Waterway Map BRITISH WATERWAYS

ANNUAL REPORT & REPORT ANNUAL 2003/04 ANNUAL REPORT & ACCOUNTS ACCOUNTS /04 2003

British Waterways Willow Grange Church Road Watford WD17 4QA

T +44 1923 201120 F +44 1923 201400 E [email protected] www.britishwaterways.co.uk Discovering the best of the UK’s waterside with Waterscape.com

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This document is printed on Greencoat Velvet Plus and Cyclus Offset. Greencoat is 80% recycled, 20% pulp from sustainable sources and has been awarded the NAPM and Eugropa recycled marks. Cyclus Offset is 100% de-inked post consumer recycled waste and has been awarded the NAPM. The document has been printed using soya based inks. July 2004 • • • • • • • The paddlegear pictured candlestick here isunique totheGrandUnion Canalbetween NaptonJunction andKnowle Locks. Front coverimage: Actingteamleader, Mick at HattonontheGrand UnionCanal. Wong, toaboater talks New organisation and the Wood Wharf, with 1000newdogwastebinsinstalled Campaign toreduce dogfouling Liverpool SouthDocks acquired leisure website,launched Waterscape.com, theinland Backlog of 8.1% growth Waterside PubPartnership safety-related maintenance in tradingincometoa a significantpropertyventureinLondon Docklands, structure introduced waterways consumer from EnglishPartnerships on towpathslaunched record million £88.3 begin partnerselectionprocesses completely eliminated

WATERWAY MAP WATERWAY MAP

KEY LOCHLOCH NESSNESS 1 Scotland CALEDONIANCALEDONIAN CANALCANAL AberdeenAberdeen Northern Waterways LOCHLOCH OICHOICH 2 North West LOCH NESS LOCHLOCH LOCHYLOCHY 3 Yorkshire CALEDONIAN CANAL 4 Wales & Border Counties Aberdeen FortFort WilliamWilliam LOCH OICH 5 East Midlands

LOCH LOCHY 1 Southern Waterways 6 West Midlands Fort William 7 Central Shires SCALE DundeeDundee 8 South West PerthPerth 9 South East 0 50 kilometres 10 London 0 10 20 30 miles

LOCHLOCH Dundee LOMONDLOMOND CRINANCRINAN StirlingStirling CANALCANAL PDunfermlineDeurtnhfermline WATFORD British Waterways’ Offices FORTHFORTH RIVERRIVER CARRONCARRON & CLYDECLYDE GrangemouthGrangemouth CANALCANAL ClydebankClydebank LOCH UNIONUNION Managed by British Waterways LOMOND CRINAN Stirling CANALCANAL EDINBURGHEDINBURGH CANAL GLASGOW Dunfermline Waterways 2025 Priority One projects MONKLANDMONKLAND FORTH CANALCANAL RIVER CARRON & CLYDE Grangemouth CANAL Other AINA Waterways Clydebank UNION CANAL EDINBURGH Reproduced from the Ordnance Survey mapping with the permission of the Controller of Her Majesty’s Stationery Office © Crown copyright. MONKLAND Unauthorised reproduction infringes Crown copyright and may lead to prosecution or civil proceedings. British Waterways, AL51127A. CANAL AyrAyr This map includes waterways managed by members of the Association of Inland Navigation Authorities (AINA) as well as BW’s current planned restoration and new build projects. There are other inland waterways that have not been included, but can be found on more detailed maps (contact BW Customer Service Centre on 01923 201120 for more information). © British Waterways 2004

Ayr

NewcastleNewcastle UponUpon TyneTyne

CarlisleCarlisle SunderlandSunderland

DurhamDurham Newcastle Upon Tyne BASSENTBASSENTHWAITEHWAITE WorkingtonWoorkingtonrkington Sunderland CarlisULLSWATERUleLLSWATER WhitehavenWhitehaven MiddlesbroughMiddlesbrough

DuDarlingtonDrahralmington TEESTEES NAVIGATIONNAVIGATION LAKELAKE DISTRICTDISTRICT ANDAND BARRAGEBARRAGE BASSENTHWAITE Workington WINDERMEREWINDERMERE ULLSWATER Whitehaven KendalKendal 3 Middlesbrough ScarboroughScarborough NORTHERNNORTHERN REACHESREACHES Darlington TEES NAVIGATION DouglasDouglas LAKE DISTRICT LANCASTERLANCASTER CANALCANAL AND BARRAGE RIVERRIVER WINDERMERE RIPONRIPON UREURE CANALCANAL DRIDRIFFFIELDFIELD LancasterLancaster LEEDSLEEDS & NAVIGATIONNAVIGATION Kendal 2 LIVERPOOLLIVERPOOL Scarborough CANALCANAL HarrogateHarrogate RIVERRIVER OUSEOUSE NORTHERN REACHES LANCASTERLANCASTER CANALCANAL YorkYork POCKLINGTONPOCKLINGTON CCANALANAL Douglas LANCASTER CANAL RIVER RIVERRIVER RIPON AIREAIREU R&E RIVERRIVER PrestonPreston BurnleyBurnley LEEDS DRIFFIELHULLHDULL BlackpoolBlackpool CANAL CALDERCALDER DERWENTDERWENT MARKMARKETET Lancaster LEEDS & NAVIGATION KingstonKingston UponUpon RIBBLERIBBLE BradfordBradford NAVIGATIONNAVIGATION WEIGHTONWEIGHTON LINKLINK LIVERPOOL CANALCANAL HullHull CANAL WakefieldWHaakrerofigealdte RIVER OUSE ROCHDALEROCHDALE SELBYSELBY CANALCANAL LANCASTER CANAL CANALCANAL York POCKLINGTON CANAL CALDERCALDER & NEWNEW JUNCTIONJUNCTION RIVERRIVER HUDDERSFIELDHUDDERSFIELD HEBBLEHEBBLE RIVER LEEDSLEEDS & AIRE & CANALCANAL RIVER ANCHOLMANCHOLME Preston MANCMANCHESHESTTERBEuRr BnOLTONOleLTyON BROADBROAD CANALCANAL NAVIGATIONNAVIGATION HULL BLIVERPOOLLlIaVcEkRpPoOoOlL CALDER STAINFORTHSTAINFORDTEHR W& ENT MARKET & BURYBURY CANALCANAL ScunthorpeScunthorpKeingston Upon CANALCANAL RIBBLE Bradford SOUTHSOUTH YORKSHIREYORKSHIRNE ANNAVIGATIONVAIVGIAGTAITOINON KEADBYKEADBY CCANALANAL RIVERRIWVEERI GHTON ASHTONASHTON HUDDERSFIELDHUDDERSFIELD CANAL Hull STST HELENSHELENS LINK CANALCANAL NARROWNARROW CANALCANAL Wakefield TRETRENTNT (SANKEY)(SANKEY) MANCHESTERMANCHESTER ROCHDALE DoncasterDoSnEcLaBsYt eCrANAL LOUTHLOUTH CANALCANAL SHIPSHIP CANALCANAL MANCHESTERCANAL NAVIGATINAVIGATIONON CALDERSHEFFIELDS H&E FFIELD & NEW JUNCTION RIVER LIVERPOOLLIVERPOOL WARRINGTON BRIDGEBRIDGEWATERWATER CCANALANAL HUDDERSFIELD HEBBLETINSLEYT INSLEY CANALCANAL LINKLINK LEEDS & PEAKPEAK FORESTFOREST SheffieldSheffield CANAL ANCHOLME LIVERPOOL WEAVERWEAVEREMAAVNECRH NAVIGATIONNEASTVEIRG ABTOIOLTNON CANALCANABLROAD CANAL NAVIGATION STAINFORTH & FOSSDYKEFOSSDYKE NNAVIGATIONAVIGATION RhylRhyl & BURY CANAL Scunthorpe CANAL ASHTON SOUTH YORKSHIRE NAVIGATION CHESTERFIELDCHEKSETAEDRBFYIE CLDANAL RIVER MacclesfieldMaHcUcDleDsEfRieSlFdIELD ChesterCChesterfieldhesterfieldfield CANALCANAL WITHAMWITHAM ST HELENS NORTHWICHCANAL NARROW CANAL TRENT NAVIGATIONNAVIGATION (SANKEY) Doncaster LincolnLincoln RIVERRIVER DEEDEE MANCHESTER MACCLESFIELDMACCLESFIELD CCANALANAL LOUTH CANAL SHIP CANAL NAVIGATION ChesterChester SHEFFIELD & TRENTTRENT NAVIGATIONNAVIGATION LIVERPOOL TINSLEY CANAL SHROPSHIRESHROPSHIRE BRIDGEWATER CANAL PEAK FOREST 5 LINK UNIOUNION CCANALANAL MIDDLEWICHMIDDLEWICH CALDONCALDON CANALCANAL Sheffield Rhyl WEABRANCHBVERRA NNCAHVIGATION CANAL EREWASHEREWASH NEWARKFOSSDYKE NAVIGATION WrexhamWrexham CANALCANAL NOTTINGHAMNOTTINGCHAEMST ERFIELD CreweCrewe Macclesfield Chesterfield CANAL WITHAM BostonBoston LLANGOLLELLANGOLLEN Stoke-on-TrentStoke-on-Trent DerbyDerby & BEESTONBEESTON SLEAFORDSLEAFORD NAVIGATION CANALCANAL CANALCANAL Lincoln RIVER DEE MTRENTTARCECNLTE S&F IMERSEYMELEDR SCEAYN AL NAVIGATIONNAVIGATION CANALCANAL GranthamGrantham Chester SHROPSHIRESHROPSHIRE TRENT NAVIGATION GRANTHAMGRANTHAM FFENSENS WATERWAYSWATERWAYS LINKLINK SHROPSHUNIONUIRNEI ON CANALCANAL STAFFSSTAFFS & NottinghamNottingham MIDDLEWICH CALDON CANAL CANALCANAL THETHE BROADSBROADS UNION CANAL WORCSWORCS TRENTTRENT & MERSEYMERSEY CANALCANAL King’sKingKing’s LLynnynnynn RIVER BRANCH EREWASH RIVERRIVER SOARSOAR Wrexham CANALCANAL CANAL NOTTINGHAM RIVERRIVER GLENGLEN SEVERN Crewe RIVERRIVER WWELLANDELLBANoDston LLANGOLLEN Stoke-on-Trent DerbyASHBYASHBY CANALCANA&L BEESTON SLEAFORD OLDOLD GreatGreat YarnmouthYarnmouth ShrewsburyShrewsburShCreAwNAsLbury COVENTRYCOVENTRY CANALCANAL CANAL NAVIGATION RIVERRIVER BIRMINGHAMBIRMINGHAMT RENT & MERSEY NorwichNorwich CANAL LeicesterLeicester Grantham RIVERRIVER NENENENE NENENENE GREATG R E AT OUSEOUSE RIVERRIVER MONTGOMEMONTGOMERYRY CANALCANAL NNAVIGATIONSAVIGATIONS PeterboroughPeterborough SHROPSHIRE 7 GRANTHAM CANALCANAL RIVER SEVERN FAZELEY FENS WATERWAYS LINK RIVERRIVER WISSEYWISSEY UNION CANAL STAFFS & Nottingham MARKETMARKET CHHARBOROUGHAANRABLOROUGH ARMARM THE BROADS BIRMINGHAMBIRMINGHAM TWENTYTWENTY SIXTEENSIXTEEN WORCS TRENT & MERSEY CANAL RIVER SOAR FOOTFOOT King’s Lynn CANBIRMINGHAMAL & FAZELEYFAZELEY CANALCANAL RIVER GLEN FOOTFOOT RIVERRIVER LITTLELITTLE OUSEOUSE BirminghamBirmingham OXFORDOXFORD CANALCANAL RIVER WELLAND OLD 6 STOURBRIDGESTOURBRIDGE ASHBY CANAL MIDDLEMIDDLE LLEVELEVEL OLDOLD BBEDFORDEDFORD Great Yarnmouth STAFFSSTAFFS NEWNERWIV ER TENTEN MILEMILE OUSEOUSE Shrewsbury CANALCANAL COVENTRY CANAL NAVIGATIONSNAVIGATIONS RIVERRIVER & WORCSWORCBSI RMINGHAM RIVERRIVER NENENENE BEDFORDBENDEFNOER D G R E AT OUSE RIVER Norwich CANALCANAL CoventryCoventry Leicester RIVER NENE MONTGOMERY CANAL NAVIGATIONS GRANDGRAND UNIONUNION CANALCANAL Peterborough OLDOLD WESTWEST RRIVERIVER RIVERRIVER RIVERRIVER LARKLARK CANAL StourportStourport STRATFORD-STRATFORD- Stratford-upon-AvonStratford-upon-Avon LEICESTERLEICESTER LLINEINE RIVER WISSEY MARKET HARBOROUGH ARM ELYELY OOUSEUSE UPON-AVONUPON-AUPON-AVONVON BIHATTONRMINGHAM TWENTY SIXTEEN FOOT DROITWICHDROITWICH CANALSCANALS CANALCANAL & FAZELEY CANAL FOOT BurBBuryury St.St. EdmundsEdmunds 4 GRANDGRAND RIVERRIVER CAMCAM RIVER LITTLE OUSE WORCESTERWORCESTER & Birmingham OXFORD CANAL STAFFS STOURBRIDGE UNIONUNION MIDDLE LEVEL OLD BEDFORD TEN MILE OUSE WorcesterWoorrcestercester CBIRMINGHAMBAINRAMLINGHAM NorthamptonNorthampton 9 RIVERRIVER GREATGREAT OUSEOUSE CambridgeCambriNdEgWe & WORCS CANALCANAL CANALCANAL NAVIGATIONS RIVER HEREFORDSHIREHEREFORDSHIRE & Coventry RIVER NENE BEDFORD CANAL UPPERUPPER AVONAVON GRAND UNION CANAL BedfordBedford RIVER LARK GLOUCESTERSGLOUCESTERSHIREHIRE CANALCANAL GRANDGRAND UUNIONNION OLD WEST RIVER RIVER IpswichIpswich Stourport STRATNAVIGATIONNFAOVRIGDA-TION StrBanburyBanburBatafnobrdu-ruypon-Avon LEICESTER LINE BEDFORDBEDFORD & MILTONMILTON HerefordHereford CANALCANAL ELY OUSE RIVERRIVER STOURSTOUR RRIVERIVER UPON-AVON KEYNESKEYNES WWATERWAYATERWAY DROITWICH CANALS LOWERLOWER AVONAVONC ANAL MILTON KEYNES SEVERNSEVERN NAVIGATIONNAVIGATION RIVER CAM Bury St. Edmunds WORCESTER & GRAND MONMOUTHSHIREMONMOUTHSHIRE UNIONOXFORDO XFORD & BRECONBRECON CANALCANAL Worcester BIRMINGHAM Northampton RIVER GREAT OUSE Cambridge Bishop’sBishopBishop’s ColchesterColchester CANACANALCLANAL StortfordStortford CANAL CHELMERCHELMER & HEREFORDSHIRE & GLOUCESTERUPPER A8VON Bedford SWANSEASWANSEA GLOUCESTERSHIRE CANAL GRAND AYLESBURYAUYNLIEOSNB URY AARMRM BLACKWATERBLACKWATER Ipswich RIVERRIVER NAVIGATION BEDFORD & MILTON 10 CANALCANAL LydneyLydney Banbury RIVRIVEERR STORTSTORT NAVIGATIONNAVIGATION Hereford WYEWYE GLOUCESTERGLOUCESTER & SHARPNESSSHARPNESS CANALCANAL CANAL RIVER STOUR HarbourHarbour KEYNES WATERWAY HertfordHertford NAVINAVIGGATATIIONON RIVER LOWER AVON SEVERN OxfordOxford WENDOVERWENDOVER ARMARM NAVIGATION RIVERRIVER THAMESTHAMES RIVRIVEERR LEELEE NANAVVIGIGAATITIOONN NEATHNEATH & MONMOUTHSHIRE STROUDWATERSTROUDWATER WATFORD ChelmsfordChelmsford SwanseaSwansea SHARPNESSSHARPNESS NAVIGATIONNAVIGATION OXFORD Bishop’s Colchester TENNANTTENNANT & BRECON CANAL DOCKSDOCKS CANAL GRAGRANNDD UNIOUNION CACANALNAL CANALCANAL (COTSWOLDCOTSWOLD CANALSCANALS) SwindonSwindon StortfoSouthend-on-SeaSrdouthend-on-Sea NewportNewport REGENT’SREGENTREGENT’S CHELMER & SWANSEA MaidenheadMaidAeYnLhEeSaBdURY ARM HERTHERTFORFORD UNUNIONION CANALCANAL BLACKWATER RIVER CANALCANAL CANAL Lydney RIVERRIVER PADDINGTON BOWBOW BACKBACK RIVERSRIIVVEERRS STORT NAVIGATION WYE GLOUCESTER & SHARPNESS CANAL Harbour THAMESTHAMES SloughSlough PADDINGTONPADDINGTONH BBRANCHerRtAfoNrCdH LIMEHOUSELIMEHOUSNEA VCUTCIUGTATION BristolBristol SLOUGSLOUGH CARDIFFCARDIFF RIVER THAMES Oxford WENDOVER ARM LONDONLONDON DOCKLANDSDOCKLANDS ReadingReading ARMARM RIVER LEE NAVIGATION NEATH & STROUDWATER Chelmsford Swansea RIVERRIVER AVONAVON SHARPNESS NAVIGATION RIVERRIVER THAMESTHAMES TENNANT DOCKS WindsorWinGdRsAoNrD UNION CANAL CANAL BathBath (COTSWOLD CANALS) Swindon Southend-on-Sea Newport Maidenhead REGENT’S HERTFORD UNION CANAL KENNETKENNET & AVONAVON BasingstokeBasingstoke CANAL MaidstoneMaidstone CANALCANAL RIVER BOW BACK RIVERS THAMES Slough RIVERRIVER WEYWPEAYDDINGTON BRANCH LIMEHOUSE CUT Bristol SLOUGH CARDIFF BASINGSTOKEBASINGSTOKE CCANALANAL GuildfordGuildford LONDON DOCKLANDS Reading ARM RIVERRIVER MEDWAYMEDWAY DoverDover RIVER AVON RIVER THAMES BridgwaterBridgwater Windsor Bath WEYWEY & ARUNARUN CANALCANAL Maidstone TauntonTauntonaunton RIVERRIVER PARRETTPARRETT KENNET & AVON Basingstoke CANAL RIVER WEY BRIDGWATERBRIDGWATER & RyeRye HarbourHarbour BASINGSTOKE CANAL GRANDGRAND WWESTERNESTERN CCANALANAL TAUNTONTAUNTON CANALCANAL SouthamptonSouthampton Guildford RIVER MEDWAY Dover RIVERRIVER ARUNARUN Bridgwater BrightonBrighton BUDEBUDE CANALCANAL PortsmouthPortsmouth WEY & ARUN CANAL Taunton RIVER PARRETT ExeterExeter BournemouthBournemouth BRIDGWATER & Rye Harbour GEXETEREXREATNEDR WSHIPSHEISPT ERN CANAL TAUNTON CANAL Southampton CANALCANAL RIVER ARUN Brighton BUDE CANAL Portsmouth

Exeter Bournemouth TorquayTEoXrEqTuEaRy SHIP CANAL PlymouthPlymouth

Torquay Plymouth Contents

02 About British Waterways 03 Financial Summary 04 Non-Executive Board Members 05 Executive Directors 06 Chairman’s Statement 10 Chief Executive’s Review 11 Developing our Business 22 Maintaining and Caring for the Waterways 24 Safety Management 27 Our Corporate Social Responsibility 32 Meeting Customer Needs 36 People and Business Processes 40 Scotland Director’s Review 46 Financial Review, Scotland 48 Finance Director’s Review 53 Contents of Accounts 96 Addresses and Contents 97 Waterway Map ABOUT BRITISH WATERWAYS

British Waterways is a public corporation, a company owned by the people of this country, on whose behalf we manage and care for more than 2,000 miles of canals and rivers in England, Scotland and Wales.

As well as being governed by the normal Waterways for Tomorrow is the Their strategy to achieve this is based accounting, employment, environmental, Westminster government’s policy statement on four main principles: planning and safety legislation that affects all for inland waterways in England • increasing awareness of canals in any modern organisation, we are specifically and Wales. general and encouraging more private governed by the Transport Acts of 1962 sector investment and 1968 as well as many of the original In summary the policy statement: • encouraging all public bodies canal enabling Acts. • sees the inland waterways as ’an sponsored by the Executive and local important asset for future generations authorities to continue to work Our sponsoring government departments to enjoy’ together and support the sustainable are the Department for Environment, Food • wants to see waterways ’maintained development and regeneration of and Rural Affairs in England and Wales and developed in a sustainable way canals and their surrounding areas and, in Scotland, the Enterprise, Transport so that they fulfil their social, economic • promoting voluntary sector and and Lifelong Learning Department. We and environmental potential’ community involvement in canals, with also liaise closely with the Department for • wants to ensure that ’the many particular regard to their educational Economic Development and Transport benefits and opportunities they provide value and their positive impact on in Wales. A map of our waterway network are used to the full’ quality of life can be found in the inside back cover (Waterways for Tomorrow, p16, • promoting the need for other public of this document. published 2000). policy decisions to take account of the sustainable development and Our relationship with governments It describes British Waterways as: regeneration aims for our canals The Westminster government has set out its objectives for us in the published ‘A public corporation which runs its affairs British Waterways will continue to receive Framework Document for British on a commercial basis consistent with Scottish Executive grant to meet its Waterways (DETR, 1999). Our aims, as its statutory powers and obligations for statutory duties and help progress new explained in the Framework Document, navigation and the environment; and its initiatives, but are encouraged to develop can be summarised as follows: objectives agreed by the government. new and existing earned income streams. • maintain and develop Britain’s inland It is expected to promote the use of waterways in a sustainable manner its waterways for leisure and recreation, In 2003 we produced the consultation so that they fulfil their full economic, tourism, regeneration, and transport document, Waterways for Wales, at the social and environmental potential while also conserving their built and request of the National Assembly for • fulfil statutory navigation functions natural heritage.’ Wales. Waterways for Wales places • conserve waterways heritage and inland waterways in a strategic context environment for the future In 2002 the Scottish Executive published and sets out the positive contribution they • promote and enable rural and Scotland’s Canals – An Asset for the can make to the future of Wales. urban regeneration Future, the first ever policy document for • maintain and enhance leisure, Scotland’s canals. The Scottish Executive We use all of these documents to guide recreation, tourism and educational believes that our canals are an asset that, us in our business planning. opportunities for the general public if used wisely, can enhance the future • facilitate waterway transport quality of life in Scotland. • play a lead role in co-ordinating other UK navigation authorities • act commercially

02 ANNUAL REPORT & ACCOUNTS OVERVIEW 1 FINANCIAL SUMMARY 03 - - 1.1 4.4 3.8 (8.8) 27.9 81.7 82.0 (19.5) 191.6 (211.1) 2002/03 it of, British Waterways. 7. 6 0.3 0.8 (3.4) (1.0) (5.4) (3.8) 88.3 14.3 94.8 2255 2191 197.4 (201.2) ANNUAL REPORT & ACCOUNTS 2003/04 £million Trading Income Restoration and Third Party Funding Government Grant 03/04 02/03 01/02 00/01 99/00 0 Loss for the financial year before taxation for the financial year before Loss Taxation for the financial year after taxationLoss to realised capital reserve profits transferred Property & to Profit transferred Loss reserves Loss (1.8) (1.5) (14.6) (4.9) (10.2) (19.0) Net interest payable Total revenue Total Exceptional costs of business re-organisation Operating loss and joint ventures Share of operating profits and losses of associates on sale of investment properties Profit Total expenditure Total Trading income Trading third party funding & Restoration Government grant Average number of employees Average BW benef Board and those subsidiaries incorporated to act solely on behalf of, and for the comprises the British Waterways Group 50 100 150 200 Consolidated Financial Highlights Total Revenue £m Total Trading income continues to grow. to grow. continues income Trading our of up 45% made it year This proportionlargest ever the total income, income. source of for this BW Group NON-EXECUTIVE BOARD MEMBERS

Dr George Greener Chairman George is also Chairman of The Big Food Group plc, Director of Reckitt Benckiser plc, Director of JP Morgan Fleming American Investment Trust plc, and holder of various other directorships. He is the former Chairman of Allied Dunbar Assurance plc, Eagle Star Holdings plc, Threadneedle Asset Management plc and Swallow Group. He is a former director of BAT Industries plc and former Group Chief Executive Officer of Hillsdown Holdings plc. Age 58. P N S

Sir Peter Soulsby Helen Gordon Vice Chairman Helen is Property Director of Legal and General Life Peter is currently Head of Regions for the British Lung Fund. Prior to that she was Property Director at Foundation. He is the former leader of Leicester City Council. Railtrack. She is an expert in enhancing ‘Brownfield’ He was knighted in 1999 for services to the City of Leicester sites and development of under-utilised resources. and local government. Until April 1998, Peter was chair She was Managing Director of John Laing Property of Leicester’s City Challenge project. He is a former Ventures Ltd and has also advised on many major member of the Audit Commission and of the Government’s regeneration projects. Age 45. P A Beacon Council Advisory Panel. He also Chairs the Remuneration Committee. As a keen user of the inland waterways system, Peter has cruised the network extensively on his own narrowboat. Age 55. R N

Susan Achmatowicz Dr Derek Langslow CBE Susan is a leisure business entrepreneur, who has Derek is a member of the Agriculture and developed her own award-winning cycle tourism business. Environmental Biotechnology Commission, Chairman She has a background in the City of London. She also of the Rail Passenger Committee for Eastern England, acts as adviser, consultant and lecturer on leisure, cycling a trustee of the Heritage Lottery Fund, a non-executive and sustainable tourism issues. Her work in the areas of director of Harwich Haven Authority and is an external rail-cycle integration, e-commerce and sustainable tourism consultant to Defra on Quinquennial Review. has been hailed as UK best practice. Formerly a Vice He is the former Chief Executive of English Nature, President of the Bankers Trust Company, she holds an having set up the organisation following its demerger MBA in Marketing and Finance from the University of from the Nature Conservancy Council. He also Chairs Alberta. She also Chairs the Pensions Committee. Age 49. the Audit Committee. Age 59. A N P A S

Dr Campbell Christie CBE Janet Lewis-Jones Campbell is the former General Secretary of the Janet is a member of the Strategic Rail Authority, Scottish TUC, a board member of Scottish Enterprise a Commissioner for the Postal Services Commission, and Vice Chairman of Forth Valley NHS Board. Vice President of the British Board of Film He is also a director of South West Trains Ltd. Classification, and a trustee of the Institute of Rural and President of the Scottish Civic Forum. He is Health and the Baring Foundation. She speaks Welsh the Chair of the BW Scotland Group and represents and represents Welsh interests on the Board. Age 54. Scottish interests on the Board. Age 66. P R N S R N

Ian Darling Adeeba Malik MBE Ian is a chartered surveyor and former Director Adeeba is Deputy Chief Executive of QED UK (Quest for of Chesterton (Scotland) Property Consultants. Economic Development), a national economic development He is a member of the Lands Tribunal for Scotland charity. She is involved in local, regional and national and a member of the Court of Edinburgh University. committees and boards covering enterprise, health, He also serves on the Council and Scottish Committee learning and education and community development. She is of the RSPB and is a past Chairman of the Royal a board member of Yorkshire Forward, a non-executive Institution of Chartered Surveyors in Scotland. director of NCAA (National Clinical Assessment Authority, He is a regular user of Scotland’s canals and Department of Health) and a member of the National represents Scottish interests on the board. Age 59. Ethnic Business Advisory Forum, DTI. She is also a director R S of Northern Ballet. Age 37. A

Professor George Fleming Terry Tricker George retires as Professor of Civil Engineering Terry is currently Chairman of an Independent Review into at the University of Strathclyde in 2004. a NHS mental health unit in Birmingham. He is a former He is Managing Director of EnviroCentre Chairman of Burton Hospitals NHS Acute Trust, Director of (an environmental consultancy based at the University). Operations and board member of Severn Trent Water Ltd, He is a past President of the Institution of and a non-executive director of the Employment Needs Civil Engineers. He is also Non-Executive Director Training Agency. He is a mentor with ‘Jigsaw’, a young of WRAP (Waste and Resource Action Programme). people’s mentoring organisation, part of the National Age 59. A S Mentoring network, and has worked with disadvantaged children in the UK and Romania. He is a Chartered Chemist and had a long career trying to improve our aqueous environment. He has recently established his own leisure company, Derby Caravan Centre Ltd. Age 60. R

P DIRECTOR OF BRITISH WATERWAYS PENSION TRUSTEES LTD A MEMBER OF THE AUDIT COMMITTEE R MEMBER OF THE REMUNERATION COMMITTEE N MEMBER OF THE NOMINATION COMMITTEE S MEMBER OF THE BRITISH WATERWAYS SCOTLAND GROUP BOARD MEMBERS & 1 EXECUTIVE DIRECTORS 05 05 ANNUAL REPORT & ACCOUNTS BA FCIPD BSc MA Oxon MBA OBE CEng FICE MCIWEM FCCA Mark Smith Financial Director of the Chartered Association of Certified A fellow of his professional Accountants, Mark has spent much career in retailing, and held senior finance and business development positions in Marks and Spencer plc 2001. in March before joining British Waterways Age 45. Stewart Sim Director Technical Stewart was Operations Director until May 2003 when civil engineer by A Director. he became Technical Stewart has worked for British Waterways profession, for 30 years in most areas of the country and has been involved in most parts of the business. Age 58. Nigel Johnson Director Solicitor Legal Nigel was A corporate lawyer for most of his career, Chief Solicitor to Cheltenham & Gloucester plc from He was then Official Solicitor to to 1997. 1987 Commissioners, before joining British the Church Director and Secretary to the as Legal Waterways Board in April 2001. Age 49. Moran Vincent Director Personnel following in 1997 joined British Waterways Vince personnel and general management careers in the public and private sectors. Age 48. Simon Salem Marketing & Communications Director of marketing, PR,Simon has 20 years’ experience corporate affairs and fundraising. Before joining Transport. he worked for London British Waterways in the leisure and He has worked extensively Age 46. tourism industry. where, KPMG KPMG MA BSc FRICS BSc MEng CEng FICE FCA IEng AMIStructE OBE BScMBA CEng FICE MIStructE

Robin Evans Chief Executive in 1999 Waterways Robin joined British became as Commercial Director and 2002. Chief Executive in December as Palaces’ to that he spent four years Prior Director for Historic Royal Palaces Landmark The and was Chief Executive of for eight years. Age 50. Trust

Commercial Director Commercial 1983From to 1999 James was at Managing Director, Southern Waterways Managing Director, in 1996 following John joined British Waterways followed a career in the accountancy profession, by 20 years in general management positions Age 57. within the dairy industry. James Froomberg he headed the firm’s management as a partner, He was then consultancy to the leisure industry. as Director of Corporate plc appointed to Wembley Development, before joining British Waterways 2003. He is also a director of Business in March Age 48.in Sport and Leisure. John Lancaster Derek Cochrane Cochrane Derek Northern Waterways Managing Director, for 25 years Derek has worked for British Waterways to that he worked for commencing in Scotland. Prior a water authority and in private sector consultancy. Age 53. Mark Bensted London Director, Mark has been responsible for the operational, leisure and regeneration activities of property, since 1990. London British Waterways in 1980 to joining British Waterways Prior Mark worked in the construction industry for Stewart. Age 46. and Kyle Woodrow Taylor Jim Stirling Scotland Director, Scotland as Manager, Jim joined British Waterways Scotland in 1997. in 1992 became Director, and Jim spent many years in civil engineering and construction, both in the UKabroad. Age 51. and

DIRECTORS EXECUTIVE CHAIRMAN’S STATEMENT

I want to thank everyone at British Waterways, and our partners, for the progress we have made. We have faced up to significant challenges.

Dr George Greener, Chairman. 2 1. Accumsan et iusto odio dignissim qui epist blandit praesent luptatum zzril delenit augue duis dolore te feugait nulla facilisi. Lorem ipsum dolor sit amet. STATEMENT CHAIRMAN’S 2. Consectetuer amet adipiscing elit, sed diam nonummy nibh euismod tincidunt

Building Blocks for the Future Progress on our Ventures The challenge for British Waterways this Our well established public private year has been to put the building blocks partnerships, ISIS and Watergrid in place to deliver our vision for the Limited, continue to perform well future of the waterways. I want to thank and meet their targets. everyone at British Waterways, and all our partners, for the progress we have made. During 2003/04 we set about establishing We have faced up to significant challenges. two wholly owned subsidiaries. The first, Waterscape.com was launched in July In May 2003 we began the process of 2003, in partnership with the Environment restructuring our business to allow us to Agency. It is a leisure-based e-business deliver our new strategy more effectively built around a website. It promotes a varied and consistently. Thanks to the hard work range of inland waterway activities to a of our people we were able to put the wide range of people, and I am pleased new structure in place from 1 September to report that in its first nine months 2003 – a considerable achievement. of trading it had more than 400,000 visitors. British Waterways Marinas Ltd A review of our business plans under the was also created and will allow us to new structure, along with a late and operate our marinas more effectively as unplanned cut in government grant for well as secure transparency of operation 2004/05, accelerated our decision to in a competitive market. reduce our fixed cost base. Subsequently, in March 2004 we announced a This year we also launched two new programme of some 140 redundancies. ventures for which we are seeking partnership. Once formed, our Waterside It is a great tribute to the people in Pubs Partnership and our London property British Waterways that we finished the development, Wood Wharf, will bring year very close to our original plan. in significant future revenue as well Our total income grew by 3% during as aid our wider remit for sustainable the year to £197.4 million. However we development. We hope to secure did record an overall loss of £4.9 million, partnership for both of these ventures which was planned for and relates by the end of 2004/05. to spending one-off funds now, that were received and accounted for in previous years.

ANNUAL REPORT & ACCOUNTS 07 In 2003/04 we successfully completed consultation on proposals to improve openness and accountability and are now implementing improvements.

Early Completion of the Safety- Grant – Past and Future Related Backlog of Maintenance This year we received our grant We are headed by a Board, which With the help of both the Westminster commitments from the Westminster collectively has contributed much to and Scottish governments, in the form of government and Scottish Executive, our success. I take this opportunity additional grant, we were able to eliminate and we take great heart from their to thank all our Board Members for our backlog of safety-related maintenance general support, help and enthusiasm. their work this year. eight months earlier than our published Governments are making planned promise. I thank them for their valuable investments now to reduce the burden Your Board has adopted as far as it can contributions. This has been a great on the taxpayer later, while enabling the provision of the 2003 revision to the accomplishment, as only seven years ago British Waterways to implement their Combined Code on Corporate Governance, policies and achieve the vision for the this work was valued at £93.8 million. although it is not required to do so until Praise must be given to our people, and waterways. Whilst next year we will the next financial year. The provisions have our omnibus contractors AWG, Dew, have to manage the consequences been adopted as if British Waterways was Galliford Try and Nuttalls, who worked of a rather sudden and unplanned cut a quoted plc, with necessary adaptations so hard to make this happen. During in grant from Westminster, our plans to reflect our status as a public the year we also spent an additional assume that grants levels will be corporation. Further details are given in £21 million to reduce our backlog of restored in future years. statutory arrears, which is now valued the statement on Corporate Governance at £158 million. We plan to eliminate the Openness and Accountability on page 58. arrears by 2012 provided government We interact with a very wide range grant and commercial income is received of people and have very active and This year your Board also started to as planned, in future years. representative user groups. These publish its Board Minutes on our website groups continue to play an important as part of our drive for openness and Employee Safety role and I value their input. In 2003/04 accountability. Safety must continue to be our top priority. we successfully completed consultation Having been dissatisfied with our on proposals to improve openness and We have achieved much this year and I am occupational safety record following an accountability. Some of the items more confident than ever that the inland internal review, new safety procedures proposed are already in place, including waterways will become an increasingly have now been implemented. Our aim is a new internal complaints procedure. valued national asset, used by many more that these procedures, along with a high In 2004/05 we will set up a new National people. We are guided by strong values, profile awareness campaign, and training, Consultative Council that is representative we have the necessary plans in place, and will enable us achieve our target of being of all significant groups and bodies that most of all we have, through our people, in the upper quartile of comparable have an interest in the waterways. This the determination to succeed. companies for safety in the workplace. will incorporate our established and well attended national user group meetings. It will also include arrangements for members to have improved direct access to our Board and senior management.

George Greener Chairman

08 ANNUAL REPORT & ACCOUNTS CHAIRMAN’S 2 STATEMENT Visitors outside Hatton Locks Café on the Grand Union Canal. outside Hatton Locks Visitors CHIEF EXECUTIVE’S REVIEW

This year has been about putting the right structure, systems and cost base in place so that we can deliver our vision.

Robin Evans, Chief Executive. CHIEF EXECUTIVE’S REVIEW 3 DEVELOPING OUR BUSINESS 48% 45% 11 03/04 7.0% 02/03 01/02 00/01 ANNUAL REPORT & ACCOUNTS Government Grant Trading Income Restoration and Third Party Funding 99/00 48% 45% 7% 0 50 100 150 Split of Revenue 2003/04 Total Revenue £m Total 200 Making effective use of our assets, just Making effective as the original canal companies did, continues to generate significant income and ensure that waterways are here for waterway use our the long-term. We assets to earn income in ways that are relevant for the 21st century and in ways wider public benefit. that create much commercial earn income through our We businesses, government grant, and restoration and third party funding. In 2003/04 our total income was up 3% million. Our trading income to £197.4 grew by 8.1% to £88.3 million, our government grant increased by 15.6% to £94.8 million while our restoration by 48.4%and third party funding fell to £14.3 million. Developing Our Business we published a new vision for Our Plan for the Future

We are committed to creating a sustainable We future for the waterways and 2003/04 has been about making our new structure and systems work for us and continuing our to deliver our plan to achieve long-term vision. It has been a tough year. As with any It has been a tough year. all our work lives have been big change, disrupted. I want to thank everyone in for being prepared to British Waterways face up to the difficult issues and find solutions to move us forward. This year has been aboutThis putting the right structure, systems and cost base in place so that we can deliver our vision. has meant reducing the number That of people we employ as well as many other changes. Last year in 2003-2007 as one said that it will be regarded We of the nation’s most important and valued national assets, and that visitors will be delighted with the quality of the experience and as a consequence many will become active participants. British Waterways. We said that by 2012 We British Waterways. vibrant, we will have created an expanded, largely self-sufficient waterway network used by twice as many people as in 2002. DEVELOPING OUR BUSINESS OUR DEVELOPING In January 2004 we supported boating business on inland waterways by sponsoring the Waterscape.com Inland Waterways Attraction at the Schroders London International Boat Show. Over a quarter of visitors stated that one of their main objectives for attending the show was because of the Inland Waterways Attraction.

Waterscape.com terminals at the Schroders London International Boat Show. CHIEF EXECUTIVE’S REVIEW 13 TRADING INCOME 901 148 441 340 313 128 7, 8 9 2 1,341 1,193 2,242 3,552 3,865 26,426 19,979 23,844 23,403 19,851 13 99 44* 426 982 303 445 401 1,100 3,630 2,082 2,082 1,001 3,586 1,656 20,225 23,410 19,824 23,855 All Waterways Canals & Rivers Rivers 2003/04 2002/03 – – – 03/04 02/03 01/02 ANNUAL REPORT & ACCOUNTS 00/01 Other business craft Powered Unpowered Boats Private Pleasure Unpowered Hire craft – rivers only Hire craft – all waterways Private Pleasure Boats Private Pleasure Powered Unpowered TOTAL TOTAL TOTAL TOTAL TOTAL Licences Long-Term Total 26,240 Mooring permits issued 7,269 business craft Total Licences and Moorings in England & Wales (See Boats and Boating commentary on page 14) TOTAL Boats Private Pleasure Powered Houseboats Business Craft Hire craft – canals 2005/06From onwards, we will re-categorise business craft figures as follows: business craft Leisure plates, freight Trade and workboats licence for portable, unpowered craft that applies to canals and rivers alike. *In April 2003 we introduced a single, low cost 99/00 5 0 15 10 25 20 Leisure Income £m £m Income Leisure 03/04 02/03 01/02 00/01 99/00 0 10 20 70 60 50 40 30 90 80 Waterscape.com On 30 our 2003 we launched June consumer leisure website, Waterscape.com, a comprehensive range of offers which waterway-related information, goods and services. 400,000 people visited the site in its first nine months and it is fast becoming the main vehicle for our consumer communications. It generates income through advertising sales and e-commerce and currently has 50,000 products for sale on the site including boating cottages and hotels. holidays, It plans to increase the product range in the future. In the nine months of trading during the financial year, in achieving succeeded Waterscape.com its business plan targets. Pub Partnership Waterside In 2004/05 we plan to form a partnership with the private sector to develop and operate a network of high quality waterside past year we have identified pubs. This 60 sites from our waterside property into the portfolio that will be offered the stage partnership and have reached of shortlisting three potential partners. Our aim is to finalise this by the end of is Partnership Pub Waterside 2004. The to invest aboutexpected £50 million over years to create distinctive the first few high quality pubs. Trading Income £m Income Trading 10 0 Increasing Visitor Numbers Visitor Increasing & Customer Satisfaction In 2003/04 we progressed our plans to double the number of visitors to our waterways by 2012 from 2002 figures. a consumer leisure website, launched We developed the Waterscape.com, groundwork for a nationwide pub venture, identified further potential visitor destination sites for development and introduced service managers to improve customer service. Leisure Our leisure income is earned from boat moorings, visitor centres licences, and outlets, angling and for the first time internet marketing and sales 2004 our In from Waterscape.com. leisure income increased by 12.6% to £20.4 million. Trading income, which comes from income, which Trading wayleaves water sales, leisure, property, and premiums and freight, continues a healthy growth. In 2003/04 it grew by 8.1% to a record £88.3 million, and this was mainly due to an increase in property and wayleaves and premiums revenues. Trading Income Trading In January 2004 we separated out our marina businesses in preparation to set up a wholly owned subsidiary company, British Waterways Marinas Ltd (BWM Ltd).

Capital Value of Investment Visitor Centres and Sites Evasion Property £m Our largest visitor centre at The Falkirk In 2003/04 the number of people keep- Wheel had another strong year with ing a boat without a licence and/or

450 around 380,000 visitors. It is benefiting mooring permit on our waterways from its enlarged building and has one increased, which meant that our income 400 new trip boat, with another to follow soon, in this area was less than it should have 350 to expand its capacity for the coming year. been. We are actively addressing this 300 Our visitor centre at the Anderton Boat problem and devising new strategies 250 Lift continues to deliver over 100,000 to tackle evasion, including using our 200 visitors each year, however both Anderton new computer technology and improved 150 and the Standedge Tunnel Visitor mobile IT equipment. Experience have both undergone strategic 100 reviews during the year to identify ways British Waterways Marinas Ltd 50 to improve their financial performance. (BWM Ltd) 0 99/00 00/01 01/02 02/03 03/04 In January 2004 we separated out our Boats and Boating marina businesses in preparation to set Navigation is, and always will be, at up a wholly owned subsidiary company, Investment Property the core of what we do. We have over British Waterways Marinas Ltd (BWM Rental Income £m 26,000 boats licensed on our waterways. Ltd). The relationship between British In 2003/04 our income from craft Waterways and BWM Ltd will be licences and moorings increased by 2.5% governed by the terms of a protocol, on 25 to £14.6 million and represented 7.4% which we consulted with the industry of our total income. In 2003 we asked during 2003. This transfer and the protocol 20 the independent economic consultants, are to ensure that our marina businesses OXERA, to review our licence indexing cannot be judged to enjoy any unfair 15 process. Using information in their report competitive advantage by virtue of their we now have a cost-reflective index ownership by British Waterways. We will 10 endorsed by user groups. We will use this lease properties to BWM Ltd under our index to determine licence prices in the standard commercial terms and will 5 future. Using the index resulted in our have service level agreements where licence fees increasing by 2.5 per cent necessary. We have so far placed ten 0 in April 2004. of our marinas into it. 99/00 00/01 01/02 02/03 03/04 We set market-led prices for our moorings In 2003/04 investment property which ensures transparency of prices, capital value and income includes leisure reflected in open market rates. We publish properties previously classified as operational assets. all our moorings prices on Waterscape.com and we encourage private sector operators to do the same. In April 2004 we increased the price of our moorings by an average of 4%. Following consultation, we also published our ‘Mooring Guidance for Continuous Cruisers’ this year that defines what is, and is not, continuous cruising.

14 ANNUAL REPORT & ACCOUNTS 3 Wood Wharf, our 20-acre site in the north east corner of the Isle of Dogs, just east of Canary Wharf, London, was PROPERTY & LEISURE CHIEF

acquired in 2001. It is our single most valuable property REVIEW EXECUTIVE’S development asset, and we have produced a masterplan, with the London Borough of Tower Hamlets, for creating a waterside mixed-use development in partnership.

Computer generated image of Wood Wharf, London Docklands.

Property and Regeneration Property Development The property and land surrounding our We undertake the vast majority of our Our £60 million joint venture, Edinburgh inland waterways are an important part of property development activity through joint Quay, which will provide 11,000 sq maintaining an attractive and vibrant network, ventures or other similar partnerships with metres of office space, 3145 sq metres they offer opportunities for us to participate private sector developers. ISIS Waterside of leisure space, and 62 residential in urban and rural regeneration projects Regeneration is our national development apartments, is due for completion in and provide a crucial income source. partnership, but we also participate in summer 2004. It will provide the only Last year we earned £24 million from a number of single site partnerships. Grade A office accommodation available these properties, an increase of 4% in the city at present and has already from the previous year. The main reasons ISIS pre-let space. for growth this past year are our successful ISIS, our partnership with AMEC programme of property disposals and Developments and Igloo Regeneration In London H20 Urban Ltd, with bloc, will re-investment, our regular rent reviews Fund, managed by Morley Fund develop a number of smaller waterside and the investment into property of the Management, now has a total of eleven sites. We are also in the planning stages bulk of the £32.5 million dowry received sites, having added our Leeds Canal of a major £100 million development of from English Partnerships when we took Basin site to its portfolio this year. During City Road Basin, our joint venture with over the ownership of Liverpool Docks the year we invested £3.1 million of Miller Developments and we have during the year. equity into ISIS for this site purchase and installed the first business barges at working capital, and received £0.2 million Paddington Basin with Chelsfield. At 31 March the value of our investment as our share of the proceeds from property estate, based on a professional ISIS’ sale of its site in Walsall. In line with We plan to establish other development valuation carried out by Gerald Eve, was our expectations ISIS progressed its partnerships, the most significant being £419.3 million (2003: £317.6 million). development plans for several of its sites Wood Wharf, London Docklands. This Detailed comments on this 32% increase during 2003, and anticipates submitting development opportunity was marketed can be found in the Finance Director’s planning applications for them in 2004. to potential partners in February 2004 Review on pages 49 to 50. through the Official Journal of the Other Partnerships European Union, with PR and advertising We have key property development support. We anticipate that the partnership partnerships in Edinburgh and London. will be awarded in December 2004.

ANNUAL REPORT & ACCOUNTS 15 Water Sales Income £m Wayleaves and Premiums Income £m Freight Tolls and Dues Income £m

6 35 1.4

30 1.2 5

25 1.0 4 20 0.8 3 15 0.6 2 10 0.4

1 5 0.2

0 0 0 99/00 00/01 01/02 02/03 03/04 99/00 00/01 01/02 02/03 03/04 99/00 00/01 01/02 02/03 03/04

Water Sales We continue to sell water, as canal In the last year we earned £28.6 million In the past year we earned £0.74 million companies have been doing for the past (2002/03: £26.7 million) from these from freight, up 5.7% from last year, 200 years. We currently sell over 700 activities, an increase of 7.1% from removing the equivalent of around megalitres of water a day to over 400 past year. The growth this year includes 64,000 (25 tonne) lorry loads from our customers including water companies, one-off arrears payments from some of roads. Our new London freight contract agriculture and industry. In 2000 we the utility companies. with Hanson Aggregates, has been received additional income from Bristol transporting sand and gravel on the Water to install new pumps and improve In the last year we have begun negotiations Grand Union Canal since July 2003 the canal in the Gloucester area, to provide with the water companies over their and steel movements on the Sheffield greater security of supply of water to discharges of water into our canals. This & South Yorkshire Navigation have them. This income was phased over a followed a Court of Appeal judgement also increased. four-year period, with less of it received in in our favour in 2002. These negotiations the latter years. This has led to a reduction are ongoing, however some arrears The Maritime and Coastguard Agency of 1.1% in our water sales income to payments have already been made has accepted our standards, and those £3.7 million in 2003/04. by water companies. of the Port of London Authority, as the basis of a new regime for existing Watergrid Ltd In 2003 we terminated the agreement vessels from April 2005, and they will Our Public Private Partnership, Watergrid with our mobile phone mast partner introduce competency assessments for Ltd, was established in 2002 with Ultramast, and are now working to exploit freight carrier skippers in 2005. Anglian Water Limited, Bristol Water this opportunity with a consortium of Holdings and Partnerships UK. New Edge Telecommunications, Taylor Our long-term strategic objective remains Watergrid Ltd is actively seeking to Woodrow and Grimleys. to double the volume of freight carried on provide sustainable water services our waterways by 2010. In 2003 we to new customers in the industrial and Freight prepared a Freight Marketing Strategy property development markets. This is Canals were originally built for the focusing on the markets for the carriage a long-term prospect for us and during transportation of goods and we have been of waste, aggregates and containers. 2003 it entered into serious discussions putting plans in place to increase our We are encouraged by the interest and with a number of major potential activity in this area in support of enthusiasm being shown by industry for customers who are expected to sign government transport and environmental waterbourne freight transport and we by the end of 2004. policy, where it is feasible to do so. expect to welcome some significant new contracts onto our waterways over the Wayleaves & next two years. Premiums The towpaths adjacent to our waterways carry a significant number of utility services including electricity and telecoms cables, water and gas pipelines and private services. We seek to ensure that companies, and in some cases individuals, pay a fair rate for this benefit.

16 ANNUAL REPORT & ACCOUNTS 3 We have set up a new partnership to exploit WATER, WAYLEAVES & FREIGHT REVIEW EXECUTIVE’S CHIEF opportunities for providing sites to the telecoms industry for mobile phone masts, for which we will gain long-term rental income.

Business utilities manager, Richard Mercer at Little Venice, London, where telecoms cables run underneath the towpath to form part of a national network. Our document Waterways 2025, published in June 2004, contains our plans for the future shape of the waterways network.

Restoration & Third Party Funding £m Restoration & Third Party Funding Priority One 70 We receive funds for enhancements • Ashby Canal (to Measham) 60 to the existing waterway network, for • Bedford & Milton Keynes Waterway* the restoration of derelict waterways • Bow Back Rivers 50 and for building new waterways from • Cotswold Canals (Phase One) 40 many partners including European • Droitwich Canals bodies, the Heritage Lottery Fund, • Fens Waterways Link 30 Regional Development Agencies and • Liverpool Link 20 local authorities. • Manchester, Bolton & Bury Canal • Montgomery Canal 10 Our income fluctuates considerably in line • Northern Reaches, Lancaster Canal 0 with project activity and in 2003/04 it • River Carron Navigation 99/00 00/01 01/02 02/03 03/04 decreased by 48.7% to £14.3 million. This reduction is due to the completion *At the time of writing, it is proving difficult to achieve the necessary levels of funding of the physical build of our Tranche One needed for the construction of the Bedford restoration projects, and slower progression & Milton Keynes Waterway. We are committed to supporting this project, and it will therefore of our current restoration projects remain a Priority One project. We will endeavour because of the increased competition for to ensure the line of the canal is safeguarded by planners in the hope that funding can be generated. securing increasingly scarce funds from the Lottery and European bodies.

Progress on Restoration Projects In June 2004 we published our future plans for restoration in our document Waterways 2025. We have prioritised our restoration projects, and our Priority One projects, (ie those that we believe are most likely to be feasible in the next ten years) are above right. In the past year we have been working hard to secure funding for our Priority One projects. We recognise that over such long timescales circumstances may change and some Priority One projects may fail to achieve key objectives, whilst other projects become more feasible. We keep progress under regular review.

18 ANNUAL REPORT & ACCOUNTS 3 ETRTO HR PARTY THIRD RESTORATION & REVIEW EXECUTIVE’S CHIEF

Anderton Boat Lift has proved popular since its restoration in 2001. This past year over 100,000 people visited it. We now own eleven docks in Liverpool, including the famous Albert Dock and look forward to progressing our plans to build a new 0.7-mile canal to link them to our network.

We are progressing Cotswold Canals’ Restoration Liverpool Link and Docks This year we led a Heritage Lottery Fund In July 2003 we took on the ownership well with all our (HLF) bid on behalf of the Cotswold and operation of Liverpool South Docks Canals Partnership and in February, from English Partnerships, along with projects, and here as a result of the current climate of a dowry of £32.5 million to fund their highlight the progress fierce competition for funds, the HLF long-term maintenance. Consequently decided to defer their decision until July. we now have an additional 11 docks, we have made with They asked us to reduce our £22 million and 75 acres of waterspace, including the Cotswold Canals bid by around half and in April 2004 we the famous Albert Dock and two submitted a revised bid for a reduced docks across the River Mersey in and Droitwich Canals scheme. We are hopeful that the new Birkenhead, Wirral. bid will be successful and are looking restorations, and the for match funding from the South West In February 2004 we submitted a planning proposed new Regional Development Agency, Stroud application for our proposal to build a District Council, Gloucester County new 0.7-mile long canal link between the Liverpool Link. Council, the private sector, Landfill Tax end of the Leeds & Liverpool Canal in Credits and through fundraising by the the Central Docks to the South Docks Cotswold Canals Trust and The Waterways in Liverpool. We believe this proposal, Trust. The project benefits from tremendous which will connect the South Docks to local support and if funded will provide an the rest of the waterway network, is a additional 1,200 jobs, 205 new housing vital component in the long-term success units, new wildlife habitats, 200,000 of the South Docks. We are working in towpath visits each year and over partnership with the key waterfront £0.5 million of additional tourism and stakeholders to ensure that the canal link leisure spend. respects the Pier Head, integrates and adds value to the proposed ‘Fourth Grace’ Droitwich Canals’ Restoration development, tram link and new ferry and In March 2003 the Heritage Lottery Fund cruise liner terminal facilities. and Advantage West Midlands gave provisional support of £7.3 million towards the restoration of the Droitwich Canals, in addition to the £1 million pledged by Worcestershire County Council and Wychavon District Council. It is anticipated that once complete the restoration will bring an additional £2.75 million of income to the region, generate over100 new jobs and attract 330,000 visitors within the first five years. The physical work is expected to commence in autumn 2004, with completion at the end of 2008.

20 ANNUAL REPORT & ACCOUNTS CHIEF EXECUTIVE’S REVIEW 3 RESTORATION s Bridge on the Thames & Severn Canal, s Bridge on the Thames ’ We are eagerly awaiting the outcome of our of outcome the awaiting are eagerly We the of One Phase bid for Fund Lottery Heritage and expect Cotswold Canals of the restoration a 2004. end of July at the decision part of the Cotswold Canals. Stanton MAINTAINING AND CARING FOR THE WATERWAYS

The provision of planned grant funding from both governments together with additional grant from the Scottish Executive enabled us to eliminate our backlog of safety-related maintenance eight months earlier than our published promise.

Government Grant Expenditure Asset Management We receive an annual grant from the Our total expenditure this past year Westminster and Scottish governments. was down by 4.7% to £201.2 million and Waterway In 2003/04 the amount of grant accrued (2002/03: £211.1 million). This was Maintenance in our accounts was £94.8 million in total, mainly due to our decreased spend We aim to look after and operate our up 15.6% from last year. on major repairs and renovations, assets efficiently and effectively so which fell by 21.5% to £65.6 million, that our waterways and the structures The increase in total grant reflects a reflecting the reduction in our work surrounding them are safe and well temporary and specific programme to on restoration projects. maintained. In recent years we have made invest in water control facilities and to substantial progress in reducing a £300 reduce the backlog of safety-related Other operating costs, including expenditure million backlog of maintenance arrears maintenance, including one-off funds from on our general maintenance programme, (£93.8 million of which was safety-related) the Scottish Executive for specific were up 4.6% to £69 million. This that had built up following years of works in Scotland. includes an additional £5 million for underfunding and had left the waterways customer facilities, as well as start up with serious structural engineering We are grateful for these additional grant fees for our new ventures programmes. problems in the 1990s. To help with this payments; they reflect the importance Staff costs rose by 6.1% to £60.7 million. process we split the arrears into those the governments place on our work. that were safety-related and those that However, in 2004/05 the Westminster were statutory. government has belatedly been unable to meet fully its commitments to us with a As a result of a tremendous effort from late announcement of a £2.5 million cut our people and our contractors we in our grant. completed the safety-related part of this backlog of maintenance in April 2004, eight months earlier than our original published promise. Though a significant milestone has now been reached, we must report that we still have a long way to go to eliminate our £158 million of statutory arrears of maintenance.

22 ANNUAL REPORT & ACCOUNTS CHIEF EXECUTIVE’S REVIEW

3 MAINTAINING OUR WATERWAYS 12/13 11/12 10/11 23 09/10 03/04 03/04 08/09 02/03 02/03 07/08 06/07 01/02 01/02 05/06 00/01 00/01 04/05 ANNUAL REPORT & ACCOUNTS 03/04 99/00 99/00 0 0 50 10 20 70 60 50 40 30 90 80 Expenditure £m Expenditure Government Grant £m 02/03 100 150 Backlog of Statutory Backlog Arrears of Maintenance £m 200 250 100 0 50 200 150 100 included a local included ) Water Management Water is one of our most precious Water resources and we work hard to manage our water supplies. It is a credit to our people that we kept our waterways open throughout the 2003 summer boating season despite record-breaking temperatures and low rainfall, combined with a 6% increase in nearest comparison of usage. The lock these weather conditions was in 1995, when a number of waterways were only had one restricted and closed. We usage restriction, and this was on lock on the Macclesfield Canal for a week Over the winter at the end of October. we closely monitored the refill of our reservoirs and anticipated and acted on us in 2004. shortfalls that could affect year we completed the £6.7 million This investment in Supervisory Control and to constantly Data Acquisition (SCADA) monitor and control our water levels and will continue flows across the network. We also delivered We to invest in SCADA. the world’s first water resource model of will underpin all the canal system, which our strategic and operational planning of water resources. Last year we successfully completed water management plans plans waterway unit. These for each provide the strategic framework for all our water management actions eg flood Along management and hydrometry. with this we continued to invest in back pumping systems. WOW ( future grant and our own earnings The backlog of maintenance arrears backlog The came about because waterways were underfunded for many decades, we want to make sure that this never occurs again. invest heavily in maintenance work We year and in 2003/04 we spent over each million on operating and maintaining £70 spend on our our network, excluding and statutory backlog safety-related arrears. A list of our completed waterway improvements can be found on page 33. Preventative Maintenance develop as we have planned, and so long venturesour as in water and property proceed as planned, we will eliminate of statutory arrears by the the backlog end of 2012. We spent £21 million reducing our statutory spent £21 million reducing We and our arrears of maintenance this year, help aim is to eliminate it by 2012. To with this process we have divided our outstanding statutory arrears into high and low risk categories by looking at what the consequence would be if the assets our high have prioritised failed. We consequence of failure assets and have plans accordingly. revised our expenditure graph (below right) shows that, The provided community and schools event in Gloucester, event in and schools community the fun. joined in the Minister where Waterways Minister, Rt Hon Alun Michael MP, Michael Hon Alun Rt Minister, Waterways initiative education Our events. our attends often Waterways Over Wild SAFETY MANAGEMENT

We have embarked on an occupational safety transformation programme to bring about improvements in safety. In the past year our reportable incidents have been reduced by 8%.

Roy Whitbread, waterway operative, working at Harlow Mill on the River Stort Navigation. CHIEF EXECUTIVE’S REVIEW 3 SAFETY MANAGEMENT 25 ANNUAL REPORT & ACCOUNTS We have a target to reduce reportable have a target to reduce We help To incidents by 20% year on year. of our people with this in 2003, 670 training and undertook behavioural safety over 130 had additional training to act as facilitators in the workplace. Our reportable incidents were reduced by 8% in 2003/04 compared with 2002/03. Around 350 people have also completed and been assessed on other safety frequency of site programmes. The reviews has increased significantly safety over the last six months. Overall, 27 were sites were inspected, nine of which quality managed by our contractors. The had improved, sites of British Waterways’ with a 10% increase in sites that were satisfactory and a 30% reduction in sites that were unacceptable. audits to will have regular external We monitor improvements against well-defined work in performance indicators. We partnership with the trade unions to make continuous improvements to employee and in selecting our contractors we safety make sure we take account of their proven performance. safety Occupational Safety A review of our occupational safety performance established that there was scope for improvement when compared with the best in equivalent industries. To for measuring our give a clear benchmark performance, we are now using the Benchmark Construction Industry Safety Data, produced annually by the Department Our accident record put & Industry. of Trade us in the second quartile of this benchmark the upper quartile and our target is to reach major contractors within three years. The with whom we currently partner are already at this high level of performance. bring about improvements in safety, To we have embarked on a safety has transformation programme. This clearer Health already resulted in a much Statement defining Policy and Safety and our account- our commitment to safety performance. ability for delivering safety full policy statement is available on The britishwaterways.co.uk/safetypolicy. Safety remains top of our agenda. Safety In 2003/04 we undertook a special do so To review of occupational safety. we recruited an interim manager with over 30 of managing years experience in high-risk industries. safety We promote safety for boats and their installations through the Boat Safety Scheme, a joint initiative with the Environment Agency. The Scheme was adopted by the Association of Inland Navigation Authorities in October 2003.

Customer Safety Boat Safety Scheme Our strategy for ensuring acceptable Protecting waterway users, visitors, levels of safety amongst waterway users neighbours and employees is also is based on hazard identification and risk achieved through another joint British management, especially the promotion Waterways and Environment Agency of awareness through education. initiative, the Boat Safety Scheme (BSS). Set up to promote safety in regard of We have produced a set of waterway boats and their installations, the codes that provide advice and guidance Scheme has been the subject of further to visitors on how to enjoy the waterways developments this year. safely and sustainably. The codes complement our Boater’s Handbook In October 2003, the Association of and Wild Over Waterways (see page 30) Inland Navigation Authorities formally waterside safety resource for teachers. adopted the Scheme and in January We also produced a video version of the 2004 the Scheme held its first ever Boater’s Handbook, working with the open meeting, successfully attracting Environment Agency and the Royal over 100 people. Yachting Association, and it is being distributed through hire boat bases, time- Representatives of the boating share companies and boat brokerages. organisations, marine trade and navigation authorities on various BSS committees We have been working with a number of have been involved in drafting modernised agencies and landowners, including the requirements for an open consultation Forestry Commission, National Trust, which will be launched in July 2004. English Heritage, Countryside Agency, A further shift away from prescriptive Environment Agency, RSPB, and regulation is proposed, with owners, Worcestershire County Council to develop supported by guidance from the national standards for visitor safety in Scheme, taking on more responsibility the countryside and publish a helpful for their own safety. The consultation document, ‘Managing Visitor Safety in is also supported by enhancements to the Countryside’. openness and accountability, facilitated by a recent refurbishment of the BSS website, boatsafetyscheme.com. Campaigning on hazard awareness and risk management stepped up a gear with the Scheme having its own stand at the Schroders London International Boat Show.

26 ANNUAL REPORT & ACCOUNTS 3

OUR CORPORATE SOCIAL RESPONSIBILITY RESPONSIBILITY SOCIAL CHIEF

Providing social, economic and environment & heritage REVIEW EXECUTIVE’S benefits is an essential outcome of our work.

In 2003 we analysed our five business areas and the way Our Plan for the Future 2003-2007. We have assessed our in which they interact with these sustainability themes. progress in each area and list the outcomes below. Our We developed lead indicators so that our progress can future indicators are outlined in the document Our Plan for be measured in the future and first published them in the Future 2004-2008.

Business Areas Sustainable Development Indicators 2003 /04 Economic All The income we generate for reinvestment in the Independent economists confirmed waterways is a proper measure of economic benefit, that BW’s activities create non-market as all the income we earn is spent on the waterways. of benefits the order of £300 million See pages 10-21 per annum predominately through visitors to the canal who do not pay for the facilities Social Leisure Number of Visitors An average 3.2 million adult visitors over a two week period* ‘Excellent’ visitor satisfaction levels 9% Boat Owners** 42% Towpath users*** Property Total affordable housing units planned 710 Core Waterway Improved appreciation through 64**** changed attitudes Restoration Miles of newly accessible waterways corridor 25.3 new miles accessible Ventures (eg ISIS, Hits on the Waterscape.com website 2.8 million hits Watergrid, Waterscape.com) Environment and Heritage Leisure Number of interpretation schemes completed 13 Property Reducing number of our buildings on the English 4.5% (118) of our Heritage and Local Authority ‘at risk’ registers buildings on registers Core Waterway Reduced CO2 emissions from employee 8,900 business miles vehicles by reducing business mileage per company car***** Restoration Miles of historic waterways restored 4 miles Ventures (eg ISIS, % of ISIS projects meeting 100% Watergrid, Waterscape.com) sustainable development criteria

* In Aug 03 we commissioned a new long-term survey to get a clear idea of the number and type of waterway visits. Data so far suggests that there are an estimated average of 3.2 million adults visiting our waterways over a two week period, generating around 400 million visits over the whole year. Page 32 contains a breakdown of the visit type. ** 68% rate them as good or excellent. *** 91% rate them as good or excellent. **** We have a telephone tracking survey which traces movements in public perception of the value of canals and rivers compared with other nationally important assets. Currently, the seaside is rated at the top of the scale at 100, followed by parks & gardens at 90, woods & forests at 86, historic houses, castles & other monuments at 78, zoos, wildlife parks and farms also at 78 and museums & galleries at 73. Valued at 64, canals & rivers are starting at the bottom of the list of those surveyed. Our vision is that by 2012 inland waterways will be regarded as one of the nation’s most important and valued national assets, so we know we have some way to go! *****Based on our mileage per company car. On average in Britain a company car does 8,600 miles per annum. Source: Department for Transport 2002. In 2003/04 we introduced video and phone conferencing to reduce this in the future.

ANNUAL REPORT & ACCOUNTS 27 SOCIAL

Our waterways run through areas of real social deprivation as well as areas of some wealth. Being responsive to local community needs and aspirations is one of our most important values and we often work on projects in partnership with local voluntary and charitable bodies to achieve common goals.

Better Access at Little Venice Better Access in Nottingham In Our Plan for the Future 2003-2007 In West London we’ve begun our second We have improved the towpath through we said we would prioritise our plans and phase of access and environmental the centre of Nottingham working with focus predominately on providing access improvements at Little Venice. A ramp has the City Council. Ramps have been for all, community relations and education. been installed, the towpath resurfaced installed so that wheelchair users now and a subtle lighting scheme completed. have access to the towpath. Also near New signage will be also be installed, Nottingham, at Gamston, the £50,000 Access for All as will new dog waste bins, and an Grantham Canal Waterway Access for We want to encourage more people from anti-graffiti drive is in place between All initiative developed a fully accessible ethnic and disadvantaged groups to visit Little Venice and Camden. 2 circular walk around a section of the our waterways. We also want to make sure Grantham Canal. The footbridge now they are accessible for as many people as Tame Valley Doorstep Greens has a non-slip timber decking and a ramp, possible, and will try to accommodate Working with Groundwork Black Country, there is extended access to the towpath, access for wheelchairs and pushchairs, the Tame Valley Doorstep Greens project new seating, and the towpath has been the visually impaired and hard of hearing. has set-up a community group. ‘The reconstructed and resurfaced and now We are involved in many projects, a few Friends of Tame Valley’ partnered us when runs at a lower gradient. 4 of which are listed here. we applied for a Countryside Agency ’Doorstep Greens’ grant to improve two Community Relations Stoke Bruerne Audio Trail green spaces adjacent to the Tame Valley We have many locally-based partnership In partnership with The Waterways Trust Canal. The project included creating new officers, patrol staff and customer we launched an audio trail at the Canal steps and access onto the canal as well as service people who work with the local Museum in Stoke Bruerne in September new paths, seating and art features. 3 community to help them meet their 2003. All elements of the trail have aspirations. We have listed here just a been designed with the aim of making few of the worthwhile projects we have interpretation accessible to a wider been involved in over the past year. audience. Along with the Fieldfare Trust, we organised a visit by visually impaired Rugby Reparation Project adults in January this year to test the trail In 2003 a group of young offenders were and tell us how to improve it. 1 joined by a local scout group to revamp a heavily graffitied canal bridge in Rugby. The project was carried out in partnership with Rugby Borough Council, Warwickshire Police, Barnardo’s children’s charity, the Youth Offenders Team and Warwickshire Probation Service. The project was so successful that the scheme is planned to continue elsewhere in Rugby. 5

28 ANNUAL REPORT & ACCOUNTS 1 2 3 3 OILRESPONSIBILITY SOCIAL REVIEW EXECUTIVE’S CHIEF

4 5

6 7 8

Past Masters Project Nature Reserve at Fradley Limehouse Cut Regeneration The £1.2 million ‘Past Masters’ Heritage We have created a new nature reserve Programme Lottery funded project to restore three at Fradley Junction, with the help of local The Limehouse Cut Regeneration early 19th century cast iron aqueducts schools who designed the mini gateway Programme is a £1.4 million project, involved local community and consultation to the reserve and a scout group who have funded through Leaside Regeneration’s meetings. Throughout the project community built bird boxes. The site is of biological SRB6 programme, to regenerate and activities were organised including a schools’ importance, and pond dipping platforms, a improve the 1.5-mile Limehouse Cut. The week, guided boat trips and a workshop wheelchair and pushchair friendly pathway, scheme, supported by Leaside Regeneration for people to learn about stone masonry, and a thatched bird-watching hide on and Lea Rivers Trust, aims to make the lime mortaring and metal work repairs. stilts have been installed. A café and car Cut a safer, more accessible and exiting The project was the joint winner of the park have also been built for visitors. 7 place for all members of the local Heritage and Conservation Award at community and the programme will The Waterways Trust’s ‘Waterways be completed by late summer 2004. 8 Renaissance Awards’ in March 2004. 6

ANNUAL REPORT & ACCOUNTS 29 In May 2004 our working boats education project, Harry’s Cut, won the special Caliba Award for Best Practice in Interpretation, against strong competition, at the 2004 Interpret Britain & Ireland Awards, organised by The Association for Heritage Interpretation.

The ’Harry’s Cut’ project.

Education

WOW (Wild Over Waterways) WOW is our education initiative in with local schools and community groups. our support are now applying for charitable partnership with the Inland Waterways It provided 40 curriculum-related teaching status to take responsibility for the day Association and The Waterways Trust. resources to schools directly through its to day management. Since its formation it has developed website, a more sustainable method of child-focused events, a large series of providing materials. Over the year, the ‘Harry’s Cut’, the educational element of innovative learning resources, and an website recorded 100,000 page impres- our Heritage Lottery Funded project in award-winning website, wow4water.net. sions and was successfully accredited the Midlands, tells the story of working In 2003/04 WOW concentrated on by the National Grid for Learning and boats to Keystage 2 school children promoting ‘SAFE: Stay Away From the awarded the highest rating of five stars by through a lively mix of media, including live Edge’ to hundreds of school children. schoolzone.co.uk for educational quality. interpretation. Performances use real working Over the summer it attended four national boats and focus on the waterways’ industrial waterway festivals and many local events, Working Boats’ ‘Harry’s Cut’ Project past through the eyes of three central making a direct impact on 8,000 children We have restored some of our working characters. Sponsors to date include: and their communities. It also organised boats and use them for guided tours, in Advantage West Midlands in Birmingham, specially designed heritage ‘Water parades, as exhibits and as an educational the Black Country Living Museum in Racket’ events, which attracted over resource. A group of volunteers have Dudley, and the Education Action Zone 2,000 young people and was developed been trained to work the boats, and with in Gloucester.

30 ANNUAL REPORT & ACCOUNTS 3

ENVIRONMENT & HERITAGE EDUCATION ENVIRONOMENT & REVIEW EXECUTIVE’S CHIEF

Crufts ‘Best in Show’ winner, Deedee, helped us promote our campaign to reduce dog fouling on towpaths at a press launch in April 2004.

We own very large asset with many listed We also own and manage 63 SSSIs Reduction in Energy structures and Sites of Special Scientific in England, Scotland and Wales. In 2003 Interest (SSSIs), and work closely with English Nature completed a national Consumption English Heritage, CADW (the historic survey of all SSSIs and ruled them either During 2003/04 we started work on our environment agency within the Welsh ‘favourable’, ‘recovering’ or ‘unfavourable’. campaign to reduce energy consumption Assembly Government), Historic Scotland, The national figure was 63% ‘favourable’ across the business. We are working with English Nature, Countryside Council for or ‘recovering’, whereas 66% of Action Energy and the Carbon Trust Wales and Scottish Natural Heritage our sites fell into this category. We are focusing initially on our use of electricity. to maintain and improve them. We use working closely with the statutory Action Energy will carry out energy audits Biodiversity and Heritage Action Plans to conservation organisations to prepare at ten sample sites in 2004/05, including help evaluate and manage our assets in management plans to improve the status a back pumping installation, a sanitary a consistent manner. We also follow an of our sites, whilst continuing to meet station, and a marina, and will provide Environmental Code of Practice when our navigation duties. follow-on advice and assistance. carrying out works. As stated in Our Plan for the Future The results will provide a benchmark from We have started to review our structures 2003-2007, we decided to focus on two which future consumption targets can be and buildings identified by local authorities campaigns that are important to our set and measured. Our aim at present is and English Heritage as potentially at customers and to the waterways, and to achieve a 5% reduction by the end of risk. By the end of 2003/04 4.5% (118) have made good progress in these areas. 2004/05. Our business car mileage this of our buildings were on these registers, year was 6.6 million miles and in the next the vast majority of which are structures Reducing year we aim to reduce this by 5% and that require minimal work to remove have successfully introduced video them from the register. We believe that Dog Fouling conferencing in our offices to help with we can reduce this to 27 by 2008. We have taken on board research this. Renewable energy is already feedback and implemented a number of procured for Lemonroyde Marina in Leeds measures to reduce dog fouling. In early and the Tees Barrage, where carbon 2004 we launched a long-term publicity dioxide emissions have already been and educational campaign, working reduced by just over 200,000 kg per with the Kennel Club, Oscar Pet Foods, annum. We have energy efficient flood JRB Enterprises and local authorities. lighting at Hull Marina, and have introduced In spring 2004 we installed an additional an energy awareness campaign at 1000 new dogs bins around the network Stanley Ferry workshop. We also have and are offering poop scoops to encourage a pilot project in the East Midlands to people to pick up after their pets. In monitor and measure electricity use for areas assessed as bad we aim to reduce the waterway. dog fouling by 40% in 2005 and 60% by 2006.

ANNUAL REPORT & ACCOUNTS 31 MEETING CUSTOMER NEEDS

Market Research results for summer 2003 showed that 42% of towpaths users rated overall enjoyment as ‘excellent’.

Waterway Visits 2003/04 We encourage a diverse range of people It will be regarded as one of the to make use of our waterways for many nation's most important and valued 61% Informal leisure (often daily 31% walking & reasons. We gather market research about national assets. jogging and 30% dog walking) our customers’ needs and wants, and use Our telephone tracking survey traces 27% Formal leisure (day visitors, boaters and anglers) this information to offer visitors a better movements in public perception of the 12% Functional (Often daly commuting on foot and by bike) product and service. value of canals and rivers compared with 27% six other nationally important assets. 61% Market Research Currently, the seaside is rated at the top of In August 2003 we put in place a new the scale and canals & rivers are starting market research framework to improve at the bottom (see the graph below left), year on year consistency in the information so we know we have some way to go to we gather. A new telephone tracking fulfil our vision! We relish this challenge, survey, the Inland Waterway Visits Survey, and with the help of the millions of people is gathering nationally representative data who enjoy the waterways are confident on the total numbers and purpose of visits, that our position will improve. 12 % the number of adult visitors during the previous two weeks as well as the demo- Visitors will be delighted with the graphic profile of visitors. This survey, quality of the experience. along with our customer satisfaction We would like to see a higher percentage surveys, will enable us to measure of people rate satisfaction levels as ourselves against our vision that: ‘excellent’ in the future. Public Rating of the Value of Canals & • by 2012 our waterway network will Rivers Compared to other National Assets be used by twice as many people We use tourist destination surveys, with as in 2002 face to face interviews, to measure 100 • it will be regarded as one of the customer satisfaction. We use the same 90 nation’s most important and valued method as that adopted by Association

80 national assets of Leading Visitor Attractions to enable visitors will be delighted with the quality us to benchmark the results. The results 70 • of the experience for summer and autumn 2003 told us 60 that 93% of visitors rate overall enjoyment 50 By 2012 our waterway network will as good or excellent, with 36% rating us 40 be used by twice as many people as as excellent. 30 in 2002 Data gathered so far suggests that in a We also carry out a towpath survey to 20 typical two-week period, 3.2 million adults monitor the visitor experience using Historic Houses, Castles & Other Monuments 10 Seaside Parks & Gardens Woods & Forests Zoos, Wildlife Parks & Farms Museums & Galleries Canals & Rivers will visit our waterways, generating around postcard questionnaires handed out 0 400 million visits over the whole year. by our people. The results for summer Of these adult visitors 12% visit for 2003 were that 91% of towpath users boating, angling or days-out, with the rate overall enjoyment as good or excellent, remaining 88% using the towpaths for with 42% rating them as excellent. regular dog walking, jogging, or commuting to work or school (see graph above left).

32 ANNUAL REPORT & ACCOUNTS 3 During the year 333 visitor moorings were created, MEETING CUSTOMER NEEDS CHIEF 23 service blocks were built, 57 miles of towpaths

were improved and 188 lock gates were replaced. REVIEW EXECUTIVE’S

Our survey of boat owners measures satisfaction with our facilities. The survey Completed Waterway Improvements is mailed to a randomly selected sample 2003/04 2002/03 of boats asking them to comment on their Canals restored to navigation (miles) 4 27 past cruising season. The 2003 survey Canals dredged (miles) 559 56 informed us that 68% rate the overall Rivers dredged (tonnes) 194,720 149,560 upkeep of the waterways as good or Combination removed from canals (tonnes) 50,237 170,043 excellent, with 9% rating them as excellent. Towpaths improved (miles) 57 106 Total length vegetation removed from towpaths (miles) 4,674 4,294 Our Plan for the Future 2004-2008 Lock gates replaced (number) 188 219 document highlights our plans for Lock structures repaired (number) 130 159 improving these ratings. We will keep Lock surroundings repaired (number) 113 218 our market research under review, Lock paddles replaced (number) 311 341 making any additions and adjustments Flood paddles replaced (number) 35 27 as and where necessary to ensure our Culverts inspected (number) 372 246 progress against achieving our vision is Culverts repaired (number) 36 47 adequately monitored. The results from Tunnels repaired (number) 0 3 customer surveys will link directly with Hedges laid/cut (miles) 707 689 our new waterway standards to provide Bridges repaired (number) 81 112 a direct relationship between what we Feeders improved (miles) 13 10 deliver on the ground and the satisfaction Reservoirs repaired (number) 14 10 of our customers. New visitor moorings location (number) 70 72 Visitor moorings (number of individual moorings created) 333 472 Waterway Standards Service blocks built (number) 23 42 Service blocks improved (number) 23 44 Waterway Standards are one of our Additional waterpoints (number) 97 115 measures of the level of customer service Listed/schedule buildings improved (number) 30 34 provision. Our existing waterway standards Partnership schemes that bring value to the waterways (£’000) 13,799 21,343 were first introduced in 1993. Whilst they Vegetation clearance (£’000) 1,747 1,210 include specific elements for the towpath and environs, they are predominantly In 2004/05 we plan to complete the Completed Waterway Improvements navigation-focused. Surveys of all types details of the proposals for waterway Our completed waterway improvements of waterway visitor reveal a much wider standards and consult with our users and for the past year are listed above. In set of needs, and we have made good set out the costs and timescales for the future years we will publish a comprehensive progress in drafting new standards which investment required to reach the new report on customer satisfaction levels specifically address the requirements of standards. We will ensure that targets for rather than list the physical improvements boaters, walkers, casual towpath users, each waterway length will relate to local to the network. We believe these results, anglers, cyclists and day visitors. market conditions and potential for each coming from independent market research, activity group. combined with statements on progress towards achieving our new waterway standards, will be a more meaningful record of our performance in maintaining the network.

ANNUAL REPORT & ACCOUNTS 33 Nolan Gildersleve, website co-ordinator, browsing our recently re-launched website. 3 We re-launched our website, britishwaterways.co.uk, in April 2004. OPENNESS & ACCOUNTABI CHIEF It now contains a section on openness & accountability and on

the Freedom of Information Act. REVIEW EXECUTIVE’S LITY

Improving Customer Service Openness and Accountability As part of our restructure we created From January 2005 a general right of We are now implementing these measures a Service Manager role in each of our access to information held by public to improve the way we communicate and waterway units. Service Managers are authorities will come into force as part consult with our stakeholders. The changes responsible for customer service in their of the Freedom of Information Act 2000. mean we now have a more streamlined area. They are supported by a team of Under this all public authorities are and responsive internal complaints people with expertise in marketing and required to adopt and maintain a procedure that takes full advantage of communications, leisure development, publication scheme, and this includes our new flatter management structure. social and economic development, funding British Waterways. We submitted our In 2004/05 we will set up a new and local project delivery. Also part of the publication scheme for approval by national consultative framework that is team, the Customer Operations Managers the Information Commissioner in representative of all significant groups look after the delivery of customer service December 2003 and this was granted and bodies that have an interest in the to the wide range of visitors to the until 29 February 2008. Our publication waterways including arrangements for an waterways. Their role covers customer scheme sets out the classes of information elected committee(s) to have direct access activities such as moorings management, that we will publish, the manner in which to our Board and senior management. patrol, enforcement and direct customer we will publish them and whether the We will adopt improved procedures for service operatives such as lock and information is freely available or at direct consultation that include following bridge keepers. a charge. However we may withhold the Cabinet Office Code Practice on information if we consider it to be Written Consultations for all national confidential or commercially sensitive, written consultations. We will also have and will take into account the Freedom a re-constituted and updated Waterways of Information Act, the Environmental Ombudsman Scheme. Information Regulations and public interest when making this decision. The Waterways Ombudsman’s Report When information is withheld we will The Waterways Ombudsman independently explain why we have done so. adjudicates on complaints where our We have a section on our website, own procedure has been exhausted. britishwaterways.co.uk/foi, where this During the year he received 32 enquiries information is held. and accepted six of these for further investigation, three of which are still under In 2003 we also consulted with user investigation. He published five cases groups, canal societies, trusts, local in all this year, some of which were authorities and other bodies with a direct carried over from last year. The interest in our management of the Ombudsman found no maladministration waterway network on openness and in four of the cases. In the fifth he found accountability. We published a proposed maladministration against us in two package of measures by which we aim to respects and recommended an apology, improve our openness and accountability. which we have made.

ANNUAL REPORT & ACCOUNTS 35 PEOPLE AND BUSINESS PROCESSES

The reorganisation of our structure, announced in May 2003 was achieved in less than six months, the new structure was introduced on 1 September 2003.

IT Contracts As the Chairman said in his statement, In April 2003 we completed the installation In April 2004 we contracted out our PC the challenge for British Waterways this of new computer software - SAP. The & server provision and support to Fujitsu year has been to put the building blocks implementation of SAP has been an Services Limited, the largest IT concern in place to deliver our vision for the future overall success; we could not have in Europe. This contract will reduce the of the waterways. made the progress we are making as costs of our IT support and equipment, a business without it. It is enabling us while providing us with good end-user This year has been about putting the right to better understand our data and support and the resource that can structure, systems and cost base in place share information and we fully intend to be obtained from a specialised provider. so that we can deliver our vision. This maximise its potential to increase Sixteen of our people transferred to has meant that 2003/04 was a year of our business efficiency. Fujitsu under the Transfer of Undertakings major change for us. We restructured, (Protection of Employment). introduced a new integrated computer In March 2004, we began the process of system using SAP technology and started reducing the cost of our payroll to ensure to reduce our costs with the announcement it balances with our future income of 140 redundancies. We have carefully predictions. We prioritised our recruitment monitored risk during this change. needs and implemented a redundancy programme involving around 140 posts. Restructure The decision to do this was taken in light The new structure was introduced on of next year’s predicted 13% reduction in 1 September 2003. The existing 25 income, from reduced restoration income waterways and six regions were as well as the unexpected cut in Defra’s transformed into ten waterway units. This grant of £2.5 million (£3.7 million if structure has already increased our ability Defra’s previous cut in index linking is to manage effectively through clearer taken into account). and shorter lines of communications and has put greater expertise at the It is never easy to lose people from a waterway unit level where it can help and dedicated workforce, but if we are to influence day to day activity. We also manage our business effectively and established a Shared Services Centre. efficiently we must keep our fixed costs All our common accounting, credit under control so we have the flexibility control and purchasing functions will be to meet unexpected costs, and deliver administered through the Centre and this customer improvements where they are will reduce our fixed overheads locally. needed most. One of our key priorities in We also consolidated our workshops managing the reductions has been to to create improved efficiency in our retain the skills needed to manage the manufacturing operations. waterways safely and to serve customers properly – this remains unaltered.

36 ANNUAL REPORT & ACCOUNTS CHIEF EXECUTIVE’S REVIEW 3 PEOPLE & BUSINESS PROCESS 37 and the Transport & and the Transport ANNUAL REPORT & ACCOUNTS ISON ISON In 1997 20% of our staff were female, In 1997 and in 2003/04 this increased to 24%. An increasing proportion of women are moving into senior management positions, 20% of our total senior management group are compared with 7% in 1997, female, with 24% of senior managers in our waterway units being female. closely have continued to work We with UN General Workers Union in employee General Workers relations matters particularly the consultation processes involved with during the year and the major changes we will continue to do so in the future. We are committed to investing in training are committed to investing We for our people and our programme of training days was four days per employee absence increased in 2003/04. Sickness from eight days to nine days per person level is below the This during the year. average for public sector bodies and also Our below some parts of the private sector. aim, through our improved occupational health processes, is to reduce our sickness absence level to the best of the private sector of seven days per person 2004/05. In 2004 we received a joint gold award for occupational health and with AWG from RoSPA. safety to reflect would like our workforce We the ethnic mix of the diverse communities 0.5% of staff we serve. In 1997 which were from minority ethnic backgrounds, and in 2003/04 this grew to 1%. We would like to see this increase in the future. for the Employee Surveys we want, this period of change Throughout and need, to make sure that we understand do this we carry out To people’s feelings. undertook regular employee surveys. We a survey in October 2003 asking our people about the restructuring of British that 86% Results showed of Waterways. employees understood the reasons were delighted when, for the first time We a place in the we achieved last year, 100 Best Companies to Sunday Times in light of our As expected For. Work we did not make listing recent changes But our aim for the future is to this year. listing again. achieve restructure, with 67% believing it would restructure, with 67% our vision. As expected help us achieve of this nature, most people with change it could have been handled better and felt of people’s trust in us had lessened. 67% Motivation levels had dropped with 56% of employees being motivated, compared to 94% in May 2003 (pre-restructure). Restoring trust and morale is of course a high priority and we are working hard this, and will carry out research to achieve to measure our progress. Part of our restructure included creating creating included restructure of our Part out to carry Centre Services a Shared administration. common THE FUTURE

I have already said last year was challenging for everyone in British Waterways and I would like to thank our people for their dedication and professionalism throughout the year.

Risk Management We have introduced various elements Our joint ventures include significant Safety risks, vandalism and impediments of current best practice into our risk property development opportunities to access for all are managed by management framework. This helps us within which there are various risks. our educational role and community manage risk to create opportunities for We actively engage the expertise of our engagement through organisations with innovation and growth as well as identifying chosen partners to manage these risks strong involvement in social inclusion. threats to the achievement of our effectively within the constraints of the objectives. Our approach to risk manage- wider economic cycle. ment is given on page 60. This shows The Future the importance attached to the ongoing We care for the safety of our customers We have a clear vision and the strategic clarification of risks, ensuring effective and employees on the waterways through plans to achieve it. We have the right control processes exist and for embedding safety training, procedures, signage, structure, the right people and the right risk management into our culture. regular maintenance of assets and the attitude to achieve everything we are development of relevant competencies. planning for. The main risks stem from the ageing infrastructure for which there is ongoing Following a period of restructuring and In the coming year I expect us to make inspection, assessment and prioritisation refocusing, the business is now well significant improvements to our customer of remedial action to assets with a high positioned to pursue its objectives. There service and our operational efficiency. consequence of failure. Completion of the are risks associated with implementing I want our financial resources to work safety backlog of maintenance in March such business change. We manage these even harder and expect our ventures and 2004 was a major landmark, but risks through recognised project control investments to grow at an even faster substantial risks in the asset base remain techniques, communication, regular rate than before. and there is still a great deal of essential performance appraisal and individual work to do. The current statutory arrears development plans reflecting the new I have already said last year was chal- of maintenance were valued at £158 business priorities. lenging for everyone in British Waterways million at 31 March 2004. and I would like to thank our people for Given the nature of our work and their dedication and professionalism We are dependent on continued responsibilities we are exposed to changes throughout the year. Following these funding from the government to fulfil in legislation and regulation, particularly changes, my fellow directors and senior statutory obligations to eliminate the relating to environment and heritage, managers will be able to lead their teams remaining maintenance arrears. An which impacts on our total costs. with a clear and concise direction. I know increasingly important source of additional The impacts will be clearer as the full our people will respond and together we funding is by the use of partnerships. requirements emerge from, for example, shall create a secure and exciting future These partnership ventures allow further the Water Framework Directive. for our canals and rivers and an equally exploitation of our infrastructure by bright future for British Waterways. accessing investment funds and In our wider objectives, we have a com- management expertise. Processes have mitment to deliver social, environmental been developed for choosing the right and heritage benefits. Risk based partner, monitoring performance, assessments in accordance with our governance and allocating appropriate Environmental Code of Practice are responsibilities between partners. applied to all works undertaken.

Robin Evans Chief Executive

38 ANNUAL REPORT & ACCOUNTS CHIEF EXECUTIVE’S REVIEW 3 THE FUTURE Barry Whitelock, lock keeper, helping a boater at Bingley Five Rise keeper, lock Barry Whitelock, &on the Leeds Liverpool Canal. SCOTLAND DIRECTOR’S REVIEW

This year the waterways in Scotland saw an increase in use with more boaters, cyclists, walkers and a host of visitors and people from local communities.

Jim Stirling, Director Scotland. 4 Boat Licences in Scotland REVIEW DIRECTOR’S SCOTLAND

Under 3 months Over 3 months Total The total number of boats licensed (03/04) (02/03) (03/04) (02/03) (03/04) (02/03) decreased slightly by 0.2% from Caledonian Canal 1,151 1,067 140 207 1,291 1,274 2002/03 figures to 2,914 and this is because there was a small reduction Lowland canals 128 159 220 164 348 323 in the number of transits. Crinan Canal* 1,214 1,261 61 62 1,275 1,323

*There were 119 commercial freight ship visits to the Crinan Canal

Trading Income Total Income £m British Waterways Scotland works in Our trading income increased by 7.3% partnership with the Scottish Executive, to £3.2 million in 2003/04. This was 50 local authorities, voluntary groups, private mainly due to the continued growth of 45 companies and government agencies The Falkirk Wheel visitor attraction. 40 to develop the canals in Scotland and 35 to bring benefit to the communities Leisure 30 through which they run. We balance This year the waterways again saw an 25 the conservation of their heritage and increase in use with more boaters, 20 environment with the development cyclists, walkers and a host of visitors 15 of commercial opportunities for generating and people from local communities now 10 income to reinvest in the Caledonian, benefiting from these superb assets. 5 Crinan, Forth & Clyde, Union and Our ongoing programme of improvements 0 01/02 Monkland canals. is aiming to create a first class leisure 99/00 00/01 02/03 03/04 resource for Scotland. We now have The British Waterways Scotland Group waiting lists for moorings of 133 on the The British Waterways Scotland Group, Lowland canals and 24 at Dochgarroch chaired by Board Member Campbell on the Caledonian Canal. Total Expenditure £m Christie, continues to champion our corporate and commercial interests in Navigation Scotland, providing a valuable counselling, Following extensive consultation and 50 consultative and influencing function both discussion we have introduced a new 45 internally and externally. It meets three system of commercial fees on the 40 to four times each year and the public Caledonian Canal linking British Waterways 35 and interested organisations have the with its commercial customers. The aim 30 opportunity to discuss their needs and is to assist businesses to grow and to 25 wants. On behalf of Campbell Christie, encourage business to business 20 I would like to thank those who retired relationships. The construction of new 15 from the Group during the year following large craft jetties at several locations on 10 three years’ valuable contribution; Sir Ken the Caledonian Canal has enhanced the 5 Collins, Chairman of Scottish Environment berthing facilities for large commercial craft. 0 99/00 00/01 01/02 02/03 03/04 Protection Agency; Arthur McCourt, Chief Executive of Highland Council; and With the benefit of a £75,000 contribution Neil Butler, Managing Director of UZ from Scottish Enterprise, construction Events. We are pleased to welcome three of a new 56-berth mooring basin at new members to the Group. Eva McCracken Auchinstarry, on the Forth & Clyde Canal, is an active campaigner for the rights of got underway. We are also installing the disabled and co-founded the Scottish landing platforms at locks along the Disabled Ramblers, Guthrie Hutton, for- canal and constructing a facilities block merly in production with the BBC is also at Temple in Glasgow. New moorings a strong campaigner for the reopening have been provided by dredging the and regeneration of the Lowland canals, historic Port Maxwell in Falkirk, on the and Richard Millham, former principal and Union Canal. chief executive of Motherwell College, is well connected with local authorities. We look forward to working with them in furthering our work in Scotland. ANNUAL REPORT & ACCOUNTS 41 The first Scottish Boat Show took place at the Wheel in August 2003 and was a huge success. Over 60 vessels from across the country were exhibited with more than 25,000 visitors to the show over the three days – 10,000 more than the original estimates.

Visitor Attractions – The Falkirk Wheel World Canals Conference The Falkirk Wheel, the world’s first and only We brought together canal professionals Restoration & Third rotating boat lift, is one of the country’s and enthusiasts from over ten countries, Party Contributions leading visitor attractions. We are proud that including over 60 from Canada and the Our third party income continued to it won the prestigious title of ‘Innovation USA, to showcase our canals and to share decrease in line with our plan and was Icon of Scotland’ at an awards ceremony best practice and knowledge at the World £0.76 million in 2003/04 a reduction on Tartan Day in New York. The award was Canals Conference in September 2003, of 38.8% from last year. We expect this presented to Andy Kerr MSP, Minister for which included a government sponsored funding to rise over the next two years Finance and Public Services at the Scottish reception in Edinburgh Castle. as we commence the reconnection of Executive, in front of an audience of over Port Dundas in Glasgow. 250 members of the world’s press, travel Property trade and business community. Edinburgh Quay, on the Union Canal, In Glasgow a £5.6 million project to a £60 million joint venture with Miller reconnect Speirs Wharf and Pinkston Nearly 30,000 visitors from all over the Developments is transforming the area Basin in Port Dundas, on the Forth & world enjoyed a boat trip through the around Lochrin Basin in Edinburgh. Phase Clyde Canal, after a break of 40 years, Wheel in August 2003 alone and 200 One, due for completion in summer 2004, is underway. The bulk of the funding is private vessels transited the Wheel each consisting of offices, restaurants, and being provided by Glasgow City Council month last summer. We have taken delivery housing, has already secured major and Strathclyde European Partnership. of our new 96-seat trip boat, complete with tenants for office accommodation and Further development will create an wheelchair access, and expect a further licensed premises. We anticipate that impressive terminus in Glasgow. The boat this summer. A new interpretation trail Edinburgh Quay will stimulate further Port Dundas re-connection is the flagship around the Wheel basin has been installed development, planning consent already initiative in a regeneration programme with an innovative jigsaw design helping having been gained for Phase Two. of the Glasgow North area being pushed visitors, especially children, to piece The announcement that brewing is to forward with Glasgow City Council together a picture of our waterways during cease at the adjacent Fountainbridge and ISIS, our public private property their visit. Brewery at the end of this year offers development partnership. It will bring potential to enhance waterspace in the life to the Glasgow branch of the canal heart of Edinburgh. with economic and social benefits to communities formerly isolated by the dereliction of the canal corridor.

42 ANNUAL REPORT & ACCOUNTS Our mixed use development, Edinburgh Quay, 4 is due for completion in summer 2004 and has REVIEW DIRECTOR’S SCOTLAND already pre-let office space.

Computer generated image of Edinburgh Quay.

Maintaining and We are grateful for the increased baseline The Scottish Canals funding pledge of £8.9 million in 2004/05 Development Group Caring for the and 2005/06, but remain concerned as We are working with the Scottish Waterways this is insufficient to achieve the aspirations Executive to establish a new pan-Scotland in the Executive’s policy paper, Scotland’s partnership involving all those bodies who Scottish Executive Grant Canals – An Asset for the Future. It is can contribute to and benefit from vibrant We receive grant funding from the Scottish also insufficient to meet the legitimate canals as set out in Scotland’s Canals – Executive as inland waterways in Scotland demands of our customers for a secure An Asset for the Future. Our Minister, are now devolved. In 2003/04 our baseline infrastructure and an improving level of Nicol Stephen, intends to chair the new grant was £8.4 million compared to £7.1 service. The provision of additional funding Scottish Canals Development Group, million in 2002/03 and we were delighted on an ad-hoc basis, whilst welcome, which will meet annually. There are plans to receive additional ad-hoc grants totalling causes difficulties in planning, putting to set up two project development £4.2 million, which is a clear indication of at risk the programme for the elimination steering groups so that identified priorities the Executive’s support. The additional of statutory arrears. are pursued and delivered. One will focus grant allowed us to eliminate our safety- on the Highland canals the other on the related backlog of maintenance and to Lowlands. These groups are expected to further reduce the outstanding statutory meet four times a year, reporting progress arrears in Scotland. to the Minister’s group.

ANNUAL REPORT & ACCOUNTS 43 We look forward to continuing to work with the Scottish Executive, our public and private sector partners and communities across Scotland.

Our Corporate Expenditure Social Responsibility Our expenditure was £16.5 million, The embankment and lock stabilisation compared to £20.8 million in 2002/03, work carried out on the Crinan during Community Involvement reflecting the reduced overall level the winter of 2002/03 significantly We are actively involved with communities of works undertaken during the year to reduced water losses. The success of across Scotland. During the past year eliminate our backlog of safety-related that work led us to substitute further lock five small vessels were constructed by maintenance. stabilisation this year in place of a local trainees in the workshop at Anniesland scheme to install back pumps from the College, Glasgow. The College is continuing Maintenance works West Reach to the Summit Pound. Locks with an Engineering to Employment project With the help of ad-hoc funding from the 9,10 & 11 have been stabilised and and The Boatmaster Project. Not only are Scottish Executive we have been able to improved, further aiding water conservation. local people given employment skills but complete a further stage of the Crinan Jetty has been rebuilt, using also local canalside communities are given Caledonian Lock stabilisation programme. recycled timber from lock gates on the a visible and tangible ownership stake A total of £2.5 million has been invested Caledonian. The unique rolling bridge at in the canal. The vessels will be available in securing the Muirtown lock flight and Dunardry has been improved and sections for use as day boats by communities in works to Clachnaharry Works lock and of the towpath have been upgraded with in north Glasgow. Muirtown Basin. It had been 25 years the assistance of funds from Argyll and since the Muirtown Basin had been Bute Council. drained and we undertook a major clear-out operation to remove accumulated debris. However, further major works remain outstanding, at Dochgarroch and Clachnaharry.

44 ANNUAL REPORT & ACCOUNTS 4 Trainees from Anniesland College in Glasgow REVIEW DIRECTOR’S SCOTLAND were involved in constructing five vessels, giving them further skills.

Environment & Heritage This year Scotland won British Waterways’ The Waterways Trust Scotland promotes We recognise the need to improve the national natural environment award for greater public enjoyment and awareness of entrances to the Lowland canals at both the aquatic plant management plan for the Scotland’s waterways and their heritage. the River Carron and Bowling. The Lowland canals and the national built The Trust also develops partnerships navigation windows on the River Carron heritage award for the Union Canal to secure funding for the conservation in particular need to be improved. To milestone project. and restoration of waterways and helps achieve this requires development of the us realise their social, environmental, old docks in Grangemouth. This must be EU legislation known as the Water educational and economic potential. done without damaging the petro-chemical Framework Directive has the key objective In addition to raising £100,000 for the facilities which currently sterilise the of long-term protection of available water Port Dundas re-connection, the Trust has dock area through Health and Safety resources through promoting sustainable helped to raise nearly £30,000 towards Consultation Zones. Again a co-ordinated water use. We are consulting with the the restoration and planting of native effort by public and private sector interests Scottish Executive and the Scottish hedgerows along the Lowland canals. is needed. Environment Protection Agency to ensure that all parties fully understand the issues Thanks to a committed and supportive involved and that we can comply with new The Future team of people in Scotland we have laid control regimes expected to be phased in We have been disappointed not to make strong foundations for the future. We over two years from April 2005. It is against any further headway in developing the look forward to continuing to work with this background that we were disappointed amenities around Loch Ness. This loch the Scottish Executive, our public and not to complete a deal to supply canal needs to come alive and that requires safe private sector partners and communities water to meet cooling systems needs moorings and tourism facilities around the across Scotland to further develop at the Grangemouth industrial complex. loch. We are keen to play our part but a Scotland’s waterways as safe and customer Water from the canal would promote concerted, co-ordinated effort by public focused assets. We will continue to a more efficient and sustainable use of and private sector interests is required to work to reduce the statutory arrears on scarce water resources as recommended make the most of this outstanding, world- Scotland’s canals and to expand their by the Grangemouth Water Users Group, renowned waterways asset. The new leisure and recreational use to maximise following a £1 million Department of Trade pan-Scotland canals group should provide economic, environment, community and and Industry funded research project. the impetus needed. heritage benefits in Scotland.

James M Stirling Director, Scotland

ANNUAL REPORT & ACCOUNTS 45 FINANCIAL REVIEW, SCOTLAND

BW Scotland made a profit of £0.4 million Detailed comments on income and The value of fixed assets increased in 2003/04 (2002/03: £3.6 million loss) due expenditure can be found in the by £2.2 million to £16.9 million, mainly mainly to the release of provisions required Scotland Director’s Review, starting as a result of the £2.0 million revaluation for the completion of the Millennium Link on page 40. of investment property based on a contract negotiations. The £0.4 million professional valuation carried out by profit reduces the cumulative loss over the During the year we increased our loan Gerald Eve. four years since devolution to £8.0 million. capital to Edinburgh Quay Ltd, an associate company set up to develop This amount represents the continued property in Edinburgh, by £3.8 million commitment of the BW Group to the to £6.5 million. Interest receivable on long-term potential of the waterways loans made to Edinburgh Quay Ltd in Scotland. amounted to £0.2 million.

Profit and Loss Account Scotland year to 31 March 2004 2003 /04 2002/03 £000 £000 Direct income 3,977 4,331 Scottish Executive grant 12,646 12,637 Total Revenue 16,623 16,968

Major repairs and renovations (4,915) (6,165) Other operating charges (5,760) (9,814) Staff costs (5,386) (4,368) Depreciation (415) (409) Own work capitalised or charged to major works - - Total Expenditure (16,476) (20,756) Operating profit / (loss) 147 (3,788)

Profit on sale of investment properties 209 321 Interest receivable 232 146 Profit / (loss) for the financial year 588 (3,321) Transfer of profits on sale of property (209) 321 Profit / (loss) transferred to / (from) reserves 379 (3,642)

46 ANNUAL REPORT & ACCOUNTS Grant receivable from Scottish Executive 2003/04 2002/03 £000 £000 14,534 9,459 Accrued grant at 1 April (4,351) - Accrued grant at 31 March 2,417 4,351 12,600 13,810 Allocated to deferred capital grant - (1,173) Deferred capital grant released to profit and loss account 46 - Total revenue grant accrued during the year 12,646 12,637

Analysis of fixed assets

a) Tangible fixed assets (net book value)

31 March 2004 31 March 2003 £000 £000

Freehold land, building and structures - operational 4,326 4,310 Freehold land, building and structures - investment 9,630 7,78 5 Craft plant and equipment 2,982 2,701 16,938 14,796

b) Investments

31 March 2004 31 March 2003 £000 £000 Shares at cost: Balance at 31 March 1 1 Loan to Edinburgh Quay Limited: Balance at 1 April 2,695 1,339 Additions Balance at 31 March 6,472 2,695 Net book amount at 31 March 6,473 2,696

Issued share Equity interest capital held £% Edinburgh Quay Ltd 100 100 Edinburgh Quay Ltd’s principal activity is property development in Edinburgh. British Waterways’ investment is shown in the balance sheet at cost less provisions for impairment The aggregate amount of capital and reserves and the profit and loss for the year was as follows:

Capital & Profit / (loss) Reserves for the year £000 £000 Edinburgh Quay Ltd (549) (978)

ANNUAL REPORT & ACCOUNTS 47 FINANCE DIRECTOR’S REVIEW

Delivery of a sustainable waterway network is dependent on the continued success of our key commercial activities. To this end, we have established or acquired four subsidiary companies to further our leisure and property businesses.

Mark Smith, Finance Director. 5 Consolidated Financial Highlights (£million)

2003/04 2002/03 REVIEW DIRECTOR’S FINANCE Total revenue 197.4 191.6 Total expenditure (201.2) (211.1) Operating loss (3.8) (19.5) Share of operating profits and losses of associates and joint ventures (1.0) 1.1 Profit on sale of investment properties 7. 6 3.8 Exceptional costs of business reorganisation (5.4) - Net interest receivable 0.8 - Loss for financial year before taxation (1.8) (14.6) Taxation 0.3 4.4 Loss for financial year after taxation (1.5) (10.2) Property profits transferred to realised capital reserve (3.4) (8.8) Loss transferred to P & L reserves (4.9) (19.0) Within the overall Group loss of £4.9 million, losses of £4.3 million were reported in the BW accounts

Results for the year Subsidiaries Joint Ventures & Associates This has been a year of significant change Our new leisure e-commerce subsidiary, Our share of operating surplus and in British Waterways and this is reflected in Waterscape.com, was formed on 1 April losses of associates and joint ventures our financial results with the restructuring 2003 followed by the launch of the website added £1.5 million loss to the Group’s of our business giving rise to an exceptional on 30 June 2003. In its first year result. These arose mainly from property cost of £5.4 million. Waterscape.com traded in line with its joint ventures and associates that are in business plan returning a £2.1 million loss. the early planned stages of development Whilst job losses are always regrettable, This arose mainly from development with returns expected in future years. the changes made were essential to put and marketing costs to establish the new the business on the right footing to deliver brand and drive online traffic. Scotland its long-term goals. The increased flexibility British Waterways is a single legal entity we have created in our cost base will also British Waterways Marinas Ltd and operates on a cross border basis. enable us to step up our investment in (BWM Ltd) was formed on 1 January However, under devolved powers we are customer priorities going forward. 2004. The first published financial accountable to the Scottish Executive statements for BWM Ltd will cover the for the waterways in Scotland. Separate Delivery of a sustainable waterway network fifteen months to 31 March 2005. funding is received directly from the is also dependent on the continued Results for the subsidiary for the period Scottish Executive. An Operations and success of our key commercial activities. January to March 2004 are included Financial Review and pro forma To this end, we have established two new within the 2003/04 consolidated accounts for Scotland can be found subsidiary companies this year: British BW Group accounts. on pages 40 to 47. Waterways Marinas Ltd and Waterscape.com. Our current corporate structure for In the initial three months period to Corporation Tax financial reporting is set out below. 31 March 2004 BWM Ltd has traded in A provision of £2.1 million (2003: line with expectations. The reported loss £0.7 million) is held in the Balance Sheet BW of £0.05 million reflects the seasonal for current and previous year corporation The net result for the year is, as expected, nature of the business. We expect tax liabilities which have arisen on trading a loss due to the continued re-investment BWM Ltd to be profitable on a full year account and capital gains. of the exceptional profit made in 2001/02. basis during 2004/05. Our not-for-dividend business model Fixed Assets means we reinvest such profits back into On 2 September 2003 BW increased its BW’s investment properties are operating the network, with costs charged investment in Granary Wharf Ltd and carried at a 31 March 2004 value of directly to the profit & loss account in the Leeds Canal Basin (Developments) Ltd £419.3 million (2002: £317.6 million). year incurred. This creates a planned loss from 49% to 100%. Post acquisition This carrying value is based on a in subsequent periods as happened this profits for the remaining year were £2.2 valuation at 31 December 2003, year. We expect a similar position in million arising mainly from property sales. performed by Gerald Eve. 2004/05. Detailed comments on income and expenditure can be found in the Chief Executive’s Review, starting on page 10.

Corporate Structure for Financial Reporting BW Group

BW BWM Ltd Waterscape.com Property Joint ventures core waterway marina business internet leisure & subsidiaries & associate business tourism business companies

Subsidiaries of BW Group Further details of the composition of the BW Group can be found in Note 10 to the Accounts on page 84.

ANNUAL REPORT & ACCOUNTS 49 Group Investment Properties (£million) 2003/04 2002/03 Value at 1 April 317.6 292.9 Additions 63.2 6.7 Disposals (9.8) (8.0) Other movements1 4.8 0.8 Revaluation 43.5 25.2 Value at 31 March 2003 419.3 317.6

1 Transfers on 2003/04 were exceptionally high, arising mainly from the reclassification of properties accounted as operational property on a historic cost basis.

Growth in Investment Property 2003/04 Accounting Policies Within the total there was an increase BW’s accounting policies have been in the valuation of properties held at the reviewed during the year by the Audit £53.4m Additions Net of Disposals £27.5m Reclassification of Leisure Properties beginning of the year of £20.8 million. Committee, in accordance with FRS 18 £20.8m Revaluation A further £22.7 million one-off increase ‘Accounting Policies’. The policies are £20.8m arose from the reclassification of proper- presented on page 71. There have been £53.4m ty previously held for operational use at no significant changes during the year. historic cost. Cash Flows Total acquisitions were a record £63.2 There was a movement on net cashflow million financed from disposals in the from operating activities of £60.8 million year, cash brought forward and the on last year. Significant items within this £32.5 million dowry received as part of were increased working capital of £51.5

£27.5m the Liverpool Docks acquisition. million, (primarily the Liverpool Docks dowry) and lower losses £10.3 million. The investment properties sold during the year achieved a profit of £7.6 million Increased gross investment spend of (2002/03: £3.8 million) over previous £53.7 million (including investments in valuations and a further £7.6 million subsidiaries, joint ventures and associates (2002/03: £8.0 million) over historic of £4 million) was significantly higher than book value. the receipts from the sale of fixed assets of £19.7 million. As a result net cash The average rental yield on investment was £1.5 million lower at £21.1 million. properties based on their opening value was 0.2% higher than the previous year Treasury Management at 6.8% (2002/03: 6.6%), with 7.1% Our current policy is not to invest cash growth in the opening net book value in equities, treasury bills, certificates of of investment properties and a 10.2% deposit, financial derivatives, or in high growth in rents. return/high risk deposits. BW does not have any significant level of exposure Net asset value increased to £418.7 to foreign currencies. million (2002/03: £373.9 million) an increase of 12% (5.9% on a like for BW has a bank overdraft facility of like basis excluding asset reclassification £3 million which was unused at both adjustment). Within this, the net book the end of 2003/04 and at the end value of fixed assets other than of the previous year. investment properties at 31 March 2004 totalled £70.3 million (2003: £74.0 million) of which £42.5 million relates to operational land and buildings (2003: £47.9 million).

50 ANNUAL REPORT & ACCOUNTS 5 Summary Consolidated Cash Flows (£million)

2003/04 2002/03 REVIEW DIRECTOR’S FINANCE Operating loss (3.8) (19.5) Exceptional costs of business reorganisation (5.4) - Non-cash items 5.1 5.3 (Decrease) / increase in working capital 37.6 (13.9) Movement on provisions (1.9) (1.1) Net cash outflow from operating activities 31.6 (29.2) Investment, acquisitions and servicing of finance (33.8) 20.4 Financing 0.7 4.6 Decrease in cash (1.5) 4.2

Liverpool Docks. 1. Accumsan et iusto odio dignissim qui epist blandit praesent luptatum zzril delenit augue duis dolore te feugait nulla facilisi. Lorem ipsum dolor sit amet. 2. Consectetuer amet adipiscing elit, sed diam nonummy nibh euismod tincidunt

Pension Fund No new loans were taken out in the year, In common with many pension funds this however, in the past BW took out a limited year we are reporting a deficit in our number of fixed term, fixed interest loans pension scheme under the calculations from the National Loans Fund. Most required by the new accounting standard of the loans still in existence date back FRS17 (see Note 8 on page 80). The to the 1970s and 1980s and were net pension liability has reduced to £38.9 related to activities in which we are no million (2003: £47.5 million). longer engaged, such as freight carrying and handling. The FRS17 calculations take a snapshot of the fund’s assets and liabilities as In 1999, the government decided to at 31st March 2004 and are therefore make capital contributions to BW particularly vulnerable to short term to enable loans maturing before 2013 movements in the stock market. Our (£11.6 million at March 2004) to be funding of the pension scheme is repaid as they matured, without BW determined from separate work by the having to take out new loans to replace fund actuary reflecting assumptions as to them. Details of outstanding loans are the long-term performance of the fund. set out in Note 19 in the accounts. The next triennial actuarial valuation is Financial gearing at 31 March 2004 due in 2004 and will be completed by fell to 3.5% from 3.9% last year. The October 2004. The fund continues to average rate of interest payable reduced have the necessary resources to meet its slightly from 12.2% to 11.5% reflecting current obligations and is comfortably prevailing interest rates at the time the within statutory minimum funding limits. loans were taken out. BW is prevented from re-financing these liabilities by government accounting rules.

Overall interest receivable exceeded interest payable by £0.8 million (2002/03: nil) reflecting higher interest receivable of £5.3 million (2002/03: Mark Smith £3.6 million). Interest payable during Finance Director the year comprised payments on fixed June 2004 term, fixed interest loans, interest credited to provisions and interest earned from cash deposits, held on behalf of external project funding partners, and subsequently repaid as additional funding to the project.

52 ANNUAL REPORT & ACCOUNTS Contents of Accounts

54 Statutory and Financial Framework 56 Board Members’ Report 58 Corporate Governance 62 Directors’ Remuneration Report 66 Auditors’ Report 68 Consolidated Profit and Loss Account 68 Statement of Total Recognised Gains and Losses 68 Note of Historical Cost Profits and Losses 69 Balance Sheets 70 Consolidated Cash Flow Statement 71 Notes to the Accounts 93 Five Year Summaries 94 Accounts Direction STATUTORY AND FINANCIAL FRAMEWORK

BW is responsible for approximately 2,000 miles of canals and river navigations in England, Scotland and Wales, together with their associated reservoirs, docks, repair yards and workshops.

Statutory Basis The British Waterways Board (BW) is a but subject nevertheless to a duty The government requirement in the public corporation, which was established (contained in the British Waterways Act Framework Document is expressed to by the Transport Act 1962 to manage the 1995) to take account of the desirability be subject to BW’s statutory obligations. inland waterways, docks and estates, of protecting them for future use as Nevertheless the government (Scottish which had previously been the responsibility cruising waterways or for other public Ministers in respect of waterways in of the British Transport Commission. recreational use. Scotland) have power to make Orders varying the historic standards prescribed BW is responsible for approximately Under section 27 of the Transport Act in the 1968 Act. Furthermore, the 2,000 miles of canals and river navigations 1962, the government may give directions currently prescribed standards may only in England, Scotland and Wales, together of a general character to BW as to the be enforced in special proceedings under with their associated reservoirs, docks, exercise of its functions and in February that Act. The government (and Scottish repair yards and workshops. 1999 the government published a Ministers) have power to intervene in any Framework Document containing its aims such enforcement proceedings and to The Transport Act 1968 classified these and objectives for BW. Under the terms curtail them if they certify to the court waterways into: of the Framework Document, BW is they intend to make an Order specifying required by the government to operate different statutory standards. This power a) The Commercial Waterways, which and maintain its waterways to standards may be exercised if compliance with the were to be kept principally available that reflect use and prospects of use standards being enforced under the for the commercial carrying of freight and any land drainage requirements. proceedings would require the payment and maintained in a suitable Such standards do not always fully reflect of further grant by the government (or condition for use by commercial the historic standards for the channel Scottish Executive). freight carrying vessels. dimensions of Commercial and Cruising Waterways prescribed by the Transport The Framework Document also sets b) The Cruising Waterways, which were Act 1968. out BW’s wider relationship with to be kept principally available for government and responsibilities of the cruising, fishing and other recreational Board and chief executive, as well as purposes and maintained for use by setting a framework for BW’s relations vessels constructed or adapted for with users, the Waterways Ombudsman the carriage of passengers and driven and the Inland Waterways Amenity by mechanical power. Advisory Council. c) The remainder, which have to be dealt Consistent with its statutory obligations, with in the most economical manner powers and objectives agreed with possible (consistent, in the case government, BW runs its affairs on a of retained waterways, with the commercial basis and promotes the requirements of public health and fullest use of the waterways for leisure, the preservation of amenity and safety), recreation and amenity, and freight transport where appropriate.

54 ANNUAL REPORT & ACCOUNTS Borrowings and Determination of Grant Capital Investment Available Funding BW receives an annual grant in monthly The government sets the maximum The financial resources available to BW instalments from the government, which amount of grant and any access to loans during any year are controlled by the assists it in meeting its statutory from the National Loans Fund to fund government, which fixes resource and obligations. BW’s activities in England capital expenditure. BW is not allowed capital expenditure budgets as part of and Wales are being funded by Defra long term borrowings other than from the bi-annual Comprehensive Spending and in Scotland are being funded by National Loans Fund. The limit of all BW’s Reviews spanning three years. the Scottish Executive. borrowings was increased to £35 million BW manages its expenditure to remain under an order of the Secretary of State within these budgets and finances the Conditions for the payment of grant for the Environment in March 2001 expenditure from its own earned income and details of other controls applicable exercising powers contained in the Water and annual grant from Defra and the to BW as a public corporation are set Act 1981. The Treasury annually renews Scottish Executive. The grant received out in Financial Memoranda issued guarantees of bank overdraft facilities from the government during 2003/04 by government. in order for BW to meet day-to-day was £91.1 million of which £0.7 million fluctuations in receipts and payments. was allocated specifically for expenditure Part of the grant received from government on operational fixed assets. is used for the purchase of vehicles, BW’s profit generating capital expenditure plant and equipment for maintaining the can be funded through access to Preparation of waterways as economically as possible National Loans Fund loans, subject to but on which no return on investment government limits. In recent years BW has Accounts can be obtained. This is treated in only been permitted to borrow amounts British Waterways is required to prepare the accounts as a capital grant and equal to the total of earlier loans due for audited Annual Accounts which comply the income deferred and brought into repayment. Within these limitations, BW with Companies Act requirements and account in line with the depreciation has been restructuring its asset portfolio best commercial accounting practice, charges on the assets concerned. by disposal and reinvestment to improve although the information to be disclosed its ability to achieve its business objectives. is amended and extended by Direction BW is precluded from drawing government In February 1999 the Deputy Prime of the Secretary of State for Environment, grant in advance of need. Minister announced that the government Food and Rural Affairs as shown on had decided to phase out most of BW’s page 94. Objective to Avoid outstanding debt as it matures, thus removing from BW the need to take out Expenditure on repairs and renewals of Loss and Not new loans to repay existing loans. the basic canal infrastructure is written Draw Grant in off to profit and loss account as it is BW is also required to obtain government incurred. Investment property is re-valued Advance of Need consent for all expenditure projects over annually by external valuers. The above requirement of not drawing £3 million or when there are novel or grant in advance of need, combined with contentious features or to take an interest the statutory responsibility to avoid a in a body corporate in excess of 49%. loss on revenue account, taking It is furthermore required to consult Defra one year with another, leads BW to or the Scottish Executive at the earliest target to break even on profit and loss stage, in the case of major development account each year. proposals where the value of any BW investment, including the value of land with planning consent for the proposal, exceeds £3 million.

ANNUAL REPORT & ACCOUNTS 55 BOARD MEMBERS’ REPORT

The Board Members present their annual report on the affairs of BW, together with the accounts and auditors’ report, for the year ended 31 March 2004.

Principal Activities Board Members Fixed Assets BW’s principal activities are set out on The Board Members who served during Details of movements in fixed assets page 2. the year are shown on page 4. A Register during the year, including the revaluation of Interests is maintained by the legal of investment properties, are set out in director through whom public inspection Note 9 to the accounts. Business Review can be arranged. A detailed review of BW’s performance during the year and expected future BW does not incorporate revaluations developments is contained in the Statutory Maintenance of operational properties in the accounts. ‘Chairman’s Statement’, the ‘Chief Based upon external valuations at Executive’s Review of Operations’ and Obligations 31 December 2003, it is the opinion in the ‘Finance Director’s Review’. Under its Framework Document, BW is of the Board Members that the required by the government to maintain operational property, excluding the canal its waterways to standards that reflect track, towpaths and reservoirs, has a Results use and prospects of use. Such standards market value in the region of £49 million The audited accounts for the year ended do not always fully reflect the historic (2002: £83 million). A tax liability would 31 March 2004 are shown on pages 68 standards prescribed by the Transport Act not be expected to arise if land and to 93. 1968. The Board consider compliance with buildings were sold at that value. the Framework Document requirements The analysis of income and expenditure to be appropriate, notwithstanding the in the accounts is based on the current statutory standards, in the light of the Charitable and use of waterways rather than their power of the government (and Scottish Transport Act 1968 classification. Ministers) to make Orders varying the Political Contributions This provides a more meaningful statutory prescribed standards and to BW has not made any charitable or presentation but does not affect BW’s intervene in any enforcement proceedings. political contributions. statutory obligations set out in the Further details are given under the Transport Act 1968. description of BW’s statutory and financial framework on page 54. 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 8 days credit (2003: 24 days).

56 ANNUAL REPORT & ACCOUNTS Environment and Equal Opportunities Heritage BW is committed to equality of opportunity BW has a structured system in place to and has policies and procedures in place identify how work should be carried out to ensure continuous improvement. BW to protect and conserve heritage and fully recognises its legal responsibilities, environment. This is guided by our particularly in respect of race relations, Environmental Code of Practice (ECP) – sex and disability discrimination. our environmental management system.

Employees BW’s natural and cultural heritage and BW places considerable value on the the requirements to conserve or improve involvement of its employees and has it are described in a range of continued its practice of keeping them Conservation Plans, Biodiversity Action informed on matters affecting them as Plans, Heritage Principles, Standards and employees and on the various factors Action Plans. Further information on such affecting its performance. This is plans and strategy is available on request. achieved through formal and informal meetings allowing the two-way flow of information between management and Audit employees, and a monthly newspaper PricewaterhouseCoopers were appointed supplemented by occasional regional as external auditors of BW for the year information sheets, and employee surveys. ended 31 March 2004 by the Secretary of State for Environment, Food and Rural BW has common terms and conditions Affairs in accordance with Section 24(2) of employment and single table of the Transport Act 1962. bargaining with employee representatives through National, Intermediate and By order of the Board 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 Nigel I Johnson annual performance and development Legal Director and Secretary to the Board review process.

ANNUAL REPORT & ACCOUNTS 57 CORPORATE GOVERNANCE

Corporate governance is concerned with ensuring that an organisation is acting in accordance with best practice.

This statement by the Board covers the and (in respect of two members) Scottish The Board is kept informed of key elements in the application by British Ministers. Their appointment is fixed for developments within the business through Waterways of the principles of corporate a period of three years and their regular presentations by management. governance. The Board has resolved that, remuneration is set by the Secretary of All Executive Directors are normally save for necessary adaptations consequent State and Scottish Ministers. As such, present during Board meetings. Board upon its actual status as a statutory Sections 1A.5, 1A.6 and 1B of the meetings are held at different locations Public Corporation, it should adhere to 1998 Code relating to the appointment, around the business and are preceded by and apply the standards of corporate re-election and remuneration of Board visits and meetings with BW employees governance applicable to a quoted public Members are not applicable to BW. and local stakeholders. limited company. The Board meets regularly (six times During the year the Board introduced a The applicable standards for the reporting during the year) and brings an independent new and rigorous methodology to evaluate year 2003/04 are those set out in judgement to its oversight of financial, its performance. A probing questionnaire the version of the Combined Code on strategic, performance and organisational on performance of the Board, its Corporate Governance published in issues. Reporting to the Board are Committees and members has been 1998. In July 2003 the Code was revised Executive Directors who have delegated completed (non-attributably) by each and the Board began to implement the responsibility for operations and Member and a summary of responses standards required by the new version management and for the development prepared by the Secretary to the Board. of the Code in 2003/04 even though of business strategy and policies, subject The summary will be discussed by the compliance with it was not required to approval by the Board. Biographical Board as a whole with a view to preparing before the reporting year beginning details of the Board Members and a Board Improvement Plan. The evaluation 1 April 2004. Executive Directors can be found on methodology requires the Board to meet pages 4 and 5. without the Chairman present at least This report, therefore, explains how the once a year to appraise his performance. Board has addressed the principles of the All the Non-Executive Board Members 1998 Code throughout the reporting year are independent from management and The Board has a schedule of matters and how it has implemented the revised the majority are free from any business specifically reserved to it for decision principles of the 2003 Code during the or other relationship which could materially and has also defined those delegated to course of the year. The compliance interfere with the exercise of their Board Committees and the Executive statement is, however, in respect of the independent judgement. On specific Directors. The Board considers that 1998 Code provisions. issues where there may be a potential its exclusively non-executive membership conflict of interest, Members declare their brings a sufficient strength of independence Board – Operation and Membership interests and withdraw from the meeting. to the Board and has not nominated any One of the principal differences between This is noted in the minutes. one non-executive member to be a senior BW and a quoted public limited company independent Board Member. The roles relates to the structure of the Board The Chairman has ensured that the of Chairman and Chief Executive are and the appointment of its members. Board Members have been provided with clearly separated and the division of appropriate and timely information and responsibilities is defined in the delegation BW is governed by a Board comprising that their enquiries have been properly arrangements, which also provide for all a Chairman and Vice Chairman and met. Board papers are distributed a week Board Members to have access to the (currently) 9 other non-executive members in advance of the relevant meeting to advice and services of the Secretary appointed by the Secretary of State for allow the Members fully to prepare for to the Board, and take independent the Environment, Food and Rural Affairs meetings, and minutes of Committee professional advice at BW’s expense meetings are circulated to all Members. after notifying the Chairman.

58 ANNUAL REPORT & ACCOUNTS Board Audit Remuneration Attendance Total number of meetings 6 3 4 Details of attendance at the principal Dr George Greener 6 3* 4* Board and Committee meetings in 2003/04. Sir Peter Soulsby 6 2 4 * Dr George Greener is not a member Helen Gordon 6 3 - of the Audit Committee and ceased Dr Derek Langslow 6 3 - to be a member of the Remuneration Dr Campbell Christie 5 - 4 Committee during the year but attends Janet Lewis-Jones 5 - -** their meetings by invitation. Prof George Fleming 6 2 - **Janet Lewis-Jones and Susan Ian Darling 6 - 4 Achmatowicz joined the Remuneration an Audit Committees respectively Adeeba Malik 5 2 - during the reporting year, but after Susan Achmatowicz 6 -** - the last meetings of those committees Terry Tricker 5 - 3 in the year.

The Secretary ensures that new Board The Audit Committee oversees the nature Remuneration Committee Members receive appropriate training on and amount of non-audit work undertaken The Remuneration Committee, comprising appointment that includes an information by PricewaterhouseCoopers LLP each five Non-Executive Board Members pack and an induction session. The year to ensure that the external auditors (details of whom are given on pages 4 Secretary may only be removed with independence is safeguarded. In 2003 and 62), has as its main task consideration the approval of the Board. the Committee adopted a new policy annually of the performance of the regarding external auditor independence Executive Directors and determination of The Board has introduced a methodology and the provision of non-audit services by their remuneration levels. During the year for determining appropriate levels of the external auditors. All non-audit services George Greener stood down from control of subsidiaries, joint ventures and above £12,000 to be performed by the the Committee (although he still attends associated undertakings of BW. The external auditors are required to be by invitation) and Janet Lewis-Jones methodology provides a risk profile that approved by the Audit Committee. The joined the Committee. Revised terms of is used as a guide to the appointment Boards policy is for a presumption reference for the Remuneration Committee of directors and the appropriate level of that non-audit work will be put out to have been agreed and are also available management reporting. competitive tender. Details of the external on the BW website. Further details of the auditors’ fees are given in note 4 on work of the Committee are given in Audit Committee page 76. The Committee reviews the the Director’s Remuneration Report on The Board’s Audit Committee comprises effectiveness of the external auditors pages 62 to 65. five non-executive Board Members. annually and will be extending that to Details of the current Members are given cover internal audit. Pensions Trustees on page 4. Towards the end of the year A subsidiary, British Waterways Pension Sir Peter Soulsby stood down from the Nominations Committee Trustees Limited, the trustee of the committee and Susan Achmatowicz The Board has established a Nominations Pension Fund, is responsible for its own joined it. The Committee has written Committee and terms of reference are governance. The trustee directors, who terms of reference that are available on available on our website. It comprises meet twice yearly, are four members our website, and meets at least three six Non-Executive Board Members of the Board, the Chief Executive, three times a year to review the internal audit details of which are given on page 4. It employee representatives and a plan, progress against that plan, and will provide support and advice to the representative elected by current summary findings of the internal and Board Chairman when consulted by pensioners. Fund management is overseen external auditors. In addition to reviewing Ministers on the appointment of persons by an Investment Sub-Committee and is the financial results and accounting to the Board and review the Board delegated to external professional policies, the Committee monitors the composition (its mix of skills, experiences investment managers. Responsibility for effectiveness of risk management and and characteristics) from time to time the management and administration internal control systems for the Board. and make reports or recommendations of the Fund is vested in a Committee By invitation the Chairman attends the to the Chairman for Ministers. It will also of Management. Ongoing day to day meetings, together with the Chief cover succession planning. supervision of the administration of the Executive and the Head of Audit and, Fund is carried out by the Pensions when appropriate, Executive Directors Manager and staff, under an administration and the external auditors. The Committee agreement between British Waterways also meets the external auditors without Pension Trustees Limited and BW. Executive Directors present. A similar session is being introduced with the Head of Audit.

ANNUAL REPORT & ACCOUNTS 59 Corporate Governance

Relations with Shareholders The Board Members acknowledge their Information and Communication Unlike a listed company, BW does not ultimate responsibility for BW’s system The Executive Directors submit a rolling have shareholders so that Sections 1C of internal control and for reviewing its three-year Business Plan, detailed annual and 2 of the 1998 Code do not apply. effectiveness. These internal controls are budgets and key performance indicators The Board is responsible to the Secretary designed to manage rather than eliminate on its strategic priorities to the Board of State for the Environment, Food and the risk of failure to achieve business for approval. The plan describes the Rural Affairs and Scottish Ministers and objectives, and can only provide reasonable implementation of the Boards long-term maintains an ongoing dialogue at all and not absolute assurance against strategic vision and is supported by levels within government. The Board material misstatement or loss. individual business unit plans that apply holds an Annual Meeting at which it consistent economic and financial communicates the key business results Risk Identification and Management assumptions. Monthly operational reports and plan for the future to the main user There is an ongoing process for identifying, and financial summaries together with groups, its partners and individual users. evaluating and managing the significant regular forecasts are produced for each risks faced by BW. The Board regularly business unit and reviewed by the BW has established an advisory Group, reviews this process. Executive. Progress against the key the British Waterways Scotland Group performance indicators is supplied on (BWSG) to support the development of Risks are identified in each business unit a quarterly basis to the Executive for the business in Scotland within the new plan and are reviewed by the Executive review. Detailed reports and projections devolved political environment. The Directors and the Board. The key risks are presented to each Board meeting. BWSG is a non-statutory group working are subject to regular review by the to support BW’s Board and its executive Executive Directors to identify new and Monitoring directors. It has a counselling, consultative changing risks. The results are incorporated During the year the Audit Committee: and influencing function externally and into the Chief Executive’s operating internally, rather than a decision-making report to the Board. The Board also • reviews the internal and external role and has an open remit to bring to the considers specific reports on key risks, audit plans Board and/or the Executive Directors including the statutory arrears and safety • considers reports from management, for consideration any issue of concern backlog. Each Director annually completes internal and external audit on the to a majority of the members. Further a letter of assurance outlining how risk system of risk management, internal information on the BWSG, including management and the control environment control and any significant control details of recent changes to the external has provided reasonable assurance of weaknesses appointments, is given in the Scotland effective and efficient operations throughout • discusses with management the Director’s Review on page 41. the period. The Chief Executive considers actions and progress in dealing with this with each Director during the annual identified problem areas In addition, under its Openness and corporate governance review and Accountability programme, the Board is a statement is given to the Audit The Chairman of the Audit Committee putting in place new arrangements for Committee summarising the significant reports the outcome of the Audit a National Consultative Council through risks, controls and required action points. Committee meetings and any significant which stakeholder organisations will have internal control issues to the Board. The direct access to Board Members and This is supplemented by ongoing risk Board receives the minutes of all Audit senior management to raise significant assessments at each business unit jointly Committee meetings. issues of concern or common interest. by management and internal audit. This will incorporate and supplement the successful national user group meetings. Control Environment There is a clear organisation structure Internal Control with delegated responsibilities and The Board has maintained procedures authorities. The Board is committed to necessary to comply with the requirements achieving high standards from its people. of the 1998 Code relating to internal A code of conduct and ethics statement, control and the September 1999 which includes a whistleblowing proce- Guidance for Directors on the internal dure, is supported by high recruitment control requirements of the Combined standards, an appraisal process and a Code (the Turnbull Report). policy of unlocking the potential of staff. The key control processes are documented and available on-line throughout BW.

60 ANNUAL REPORT & ACCOUNTS Board Members’ Responsibilities in They are also responsible for safeguarding Respect of the Group Accounts the assets of BW and hence for taking The Board Members are required to reasonable steps to prevent and detect prepare group accounts for each financial fraud and other irregularities. year which comply with the Accounts Direction issued by the Secretary of Compliance with the Combined Code State for the Environment, Food and Rural The Board considers it has complied Affairs in respect of BW (see pages throughout the financial year and up to 94 and 95). the date of approval of the annual report and accounts with the 1998 Combined In preparing those accounts, Board Code, except for those matters discussed Members are required to: in this report or those that cannot be • select suitable accounting policies and applied to BW. Furthermore, it has during then apply them consistently the year put in place systems and • make judgements and estimates that processes necessary for compliance with are reasonable and prudent the 2003 revision of the Combined Code. • state whether applicable accounting standards have been followed, subject BW is additionally subject to public sector to any material departures disclosed controls, government monitoring and and explained in the accounts approval, Parliamentary scrutiny and • prepare the group accounts on the external reviews. going concern basis unless it is inappropriate to presume that the Going Concern organisation will continue in business. The funding arrangements of BW differ from those of a public limited company. The Board Members confirm that the BW receives an annual grant from group accounts comply with the above government to assist it in meeting its requirements. statutory obligations, as referred to in the Statutory and Financial Framework on Board Members are responsible for page 54. The grant available for the year ensuring that proper accounting records ending 31 March 2005 has been notified are kept and that these disclose with as £68.0 million. It is anticipated that reasonable accuracy, at any time, the grant will continue at levels sufficient to financial position of BW and enable them enable BW to continue in operational to ensure that the accounts comply with existence for the foreseeable future. the Direction.

ANNUAL REPORT & ACCOUNTS 61 DIRECTORS’ REMUNERATION REPORT

The Remuneration The BW Board Committee Board Members’ appointments are The Board has established a Remuneration (TPRC) with responsibility levels assessed determined by the Secretary of State Committee responsible for determining and compared with organisations of similar for Environment, Food and Rural Affairs and reviewing the terms of employment size in the public and private sectors. or (in the case of two Board Members) and remuneration for Executive Directors. TPRC recommend that the closest match Scottish Ministers and are for a fixed term The remuneration principles established of responsibility, liability and risk are to be with the option for this to be extended for this senior group of employees found in the private sector. by a further term. The contracts are provides the framework for, and is terminable upon notice not exceeding consistent with, remuneration policy In 2003/04 the Committee commissioned six months. The Secretary of State or throughout the business. The Committee TPRC to update their work on Executive Scottish Ministers as appropriate, comprises five Board Members and is Director roles and to undertake an evaluation determines Board Members’ emoluments. chaired by the Board’s Vice Chairman. of the General Manager roles created During the year George Greener stepped in the organisational restructure of the No Board Member receives a benefit down from the Committee in the light of business. in kind. the new guidance contained in the 2003 revision of the Combined Code on The Committee operate to a Remuneration The Chairman’s pension entitlement is Corporate Governance. He nevertheless Policy designed specifically to reflect calculated by analogy to the British attends meetings of the Committee by BW’s business requirements taking Waterways (1990) Pension Fund. invitation. Janet Lewis-Jones joined the account of the specialist independent The increase in the provision required Committee at the end of the year. At advice received. The Executive Directors for the year is calculated by a qualified the end of 2003/04 the Committee have agreed with the recommendation actuary using the discount rates members were: to publicly disclose their remuneration. consistent with those required under Full details are included in the table on FRS17 as shown in note 8 to the Sir Peter Soulsby, Chairman page 65. Annual Accounts. Dr Campbell Christie Ian Darling There were no contracts or transactions Janet Lewis-Jones Remuneration Policy in which the Board Members had a Terry Tricker The Remuneration Committee’s disclosable interest. overriding objective is to ensure that BW’s The Chief Executive and Personnel remuneration policy and remuneration Details of Board Members’ fees are Director attend the Committee by invitation packages are sufficient to attract, retain shown in the table on page 64. to present recommendations and and motivate a high quality team of provide technical support but have Executive Directors to deliver the Reporting to the Board, but not Board no input into decisions affecting their business strategy where growth is Members, are Executive Directors who own remuneration. the fundamental requirement for a have responsibility for management and sustainable business. Based on the for the development of business strategy In determining appropriate remuneration information and recommendations and policies, subject to approval and levels, the Committee commissions provided by TPRC the Committee had general oversight by the Board. specialist independent advice, surveys agreed that BW should match base conducted by external consulting firms salaries to market median levels with and remuneration information on a proportion of variable pay in the form comparable organisations. All Executive of annual bonus. TPRC also recommend Director roles are fully evaluated by that, unlike the private sector, a Long-Term Towers Perrin Remuneration Consultants Incentive Plan is not applicable at this

62 ANNUAL REPORT & ACCOUNTS stage in BW’s development. A summary This level of potential total annual bonus Value Created targets would replace of each element of the remuneration was recommended by the Remuneration income generation as the overarching package is set out below. Committee to reflect in part the absence indication of business growth. of Long-Term Incentive Plan arrangements 1. Basic Salary that normally exist in the private sector. 2.2 Personal Performance Element Basic salaries are normally reviewed Bonus payments are normally made on Of the total bonus potential, up to 12.5% annually on 1 June and increases are 1 June each year. Total bonus payments (20% for the Chief Executive) of basic determined by reference to comparator for each Executive Director are shown in salary may be awarded for the achievement information taking into account each the table on page 65. of a range of stretching targets set to Director’s contribution during the year. encourage each Director to achieve The evaluation by TPRC during 2002 2.1 Corporate Performance Element performance levels over and above the indicated that Executive Director salaries Of the total bonus potential up to 17.5% normal expectations of their role. Targets were significantly below the appropriate (20% for the Chief Executive) of basic are directly linked to the achievement of median market levels. The Remuneration salary may be awarded for the achievement key strategic business activities. Committee recommended that salaries of income generation targets. In broad should be increased towards the market terms the achievement of budgeted 3. Benefits levels in a staged way. Details of basic corporate income would indicate that half The Executive Directors are entitled to salary levels for 2003/04 for each Corporate performance bonus would be a company car, health insurance and Executive Director are shown in the table appropriate with full bonus applicable only critical illness insurance. Details of the on page 65. where income exceeds budget by a levels of taxable benefit are shown in significant proportion. Failure to significantly the table on page 65. 2. Annual Bonus achieve budget income levels would A maximum total annual bonus of 30% normally indicate that no corporate bonus 4. Pensions (40% for the Chief Executive) of basic is payable. The Committee selected All Executive Directors participate in the salary may be awarded subject to the income generation as the overarching BW (1990) Pension Fund which provides achievement of Corporate performance target and indicator of business growth, a pension on a defined benefit basis and targets measured by income generation to ensure a clear performance focus based on basic salary. Executive Directors and personal performance measured within the complex range of objectives are required to retire at age 60 rather against the achievement of individual that BW is required to achieve, bearing than 65 as is normal in BW and are targets. Fundamental measures of in mind the controls that exist on the compensated for this by the purchase on customer satisfaction and safety are quality of income because of the need their behalf by BW of 5 years pension in place and have to be satisfactorily to breakeven on the P&L Account. service. Where death in service benefit for achieved before consideration is given an Executive Director is limited by Inland to any bonus payment. The Remuneration In 2003/04, whilst the income generation Revenue regulations the shortfall is covered Committee requires internal audit and targets were exceeded, the remuneration by a separate insurance arrangement external verification of these non-financial committee decided to exercise its available and the premium is paid by BW. The measures. The Remuneration Committee discretion described under 2 and chose Committee has been monitoring the reserves total discretion to award or to reduce the corporate bonus from that potential impact of changes to pension withhold bonus payments taking account which could have been awarded. taxation. Arrangements to compensate of any mitigating factors. for these effects have remained under The Committee decided during 2003/04 consideration. Details of accrued pension that for future years, beginning in levels are shown in the table on page 65. 2004/05, the achievement of Economic

ANNUAL REPORT & ACCOUNTS 63 Directors’ Remuneration Report

5. Notice Period Summary of Directors Executive Directors are entitled to Remuneration 2003/04 12 months notice of termination of The information provided below in respect contract by BW. Directors are required of the BW Board complies with the provi- to give BW six months notice. sions of Schedule 7A of the Companies Act 1985, as required by the Accounts 6. External Appointments for Direction of the Secretary of State. In Executive Directors addition, and with their agreement, BW The Board recognises that Executive has chosen to include information on the Directors may be invited to become Non- remuneration of the Executive Directors. 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 22 to the accounts on page 92.

2003/04 2002/03 Date of expiry of Fees Total Total BW Board current term £ £ £ George Greener, Chairman 9/7/05 70,147 70,147 66,598 Sir Peter Soulsby, Vice Chairman 30/9/04 14,332 14,332 13,761 Susan Achmatowicz 9/10/04 10,866 10,866 10,433 Campbell Christie 30/6/04 10,866 10,866 10,433 Ian Darling 3/9/06 10,866 10,866 10,433 George Fleming 9/10/04 10,866 10,866 10,433 Helen Gordon 3/9/06 10,866 10,866 10,433 Derek Langslow 3/9/06 10,866 10,866 10,433 Janet Lewis-Jones 9/10/04 10,866 10,866 10,433 Adeeba Malik 9/10/04 10,866 10,866 10,433 Terry Tricker 9/10/04 10,866 10,866 10,433 182,273 182,273 174,256

64 ANNUAL REPORT & ACCOUNTS Taxable Termination 2003/04 2002/03 Salary Bonus Benefits Payments Total Total Executive Directors ££ £ £ £ £ Robin Evans, Chief Executive 164,336 33,180 9,259 - 206,775 163,918 David Fletcher, Chief Executive (to 12 December 2002) - - - - - 164,125 James Froomberg (from 24 March 2003) 130,179 - 8,052 - 138,231 2,968 Nigel Johnson 117,676 25,200 12,050 - 154,926 139,787 Vincent Moran 102,167 20,250 7,731 130,148 115,521 Simon Salem 93,833 16,720 10,142 - 120,695 115,011 William Schlegel (to 30 September 2003) 47,563 14,250 7,023 94,642 163,478 128,790 Stewart Sim 120,333 22,250 10,463 - 153,046 156,229 Mark Smith 124,407 27,500 9,379 161,286 142,600 900,494 159,350 74,099 94,642 1,228,585 1,128,949

Robin Evans was previously employed by BW as Commercial Director until his appointment as Chief Executive form 12 December 2002

Accrued Pension Increase Increase Increase transfer value in accrued in accrued Transfer value of over the year Accrued Accrued pension lump sum accrued benefits net of Pension at lump sum at during the during the 31 March 31 March Directors’ 31 March 2004 31 March 2004 year year 2004 2003 Contributions £pa £ £ £pa £ £ £ BW Board Member George Greener 5,204 - 1,154 - 91,500 61,000 26,684 Executive Directors Robin Evans 27,644 - 12,323 - 279,047 119,651 102,286 David Fletcher - - - - - 159,836 - James Froomberg 3,300 - 3,300 - 30,843 - 16,412 Nigel Johnson 9,571 - 3,593 - 95,214 46,200 43,599 Vincent Moran 13,366 - 3,985 - 124,287 67,811 51,166 Simon Salem 32,803 6,135 4,528 452 280,656 187,848 87,688 William Schlegel 34,221 15,203 3,489 4,318 341,278 236,425 71,152 Stewart Sim 66,101 39,325 7,007 1,300 1,051,352 813,814 230,907 Mark Smith 7,650 - 3,449 - 61,814 26,379 30,020

The pension benefit is the increase in transfer value after indexation in accrued pension during the year, less the Board Members’ or Executive Directors’ own contributions. The accrued annual pension is the amount, on attaining normal pension age, to which the Board Member or Executive Director would be entitled if he had left BW at the year end or is entitled, having retired during the year. The accrued benefits at 31 March 2004 reflect, for members subject to the pension schemes earnings cap, normal Fund benefits based on uncapped earnings restricted, as appropriate, to current Inland Revenue limits. This was not the method adopted for the calculation of the accrued benefits as at 31 March 2003, as shown in the BW’s accounts for the year ending 31 March 2003. The increase in the accrued benefits and the increase in the transfer value therefore include an element that represents this change. 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.

Signed on behalf of the Board Nigel I Johnson Legal Director and Secretary to the Board

ANNUAL REPORT & ACCOUNTS 65 INDEPENDENT AUDITOR’S REPORT TO THE SECRETARY OF STATE FOR ENVIRONMENT, FOOD AND RURAL AFFAIRS

We have audited the financial statements We report to you our opinion as to Board’s corporate governance procedures, which comprise the profit and loss account, whether the financial statements give a or its risk and control procedures. the balance sheet, the cash flow true and fair view and whether the financial statement, the statement of total statements are properly prepared in The maintenance and integrity of British recognised gains and losses and the accordance with the provisions of the Waterways Board’s website is the related notes (note 1 to 24), which Transport Act 1962, and any directions responsibility of the Board Members; have been prepared under the historical issued by the Secretary of State for the the work carried out by the auditors does cost convention as modified by the Department for Environment, Food and not involve consideration of these matters revaluation of certain fixed assets and Rural Affairs. We also report to you if, and, accordingly, the auditors accept the accounting policies set out in the in our opinion, the Board Members’ Report no responsibility for any changes that statement of accounting policies. is not consistent with the financial may have occurred to the financial statements, if British Waterways Board statements since they were initially Respective Responsibilities of has not kept proper accounting records, presented on the website. Board Members and Auditors if we have not received all the information The Board Members’ responsibilities and explanations we require for our audit, Legislation in the United Kingdom for preparing the Annual Report and or if information specified by law, or the governing the preparation and the Financial Statements in accordance Accounts Direction, regarding Board dissemination of financial statements may with applicable United Kingdom Members’ remuneration and transactions differ from legislation in other jurisdictions. law and accounting standards are set is not disclosed. out in the statement of Board Members’ Basis of Audit Opinion responsibilities. We read the other information contained We conducted our audit in accordance in the Annual Report and consider with auditing standards issued by the Our responsibility is to audit the financial the implications for our report if we become Auditing Practices Board. An audit statements in accordance with relevant aware of any apparent misstatements includes examination, on a test basis, legal and regulatory requirements and or material inconsistencies with the financial of evidence relevant to the amounts and United Kingdom Auditing Standards statements. The other information disclosures in the financial statements. issued by the Auditing Practices Board. comprises only the Board Members’ Report, It also includes an assessment of the This report, including the opinion, has the Directors’ Remuneration Report, the significant estimates and judgements been prepared for and only for British Chairman’s Statement, the operating made by the Board Members in the Waterways Board’s members as a body and Financial Review, and the Corporate preparation of the financial statements, in accordance with the provisions of the Governance Statement. and of whether the accounting policies Transport Act 1962 and for no other are appropriate to British Waterways purpose. We do not, in giving this opinion, We also, at the request of the Board Board’s circumstances, consistently accept or assume responsibility for any Members, review whether the Corporate applied and adequately disclosed. other purpose, or to any other person to Governance Statement reflects British whom this report is shown, or into whose Waterways Board’s compliance with the hands it may come save where expressly seven provisions of the Combined Code agreed by our prior consent in writing. for our review, and we report if it does not. We are not required to consider whether the Board Members’ statements on internal control cover all risks and controls, or to form an opinion on the effectiveness of British Waterways

66 ANNUAL REPORT & ACCOUNTS We planned and performed our audit Opinion PricewaterhouseCoopers LLP so as to obtain all the information and In our opinion: Chartered Accountants and Registered explanations which we considered Auditors necessary in order to provide us with • The financial statements give a true Southwark Towers sufficient evidence to give reasonable and fair view of the state of affairs 32 London Bridge Street assurance that the financial statements of British Waterways Board and the London are free from material misstatement, group at 31 March 2004 and of its SE1 9SY whether caused by fraud, or other loss and cash flows of the group for irregularity, or error, and in all material the year then ended and have been June 2004 respects, the expenditure and income properly prepared in accordance with have been applied to the purposes the Directions of the Secretary of intended by Parliament and the financial State for Environment, Food and transactions conform to the authorities Rural Affairs; which govern them. In forming our • In all material respects, the expenditure opinion, we also evaluated the overall and income have been applied to the adequacy of the presentation of purposes intended by Parliament and information in the financial statements. the financial transactions conform to the authorities which govern them.

ANNUAL REPORT & ACCOUNTS 67 Consolidated Profit and Loss Account as at 31 March 2004

Continuing Operations Total Acquisitions Note 2003/04 2003/04 2003/04 2002/03 £000 £000 £000 £000 Group turnover including joint ventures 102,432 494 102,926 109,626 Less: joint ventures (319) - (319) - Turnover 2 102,113 494 102,607 109,626 Government grant 394,770- 94,77081,970 Total revenue 196,883 494 197,377 191,596 Major repairs and renovations (65,613) - (65,613) (83,560) Staff costs (60,596) (106) (60,702) (57,165) Other operating charges (68,723) (309) (69,032) (65,973) Depreciation (5,981) (90) (6,071) (6,200) Own work capitalised or charged to major works 263 - 263 1,852 Total expenditure 2 (200,650) (505) (201,155) (211,046) Operating loss 4 (3,767) (11) (3,778) (19,450) Share of operating profits and losses of associates and joint ventures (946) - (946) 1,059 Profit on sale of investment properties 4,892 2,678 7,570 3,771 Exceptional costs of business reorganisation (5,402) - (5,402) - Loss for the financial year before interest (5,223) 2,667 (2,556) (14,620) Interest receivable 5,269 3,592 Interest payable 5 (4,532) (3,626) Loss for the financial year before taxation (1,819) (14,654) Taxation credit 6 346 4,362 Loss for the financial year after taxation (1,473) (10,292) Transfer to realised capital reserve 17 (3,352) (8,775) Loss transferred to reserves 18 (4,825) (19,067)

Statement of Consolidated Total Recognised Gains & Losses

Note 2003/04 2002/03 £000 £000 Loss for the financial year after taxation (1,473) (10,292) Net increase in revaluation reserve resulting from transfers between investment and operational properties 17 22,907 - Unrealised surplus on revaluation of investment properties 17 24,552 21,300 Corporation tax charge on capital gains 6 (1,182) (1,881) Total gains recognised since last Annual Report 44,804 9,127

Note of Consolidated Historical Cost Profits & Losses

Note 2003 /04 2002/03 £000 £000 Loss for the financial year after taxation (1,473) (10,292) Realisation of property revaluation gains of previous years 17 7,601 7, 9 8 1 Corporation tax charge on capital gains 6 (1,182) (1,881) Historical cost profit / (loss) for the financial year 4,946 (4,192)

68 ANNUAL REPORT & ACCOUNTS Balance Sheets as at 31 March 2004

Group BW Note 2004 2003 2004 2003 £000 £000 £000 £000 Fixed assets Intangible assets - Goodwill 23 3,109 - - - Tangible assets 9 489,606 391,600 488,404 387,688 Investments in joint ventures: Share of gross assets 3,389 738 Share of gross liabilities (671) (451) Goodwill (87) (30) 2,631 257 Investments in associates 6,627 4,594 Other investments 148 148 21,176 7, 3 67 Total investments 10 9,406 4,999 21,176 7, 3 67 502,121 396,599 509,580 395,055 Current assets Stocks 11 939 1,048 449 1,048 Debtors Trade debtors 13,504 20,263 13,203 20,262 Other debtors 12 25,812 29,488 25,435 29,481 Prepayments and accrued income 18,490 17,438 18,315 17,438 57,806 67,189 56,953 67,181 Cash at bank and in hand 13 21,116 22,692 20,333 22,616 79,861 90,929 77,735 90,845 Less: Creditors: Amounts falling due within one year 14a 71,060 69,502 75,637 71,898 Net current assets 8,801 21,427 2,098 18,947 Total assets less current liabilities 510,922 418,026 511,678 414,002 Creditors: Amounts falling due after more than one year 14b (66,349) (16,949) (66,260) (16,871) Provisions for liabilities and charges 15 (12,484) (13,021) (12,717) (9,221) Deferred capital grant 16 (13,344) (14,130) (13,344) (14,130) 418,745 373,926 419,357 373,780 Financed by Reserves Investment property revaluation reserve 17 259,345 219,484 259,339 219,481 Realised capital reserve 17 137,742 127,970 137,742 127,970 Unrealised capital reserve 17 4,100 4,100 4,100 4,100 Capital contribution 17 3,450 3,450 3,450 3,450 Other reserves 17 21 10 - - Profit and loss account 18 (649) 4,176 (10) 4,043 404,009 359,190 404,621 359,044 Debt Due to National Loans 19 14,736 14,736 14,736 14,736 418,745 373,926 419,357 373,780

G.P. Greener R Evans Chairman Chief Executive 23 June 2004

ANNUAL REPORT & ACCOUNTS 69 Consolidated Cash Flow Statement year to 31 March 2004

Reconciliation of operating loss to net cash inflow from operating activities

Group BW 2003/04 2002/03 £000 £000 £000 £000 Operating loss (3,778) (19,450) Business re-organisation costs (5,402) - (9,180) (19,450) Items not involving the flow of cash Depreciation 6,071 6,200 Profit on sale of operational fixed assets 32 (3) Write down in value of fixed assets 463 1,215 Release of deferred capital grant (1,480) (2,153) 5,086 5,259 (4,094) (14,191) Decrease / (increase) in stocks 109 (489) Decrease / (increase) in debtors 8,627 (25,831) Increase in creditors 28,829 12,402 37,550 (13,918) Decrease in provisions (1,896) (1,147) Net cash inflow / (outflow) from operating activities 31,560 (29,256)

CASH FLOW STATEMENT 2003/04 2002/03 Note £000 £000 £000 £000 Net cash outflow from operating activities 31,560 (29,256) Returns from servicing of finance Interest received 3,564 4,265 Interest paid (3,452) (2,636) Net cash inflow from servicing of finance 112 1,629 Capital expenditure and financial investment Payments to acquire fixed assets (49,687) (24,683) Receipts from sale of fixed assets 19,711 13,765 Receipts from sale of other property rights - 29,926 Net cash inflow from capital expenditure and financial investment (29,976) 19,008 Acquisitions Investments in joint ventures and associated undertakings 10 (405) (141) Purchase of subsidiaries 10 (3,567) (112) Net cash outflow from acquisitions (3,972) (253) Net cash outflow before financing (2,276) (8,872) Financing Capital grant in respect of fixed assets 16 700 4,641 Capital contribution from Defra - 1,600 Repayment of loans to National Loans Fund 19 - (1,600) Net cash inflow from financing 700 4,641 Decrease increase in cash 13 (1,576) (4,231)

Reconciliation of net cash flow to movement in net funds 2003/04 2002/03 £000 £000 £000 £000 Decrease increase in cash in the period (1,576) (4,231) Repayment of loans to National Loans Fund - 1,600 Change in net debt from cash flows during period (1,576) (2,631) Net funds at 1 April 7, 9 5 6 10,587 Net funds at 31 March 6,380 7,956

70 ANNUAL REPORT & ACCOUNTS NOTES TO THE ACCOUNTS

1. Accounting Policies

A summary of the principal accounting which BW has a long-term interest and is Tangible Fixed Assets policies, all of which have been applied jointly controlled by BW and one or more (a) Operational Assets consistently throughout the year and the other venturers under a contractual Waterways, reservoirs and towpaths preceding year, is set out below. arrangement. The accounts include the were written off in the capital relevant percentage of all joint ventures’ reconstruction on 1 January 1969 Basis of Accounting turnover and operating profit/loss on the resulting from the Transport Act 1968. Under Section 24(1)(b) of the Transport face of the profit and loss account and Act 1962, BW is required to prepare an the share of gross assets and gross Land, buildings, and structures annual Statement of Accounts in such liabilities on the face of the balance capitalised are: form and containing such particulars as sheet. The notes to the accounts disclose the Secretary of State for Environment, the names of joint ventures, the nature (i) Purchases of land and the construction Food and Rural Affairs may, with the of the business and details of the shares and major improvement of buildings. approval of H.M. Treasury, from time held by BW. (ii) Additional assets and improvements to time direct. A copy of the Accounts to existing assets of BW, provided the Direction, at present in force, is set out An associate is an entity (other than a financial return meets the commercial on pages 94 to 95. subsidiary) in which BW has a participating viability criteria laid down by BW. interest and over whose operating Accounting Convention and financial policies. BW exercises All other expenditure on improvements, The accounts are prepared in accordance a significant influence. The accounts repairs and renewals is charged to with the historical cost convention include the relevant percentage of all the profit and loss account as it arises. modified by the revaluation of investment associates’ operating profit/loss on the properties and generally accepted face of the profit and loss account, as well (b) Craft, plant and equipment accounting principles in the United as the relevant percentage of any item All expenditure on additions, Kingdom, with the following exception, below the operating profit line. The improvements and replacements required by the Accounts Direction: interest in the associates’ net assets is is capitalised. shown on the face of the balance sheet. In the balance sheet, National Loans (c) Gross book value Fund loans from the Secretary of State Intangible Fixed Assets The gross book value of fixed assets are grouped with capital and reserves, Goodwill related to joint ventures and other than investment properties is rather than as creditors falling due after associated undertakings is included in shown at the valuation at 1 January more than one year. the carrying value of the investment. An 1969 or at subsequent cost. impairment review of goodwill is carried Consolidation out annually by Directors, and any Tangible fixed assets are stated at cost The BW Group comprises the British amortisation charged to the profit and or valuation, net of depreciation and Waterways Board (BW) and those sub- loss account. any provision for permanent diminution sidiaries incorporated to act solely on in value. Depreciation is provided on all behalf of, and for the benefit of, BW. The tangible fixed assets, other than investment acquisition method of accounting has properties and freehold land, at rates been adopted. Under this method, the calculated to write off the cost or valuation, results of subsidiaries acquired of in less estimated residual value (if any), of the year are included in the consolidated profit and loss account from the date of acquisition. A joint venture is an entity in

ANNUAL REPORT & ACCOUNTS 71 Notes to the Accounts

each asset on a straight-line basis over Deferred Consideration Stocks its expected useful life, as follows: Where BW enters into a significant sale of Stocks are stated at the lower of cost assets or rights with deferred consideration or net realisable value. Freehold buildings 40 years terms, the net present value of the amounts receivable, discounted at the clearing Turnover Leasehold land Over the term bank base rate ruling at the date of the Turnover represents amounts receivable and buildings of the lease transaction, is recognised in the profit for goods and services provided in the and loss account. Imputed interest is normal course of business, net of trade Plant, machinery Between 5 recognised in the profit and loss account discounts and VAT. Contributions to and structures and 25 years on a receivable basis. non-statutory works are recognised on an accruals basis after all conditions for their Vehicles 5 years Deferred Capital Grant receipt have been met. A proportion of the grant-in-aid received Any differences between physical assets from government is allocated by BW for Taxation and asset registers identified as a result of the purchase of plant, equipment and Deferred tax is recognised in respect of all the organisation’s continuous programme vehicles used for waterway operation and timing differences that have originated but of asset verification are treated as maintenance. The grant concerned is not reversed at the balance sheet date adjustments in the fixed asset statements, treated as deferred capital grant and where transactions or events that result in in the year in which identified. released to the profit and loss account an obligation to pay more tax in the future over the expected useful lives of the or a right to pay less tax in the future have Investment Properties assets concerned. occurred at the balance sheet date. Investment properties are revalued annually. Surpluses or deficits on individual properties Leased Fixed Assets Timing differences are differences are transferred to the investment revalua- All current leases are operating leases. between BW’s taxable profits and its tion reserve, unless a deficit below historical Rentals under operating leases are results as stated in the financial cost (or its reversal) is expected to be charged on a straight-line basis over the statements that arise from the inclusion permanent, in which case it is charged lease term, even if the payments are not of gains and losses in tax assessments in (or credited) to the profit and loss made on such a basis. periods different from those in which they account. Depreciation is not provided in are recognised in the financial statements. respect of freehold investment properties Acquisitions and Goodwill or of leasehold investment properties Acquisitions are accounted for under the A net deferred tax asset is regarded as where the unexpired term of the lease is acquisition method. recoverable and therefore recognised more than 20 years. The Board Members only when, on the basis of all available consider that this departure from the Goodwill arising on acquisitions in the evidence, it can be regarded as more statutory accounting rules is necessary to year ended 31 March 1998 and earlier likely than not that there will be suitable provide a true and fair view and to comply periods was written off to reserves in taxable profits from which the future with Statement of Standard Accounting accordance with the accounting standard reversal of the underlying timing differences Practice No. 19. then in force. Negative goodwill was can be deducted. shown as an unrealised capital reserve Disposal of Investment Properties and is credited to realised capital BW accounts for disposals of investment reserves in the periods expected to properties upon completion of sale. The benefit. As permitted by the current proceeds in respect of properties sold are accounting standard the goodwill used for the funding of capital expenditure previously written off to reserves has not of a commercial nature, or such other been reinstated in the balance sheet. expenditure as agreed by the Secretary On disposal or closure of a previously of State for Environment, Food and acquired business, the attributable Rural Affairs. amount of goodwill previously written off to reserves is included in determining the profit or loss on disposal.

Goodwill related to joint ventures and associated undertakings is included in the carrying value of the investment.

72 ANNUAL REPORT & ACCOUNTS Deferred tax is not recognised when BW has adopted the transitional fixed assets are revalued unless by the arrangements for pension cost disclosure balance sheet date there is a binding detailed in FRS17 and has therefore agreement to sell the revalued assets included the new disclosures within the and the gain or loss expected to arise notes to the accounts. on sale has been recognised in the financial statements. Neither is deferred Provisions for an unfunded pension tax recognised when fixed assets are entitlement for the Chairman and to cover sold and it is more likely than not that the present value of the future costs of the taxable gain will be rolled over, being reduced cost travel benefits are included charged to tax only if and when the in the balance sheet. These provisions replacement assets are sold. for unfunded arrangements have been calculated in accordance with FRS17 Deferred tax is measured at the average based on the assumptions set out in note tax rates that are expected to apply in the 8 to these accounts. periods in which the timing differences are expected to reverse, based on tax rates Finance Costs and laws that have been enacted Finance costs of debt are recognised in or substantively enacted by the balance the profit and loss account over the term sheet date. Deferred tax is measured on of such loans at a constant rate on the a non-discounted basis. carrying amount.

Pensions Deferred Income BW operates a single funded defined BW has received cash dowries to take benefit scheme for all staff. Pension costs on the asset maintenance and operational are charged to the profit and loss account obligations of other public sector so as to spread the cost over the employees’ organisations. Each dowry is accounted working lives with BW. The regular cost for as deferred income and released to is attributed to individual years using the the profit and loss account in line with the projected unit method. Variations in net operating expenditure. pension costs which are identified as a result of actuarial valuations, are amortised Segmental Disclosure over the average expected remaining For the purpose of Statement of Standard working lives of employees in proportion Accounting Practice No. 25, BW is, in the to their expected payroll costs. Differences opinion of its Board Members, engaged in between the amounts funded and the one class of business. amounts charged to the profit and loss account are treated as either a provision or prepayment in the balance sheet. The assets of the pension fund are in a separate trust to any BW assets.

ANNUAL REPORT & ACCOUNTS 73 Notes to the Accounts 2. Segmental Analysis of Continuing Operations

a) BW Group analysis

(Loss) / profit Net assets Total Operating (Loss) / profit transferred to (liabilities) at 2003/04 Revenue Costs before tax reserves 31 March £000 £000 £000 £000 £000 British Waterways Board 195,584 197,148 (822) (4,315) 419,357 Leisure subsidiaries 1,274 3,472 (2,198) (1,538) (1,539) Property subsidiaries 519 535 2,686 2,319 2,739 Joint venture undertakings - - (811) (811) (1,579) Associated undertakings - - (674) (480) (233) 197,377 201,155 (1,819) (4,825) 418,745

2002/03 British Waterways Board 191,596 211,085 (15,418) (19,476) 373,780 Property subsidiaries - (39) (1) 1 3 Joint venture undertakings - - (587) (498) (589) Associated undertakings - - 1,352 906 732 191,596 211,046 (14,654) (19,067) 373,926

b) Analysis of BW direct income and expenditure (excludes group undertakings)

Not fully Multiple use Leisure use navigable waterways waterways waterways Total 2003/04 2002/03 2003/04 2002/03 2003/04 2002/03 2003/04 2002/03 £000 £000 £000 £000 £000 £000 £000 £000 Income from property Rents from investment properties 5,669 6,454 14,351 12,672 1,346 269 21,366 19,395 Rents from leisure properties 335 525 2,273 3,264 61 30 2,669 3,819 Other rents, wayleaves, licences & easements 6,330 6,297 21,077 18,186 1,176 2,176 28,583 26,659 12,334 13,276 37,701 34,122 2,583 2,475 52,618 49,873 Income from leisure uses Craft licences and moorings 2,177 2,064 11,563 12,210 522 3 14,262 14,277 Retail 417 64 3,912 3,019 121 - 4,450 3,083 Angling 58 72 364 658 27 31 449 761 2,652 2,200 15,839 15,887 670 34 19,161 18,121 Income from commercial uses Water charges 1,454 1,420 2,033 2,196 223 137 3,710 3,753 Tolls and dues 135 696 606 - - - 741 696 1,589 2,116 2,639 2,196 223 137 4,451 4,449 Income from other uses Contributions to non-statutory works 2,026 2,334 11,500 14,150 777 11,382 14,303 27,866 Other income 1,259 2,046 4,708 4,932 268 444 6,235 7,422 Maintenance agreements 279 96 3,740 1,778 107 21 4,126 1,895 3,564 4,476 19,948 20,860 1,152 11,847 24,664 37,183

Total direct income 20,139 22,068 76,127 73,065 4,628 14,493 100,894 109,626

Government grant 94,770 81,970 Total revenue 20,139 22,068 76,127 73,065 4,628 14,493 195,664 191,596

74 ANNUAL REPORT & ACCOUNTS Not fully Multiple use Leisure use navigable waterways waterways waterways Total 2003/04 2002/03 2003/04 2002/03 2003/04 2002/03 2003/04 2002/03 £000 £000 £000 £000 £000 £000 £000 £000 Expenditure Major repairs and renovations 11,930 12,852 51,559 57,243 2,124 13,465 65,613 83,560 Staff costs 11,879 13,376 45,192 37,511 2,901 6,278 59,972 57,165 Other operating charges 11,388 14,231 49,999 47,747 4,292 3,945 65,679 65,923 Depreciation 1,414 1,455 4,294 4,274 259 471 5,967 6,200 Own work capitalised or charged to major works (49) (717) (201) (1,037) (13) (98) (263) (1,852) Total expenditure 36,562 41,197 150,843 145,738 9,563 24,061 196,968 210,996 Waterway lengths 360 miles 1,563 miles 128 miles 2,051 miles

The following waterways have been categorised as multiple use waterways: Aire & Calder Navigation New Junction Canal Tees Navigation Caledonian Canal River Ouse South Tees Navigation Crinan Canal River Ouse Weaver Navigation Gloucester & Sharpness 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 1968 Transport Act.

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.

ANNUAL REPORT & ACCOUNTS 75 Notes to the Accounts 3. Grants Receivable from Central Government

2003/04 2002/03 £000 £000 Grant receivable from Defra Grant received in year 76,590 71,580 Accrued grant at 31 March 4,800 - 81,390 71,580 Allocated to deferred capital grant (700) (4,400) Deferred capital grant released to profit and loss account 1,434 2,153 82,124 69,333 Grant receivable from Scottish Executive Grant received in year 14,534 9,459 Accrued grant at 1 April (4,351) - Accrued grant at 31 March 2,417 4,351 12,600 13,810 Allocated to deferred capital grant - (1,173) Deferred capital grant released to profit and loss account 46 - 12,646 12,637 Total revenue grant accrued during the year 94,770 81,970 Grant received on 1 April, for expenditure incurred but not paid before 31 March, is accrued in these accounts.

4. Consolidated Operating Loss

2003/04 2002/03 £000 £000 This is stated after charging Depreciation of tangible fixed assets 6,071 6,200 Profit on sale of operational fixed assets 32 (3) Rents on leased properties 1,531 868 Auditors’ Remuneration - audit services 187 114 - non audit services 22 12 Board Members emoluments (Note 7) 183 169 Inland Waterways Amenity Advisory Council expenses 168 132 The audit fee for BW was £169,000 (2002: £110,000)

5. Consolidated Interest Payable

2003/04 2002/03 £000 £000 Interest payable on sums wholly repayable within five years: Interest on loans form Defra under Section 19 of the Transport Act 1962 1,082 1,067 Unwinding of discount 1,925 1,091 Other short-term interest 919 744 3,926 2,902 Interest payable on all other loans: Interest on loans from Defra under Section 19 of the Transport Act 1962 606 724 Total interest payable 4,532 3,626

76 ANNUAL REPORT & ACCOUNTS 6. Consolidated Taxation

The total tax charged / (credited) to profit and loss account and capital reserves is as follows: a) Charged / (credited) to profit and loss account: 2003/04 2002/03 £000 £000 Current tax Credit for current year losses available for carry back - (7,070) UK Corporation tax on profits for the period 1,238 1,505 Adjustments in respect of prior years (435) 510 803 (5,055) Share of joint ventures and associates’ current tax, including adjustments in respect of prior years (195) - Total current tax 608 (5,055)

Deferred tax Origination and reversal of timing differences (1,588) 693 Adjustments in respect of prior years 634 - Total deferred tax (954) 693 Taxation credit on loss for the financial year (346) (4,362)

b) Charged / (credited) to reserves: 2003/04 2002/03 £000 £000 Provision required for capital gains in the current year 1,788 2,432 Adjustments in respect of prior years (606) (551) Total current tax 1,182 1,881

c) Factors affecting current tax charge The provision charged (2003: credited) 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: 2003/04 2002/03 £000 £000 Loss for the financial year before taxation (1,819) (14,654)

Corporation taxation at 30% (546) (4,396)

Effects of: Expenses not deductable for tax purposes 571 498 Depreciation in excess of capital allowances (221) (99) Other short term timing differences 1,682 (1,684) Losses arising in the year 127 (12) Losses arising in the year not recognised 90 - Tax basis and indexation on asset disposal (372) 128 Adjustments in respect of prior years (435) 510 Appropriation of stock to investment property 34 - Joint ventures and associates prior years adjustments (12) - Non taxable gain on disposal to ISIS (310) - 1,154 (659) Charge / (credit) for corporation tax 608 (5,055)

ANNUAL REPORT & ACCOUNTS 77 Notes to the Accounts 7. BW Board Members’ Emoluments

Basic remuneration 2003 /04 2002/03 Fees Total Total £000 £000 £000 George Greener, Chairman 70 70 67 Sir Peter Soulsby, Vice Chairman 14 14 14 Susan Achmatowicz 11 11 10 Campbell Christie 11 11 10 Ian Darling 11 11 10 George Fleming 11 11 10 Helen Gordon 11 11 10 Derek Langslow 11 11 10 Janet Lewis-Jones 11 11 10 Adeeba Malik 11 11 10 Terry Tricker 11 11 10 183 183 171

The Board Members’ appointment and remuneration is determined by the Secretary of State for Environment, Food and Rural Affairs. No Board Member receives a benefit in kind. Further details in relation to Board Members’ remuneration can be found in the Directors Remuneration Report on pages 62 to 65.

The Chairman’s pension entitlement is calculated by analogy to the British Waterways (1990) Pension Fund. The increase in the provision required for the year is calculated by a qualified actuary using the discount rates consistent with those required under FRS17 as shown in note 8 to these accounts.

The Chairman, George Greener, had accrued entitlements under this defined benefit arrangement as follows: £pa Accrued pension at 1 April 2003 2,871 Indexed on accrued pension at 1 April 2003 49 Accrued pension during the year 1,019 Accrued pension at 31 March 2004 3,939

Transfer value of increase after indexation is £20,300 The Chairman contributed £3,816 to the scheme during the year.

78 ANNUAL REPORT & ACCOUNTS 8. Employee Costs a) The average number of persons (excluding Board Members) employed during the year was:

2003/04 2002/03 Number Number Total employed 2,255 2,191 Full-time equivalent 2,214 2,147 b) Total employment costs (excluding Board Members’ emoluments stated in Note 7 to these Accounts) were:

2003/04 2002/03 £000 £000 Wages and salaries 50,698 47,722 Social security costs 4,081 3,506 Pension costs 5,923 5,937 Total employment costs 60,702 57,165

There were no prepaid or outstanding pension contributions at 31 March 2004 (2003: £5,500,000 prepaid). c) Senior employee emoluments The number of senior employees whose emoluments, including the taxable value of benefits-in-kind, but excluding employer’s pension contributions and payments on leaving service, were within the following ranges:

2003/04 2002/03 £ Number Number 50,000 - 60,000 40 21 60,001 - 70,000 17 8 70,001 - 80,000 6 2 80,001 - 90,000 2 1 90,001 - 100,000 2 3 100,001 - 110,000 3 1 120,001 - 130,000 1 3 130,001 - 140,000 3 1 140,001 - 150,000 - 1 150,001 - 160,000 2 1 160,001 - 170,000 1 2 200,001 - 210,000 1 - d) Pension scheme BW operates a single funded defined benefit pension scheme for all staff. Contributions to the Scheme are determined with the advice of independent professionally qualified actuaries on the basis of a triennial valuation using the projected unit method. The most recent valuation was conducted as at 31 March 2001 using the following main financial assumptions:

Rate of return on existing assets 5.0% Rate of return on future contributions 6.25% Rate of salary and wage increases 4.0% Rate of pension increases 2.5%

The cost and balance sheet movements have been assessed in accordance with actuarial advice. The market value of the Scheme’s assets (excluding members’ additional voluntary contributions) at 31 March 2001 amounted to £200.5 million and the value placed upon the benefits that had accrued to members, after allowing for the effect of future increases in their earnings, was £203.4 million. The Scheme was therefore 99% funded on an ongoing basis. On the solvency basis prescribed by the statutory Minimum Funding Requirement, the Scheme’s assets were 115% of accrued liabilities.

ANNUAL REPORT & ACCOUNTS 79 Notes to the accounts

The employer contribution rate was reviewed by the Scheme actuary as part of the valuation, and the recommended rate remained stable at 16% of pensionable pay. This included an allowance of 0.8% towards administrative expenses, 1% towards the cost of extra benefits under the voluntary early retirement arrangements, and 1.1% to raise the ongoing funding level to 100% within six years if the adopted assumptions were borne out in practice. The voluntary early retirement scheme closed at 31 March 2003 and the ongoing employer contribution rate reduced by 1% to 15% for 2003/04. The next full actuarial valuation will be carried out as at 31 March 2004 and the valuation report will be issued in October 2004.

FRS17 Retirement benefits The Accounting Standards Board has announced a deferral of full mandatory adoption of FRS17 following the notification of intention by the International Accounting Standards Board that it is to review IAS19, the present international standard for post employment benefits. Instead the transitional disclosure requirements will continue.

The valuation of the Scheme used for FRS17 disclosures has been based on the most recent actuarial valuation of BW’s scheme at 31 March 2001 and updated to 31 March 2004 by an independent qualified actuary and takes into account the transitional requirements of FRS17. The present value of the scheme liabilities was calculated in accordance with FRS17 using the following assumptions:

31 March 2004 2003 2002 Rate of inflation 2.75% 2.5% 2.5% Rate of increase in salaries 4.3% 4.0% 4.0% Rate of increase for pensions in payment and deferred pensions 2.75% 2.5% 2.5% Rate used to discount scheme liabilities 5.5% 5.4% 6.0%

The assets in the Scheme at 31 March 2004 and the expected future rates of return on them were:

31 March 2004 31 March 2003 31 March 2002 £ million % £ million % £ million % Equities 118.2 8.1% 104.4 7.5% 152.4 6.1% Bonds 68.4 4.9% 46.5 5.0% 29.2 5.3% Other assets 0.3 4.0% 3.0 3.75% 11.8 4.0% Total fair value of assets 186.9 153.9 193.4 Present value of scheme liabilities 242.5 221.7 188.0 (Deficit) / surplus in the scheme (55.6) (67.8) 5.4 Related deferred tax asset 16.7 20.3 1.6 Net pension (liability) / asset (38.9) (47.5) 3.8

If FRS17 had been adopted in the financial statements, the Group’s net assets and profit and loss reserve at 31 March 2004 would be as follows: 31 March 31 March 2004 2003 Net assets £million £million Net assets excluding pension liability 418.7 373.9 Pension liability (38.9) (47.5) Net assets including pension liability (379.8) (326.4)

31 March 31 March 2004 2003 Reserves £million £million Profit and Loss account reserve excluding pension liability (0.6) 4.2 Pension reserve (38.9) (47.5) Profit and loss account reserve (39.5) (43.3)

80 ANNUAL REPORT & ACCOUNTS If FRS17 has been adopted in the financial statements, the following amounts would have been recognised in the performance statements for the financial year to 31 March 2004: 31 March 31 March 2004 2003 Amounts charged to the profit and loss account £million £million Current service cost 7. 1 6.3 Past service costs - 1.5 Total charged to operating profit 7. 1 7. 8

The amount charged / (credited) to other finance income Interest on scheme liabilities 12.0 11.3 Expected return on scheme assets (10.2) (11.5) Net charge / (credit) to other finance income 1.8 (0.2) Total charged to profit and loss account before deduction of tax 8.9 7. 6

Amounts recognised in the Statement of Recognised Gains and Losses (STRGL) 2003/04 2002/03 Total Total £million £million Gain / (loss) on assets - 22.8 (52.0) Experience (loss) / gain on liabilities - (1.6) 0.1 Loss on change of assumptions (financial and demographic) - (6.1) (21.2) Total gain / (loss) recognised in STRGL before adjustment of tax 15.1 (73.1)

31 March 31 March 2004 2003 History of experience gains and losses £million £million Gain / (loss) on scheme assets (amount) 22.8 (52.0) % of scheme assets at end of year 12.2% 33.8% Experience (loss) / gain on scheme liabilities (amount) (1.6) 0.1 % of scheme liabilities at end of year 0.7% 0.0% Total actuarial gain / (loss) recognised in STRGL (amount) 15.1 (73.1) % of scheme liabilities at end of year 6.2% 33.0%

31 March 31 March 2004 2003 Movement in surplus / (deficit) in the Scheme during the year £million £million (Deficit) / surplus in the scheme at 1 April (67.8) 5.4 Contributions paid 6.0 7. 5 Current service cost (7.1) (6.3) Past service cost - (1.5) Other finance (charges) / income (1.8) 0.2 Actuarial gain / (loss) 15.1 (73.1) Deficit in the scheme at 31 March before tax (55.6) (67.8)

Provisions in respect of unfunded pension arrangements (see notes 7 and 15) have been calculated using the discount rates shown above and therefore are consistent with FRS17.

ANNUAL REPORT & ACCOUNTS 81 Notes to the Accounts 9. Tangible Fixed Assets

Group Freehold Land Leasehold Craft, Plant and Buildings and Structures Land and Buildings Equipment Operational Investment Operational Investment Owned Leased Total £000 £000 £000 £000 £000 £000 £000 Cost or valuation At 1 April 2003 61,095 316,851 2,651 747 53,969 1,002 436,315 Transfers (6,379) 4,392 (1,571) 512 1,009 (1,002) (3,039) Additions 1,427 63,189 - - 7,595 - 72,210 Reduction in value (2) (39) (80) - (342) - (463) Disposals (18) (9,819) - - (1,207) - (11,044) Revaluation - 43,160 - 300 - - 43,460 At 31 March 2004 56,123 417,734 1,000 1,559 61,023 - 537,439

Depreciation At 1 April 2003 15,651 - 137 - 27,925 1,002 44,715 Transfers (2,128) - (10) - 101 (1,002) (3,039) Additions - - - - 1,146 - 1,146 Provision for year 961 - 23 - 5,087 - 6,071 Disposals (5) - - - (1,055) - (1,060) At 31 March 2004 14,479 - 150 - 33,204 - 47,833 Net book value: at 31 March 2004 41,644 417,734 850 1,559 27,819 - 489,606 At 31 March 2003 45,444 316,851 2,514 747 26,044 - 391,600

BW Freehold Land Leasehold Craft, Plant and Buildings and Structures Land and Buildings Equipment Operational Investment Operational Investment Owned Leased Total £000 £000 £000 £000 £000 £000 £000 Cost or valuation At 1 April 2003 61,095 312,940 2,651 747 53,968 1,002 432,403 Transfers (6,379) 4,392 (1,571) 512 1,009 (1,002) (3,039) Additions 1,427 61,854 - - 6,272 - 69,552 Reduction in value (2) (39) (80) - (341) - (462) Disposals (18) (9,314) - - (1,003) - (10,335) Revaluation - 46,960 - 300 - - 47,260 At 31 March 2004 56,123 416,793 1,000 1,559 59,904 - 535,379

Depreciation At 1 April 2003 15,651 - 137 - 27,925 1,002 44,715 Transfers (2,128) - (10) - 101 (1,002) (3,039) Provision for year 961 - 23 - 4,983 - 5,967 Disposals (5) - - - (663) - (668) At 31 March 2004 14,479 - 150 - 32,346 - 46,975 Net book value: At 31 March 2004 41,644 416,793 850 1,559 27,558 - 488,404 At 31 March 2003 45,444 312,940 2,514 747 26,043 - 387,688

The value of fixed assets includes assets in the course of construction valued at £3.8 million (2003: £6.4 million)

82 ANNUAL REPORT & ACCOUNTS Group BW The surplus on revaluation at 31 March comprises: 2003/04 2002/03 2003/04 2002/03 £000 £000 £000 £000 Increase in net revaluation from transfers between investment and operational properties 22,707 - 22,707 - Surplus on revaluation of investment properties 20,753 25,224 24,553 21,312 43,460 25,224 47,260 21,312

The net book value of investments properties at 31 March comprises: Cost 159,948 94,315 159,013 94,206 Revaluation surpluses 259,345 223,284 259,339 219,481 419,293 317,599 418,352 313,687

Depreciation In 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 properties Investment properties were revalued at 31 December 2004 on an open market value basis by Gerald Eve, Chartered Surveyors. Based upon these valuations, British Waterways has incorporated a value of investment properties of £419.3 million in these accounts.

BW continues to reposition its property portfolio through disposals and reinvestment.

In the event that the investment properties were to be sold for their revalued amount, tax on such disposals would be approximately £70 million (2002/03: £61 million).

ANNUAL REPORT & ACCOUNTS 83 Notes to the Accounts 10. Fixed Assets Investments

Group BW 2003/04 2002/03 2003/04 2002/03 £000 £000 £000 £000 Shares in group undertakings At 1 April - - 1,316 1,068 Additions in year Joint ventures and associated undertakings 405 141 Subsidiary companies 6,267 112 Disposals in year - - - (5) At 31 March --7, 9 8 8 1,316

Loans to group undertakings At 1 April - - 5,903 2,652 Additions in year - - 7, 1 4 2 4,564 Repayments in year - - (5) (1,313) At 31 March --13,040 5,903

Interests in joint ventures (see Note 10b below) Additions - net assets 2,718 287 - - - goodwill (87) (30) - - At 31 March 2,631 257 - -

Interests in associates (see Note 10b below) At 1 April - net assets 4,045 2,591 - - - goodwill 549 549 - - 4,594 3,140 - -

Additions - net assets 2,582 1,454 - - Transfer to subsidiary undertakings (549) - - - At 31 March - net assets 6,627 4,045 - - - goodwill - 549 6,627 4,594

Other investments At 1 April 148 148 148 148 At 31 March 148 148 148 148 - - Total fixed asset investments 9,406 4,999 21,176 7, 3 67

a) Subsidiary undertakings BW’s principal subsidiary undertakings are as follows: - Waterscape Limited commenced trading 1st April 2003, operates - Blackwall Estates Ltd manages property in London Docklands an online travel and leisure website. - British Waterways Marinas Ltd commenced trading - Wood Wharf Management Company Ltd manages property 1 January 2004, operates inland waterway marinas. in London Docklands. - British Waterways Pension Trustees Ltd acts as trustee to the British Waterways 1990 Pension Fund. The book value The following companies did not trade during the year: of BW’s interest is represented by a debt of equal amount - Limehouse Developments Ltd due to the subsidiary and both have been eliminated from - Limehouse Basin Management Ltd BW’s accounts. - Granary Wharf Ltd, acquired 2nd September 2004-2003 Goodwill arises from BW’s investment in Leeds Canal Basin manages property in Leeds. (Development) Ltd (£3,109,000) and the Directors have - Leeds Canal Basin (Development) Ltd, acquired 2nd performed an impairment review and no amortisation September 2004-2003 manages property in Leeds. is required.

84 ANNUAL REPORT & ACCOUNTS b) Investments joint ventures and associated undertakings The following information relates to those joint ventures and associated undertakings of the Group at the year end whose results or financial position, in the opinion of the directors, principally affect the figures of the Group. All joint ventures and associated undertakings of the Group are unlisted and are registered and operate in the United Kingdom.

Accounting Issued Equity Period End Share Interest Main Date Capital Held Activity Joint Ventures ISIS Waterside Regeneration Ltd Partnership 31 December 2003 9,900 50% Property Watergrid Ltd 31 December 2003 300,000 45% Water Supply Associated Undertakings Nottingham Waterside Ltd 31 December 2003 1,000 49% Property Paddington Business Barges 31 December 2003 1,000 49% Office Development Waterwise UK Ltd 31 December 2003 1,000 49% Water Safety City Road Basin Ltd 31 December 2003 100 49% Property Edinburgh Quay Ltd 31 December 2003 100 49% Property H2O Urban Ltd 31 December 2003 100 49% Property Euro-waterways Ltd 30 April 2003 90 49% Leisure

c) Other investments BW has an investment of £147,500 in Easynet Group plc. Easynet Group plc and subsidiaries provide internet access, computer networking hardware, software, peripherals and consultancy services to customers in the UK and Europe.

11. Stocks Group BW 31 March 2004 31 March 2003 31 March 2004 31 March 2003 £000 £000 £000 £000 Raw materials and consumables 195 382 195 382 Held for resale 744 666 254 666 939 1,048 449 1,048

12. Other Debtors Group BW 31 March 2004 31 March 2003 31 March 2004 31 March 2003 Note £000 £000 £000 £000 Deferred consideration sale agreements 12a 10,993 16,251 10,993 16,251 Grant-in-aid 7,217 4,351 7,217 4,351 Value added tax 5,580 6,715 5,575 6,715 Deferred tax asset 12b 283 - 273 - Others 12c 1,739 2,171 1,377 2,164 25,812 29,488 25,435 29,481

a) Deferred consideration sale agreements Of the deferred consideration sale agreements £2.5 million (2003: £10.9 million) will fall due after more than one year.

ANNUAL REPORT & ACCOUNTS 85 Notes to the Accounts b) Deferred tax asset In accordance with FRS19 no liability has been provided for deferred tax on gains recognised on revaluing property to its market value or on the sale of properties where potentially taxable gains have been rolled over into replacement assets. Such tax would become payable only if the property were sold without it being possible to claim rollover relief. The total amount unprovided is £80 million (70 million for revalued properties, £10 million for rolled over gains).

Not Recognised Recognised Group 2003/04 2002/03 2003/04 2002/03 £000 £000 £000 £000 Accelerated capital allowances (1,084) (549) - - Short term timing differences 234 (1,448) - - Losses 1,113 1,304 - - Potential deferred tax asset / (liability) 283 (693) - - Rolled over gains 10,055 9,891

Not Recognised Recognised BW 2003/04 2002/03 2003/04 2002/03 £000 £000 £000 £000 Accelerated capital allowances (1,085) (549) - - Short term timing differences 234 (1,448) - - Losses 1,124 1,304 - - Potential deferred tax asset / (liability) 273 (693) - - Rolled over gains 10,055 9,891

c) Other long term debtors Of the others, (2003: £115,000) will fall due after more than one year.

13. Analysis of Net Funds

1 April Cash 31 March 2003 Flows 2004 Group £000 £000 £000 Cash at bank and in hand 22,692 (1,576) 21,116 Capital debt (Note 19) - due within one year - (600) (600) - due after one year (14,736) 600 (14,136) 7,956 (1,576) 6,380

1 April Cash 31 March 2003 Flows 2004 BW £000 £000 £000 Cash at bank and in hand 22,616 (2,283) 20,333 Capital debt (Note 19) - due within one year - (600) (600) - due after one year (14,736) 600 (14,136) 7,880 (2,283) 5,597

86 ANNUAL REPORT & ACCOUNTS 14. Creditors a) Amounts falling due within one year

Group BW 31 March 2004 31 March 2003 31 March 2004 31 March 2003 £000 £000 £000 £000 Trade creditors 5,955 14,133 5,907 14,133 Taxation and social security 1,601 1,432 1,587 1,432 Amounts owed to group undertakings - - 3,061 43 Other creditors 16,683 14,224 16,511 14,223 Accruals 22,746 16,655 22,529 16,661 Deferred income (see note 14c) 24,075 23,058 26,042 25,406 71,060 69,502 75,637 71,898

b) Amounts falling due after more than one year

Group BW 31 March 2004 31 March 2003 31 March 2004 31 March 2003 £000 £000 £000 £000 Deferred income (see note 14c) 46,910 16,871 46,910 16,871 Other creditors 19,439 78 19,350 - 66,349 16,949 66,260 16,871

Of the other creditors £19.4million (2002: nil) will fall due after more than one year. c) Deferred income The balance on creditors falling due after more than one year includes deferred income arising from the receipt of cash dowries received in respect of obligations to maintain the River Tees navigation and Tees Barrage which was acquired from the Commission for the New Towns in the year ended 31 March 2000 and the Liverpool Docks which was acquired from English Partnerships on 1 July 2003. Movements during the year were as follows: 2003/04 2002/03 £000 £000 Balance at 1 April 2003 Amounts falling due within one year 993 762 Amounts falling due after more than one year 16,871 17,124 17,864 17,886 Acquisition of Liverpool Docks 32,486 - Unwinding of discount 1,924 1,073 52,274 18,959 Reduction due to re-assessment of outstanding liability - (333) Payments (2,511) (762) Balance at 31 March 2004 49,763 17,864

Balance at 31 March 2004 analysed as follows: Amounts falling due within one year 2,853 993 Amounts falling due after more than one year 46,910 16,871 49,763 17,864

ANNUAL REPORT & ACCOUNTS 87 Notes to the Accounts 15. Provisions for Liabilities and Charges

Provision 1 Charged / Provision 31 April 2003 On acquisitions Paid (released) March 2004 Group Note £000 £000 £000 £000 £000 Corporation tax 15a 735 68 (662) 1,984 2,125 Deferred taxation 12b 693 (22) - (671) - Chairman’s pension costs 15b 57 - - 21 78 Other post retirement benefits 15c 367 - (8) (32) 327 Business reorganisation 15d 660 - (1,446) 5,402 4,616 Other provisions 15e 10,509 - (7,559) 2,388 5,338 Group 13,021 46 (9,675) 9,092 12,484

Provision 1 Charged / Provision 31 April 2003 On acquisitions Paid (released) March 2004 BW Note £000 £000 £000 £000 £000 Corporation tax 15a 735 - (662) 2,285 2,358 Deferred taxation 12b 693 - - (693) - Chairman’s pension costs 15b 57 - - 21 78 Other post retirement benefits 15c 367 - (8) (32) 327 Business reorganisation 15d 660 - (1,446) 5,402 4,616 Other provisions 15e 6,709 - (2,574) 1,203 5,338 BW 9,221 - (4,690) 8,186 12,717

a) Corporation tax A provision has been made for current and previous year corporation tax liabilities on trading profits and capital gains. Additional disclosure is made in note 6 to these accounts.

b) Chairman’s pension costs An unfunded pension entitlement has been arranged for the Chairman. A provision is included in the balance sheet to cover this liability and has been calculated using discount rates consistent with those required under FRS17 as shown in note 8 to these accounts.

c) 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 seven BW employees and 295 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 2004 by independent qualified actuaries using discount rates consistent with those required under FRS17 as shown in note 8 to these accounts.

d) Business reorganisation The business reorganisation provision relates principally to redundancy costs arising from the significant change in the organisations structure announced in May 2003.

e) Other provisions The other provisions relate principally to third party claims and a provision arising from leasehold properties previously occupied by BW.

88 ANNUAL REPORT & ACCOUNTS 16. Deferred Capital Grant

Group and BW 2003 /04 2002/03 £000 £000 Balance at 1 April 14,130 10,469 Defra grant allocated to capital 700 4,400 Scottish Executive grant allocated to capital - 1,173 Other deferred capital grants - 241 14,830 16,283 Released to profit and loss account Government grant (1,480) (2,153) Non government grants (6) Balance at 31 March 13,344 14,130

17. Reserves Investment Property Unrealised Realised Revaluation Capital Capital Other Capital Reserve Reserve Reserves Contribution Reserves £000 £000 £000 £000 £000 BW Balance at 1 April 2003 127,970 219,481 4,100 3,450 - Net increase resulting from transfers between - 22,907 - - - investment and operational properties - Realisation of property revaluation gains of previous years 7,601 (7,601) - - - Corporation tax on capital gains of previous years (1,182) - - - - Unrealised surplus on revaluation on investment properties - 24,552 - - - Transfer of profit on sale of investment properties 4,892 - - - - from profit and loss account Transfer of other property from profit and loss account (1,403) - - - - Corporation tax on capital gains in current year (1,102) - - - - Reduction in provision on deferred taxation on property gains 966 - - - - Balance at 31 March 2004 137,742 259,339 4,100 3,450 -

Group share of reserves in associated undertakings Balance at 1 April 2003 - 3 - - 10 Unrealised surplus on revaluation of investment properties - 3 - - - Movement on other reserves - - - - 11 Balance at 31 March 2004 -6--21

Total Group 137,742 259,345 4,100 3,450 21

The realised capital reserve includes the value of profits on valuation 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 value of the excess of the fair value of assets acquired on acquisition of a business over the fair value of the consideration received. Capital contributions are from Defra to enable BW to repay National Loans Fund loans maturing before 2013 as they mature (see note 19).

ANNUAL REPORT & ACCOUNTS 89 Notes to the Accounts 18. Profit and Loss Account

Group BW 2003 /04 2002/03 2003 /04 2002/03 £000 £000 £000 £000 Balance at 1 April 4,176 23,243 4,043 23,519 Loss transferred to reserves (4,825) (19,067) (4,053) (19,476) Balance at 31 March (649) 4,176 (10) 4,043

19. Amounts due to National Loans Fund Group and BW 31 March 31 March 2004 2003 £000 £000 Loans are repayable as follows: In one year or less 600 - Between one and two years 3,584 600 Between two and five years 3,712 6,272 In greater than five years 6,840 7, 8 6 4 Total 14,736 14,736

Details of individual loans:

Maturity Rate of Amount Maturity Rate of Amount Maturity Rate of Amount Date Interest % £000 Date Interest % £000 Date Interest % £000

2 Oct 2004 151/4 600 2 Apr 2007 133/4 1,344 2 Apr 2012 101/4 640

2 Apr 2005 14 640 2 Oct 2007 135/8 320 2 Apr 2012 9 448

2 Apr 2005 145/8 704 2 Apr 2008 121/8 256 2 Oct 2012 91/2 714

2 Apr 2005 141/8 640 2 Apr 2008 11 768 2 Apr 2020 85/8 1000

2 Oct 2005 133/8 960 2 Apr 2009 101/4 896 2 Apr 2021 81/2 1000

2 Oct 2005 131/2 640 2 Apr 2010 111/8 576 2 Apr 2022 73/4 250

2 Apr 2006 141/4 640 2 Apr 2010 107/8 128 2 Apr 2023 57/8 250

2 Apr 2007 151/8 384 2 Apr 2011 91/4 288 2 Apr 2024 5 650

The government has decided to make capital contributions to BW to enable. BW to repay those loans maturing before 2013 (£11.6 million) as they mature, thus removing from BW the need to take out new loans to repay them.

Borrowing authorised by Defra 31 March 31 March 2004 2003 £000 £000 Amount of debt due to National Loans Fund 14,736 14,736 Bank overdraft facility 3,000 3,000 Borrowing authorised by Defra 17,736 17,736

The bank overdraft facility is guaranteed by H.M. Treasury annually.

Analysis of changes in financing during the year 2003/04 2002/03 Capital Debt £000 £000 At 1 April 14,736 16,336 Loans repaid - (1,600) At 31 March 14,736 14,736

90 ANNUAL REPORT & ACCOUNTS 20. Capital Commitments

All capital commitments arise within BW. Capital expenditure for which BW has contracted at 31 March 2004 was £2,232,000 (2003: £4,424,000).

21. Operating Leases

At 31 March 2003 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 leases 31 March 31 March 31 March 31 March 2004 2003 2004 2003 Group £000 £000 £000 £000 Leases due to expire Within one year 139 50 239 163 Within two to five years 778 187 1,158 1,843 In greater than five years 815 750 52 50 1,732 987 1,449 2,056

Land and buildings Other operating leases 31 March 31 March 31 March 31 March 2004 2003 2004 2003 BW £000 £000 £000 £000 Leases due to expire Within one year 139 50 239 163 Within two to five years 669 187 1,158 1,843 In greater than five years 815 750 52 50 1,623 987 1,449 2,056

ANNUAL REPORT & ACCOUNTS 91 Notes to the Accounts 22. Related Party Transactions

During the year, BW entered into a number of transactions with related parties in the normal course of business and at 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.

There are no further related party transactions arising within BW’s wholly owned subsidiaries.

Amount receivable / (payable) Amount outstanding at during the year 31 March 2004 £000 £000 Transactions with The Waterways Trust, a registered charity of which Sir Peter Soulsby (resigned November 2003) and Simon Salem (resigned March 2004) were trustees during the year Fees paid for fundraising, archiving and support services (1,646) - Contribution to restoration works 28 55 Transactions with the Millennium Link Trust a charitable company limited by guarantee of which Jim Stirling (Director, Scotland) is a Director Rent receivable 75 - Rent payable (75) - Transactions with the Heritage Lottery Fund, a non-departmental public body of which Derek Langslow (Board Member) is a trustee Contribution to restoration works 1,295 17

23. Acquisition of Business

On 2 September 2003 BW increased its investment in Granary Wharf Ltd and Leeds Canal Basin (Developments) Ltd from 49% to 100% by purchasing the remaining 51% shareholding.

The following table sets out the fair value of the identifiable assets and liabilities to BW as at the date of acquisition.

£000 £000 Tangible fixed assets acquired 1,486 Fair value adjustment 5,484 Fair value of tangible fixed assets 6,970 Current assets 2,229 Current liabilities (1,542) 687 Fair value of net assets acquired 7,657 Investment in associates on date of acquisition 1,050 Purchase consideration : cash 3,498 4,548 Goodwill on acquisition 3,109

The fair value adjustment to fixed assets at the date of acquisition arises from an independent open market valuation of property.

24. Contingent Liabilities

Contingent liabilities arising from third party claims, valued at £4,600,000 (2002: £5,800,000), are not included in the balance sheet as it is not considered likely that the amounts will fall due for payment.

92 ANNUAL REPORT & ACCOUNTS Five Year Summaries PROFIT AND LOSS ACCOUNT

BW Group* BW Group BW BW BW 2003/04 2002/03 2001/02 2000/01 1999/00 £000 £000 £000 £000 £000 Direct income from: Property 53,057 49,873 40,040 36,391 24,695 Leisure uses 20,435 18,121 15,566 13,971 11,808 Commercial Uses 4,451 4,449 4,889 6,089 6,625 Contributions to non-statutory works 14,303 27,866 43,019 66,645 51,524 Other Income 6,235 7,422 6,418 5,087 3,287 Maintenance agreements 4,126 1,895 1,047 771 750 Direct Income 102,607 109,626 110,979 128,954 98,689 Government grant 94,770 81,970 64,637 62,055 58,673 Total revenue 197,377 191,596 175,616 191,009 157,362

Operating (loss) / profit (3,778) (19,450) (9,938) (287) 849 Share of operating profit and losses of associates and joint ventures (946) 1,059 - - - Profit on sale of investment properties 7, 570 3,771 2,078 5,103 2,673 Profit on sale of other property rights - - 45,882 - - Exceptional costs of business reorganisation (5,402) -- -- Income from associated undertakings - -- -170 Interest receivable net of (payable) 737 (34) (1,472) (188) (563) Loss / (profit) for financial year before taxation (1,819) (14,654) 36,550 4,628 3,129 Taxation on profits 346 4,362 (2,665) (73) (277) Loss / (profit) for financial year after taxation (1,473) (10,292) 33,885 4,555 2,852 Transfers to realised capital reserve (3,352) (8,775) (5,926) (5,030) (2,396) Revenue (loss) / profit retained (4,825) (19,067) 27,959 (475) 456

BALANCE SHEET Assets employed Fixed assets 502,121 396,599 362,716 351,555 298,089 Current assets 79,861 90,929 101,330 66,721 77,086 Creditors - amounts falling due within one year 71,060 69,502 58,951 66,609 49,627 Net current assets 8,801 21,427 42,379 112 27,459

Total assets less current liabilities 510,922 418,026 405,095 351,667 325,548 Creditors: Amounts falling due after more than one year (66,349) (16,949) (17,124) - - Provisions for liabilities and charges (12,484) (13,021) (12,452) (33,188) (31,635) Deferred capital grant (13,344) (14,130) (10,469) (7,251) (5,386) 418,745 373,926 365,050 311,228 288,527

Financed By Reserves Reserves 404,009 359,190 348,714 294,492 270,341 Debt 14,736 14,736 16,336 16,736 18,186 418,745 373,926 365,050 311,228 288,527

INVESTMENT PROPERTIES Net book value of investment properties (£000) 419,292 317,599 292,900 293,158 247,703 Annual revaluation of investment properties (£000) 43,460 25,224 15,752 18,239 23,372 Rental yield per accounts 6.8% 6.6% 6.3% 6.8% 6.9%

*2002/03 was the first year that BW presented consolidated accounts. Comparatives for Group results are not included for years prior to 2002/03.

ANNUAL REPORT & ACCOUNTS 93 ACCOUNTS DIRECTION

British Waterways Board direction given by the Secretary of State for Environment, Food and Rural Affairs in respect of the annual accounts.

The Secretary of State for Environment, 2. The annual accounts referred to 4. Clarification of the application of the Food and Rural Affairs in exercise of the shall give a true and fair view of the accounting and disclosure requirements powers conferred by section 24 of the profit or loss, state of affairs and of the Companies Act and accounting Transport Act 1962 and of all other powers cash flows of BW and its subsidiaries. standards is given in Schedule 1 to enabling her in that respect, and with Subject to the foregoing requirements, this Direction. The annual accounts the consent of the Treasury and in without limiting the information shall include the information set consultation with the Scottish Executive, given, and save as described in out in Schedule 2 to this direction. hereby makes the following direction. Schedule 1 to this direction, the annual accounts shall also, where 5. The Direction shall be reproduced 1. The annual accounts, which it is the applicable, comply with: as an annex to the annual accounts. duty of the British Waterways Board to prepare in respect of each (a) the accounting and disclosure 6. The Direction issued on 20 May 2002 accounting year until further notice, requirements of companies legislation is hereby revoked. shall comprise in respect of BW: currently in force; Dated 27 January 2003 (a) in respect of the Board and (b) the best commercial accounting Signed by authority of the its subsidiaries practice as defined by UK Generally Secretary of State (i) a Board Members’ Report Accepted Accounting Practise J Roberts (ii) a Consolidated Profit and (UK GAAP) and accounting standards A Senior Civil Servant in the Department Loss Account adopted or issued by the Accounting for Environment, Food and Rural Affairs. (iii) a Consolidated Statement Standards Board; and of Recognised Gains and Losses Schedule 1 (iv) a Consolidated Balance Sheet; and (c) any additional disclosure or accounting In the balance sheet, loans from the (v) a Consolidated Cash Flow requirements that the Treasury may Secretary of State shall be grouped with Statement; and issue from time to time in respect of capital and reserves. Interest on these public corporations’ accounts. loans shall be separately disclosed in the (b) in respect of the Board profit and loss account. When preparing (public corporation) 3. The balance sheet shall be prepared its balance sheet, BW shall have regard (i) a balance sheet; under the historical cost convention to the balance sheet format 1 prescribed modified by the revaluation of in Schedule 4 to the Companies Act including in each case such notes investment properties. 1985. Items A to J in Format 1 shall as may be necessary for the be presented so as to show the total purposes referred to in paragraph 2. 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.

94 ANNUAL REPORT & ACCOUNTS Schedule 2 (I) The Board Members’ Report shall (c) government grant received during (a) contain the information which the the year reconciled to income from Companies Act 1985 requires to grant as shown in the profit and be disclosed in the directors’ report, loss account; where appropriate; (d) indebtedness to the Secretary of (b) state that the accounts have been State (National Loans Fund) at prepared in a form notified by the the year end including details of Secretary of State with the consent maturity dates, interest rates and of the Treasury in accordance with information about the use of BW’s the relevant statute; and borrowing powers.

(c) include a brief history and statutory (e) the Chairman’s and Board Members’ background of BW. emoluments for the year provided written consent has been obtained (II) The annual accounts, or the notes to disclosure under the Data Protection thereto, shall disclose: the turnover Act 1998 and if consent to disclosure and other operating income, is with held then a statement to that operating costs, each analysed effect against the name of the as follows: individual (this consent is not required (i) BW (public corporation) to include where a requirement to disclose is a an analysis of expenditure on: condition in the employment contract); (a) multiple use waterways; (f) staff costs for the year, excluding (b) leisure waterways and; Non-Executive Board Members, according to categories of staff; (c) waterways not fully navigable. (i) BW’s subsidiary companies (g) a statement of the number of (ii) BW’s share of joint ventures employees during the year, excluding and associates board members, whose emoluments excluding pension contributions fell in (III) The annual accounts shall also each bracket of a scale in multiples disclose details of: of £10,000, starting at £50,000.

(a) rents receivable for the year showing (h) a statement that the resource separately rents from investment Departmental Expenditure Limit (DEL), property and rents from other property; capital DEL and resource annually managed expenditure budget limits (b) interests during the year in other set by the Department have not transport undertakings and other been exceeded. trade investments;

ANNUAL REPORT & ACCOUNTS 95 ADDRESSES AND CONTACTS

BW Head Office BW Customer Service Centre Willow Grange, Church Road, Willow Grange, Church Road, Watford WD17 4QA Watford WD17 4QA T 01923 226422 T 01923 201120 F 01923 201304 E [email protected]

British Waterways Scotland Northern Waterways Southern Waterways Canal House, Managing Director’s Office, Managing Director’s Office, Applecross Street, Middle Warehouse, Castle Quay, Canal Lane, Hatton, Glasgow G4 9SP Manchester M15 4NJ Warwick CV35 7JL T 0141 332 6936 T 0161 838 5580 T 01926 626100 F 0141 331 1688 F 0161 838 5590 F 01926 626101

British Waterways London Wales & Border Counties South West Waterway Unit 1 Sheldon Square, Waterway Unit Harbour House, West Quay, Paddington Central, Navigation Road, Northwich, The Docks, London W2 6TT Cheshire CW8 1BH Gloucester GL1 2LG T 020 7985 7200 T 01606 723800 T 01452 318000 F 020 7985 7201 F 01606 871471 F 01452 318076

North West Waterway Unit West Midlands Waterway Unit Trafalgar House, Temple Court, Albert House, Quay Place, Birchwood, 92-93 Edward Street, Warrington WA3 6GD Birmingham B1 2RA T 01925 847700 T 0121 200 7400 F 01925 847710 F 0121 200 7401

Yorkshire Waterway Unit Central Shires Waterway Unit Fearns Wharf, Neptune Street, Peel’s Wharf, Lichfield Street, Fazeley, Leeds LS9 8PB Tamworth B78 3QZ T 0113 281 6800 T 01827 252000 F 0113 281 6886 F 01827 288071

East Midlands Waterway Unit South East Waterway Unit The Kiln, Mather Road, Ground Floor, Witan Gate House, Newark NG24 1FB 500-600 Witan Gate, T 01636 704481 Milton Keynes MK9 1BW F 01636 705584 T 01908 302500 F 01908 302510

96 ANNUAL REPORT & ACCOUNTS