Kelda Group plc

1

• Kelda Group plc
• Presentation of Preliminary Results
• 7 June 2007

2

• Introduction
• John Napier
• 
  Chairman

3

• Business Review
• 
  Kevin Whiteman
• Chief Executive

4
Kelda Group plcHighlights

• Operating profit from continuing operations up
  7.2 to 338.2m
• Basic EPS from continuing activities increased
  12.4 to 48.1p
• Full year dividend increased 6.3 to 32.25p
  final dividend 23.0p
• Completion of balance sheet restructuring
  anticipated early July 2007
• YW operating cost outperformance 2m
• On track for 7.5 capital outperformance

5
Kelda Group plcHighlights

• YW continued to improve levels of operational and
  customer service
• Utility of the Year for the third consecutive
  year
• Again recognised by Ofwat as most efficient water
  and sewerage company
• Further profit growth in UK Service Operations
• Sale of Aquarion announced 1 May 2007

6

• Yorkshire Water

7
Yorkshire WaterHighlights

• Operating profit increased by 6.4 to 332.7m
• Outperformed regulatory operating cost targets by
  2m
• Absorbed significant increases in energy prices
• Commitment to invest 20m in renewable energy
• Capital programme well on track outputs and
  7.5 out performance
• Four As for efficiency from Ofwat again most
  efficient

8
Yorkshire WaterHighlights

• Continued to improve score in Ofwats Overall
  Performance Assessment
• Excellent year for water supply security
• Billing system successful implementation, no
  customer impact
• Significant initiatives delivering service
  improvements and efficiencies

9
Yorkshire WaterHighlights

• Pollution incidents reduced year on year
• 100 waste water treatment works compliance
• 7 Blue Flags awarded to Yorkshire beaches
• Good progress on Sites of Special Scientific
  Interest

10
Yorkshire WaterHighlights

• Platinum status in 100 Companies That Count 2007
• Cool Schools campaign installed 1,400 coolers in
  750 schools
• 38 of YW employees involved in community
  volunteering
• Progress from new technology and ways of working
  due to talent and commitment of our people

11
Yorkshire Water Highlights
12
UK Service Operations KeyLand
13
UK Service Operations and KeyLand

• UK Service Operations profits increased to 10.7m
  (2005 9.1m)
• Operating profit margin increased from 7.4 to
  8.2
• Includes Kelda Water Services, Loop and Safe-Move
• KeyLand operating profit increased by 1.3m to
  4.3m

14
UK Service Operations - Kelda Water Services

• UK Service Operations profits increased to 10.7m
  (2005 9.1m)
• Good performance from KWS existing businesses
• Northern Ireland Water contract progressing well

15
UK Service Operations - Kelda Water Services

• KWS grown to 123m turnover business in 5 years
• Proven track record on bidding and delivering
  commitments
• Well placed to seek new growth opportunities

16
Aquarion
17
Aquarion

• Sale completion announced on 1 May 2007
• US exit in best interest of shareholders
• New owners acquired well run and efficient
  business
• Aquarion secured a long term quality owner

18
Group Financial Performance
Martin Towers Group Finance Director
19
2006/07 Results highlights

• 2006/07 2005/06 Increase
• m m
• Group turnover inc. associates() 878.9
  825.4 6.5
• Profit after tax () 171.7
  158.9 8.1
• Basic EPS () 48.1p 42.8p 12.4
• Dividend (per share) 32.25p 30.35p
  6.3
• () from continuing operations

20
Continuous improvement at Yorkshire Water
(regulated)
6.8 increase
m
6.4 increase

• Turnover growth and cost containment has produced
  improving results

21
Yorkshire Water (regulated)Focus on cost
reduction

• m 2006/07 2005/06 change
• Turnover 741.1 693.8 6.8
• Energy costs (42.8) (29.3) 46.1
• Other operating costs (211.8) (214.0)
  (1.0)
• Inflation (3.7) excluding energy (8.0)
  -
• Other income 8.3
  5.8
• Depreciation (115.6) (107.8)
• Infrastructure renewals
  (49.1) (47.6)
• IFRS adjustments 10.6
  11.8
  
• 332.7 312.7 6.4
• Operating cost reduction in real terms after
  absorbing operating costs of new capital schemes

22
Yorkshire Water (regulated)Focus on cost
reduction
10m operating cost out performance in
2005/06 2m operating cost out performance in
2006/07 Further outperformance sought during AMP4
23
Growth in UK Service Operations

• 2006/07 2005/06
• m m
• Turnover (including associates) 130.9
  123.6
• Operating profit 10.7 9.1
• 15 of group turnover including associates (KWS
  14)
• Improved operating profit margin

24
Aquarion discontinued operations

• 2006/07 2005/06
• m m
• Turnover 99.4 104.2
• Profit excluding impairment 41.6 32.8
• Impairment charge
  (45.5) -
• Interest (net) (10.3) (8.9)
• (Loss)/Profit before tax
  (14.2) 23.9
• Tax (6.2)
  (8.7)
• (Loss)/Profit after tax (20.4)
  15.2
• Conversion at 1.89 (2005/06 1.79 )
• Dollar turnover broadly comparable
• 2007 profit of 41.6m 28.9m adjusting for
  depreciation not charged
• Impairment charge recognises the exit from USA

25
Taxation (excluding Aquarion)

• 2006/07 2005/06
• m m
• Profit before tax 241.2
  100 224.3 100
• Current tax 49.6 21 53.5 24
• Deferred tax 22.8 9 14.9 6
• 72.4 30 68.4 30
• Prior year adjustment (Net) (2.9)
  (3.0)
• 69.5 65.4
• Underlying 30 effective rate reflects current UK
  rate

26
Group cash flow movements summary (including
Aquarion)

• 2006/07 2005/06
  m m
• Cash generated from operations
  534.7 462.5
• Taxation (45.2) (38.5)
• Interest (net) (95.2)
  (106.3)
• Capital spend (net) (374.8)
  (299.6)
• Dividends (109.7) (109.4)
  
• Share re-purchase (59.3)
  (72.9)
• Other movements (net)
  (1.2) (5.9)
  (150.7) (170.1)
• 1 April 2006
  (1,953.6) (1,783.5)
• 31 March 2007
  (2,104.3) (1,953.6)

27
Kelda Group plcBalance sheet restructuring

• Sale of Aquarion opportunity to improve
  efficiency of balance sheet
• Shareholder approval to return 750m capital by
  way of B share scheme and share consolidation
• Increased YW debt to RCV to 60 in line with
  regulatory assumptions
• Dividends in 2008 will be adjusted to take
  account of return of capital
• Continue policy of growing dividends by 2 real
• Increase financial efficiency, retain balance of
  risk and flexibility

28
Balance sheet gearing levels

• 31.3.07 31.3.06
• Group gearing 59 57
• YW debt to RAV 60.6 42.5
• Dividend paid from YW to Kelda in preparation for
  return to shareholders
• Sound investment grade ratings maintained
• UK Pension fund IAS 19 surplus 7.3m triennial
  actuarial valuation as at 31 March 2007
• 600m long-term debt raised by YW in May 2007

29
Overall financial summary

• Robust set of financial results
• Prepared for return of capital to shareholders in
  July 2007
• Debt to RCV mid of regulatory range
• Financial ratios continue to be strong

30
Kelda Group plc Summary
31
Kelda Group plcSummary

• YW had a strong year driving efficiency and
  service
• Return of capital brings balance sheet efficiency
  in line with operational efficiency
• Aspiration to continue to grow KWS by continuing
  to leverage off core skills
• Developing plans for PR09 and beyond
• Kelda well placed to build on successful progress

32

• Kelda Group plc
• Presentation of Preliminary Results
• 7 June 2007