Glossary

AD

Anaerobic digestion

AGM

Annual General Meeting. The annual meeting for shareholders at which routine matters, such as the election of directors and the laying of reports and accounts are put to the vote of shareholders.

Assets

Fixed assets include land, machinery, equipment and buildings; current assets consist of cash, money owed, stock, investments and work in progress; intangible assets are goodwill, trade marks, patents, etc; liquid assets are funds kept in cash or in a form that can be quickly and easily turned into cash.

Base rate

Interest rate on which lending charges are calculated by British banks.

Basis point

Usually one hundredth of a percentage point (0.01 per cent), used in quoting movements in interest rates or yields on securities.

Bear

A person who expects prices of shares and/or stock markets to fall.

Bear market

A period of falling share prices; a pessimistic state of affairs. See also bull market.

Bid Price

The price at which market makers will bid for stock, ie the price at which investors sell their shares to the market maker.

Blue chip

A stock considered reliable with regard to dividend income and capital value.

Bond

A certificate of debt issued to raise funds. Bonds typically pay a fixed rate of interest and are repayable at a fixed date.

Brokers forecast

Estimates of future company performance issued by stockbrokers and bank analysts.

Bull

A person who expects the price of shares, and/or stock markets, to rise.

Bull market

A period of rising share prices; an optimistic state of affairs. See also bear market.

CAGR

Compound Annual Growth Rate, being the rate of growth over a period, expressed as a single annual average figure.

Capital gain

Profit made on the sale of shares, commodities, property or land; In the UK, capital gains tax may be payable on the profit.

Cash flow

Measure of the actual cash generated by a business rather than the accounting profit. In the UK typically pre-tax profit plus depreciation, amortisation and other non-cash charges. In the US, net income with depreciation charges added back.

Close period

The period prior to the company's release of its half yearly or Preliminary results, during which the directors and some members of senior management are not permitted to trade in the shares of the company. Normally two months, or, if shorter, the period from the relevant financial period end up to and including the time of such publication.

Closed-end investment funds

Investment funds with a fixed share capital. As opposed to open-ended funds which expand or contract according to investor demand.

Consensus forecasts

A market average of stockbrokers' and bank analysts' forecasts of the future financial performance of a company.

Corporation tax

A tax assessed on corporate profits after adjustment for items such as depreciation, capital allowances, provisions, etc.

Coupon

The rate of interest payable on a fixed-interest security (bond), traditionally a detachable coupon.

Cum dividend

Purchase of a share cum dividend means that the buyer of a share is entitled to the next dividend payment. Opposite of ex: dividend

Current assets

Assets of a company which can be realised in cash, sold or consumed within one year. Typically the sum of cash, cash equivalents, receivables, stocks, prepaid expenses and other current assets.

Current liabilities

Liabilities of a company that the company expects to satisfy within one year. Typically accounts payable, short term debt, notes payable, taxes payable, dividends payable and other current liabilities.

Debt/equity ratio

A ratio which describes the leverage or gearing of the company and is calculated as total debt divided by shareholders' equity expressed as a percentage.

Deferred tax

An accounting entry that recognises that taxable profits are different from accounting profits by smoothing out the effective tax rate over time. In the water industry, by virtue of its long life assets, the reversal of timing differences arising between taxable profits and accounting profits is permitted to be discounted thereby recognizing the time value of money.

DEFRA

Department for Environment, Food and Rural Affairs

Depreciation

The reduction in the balance sheet value of a company asset to reflect its loss of value through usage in the business.

Determination

The price limits and expenditure plans determined by Ofwat for South West Water for a five year period

Dividend cover

The number of times a company could pay its most recent dividend out of its net profit (profit after tax).

Dividend re-investment plan

If offered by the company, shareholders can sign a mandate to the effect that all future dividends be used to purchase additional shares in the company on the stock market and added to their existing holding.

Dividends

The proportion of a company's profit that it pays to its shareholders, usually declared as a dividend per share (DPS). In the UK the dividend is normally paid in two parts; an interim dividend payment, and a final dividend once the final results are known.

DWI

Drinking Water Inspectorate

EA

Environment Agency

Earnings

Profit available to ordinary shareholders, after all operating expenses, interest charges and taxes have been deducted.

Earnings per share (EPS)

Earnings divided by the number of ordinary shares outstanding.

EfW

Energy from Waste

EGM

Extraordinary General Meeting. A meeting of shareholders which may be called to approve special events such as a take-over, or a major acquisition.

EMS

Environmental Management System

Equity

The equity share capital, plus retained profits and all other reserve.

Equity Share Capital

The proportion of the issued share capital (normally referred to as ordinary share capital) of a company carrying an unrestricted right to participate in any distributable profits.

ERFs

Energy Recycling Facilitiies

Ex dividend (XD)

Purchase of a share Ex dividend means that the buyer of a share is not entitled to the next dividend payment. Opposite of cum.

Financial year

Financial year of the Group ending 31 March

Flotation

The process of listing a company's shares on a stock exchange.

Gearing

Used to describe the relationship between debt and equity and is calculated by dividing the company debt by the shareholders' equity. A highly geared company is one that carries a lot of debt.

GWh

Gigawatt hours

Half yearly results

First half trading results which provide an indication of the company's trading and profit performance since the last full year accounting period.

Holding company

Company whose main assets are shareholdings (usually controlling) in other companies.

HWRS

Household waste recycling sites

IFRS

International Financial Reporting Standards

Institutional investor

Large financial institutions such as pension funds, unit or investment trusts and insurance companies.

Intangible assets

Describes assets that do not have a physical existence. An example of intangible assets is goodwill, when purchasing a business.

Interest payable

This is the interest that is calculated and due to be paid on a company's borrowings.

Interim Determination

Interim Determination of K (IDOK)

ISO 14001

International environmental management accreditation standard

ITOO

Input, Throughput and Output Optimisation – programme adopted by Viridor’s recycling business to improve asset productivity.

Joint venture

Co-operation on a business between two corporate bodies.

June Return

The annual return to Ofwat made by South West Water on its performance during the previous financial year

K factor

The price limit set by Ofwat on the average change in charges that a water company can impose in any year. The K factor is set in five year blocks as part of the price review process.

K6

The sixth regulatory contract period for South West Water, running from 2015 to 2020.

KPIs

Key Performance Indicators

LATS

Landfill Allowance Trading Scheme

LAWDC

Local Authority Waste Disposal Company

Liabilities

The debts of a company and other financial obligations; the opposite of assets.

Liquidity

The proportion of cash or cash equivalents in a company's assets. Sometimes used as a measure of the near term financial health of a company. Also a measure of the volume of shares being traded, which may affect the ability of buyers or sellers to build/unwind large holdings without a substantial impact on the price.

Long term debt

All interest-bearing financial obligations which mature in more than a year.

Long-Term Incentive Plan (L-Tip)

Long-term incentive plan for senior managers of the Group. Awards under the Plan, involving the release of Ordinary Shares in the Company to participants, is dependent upon performance criteria being met. Further details can be found in the Annual Report.

LSE

London Stock Exchange.

Margins

Profit margin is profit as a percentage of revenue (or turnover). Normally calculated before tax.

Market capitalisation

Value at current market prices of a company's equity capital. It is calculated by multiplying the current share price by the number of shares outstanding.

Market Price

The price at which a share can currently be traded in the market.

Mid Price

The mid point between the bid and offer price quote in the market.

Ml

Megalitres

MRF

Materials Recycling Facility

MW

Megawatts

Net income

Income (profit) shown after all operating and non-operating income and expenses, after taxes but before ordinary dividends.

NFFO

Non Fossil Fuel Obligation

Nominal return

Return that takes no account of the effects of inflation.

OEICS

An open-ended investment company, with a single price for buying and selling.

Offer Price

The price at which market makers offer shares, ie the price at which investors buy shares from the market maker.

Ofwat or water regulator

Water Services Regulatory Authority

Operating profit

The difference between revenue (or turnover) and the costs incurred during operations (total operating expenses).

Option

The right (but not the obligation) to buy or sell securities at a given price (exercise or strike price) before a given date (expiry date).

Ordinary share

The most common class of share representing the shareholders' interest in a company.

P/E Ratio

Ratio or multiple calculated by dividing the price per share (p) by the earnings per share (e). A simple measure for comparing the relative valuations of different companies.

percentage population equivalent

Waste water treatment works loadings from domestic, industrial and diffuse sources, averaged and stated as a population equivalent load, expressed as a percentage

PFI

Private Finance Initiative

PPC

Pollution, Prevention and Control

PPP

Public Private Partnership

PR

Price Review - the periodic review undertaken by Ofwat to determine the water industry's price limits and expenditure plans for five-year regulatory periods.

Preliminary Results (Prelims)

The first release of a company's results for the full financial year to the stock exchange (unaudited).

Pretax profit

Income before tax.

Profit

The surplus of revenue generated over expenses incurred for a particular accounting period. Operating profit refers to the profit generated before interest and tax have been taken into account.

Prospectus

A document, published prior to the issue of shares to the public, which explains all aspects of a company's business, detailing financial and other information about the company and the securities being offered for sale.

Real return

Return adjusted to take account of inflation.

Receivables

A current asset that represents amounts due to the company from the sale of goods and services on credit.

Regulatory Capital Value (RCV)

The Regulatory Capital Value (RCV) is the capital base remunerated by Ofwat at price reviews. It is derived from the market valuation (including debt) of the company around the time of initial price setting in 1989, with the addition of net new capital expenditure (after allowing for current cost depreciation) assumed at the time of initial price setting and at subsequent price reviews.

Retail price index (RPI)

A broad basket of goods/services whose price is calculated monthly and which provides a broad measure of the level of inflation.

Return on assets

Ratio which measures the return a company generates from its total assets.

RIDDOR

Reporting of Injuries, Diseases and Dangerous Occurrences Regulations (1995)

Rights issue

Offer of shares to existing shareholders to raise money.

Risk premium

The excess return over a risk-free asset (eg a gilt) which investors will require to compensate themselves for the higher risk associated with holding an asset like an equity.

ROCs

Renewables Obligation Certificates

Scrip dividend alternative

If offered by the company, new shares issued by the company can be acquired by investors in lieu of a dividend payment. In addition, shareholders will know in advance how many shares they will receive if they elect for the scrip alternative thereby avoiding market uncertainty.

Scrip issue

A book keeping transaction that does not affect the value of the shareholder's interest or raise any money for the company; it is a means for a company to transfer money from reserves into permanent capital.

Securities

A financial instrument issued by a company and traded on a stock exchange.

Securities and Futures Authority (SFA)

The Regulatory body for the securities and futures markets in the UK. Formed in 1991 through a merger of the Securities Association and the Association of Futures Brokers and Dealers.

SEPA

Scottish Environment Protection Agency

Share capital

The original cost of shares outstanding.

Share option

See Option.

Short term debt

The portion of debt that is payable within one year. Falls under current liabilities on the company balance sheet.

Spread

Usually the difference between the Bid and Offer prices.

Stock split

The term used to describe the division of shares into a larger number of shares with lower unit value. There is no change to the proportional holding of shares.

Tangible assets

Tangible fixed assets represents property, plant and equipment, after the deduction of depreciation.

UK GAAP

United Kingdom Generally Accepted Accounting Principles

Viridor

Viridor Limited (subsidiary of Pennon Group Plc) or a Viridor Limited operating subsidiary, depending on the nature of the activity described

WEEE

Waste electrical and electronic equipment