Contents

NOTES TO THE FINANCIAL STATEMENTS

6. operating segments

Operating segments are reported in a manner consistent with internal reporting provided to the Chief Operating Decision-Maker, which has been identified as the Pennon Group Plc Board.

The water and sewerage business comprises the regulated water and sewerage services undertaken by South West Water Limited. The waste management business is the waste treatment, recycling and renewable energy services provided by Viridor Limited. Other includes parent company financing of business acquisitions made before 1999. Segment assets include goodwill and other intangible assets, property, plant and equipment, inventories, trade and other receivables and cash and cash deposits. Segment liabilities comprise operating liabilities and exclude taxation. The other segment liabilities include the Company's financing of business acquisitions and Group taxation liabilities. Capital expenditure comprises additions to property, plant and equipment, including additions resulting from acquisitions through business combinations.

2010

£m

2009
(Restated note 5)
£m

Revenue

Water and sewerage

444.2

431.7

Waste management

626.5

528.0

Other

8.5

8.7

Less intra-segment trading*

(10.3)

(10.2)

1,068.9

958.2

Segment result

Underlying operating profit before depreciation and amortisation (EBITDA)

Water and sewerage

290.1

281.4

Waste management

114.8

105.2

Other

(0.2)

1.7

404.7

388.3

Underlying operating profit

Water and sewerage

196.5

191.6

Waste management

73.1

63.5

Other

-

1.9

269.6

257.0

Operating profit

Water and sewerage

191.5

186.6

Waste management

72.8

62.3

Other

-

1.9

264.3

250.8

Underlying profit before tax

Water and sewerage

132.5

121.9

Waste management

55.4

41.1

Other

1.2

2.6

189.1

165.6

Profit before tax

Water and sewerage

127.5

116.9

Waste management

55.1

39.9

Other

1.2

2.6

183.8

159.4

* Intra-segment trading between and to other segments by the water and sewerage and waste management segments is under normal commercial terms and conditions that would also be available to unrelated third parties. Intra-segment revenue of the other segment is at cost.

Underlying measures exclude restructuring costs in South West Water and amortisation of intangibles in Viridor. A full reconciliation between underlying and reported measures is included in the Directors' report; Financial performance and in note 11 for earnings per share.

Water and sewerage

£m

Waste management
(Restated note 5)
£m

Other
(Restated note 5)
£m

Eliminations

£m

Group
(Restated note 5)
£m

Balance sheet

31 March 2010

Assets (excluding investments in joint ventures)

2,751.2

1,018.8

901.1

(789.3)

3,881.8

Investments in joint ventures

-

0.2

-

-

0.2

Total assets

2,751.2

1,019.0

901.1

(789.3)

3,882.0

Liabilities

(1,985.8)

(777.2)

(1,247.4)

789.3

(3,221.1)

Net assets/(liabilities)

765.4

241.8

(346.3)

-

660.9

31 March 2009

Assets (excluding investments in joint ventures)

2,684.9

848.2

809.6

(771.2)

3,571.5

Investments in joint ventures

-

2.2

-

-

2.2

Total assets

2,684.9

850.4

809.6

(771.2)

3,573.7

Liabilities

(1,959.7)

(710.2)

(1,074.4)

771.2

(2,973.1)

Net assets/(liabilities)

725.2

140.2

(264.8)

-

600.6

Segment liabilities of the water and sewerage and waste management segments comprise operating liabilities. The other segment liabilities include the Company's financing of business acquisitions before 1999 and Group taxation liabilities.

Water and sewerage

£m

Waste management
(Restated note 5)
£m

Other

£m

Group
(Restated note 5)
£m

Other information

31 March 2010

Amortisation of other intangible assets (note 16)

-

0.3

-

0.3

Capital expenditure (including acquisitions)

143.3

55.9

0.3

199.5

Depreciation

93.6

41.7

(0.2)

135.1

Finance income (note 8)

18.1

12.2

4.1

34.4

Finance costs (note 8)

82.2

31.0

2.8

116.0

31 March 2009

Amortisation of other intangible assets (note 16)

-

1.2

-

1.2

Capital expenditure (including acquisitions)

147.8

87.4

-

235.2

Depreciation

89.8

41.7

(0.2)

131.3

Finance income (note 8)

29.8

7.2

8.8

45.8

Finance costs (note 8)

99.5

30.4

8.1

138.0

Geographical segments

Separate disclosure by geographical segment is not shown since the operations of the Group are substantially located in the United Kingdom.