), up 6.6% on 2005/06, generatingus £12.5m from craft licences and £4.9m frommoorings (excluding BWML income) - 17%of what it costs to maintain the waterways.
Throughout the year we have cracked downon unlicensed boats, reducing evasion by 1.5%to 7.1% and removing 125 unlicensed boats usingour powers under British Waterways Act 1983.Following its launch in March 2006, ourNew Marinas Unit is on target to help facilitatethe construction of over 10,000 new marinaberths by 2016.
Income at British Waterways Marinas Ltd,our separate subsidiary company which operates16 marinas at the end of the financial year, roseby 7.7% during 2006/07 to £6.1m, and pre-taxprofits grew by 124% from £202k to £452k.
We work closely with, and receive fundingfrom, organisations such as Transport for Londonto explore and progress viable freight andtransportation opportunities on our waterways.
The welcome go-ahead for Prescott Lock,for example, gives a significant boost to freightopportunities for the Olympic construction projectand beyond, however, long-term freight trafficin other parts of the network remains difficultto achieve. We have commissioned a study fromeconomic consultants Oxera to examine the truecosts and benefits of waterborne freight on ournetwork and to review the current grant regimesfor encouraging freight. We will use its conclusionsto try to ensure the best possible environmentfor freight to flourish.
Property and property joint venturesOur property estate remains the cornerstoneof our plans for the waterways to be largelyself-sufficient whilst creating attractive watersidedestinations. Our £544m (2005/06: £520m)property estate generated property rental incomeof £30m (2005/06: £29m) and the share of profitsfrom our joint ventures was £2.4m (2005/06:£7.7m). Our key regeneration schemes arehighlighted on the map on page 13.
We continuously look for new ways to minimisecost and improve service and in the comingyear will outsource the day-to-day routinemanagement of part of our estate tocommercial agents.
“The Waterways Trust works alongside BW to promotegreater public enjoyment of inland waterways. BW’s ability to raise commercial income alongside its government grantsensures that the public receives even greater value and benefit from its waterways.”Roger Hanbury, chief executive, The Waterways Trust
Waterwayincome
1.
1. Foxton Locks, on the Grand Union
Canal, Leicester Line, is a popular
destination for local families
2p per personOur waterways
only cost around 2p perperson, per week
UtilitiesOur performance in utilities remains strong, withincome from water sales and electricity, cables, water, gas and telecoms companies accessing our waterways for their networks achieving record levels.
We are developing proposals for watersidecompanies and developers to use canal water for heating and cooling their buildings – reducing their carbon footprint and providingincome for reinvestment in the waterways.
Waterside Pub PartnershipOur innovative pub joint venture with Scottish & Newcastle Pub Enterprises has acquired pubs in Leek, Retford, Upton-on-Severn and Keadby – further improving the number and quality of waterside pubs.
Advertising hoardingsFollowing tender, we established an agreement with an external contractor to market advertising hoardings at key roadside locationsacross our network. The venture is projected to generate us £1m a year by 2010.
17Waterway income
£117mtrading, restoration & third party income
£1madditional ScottishExecutive cash grantreceived, increasing from£12m in 2005/06 to£13m in 2006/07
11%reduction in Defra cashgrant received, down to £55.7m
• Property income £29.8m – returns from investmentestate in line with IPD UK commercial property index
• Utility income at £17m with water sales exceeding £4m for first time
• Boat licence receipts up 6.6 % to the highest level ever
• 1,000 new mooring berths created across the network
• Waterside Pub Partnership added four new pubs
Trading income & government grants
0
20
40
60
80
100
120
140
2002/03 2003/04 2004/05 2005/06 2006/07
Trading income Scottish Executive grantDefra grant
£m
Computer-generated image of Granary Wharf at Leeds
on the Leeds & Liverpool Canal
One of our pub partnership pubs, the Steamboat Inn at Trent Lock on the Erewash Canal
18 Waterway responsibility
We have embedded the principles of sustainabledevelopment in our business for many years and we work hard to be a responsible member of the community. Our contribution to sustainabledevelopment is wide ranging but we put particularemphasis on sustainable economic developmentthrough urban and rural regeneration; sustainablesocial development through our educational and localcommunity work; and a sustainable environmentthrough our habitat management and biodiversity.
The waterways and climate change However, in a world where global warming and theover use of scarce resources has become a criticalissue, we recognise we must do more to reduce our impact on the environment.
We are well placed to make a positive contribution.We can do more to change the way we operate, and the waterways can offer opportunities to help others.
Our first challenge is to understand, measure and monitor our impact on the environment acrossthe whole range of our activities. Some of these are positive such as our work on biodiversity and habitat management, others less so like our use of carbon fuels and primary aggregates. In 2007 we shall establish where we can have the most beneficial impact and set ourselves targetsso we can report on progress. We already buy mostof our electricity from renewable sources and wereduced business mileage by 10% since 2003/04,but we know we can do more.
We have described here a few examples of where we are already working, sometimes with new technology and innovative practices to optimise the contribution our waterways can make to a sustainable future.
Canal water cooling Technological advances are beginning to provethemselves in providing cost efficient cooling forwaterside properties in the UK. Using heat exchangetechnology, canal water provides sustainable cooling in place of burning fossil fuels or using largeamounts of electricity to power air cooling units.BW already has working examples in the Mailboxdevelopment in the heart of Birmingham and at ourmooring basin facilities at Auchinstarry in Scotland.We are working with increasing numbers ofdevelopers who are interested in this environmentallyfriendly approach and expect there to be a number of new projects in 2007, including the HepworthGallery on Wakefield Waterfront. We see this as agrowth area for our business and we will be lookingto encourage the use of heat pumps in many moreexisting and planned waterside developments.
Micro-hydroelectricity generation We facilitated the installation of a micro generatingplant at Beeston on the River Trent in 2000.Technology has continued to advance and we believeit is now economically viable to generate electricityon other parts of our network including river weirsand disused locks. We see this as another growtharea and we will be working with our partners to offer this technology to waterside businessesacross our network.
“British Waterways is an important environmental organisation.Not only does it have dedicated programmes in place toenhance the waterways’ rich biodiversity, but it is alsostarting to implement plans which will have a positive impacton reducing its carbon emissions in the future.”Barbara Young, chief executive, Environment Agency
Waterwayresponsibility
1.
19Waterway responsibility
2bn litres in summer we manage the supply of over 2bnlitres of water per day to our waterways
54,000jobs supported by inland waterways
Water managementManaging our water resources from reservoirto sea is central to what we do. We continueto invest in our reservoirs, in controlling leakage,in backpumping and in our state-of-the-artcomputerised SCADA water management system,all designed to control water flows and minimizeour use of water. In summer we have two billion litresof water in our system everyday so we can makea big impact by continually improving our useand management of this scarce resource.
Waste managementDredging our waterways produces significantvolumes of waste and these have to be managed, ordisposed of, in line with the strict requirements of EUDirectives. Suitable material is used to beneficiallycondition agricultural land but, where contaminantsare present, often resulting from our historic industrialneighbours, disposal at landfill is the norm. Recentlegislative changes have resulted in hugely increasedcosts for disposal at landfill, as well as introducingrequirements for waste to be pre-treated before itcan be landfilled. Our challenge for the future is tocome up with alternative solutions for dealing withdredged material that does not involve landfilling.
Finding more cost effective and sustainablesolutions for disposing of aquatic weed providesus with another challenge; an example of wherewe have found an effective solution is on theRiver Lee in London. Annually we have disposedof approximately 400 tonnes of duckweedfrom the River to landfill. Following an approachto London Waste, we trialled compostingthe weed at their new composting centre.
The trial proved successful and we have nowentered into a four year contract with LondonWaste and this arrangement comes with the addedadvantage of being able to transport the weedto the centre by barge.
Clearance of litter and fly tipped materials is anon-stop task and we welcomed the involvement of600 volunteers who joined our office and banksidestaff in the annual spring clean event; during whichwe removed 152 tonnes of litter and 123 shoppingtrolleys. We continue to look for ways to reduce theamount of litter and fly tipped materials in and aroundthe waterways and, working closely with localauthorities, traders and NGOs.
Looking after our heritage and the environmentWhilst attracting new boaters, anglers and visitorsto the waterways is a priority, we are very consciousthat this must be achieved in harmony withthe historic and natural environment. We knowthat heritage and nature conservation are twoof the most important attributes that attract peopleto our waterways and a great deal of our time goesinto ensuring they are managed sustainably.
The waterways provide important habitat for a diverserange of wildlife and we work closely with theEnvironment Agency, Natural England, CountrysideCouncil for Wales, and local environmental groups.We are also the third largest owner of listed buildingsand structures in England and Wales, so we alsowork closely with English Heritage, Cadw, localauthority conservation officers and canal societies.
2.
1. Our annual wildlife survey
is fun for all the family
2. Learning services officer,
Elaine Stanley teaching
aboard Beauchamp,
the floating classroom,
on the Regent’s Canal
20 Waterway responsibility
Bugsworth Basin The physical maintenance of our historic waterways is essential but it is also important that we provide education and interpretation.In this way we hope that future generations will share our passion and enthusiasm for this great national asset.
Bugsworth Basin, at the end of the Peak ForestCanal, is a good example. Here a detailed interpretiveplan was commissioned during the year to bring to life the story of the basin and its historicimportance during the industrial revolution. Working in partnership with the Inland Waterways ProtectionSociety, and with funding from the EU Interreg NorthSea Region Mopark project, the scheme went on to receive a commendation at the 2007 British Urban Regeneration Association Awards.
Rushall Canal embankment Our waterways are often habitats for many species,so it is extremely important that we take care whencarrying out our engineering works. A recent awardwinning example is our £2.35m project to stabilizethe embankment on the Rushall Canal.
When a pre-works survey revealed three protectedspecies – crayfish, water voles and Luronium -special measures were put in place to ensure thatthey were protected or 'rehoused' during the works and carefully re-established in their habitats on completion.
Great care was also taken not to disturb the rarefloating water plantain on the canal bed and workwas scheduled not to coincide with the bird nestingseason. As a result the project went on to win an award for environmental best practice from the Civil Engineering Environmental QualityAssessment and Award Scheme.
Openness & accountability We are continuing to become more open andaccountable in all that we do and have establishedprocedures for consultations and handlingcomplaints. Each of our waterway units hold regularmeetings with customers to deal with local issues. In addition, the British Waterways Advisory Forumbrings together a wide range of interest groups for twice yearly meetings with the chair, chiefexecutive and other board members.
We also have a constructive relationship with the Inland Waterways Advisory Council who adviseDefra on the waterways.
During the year, working with the Welsh LanguageBoard, we also published our Welsh LanguageScheme, which aims to help Welsh speakerscommunicate in their language. The scheme is available on our website.
“I loved the cool names of the wee plants.Wicked!”William (aged 9), Westburn Primary School, Edinburgh, after a school
visit organised by our Wild Over Waterways (WOW) team
1.
1,000wildlife conservation
sites and over 60 Sites of Special Scientific
Interest cared for, 17 of which are of European
Importance recognized as Natura 2000 sites
21Waterway responsibility
ComplaintsFrom January 2007 the target time we taketo respond to complaints reduced from 20to 15 working days. Over the year we handled762 complaints, down 23.9% on the previous year.We responded to 98.3% of complaints within ourpublished timescales up from 95.5% in 2005/06and 11.7% of complaints went to the second reviewstage. In 2006/07 the Waterways Ombudsmanscheme gained full membership of the British & IrishOmbudsman Association demonstrating that itachieves exacting quality standards.
During the year, 108 matters were referred to theWaterways Ombudsman. Of these, 26 were withinher jurisdiction. In total, the Ombudsman completed26 cases, some carried over from the previous year.Of the completed complaints, one was withdrawnat a late stage and two were resolved informallyas a result of the Ombudsman’s intervention.Of the remaining 23, fourteen were found to showmaladministration or unfair treatment (in part or infull), with BW asked to take appropriate action. In theremaining nine completed cases, the Ombudsmanfound no maladministration or unfair treatment.
1. New interpretation panels
at Bugsworth Basin
2. WOW activities for children
bring waterway visits to life
2.
• Over 6,000 waterway wildlife sightings made bythe public in our survey
• 95% of our electricity supply comes from green sources
• All our lock gate replacements were made from FSCcertified timber
• Construction contract for the Liverpool Link restorationagreed with 60% recycled materials to be used
• Business mileage reduced by 10% since 2003/04(beating our original target of 2008)
22 Scotland review
British Waterways Scotland (BWS) is responsiblefor managing and developing a diverse networkof canals, covering some 137 miles and includingthe magnificent Caledonian Canal in the Highlands,the picturesque Crinan Canal in Argyllshireand the Forth & Clyde, Union and Monklandcanals in the Lowlands.
Scotland’s inland waterways, particularly the LowlandCanals, are at a different stage in their evolutionto those in other parts of the UK, and this combinedwith the individuality of each canal presents a uniqueset of challenges and opportunities.
In 2006 the team in Scotland made goodprogress towards its plans which are not onlycontributing to BW’s UK vision but also ensuringthat our waterways continue to be wovenin to the wider fabric of Scotland.
The Scottish Inland Waterways AgendaSince devolution, BWS has received grant fundingfrom the Scottish Executive. Scotland’s CanalsAn Asset for the Future was launched by theScottish Executive in 2002 and set the agendaagainst which we focus our resources.
Today our canals offer far more than the provisionof water spaces for boating. Scotland’s canalsare responding to wider agendas in leisureand tourism, health and community development,regeneration and economic opportunity,and environment and sustainability.
Our baseline grant saw a real increase to £10.9min 2006/07 up from £8.9m in 2005/06 andwill increase further to £11.4m in 2007/08.
During 2006/07 we received additionalad hoc funding of £2.4m and a contributionof £1.5m towards a landscaping and publicrealm project at Port Dundas, bringing the totalfor the year to £14.8m.
Delivering benefitsTo ensure BWS delivers on its remit from theScottish Executive, we continue to focus onthree key themes: asset management; creatingdestinations; and enabling and deliveringsustainable regeneration.
Asset managementOur waterways are valuable assets that impacton many aspects of life in Scotland.
At the close of 2006/07, outstanding statutorymaintenance arrears in Scotland stood at £3.7m,down from £6.2m at the start of the financial year.We remain on target to eliminate these arrearscompletely by 2012.
On the Caledonian Canal the then TransportMinister, Tavish Scott MSP, marked the completionof the ten-year lock refurbishment programmewith a visit to Banavie in May 2006. This £20minvestment has secured the long-term futureof the waterway and provided a platform tocontinue to explore the development of a rangeof leisure and freight opportunities.
For the first time in many years the full lengthof the Caledonian Canal is now open for businessfor 12 months each year, an achievement we wishto maintain.
"Scotland's canals have seen a huge transformation over the past few years and nowhere is this more evident than in the Lowlands. Keyto this success has been a strong partnership approach and I lookforward to continuing to work closely with BW and our other partnersto ensure that our inland waterways continue to deliver a range ofeconomic, environmental and social benefits for the people of Scotland." Stuart Ogg, operations director, Scottish Enterprise Forth Valley & chair of the Scottish Lowland Canals Steering Group
Scotland’s canalspart of the wider fabric of Scotland
1.
23Scotland review
Thanks to the additional funding from the ScottishExecutive we were able to bring forward a rangeof customer-focused improvements during 2006including: new boater facilities across all Scotland’scanals; embankment repairs; dredging; and towpathupgrades at key destinations on the Lowlandcanal corridor. Several areas benefited from theworks including Bowling, Glasgow and Edinburghin the Lowlands, the Crinan in Argyll and Corpachand Laggan on the Caledonian Canal.
BoatingTransit traffic rose on all our canals during the year.The total number of boats licensed in Scotlandin 2006/07 was 3,490, compared with 3,160in 2005/06. (see table on page 25).
Our customer satisfaction survey showedthat 97% of hire boaters in 2006 rated overallupkeep as OK or better, compared with 93%in 2005, while 68% said they would definitelyrecommend to a friend, just lower than lastyear’s figure of 70%.
Water Framework Directive in ScotlandThe EU Water Framework Directive – the mostimportant piece of environmental legislationin recent years – aims to promote the sustainablemanagement of all waters, including canals inScotland Close working relationships with theScottish Executive water team and the ScottishEnvironment Protection Agency (SEPA) have allowedus to ensure that SEPA is sensitive to the specialnature of the canals as artificial structures.
Creating destinationsIn order to meet our overarching objectiveof increasing the use of and contribution whichwaterways can make we continue to focus oncreating and developing high quality destinationsat key sites across the network.
The latest Association of Leading Visitor Attractions’figures showed that The Falkirk Wheel enjoyedthe largest increase in visitors of any Britishtourist attraction last year. The iconic structurealso reinforced its position as one of the country’sleading visitor attractions with two awards,including one for ‘Outstanding Achievement’at the 2007 Waterways Renaissance Awards.
Glasgow was awash with colour in Septemberas a flotilla of boats gathered to mark the completionof a new canal basin in the heart of the city.A new £3.5m landscaping and public realm projectat the site of the waterway extension at PortDundas will help in the creation of a thriving canalquarter and new events space for Glasgow.
The Waterside Pub Partnership will start buildinga new canalside pub at Auchinstarry in June2007 with opening scheduled for March 2008.Plans for a further outlet at Seaport Marinain Inverness are also being progressed.
1. Rt. Hon. Michael Martin MP,
Speaker of the House of
Commons with Glasgow
Lord Provost, Liz Cameron
on The Wee Spark at the
opening of the new canal
basin at Port Dundas
2. Pupils from Dochgarroch
Primary School, nr. Inverness
were enthused about seeds
and plants by heritage &
environment manager,
Olivia Lassiere2.
Quay 2, the second stage of the Edinburgh Quay mixed-use project was launched in February2007. Our imaginative joint venture with MillerDevelopments has transformed the area aroundLochrin Basin and started the regeneration of theFountainbridge corridor. For the second year runningthe opening party for the Edinburgh Fringe Festivalwas held at Edinburgh Quay.
The regeneration of Bowling Harbour progressedduring 2006 while developments are well underway at Rosebank where residential flats have been erected beside the canal.
Waterside regenerationDuring 2006 we continued to create the solidfoundations on which to build longer-term sustainablewaterway regeneration across the network.
The Glasgow Canal Regeneration Project, a partnership between ISIS WatersideRegeneration and Glasgow City Council, will seethe creation of a series of mixed-use developmentsand a number of new destinations across 1,000 acres of the Glasgow branch of the Forth & ClydeCanal over the next 15 to 20 years. In 2006 we reviewed our development approach to ensurethe regeneration vision is right for the people of Glasgow and that local communities are fullyinvolved in helping to shape the future of the area.
At Bowling we continue to explore the role of the canal in the wider regeneration of the area and we have also pushed forward our in-depth examination of the potential restorationof navigation along the River Leven fromDumbarton on the Clyde to Loch Lomond.
As a pivotal location on Scotland’s canal network,Falkirk presents a number of regenerationopportunities. A study to identify the opportunitiesin and around the Tamfourhill area has beenundertaken and we continue to work with ourpartners to ensure the canal plays a significant role in the masterplanning process.
We continue to be a key player within the Dalriada project in Argyllshire and with our community and public sector partners we are exploring the significant regenerationopportunities in and around Ardrishaig.
Working in partnershipWe cannot realise our vision for Scotland’s canalnetwork in isolation and we continue to forgecloser working relationships with a broad spectrumof organisations in numerous policy areas.
Key to our partnership approach is the work of the British Waterways Scotland Group. Chaired by BW’s vice-chairman, the Group meetsthree times a year and represents our corporateand commercial interests in Scotland’s devolvedpolitical environment (see page 42 for more details).
We also play our full part within the Scottish Canals Development Group, a partnership chaired by the Scottish Executive that brings togetherorganisations with a common interest in contributingto, and benefiting from, vibrant canals. Two furthergroups – the Highland Canals Steering Group andthe Lowland Canals Steering Group – bring togetherour principal partners on a quarterly basis to discussand progress projects.
Working with the Waterways Trust Scotland we also encourage community and voluntary sectorengagement with our network.
Director’s summaryMuch has been achieved over the past few years to revitalise the canal network, however, there is still a huge amount of potential to beunlocked. As our environment has changed, so too has BWS. We have embraced a moreoutward looking, customer-focused and dynamicapproach to our business which in turn is makingus more commercially astute. As we move forwardwe aim to develop our position as a partner ofchoice and to extend and grow our reputation for waterside regeneration and development.
We have had a very busy and productive year and I would like to thank our committed workforce,the Scottish Executive and our partners in thepublic, private and voluntary sectors for theircontinued support as we strive to develop the full potential of Scotland’s canals.
24 Scotland review
Steve DunlopDirector, Scotland
25Scotland review
• 25m visits to Scotland’s canals
• Visitors to The Falkirk Wheel up by 48% - the highest increase of any visitor attraction in the UK*
• 97% of hire boaters rated overall upkeep as OK or better
• 10% increase in boat licences to 3,490
• Outstanding statutory maintenance arrears reduced from £6.2m to £3.7m
• Opening of the new canal basin at Port Dundas,representing the first step in the long-term regeneration of the Glasgow canal corridor
• Formal completion of the £20m,10-year restorationprogramme on the Caledonian Canal, securing its long-term future
• Quay 2 regeneration launched in Edinburgh
* Association of Leading Visitor Attractions Report
1. Boating near Lochgilphead,
on the Crinan Canal
1.
Boat licences in Scotland
06/07 05/06 06/07 05/06 06/07 05/06
Caledonian Canal* 1343 1145 134 167 1477 1312
Lowland Canals 144 126 232 232 376 358
Crinan Canal** 1565 1421 72 69 1637 1490
Total 3052 2692 438 468 3490 3160
* In 2006/07 there were 83 commercial vessels operating on the Caledonian Canal (83 in 2005/06)** In 2006/07 there were 157 commercial freight ship visits to the Crinan Canal (131 in 2005/06)
Under 3 months Over 3 months Total
Family enjoying a boat trip on The Falkirk Wheel
26 Board members
1. Tony Hales, Chairman (D,F,G)Tony is chairman of Workspace Group plc and NAAFI Ltd.He was previously chief executive of Allied Domecqand a non-executive director of HSBC Bank plcand Welsh Water plc. Age 58.
2. Dr Campbell Christie CBE, Vice Chairman (A,C,D,E)Campbell was general secretary of the Scottish TUC for 12 yearsuntil retiring in 1998. He is the chair of the BW Scotland Groupand represents Scottish interests on the Board. He is chairmanof Falkirk Football Club and the NHS Forth Valley Acute OperatingDivision, president of the Scottish Civic Forum, and a non-executive director on the Board of South West Trains Ltd. Age 69.
3. Susan Achmatowicz (A,B,E)Susan is a leisure entrepreneur, who has developed her ownaward-winning cycle tourism business. She is an advisor on cycletourism, rural business start-up and sustainable development.Formerly a vice president of Bankers Trust in the City, Susanis a member of the New Forest National Park Authorityand non-executive director of Hadrian’s Wall Heritage. Age 51.
4. Richard Bowker CBE (B,D)Richard is the group chief executive of National ExpressGroup Plc, a leading international transport business.The former chairman and chief executive of the Strategic RailAuthority, he is also a board member of the Countryside Alliance,a trustee of the Settle Carlisle Railway Trust, the deputypresident of the Heritage Railway Association and a memberof the Business Development Board of SCOPE. Richardis also a keen boater having cruised extensively aroundthe network on his own boat. Age 40.
5. John Bridgeman CBE TD (B,F)John is a former director general of Fair Trading, Memberof the Monopolies and Mergers Commission and previouslywas chief executive of British Alcan Aluminium plc. He is thechairman of the Horseracing Regulatory Authority and the Auditand Standards Committees of Warwickshire County Counciland the Warwickshire Police Authority. He is Visiting Professorin Management at the Universities of Keele and Surreyand an independent consultant in Corporate Strategy,Competition Policy and Consumer Affairs. Age 61.
6. John Bywater (C,G)John retired as board director of Hammerson plc, a FTSE 100property company in April 2007 and has taken up the post ofmanaging director of Caddick Developments, a small propertydeveloper based in Yorkshire. He is an independent director ofWorkspace Group plc, the leading provider of affordablecommercial property to small and medium enterprises, and aboard member of the West Bromwich Building Society. John isalso on the advisory board of The Academy of St. Martin in theFields, one of London’s leading orchestras. Aged 59.
7. Prof. George Fleming (B,E)George is Emeritus Professor of Civil Engineeringat the University of Strathclyde and is managing director ofEnviroCentre. He is a past president of the Institution of CivilEngineers. He is also non-executive director of WRAP (Wasteand Resource Action Programme) and Port of Tyne. Age 62.
8. Nigel Hugill (B,G)Nigel is chairman of Lend Lease Europe and former managingdirector of Chelsfield plc (both major property and developmentbusinesses). He is a member of the General Council of theBritish Property Federation and the Independent TransportCommission. He sits on the Review Panel advising on theFormation of Communities England, is a fellow of the RoyalSociety and a Trustee of the Architecture Foundation. Age 49.
9. Duncan Sutherland (C,E,G)Duncan is managing director of Inpartnership. Previouslyhe was director of City Development for Coventry City Counciland achieved many city centre projects including Coventry CanalBasin. He has also worked at Inner City Enterprises plc, was chiefexecutive of the EDI Group Ltd and has been involved in nationalorganisations such as Historic Burghs Association of ScotlandAdvisory Council and was an executive committee memberof the Scottish Council for Development & Industry. Age 55.
10. Terry Tricker (C,D,F)Terry is chairman of his own leisure business. He was previouslychairman of Burton Hospitals NHS Acute Trust and a boardmember of Severn Trent Water Ltd. He is a mentor with ‘Jigsaw’,a mentoring organisation supporting disadvantaged youngpeople. Age 63.
Boardmembers
The British Waterways Board
is appointed by the Secretary
of State for Environment,
Food and Rural Affairs and
(in respect of two members)
by the Scottish Executive.
The appointments are intended
to ensure a good balance of
skills and experience which are
relevant to British Waterways’
wide ranging remit.
1.
2. 3 4. 5.
6. 7. 8. 9. 10.
Membership KeyA. Director of BW Pension Trustees LtdB. Member of The Audit CommitteeC. Member of The Remuneration CommitteeD. Member of The Nomination CommitteeE. Member of The BW Scotland GroupF. Member of The Fair Trading CommitteeG. Member of The Property Group Committee
27Executive directors
1. Robin Evans BSc, FRICSChief ExecutiveRobin joined British Waterways in 1999 as commercialdirector and became chief executive in December 2002.Prior to that he spent four years as palaces’ directorfor Historic Royal Palaces and was chief executiveof The Landmark Trust for eight years. Age 53.
2. Mark Bensted IEng, AMIStructEDirector, LondonMark has been responsible for the operational, property,leisure and regeneration activities of British WaterwaysLondon since 1990. Prior to joining British Waterwaysin 1980 Mark worked in the construction industryfor Taylor Woodrow and Kyle Stewart. Age 49.
3. Steve DunlopDirector, ScotlandSteve was previously director of regeneration at NewcastleCity Council. He started his career in leisure managementbefore moving to a number of high profile senior positionsin local government, latterly as director of communityservices at Falkirk Council. Age 45.
4. James Froomberg MACommercial DirectorFrom 1983 to 1999 James was at KPMG where,as a partner, he headed the firm’s management consultancyto the leisure industry. He was then appointed to Wembleyplc as director of corporate development, before joiningBritish Waterways in March 2003. Age 51.
5. Nigel Johnson BSc (Econ), Solicitor (A)Legal Director and Secretary to the BoardNigel worked as a corporate lawyer in the financeindustry for 18 years and was a senior lawyer inWestminster before joining British Waterways. Age 52.
6. Vincent Moran BA, FCIPDCustomer Operations DirectorVince joined British Waterways in 1997 following extensivepersonnel and general management experience in production,manufacturing and service activities with the coal industryand Chubb Security plc. Age 51.
7 Philip Ridal BEng, FCA, MCT (A)Finance DirectorA member of the Institute of Chartered Accountantsand a member of the Association of Corporate Treasurers,Philip has held a variety of financial roles in UK listedproperty companies, including the Mowlem constructiongroup, and is the former finance director of ManchesterAirports Group plc. Age 53.
8. Simon Salem BA, MBAMarketing and Customer Service DirectorSimon has over 20 years’ experience of marketing, PR,corporate affairs and fundraising. Before joining BritishWaterways he worked for London Transport. He has workedextensively in the leisure and tourism industry. Age 49.
9. Jim Stirling OBE, BSc, MBA, CEng, FICE, MIStructETechnical DirectorJim joined British Waterways as manager, Scotlandin 1992 and became director, Scotland in 1997and technical director in 2005. Jim spent many yearsin civil engineering, construction and developmentboth in the UK and abroad. Age 54.
Executivedirectors
1.
2. 3. 4. 5.
6. 7. 8. 9.
28 Financial review
The result on operational activities, aftertaxation, was a loss of £0.1m comparedwith a profit of £3.1m in the previous year.
Group reserves increased by 11% to £525m,reflecting a revaluation of the property estatein the continuing buoyant market conditions(see table below).
Trading incomeTrading income was up by 1.9% at £116.6mcompared with reductions in our grant incomefrom government of 5.3%.
The main contributor to the increasein income was from third party contributionsto regeneration projects.
This included contributions to projects suchas the Liverpool Canal Link and the restoration ofthe Bow Back Rivers supporting the 2012 Olympics.
Grant income was down by £4.0m, dueto the 11% reduction in grant from Defra offsetby the 25% increase in the grant from theScottish Executive (see page 22).
The group’s share of turnover in joint venturesreduced to £15m (2006: £30m) and the shareof profit reduced to £2.4m (2006: £7.7m) reflectingthe phasing of activity within our property jointventures. Development expenditure is incurredduring the project development phase and turnoverand profits are generated as each developmentis completed and sold on to the market.
“The revival of the canal network represents both acommercial and a cultural triumph... British Waterwayshas proved adept at realising commercial opportunitieswithout destroying the essence of the canals.”The Times, 1 June 2007
Financialreview
Summary of year’s results £m
2006/07 2005/06 Change
%
Group trading income* 116.6 114.4 1.9%
Government grants 72.1 76.1 -5.3%
Total income 188.7 190.5 -0.9%
Group share of income in joint ventures 15.0 30.0
Share of operating results of joint ventures 2.4 7.7
Profit/(loss) on operational activities
before tax 0.6 5.1
after tax (0.1) 3.1
Profit on non-operational property activities
before tax 8.3 15.0
after tax** 5.7 10.2
Group Reserves 525.2 472.5 11%
* including restoration and third party income** transferred to capital reserve
1.
1. People live, work and spend leisure
time by canals & rivers
29Financial review
The group’s share of turnover in 2006/07 includes£11.2m from the ISIS Waterside Regenerationpartnership, generating profit of £3.9m.
Transfers to realised capital reserves of £5.7m(2005: £10.2m) have been made in respect of profits arising on the disposal of investmentproperties and investments, net of attributabletaxation.
Our income from property rentals increased by 3.5% to £29.8m which reflects the continuingreduction in the portfolio as properties are sold to realise cash for investment in joint ventures.The apparent reduction in utility income is primarilybecause the prior year income included arrearstotalling £5.6m which masks a strong underlying10.8% growth in 2006/07.
Craft licence income has increased by 9%reflecting the increase in the number of licencesissued of 6.6% and an increase in price yield of2.3%. Moorings income increased by 7.9% overall,reflecting better utilisation of the available mooringfacilities and a small improvement in the net yieldper permit (see table above right).
Operating costsOperating costs reduced by 0.4% to £189.3m. After allowing for expenditure on major canalinfrastructure works, canal dredging, restorationand regeneration costs, and the cost of thebusiness reorganisation the underlying reduction in operating costs was 6.6% (see table right).
Group income summary £m
2006/07 2005/06 Change
%
Property rentals 29.8 28.8 3.5%
Utility income and water sales 17.0 20.9 -18.9%
Property wayleaves and premiums 16.8 17.5 -3.9%
Craft licences 12.5 11.4 9.0%
Maintenance and other income 6.0 8.1 -25.0%
BWML 6.1 5.7 7.0%
Mooring permits* 4.9 4.6 7.9%
Retail sales* 3.3 2.9 12.1%
Group commercial income 96.4 99.9 -3.5%
Third party contributions 20.2 14.5 39.3%
Group trading income 116.6 114.4 1.9%
Number of craft licences issued 30,905 29,000 6.6%
Number of mooring permits issued* 6,409 6,158 4.1%
Craft licence income per vessel £ 404 395 2.3%
Moorings income per permit* £ 771 743 3.7%
* Excluding BWML
Analysis of operating costs £ms
2006/07 2005/06 Change
%
Major infrastructure works 22.3 25.6 -12.9%
Restoration and regeneration expenditure 21.0 13.5 55.3%
Canal dredging 5.7 6.7 -14.9%
Exceptional costs of business reorganisation 5.6 -
Other operating costs 134.7 144.3 -6.6%
189.3 190.1 -0.4%
Licences and moorings, England & Wales
2006/07 2005/6
Private pleasure boats – canals & rivers
Powered 23,911 22,073
Unpowered 524 436
Total 24,435 22,509
Private pleasure boats – rivers
Powered 4,325 4,247
Unpowered 33 38
Total 4,358 4,285
Private pleasure boats – all waterways
Powered 28,236 26,320
Unpowered 557 474
Total 28,793 26,794
Houseboats
Total 88 96
Business craft
Leisure business craft 1,608 1,724
Trade plates, freight and workboats 416 386
Total 2,024 2,110
Total long-term licences 30,905 29,000
Mooring permits issued 6,409 6,158
Maintenance operative, BryanLewis offers help to a weekendvisitor along the canal
30 Financial review
In October we reduced the number of waterwaybusiness units from ten to nine, with the CentralShires and West Midlands waterway units beingamalgamated. With the help of our workforce and working closely with trades unions, we reviewed our organisational structures in both operational and central service functions. As a result more than 140 jobs became redundant during the year.At the same time, the restructure created animproved operational focus in the waterway units(see page 6 for more details). The cost of thisreorganisation was £5.6m, which was financed by a reduction in operating costs. The reduction in Defra grant was managed by a rescheduling of the major works programme.
Our drive for greater efficiencies, seeking bestpractices and new technology at every opportunityto compensate for rising construction costsunderpins the reduction in underlying operatingcosts during the year. Various efficiency initiativeshave continued during the year such as the NewWays of Working project that aims to achievesavings in office space by more effective workingmethods. This project has been rolled out across all BW offices and will include the head office in Watford, which will be moving to a smaller and more efficient office in 2007/08.
Profit and loss of operational activitiesThe profit and loss position on operational activities,after attributable taxation, reduced to a net loss of £0.1m (2006: £3.1m profit). This is in line with the break-even year-on-year target required bythe conditions for government grant-in-aid funding(see table below).
Gains on non-operational property activitiesThe gains on disposal of properties have continuedto exceed expectations due to the continuingbuoyant property market. The cash raised fromdisposals has been invested into joint ventures tofund land purchases and development expenditure.
The amount transferred to realised capital reserve is £5.7m (2006: £10.2m), which representsthe profit on disposal of investment properties and investments net of attributable taxation(see table below left).
Treasury management and cash flowCash balances are invested only in money market deposits for periods not exceeding three months. At the year end the operational cash balances stood at £7.5m (2005: £10.7m) and the non-operational activity cash balancesstood at £18.1m (2006: £24.8m). A further £1.3m (2006: £1.9m) is held in third party funding accounts for regeneration and restoration schemes (see table opposite).
A net amount of £13.7m (2006: £26.6m) of cash was realised during the year from the sale of investment properties net of amountsreinvested in property and tax payments. The non-operational cash balances are held to meet tax liabilities and funding commitments to property development joint ventures.
Long-term borrowings decreased by £0.6m to £9.9m representing 1.9% (2006: 2.2%) of total reserves.
Operational activities £m
2006/07 2005/06
Operating (loss)/profit (0.6) 0.4
Share of operating results of joint ventures 2.4 7.7
Interest receivable 4.1 3.2
Interest payable (6.2) (5.3)
Other finance income 0.9 (0.7)
Profit on operational activities before taxation 0.6 5.1
Attributable corporation tax (0.7) (2.0)
Net (loss)/profit retained (0.1) 3.1
Non-operational property activities
2006/07 2005/06
Profit on disposal of investment properties 8.3 11.5
Profit on disposal of investments 0.0 3.5
Profit on non-operational property activities before taxation 8.3 15.0
Capital gains tax on disposal profits (2.6) (4.8)
Transfer to realised capital reserve (5.7) (10.2)
Net profit retained 0.0 0.0
31Financial review
Interest rate risk mitigationAll of BW’s borrowings are from the National Loans Fundand are at fixed rates of interest until the repayment date.BW has interests in a number of property development joint ventures that are stand-alone businesses and areindependently funded with external bank debt withoutrecourse to BW. In each of the joint ventures anassessment is made whether the interest payments on borrowings should be hedged having regard to thequantum of the debt, the period over which the borrowingsare planned to be outstanding and the sensitivity of theproject to changes in interest rates.
At 31 March 2007 total borrowings in joint ventureswere £73m (2006: £54m). Of these total borrowings 35% (2006: 37%) is either at fixed rates of interest or a fixed interest rate swap is in place.
Pension fundThe accounts are prepared in accordance with FRS 17, the accounting standard which relates to accounting forpension funds. The main effect is to include the pensiondeficit on the group balance sheet net of any attributabledeferred taxation benefits. During the year investmentassets performed well showing a total increase in value of5%. Against this the pensionable service liability valuationincreased by 2.2%. As at 31 March 2007 the fund liabilitieswere 83% (2006: 81%) covered by the value of the assets.
The movements on the pension fund, based on FRS 17, are in the table below, left.
The next full actuarial valuation will be carried out as at 31March 2007 and valuation report issued during 2007/08.This will include a review of the assumptions used for thevaluation, including a full review of the mortality assumptions.The results of this actuarial valuation will therefore bereported in next year’s accounts.
Cash flow 2006/07 2005/06
Year ended 31 March 2007 £m £m
Operating (loss)/profit (0.6) 0.4
Dividends from joint ventures 4.6 4.9
Non cash items in (loss)/profit 3.4 4.2
Movement in working capital (9.2) (5.0)
Net interest receivable 1.7 1.7
Operating cash flow (0.1) 6.2
Operational capital expenditure (net) (8.7) (3.1)
Purchases of properties and investment (11.2) (18.3)
Disposal of properties and investments 38.3 52.5
Investment in joint ventures (14.1) (17.2)
Payments to acquire trade or business (1.3) 0.0
Taxation payments (13.4) (7.6)
Net cash flow (10.5) 12.5
Cash balances as at 31 March 2007 26.9 37.4
Summary of changes in pension fund deficit 2006/07 2005/06
£m £m
Deficit as at 1 April (59.3) (73.5)
Current service cost (7.5) (6.4)
Past service cost adjustment (0.3) (0.1)
Discount unwinding on pension scheme liabilities (15.3) (14.6)
Return on pension scheme assets 13.7 49.4
Experience changes on scheme liabilities (0.2) 1.9
Change in present value assumptions 8.2 (23.2)
Contributions in cash from the employer 7.1 7.2
Deficit as at 31 March (53.6) (59.3)
Assets and liabilities in pension scheme 31 March 31 March
2007 2006 Change
%
Market value of assets 263.0 250.5 5.0%
Present value of liabilities (316.6) (309.8) 2.2%
Deficit (53.6) (59.3)
Funding % 83% 81%
32 Financial review
Balance sheetGroup reserves have increased by £52.7m to £525.2m (2006: £472.5 m) representing an increase of 11% over the year. This increase is predominantly made up of an investmentproperty revaluation surplus of £46.8m, realisedproperty and investment disposal profits of £5.7mafter taxation, and a decrease in the deficit on the pension fund of £4.0m, net of deferred tax.
The profit and loss reserves include the deficit on the pension fund as required under FRS17.After separating out the effect of the pension fund deficit, the year end balance on operatingactivities profit and loss reserve was £0.4m (2006: £0.9m) see table above.
Transition to International Financial ReportingStandards (IFRS)Last year we stated our intention to produce BW’s first financial statements in accordance with IFRS for the year ending 31 March 2007. The project team established to manage thetransition from UK GAAP to IFRS substantiallycompleted the task but was unable to resolve an apparent significant accounting consequence on the treatment of income and premiums arisingfrom long-term leases of land income in time for the March 2007 year end.
With advice from our auditors, Grant Thornton, this issue has now been resolved and our currentintention is to continue with the IFRS conversionproject with a view to producing our first set of accounts under IFRS for the year ending 31 March 2008.
The most significant transitional impacts on thefinancial statements under IFRS will be as follows:
• the annual revaluation surplus/deficit on investment property will be recognised in the income statement; and
• additional deferred taxation liabilities will be provided in relation to temporary timingdifferences arising on investment propertyvaluations and the historical property cost.
Risk managementWe have continued to introduce the new elementsof current best practice into our risk managementframework. This helps manage risk to createopportunities for innovation and growth as well as identifying threats to the achievement of ourobjectives. Our approach to risk management is given in the Corporate Governance Report onpage 44. This shows the importance attached tothe ongoing clarification of risks, ensuring effectivecontrol processes exist and for embedding riskmanagement into BW’s culture.
The main risks stem from the waterwayinfrastructure for which there is ongoing inspection,assessment and prioritisation of remedial action to assets with a high consequence of failure.Completion of the safety critical backlog ofmaintenance in 2004 has reduced the overall level of risk in the asset base.
BW group Profit & Loss Reserve
Operating Pension
£m Activities Deficit Total
Balance as at 1 April 2006 0.9 (41.5) (40.6)
Loss on operating activities for the year after tax (0.1) (0.1)
Reduction in net pension fund liability (net of deferred tax) 3.8 3.8
Transfers to realised capital reserves (0.4) (0.4)
Balance as at 31 March 2007 0.4 (37.7) (37.3)
33Financial review
There remains a balance of essential but lessurgent work to complete. These statutory arrears of maintenance are valued at £110m at 31 March2007. We are dependent on continued funding from the government to fulfil statutory obligations to eliminate the remaining maintenance arrears.
Given the nature of our work and responsibilities we are particularly exposed to changes to these agreed standards by new legislation and regulation. The impacts will be clearer as the full requirements emerge from, forexample, the Water Framework Directive.
Increasingly necessary and important sources of additional funding are through partnerships.These ventures allow further exploitation of BW’sinfrastructure by accessing investment funds and development expertise. Processes have beendeveloped for choosing the right partner, monitoringperformance, governance and clarity in allocatingappropriate responsibilities between partners.Our joint ventures include significant propertydevelopment opportunities within which there are various risks.
We actively engage the expertise of our chosenpartners in the field to manage these riskseffectively within the constraints of the widereconomic cycle.
There are risks associated with implementing these business changes. These focus on behavioursfor consistency in delivering standards, customerservice and safety. We manage these risks throughcodes of practice to ensure fair trading, recognisedproject control techniques, communication, regularperformance appraisal and individual developmentplans reflecting the new business priorities.
Our top priority is the safety of our customers,contractors and employees on the waterways.We continually improve our safety processes andmeasure our safety performance. Safety training,procedures, signage, regular inspection andmaintenance of assets and the development of relevant competencies are examples of our safety framework.
In our wider objectives, we have a commitment to deliver social, environmental and heritagebenefits. Risk based assessments in accordance with our environmental code of practice are applied to all works undertaken and we haveintroduced sustainability targets to reduce the impact of carbon emissions and the use of resources. We have a regular assessment of all our heritage assets and actively follow up buildings at risk. Safety risks, vandalism and impediments to access by all are managed by our educational role and communityengagement through organisations with stronginvolvement in social inclusion and volunteers.
Our regeneration activities, including those affecting the Olympic site, deliver benefits from our active waterspace management to wider redevelopment schemes. Competentproject management, coordination with partnersdelivering shared visions contribute to timelyachievement of outcomes.
2. Catching up at the IWA’s
festival ‘Canal Cavalcade’
at Little Venice on the
Regent’s Canal
1.
35Accounts: contents
36 Board members’ report
38 Statutory and financial framework
40 Corporate governance
46 Directors’ remuneration report
50 Auditors’ report
52 Consolidated profit and loss account
52 Statement of consolidated total recognised gains and losses
52 Note of consolidated historical cost profits and losses
53 Balance sheets
54 Consolidated cash flow statement
55 Notes to the accounts
76 Scotland accounts
78 Accounts direction
80 Five year summaries
Contentsof accounts
36 Accounts: board members’ report
A Register of Interests is maintained by the
legal director through whom public inspection
can be arranged.
Fixed assets
Details of movements in fixed assets during
the year, including the revaluation of investment
properties, are set out in Note 7 to the accounts.
BW does not incorporate revaluations of operational
properties in the accounts. Based upon external
valuations at 31 December 2006, it is the opinion
of the board members that the operational property,
excluding the canal track, towpaths and reservoirs,
has a market value in the region of £46m (2006:
£56m) at 31 March 2007.
Charitable and political contributions
BW has not made any charitable or political
contributions.
Payment policy
It is BW’s policy to agree payment terms with its
suppliers at the outset of a transaction, and abide
by these terms, subject to satisfactory performance
by the supplier and the timely presentation of an
accurate invoice. Amounts owed to suppliers are
generally settled by the end of the month following
receipt of invoice. At the year end, the amount
owed to trade suppliers was equivalent to 33 days
credit (2006: 16 days).
Principal activities
BW’s principal activities are set out on pages
4 to 33.
Business review
A detailed review of BW’s performance during
the year (including key performance indicators)
and expected future developments is contained
in the Business review section on pages 4 to 33.
Results
The audited accounts for the year ended 31 March
2007 are shown on pages 52 to 75.
The analysis of income and expenditure in the
accounts is based on the current use of waterways
rather than their Transport Act 1968 classification.
This provides a more meaningful presentation but
does not affect BW’s statutory obligations under
sections 105 to 107 of the Transport Act 1968,
the Board’s approach to which is set out later
in this report under ‘Statutory and Financial
Framework’ on pages 38 to 39.
Board members
Current board members are shown on page 26.
Their terms of engagement are summarised in the
Directors’ Remuneration Report on pages 46 to 49.
Ian Darling, Helen Gordon and Derek Langslow
retired from the Board in September 2006.
John Bridgeman, Nigel Hugill and Duncan
Sutherland joined the Board in September 2006
and John Bywater joined in February 2007.
Board members’ report
The board members present their annual report on theaffairs of BW, together with the accounts and auditors’report, for the year ended 31 March 2007.
37Accounts: board members’ report
Audit
Grant Thornton UK LLP were appointed as external
auditors of BW for the year ended 31 March 2007
by the Secretary of State for Environment, Food
and Rural Affairs in accordance with Section 24(2)
of the Transport Act 1962.
Equal opportunities
BW is committed to equality of opportunity
and has policies and procedures in place to ensure
continuous improvement. BW fully recognises its
legal responsibilities, particularly in respect of race
relations, age, sex and disability discrimination.
Employees
BW places considerable value on the involvement
of its employees and has continued its practice
of keeping them informed on matters affecting
them as employees and on the various factors
affecting its performance. This is achieved through
formal and informal meetings allowing the two-way
flow of information between management
and employees, and a monthly newspaper
supplemented by occasional regional information
sheets, and employee surveys.
BW has common terms and conditions of
employment and single table bargaining with
employee representatives through National
and Business Unit Forums. Consultation on
employment and other related matters takes
place at these forums in a spirit of co-operation
and open exchange of information and ideas.
All employees are covered by an annual
performance and development review process
38 Accounts: board members’ report - statutory and financial framework
Statutory basis
The British Waterways Board (BW) is a public
corporation, which was established by the Transport
Act 1962 to manage the inland waterways,
docks and estates, which had previously been the
responsibility of the British Transport Commission.
BW is responsible for approximately 2,200 miles
of canals and river navigations in England, Scotland
and Wales, together with their associated reservoirs,
docks, repair yards and workshops.
The Transport Act 1968 classified these
waterways into:
a) The Commercial Waterways, which were to
be kept principally available for the commercial
carrying of freight and maintained in a suitable
condition for use by commercial freight
carrying vessels.
b) The Cruising Waterways, which were to be
kept principally available for cruising, fishing
and other recreational purposes and maintained
for use by vessels constructed or adapted for
the carriage of passengers and driven by
mechanical power.
c) The remainder, which have to be dealt with
in the most economical manner possible
(consistent, in the case of retained waterways,
with the requirements of public health and the
preservation of amenity and safety), but subject
nevertheless to a duty (contained in the British
Waterways Act 1995) to take account of the
desirability of protecting them for future use
as cruising waterways or for other public
recreational use.
Under s.27 of the Transport Act 1962, the
government may give directions of a general
character to BW as to the exercise of its functions
and in February 1999 the government published
a Framework Document containing its aims
and objectives for BW. Under the terms of the
Framework Document, BW is required by the
government to operate and maintain its waterways
to standards that reflect use and prospects of use
and any land drainage requirements. Such standards
do not always fully reflect the historic standards for
the channel dimensions of Commercial and Cruising
Waterways prescribed by the Transport Act 1968.
The government requirement in the Framework
Document is expressed to be subject to BW’s
statutory obligations. Nevertheless the government
(Scottish Ministers in respect of waterways in
Scotland) has power to make Orders varying the
historic standards prescribed in the 1968 Act.
Furthermore, the currently prescribed standards
may only be enforced in special proceedings under
that Act. The government (and Scottish Ministers)
has power to intervene in any such enforcement
proceedings and to curtail them if it certifies to the
court it intends to make an Order specifying different
statutory standards. This power may be exercised
if compliance with the standards being enforced
under the proceedings would require the payment
of further grant by the government (Defra or
Scottish Executive).
The Framework Document also sets out BW’s wider
relationship with government and responsibilities
of the Board and chief executive, as well as setting
a framework for BW’s relations with users, the
Waterways Ombudsman and the Inland Waterways
Amenity Advisory Council.
Consistent with its statutory obligations, powers
and objectives agreed with government, BW runs
its affairs on a commercial basis and promotes the
fullest use of the waterways for leisure, recreation
and amenity, and freight transport where appropriate.
Statutory and financial framework
39Accounts: board members’ report - statutory and financial framework
The Treasury annually renews guarantees
of bank overdraft facilities in order for BW to meet
day-to-day fluctuations in receipts and payments.
BW’s profit generating capital expenditure can be
funded through access to National Loans Fund
loans, subject to government limits. In recent years
BW has only been permitted to borrow amounts
equal to the total of earlier loans due for repayment.
Within these limitations, BW has been restructuring
its asset portfolio by disposal and reinvestment to
improve its ability to achieve its business objectives.
In February 1999 the then Deputy Prime Minister
announced that the government had decided
to phase out most of BW’s outstanding debt
as it matures, thus removing from BW the need
to take out new loans to repay existing loans.
BW is also required to obtain government consent
for all expenditure projects over £6 million
(over £10 million for property acquisition) or when
there are novel or contentious features or to take
an interest in other bodies.
Preparation of accounts
BW is required to prepare audited annual accounts
which comply with Companies Act requirements
and best commercial accounting practice, although
the information to be disclosed is amended and
extended by Direction of the Secretary of State
for Environment, Food and Rural Affairs as shown
on page 78 to 79.
Expenditure on repairs and renewals of the basic
canal infrastructure is written off to profit and loss
account as it is incurred. Investment property
is revalued annually by external valuers.
Grant
BW receives annual grants in monthly instalments
from the government, which assists it in meeting its
statutory obligations. BW’s activities in England and
Wales are part funded by Defra and in Scotland are
part funded by the Scottish Executive. From time
to time additional specific grants are made and are
given at various points through the year. In 2006/07
additional specific grants were received from the
Scottish Executive.
Conditions for the payment of grant and details
of other controls applicable to BW as a public
corporation are set out in Financial Memoranda
issued by government.
Part of the grant received from government is used
for the purchase of vehicles, plant and equipment
for maintaining the waterways as economically
as possible but on which no return on investment
can be obtained. This is treated in the accounts
as a capital grant and the income deferred and
brought into account in line with the depreciation
charges on the assets concerned.
BW is precluded from drawing government grant
in advance of need.
Objective to avoid loss and not draw grant
in advance of need
The above requirement of not drawing grant
in advance of need, combined with the statutory
responsibility to avoid a loss on revenue account,
taking one year with another, leads BW to target
to break even on profit and loss account each year.
Borrowings and capital investment
The government sets the maximum amount of grant
and any access to loans from the National Loans
Fund to fund capital expenditure. BW is not allowed
long term borrowings other than from the National
Loans Fund. The limit of all BW’s borrowings was
increased to £35 million under an order of the
Secretary of State for the Environment in March 2001
exercising powers contained in the Water Act 1981.
40 Accounts: board members’ report - corporate governance
The Board meets regularly (six times during the year)
and brings an independent judgement to its oversight
of the direction, strategy and corporate objectives
of BW. Reporting to the Board are executive directors
who have direct responsibility for operations and
management. They also are responsible for the
development of business strategy and policies,
subject to approval by the Board. Biographical details
of the board members and executive directors
can be found on pages 26 and 27.
All the board members are non-executive and
therefore are independent from management.
Any business association or other relationship which
could interfere with the exercise of their independent
judgement or any other potential conflict are required
to be declared. Any declaration is noted in the
minutes and, in appropriate cases, the board member
will withdraw from the meeting during consideration
of the business to which the declaration relates.
The chairman has ensured that the board members
have been provided with appropriate and timely
information and that their enquiries have been
properly met. Board papers are sent out a week
in advance of the relevant meeting to allow the
members fully to prepare for meetings, and minutes
of committee meetings are circulated to all members.
The Board is kept informed of developments within
the business through regular presentation by
management. Executive directors are normally
present during board meetings though the chairman
held meetings, or parts of meetings, of the board
without the executive directors present. Board
meetings are held at different locations around the
business and are preceded by visits and meetings
with BW employees and local stakeholders.
The Board has a schedule of matters specifically
reserved to it for decision and has also defined those
delegated to Board committees and the executive
directors. The Board has appointed the vice chairman,
Dr Campbell Christie, as its senior independent
director for the purposes of the Combined Code.
The roles of chairman and chief executive are clearly
separated and the division of responsibilities is
defined in the delegation arrangements.
All board members have access to the advice and
services of the secretary to the Board, and may take
independent professional advice at BW’s expense
after notifying the chairman. The secretary ensures
that new board members receive appropriate
induction on appointment.
CorporategovernanceThe Board is committed to achieving the highest
standards of corporate governance. This is key
to the objective of BW being an exemplar public
organisation that maximises the public benefit it
creates. Accordingly the Board has resolved that,
save for necessary adaptations consequent upon
its actual status as a statutory Public Corporation,
it should adhere to and apply the standards
of corporate governance applicable to a quoted
public limited company. In doing so, it also meets
(and exceeds) the Accounts Direction to meet the
disclosure requirements ‘of companies legislation
currently in force’.
The applicable standards for this reporting year
are those set out in the Combined Code on
Corporate Governance and this statement explains
how the Board has applied those standards
throughout the reporting year.
Board - operation & membership
One of the principal differences between BW
and a quoted company relates to the structure
of the Board and the appointment of its members.
As such, sections A4, A7 and B of the Combined
Code relating to the appointment, re-election
and remuneration of board members are not
applicable to BW.
BW is governed by a Board comprising a chairman
and vice chairman and (currently) eight other
non-executive members appointed by the Secretary
of State for Environment, Food and Rural Affairs
and (in respect of two members) Scottish Ministers.
Their appointment is fixed for a period of three years
and their remuneration is set by the Secretary of
State and Scottish Ministers. Subject to performance,
board members may be reappointed once without
competitive selection. The appointments are intended
to ensure a balance of skills and experience relevant
to the various sectors of the business. Mr Tony Hales
was appointed chairman from 10 July 2005, and
met the independence criteria on his appointment.
His appointment was made in accordance with
the guidance of the Office of the Commissioner for
Public Appointments (OCPA) and therefore on merit
and against objective criteria. The chairman has
enough time available to devote to the job.
41Accounts: board members’ report - corporate governance
Where necessary, BW provides the necessary
resources for professional development and updating
the knowledge and capabilities of both the board
members and executive directors. The secretary
may only be removed with the approval of the Board.
The Board has a prescribed methodology for
determining appropriate levels of governance and
control for subsidiaries, joint ventures and associated
undertakings of BW. The methodology provides
a risk profile that is used as a guide to the
appointment of directors and the appropriate level
of management reporting.
Conduct and performance evaluation
The Board is committed to achieving high standards
of conduct. The Seven Principles of Public Life
recommended by the Committee on Standards in
Public Life have been applied to itself and its people
and these are complemented by a code of conduct
and ethics statement.
The Board evaluates its performance annually.
In 2007 the Board has engaged the services
of an external consultant to undertake an evaluation
of its effectiveness. The consultant shall be preparing
a summary of his findings to be discussed by the
Board as a whole and a Board Improvement Plan
will be prepared in the light of its outcomes.
The chairman undertakes appraisals of individual
board member performance and the vice chairman
appraises the chairman. The Board meets without
the chairman present at least once a year to consider
the appraisal of his performance.
Audit committee
The Board’s Audit Committee comprises five
non-executive Board members. Details of the
current members are given on page 26. The Board
is satisfied that at least one Member of the Audit
Committee has recent and relevant financial
experience. The Committee has written terms
of reference that are available on the BW website,
and meets at least three times a year to review
the internal audit plan, progress against that plan,
and summary findings of the internal and external
auditors. In addition to reviewing the financial results
and accounting policies, the Committee monitors
the effectiveness of risk management and internal
control systems for the Board. By invitation the
chairman attends the meetings, together with the chief
executive and the head of audit and, when appropriate,
executive directors and the external auditors.
The Committee also meets the external auditors
and head of audit each without executive directors
present. The Committee reviews the effectiveness
of the external auditors and of internal audit annually
and considers an external effectiveness review
of the internal audit unit every five years.
The last such review was in 2006.
The Audit Committee oversees the nature and
amount of non-audit work undertaken by Grant
Thornton UK LLP each year to ensure that the
external auditors’ independence is safeguarded.
All non-audit services above £12,000 to be
performed by the external auditors are required to be
approved by the Audit Committee. The Board’s policy
is for a presumption that non-audit work will be put
out to competitive tender. Details of the external
auditors’ fees are given in Note 3 on page 58.
The Audit Committee is responsible for making
recommendations to the Secretary of State regarding
the appointment of the external auditor. Following
an evaluation by the Audit Committee, Grant Thornton
UK LLP were appointed by the Secretary of State
(in consultation with Scottish Ministers) as external
auditors for the period from 1 April 2006.
Nominations committee
The Board has a Nominations Committee and
terms of reference are available on the BW website.
It comprises four non-executive board members,
details of which are given on page 26. It provides
support and advice to the board chairman when
he is consulted by Ministers on the appointment
of persons to the Board and reviews the board
composition (its mix of skills, experiences and
characteristics) from time to time. It also considers
succession planning.
Remuneration committee
The Remuneration Committee, comprising four
non-executive board members (details of whom are
given on page 46), has as its main task consideration
annually of the performance of the executive
directors and determination of their remuneration
levels. The chairman of the Board attends by
invitation but is not a member of the Committee.
Terms of reference for the Remuneration Committee
are also available on the BW website. Further details
of the work of the Committee are given in the
Director’s Remuneration Report on pages 46 and 47.
42 Accounts: board members’ report - corporate governance
Fund management is overseen by an Investment
Sub-Committee and is delegated to external
professional investment managers.
The trustee directors are responsible for the
management and administration of the Fund. Ongoing
day to day supervision of the administration of the
Fund is carried out by the pensions manager, under an
administration agreement between British Waterways
Pension Trustees Limited and BW. The pension fund
administration is outsourced to Capita Hartshead, a
contract managed in-house by the pensions manager.
Relations with shareholders
Unlike a listed company, BW does not have
shareholders so that Section D of the Combined Code
does not apply. The Board is responsible to the
Secretary of State for Environment, Food and Rural
Affairs and to Scottish Ministers and maintains an
ongoing dialogue at all levels within both governments.
This includes regular contact by the chairman, chief
executive, finance director and (in Scotland) Scotland
director, including scheduled quarterly meetings with
agendas set in accordance with the respective
financial memorandums. The chairman’s meetings
include reference to the board members’ performance
evaluation, and whether those reappointed would
continue to be effective by adequate commitment
to the role and time.
The Board holds an Annual Meeting at which it
communicates the key business results and plan
for the future to the main user groups, its partners
and individual users.
BW has established an advisory group, the British
Waterways Scotland Group (BWSG) to support
the development of the business in Scotland within
the new devolved political environment. The BWSG
is a non-statutory group working to support BW’s
Board and its executive directors. It has a counselling,
consultative and influencing function externally and
internally, rather than a decision-making role and has
an open remit to bring to the Board and/or the
executive directors for consideration any issue
of concern to a majority of the members.
Fair trading committee
The fair trading committee, comprising three
non-executive board members (details of whom are
given on page 26) has as its main task an informed
scrutiny and oversight of compliance by BW and its
subsidiaries of their fair trading commitments and
obligations. Terms of reference for the Fair Trading
Committee are available on the BW website.
Since its establishment the Committee has focused
much of its attention on the competition and fair
trading implications of the operation, by the subsidiary
British Waterways Marinas Limited (BWML), of inland
marinas in competition with other marina operators.
In addition, it has considered the fair trading aspects
of the operation, by BW, of its on-line moorings
business that also is competing with private
mooring operators.
Other work of the Fair Trading Committee concerned
BW fair trading practice in connection with a wider
range of its commercial activities or those of its
subsidiaries as well as continuing oversight of its
compliance with competition law. It reviews all
decisions of the Waterways Ombudsman on fair
trading related complaints. It has set out topics for
the internal audit unit to cover and report.
Property committee
The Property Committee, comprising four
non-executive board members (details on whom are
on page 26), first met in December 2006, replacing
the more informal property sub-group of the board.
The main task of the Committee is to provide
a non-executive strategic oversight of the commercial
property business of BW, in particular monitoring the
performance of the commercial property portfolio
against external benchmarks. It also reviews policies
and strategies and may obtain reports. The role of
approving large property transactions outside the limit
of the delegated authority of executive directors
remains with the Board. The Committee also keeps
under review at each meeting progress on the major
Wood Wharf joint venture development.
Pensions trustees
A subsidiary, British Waterways Pension Trustees
Limited, the trustee of the Pension Fund,
is responsible for its own governance. The trustee
directors, who meet quarterly, are an independent
chairman, two members of the Board, two executive
directors, three employee representatives and
a representative elected by current pensioners.
43Accounts: board members’ report - corporate governance
Under the Waterways Ombudsman Scheme, the
Ombudsman may consider complaints against BW
by users and others that have not been resolved
under BW’s internal complaints procedure.
It is a non-statutory scheme funded by BW.
More information on the work of the Ombudsman
since the last Annual Report is given on page 21.
Internal control
The board has maintained the procedures necessary
to comply with the requirements of the Combined
Code relating to internal control. It has conducted
a review of the effectiveness of the system of internal
controls, including financial and operational, and risk
management systems.
The Board members acknowledge their ultimate
responsibility for BW’s system of internal control
and for reviewing its effectiveness. These internal
controls are designed to manage rather than
eliminate the risk of failure to achieve business
objectives, and can only provide reasonable
and not absolute assurance against material
misstatement or loss.
In England and Wales, under its Openness and
Accountability initiative, BW has facilitated the
creation of the British Waterways Advisory Forum
(BWAF). This is a body, independent of BW, whose
membership comprises organisations of national
scope with an interest in the waterways managed
by BW. Through meetings between BWAF and BW
such stakeholder organisations will have direct
access to the chairman, board members and senior
management to raise significant issues of concern
or common interest. These new arrangements
incorporate and enlarge upon the former
arrangements for national user group meetings.
An independent Waterways Ombudsman is available
to consider complaints against BW. The terms of the
scheme under which the Ombudsman operates are
available from the Waterways Ombudsman’s website
(www.waterways-ombudsman.org).
Operation of the scheme is overseen by a Waterways
Ombudsman Committee under the chairmanship
of Professor Jeffrey Jowell QC, Professor of Public
Law at University College London. The Committee
comprises a majority of persons who are not
connected with BW and includes members elected
by the British Waterways Advisory Forum.
The Waterways Ombudsman, Hilary Bainbridge,
is a full member of the British and Irish Ombudsmen
Association which has strict independence criteria
for such membership.
Board Audit Remuneration Nominations FTC Property
Total number of meetings 6 5 2 2 4 2
Tony Hales1 6 (3) (2) 2 4 2
Dr Campbell Christie 6 - 2 2 - -
Susan Achmatowicz 5 4 - - - -
Richard Bowker 4 5 - 1 2 -
John Bridgeman 3 2 - - 2 -
John Bywater 1 - - - - 1
Ian Darling 1 - 1 - - -
Prof George Fleming 5 3 - - - -
Helen Gordon 2 3 - - - -
Nigel Hugill 4 2 - - - 2
Dr Derek Langslow 2 3 - - - -
Duncan Sutherland 4 - 1 - - 2
Terry Tricker 6 - 2 2 4 -
1: Tony Hales, Chairman, is not a member of theAudit Committee, nor of the RemunerationCommittee but attendstheir meetings byinvitation.
( ) – attended by invitation
Attendance
Details of attendance at the principal Board and Committee meetings in 2006/07 were:
44 Accounts: board members’ report - corporate governance
Risk identification and management
There is an ongoing process for identifying, evaluating
and managing the significant risks faced by BW.
The Board regularly reviews this process.
Risks are identified in each business unit plan and
are reviewed by the executive directors and the
Board. The key risks are subject to regular review
by the executive directors to identify new and
changing risks. The results are incorporated into
the chief executive’s operating report to the Board.
The Board also considers specific reports on key
risks, including the statutory arrears. Each director
and general manager annually makes a representation
of assurance outlining how risk management and the
control environment has provided reasonable
assurance of effective and efficient operations
throughout the period. The chief executive considers
this with each director and general manager during
the annual corporate governance review and
a statement is given to the Audit Committee
summarising the significant risks, controls
and required action points.
This is supplemented by ongoing risk assessments
at each business unit jointly by management
and internal audit.
Control environment
There is a clear organisation structure with
delegated responsibilities and authorities.
The Board is committed to achieving high standards
from its people. A code of conduct and ethics
statement, which includes a whistleblowing
procedure, is supported by high safety, customer care
and recruitment standards, an appraisal process
and a policy of unlocking the potential of staff.
Information and communication
The executive directors submit a rolling four year
Business Plan, detailed annual budgets and key
performance indicators on its strategic priorities
to the Board for approval. The plan describes the
implementation of the Board’s long-term strategic
vision and is supported by individual business unit
plans that apply consistent economic and financial
assumptions. Monthly operational reports and
financial summaries together with regular forecasts
are produced for each business unit and reviewed by
the Executive. Progress against the key performance
indicators is supplied on a quarterly basis to the
Executive for review. Detailed reports and projections
are presented to the Board.
Monitoring
During the year the Audit Committee:
• reviews the internal and external audit plans
• considers reports from management, internal and
external audit on the system of risk management,
internal control and any significant control
weaknesses
• discusses with management the actions and
progress in dealing with identified problem areas.
The chairman of the Audit Committee reports
the outcome of the Audit Committee meetings and
any significant internal control issues to the Board.
The Board receives the minutes of all Audit
Committee meetings.
Board members’ responsibilities
in respect of the group accounts
The Board is required to prepare group accounts for
each financial year which comply with the Accounts
Direction issued by the Secretary of State for
Environment, Food and Rural Affairs in respect
of BW, see pages 78 to 79.
In preparing those accounts, the Board is required to:
• take all reasonable steps to secure that
the operating and financial review complies
with the Accounts Direction
• select suitable accounting policies and then
apply them consistently
• make judgements and estimates that are
reasonable and prudent
• state whether applicable accounting standards
have been followed, subject to any material
departures disclosed and explained in the accounts
• prepare the group accounts on the going concern
basis unless it is inappropriate to presume that
the organisation will continue in business.
The Board confirms that the group accounts comply
with the above requirements.
In the case of each board member or director:
• so far as the board member or director is aware,
there is no relevant audit information of which
the company’s auditors are unaware, and
• all the steps that ought to have taken as a board
member or director have been taken in order to
make himself or herself aware of any relevant
audit information and to establish that the Board’s
auditors are aware of that information.
The Board is responsible for ensuring that proper
accounting records are kept and that these disclose
with reasonable accuracy, at any time, the financial
position of BW and enable them to ensure that the
accounts comply with the Direction.
The Board is also responsible for safeguarding the
assets of BW and hence for taking reasonable steps
to prevent and detect fraud and other irregularities.
Compliance with the combined code
The Board considers it has complied throughout the
financial year and up to the date of approval of the
annual report and accounts with the Combined Code,
except for those matters disclosed in this statement
or those that cannot be applied to BW because of
its status as a statutory public corporation rather than
a quoted public limited company.
BW is additionally subject to public sector controls,
government monitoring and approval, parliamentary
scrutiny and external reviews.
Going concern
The funding arrangements of BW differ from those
of a public limited company. BW receives payment
from government to assist it in meeting its statutory
obligations, as referred to in the Statutory and
Financial Framework on page 38 to 39. It is
anticipated that funding will continue at levels
sufficient to enable BW to continue in operational
existence for the foreseeable future.
By order of the Board
Nigel Johnson
Legal director and secretary to the Board
45Accounts: board members’ report - corporate governance
46 Accounts: directors’ remuneration report
The Committee operate to a Remuneration Policy
designed to specifically reflect BW’s business
requirements taking account of the specialist
independent advice received. The executive directors
have agreed with the recommendation to publicly
disclose their remuneration. Full details are included
in the table on page 48.
Remuneration policy
The Remuneration Committee’s overriding objective
is to ensure that BW’s remuneration policy and
remuneration packages are sufficient, taking account
of BW’s financial position and the wider remuneration
context in the business, to attract, retain and motivate
a high quality team of executive directors to deliver
the business strategy.
Based on the information and recommendations
provided by TPRC the Committee have agreed
that BW should benchmark base salaries to market
median levels with a proportion of variable pay
in the form of annual bonus. TPRC have
recommended that, unlike the private sector, a Long
Term Incentive Plan has not been applicable so far
in BW’s development. The Committee has recognised
that as the business strategy develops, it may be
appropriate to introduce a Long Term Incentive Plan
at a future stage.
A summary of each element of the remuneration
package is set out below.
1. Basic salary
Basic salaries are normally reviewed annually
on 1 July and increases are determined by reference
to comparator information taking into account each
director’s contribution during the year. The initial
evaluation by TPRC during 2002 indicated that
executive director salaries were significantly below
the appropriate median market levels and this
information is updated annually. The Remuneration
Committee recommended that salaries should be
increased towards the market levels in a staged way
and this was continued in 2006/07. Details of basic
salary levels for 2006/07 for each executive director
are shown in the table on page 48.
2. Annual bonus
A maximum total annual bonus of 30% (40% for the
chief executive) of basic salary may be awarded
subject to the achievement of corporate performance
targets measured by Economic Value Created (EVC),
Contribution before Tax (CBT) revenue and personal
performance measured against the achievement
The BW Board
The terms of board members’ appointments are
determined by the Secretary of State for Environment,
Food and Rural Affairs or (in the case of two board
members) Scottish Ministers. They are for a fixed
term with the option for this to be extended by
a further term. The contracts are terminable upon
notice not exceeding six months. The Secretary
of State, or Scottish Ministers as appropriate,
determines Board Members’ emoluments.
Details of board members’ fees are shown in the
table on page 48.
Reporting to the Board, but not board members,
are executive directors who have responsibility for
management and for the development of business
strategy and policies, subject to approval and general
oversight by the Board.
The remuneration committee
The Board has established a Remuneration
Committee responsible for determining and reviewing
the terms of employment and remuneration for
executive directors. The remuneration principles
established for this senior group of employees
provides the framework for remuneration policy within
the business. The Committee comprises from three to
five board members. The Committee members are:
Terry Tricker, chairman
Dr Campbell Christie
Ian Darling (to September 2006)
Duncan Sutherland (from January 2007)
The chairman, chief executive and customer
operations director attend the Committee by invitation
to present recommendations and provide technical
support but have no input into decisions affecting
their own remuneration.
In determining appropriate remuneration levels,
the Committee commissions specialist independent
advice, surveys conducted by external consulting
firms and remuneration information on comparable
organisations. All executive director roles are fully
evaluated by Towers Perrin Remuneration
Consultants (TPRC) with responsibility levels
assessed and compared with organisations of similar
size in the public and private sectors. TPRC
recommend that the closest match of responsibility,
liability and risk are to be found in the private sector.
Directors’ remuneration reportNOT AUDITED
47Accounts: directors’ remuneration report
4. Pensions
All executive directors with over two years’ service
participate in the BW Pension Fund which provides a
pension on a defined benefit basis and based on basic
salary. BW prefers directors to retire at age 60 rather
than 65 as is normal in BW and where they comply
with this preference they are compensated by the
purchase on their behalf by BW of five years’ pension
service. Following changes to the pension fund and
the introduction of a minimum retirement age of 63,
the Committee approved part compensation for
executive directors complying with the preference
to retire at age 60 by making additional contributions
to the fund so as to treat the minimum pension age
as 61 1/2. Following the recent changes to pensions
taxation the rules of the pension fund were amended
in April 2006 and in particular it was decided not to
keep the limit on earnings that could count towards
pension benefits that had previously applied to those
joining the pension fund after May 1989. Details of
the accrued pension levels are shown in the table on
page 49 and these take into account the changes to
the pension fund rules in April 2006. The Committee
has considered the potential impact of the taxation
changes, electing to monitor the situation for any
detrimental effect on recruitment and retention.
5. Notice period
Executive directors are entitled to 12 months’ notice
of termination of contract by BW. Directors are
required to give BW six months’ notice.
6. External appointments for executive directors
The Board recognises that executive directors may
be invited to become non-executive directors of other
companies unconnected with BW's activities and that
such appointments can broaden their knowledge and
experience to the benefit of BW. On the basis that it
does not impact upon their executive duties, directors
are generally allowed to accept one such appointment
and retain any resulting fee. In addition executive
directors may also serve as non-executive directors
of joint venture companies. In such circumstances
fees are not payable to executive directors as activities
of this nature are part of the normal responsibilities
of the directors. The disclosable external interests
of executive directors are set out in Note 20 to the
accounts on page 71.
of individual targets. Fundamental measures of safety
and customer satisfaction are in place and have
to be satisfactorily achieved before consideration
is given to any bonus payment. The Remuneration
Committee requires internal audit and external
verification of these non-financial measures.
Even where threshold measures are met, the
Remuneration Committee reserves total discretion
to award or withhold bonus payments taking account
of any mitigating factors.
This level of potential total annual bonus was
recommended by the Remuneration Committee
to reflect in part the absence of Long-Term Incentive
Plan arrangements that normally exist in the private
sector. Bonus payments are normally made on
1 July each year. Total bonus payments for each
executive director are shown in the table on page
48 and reflect performance in the 2005/06 financial
year. Bonus payments for 2006/07 will be paid on
1 July 2007 and reported in the 2007/08 accounts.
2.1 Corporate performance element
Of the total bonus potential up to 10% (15%
for the chief executive) of basic salary may be
awarded for the achievement of EVC targets, and
up to 10% (15% for the chief executive) of basic
salary for the achievement of CBT revenue targets.
In broad terms the achievement of budgeted EVC
and CBT revenue would indicate that half Corporate
performance bonus would be appropriate with full
bonus applicable only where EVC and CBT revenue
exceeds budget by a significant proportion. Failure
to significantly achieve budget EVC and/or CBT
revenue levels would normally indicate that no
corporate bonus is payable.
The bonus payments shown on page 48 relate
to the 2005/06 year.
2.2 Personal performance element
Of the total bonus potential, up to 10% of basic
salary may be awarded for the achievement of
a range of stretching targets set to encourage
each director to achieve performance levels over
and above the normal expectations of their role.
Targets are directly linked to the achievement
of key strategic business activities.
3. Benefits
The executive directors are entitled to a company
car (or an allowance in lieu of a company car),
health insurance and critical illness insurance.
Details of the levels of taxable benefit are shown
in the table on page 48.
48 Accounts: directors’ remuneration report
Contracted timecommitted 2006/07 2005/06
Date of expiry of during the year Total TotalBW Board current term Days £ £
Tony Hales, chairman (from 10/7/05) 9/7/08 76 47,736 33,840
Campbell Christie, vice chairman 30/6/07 up to 42 18,211 14,440
Susan Achmatowicz 9/10/07 up to 42 15,793 10,948
Richard Bowker 31/8/07 up to 42 15,054 10,948
John Bridgeman (from 25/9/06) 24/9/09 up to 42 7,481 –
John Bywater (from 1/2/07) 31/1/10 up to 42 2,398 –
George Fleming 9/10/07 up to 42 13,292 10,948
Nigel Hugill (from 25/9/06) 24/9/06 up to 42 7,481 –
Duncan Sutherland (from 25/9/06) 24/9/06 up to 42 8,000 –
Terry Tricker 9/10/07 up to 42 17,293 10,948
Ian Darling – – 5,955 10,948
Helen Gordon – – 6,376 10,948
Derek Langslow – – 6,166 10,948
Dr George Greener, chairman (to 9/7/05) – – 19,380
171,236 144,296
Taxable Termination 2006/07 Taxable 2005/06Salary Bonus benefits payments Total Salary Bonus benefits Total
£ £ £ £ £ £ £ £ £
Executive Directors
Robin Evans, chief executive 201,250 66,500 11,863 – 279,613 187,155 41,580 12,633 241,368
Mark Bensted 111,750 28,050 13,522 – 153,322 99,120 18,260 13,494 130,874
Derek Cochrane (to 31/3/07) 110,500 25,970 8,867 140,965 286,302 105,126 17,750 9,091 131,967
Steve Dunlop (from 1/2/06) 105,000 10,500 9,334 – 124,834 17,500 - 386 17,886
James Froomberg 152,125 42,332 13,858 – 208,315 142,528 28,324 13,729 184,581
Nigel Johnson 141,750 36,300 10,407 – 188,457 130,613 22,365 10,619 163,597
John Lancaster (to 10/10/06) 56,823 24,441 4,947 – 86,211 103,460 16,750 9,618 129,828
Vincent Moran 135,000 34,450 7,947 – 177,397 115,814 22,877 8,121 146,812
Philip Ridal (from 12/9/05) 157,500 22,500 1,156 – 181,156 88,506 - 654 89,160
Simon Salem 118,500 30,210 9,807 – 158,517 112,417 19,594 11,986 143,997
Jim Stirling 132,500 35,750 8,750 – 177,000 110,373 17,775 8,682 136,830
Stewart Sim (to 3/2/06) – – – – – 108,023 22,099 8,244 138,366
Mark Smith (to 4/5/05) – – – – – 17,788 28,428 426 46,642
1,422,698 357,003 100,458 140,965 2,021,124 1,338,423 255,802 107,683 1,701,908
AUDITED
Summary of directors’ remuneration 2006/07
The information provided below in respect of the BW Board complies with the provisions of Schedule 7A of the
Companies Act 1985, as required by the Accounts Direction of the Secretary of State. In addition, and with
their agreement, BW has chosen to include information on the remuneration of the executive directors.
49Accounts: directors’ remuneration report
Increase Increase Increase in transfer in accrued in accrued Transfer value of value over the
Accrued Accrued pension lump sum accrued benefits year net ofpension at lump sum at during the during the 31 March 31 March directors’31 Mar 07 31 Mar 07 year year 2007 2006 contributions
£pa £ £pa £ £ £ £
Robin Evans 57,216 – 8,100 – 781,732 612,595 157,915
Mark Bensted 52,089 31,430 7,796 3,493 614,995 484,955 123,919
Derek Cochrane 64,350 40,315 10,625 2,007 1,096,058 863,720 226,288
James Froomberg 18,755 – 5,153 – 228,657 153,913 66,321
Nigel Johnson 20,687 – 4,291 – 274,069 197,218 69,020
John Lancaster 26,241 – 2,825 – 545,018 473,695 68,303
Vincent Moran 26,217 – 6,003 – 321,440 230,131 83,825
Simon Salem 49,657 8,627 4,954 443 593,919 493,126 94,287
Jim Stirling 33,615 – 8,237 – 503,547 351,338 144,906
Accrued pension
The pension benefit is the increase in transfer value
after indexation in accrued pension during the year,
less the executive directors’ own contributions.
The accrued annual pension is the amount, on
attaining normal pension age, to which the director
would be entitled if he had left BW at the year end
or is entitled, having left employment during the year.
These amounts cover all retirement benefit
entitlements for directors and there are no other
funded or unfunded unapproved retirement benefit
entitlements.
The transfer values, calculated by reference to
GN11 published by the Institute of Actuaries,
are of the accrued benefits under the scheme
at the dates stated not including any additional
voluntary contributions.
John Lancaster left the Fund on 10 October 2006.
The figures shown as at 31 March 2007 represent
his accrued pension at 10 October 2006 but assume
market conditions as at 31 March 2007. The actual
benefits paid were a pension, payable for life,
of £17,112.14 per annum, plus a lump sum
of £114,080.93.
Derek Cochrane left the Fund on 31 March 2007.
The actual benefits paid were an early retirement
pension, payable for life, of £39,042.96 per annum,
plus a lump sum of £260,286.40. BW paid
£110,964.88 to the British Waterways Pension
Fund in consideration of these benefits.
Philip Ridal and Steve Dunlop are currently within
the two-year waiting period for new joiners to the
pension fund and are therefore not included
in the table above.
Signed on behalf of the Board
Nigel Johnson
Legal Director and Secretary to the Board
50 Accounts: independent auditors’ report
Our responsibility is to audit the financial statements
in accordance with relevant legal and regulatory
requirements and International Standards on Auditing
(UK and Ireland).
We report to you our opinion as to whether the
financial statements give a true and fair view and are
properly prepared in accordance with the Transport
Act 1962 and any directions issued by the Secretary
of State for Environment, Food And Rural Affairs.
We also report to you whether in our opinion
the information given in the Board Members’
Report is consistent with the financial statements.
The information given in the Board Members’
Report includes that specific information presented
in the business review sections in pages 4 to 33
that is cross referred from the business review
section of the Board Members’ Report.
In addition we report to you if, in our opinion,
the British Waterways Board has not kept proper
accounting records, if we have not received all the
information and explanations we require for our audit,
or if information specified by law regarding Directors’
remuneration and other transactions is not disclosed.
We read other information contained in the Annual
Report and consider whether it is consistent with
the audited financial statements.
The other information comprises only the chairman’s
statement, business review sections contained in
pages 4 to 33, Board Members’ Report and the
Directors’ Remuneration Report.
We have audited the group and parent company
financial statements (‘the financial statements’)
of The British Waterways Board for the year ended
31 March 2007 which comprise the Consolidated
Profit and Loss Account, the Group and Entity
Balance Sheets, the Consolidated Cash Flow
Statement, the Consolidated Statement of Total
Recognised Gains and Losses and the related
notes 1 to 24. We have also audited the information
in the Directors’ Remuneration Report that is
described as having been audited. These financial
statements have been prepared under the accounting
policies set out on pages 55 to 57.
This report is made solely to The Secretary Of
State For Environment, Food And Rural Affairs and
British Waterways board members in accordance with
the Transport Act 1962. Our audit work has been
undertaken so that we might state those matters
we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume
responsibility to anyone other than The Secretary
Of State for Environment, Food And Rural Affairs and
British Waterways board members, for our audit work,
for this report, or for the opinions we have formed.
Respective responsibilities
of board members and auditor
The board members’ responsibilities for preparing the
Annual Report, the Directors’ Remuneration Report
and the financial statements in accordance with
United Kingdom law and Accounting Standards
(United Kingdom Generally Accepted Accounting
Practice) are set out in the Statement of Board
Members' Responsibilities.
Independent Auditors’ Report to the Secretary of State forEnvironment, Food and RuralAffairs
51Accounts: independent auditors’ report
Opinion
In our opinion:
• the financial statements give a true and fair view,
in accordance with United Kingdom Generally
Accepted Accounting Practice, of the state of the
Group’s and The British Waterways Board’s affairs
as at 31 March 2007, and of the Group’s profits
for the year then ended;
• the financial statements have been properly
prepared in accordance with the directions
of the Secretary of State for Environment,
Food and Rural Affairs;
• the information given in the Board Members’
Report is consistent with the financial statements;
and
• in all material respects, the expenditure and income
have been applied to the purposes intended by
Parliament and the financial transactions conform
to the authorities which govern them.
Grant Thornton UK LLP
Registered Auditors
Chartered Accountants
London
We consider the implications for our report if we
become aware of any apparent misstatements or
material inconsistencies with the financial statements.
Our responsibilities do not extend to any other
information.
Basis of audit opinion
We conducted our audit in accordance with
International Standards on Auditing (UK and Ireland)
issued by the Auditing Practices Board. An audit
includes examination, on a test basis, of evidence
relevant to the amounts and disclosures in the
financial statements. It also includes an assessment
of the significant estimates and judgements made by
the board members in the preparation of the financial
statements, and of whether the accounting policies
are appropriate to the Group’s and The British
Waterways Board’s circumstances, consistently
applied and adequately disclosed.
We planned and performed our audit so as to
obtain all the information and explanations which
we considered necessary in order to provide us
with sufficient evidence to give reasonable assurance
that the financial statements are free from material
misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also
evaluated the overall adequacy of the presentation
of information in the financial statements.
Note 2006/07 2005/06£m £m
restated
Group turnover including joint ventures 131.6 144.4
Less: joint ventures (15.0) (30.0)
Turnover 116.6 114.4
Government grant 2 72.1 76.1
Total revenue 188.7 190.5
Operating expenditure (183.7) (190.1)
Exceptional costs of business reorganisation (5.6) -
Total expenditure 3 (189.3) (190.1)
Operating (loss)/profit 3 (0.6) 0.4
Share of operating profits and losses of joint ventures 2.4 7.7
Profit on sale of investment properties 8.3 11.5
Profit on sale of other fixed asset investment - 3.5
Profit for the financial year before interest 10.1 23.1
Interest receivable 4.1 3.2
Interest payable 5 (6.2) (5.3)
Other finance income/(expense) 22 0.9 (0.9)
Profit for the financial year before taxation 8.9 20.1
Taxation charge 6 (3.3) (6.8)
Profit for the financial year after taxation 5.6 13.3
Transfer to realised capital reserve 15 (5.7) (10.2)
(Loss)/profit transferred to profit and loss reserve 15 (0.1) 3.1
52 Accounts: consolidated profit and loss account
Note 2006/07 2005/06£m £m
restated
Profit for the financial year after taxation 5.6 13.3
Net decrease in revaluation reserve resulting from transfers
between investment and operational properties - (1.5)
Unrealised surplus on revaluation of investment properties 15 46.8 43.8
Corporation tax charge on realised property revaluation gains 6 (4.1) (4.2)
Gain on pension liability 22 5.5 14.4
Deferred tax associated with gain on pension liability 22 (1.7) (4.3)
Total recognised gains and losses relating to the year 52.1 61.5
Prior year adjustment arising from adoption of FRS17 (51.4)
Total gains recognised since last Annual Report 10.1
Consolidated Profit and Loss Account for the year to 31 March 2007
Statement of Consolidated Total Recognised Gains and Losses
Note 2006/07 2005/06£m £m
restated
Profit for the financial year after taxation 5.6 13.3
Realisation of property revaluation gains of previous years 15 25.1 27.6
Corporation tax charge on realised property revaluation gains 6 (4.1) (4.2)
Historical cost profit for the financial year 26.6 36.7
Note of Consolidated Historical Cost Profits and Losses
53Accounts: balance sheets
Group BWNote 2007 2006 2007 2006
£m £m £m £mrestated restated
Fixed assets
Intangible assets - Goodwill 8c 0.8 3.1 - -
Tangible assets 7 574.6 545.5 569.4 541.6
Investments
Subsidiaries 8 - - 10.2 8.7
Joint ventures:
Share of gross assets 97.4 71.6
Share of gross liabilities (42.8) (37.2)
Total investments in joint ventures 8 54.6 34.4 57.5 37.2
Total investments 8 54.6 34.4 67.7 45.9
630.0 583.0 637.1 587.5
Current assets
Stocks 9 1.6 1.9 0.9 0.9
Debtors 10 69.8 53.4 68.6 52.0
Cash at bank and in hand 11 26.9 37.4 23.4 34.2
98.3 92.7 92.9 87.1
Less:
Creditors: Amounts falling due within one year 12a 82.9 77.7 84.5 75.7
Net current assets 15.4 15.0 8.4 11.4
Total assets less current liabilities 645.4 598.0 645.5 598.9
Creditors: Amounts falling due after more than one year 12b (52.2) (51.6) (52.1) (51.6)
Provisions for liabilities 13 (12.2) (11.9) (10.9) (11.9)
Deferred capital grant 14 (8.4) (10.0) (8.4) (10.0)
Net assets excluding pension liabilities 572.6 524.5 574.1 525.4
Pension liability (net of deferred tax) 22 (37.5) (41.5) (37.5) (41.5)
Net assets including pension liabilities 535.1 483.0 536.6 483.9
Financed by
Reserves 15 562.5 513.1 562.6 515.0
Profit and loss account 15 (37.3) (40.6) (35.9) 41.6
525.2 472.5 526.7 473.4
Debt
Due to National Loans Fund 17 9.9 10.5 9.9 10.5
535.1 483.0 536.6 483.9
T Hales R EvansChairman Chief Executive18 June 2007
Balance Sheets as at 31 March 2007
54 Accounts: consolidated cash flow statement
Consolidated Cash Flow Statement for the year to 31 March 2007
Cash flow statement Note 2006/07 2005/06£m £m £m £m
Net cash outflow from operating activities (6.4) (0.4)
Dividends from joint ventures 4.6 4.9
Returns from servicing of finance
Interest received 3.5 3.8
Interest paid (1.8) (2.1)
Net cash inflow from servicing of finance 1.7 1.7
Taxation (13.4) (7.6)
Capital expenditure and financial investment
Payments to acquire fixed assets (19.9) (21.4)
Receipts from sale of fixed assets 38.3 48.8
Receipts from sale of other fixed asset investment - 3.7
Net cash inflow from capital expenditure and financial investment 18.4 31.1
Acquisitions
Investments in joint ventures (14.1) (17.2)
Payments to acquire trade or business (1.3) -
Net cash outflow from acquisitions (15.4) (17.2)
Net cash (outflow)/inflow before financing (10.5) 12.5
Financing
Capital contribution from Defra 0.6 3.6
Repayment of loans to National Loans Fund 17 (0.6) (3.6)
Net cash inflow from financing - -
(Decrease)/increase in cash in the period 11 (10.5) 12.5
Reconciliation of operating (loss)/profit to net cash inflow from operating activities
Note 2006/07 2005/06
£m £m £m £m
Operating (loss)/profit (0.6) 0.4
Items not involving the flow of cash:
Depreciation 4.9 4.8
Difference between pension charge and cash contributions 0.8 (0.7)
(Profit)/loss on sale of operational fixed assets (0.7) 0.5
Write down in value of fixed assets - 1.2
Release of deferred capital grant (1.6) (1.6)
3.4 4.2
Movements in working capital
Decrease in stocks 0.3 0.2
Increase in debtors (19.0) (3.6)
Increase/(decrease) in creditors 8.5 (2.1)
(10.2) (5.5)
Decrease in provisions 1.0 0.5
Net outflow from operating activities (6.4) (0.4)
Reconciliation of net cash flow to movement in net funds
Note 2006/07 2005/06£m £m £m £m
(Decrease)/increase in cash in the period (10.5) 12.5
Repayment of loans to National Loans Fund 0.6 3.6
Change in net debt from cash flows during period (9.9) 16.1
Net funds at 1 April 26.9 10.8
Net funds at 31 March 11 17.0 26.9
55Accounts: notes to the accounts
Notes relatingto the accounts
The accounts include the relevant percentage
of all joint ventures’ turnover and operating
profit/loss on the face of the profit and loss
account and the share of gross assets and gross
liabilities on the face of the balance sheet.
The notes to the accounts disclose the names
of joint ventures, the nature of the business
and details of the shares held by BW.
An associate is an entity (other than a subsidiary
or joint venture) in which BW has a participating
interest and over whose operating and financial
policies BW exercises a significant influence.
The accounts include the relevant percentage of
all associates’ operating profit/loss on the face of
the profit and loss account, as well as the relevant
percentage of any item below the operating profit
line. The interest in the associates’ net assets
is shown on the face of the balance sheet.
The ‘company’ balance sheet shows the investment
in the joint ventures and associates at cost less
any amounts written off.
Intangible fixed assets
Goodwill relating to joint ventures and associated
undertakings is included in the carrying value of
the investment. An impairment review of goodwill
is carried out annually by directors, and any
amortisation charged to the profit and loss account.
Tangible fixed assets
(a) Operational Assets
Waterways, reservoirs and towpaths
were written off in the capital reconstruction
on 1 January 1969 resulting from the
Transport Act 1968.
Land, buildings, and structures capitalised are:
(i) Purchases of land and the construction
and major improvement of buildings.
(ii) Additional assets and improvements
to existing assets of BW.
1. Accounting policiesA summary of the principal accounting policies,
all of which have been applied consistently
throughout the year and the preceding year, is set
out below. Certain comparative information has been
restated as described in Note 23 to the accounts.
Basis of accounting
Under Section 24(1)(b) of the Transport Act 1962,
BW is required to prepare an annual Statement
of Accounts in such form and containing such
particulars as the Secretary of State for Environment,
Food and Rural Affairs may, with the approval
of H.M. Treasury, from time to time direct. A copy
of the Accounts Direction, at present in force,
is set out on pages 78 to 79.
Accounting convention
The accounts are prepared in accordance with
the historical cost convention modified by the
revaluation of investment properties and generally
accepted accounting principles in the United
Kingdom, with the following exception, required
by the Accounts Direction:
In the balance sheet, National Loans Fund loans
from the Secretary of State are grouped with
capital and reserves, rather than as creditors
falling due after more than one year.
Consolidation
The group financial statements consolidate
the financial statements of the British Waterways
Board (BW) and its subsidiary undertakings
drawn up to 31 March each year. The acquisition
method of accounting has been adopted. Under
this method, the results of subsidiaries acquired
in the year are included in the consolidated profit
and loss account from the date of acquisition.
A joint venture is an entity in which BW has
a long-term interest and is jointly controlled
by BW and one or more other venturers under
a contractual arrangement.
56 Accounts: notes to the accounts
Deferred consideration
Where BW enters into a significant sale of assets
or rights with deferred consideration terms, the net
present value of the amounts receivable, discounted
at the clearing bank base rate ruling at the date of
the transaction, is recognised in the profit and loss
account. Imputed interest is recognised in the profit
and loss account on a receivable basis.
Leased fixed assets
All current leases are operating leases. Rentals under
operating leases are charged on a straight-line basis
over the lease term, even if the payments
are not made on such a basis.
Acquisitions and goodwill
Acquisitions are accounted for under the
acquisition method. Goodwill arising on consolidation,
representing the excess of the fair value of the
consideration given over the fair value of the
identifiable net assets acquired, is capitalised and
written off on a straight line basis over its estimated
useful economic life. Provision is made for any
impairment.
Goodwill arising on acquisitions in the year ended
31 March 1998 and earlier periods was written off to
reserves in accordance with the accounting standard
then in force. Negative goodwill was shown as an
unrealised capital reserve and is credited to realised
capital reserves in the periods expected to benefit.
As permitted by the current accounting standard the
goodwill previously written off to reserves has not
been reinstated in the balance sheet. On disposal
or closure of a previously acquired business, the
attributable amount of goodwill previously written
off to reserves is included in determining the profit
or loss on disposal.
Goodwill relating to joint ventures and associated
undertakings is included in the carrying value
of the investment.
Stocks
Stocks are stated at the lower of cost or net
realisable value.
All other expenditure on improvements, repairs
and renewals is charged to the profit and loss
account as it arises.
(b) Craft, plant and equipment
All expenditure on additions, improvements
and replacements is capitalised.
Tangible fixed assets are stated at cost or valuation,
net of depreciation and any provision for permanent
diminution in value. Depreciation is provided on
all tangible fixed assets, other than investment
properties and freehold land, at rates calculated to
write off the cost or valuation, less estimated residual
value (if any), of each asset on a straight-line basis
over its expected useful life, as follows:
Freehold buildings
40 years
Leasehold land and buildings
Over the term of the lease
Plant, machinery and structures
Between 5 and 25 years
Vehicles
5 years
Any differences between physical assets and asset
registers identified as a result of the organisation’s
continuous programme of asset verification are
treated as adjustments in the fixed asset statements,
in the year in which identified.
Investment properties
Investment properties are revalued annually.
Surpluses or deficits on individual properties are
transferred to the investment revaluation reserve,
unless a deficit below historical cost (or its reversal)
is expected to be permanent, in which case it is
charged (or credited) to the profit and loss account.
Depreciation is not provided in respect of freehold
investment properties or of leasehold investment
properties where the unexpired term of the lease
is more than 20 years. The board members consider
that this departure from the statutory accounting
rules is necessary to provide a true and fair view
and to comply with Statement of Standard
Accounting Practice No. 19.
Disposal of investment properties
BW accounts for disposals of properties upon
completion of sale. The proceeds in respect of
properties sold are used for the funding of capital
expenditure of a commercial nature, or such other
expenditure as agreed by the Secretary of State
for Environment, Food and Rural Affairs.
1. Accounting policies (continued)
57Accounts: notes to the accounts
Deferred tax is measured at the average tax rates
that are expected to apply in the periods in which
the timing differences are expected to reverse, based
on tax rates and laws that have been enacted or
substantively enacted by the balance sheet date.
Deferred tax is measured on a non-discounted basis.
Pensions
BW operates a single funded defined benefit scheme
for all staff. In accordance with FRS17, the service
cost of pension provision relating to the period,
together with the cost of any benefits relating to past
service, is charged to the profit and loss account.
A charge equal to the increase in the present value of
the scheme liabilities (because the benefits are closer
to settlement) and a credit equivalent to the Group’s
long-term expected return on assets (based on the
market value of the scheme assets at the start of the
period) are included in the profit and loss account
under ‘other finance income.’ The difference between
the market value of the assets of the scheme and the
present value of accrued pension liabilities is shown
as an asset or liability on the balance sheet net of
deferred tax. Any difference between the expected
return on assets and that actually achieved is
recognised in the statement of total recognised gains
and losses along with differences which arise from
experience or assumption changes.
Further information on pension arrangements
is set out in Note 22 to the accounts.
Finance costs
Finance costs of debt are recognised in the profit
and loss account over the term of such loans
at a constant rate on the carrying amount.
Deferred income
BW has received cash dowries to take on the asset
maintenance and operational obligations of other
public sector organisations. Each dowry is accounted
for as deferred income and released to the profit
and loss account in line with the net operating
expenditure.
Segmental disclosure
For the purpose of Statement of Standard
Accounting Practice No. 25, BW is, in the opinion
of its board members, engaged in one class
of business
Turnover
Turnover represents amounts receivable for goods
and services provided in the normal course
of business, net of trade discounts and VAT.
Contributions to non-statutory works are recognised
on an accruals basis after all conditions for their
receipt have been met.
Government grants
Government grants of a revenue nature are credited
to the profit and loss account in the same period
as the related expenditure.
A proportion of the grant-in-aid received from
government is allocated by BW for the purchase
of plant, equipment and vehicles used for waterway
operation and maintenance. The grant concerned
is treated as deferred capital grant and released
to the profit and loss account over the expected
useful lives of the assets concerned.
Taxation
Deferred tax is recognised in respect of all timing
differences that have originated but not reversed
at the balance sheet date where transactions or
events that result in an obligation to pay more tax
in the future or a right to pay less tax in the future
have occurred at the balance sheet date. Timing
differences are differences between BW’s taxable
profits and its results as stated in the financial
statements that arise from the inclusion of gains
and losses in tax assessments in periods different
from those in which they are recognised in the
financial statements.
A net deferred tax asset is regarded as recoverable
and therefore recognised only when, on the basis
of all available evidence, it can be regarded as more
likely than not that there will be suitable taxable
profits from which the future reversal of the
underlying timing differences can be deducted.
Deferred tax is not recognised when fixed assets
are revalued unless by the balance sheet date there
is a binding agreement to sell the revalued assets
and the gain or loss expected to arise on sale
has been recognised in the financial statements.
Neither is deferred tax recognised when fixed assets
are sold and it is more likely than not that the taxable
gain will be rolled over, being charged to tax only
if and when the replacement assets are sold.
58 Accounts: notes to the accounts
2006/07 2005/06£m £m
Grant receivable from Defra
Grant received in year 55.7 62.6
Accrued grant at 1 April (4.8) (4.8)
Accrued grant at 31 March 4.6 4.8
55.5 62.6
Deferred capital grant released to profit and loss account 1.6 1.5
57.1 64.1
Grant receivable from the Scottish Executive
Grant received in year 13.0 12.0
Accrued grant at 1 April (2.0) (2.0)
Accrued grant at 31 March 3.8 2.0
14.8 12.0
Deferred capital grant released to profit and loss account 0.2 -
15.0 12.0
Total revenue grant accrued during the year 72.1 76.1
Grant received on 1 April, for expenditure incurred but not paid before 31 March, is accrued in these accounts.
Government Resource Accounting Budget During the year limits set by Defra and the Scottish Executive for resource Departmental Expenditure Limit (DEL) and capitalDEL, as defined by the government’s Resource Accounting Manual and set out in BW’s Financial Memorandum, have not beenexceeded.
3. Expenditure
Expenditure in the year is analysed as follows:2006/07 2005/06
£m £mrestated
Major works (incl. statutory maintenance arrears and dredging) 31.5 36.0
Employee costs 63.0 61.4
Exceptional costs of business reorganisation 5.6 -
Depreciation 4.9 4.8
Other operating charges 84.3 87.9
Total expenditure 189.3 190.1
Other operating charges include:2006/07 2005/06
£000 £000
Depreciation of tangible fixed assets 4,892 4,842
(Profit)/loss on sale of operational fixed assets (651 478
Rents on leased properties 2,405 2,355
Auditors’ remuneration - audit of BW and consolidated accounts 103 125
- audit of BW subsidiaries 31 39
- other services 8 30
Board members’ emoluments 171 144
Inland Waterways Amenity Advisory Council expenses 156 159
2. Grants receivable from central government
)
59Accounts: notes to the accounts
4. Employee costs
a The average number of persons (excluding board members) employed during the year was:
2006/07 2005/06Number Number
restated
Total employed 2,002 1,990
Full-time equivalent 1,963 1,954
The comparative values for 2005/06 have been restated to take account of an error found in the calculation of employee numbers
b Total employment costs (excluding board members’ emoluments stated in the Remuneration Report) were:
2006/07 2005/06£m £m
restated
Wages and salaries 53.4 51.0
Social security costs 4.4 4.1
Pension costs 5.2 6.3
Total employment costs 63.0 61.4
c Senior employees emolumentsThe number of senior employees whose emoluments, including the taxable value of benefits-in-kind, but excluding employer’spension contributions and payments on leaving service, were within the following ranges:
£ 2006/07 2005/06Number Number
50,000 - 60,000 53 40
60,001 - 70,000 29 24
70,001 - 80,000 13 16
80,001 - 90,000 14 1
90,001 - 100,000 5 2
100,001 - 110,000 3 2
110,001 - 120,000 3 1
120,001 - 130,000 1 -
130,001 - 140,000 1 -
150,001 - 160,000 2 1
240,001 - 250,000 1 1
The above table excludes board members. details of board members’ emoluments which form part of these financial statements,
are included in the remuneration report on pages 48 to 49.
2006/07 2005/06£m £m
Interest payable on sums wholly repayable within five years:
Interest on loans from Defra under Section 19 of the Transport Act 1962 0.6 0.8
Unwinding of discount on dowry liabilities 2.2 2.2
Other short-term interest 3.0 1.9
5.8 4.9
Interest payable on all other loans
Interest on loans from Defra under Section 19 of the Transport Act 1962 0.4 0.4
Total interest payable 6.2 5.3
5. Consolidated interest payable
60 Accounts: notes to the accounts
a) Charged/(credited) to profit and loss account:2006/07 2005/06
£m £mrestated
Current tax
UK Corporation tax on profits for the period 2.1 4.1
Adjustments in respect of prior years 0.8 (0.3)
Group current tax 2.9 3.8
Share of joint ventures’ and associates’ current tax, including adjustments in respect of prior years 0.2 2.3
Total current tax 3.1 6.1
Deferred tax
Origination and reversal of timing differences 0.3 0.5
Adjustments in respect of prior years (0.1) 0.2
Group deferred tax 0.2 0.7
Share of joint ventures’ and associates’ deferred tax, including adjustments in respect of prior years - -
Total deferred tax 0.2 0.7
Taxation charged on profit for the financial year 3.3 6.8
b) Charged/(credited) to reserves:
Provision required for capital gains in the current year 5.7 3.7
Adjustments in respect of prior years (1.6) 0.5
Total current tax 4.1 4.2
In addition, a deferred tax charge relating to the actuarial losses on the defined benefit scheme of £1.7m (2006 £4.3m) has been debited to the Statement of Total Recognised Gains and Losses.
c) Factors affecting current tax chargeThe current tax provision charged to the profit and loss account for the current year is higher than the standard rate of corporation tax in the UK (30%). The differences are explained below:
Profit for the financial year before taxation 8.9 20.1
Corporation taxation at 30% 2.7 6.0
Effect of:
Expenses not deductible for tax purposes/income not taxable 0.4 0.3
Accelerated capital allowances (1.0) (0.3)
Other short term timing differences 0.6 (0.2)
Losses (brought forward utilised)/arising in the year carried forward 0.1 (0.1)
Pensions FRS17 (0.1) 0.1
Losses arising in the year not recognised - 0.1
Capitals gains tax basis and indexation - 0.2
Adjustments relating to prior years 0.4 -
Total current tax 3.1 6.1
Expenses not deductible for tax purposes/income not taxable includes the benefit of Industrial Buildings Allowances (IBAs) on the Tees barrageof £393,000 in tax terms. Under existing legislation an equivalent benefit will be obtained in each of the next 18 years. However, in Budget 2007it was announced that IBAs are to be phased out between 2008 and 2011. Accordingly, a substantial proportion of the future allowancesare likely to be lost.
6. Consolidated Taxation
The total tax charged/(credited) to profit and loss account and capital reserves is as follows:
61Accounts: notes to the accounts
d) Deferred taxRecognised Not Recognised
2006/07 2005/06 2006/07 2005/06£m £m £m £m
restated restated
Group
Accelerated capital allowances 3.4 2.3 - -
Other timing differences 1.1 1.7 - -
Losses (0.8) (0.5) - -
Potential deferred tax liability 3.7 3.5 - -
BW
Accelerated capital allowances 3.3 2.3 - -
Short term timing differences 1.7 1.7 - -
Losses (0.8) (0.5) - -
Potential deferred tax liability 4.2 3.5 - -
In accordance with FRS 19 no liability has been provided for deferred tax on gains recognised on revaluing property to its marketvalue or on the sale of properties where potentially taxable gains have been rolled over into replacement assets. Such tax wouldbecome payable only if the property were sold without it being possible to claim rollover relief. The total amount unprovided is £101.6m (2006: £93m), £91m for revalued properties (2006: £83m) and £10.6m for rolled over gains (2006: £10m). At present, it is not envisaged that any tax will become payable in the foreseeable future.
62 Accounts: notes to the accounts
7. Tangible Fixed AssetsGroup Freehold Land Long Leasehold Craft, Plant &
Buildings and Structures Land and Buildings EquipmentOperational Investment Operational Investment Owned Total
£m £m £m £m £m £m
Cost or valuation
At 1 April 2006 56.7 457.3 1.9 21.1 58.2 595.2
Transfers (0.5) 0.9 (0.1) (0.2) (0.2) (0.1)
Additions 0.6 8.6 1.3 0.8 9.8 21.1
Disposals (0.4) (30.3) - - (3.1) (33.8)
Revaluation - 43.7 - 0.3 - 44.0
At 31 March 2007 56.4 480.2 3.1 22.0 64.7 626.4
Depreciation
At 1 April 2006 16.5 - 0.3 - 32.9 49.7
Transfers (0.1) - - - - (0.1)
Provision for year 0.9 - 0.1 - 3.9 4.9
Disposals - - - - (2.7) (2.7)
At 31 March 2007 17.3 - 0.4 - 34.1 51.8
Net book value
At 31 March 2007 39.1 480.2 2.7 22.0 30.6 574.6
At 31 March 2006 40.2 457.3 1.6 21.1 25.3 545.5
BW Freehold Land Long Leasehold Craft, Plant &Buildings and Structures Land and Buildings Equipment
Operational Investment Operational Investment Owned Total£m £m £m £m £m £m
Cost or valuation
At 1 April 2006 56.2 457.2 0.6 21.1 55.1 590.2
Transfers - 0.4 (0.1) (0.5) 0.1 (0.1)
Additions 0.5 8.6 0.1 0.8 9.2 19.2
Disposals (0.4) (29.8) - - (2.4) (32.6)
Revaluation - 43.7 - 0.3 - 44.0
At 31 March 2007 56.3 480.1 0.6 21.7 62.0 620.7
Depreciation
At 1 April 2006 16.4 - 0.2 - 32.0 48.6
Transfers (0.1) - - - - (0.1)
Provision for year 0.9 - - - 3.8 4.7
Disposals - - - - (1.9) (1.9)
At 31 March 2007 17.2 - 0.2 - 33.9 51.3
Net book value
At 31 March 2007 39.1 480.1 0.4 21.7 28.1 569.4
At 31 March 2006 39.8 457.2 0.4 21.1 23.1 541.6
63Accounts: notes to the accounts
Group BW2006/07 2005/06 2006/07 2005/06
£m £m £m £m
The surplus on revaluation at 31 March comprises:
Decrease in net revaluation from transfers between
investment and operational properties - (1.5) - (1.5)
Surplus on revaluation of investment properties 44.1 43.8 44.1 43.8
44.1 42.3 44.1 42.3
The net book value of investment properties at 31 March comprises: 2006/07 2005/06 2006/07 2005/06
£m £m £m £m
Historic cost 181.2 173.7 180.8 173.6
Revaluation surpluses 321.0 304.7 321.0 304.7
502.2 478.4 501.8 478.3
DepreciationIn accordance with Statement of Standard Accounting Practice No. 19, depreciation is not provided on investment properties. This is a departure from the requirements of the Companies Act 1985. In the opinion of the board members, this departure is required in order to show a true and fair view in these accounts.
Investment propertiesInvestment properties were revalued at 31 December 2006 on an open market value basis by Gerald Eve, Chartered Surveyors. Based upon these valuations, BW has incorporated a value of investment properties of £502.2m in these accounts.
BW continues to reposition its property portfolio through disposals and re-investment.
In the event that the investment properties were to be sold for their revalued amount, tax on such disposals would be approximately £91m (2006 : £83m).
BW Group BW2006/07 2005/06 2006/07 2005/06
Investments in subsidiaries £m £m £m £m
Shares at cost less amounts written off
At 1 April - - 8.7 12.1
Additions - - 1.5 0.9
Amounts written off - - - (4.3)
At 31 March - - 10.2 8.7
Investments in joint ventures £mGroup As restated
Net book value:
As at 1 April 2006 34.4
Additions 20.3
Net movement in share of net reserves (0.1)
As at 31 March 2007 54.6
31 March 2007 31 March 2006£m £m
Represented by: restated
Shares at cost 7.9 0.1
Net loans from group companies 49.6 37.1
Share of post acquisition results (5.7) (2.8)
Share of revaluation reserves 2.7 -
Share of realised capital reserve 0.1 -
As at 31 March 2007 54.6 34.4
BW
Cost: £m
As at 1 April 2006 37.2
Additional shares in joint ventures 7.8
Net movement in loans to joint ventures 12.5
As at 31 March 2007 57.5
An analysis of the group’s share of net assets of joint ventures was as follows:Total 2007 Total 2006
£m £m
Fixed assets 37.6 22.4
Current assets 59.8 49.2
Share of gross assets 97.4 71.5
Liabilities due within one year (15.3) (17.5)
Liabilities due after one year (27.5) (19.7)
Share of gross liabilities (42.8) (37.2)
Share of net assets 54.6 34.4
64 Accounts: notes to the accounts
8. Fixed Asset Investments
a) Subsidiary undertakingsBW’s principal subsidiary undertakings are as follows:- Blackwall Estates Ltd manages property in London Docklands.- British Waterways Marinas Ltd operates inland waterway marinas.- British Waterways Pension Trustees Ltd acts as trustee to the British Waterways 1990 Pension Fund. The book value of BW’s
interest is represented by a debt of equal amount due to the subsidiary and both have been eliminated from BW’s accounts.- Granary Wharf Ltd and Leeds Canal Basin Development Ltd manage property in Leeds.- Wood Wharf Management Company Ltd manages property in London Docklands.- BW Reinsurance Ltd provides reinsurance to BW in respect of property, motor and public products liability.
Issued EquityAccounting Share InterestPeriod End Capital Held Main
Date £ % Activity
Joint Ventures
ISIS Waterside Regeneration Ltd Partnership 31 December 2006 10,000 49.5% Property development
Waterside Pub Partnership LLP 31 December 2006 100,000 50% Pub management
Wood Wharf Ltd Partnership 31 December 2006 3 50% Property development
Gloucester Quays LLP (created 30 January 2007) 50% Property development
City Road Basin Ltd 31 December 2006 100 49% Property development
Edinburgh Quay Ltd 31 December 2006 100 49% Property development
H2O Urban Ltd 31 December 2006 100 49% Property development
Paddington Basin Business Barges Ltd 31 December 2006 1,000 49% Office management
Timber Basin Ltd 31 March 2007 2 49% Property development
Associated Undertakings
Nottingham Waterside Ltd 31 December 2006 1,000 49% Property development
Waterwise UK Ltd 31 December 2006 1,000 49% Water Safety
West India Quay Management Company Ltd 30 June 2006 1,000 12% Property management
Management accounts have been included in the BW Group accounts where the lastest audited accounts fall outside BW’s 31 March year end date.
c) Goodwill Group BW2006/07 2005/06 2006/07 2005/06
£m £m £m £m
At 1 April 3.1 3.1 - -
Additions 0.8 - - -
Amounts written off (3.1) - - -
As at 31 March 0.8 3.1 - -
During the year the goodwill arising from BW’s investment in Leeds Canal Basin Ltd and Granary Wharf Ltd, totalling £3.1m, has been written offagainst the sale of the property to which it related. Additional goodwill of £0.8m during the year arises from British Waterways Marinas Limited’spurchase of a marina business at Glasson, Lancashire. The directors have performed an impairment review and no amortisation is required.
Group BW31 March 2007 31 March 2006 31 March 2007 31 March 2006
£m £m £m £m
Raw materials and consumables 0.8 0.5 0.8 0.5
Held for resale 0.8 1.4 0.1 0.4
1.6 1.9 0.9 0.9
Group BW31 March 2007 31 March 2006 31 March 2007 31 March 2006
Note £m £m £m £mrestated restated
Trade debtors 29.1 21.3 28.3 20.0
Amounts owed from group undertakings - - 0.3 -
Prepayments and accrued income* 24.7 17.9 24.5 17.8
Deferred consideration sale agreements 5.7 5.0 5.7 5.0
Grant-in-aid 8.3 6.8 8.3 6.8
Value added tax 1.4 - 1.4 -
Others 10a 0.6 2.4 0.1 2.4
69.8 53.4 68.6 52.0
* The value of prepayments for the year to 31 March 2006 have been restated to reflect a change in accounting for pre-paid employer pensioncontributions of £6m for the year commencing 1 April 2006, which were paid in March 2006 and is shown as a prepayment on the restatedbalance sheet (see note 23 on page 73).a) Other long term debtors - Of the other debtors, £nil (2006: £45,000) will fall due after more than one year.
65Accounts: notes to the accounts
10. Debtors
b) Investments in joint ventures & associated undertakingsThe following information relates to those joint ventures and associated undertakings of the Group at the year end whose resultsor financial position, in the opinion of the directors, principally affect the figures of the Group. All joint ventures and associatedundertakings of the Group are unlisted and are registered and operate in the United Kingdom.
9. Stocks
66 Accounts: notes to the accounts
2006/07 2005/06£m £m
Balance at 1 April 2006
Amounts falling due within one year 2.4 2.8
Amounts falling due after more than one year 45.6 45.7
48.0 48.5
Acquisitions - 0.3
Unwinding of discount 2.2 2.2
50.2 51.0
Release to profit and loss account (2.1) (3.0)
Balance at 31 March 2007 48.1 48.0
Balance at 31 March 2007 analysed as follows:
Amounts falling due within one year 2.9 2.4
Amounts falling due after more than one year 45.2 45.6
48.1 48.0
11. Analysis of Net Funds1 April Cash 31 March2006 Flows 2007
Group Note £m £m £m
Cash at bank and in hand 37.4 (10.5) 26.9
Capital debt 17
- due within one year (0.6) (1.4) (2.0)
- due after one year (9.9) 2.0 (7.9)
Totals 26.9 (9.9) 17.0
1 April Cash 31 March2006 Flows 2007
BW £m £m £m
Cash at bank and in hand 34.2 (10.8) 23.4
Capital debt 17
- due within one year (0.6) (1.4) (2.0)
- due after one year (9.9) 2.0 (7.9)
Totals 23.7 (10.2) 13.5
12. CreditorsGroup BW
Note 31 March 31 March 31 March 31March2007 2006 2007 2006
a) Amounts falling due within one year restated£m £m £m £m
Trade creditors 11.0 7.4 10.9 5.4
Taxation and social security 1.6 1.6 1.6 1.6
Corporation tax 0.9 7.2 0.4 7.1
Amounts owed to group undertakings - - 6.8 3.3
Other creditors 15.8 15.8 12.8 14.6
Accruals 18.8 18.4 18.5 17.5
Deferred income 12c 34.8 27.3 33.5 26.2
82.9 77.7 84.5 75.7
b) Amounts falling due after more than one year
Deferred income 12c 45.5 45.6 45.5 45.6
Other creditors 6.7 6.0 6.6 6.0
52.2 51.6 52.1 51.6
c) Deferred incomeThe balance on creditors includes deferred income arising from the receipt of cash dowries received in respect of obligations to maintain assets acquired from other public bodies. Movements during the year were as follows:
67Accounts: notes to the accounts
13. Provisions for Liabilities
Provision Provision1 April Charged/ 31 March2006 Paid (released) 2007
Group Note £m £m £m £m
Deferred taxation 6d 3.5 - 0.2 3.7
Other post retirement benefits 13a 0.3 (0.1) - 0.2
Other provisions 13b 8.1 (1.4) 1.6 8.3
11.9 (1.5) 1.8 12.2
Provision Provision1 April Charged/ 31 March2006 Paid (released) 2007
BW Note £m £m £m £m
Deferred taxation 6d 3.5 - 0.7 4.2
Other post retirement benefits 13a 0.3 (0.1) - 0.2
Other provisions 13b 8.1 (1.4) (0.2) 6.5
11.9 (1.5) 0.5 10.9
Provisions are discounted where appropriate
14. Deferred Capital GrantGroup and BW
2006/07 2005/06£m £m
Balance at 1 April 10.0 11.6
Other deferred capital grants 0.2 -
10.2 11.6
Released to profit and loss account
Government Grants (1.8) (1.6)
Balance at 31 March 8.4 10.0
a) Other post retirement benefits
Under the terms of the 1962 Transport Act, employees transferring from the British Transport Commission to successor
bodies were entitled to retain their reduced cost travel benefits. Successor bodies, including BW, were made responsible
for procuring the benefits on their behalf.
Currently 2 BW employees and 217 pensioners retain entitlement to this benefit. A provision to cover the present value
of the future cost of these benefits is included in the balance sheet.
The provision was re-assessed at 31 March 2006 by independent qualified actuaries using discount rates consistent
with those required for pension liabilities under FRS17 as shown in note 22 to these accounts.
b) Other provisions
The remainder of the balance of other provisions relates principally to third party claims and a provision arising from
leasehold properties previously occupied by BW.
68 Accounts: notes to the accounts
InvestmentRealised Property Unrealised Profit and
Capital Revaluation Capital Capital LossReserve Reserve Reserve Contribution Account Totals
£m £m £m £m £m £m
Group
Balance at 1 April 2006 196.0 305.3 4.1 7.7 (40.6) 472.5
Loss for the financial year after taxation - - - - (0.1) (0.1)
Transfer of profits on sale of investment properties net of tax 5.7 - - - - 5.7
from profit and loss account to realised capital reserve
Unrealised surplus on revaluation of investment properties - 46.8 - - - 46.8
Corporation tax charge on realised property revaluation gains (4.1) - - - - (4.1)
Gain on pension liability - - - - 5.5 5.5
Deferred tax associated with gain on pension liability - - - - (1.7) (1.7)
Realisation of property revaluation gains of previous years 25.1 (25.1) - - - -
Repayment of Defra loan - - - 0.6 - 0.6
Other transfers 0.4 - - - (0.4) -
Balance at 31 March 2007 223.1 327.0 4.1 8.3 (37.3) 525.2
BW
Balance at 1 April 2006 198.5 304.7 4.1 7.7 (41.6) 473.4
Profit for the financial year after taxation - - - - 1.7 1.7
Transfer of profits on sale of investment properties net of tax 7.2 - - - - 7.2
from profit and loss account to realised capital reserve
Unrealised surplus on revaluation of investment properties - 44.1 - - - 44.1
Corporation tax charge on realised property revaluation gains (4.1) - - - - (4.1)
Gain on pension liability - - - - 5.5 5.5
Deferred tax associated with gain on pension liability - - - - (1.7) (1.7)
Realisation of property revaluation gains of previous years 27.7 (27.7) - - - -
Repayment of Defra loan - - - 0.6 - 0.6
Other transfers (0.2) - - - 0.2 -
Balance at 31 March 2007 229.1 321.1 4.1 8.3 (35.9) 526.7
The realised capital reserve includes the value of profits arising from the sale of property and other property rights and the realisation
of property revaluation gains of previous years, net of corporation tax.
The investment property revaluation reserve includes unrealised gains on property valuation.
The unrealised capital reserve includes the excess of the fair value of assets acquired on acquisition of a business over the fair value
of the consideration paid.
Capital contributions are from Defra to enable BW to repay National Loans Fund loans maturing before 2013 as they mature
(see Note 17).
15. Reserves
69Accounts: notes to the accounts
16. Financial instrumentsFRS13, Derivatives and Other Financial Instruments, requires disclosure
of the role that financial instruments have had during the period in
creating or changing the risks an entity faces in undertaking its activities.
Details of BW’s statutory and financial framework are set out on pages
38 and 39 and because of BW’s status as a public corporation, BW is
not exposed to the degree of financial risk faced by business entities.
Also financial instruments play a much more limited role in creating or
changing risk than would be typical of the listed companies to which
FRS13 mainly applies. BW has limited powers to borrow or invest surplus
funds and financial assets and liabilities are generated by day-to-day
operational activities rather than being held to change by the risks facing
BW in undertaking its activities. BW is not exposed to risks from currency
fluctuations as business is conducted solely in sterling.
Liquidity riskBW maintains short term liquidity by judicious management of its cash
deposits. BW is not exposed to significant liquidity risk due to ongoing
government funding and the ability to release cash as necessary from
investment properties or borrow from the National Loans Fund.
Interest rate riskThe main risk arising from BW’s financial instruments is interest rate risk.
With the exception of National Loans Fund (NLF) loans all financial
instruments are subject to the prevailing UK floating rate of interest.
All of BW’s borrowings are from the National Loans Fund and are at fixed
rates of interest until the repayment date.
BW has interests in a number of property development joint ventures
that are stand-alone businesses and are independently funded with
external bank debt without recourse to BW. In each of the joint ventures
an assessment is made whether the interest payments on borrowings
should be hedged having regard to the quantum of the debt, the period
over which the borrowings are planned to be outstanding and the
sensitivity of the project to changes in interest rates. At 31 March 2007
total borrowings in joint ventures was £73m (2006: £54m). Of this total
borrowings 35% (2006: 37%) is either at fixed rates of interest or a fixed
interest rate swap is in place.
Credit riskThe credit risk in liquid funds is limited because the counterparties are
banks with Standard & Poor’s AA ratings. The group has no significant
concentration of credit risk from its customers as exposure is spread over
a large number of entities.
Fair valuesBW’s financial instruments comprise borrowings, cash deposits, trade
debtors, trade creditors and provisions that arise directly from operations.
The fair value of debt to the National Loans Fund (see Note 17) at 31
March 2007 is £12.4m (2006: £13.6m), calculated using a discount
factor of 3.5%.
The fair value of BW’s other financial instruments approximate to fair
value because of their short term maturity.
17. Amounts due to National Loans FundGroup and BW
31 March 31 March2007 2006
£m £m
Loans are repayable as follows:
In one year or less 2.0 0.6
Between one and two years 1.0 2.1
Between two and five years 3.7 2.6
In more than five years 3.2 5.2
Total 9.9 10.5
Details of individual loans:
Maturity Rate of Amount Maturity Rate of AmountDate Interest % £m Date Interest % £m
2 Apr 2007 151/8 0.4 2 Apr 2012 101/4 0.6
2 Apr 2007 133/4 1.3 2 Apr 2012 9 0.4
2 Oct 2007 135/8 0.3 2 Oct 2012 91/2 0.7
2 Apr 2008 121/8 0.2 2 Apr 2020 85/8 1.0
2 Apr 2008 11 0.8 2 Apr 2021 81/2 1.0
2 Apr 2009 111/4 0.9 2 Apr 2022 73/4 0.3
2 Apr 2010 111/8 0.6 2 Apr 2023 57/8 0.3
2 Apr 2010 107/8 0.1 2 Apr 2024 5 0.7
2 Apr 2011 91/4 0.3
The government makes capital contributions to BW to enable BW to repay those loans maturing before 2013 (£6.6m)
as they mature, thus removing from BW the need to take out new loans to repay them.
19. Operating LeasesAt 31 March 2007 the minimum lease payments due in the following year under operating leases to which the Group was committed
were as follows:
Land and buildings Other operating leases31 March 31 March 31 March 31 March
2007 2006 2007 2006£m £m £m £m
Group restated
Leases due to expire:
Within one year - 0.2 0.1 0.2
Within two to five years 0.2 0.1 2.2 2.0
In more than five years 2.1 2.3 0.4 0.4
2.3 2.6 2.7 2.6
BW
Leases due to expire:
Within one year - 0.2 0.1 0.2
Within two to five years 0.2 0.1 2.2 1.9
In more than five years 1.5 1.6 0.4 0.4
1.7 1.9 2.7 2.5
The comparative values for 2005/06 have been restated to take account of additional information that became available after publication of the
2005/06 Annual Report & Accounts in respect of computer equipment leases.
70 Accounts: notes to the accounts
18. Capital CommitmentsAll capital commitments arise within BW. Capital expenditure for which BW had contracted at 31 March 2007
was £1.7m (2006 : £5.0m).
17. Amounts due to National Loans Fund (continued)Borrowing authorised by Defra 31 March 31 March
2007 2006£m £m
Amount of debt due to National Loans Fund 9.9 10.5
Bank overdraft facility 3.0 3.0
Borrowing authorised by Defra 12.9 13.5
The bank overdraft facility is guaranteed by H.M. Treasury annually.
Analysis of changes in financing during the year
Capital Debt 2006/07 2005/06£m £m
At 1 April 10.5 14.1
Loans repaid (0.6) (3.6)
At 31 March 9.9 10.5
71Accounts: notes to the accounts
Amount receivable/(payable) Amount receivable atduring the year 31 March 2007
£000 £000
Transactions with the Millennium Link Trust, a charitable
company limited by guarantee of which Jim Stirling
(technical director) is a director.
- Rent receivable 85 -
- Rent payable (85) -
Transactions with the Heritage Lottery Fund, a non-departmental public body of which Derek Langslow (board member) is a trustee.
- Contribution to restoration works 2,414 1,392
Transactions with Thames 21, a registered environmental charity of which Mark Bensted (director, London) is a trustee.
- Contributions made to assist customer service initiatives (193) 23
Transactions with Isle of Dogs Community Foundation of which Mark Bensted (director, London) is a trustee.
- Contributions towards initiatives for the local community (20) (20)
Transactions with Envirocentre Ltd, an environmental consultancy company of which Prof. George Fleming (board member) is a director.
- Payments made for consultancy services (5) -
Transactions with Crellins, a divison of CCS Enforcement Services Ltd of which John Bridgeman (board member) is chairman
- Payments made for enforcement action 1 -
During the year BW entered into the following transactions with the Department of Environment, Food and Rural Affairs which also sponsors the Environment Agency
- Contributions to construction at Millness Wharf 6 6
Transactions with the Environment Agency
- Contributions to maintenance and the Boat Safety Scheme 375 462
- Discharge fees (2) -
- Press notice (1) -
Contingent liabilities arising from third party claims, valued at £1.3m (2006: £1.5m), are not included in the balance sheet as it is not
considered likely that the amounts will fall due for payment.
BW’s accounts include a distribution of £4.1m (2006: £1.7m) from ISIS, our property joint venture partnership, arising from profits
on projects completed in the year. Under the provisions of the ISIS Waterside Regeneration Limited Partnership’s Development
Partnership Agreement dated 18 July 2002, ISIS is required to make distributions on account of ultimate Partnership profits.
During the year to 31 March 2007, ISIS made a profit before tax of £3.9m and at 31 March 2007, had a negative P&L reserve
of £2.7m arising from costs that will be allocated to development profits as each of the remaining sites are sold. There is a risk
that any over-distributions are reclaimable from the Partners.
In the opinion of the Board members, it is unlikely that any distributions made to date will prove to be over-distributions.
21. Contingent Liabilities
During the year, BW entered into a number of transactions with related parties in the normal course of business and on an arm’s-length basis. The names of these parties, the nature of these transactions and their total value is shown below.
BW policy is to appoint directors and senior members of staff to the Board of all group undertakings and other key partners to ensure that BW’s interests are properly represented.
20. Related Party Transactions
72 Accounts: notes to the accounts
22. Retirement BenefitsBW operates a single funded defined benefit pension scheme for all staff that have completed two years continuous service.Contributions to the Scheme are determined by the Board, after considering the advice of independent professionally qualifiedactuaries, as part of the formal triennial actuarial valuations of the Scheme. The last formal triennial valuation of the Scheme using the projected unit method, was carried out as at 31 March 2004 and the amounts of employer contributions agreed for the three-yearperiod from 1 April 2005 are 12% of members’ pensionable earnings plus £2.3m a year (increasing each year in line with priceinflation plus 1.5% a year). The next full actuarial valuation will be carried out as at 31 March 2007 and the valuation report will be issued by March 2008. The valuation of the Scheme used for FRS17 disclosures has been based on the most recent actuarialvaluation of BW’s scheme at 31 March 2004 and updated to 31 March 2007 by Barnett Waddingham LLP, professionally qualifiedactuaries. The key assumptions used are as follows:
The assets in the Scheme and the expected future rates of return at 31 March 2007 were:
31 March 2007 31 March 2006 31 March 2005restated restated
% £m % £m % £m
Equities and Property 7.75 159.4 7.8 152.2 8.0 126.1
Bonds 5 79.4 4.4 94.4 4.8 79.2
Other assets (see note below) 5.25 24.2 3.75 3.9 4 (5.1)
Total fair value of assets 263.0 250.5 200.2
Present value of scheme liabilities (restated) (316.6) (309.8) (273.7)
Deficit in the scheme (53.6) (59.3) (73.5)
Related deferred tax asset 16.1 17.8 22.1
Net pension liability (37.5) (41.5) (51.4)
31 March 2007 31 March 2006Analysis of the amount charged to operating profit £m £m
Current service cost 7.5 6.4
Past service costs 0.3 0.1
Total charged to operating profit 7.8 6.5
31 March 2007 31 March 2006The amount (charged)/credited to other finance income £m £m
Expected return on scheme assets 16.2 13.7
Interest on scheme liabilities (15.3) (14.6)
Net return/(charge) 0.9 (0.9)
Amounts recognised in the Statement 31 March 2007 31 March 2006of Total Recognised Gains and Losses (STRGL) £m £m
restated
Actual less expected return on assets (2.5) 35.7
Experience (losses)/gains on liabilities (0.2) 1.9
Effect of change in assumptions on liabilities 8.2 (23.2)
Total gain recognised in STRGL before adjustment for tax 5.5 14.4
As at 31 March
2007 2006 2005
Rate of increase in pensionable salaries 4.55% 4.3% 4.3%
Rate of increase for pensions in payment and deferred pensions 3% 2.75% 2.75%
Discount rate 5.35% 4.95% 5.4%
Inflation assumption 3% 2.75% 2.75%
The value of scheme assets for the year to 31 March 2006 have been restated to reflect a change in accounting for pre-paid employercontributions of £6m for the year commencing 1 April 2006, which were paid in March 2006 and is shown as a prepayment on the restated balance sheet.
The value of other assets of £24.2m at 31 March 2007 comprises cash proceeds arising from disinvestment in bonds and cashreceived from BW at the end of March in respect of deficit and future contributions.
73Accounts: notes to the accounts
History of experience gains and losses 2007 2006 2005 2004 2003Difference between actual and expected returns on assets restated restatedAmount £(2.5)m £35.7m £4.5m £22.8m £(52.0)mPercentage of scheme assets at year end (1.0)% 14.3% (2.2)% 12.2% (33.8)%
Experience gains and losses on liabilitiesAmount £(0.2)m £1.9m £(3.4)m £(1.6)m £0.1mPercentage of scheme liabilities at year end (1.0)% 0.6% (1.2)% (0.7)% 0.0%
Total gain/(loss) recognised in STRGLAmount £5.5m £14.4m £(13.7)m £15.1m £(73.1)mPercentage of scheme liabilities at year end 1.7% 4.6% (5.0)% 6.2% (33.0)%
Provisions in respect of unfunded pension arrangements (see note 13) have been calculated using the discount rates shownabove and therefore are consistent with FRS17.
2006/07 2005/06Movement in deficit in the Scheme during the year £m £m
restated
Deficit in the scheme at 1 April (59.3) (73.5)
Contributions paid 7.1 7.2
Current service cost (7.5) (6.4)
Past service cost (0.3) (0.1)
Other finance income (expense) 0.9 (0.9)
Actuarial gain 5.5 14.4
Deficit in the scheme at 31 March before tax (53.6) (59.3)
a) Pension liability
The value of pension scheme assets for the year to 31 March 2006 have been restated to reflect a change in accounting
for pre-paid employer contributions of £6m for the year commencing 1 April 2006, which were paid in March 2006 and is shown
as a prepayment on the restated balance sheet. As a result the deficit in the pension scheme for 2005/06 has increased by £6m
from £53.3m to £59.3m and the related deferred tax asset increased by £1.8m from £16.0m to £17.8m. The net pension liability
has increased by £4.2m from £37.3m to £41.5m.
b) Investments in joint ventures
The accounting treatment for inter-group property sales and option agreements has been amended to present the consolidation
eliminations within other creditors. As a result, BW’s share of gross assets and liabilities in joint ventures and other creditors
have been increased by £5.4m.
23 Restatement of Comparatives
74 Accounts: notes to the accounts
24. Segmental Analysis of Continuing Operations
a) BW Group analysisProfit/(Loss) Net assets/
Total Operating Profit/(Loss) transferred (liabilities) atrevenue costs before tax to reserves 31 March
2006/07 £m £m £m £m £m
British Waterways Board 182.8 184.3 11.2 1.7 536.6
Leisure subsidiaries 6.1 5.7 0.4 0.4 5.2
Property subsidiaries 0.7 0.1 2.7 0.6 7.3
Other subsidiaries 0.8 0.6 0.3 0.3 0.8
Joint venture undertakings - - (2.8) (3.0) 53.9
Group consolidation adjustments (1.7) (1.4) (2.9) (0.1) (68.7)
188.7 189.3 8.9 (0.1) 535.1
2005/06 (restated)British Waterways Board 183.0 182.1 16.7 2.0 486.1
Leisure subsidiaries 5.9 6.5 (0.6) 0.4 4.4
Property subsidiaries 0.9 0.7 0.2 0.1 4.6
Other subsidiaries 0.8 1.1 (0.2) (0.2) 0.5
Joint venture undertakings - - 1.8 (0.5) 34.2
Group consolidation adjustments (0.1) (0.3) 2.2 1.3 (46.8)
190.5 190.1 20.1 3.1 483.0
b) Analysis of BW direct income and expenditure (excludes group undertakings)
Multiple use Leisure use Not fully navigablewaterways waterways waterways Total
06/07 05/06 06/07 05/06 06/07 05/06 06/07 05/06£m £m £m £m £m £m £m £m
Income from property
Rents from investment properties 9.9 10.0 15.9 14.8 0.5 0.5 26.3 25.3
Rents from leisure properties 0.5 0.5 3.1 3.0 - - 3.6 3.5
Other rents, wayleaves, licenses and easements 4.8 6.2 23.4 26.6 1.5 1.6 29.7 34.4
15.2 16.7 42.4 44.4 2.0 2.1 59.6 63.2
Income from leisure uses
Craft licenses and moorings 2.3 2.2 15.0 13.7 0.1 0.1 17.4 16.0
Retail 2.0 1.8 1.3 1.1 - - 3.3 2.9
Angling - - 0.5 0.5 - - 0.5 0.5
4.3 4.0 16.8 15.3 0.1 0.1 21.2 19.4
Income from commercial uses
Water charges 0.7 1.6 3.2 2.1 0.2 0.3 4.1 4.0
Tolls and dues 0.5 0.5 0.1 - - - 0.6 0.5
1.2 2.1 3.3 2.1 0.2 0.3 4.7 4.5
Income from other uses
Contributions to non-statutory works 5.9 5.4 13.8 8.6 0.5 0.5 20.2 14.5
Other income 0.1 0.2 0.9 0.7 - - 1.0 0.9
Maintenance agreements 1.3 1.3 2.5 3.0 0.2 0.2 4.0 4.5
7.3 6.9 17.2 12.3 0.7 0.7 25.2 19.9
Total direct income 28.0 29.7 79.6 74.1 3.0 3.2 110.7 107.0
Government grant 72.1 76.1
Total revenue 182.8 183.1
75Accounts: notes to the accounts
ExpenditureMultiple use Leisure use Not fully navigable Totalwaterways waterways waterways
06/07 05/06 06/07 05/06 06/07 05/06 06/07 05/06£m £m £m £m £m £m £m £m
Major works (incl. statutory maintenance
arrears and dredging) 6.8 5.5 24.1 29.8 0.5 0.7 31.4 36.0
Staff costs 16.1 14.8 45.1 43.3 2.4 2.0 63.6 60.1
Other operating charges 24.4 24.0 57.2 54.9 3.0 2.4 84.6 81.3
Depreciation 1.5 1.5 3.1 3.1 0.1 0.1 4.7 4.7
Total expenditure 48.8 45.8 129.5 131.1 6.0 5.2 184.3 182.1
Waterway lengths* 409 miles 1,479 miles 125 miles 2,013 miles
The following waterways have been categorised as multiple use waterways:
Aire & Calder Navigation New Junction Canal Tees Navigation
Caledonian Canal River Ouse South Yorkshire Navigation
Crinan Canal River Trent Weaver Navigation
Gloucester & Sharpness Canal River Severn
The following waterways have been categorised as not fully navigable waterways:
Cromford Canal Montgomery Canal Swansea Canal
Grantham Canal Pocklington Canal
Manchester, Bolton & Bury Canal St. Helens Canal
All other waterways have been categorised as leisure waterways.
The categorisation of waterways used in this analysis does not affect British Waterways’ obligations
set out in the Transport Act 1968.
The majority of income and expenditure, including major repairs and renovations, can be directly attributed
to waterway categories. Remaining income and expenditure is apportioned between waterway categories
in the above analysis on a mileage basis.
* The total length of waterways has increased by nine miles from the previous year through ongoing
regeneration. There have also been minor changes of classification across certain canals.
These lengths do not include canals currently under restoration where ownership currently resides within
other organisations (eg canal trusts and local authorities) and the Scottish Highland lochs. If these were
included the total length of the network would be almost 2,200 miles.
Profit and Loss Account Scotland year to 31 March 20072006/07 2005/06
£m £m
Direct Income 6.4 6.9
Scottish Executive Grant 15.0 12.0
Total Revenue 21.4 18.9
Major works (2.3) (2.5)
Staff Costs (5.5) (5.2)
Depreciation (0.3) (0.3)
Other Operating Charges (12.7) (11.9)
Total Expenditure (20.8) (19.9)
Operating profit/(loss) 0.6 (1.0)
Profit on sale of investment properties 0.1 0.7
Dividends received from joint ventures 0.5 3.1
Interest receivable 0.2 0.3
Profit for the financial year before tax (transferred to BW Group reserves) 1.4 3.1
Balance Sheet as at 31 March 20072007 2006
£m £m
Fixed assets
Tangible assets 15.3 15.2
Investments in joint ventures 3.4 2.7
18.7 17.9
Current assets
Stocks 0.1 -
Debtors 5.4 3.8
Cash at bank and in hand - 0.4
5.5 4.2
Less:
Creditors: Amounts falling due within one year (5.0) (4.1)
Net current assets/(liabilities) 0.5 0.1
Total assets less current liabilities 19.2 18.0
Provisions for liabilities - -
Deferred capital grant (0.8) (1.1)
18.4 16.9
Financed by:
Investment property revaluation reserve 5.2 5.2
Funding from BW Group 13.2 11.7
18.4 16.9
Note: These accounts do not consolidate the accounts of joint venture companies.
76 Accounts: Scotland accounts
Scotland Accounts
77Accounts: Scotland accounts
Issued share Equity interest capital held
£ %Edinburgh Quay Limited 100 49
Timber Basin Limited 2 49
The principal activity of each joint venture is property development. Further details are explained on page 24 in the Scotlandreport. The aggregate amount of capital and reserves and the profit and loss for the year was as follows:
Capital and Profit/(loss)Reserves for the year
£m £mEdinburgh Quay Limited (31 December 2006) 0.4 0.5Timber Basin Limited (31 March 2006) - -
Grant receivable from the Scottish Executive2006/07 2005/06
£m £m
Grant received in year 13.0 12.0
Accrued grant at 1 April (2.0) (2.0)
Accrued grant at 31 March 3.8 2.0
14.8 12.0
Deferred capital grant released to profit and loss account 0.2 -
15.0 12.0
Analysis of fixed assets as at 31 March2007 2006
£m £m
a) Tangible fixed assets (net book value)
Freehold land, buildings and structures operational 4.8 4.9
Freehold land, buildings and structures investment 8.5 8.2
Craft plant and equipment 2.0 2.1
15.3 15.2
b) Investments
Loans to joint ventures:
Balance at 1 April 2.7 7.7
Net movement on loans 0.7 (5.0)
Balance at 31 March 3.4 2.7
78 Accounts: accounts direction
Accounts Direction
The Secretary of State for Environment, Food and
Rural Affairs in exercise of the powers conferred
by section 24 of the Transport Act 1962 and
of all other powers enabling him in that respect,
and with the consent of the Treasury and in
consultation with the Scottish Executive,
hereby makes the following direction.
1. The annual accounts, which it is the duty of the
British Waterways Board (hereinafter referred
to as British Waterways) to prepare in respect
of each accounting year until further notice,
shall comprise in respect of British Waterways:
(a) in respect of the Board and its subsidiaries
(i) a Board Members’ Report
(ii) a Consolidated Profit and Loss Account
(iii) a Consolidated Statement of Total
Recognised Gains and Losses
(iv) a Consolidated Balance Sheet; and
(v) a Consolidated Cash Flow Statement
(b) in respect of the Board (public corporation)
(i) a Balance Sheet;
including in each case such notes as may be
necessary for the purposes referred to in paragraph
2 below.
2. The annual accounts referred to above shall
give a true and fair view of the profit or loss,
state of affairs and cash flows of British
Waterways and its subsidiaries.
Subject to the foregoing requirements, without
limiting the information given, and save as
described in Schedule 1 to this direction, the
annual accounts shall also, where applicable,
comply with:
(a) the accounting and disclosure requirements
of companies legislation currently in force;
(b) the accounts disclosure requirements of
para 43 of Chapter12 of the Financial
Services Authority listing rules;
(c) the best commercial accounting practice
as defined by UK Generally Accepted
Accounting Practice (UK GAAP) and
accounting standards adopted or issued
by the Accounting Standards Board; and
(d) any additional disclosure or accounting
requirements that the Treasury may issue
from time to time in respect of public
corporations’ accounts.
3. The balance sheet shall be prepared under
the historical cost convention modified
by the revaluation of investment properties.
4. Clarification of the application of the accounting
and disclosure requirements of the Companies
Act and accounting standards is given in
Schedule 1 to this Direction. The annual
accounts shall include the information set
out in Schedule 2 to this direction.
British Waterways Board direction given by the Secretary of State for the Department for Environment, Food and Rural Affairs in respect of the annual accounts.
79Accounts: accounts direction
5. The Direction shall be reproduced as an annex
to the annual accounts.
6. The Direction issued on 27 January 2003
is hereby revoked.
Dated May 2005
Signed by authority of the Secretary of State
J Roberts
A Senior Civil Servant in the Department
for Environment, Food and Rural Affairs
Schedule 1
In the balance sheet, loans from the Secretary of
State shall be grouped with capital and reserves.
Interest on these loans shall be separately disclosed
in the profit and loss account. When preparing its
balance sheet, British Waterways shall have regard to
the balance sheet format 1 prescribed in Schedule 4
to the Companies Act 1985. Items A to J in Format 1
shall be presented so as to show the total of those
items separately from the totals of item K (capital and
reserves). The disclosure exemptions permitted by the
Companies Act for small and medium size companies
do not apply unless approved by the Treasury.
Schedule 2
(I) The board members’ report shall
(a) contain the information which the
Companies Act 1985 requires to
be disclosed in the directors’ report,
where appropriate;
(b) state that the accounts have been prepared
in a form notified by the Secretary of State
with the consent of the Treasury in
accordance with the relevant statute and
(c) include a brief history and statutory
background of British Waterways.
(II) The annual accounts, or the notes thereto,
shall disclose:
the turnover and other operating income,
operating costs, each analysed as follows:
(a) British Waterways (public corporation)
to include an analysis of expenditure on:
(i) multiple use waterways,
(ii) leisure waterways and
(iii) waterways not fully navigable
(b) British Waterways’ subsidiary companies
(c) British Waterways’ share of joint ventures
and associates
(III) The annual accounts shall also disclose details of:
(a) rents receivable for the year showing
separately rents from investment property
and rents from other property;
(b) interests during the year in other transport
undertakings and other trade investments;
(c) government grant received during the year
reconciled to income from grant as shown
in the profit and loss account;
(d) indebtedness to the Secretary of State
(National Loans Fund) at the year end
including details of maturity dates, interest
rates and information about the use of
British Waterways’ borrowing powers.
(e) the chairman’s and board members’
emoluments for the year provided written
consent has been obtained to disclosure
under the Data Protection Act 1998 and
if consent to disclosure is withheld then
a statement to that effect against the
name of the individual (this consent is not
required where a requirement to disclose
is a condition in the employment contract);
(f) staff costs for the year, excluding non-
executive board members, according
to categories of staff;
(g) a statement of the number of employees
during the year, excluding board members,
whose emoluments excluding pension
contributions fell in each bracket of a scale
in multiples of £10,000, starting at £50,000.
(h) a statement that the resource
Departmental Expenditure Limit (DEL),
capital DEL and resource annually
managed expenditure budget limits
set by the Department and Scottish
Ministers have not been exceeded.
80 Accounts: 5 year summaries
2006/07 2005/06 2004/05 2003/04 2002/03£m £m £m £m £m
Direct income from: restated restated
Property 58.9 64.0 55.7 53.1 49.9
Leisure uses 26.7 25.2 23.3 20.4 18.1
Commercial uses 4.7 4.5 4.5 4.5 4.4
Contributions to non-statutory works 20.3 14.5 17.0 14.3 27.9
Maintenance agreements 4.0 4.5 3.4 4.1 1.9
Other income 2.0 1.7 1.8 6.2 7.4
Direct income 116.6 114.4 105.7 102.6 109.6
Government grant 72.1 76.1 73.4 94.8 82.0
Total revenue 188.7 190.5 179.1 197.4 191.6
Operating profit/(loss) (0.6) 0.4 (7.4) (3.8) (19.5)
Share of operating profit and losses of joint ventures 2.4 7.7 1.1 (0.9) 1.1
Profit on sale of investment properties 8.3 11.5 14.8 7.6 3.8
Profit on sale of other fixed asset investment - 3.5 - - -
Exceptional costs of business reorganisation - - - (5.4) -
Other finance income 0.9 (0.9) (0.5) - -
Net interest (payable)/receivable (2.1) (2.1) (3.0) 0.7 (34.0)
Profit/(loss) for the financial year before taxation 8.9 20.1 5.0 (1.8) (48.6)
Taxation on profits (3.3) (6.8) (2.7) 0.3 4.4
Profit/(loss) for the financial year after taxation 5.6 13.3 2.3 (1.5) (44.2)
BALANCE SHEETAssets employedFixed assets 630.0 583.0 530.8 502.1 396.6
Current assets 98.3 92.7 82.3 79.9 90.9
Creditors: Amounts falling due within one year (82.9) (77.7) (72.6) (71.1) (69.5)
Net current assets 15.4 15.0 9.7 8.8 21.4
Total assets less current liabilities 645.4 598.0 540.5 510.9 418.0
Creditors: Amounts falling due after more than one year (52.2) (51.6) (45.7) (66.4) (17.0)
Provisions for liabilities (12.2) (11.9) (8.5) (12.5) (13.0)
Deferred capital grant (8.4) (10.0) (11.6) (13.3) (14.2)
Pension liability (37.5) (41.5) (51.4) - -
535.1 483.0 423.3 418.7 373.8
Financed by
Reserves 525.2 472.5 409.2 404.0 359.1
Debt 9.9 10.5 14.1 14.7 14.7
535.1 483.0 423.3 418.7 373.8
Five Year Summaries
