Dee Valley : Annual Results Announcement for the year to 31 March 2015

Key Financial and Operational Highlights

· Underlying financial performance remains broadly consistent with the prior year:

o Profit from operations of £7.5m (2014: £8.6m or £7.3m after adjusting for non-cash pension scheme curtailment gain);

o Profit after tax £3.5m is £2.2m lower than the prior year, however the 2014 position included a non- cash pension scheme curtailment gain of £1.3m and a non-cash prior year deferred tax credit of £1.7m.

o Capital expenditure of £6.8m in the year and £34.1m over AMP5;

o Net cashflow from operating activities £13.0m (2014: £12.2m).

· Continued focus on customer service and delivering high levels of customer satisfaction:

o Fourth lowest water bills in England and Wales, falling by an average of 2% pre inflation during AMP6;

o Third highest penetration of the WaterSure tariff; social tariff to be implemented from April 2016;

o Our Service Incentive Mechanism (SIM, Ofwat's customer service measure) remains constant at a satisfactory level, with the qualitative portion of this score improving in the year and service categorised as 'significantly above average' by Ofwat;

o 29% reduction in customer complaints compared to the prior year.

· Operational performance remains on track, with infrastructure and water quality improvements delivered:

o Drinking water quality index remains high at 99.88%. Successful actions taken to reduce incidents of discolouration and discoloured water contacts have reduced by more than half in the year;

o A key contributor to this improvement is the £17.1m Llwyn Onn water treatment works, commissioned in 2013, which is functioning in line with expectations and providing high quality drinking water to its capacity of 47 million litres a day;

o 140km of mains network cleaning during the year;

o Leakage level remains below target and one of the lowest in the sector.

· Largest ever, targeted investment programme for AMP6

o Ofwat approved a capital programme of up to £50.0m for the 2015/20 period;

o This represents an increase of almost 50% on AMP5 capital spend;

o Long-term funding secured to support this investment (£30.0m revolving credit facility with a 5 year term to 2020) at a lower cost and with a 2 year option to extend to 2022.
· AMP6 dividend policy commitment announced

o Final dividend 42.0p per share, giving a total dividend of 62.5p per share, consistent with the prior year;

o AMP6 base dividend 62.5p, with a proposal to share future financial outperformance with shareholders.

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