Waterway Map ADDRESSES

British Waterways BRITISH WATERWAYS Willow Grange Church Road Watford WD17 4QA

T +44 1923 201120 Head Office Customer Service Centre F +44 1923 201400 Willow Grange, Church Road, Willow Grange, Church Road, E [email protected] Watford WD17 4QA Watford WD17 4QA www.britishwaterways.co.uk T: 01923 226422 T 01923 201120 Discover the best of the UK’s waterside & REPORT ANNUAL F 01923 201304 with Waterscape.com [email protected] ISBN 0 903218 48 8 This document is printed on Greencoat Velvet Plus and Cyclus Offset. Greencoat is 80% recycled, 20% pulp from sustainable sources and Design by 55 Design Ltd has been awarded the NAPM and Eugropa recycled marks. 2004 05 Printed by Greenshires Group Cyclus Offset is 100% de-inked post consumer recycled waste / and has been awarded the NAPM. The document has been printed July 2005 using soya based inks. ANNUAL REPORT & ACCOUNTS

BW Scotland Northern Waterways Southern Waterways ACCOUNTS 2004/05 Canal House, Middle Warehouse, Castle Quay, Canal Lane, Hatton, Applecross Street, Manchester M15 4NJ Warwick CV35 7JL Glasgow G4 9SP T 0161 838 5580 T 01926 626100 T 0141 332 6936 F 0161 838 5590 F 01926 626101 F 0141 331 1688 enquiries.scotland@ North West Waterways Central Shires Waterways britishwaterways.co.uk Trafalgar House, Temple Court, Peel’s Wharf, Lichfield Street, Birchwood, Warrington WA3 6GD Fazeley, Tamworth B78 3QZ BW London T 01925 847700 T 01827 252000 1 Sheldon Square, F 01925 847710 F 01827 288071 Paddington Central, enquiries.northwest@ enquiries.centralshires@ London W2 6TT britishwaterways.co.uk britishwaterways.co.uk T 020 7985 7200 F 020 7985 7201 Yorkshire Waterways South West Waterways enquiries.london@ Fearns Wharf, Neptune Street, Harbour House, West Quay, britishwaterways.co.uk Leeds LS9 8PB The Docks, Gloucester GL21 2LG T 0113 281 6800 T 01452 318000 F 0113 281 6886 F 01452 318076 enquiries.yorkshire@ enquiries.southwest@ britishwaterways.co.uk britishwaterways.co.uk

East Midlands Waterways South East Waterways The Kiln, Mather Road, Ground Floor, 500-600 Witan Gate, Newark NG24 1FB Milton Keynes MK9 1BW T 01636 704481 T 01908 302500 F 01636 705584 F 01908 302510 enquiries.eastmidlands@ enquiries.southeast@ britishwaterways.co.uk britishwaterways.co.uk

Wales & Border Counties Waterways West Midlands Waterways Navigation Road, Albert House, Quay Place, Northwich CW8 1BH 92-93 Edward Street, T 01606 723800 Birmingham B1 2RA F 01606 871471 T 0121 200 7400 [email protected] F 0121 200 7401 enquiries.westmidlands@ britishwaterways.co.uk

Back Cover: A family enjoy the rural Oxford Canal at Thrupp. restoration for theCotswoldCanals Lottery Funding committed £11.3 millionHeritage norm theUK above satisfaction toalevel 15% increaseinjob WATERWAYS 2004/05 BRITISH HIGHLIGHTS investment property income earnedfromour Record £26.4millionrental to buildtheLiverpoolLink £7.5 millioncommitted income directly earned Nearly 50% oftotal and greatercommercialfreedoms a greenlightgivenforcontractfunding Our visionendorsedbygovernment,and holder groups strategic issueswithstake- Forum formed,todiscuss British Waterways Advisory per annum fall from9daysto7.3 days Staff absenteeismlevels

KEY 1 Scotland Northern Waterways 2 North West 3 Yorkshire 4 Wales & Border Counties 5 East Midlands Southern Waterways 6 West Midlands LOCHLOCH NESSNESS 7 Central Shires CALEDONIANCALEDONIAN CANALCANAL 8 South West SCALE AberdeenAberdeen LOCHLOCH OICHOICH 9 South East 0 50 kilometres

LOCHLOCH LOCHYLOCHY 10 London 0 10 20 30 miles

FortFort WilliamWilliam WATFORD British Waterways’ Offices 1 Managed by British Waterways Waterways 2025 Priority One projects DundeeDundee Other AINA Waterways PerthPerth

Reproduced from the Ordnance Survey mapping with the permission of the Controller of Her Majesty’s Stationery Office © Crown copyright. Unauthorised reproduction infringes Crown copyright and may lead to prosecution or civil proceedings. British Waterways, AL51127A. LOCHLOCH LOMONDLOMOND This map includes waterways managed by members of the Association of Inland Navigation Authorities (AINA) as well as BW’s current planned CRINANCRINAN StirlingStirling restoration and new build projects. There are other inland waterways that have not been included, but can be found on more detailed maps CANALCANAL DunfermlineDunfermline (contact BW Customer Service Centre on 01923 201120 for more information). © British Waterways 2005

FORTHFORTH RRIVERIVER CCARRONARRON & CLYDECLYDE GrangemouthGrangemouth CANALCANAL ClydebankClydebank UNIONUNION CANALCANAL EDINBURGHEDINBURGH GLASGOW MONKLANDMONKLAND CANALCANAL

AyrAyr

NewcastleNewcastle UponUpon TyneTyne

CarlisleCarlisle SunderlandSunderland

DurhamDurham

BASSENTHWAITE WorkingtonWorkingtoWorkington ULLSWATER WhitehavenWhitehaven MiddlesbroughMiddlesbrough

DarlingtonDarlington TEESTEES NAVIGATIONNAVIGATION LAKE DISTRICT ANDAND BARRAGEBARRAGE

WINDERMERE

KendalKendal 3 ScarboroughScarborough NORTHERNNORTHERN RREACHESEACHES DouglasDouglas LANCASTERLANCASTER CCANALANAL RIVERRIVER RIPONRIPON UREURE CANALCANAL DRIFFIELD LancasterLancaster LEEDSLEEDS & NAVIGATION 2 LIVERPOOLLIVERPOOL CANALCANAL HarrogateHarrogate RIVERRIVER OUSEOUSE LANCASTERLANCASTER CANALCANAL YorkYork POCKLINGTONPOCKLINGTON CANALCANAL RIVER RIVER BurnleyBurnley LEEDS AIREAIRE & HULL BlackpoolBlackpool PrestonPreston DERWENT MARKET CALDERCALDER WEIGHTON KingstonKingston UponUpon RIBBLERIBBLE BradfordBradford NAVIGATIONNAVIGATION CANAL HullHull LINKLINK WakefieldWakefield ROCHDALE SELBYSELBY CANALCANAL CANAL NEWNEW CALDERCALDER & RIVER HEBBLEHEBBLE JUNCTIONJUNCTION LEEDSLEEDS & HUDDERSFIELDHUDDERSFIELD CANALCANAL ANCHOLME MANCHESTER BOLTON BROADBROAD CANALCANAL NAVIGATIONNAVIGATION STAINFORTHSTAINFORTH & LIVERPOOLLIVERPOOL & BURY CANAL ScunthorpeScunthorpe CANALCANAL ASHTONASHTON HUDDERSFIELDHUDDERSFIELD SOUTHSOUTH YYORKSHIREORKSHIRE NAVIGATIONNAVIGATION KEADBYKEADBY CANALCANAL RIVER STST HELENSHELENS CANALCANAL NARROWNARROW CANALCANAL TRENT (SANKEY)(SANKEY) MANCHESTER DoncasterDoncaster LOUTH CANALCANAL SHIP CANAL MANCHESTER NAVIIGATIION SHEFFIELDSHEFFIELD & LIVERPOOLLIVERPOOL WARRINGTON BRIDGEWATER CANAL TINSLEYTINSLEY CANALCANAL LINKLINK PEAKPEAK FORESTFOREST SheffieldSheffield RhylRhyl WEAVERWEAVER NAVIGATIONNAVIGATIONAVIGATION CANALCANAL FOSSDYKEFOSSDYKE NAVIGATIONNAVIGATION CHESTERFIELDCHESTERFIELD NORTHWICH MacclesfieldMacclesfield ChesteCChesterfieldhesterfielrfield CANALCANAL WITHAMWITHAM NAVIGATIONNAVIGATION RIVER DEE MACCLESFIELD CANAL LincolnLincoln ChesterChester TRENTTRENT NAVIGATIONNAVIGATION SHROPSHIRE 5 UNION CANAL MIDDLEWICHMIDDLEWICH CALDONCALDON CANALCANAL BRANCHBRANCH EREWASHEREWASH NEWARK WrexhamWrexham NOTTINGHAMNOTTINGHAM CreweCrewe CANALCANAL BostonBoston LLANGOLLEN Stoke-on-TrentStoke-on-Trent DerbyDerby & BEESTONBEESTON SLEAFORDSLEAFORD CANAL TRENTTRENT & MERSEYMERSEY CANALCANAL NAVIGATIONNAVIGATION CANALCANAL GranthamGrantham SHROPSHIRESHROPSHIRE GRANTHAMGRANTHAM FENSFENS WATERWAYSWATERWAYS LLINKINK UNIONUNION CANALCANAL STAFFSSTAFFS & NottinghamNottingham CANALCANAL THETHE BROADSBROADS WORCSWORCS TRENTTRENT & MERSEYMERSEY CANALCANAL RIVERRIVER SOARSOAR King’sKing’s LynnLynLynn RIVER RIVERRIVER GLENGLEN SEVERN CANALCANAL ASHBYASHBY CANALCANAL RIVERRIVER WELLANDWELLAND OLDOLD GreatGreat YarnmouthYarnmouth ShrewsbuSShrewsburyhrewsbury COVENTRYCOVENTRY CANALCANAL RIVERRIVER BIRMINGHAMBIRMINGHAM LeicesterLeicester RIVERRIVER NENENENE NENENENE GREATG R E AT OOUSEUSE RRIVERIVER NorwichNorwich MONTGOMERY CANALCANAL NAVIGATIONSNAVIGATIONS 7 PeterboroughPeterborough CANAL RIVER SEVERN FAZELEY RIVERRIVER WWISSEYISSEY MARKETMARKET HARBOROUGHHARBOROUGH ARMARM TWENTYTWENTY SIXTEENSIXTEEN BIRMINGHAMBIRMINGHAM FOOTFOOT BIRMINGHAM & FAZELEYFAZELEY CANALCANAL FOOTFOOT RIVERRIVER LITTLELITTLE OUSEOUSE BirminghamBirmingham 6 STOURBRIDGESTOURBRIDGE OXFORDOXFORD CCANALANAL MIDDLEMIDDLE LLEVELEVEL STAFFSSTAFFS OLDOLD BEDFORDBEDFORD NEWNEW TENTEN MILEMILE OOUSEUSE CANALCANAL NAVIGATIONSNAVIGATIONS RIVERRIVER & WORCSWORCS CoventryCoventry RIVERRIVER NENENENE BEDFORDBEDFORD CANALCANAL GRANDGRAND UNIONUNION CANALCANAL OLDOLD WESTWEST RIVERRIVER RIVERRIVER RIVERRIVER LARKLARK StourportStourport STRATFORD-UPSTRATFORD-UP Stratford-upon-AvonStratford-upon-Avon LEICESTERLEICESTER LINELINE ON-AVONON-ON-AVONAVON CANALCANAL HATTON ELYELY OUSEOUSE DROITWICDROITWICH CCANALSANALS 4 RIVERRIVER CCAMAM BuryBuBuryry St.St. EdmundsEdmundEdmunds WORCESTERWORCESTER & GRANDGRAND WorcesteWWorcesterorcester UNIONUNION 9 BIRMINGHAMBIRMINGHAM NorthamptonNorthampton RIVERRIVER GREATGREAT OUSEOUSE CambridgeCambridge CANALCANAL CANALCANAL HEREFORDSHIREHEREFORDSHIRE & BedfordBedford UPPERUPPER AVONAVON IpswichIpswich GLOUCESTERSHIREGLOUCESTERSHIRE CANALCANAL NAVIGATIONNAVIGATION GRANDGRAND UNIONUNION HerefordHereford BanburyBanbuBanbury CANALCANAL RIVERRIVER STOURSTOUR RIVERRIVER LOWERLOWER AAVONVON MILTON KEYNES SEVERNSEVERN NAVIGATIONNAVIGATION MONMOUTHSHIREMONMOUTHSHIRE OXFORDOXFORD & BRECONBRECON CANALCANAL Bishop’sBishopBishop’s ColchesterColchester CANALCANAL StortfordStortford 8 CHELMERCHELMER & SWANSEASWANSEA GLOUCESTER AYLESBURYAYLESBURY ARMARM BLACKWATERBLACKWATER CANALCANAL RIVERRIVER 10 RIVRIVERER STOSTORT NAVIGATIONNAVIGATION WYEWYE LydneyLydney GLOUCESTERGLOUCESTER & SHARPNESSSHARPNESS CANALCANAL HarbourHarbour HertfordHertford NAVIGAAVIGATIONION OxfordOxford WENDOVERWENDOVER ARMARM RIVERRIVER TTHAMESHAMES RIVRIVERER LLEEEE NAVVIGIGAATIOTION NEATHNEATH & SSTROUDWATERTROUDWATER WATFORD ChelmsfordChelmsford SwanseaSwansea SHARPNESSSHARPNESS NAVIGATIONNAVIGATION TENNANTTENNANT DOCKSDOCKS GRARAND UNIOION CANAANAL CANALCANAL (COTSWOLDCOTSWOLD SwindonSwindon Southend-on-SeaSouthend-on-Sea NewportNewport MaidenheadMaidenhead REGENT’SREGENT’S HEHERTRTFOFORD UNIIOON CANANALAL CANALCANAL RIVERRIVER PADDINGTON BOWBOW BACKBACK RIVERSRIVERS THAMESTHAMES SloughSlough PADDINGTONPADDINGTON BRANCHBRANCH BristolBristol LIMEHOUSELIMEHOUSE CUTCUT CARDIFFCARDIFF SLOSLOUGH LONDONLONDON DDOCKLANDSOCKLANDS ReadingReading ARMARM RIVERRIVER AAVONVON RIVERRIVER TTHAMESHAMES WindsorWindsor BathBath KENNETKENNET & AVONAVON BasingstokeBasingstoke MaidstoneMaidstone CANALCANAL RIVERRIVER WWEYEY BASINGSTOKEBASINGSTOKE CCANALANAL GuildfordGuildford RIVERRIVER MEDWAYMEDWAY DoverDover BridgwaterBridgwater

WEYWEY & ARUNARUN CCANALANAL TauntonTauntoTaunton RIVERRIVER PPARRETTARRETT BRIDGWATERBRIDGWATER & RyeRye HarbourHarbour GRANDGRAND WESTERNWESTERN CANALCANAL TAUNTONTAUNTON CANALCANAL SouthamptonSouthampton RIVERRIVER ARUNARUN BrightonBrighton BUDEBUDE CANALCANAL PortsmouthPortsmouth

ExeterExeter BournemouthBournemouth EXETEREXETER SHIPSHIP CANALCANAL

TorquayTorquay PlymouthPlymouth WATERWAY MAP Improved internal complaints procedure implemented, 90.4% of complaints responded to within 20 days

26% reduction in reportable Scottish & Newcastle Pub Enterprises accidents to staff confirmed as partners for the Waterside Pub Partnership

The Canary Wharf Group and Ballymore Properties Ltd confirmed as partners for Wood Wharf, our major property venture in London Docklands

New independent Ventures income up by £5.1 Ombudsman Committee million to £6.9 million established

Company car mileage £3.7 million additional reduced by 14.5% Scottish Executive grant British Waterways is a public corporation, accountable to the Department for Environment, Food and Rural Affairs (Defra) in England and Wales, and the Scottish Executive in Scotland. We manage a 2,000-mile long, 200-year-old, network of canals and rivers.

This page: Boaters at Tring, on the Grand Union Canal.

Front Cover: People enjoying a day out at the Inland Waterways Association’s festival ‘Canal Cavalcade’ at Little Venice, on the Regent’s Canal, in May 2005. CONTENTS

“British Waterways has turned 04 Chairman’s Statement

a liability into a much-loved 06 Operating and Financial Review national asset.” 07 Financial Highlights 08 Our Values and Vision 09 Measuring Success and Business Risk 10 Safety Management 12 Customer Satisfaction 14 Our Corporate Social Responsibility 22 Our People Rt Hon Alun Michael, MP, Waterways Minister, 26 Managing Our Waterways until May 2005 32 Leisure 34 Restoration 36 Property 38 Ventures 42 Fixed and Operating Costs 44 Finance and Tax

46 Scotland’s Operating and Financial Review Jim Knight, MP, became the Minister for Inland Waterways, in May 2005 52 Scotland’s Accounts

“We look forward to continuing 54 Non-Executive Board Members to work with British Waterways 55 Executive Directors and its partner organisations in 57 Contents of Accounts the delivery of a vibrant canal network for Scotland.” 100 About British Waterways

Nicol Stephen, Minister for Transport, Scottish Executive

ANNUAL REPORT & ACCOUNTS 03 CHAIRMAN’S STATEMENT

I was delighted that Board Member, reinstated for 2005/06, following the Dr Campbell Christie, was appointed 2004/05 cut of £2.5 million. However, Vice-Chairman in his place. He has index linking was not restored and while already proved to be a valuable asset. we have concerns about the medium- term consequences, it emphasises the Janet Lewis-Jones and Adeeba Malik need for us to earn our own income. also stepped down as members of the We are, however, encouraged by initiatives Board in October 2004 and I thank to lock government funding into longer them for their valuable contributions. term contractual arrangements. Richard Bowker was appointed to the The Scottish Executive continued to Board in September 2004 and has demonstrate its support for us, with This year we have again made very good brought with him a wealth of business additional ad-hoc grant of £3.7 million progress, finishing the year close to our experience and, as a keen boater, this year. We also welcomed the Scottish original plan. a passion for the inland waterways. Executive’s announcement for continued The benefits brought about by our 2003 Your Board has again contributed much funding of £8.9 million for 2005/06, organisation restructure, and introduction to British Waterways’ success this year, increasing to £10.9 million for 2006/07 of SAP computer software are already and I thank them all for their work. It is a and £11.4 million for 2007/08. This is evident. We are working more efficiently great achievement that over the past year a very clear indication of the Scottish and have reduced our fixed costs. your Board has effectively adopted the Executive’s commitment to Scotland’s 2003 revision to the Combined Code on canals. Like-for-like our total income grew by Corporate Governance, a year earlier than 1.8%, if we exclude the £21.4 million Government Review required. additional government grant received During the year Defra and the Scottish in 2003/04 for specific projects. While our Our Finance Director, Mark Smith, resigned Executive completed their five-yearly review total trading income was slightly up at in May 2005 to take up a post as Finance of British Waterways and, in addition to £88.7 million (2003/04: £88.3 million), Director with the Southern Co-operatives commending what we have achieved, the underlying growth is 14.5% year on Ltd. Mark played a key role in transforming they fully endorsed our vision, strategies year. We reduced our expenditure by the organisation and we shall miss his and plans. The review, published in March 8.4% during the year to £184.2 vision, dedication and business acumen. this year recommends that British (2003/04: £201.2 million). We all wish him great success in his Waterways should be: funded on a long- future career. term contractual basis; have greater In last year’s Annual Report, I stated that commercial freedoms; and be able to use British Waterways’ biggest challenge was Following the triennial valuation, the its proven expertise to invest in regeneration to put the building blocks in place to pension fund reported a deficit of £42 opportunities on other waterways. deliver our vision for the future of the million. We decided that we wanted to waterways. This has been achieved. find a way to retain the defined benefits Implementing these changes is essential scheme, and achieved this through the to our strategy to provide a secure, largely People co-operation of all the interested parties. self-sufficient and sustainable future. Our people have remained admirably More details about this pleasing result focused throughout the changes. It is of The intention is to continue to operate as are given on page 24. great credit to them that our new structure a successful company serving the public is now firmly embedded in the organisation. Working with Governments interest, and reinvesting all the net income All the teams are performing well. In April We have again benefited from excellent back into the waterways, while becoming 2005 people’s job satisfaction levels rose support from our governments this year. less exposed to the uncertainties of to 82% (Sept 2004: 71%), well above We welcome our new Minister for Inland government funding. Waterways, Jim Knight MP. He has taken the 75% UK norm. Motivation levels also Working with Partners rose to 69% (Sept 2004: 60%), again over from Rt Hon Alun Michael MP This is the way we achieve most of our above the UK norm of 66%. It is good to following the general election, and the plans. We value every single partner from see the recovery in morale, and that we subsequent reallocation of ministerial small voluntary groups to large businesses are well on track to achieve upper quartile responsibilities. We thank Alun Michael for working with us through joint ventures. performance. his wise counsel and staunch support, and All are crucial to help us deliver our vision. wish him well in his new role, which will Sir Peter Soulsby stepped down as Vice- also be important to British Waterways. Last year I stated that we were setting Chairman in June 2004. We benefited from up improved arrangements to listen and his great enthusiasm for the waterways and In England and Wales we accrued grant respond to our partners and customers. we all wish him well as the new Member totalling £60.7 million in 2004/05. This was as a direct result of our consul- of Parliament for Leicester South. We are pleased that baseline Westminster tation on openness and accountability government grant levels have been which followed cabinet office guidelines.

04 ANNUAL REPORT & ACCOUNTS (Left to right): George Greener, British Waterways’ STATEMENT CHAIRMAN’S Chairman and Charlie Gordon, Leader of Glasgow City Council turn the first sod to mark the start of work on the £5.6 million canal link at Port Dundas, near Glasgow.

Consequently in May 2005 the British of more than 100 waterside pubs. As well The Future Waterways Advisory Forum, comprising as bringing in significant future revenue British Waterways believes that to achieve many representatives of groups who use these ventures will aid our wider remit the plans that support its vision, it must the waterways, was formed to discuss for urban and rural regeneration, and aspire to, and indeed become, the strategic issues. As someone who was consequently more vibrant waterways. exemplar public corporation. Much has so instrumental in its development, I was been achieved and this has been taken Satisfying our Customers delighted to attend the first meeting. into account in the government review, Delighting our customers is a key part There is no doubt that this is an excellent which is enormously useful as well as of our vision. It is a principal target for approach to working in partnership to encouraging. We have an excellent the executive team. reconcile individual interests, and so platform from which to further develop progress common goals through a sharing We use independent market research, and the next steps are clear. I retire of knowledge and experience for the alongside our complaints procedure, as chairman with feelings of excited benefit of the waterways. to measure and track ‘excellent customer anticipation about what Robin Evans Fair Trading Group service levels’ amongst visitors. and his team will achieve. They have the capability, the belief and the dedication More than ever, we must be seen to trade This process has already enabled us to to the task and I very much look forward fairly within the context of being a network identify areas where customers seek the to seeing their future results. provider, especially as our commercial most improvement. Notably this year we ventures grow. That is why during the have made a concerted effort to improve year your Board established the Fair the quality of the management of towpath Trading Group. The main task of the vegetation across our entire network, Group is to scrutinise the compliance and to carry out additional dredging by British Waterways and its subsidiaries of the canals. of their fair trading commitments and obligations. This year I have also been enormously encouraged by the progress we have Since its establishment the Group has made by introducing a more straight- George Greener focused its attention on the competition forward, and dependable, internal Chairman and fair trading implications of the complaints procedure; another outcome relationship with our subsidiary British of our Openness & Accountability Waterways Marinas Limited (BWM Ltd). consultation. It is now much easier We have committed ourselves to the for customers to make a complaint, ‘Marinas Protocol’ which sets out the and also less complicated and less principles by which the commercial off-putting to progress the complaint relationships between British Waterways to the Waterways Ombudsman. and both BWM Ltd and other marina Focusing on Safety at Work operators shall be conducted. This protocol will ensure that our marina I cannot write this statement without businesses cannot be judged to enjoy talking about safety. any unfair competitive advantage by The executive team absolutely believe virtue of their ownership by British that our target of zero reportable Waterways. incidents is achievable. This year we Ventures focused on implementing our safety Our ventures are creating important transformation programme and our income streams for us. During the year reportable incident rate fell by 26%. we established a further two ventures in While we are confident that this partnership with the private sector: Wood programme will enable us to become Wharf; and the Waterside Pub Partnership. class leaders, we have experienced some Wood Wharf, our high-profile property very serious incidents. Regrettably there venture in London Docklands with Canary were three fatalities in two incidents Tony Hales has been appointed as Chairman from 10 July 2005. He is also Chairman of Workspace Wharf Group plc and Ballymore Properties involving our smaller contractors. As a consequence we immediately reassessed Group plc, and is Non-Executive Chairman of NAAFI Limited, will release additional income Ltd. He was previously Chief Executive of Allied into the business immediately. The our processes for safety risk management Domecq and a Non-Executive Director of HSBC Waterside Pub Partnership has been for smaller contractors, and new Bank plc and Welsh Water plc. set up as a joint venture with Scottish processes are being implemented & Newcastle Pub Enterprises, and is without delay. expected to develop a nationwide chain

ANNUAL REPORT & ACCOUNTS 05 OPERATING AND FINANCIAL REVIEW

(left to right): Robin Evans, Chief Executive; Russell Thomson, Customer Services Manager, Highland Canals; Carole Keltie, Customer Services Manager, Falkirk Wheel; Robert McLeod, Supervisor, Lowlands canals; and Alec Francis, Seasonal Waterway Operative, Caledonian Canal discuss ‘customer service’ with Board Members, as part of the Board’s visit to Scotland.

In Our Plan for the Future 2003-2007, We are well on track to eliminate our Our consolidated accounts include published two years ago, we set out our statutory maintenance arrears by our a £6.9 million share of turnover from new vision for British Waterways (see target date of 2012, and over the year subsidiary, joint venture and associate page 8). we spent a record £27.3 million net of companies, an increase of £5.1 million contributions from third parties (2003/ (2003/04 £1.8 million). This is attributed During 2003/04 we restructured the 04: £21 million) on further reducing it. to a full year of BWM Ltd, plus a share business, and implemented a fully- of profits from our property ventures. integrated business IT system, SAP. Our trading income has continued to Our people were also asked to focus perform well, with an underlying growth Government grants totalled £73.4 million their efforts on providing a safe place of 14.5%. However the increase from during the year (2003/04: £94.8 million), of work and excellent customer service. last year was slight at £88.7 million a decrease of 22.5%. This expected (2003/04: £88.3 million), as 2003/04 decrease takes into account one-off Throughout 2004/05, as reported here, included a number of significant one-off grant payments received in 2003/04, we have further embedded the structural receipts, resulting in an abnormal peak including £16.5 million for specific and cultural changes and made great in the growth trend. infrastructure projects. progress with our strategic aims. The restructure also allowed us to focus All this effort to make ourselves more Overall our expenditure over the year better on our property business this year, efficient and effective is the means fell by £17 million to £184.2 million and our 2004/05 group net results have whereby we can maintain our waterways (2003/04: £201.2 million) which resulted benefited from a strong performance in in a sustainable way for maximum public from the planned £21.4 million reduction this area. It is a great achievement that benefit. in accrued government grant. profits from the sale of our investment That benefit ranges from the obvious Our largest single commitment remains properties increased by 94.7% to £14.8 amenity value of 2,000 miles of accessible, to the maintenance and operation of our million (2003/04: £7.6 million). This influx attractive waterway and towpaths, to the waterways and during the year our of capital will allow us to increase our less obvious catalytic effect on urban and expenditure in this area increased to investment opportunities, and in-turn help rural regeneration; the resurgence of £114.2 million (2003/04: £112.1 million). achieve long-term self-sufficiency. The waterborne freight; and the value of our value of our property investment estate Within this £114.2 million we increased network for flood alleviation. also increased by 7% to £449.5 million our spend on customer service and day- (2003/04: £419.3 million) through capital Our Operating and Financial Review to-day maintenance and operations to growth less net disposals. This encouraging on the following pages sets out how £73.9 million (2003/04: £69.7 million). result is mainly due to: positive market our values, vision and strategic plans This 6% increase was made possible by conditions; the maturity of a number of are delivering an exemplar public service reallocating our operational savings and specific large developments; and more for the benefit of millions of visitors and diverting funds from other areas of the active estate management by our stakeholders every year. business. property teams.

Robin Evans, Chief Executive

06 ANNUAL REPORT & ACCOUNTS FINANCIAL HIGHLIGHTS FINANCIAL HIGHLIGHTS AND INTRODUCTION REVIEW FINANCIAL & OPERATING

BW Group Consolidated Financial Highlights £m 2004/05 2003/04 Trading income 88.7 88.3 Restoration and third party funding 17.0 14.3 Government grants 73.4 94.8 Total revenue 179.1 197.4 Total expenditure (184.2) (201.2) Operating loss (5.1) (3.8) Share of operating profits and losses of associates and joint ventures 1.1 (1.0) Profit on sale of investment properties 14.8 7. 6 Exceptional costs of business re-organisation - (5.4) Net interest (payable)/receivable (3.0) 0.8 Profit/(loss) for the financial year before taxation 7.8 (1.8) Taxation (3.5) (0.3) Profit/(loss) for the financial year after taxation 4.3 (1.5) Property profits transferred to realised capital reserve (6.0) (3.4) Loss transferred to reserves (1.7) (4.9)

Average number of employees 1935 2255

BW Group comprises the British Waterways Board (BW) and those subsidiaries incorporated to act solely on behalf of, and for the benefit of, British Waterways.

Breakdown of Total Income £m

250

200 Grant

Waterway Leisure

150 Restoration Property Ventures

100

50

0 03/04 04/05 05/06 06/07 07/08 ANNUAL REPORT & ACCOUNTS 07 1. Accumsan et iusto odio dignissim qui epist blandit praesent luptatum zzril OUR VALUES ANDdelenit VISION augue duis dolore te feugait nulla facilisi. Lorem ipsum dolor sit amet. 2. Consectetuer amet adipiscing elit, sed diam nonummy nibh euismod tincidunt

Our Values Company Values Behavioural Values Our values underpin everything we do. Company values characterise the results Behavioural values influence how our Our strategy is based on them. we seek to achieve people work Sustainable – we take a long-term, and Safe – we ensure that we provide collective view of our work and outputs, a safe environment for our employees, so we can better provide the correct contractors and visitors balance of social, economic, Expert Safe Open & Accountable – we are environmental and heritage benefits receptive to the views of others, and Local Sustainable Local – we seek out, engage with, and provide information on all our activities listen to local communities, so we can Stimulating Innovative – we make the waterways better understand their needs and in Treasured useful and relevant to people’s lives today Vigorous doing so offer an improved sense of place and belonging Expert – we continue to develop our Entrepreneurial Excellent knowledge and skills so that we are Entrepreneurial – we apply modern recognised as the leading advocates of Innovative Open and business techniques to make imaginative Accountable the correct balance between waterway contemporary use of our 200-year-old engineering, water resources, waterside waterway network to create value regeneration, waterway heritage and Excellent – we focus on quality waterway wildlife in all we do Company values By holding these values we will create

Behavioural values waterways which are: • Stimulating– growing in both appeal and reach • Treasured – as a national asset • Vigorous – vibrant, and full of activity

Strategies to Achieve Our Vision We will become largely self- Our Vision sufficient by: Our ambition is that by 2012 we will We will create a more vibrant • developing income streams have created an expanded, vibrant, waterway with increasing numbers that create economic value largely self-sufficient waterway of delighted visitors by: • reducing unnecessary expenditure network used by twice as many • increasing the number of boats that consumes economic value people as in 2002. • improving customer service • seeking to secure public funding It will be regarded as one of the • improving facilities through contract wherever we can nation’s most important and valued • establishing leisure businesses national assets. Visitors will be • creating visitor destinations delighted with the quality of the • championing regeneration and experience and as a consequence developing waterside property many will become active participants. • restoring waterspace

We will achieve greater public We will be able to expand participation in waterways, with the waterways by: people valuing them as national • building new waterways assets by: • restoring redundant waterways • increasing attractiveness • acquiring waterspace • improving accessibility • increasing relevance • encouraging visitors to participate • ensuring everyone has an opportunity to participate • harnessing visitors’ enthusiasm so they become long-term supporters

08 ANNUAL REPORT & ACCOUNTS MEASURING SUCCESS AND RISK VALUES, VISION, SUCCESS REVIEW FINANCIAL & OPERATING AND BUSINESS RISK

Measuring Success Business Risk We measure our overall success as: We have introduced the various elements Our joint ventures include significant of current best practice into our risk property development opportunities • Making our waterways vibrant and management framework. This helps within which there are various risks. valued, so we double visitor numbers manage risk to create opportunities for We actively engage the expertise of our by 2012 (compared to 2002 figures) innovation and growth as well as identifying chosen partners in the field to manage • Providing visitors with an experience threats to the achievement of our these risks effectively within the which will delight them, so they are objectives. Our approach to risk manage- constraints of the wider economic cycle. encouraged to become active ment is given on page 64. This shows We care for the safety of our customers participants and appreciate waterway the importance attached to the ongoing and employees on the waterways through heritage, wildlife and traditions clarification of risks, ensuring effective safety training, procedures, signage, control processes exist and for embedding • Eliminating the backlog of statutory regular maintenance of assets and the risk management into our culture. maintenance arrears and meeting development of relevant competencies. targets for water availability and quality The main risks stem from the ageing Following a period of restructuring and so that waterways are safe and reliable infrastructure for which there is ongoing refocusing, the business is now well to use inspection, assessment and prioritisation positioned to pursue its objectives. There of remedial action to assets with a high • Growing our businesses and services, are risks associated with implementing consequence of failure. Completion of so they enhance customer satisfaction, such business change. We manage these the safety-related backlog of maintenance as well as help deliver greater self- risks through recognised project control in 2004 has reduced the overall level of sufficiency techniques, communication, regular risk in the asset base. There remains a performance appraisal and individual • Developing our culture to improve balance of essential but less urgent work development plans reflecting the new safety, openness and accountability, to complete. These statutory arrears of business priorities. sustainability, commercial awareness maintenance are valued at £130.7 million. and customer service, so we can better Given the nature of our work and respon- We are dependent on continued funding serve our stakeholders sibilities we are particularly exposed from the government to fulfil statutory to changes in legislation and regulation. • Completing our restoration schemes, so obligations to eliminate the remaining The impacts will be clearer as the full that they deliver more opportunities to maintenance arrears. An increasingly requirements emerge from, for example, visit waterways and create wider public important source of additional funding the Water Framework Directive. benefits such as access to heritage, is by the use of partnerships. These jobs, tourism and regeneration ventures allow further exploitation of our In our wider objectives, we have a infrastructure by accessing investment commitment to deliver social, environ- • Proactively working with governments funds and development expertise. mental and heritage benefits. Risk based and partners, so we deliver exemplar Processes have been developed for assessments in accordance with our public service which is good value for choosing the right partner, monitoring Environmental Code of Practice are money performance, governance and allocating applied to all works undertaken. Safety appropriate responsibilities between risks, vandalism and impediments to partners. access by all are managed by our educational role and community engage- ment through organisations with strong involvement in social inclusion.

ANNUAL REPORT & ACCOUNTS 09 SAFETY MANAGEMENT Safety is our top priority.

Les Sumpter, Waterways Operative, prepares to fit a lock gate at Lowsonford, on the Stratford-upon- Avon Canal. OPERATING & FINANCIAL REVIEW

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-03/ 04/ 04 03 5 0 The totalThe number of reportable incidents in 2004/05 in 2003/04, was 30 compared with 47 targeta 26% reduction. The for 2005/06 is to keep reportable incidents below 20. 10 15 Total Reportable staff Incidents Total totals) (rolling 12-month 50 45 40 35 30 25 20 Visitor Safety Safety Visitor the waterways to As well as maintaining of media standards we use a variety safe to messages safety to communicate our Regulation combined our millions of visitors. our approach with education underpins to safety. boaters we produce a Boater’s For Handbook, containing advice on boat also We management and safety. participate, in collaboration with the Safety in the Boat Environment Agency, boat require each (BSS).Scheme We licensed with us to have a BSS certificate. BSSThe also proactively seeks to educate boatersthe hazards and risks associated of with owning a boat, and advises them of the precautions they must take. have a code of conduct available We for all waterway users. education also use our children’s We Over Waterways), (Wild campaign WOW and our Rosie & Jim branded material to help younger people understand how to use the waterways responsibly through Edge - the our SAFE From - Stay Away use the local press and campaign. We seasonal broadcast media to channel including the importance messages, safety of not walking on ice in winter and not swimming in canals and rivers during the summer. Our children’s educational campaign WOW (Wild (Wild WOW campaign educational children’s Our aboutchildren safety. water teaches Waterways) Over leaders and group past year teachers In the safety-related around 12,000 have downloaded wow4water.net. our website, from packs information Our target is to have zero reportable Our target is to have this, in help achieve incidents. To a major company- 2004/05 we began transformation programme. wide safety good progress in reducing have made We the number of reportable incidents amongst our employees (see graph right). Our target reduction was 20%, and we a 26% reduction. However, achieved tragically we had three fatalities during the year amongst smaller contractors working on our behalf. As a result we thoroughly reassessed our procedures and in 2005/06 we will be implementing risk a new standard of safety management for smaller contractors. Our aim is to become a class leader comparable with the upper quartile of the UK construction industry and we currently ourselves against our major benchmark contractors who are typically industry high performers. 2005 we appointed Tony In March Stammers as our new Head of Health experience, extensive has Tony and Safety. including 13 years at the Health and Executive and 18 years in the Safety mining industry. All our senior managers believe lost time incidents are avoidable. During the year we focused on leadership training to help culture develop this inherent safety New health throughout British Waterways. plans were also formulated for and safety unit, and a comprehensive waterway each handbooksafety was produced for every bank-based employee. Employee Safety CUSTOMER SATISFACTION Our vision is to increase the number of visitors and delight more of them.

In order to measure how we are performing Currently, the seaside is rated at the top we carry out regular surveys, and use the of the scale at 100, followed by parks and Openness and data to help us make decisions. We use gardens at 92, woods and forests at 89, Accountability independent market research agencies to wildlife parks and farms at 80, historic We believe that public corporations measure visitor attitudes and satisfaction houses, castles and other monuments at should be open and accountable. We are levels under the following headings: 78, zoos and museums and galleries determined to meet the expectations of • Towpath User Survey at 75. Valued at 68, canals and rivers our stakeholders in this respect. This questionnaire is distributed by our are at the bottom of the list of those staff, and in 2005/06 face-to-face surveyed. Our vision is that by 2012 New Internal Complaints Procedure interviews will be conducted on our behalf inland waterways will be regarded as one Following our 2003/04 openness and • Boaters’ Views Survey of the nation’s most important and valued accountability consultation, we introduced This is a postal survey to a random national assets. We are making progress a simple and consistent complaints 30% of our 24,000 private boat but we know we have a long way to go. procedure throughout the organisation. licence holders Our target is that by 2008 we will achieve Complaints are initially handled locally. • Main Visitor Destination Survey mid-point of the survey index (also see If a complainant remains dissatisfied with Face-to-face interviews are conducted page 21). our first response the complainant has on our behalf at our 22 main visitor sites the opportunity for it to be reviewed by • Hire Boaters’ Views Survey an Executive Director, without management This self-completion survey is distributed Measuring Public responsibility for the issue concerned. by our staff and hire boat companies to This simple, two-staged process has hire boat customers Awareness and worked well in its first full year of operation, Generally there was no significant change Perception with 26 reconsidered complaints being in overall customer satisfaction amongst Between 1995 and 1998 NOP (National found in the favour of the complainant. our towpath users and boaters during Opinion Poll) used a weekly telephone This new procedure has also improved 2004/05. Headline ‘Excellent’ satisfaction survey of a representative sample of complainants’ access to the Waterways scores decreased slightly. However, across 1,000 adults to track public attitudes Ombudsman by reducing the number of a range of measures, scores rating our towards the waterways, and British steps involved. service as ‘poor’ improved. This reflects our Waterways. The same elements were During 2004/05 we processed 791 approach to trying to get basic service inserted into our Inland Waterway Visitor complaints through our internal complaints right in 2004/05, such as our improved Survey during December 2004 and procedure of which 67 were taken to the vegetation management. ‘Excellent’ overall January 2005, with the sample being second level in the escalation procedure. enjoyment levels amongst visitors to our comparable in both size and structure. Our target is to respond to every complaint main visitor destinations remained constant within 20 days. We achieved this in 90.4% The results show that public perception at 18% over 2003/04 and 2004/05. of cases this year. of canals and awareness of British Waterways are both steadily rising. The British Waterways Advisory Forum Measuring the The public’s perception of canals being In May 2005 the first full meeting of ‘good places to visit and look around’ the British Waterways Advisory Forum Importance of has improved from 82% to 84%. The (BWAF) took place, which is attended Inland Waterways proportion of people that agreed ‘canals by organisations representing groups in Britain are well managed and operated’ of people who use the waterways. We believe that the importance people grew from 48% to 54%, and people able attach to the waterways is a good measure The BWAF is a forum representative to spontaneously name British Waterways of our progress. We measure it in absolute of all significant groups and bodies that as the organisation that ‘manages canals terms and relative to other types of national have an interest in the inland waterways in Britain’ increased from 20% to 26%. asset such as forests, historic houses and and which discusses, and makes decisions, the seaside. We use the Inland Waterway Reducing Dog Fouling about strategic issues. It will hold two Visits Survey to do this. Following customer feedback, in early general meetings each year which will 2004 we launched a long-term publicity also be attended by our Chairman, Chief This survey is a continuous random sample and educational campaign, along with Executive, along with some of our Board telephone survey which asks people to rate installing 1,000 dog bins, to help reduce Members. It will also hold two smaller, how important various destination types dog fouling. Our aim is to reduce dog intermediate meetings to further explore are in their lives. It traces movements fouling by 60% compared with 2003/04. issues raised, and to be raised, at the in public perception of the value of canals We have not carried out a survey this general meetings of the Forum. In addition and rivers compared with other nationally year, but will do so in 2005/06. to this we hold two national meetings important assets.

12 ANNUAL REPORT & ACCOUNTS The first full meeting of the British Waterways CUSTOMER SATISFACTION REVIEW FINANCIAL & OPERATING Advisory Forum successfully took place in May 2005. Twenty-six representatives from groups who use the waterways attended to discuss strategic issues.

We have 20 patrol officers around the country, who deal with customer enquiries, and tackle boat licence evasion. Pictured here, Andy Beal, Patrol Officer for the Lee & Stort Navigations, talks to a couple visiting the Inland Waterways Association’s festival ‘Canal Cavalcade’ at Little Venice on the Regent’s Canal.

every year to discuss towpath and boating During the year Waterways Ombudsman, main or every issue, and we were asked issues. Each of our ten waterway units, Stephen Edell, announced his retirement to take action where necessary. The which include London and Scotland, also after eight years in the post. Mr Edell Ombudsman found no maladministration hold a number of meetings with local has been supportive of our Openness or unfair treatment in the remaining two users to discuss local issues throughout and Accountability proposals and has published cases. the year. The dates and notes of these contributed to their development. Freedom of Information Act meetings are published on our website Former Deputy Local Government www.britishwaterways.co.uk/accountability. The Freedom of Information Act came Ombudsman Hilary Bainbridge has been into force in January 2005. From January Waterways Ombudsman appointed as Waterways Ombudsman by to April 2005 we had 24 requests for During the year we established a the Waterways Ombudsman Committee. information. We operate a simple but Waterways Ombudsman Committee She will take up her position from 1 July comprehensive process for people to ensure the Waterways Ombudsman 2005. wanting information. Details of the Scheme is accepted as independent process are available on our website During 2004/05, 46 complaints were of British Waterways. www.britishwaterways.co.uk/foia where referred to the Waterways Ombudsman. there are also details of our Publication Two non-aligned members were selected 15 of these were accepted for further Scheme as required under the Act. to join three waterways’ user group investigation and nine cases remain representatives and a minority under investigation. The Ombudsman We will continue to review our experience representation of two senior people from published nine cases in total, some of in the light of public comment and British Waterways on the committee. which were carried over from last year. feedback. Of these, maladministration or unfair treatment was found in seven cases, although not necessarily in respect of the

ANNUAL REPORT & ACCOUNTS 13 1. Accumsan et iusto odio dignissim qui epist blandit praesent luptatum zzril OUR CORPORATEdelenit SOCIAL augue duis dolore RESPONSIBILITY te feugait nulla facilisi. Lorem ipsum dolor sit amet. We take our corporate social2. Consectetuer responsibility amet adipiscing very elit, sed seriously. diam nonummy nibh Managing euismod tincidunt 2,000 miles of waterways that pass through countryside, villages, towns and cities gives us plenty of opportunity to shape our work to deliver public benefit.

1 Coventry canals covers 8 /2 acres around 4 Using Weevils to Control Environment an unused reservoir. It boasts a superb a Fast-Growing Water Weed & Heritage bird hide, CCTV systems to monitor and A trial using weevils to control the fast- record breeding, nesting and feeding growing water weed, Azolla filiculoides, Caring for our unique waterway birds, idyllic walks on paths which are on the Leeds & Liverpool Canal was environment and heritage is embedded wheelchair and pushchair friendly, pond- carried out in November 2004. Preliminary in everything we do. dipping platforms and a peaceful and results of the trial suggest that it is a We continue to develop and use Biodiversity tranquil environment. treatment that we may consider using at and Heritage Action Plans to help evaluate 2 The Waterway Wildlife Survey other sites affected by the destructive fern. and manage our assets in a consistent Thousands of captive-bred weevils have In May 2005, we officially launched our manner. We will expand our knowledge been used to eat through tonnes of the ‘Waterway Wildlife Survey’, encouraging and skills so that we are recognised as invasive Azolla, also known as fairy moss. people to inform us of wildlife they come the leading advocates of the correct We are working with CABI Bioscience, the across when visiting our waterways. This balance between contemporary design leading organisation in the UK dealing nationwide launch follows last August’s and use of heritage assets, and protecting with biological control, to ensure there are encouraging pilot when over 1,100 an important environment, whilst making no knock-on effects from the weevil, which sightings were recorded by the public, it available for all to enjoy. feeds exclusively on Azolla. Without control, and 60 different species were spotted, Azolla can shade out other important Environment including rare and protected creatures indigenous plants and reduce the oxygen We own a very large number of sites such as water voles, bats and otters. The levels in the water, harming fish and protected for natural conservation, information gathered will be incorporated aquatic life and causing the water to including 65 Sites of Special Scientific into our national species database, which smell. Weevils offer an environmentally- Interest (SSSIs). records biodiversity on inland waterways, friendly solution to the problem. Alternative and helps us manage and protect our rich methods of control are either mechanical – We are committed to increasing the array of wildlife. Media coverage in May harvesting the weeds with buckets which number of our SSSIs recorded as 2005 included an interview on the Radio is usually only effective in the short-term ‘favourable’ or ‘recovering’ by English Four ‘Today’ programme, as well as national – or using herbicides which have their Nature (currently at 69%). We take and local press and radio, and we will own environmental impacts. a similar approach to SSSIs in Scotland continue to promote the survey and Wales, although the assessment throughout summer 2005. Heritage protocols currently do not allow a similar Our historic estate comprises: 2,409 Listed expression of percentages. Working 3 Earlswood Lakes Buildings; 42 Scheduled Monuments; five closely with English Nature and Scottish Environmental Award World Heritage Sites; eight Historic Natural Heritage, we have now agreed Our £60,000 project at Earlswood Lakes Battlefields; two historic parks; thousands Site Management Statements for seven on the Stratford-upon-Avon Canal of archaeological sites and more than SSSIs in England and nine in Scotland. to install man-made floating islands, 311 miles (500 km) of conservation has beaten 50 other projects to win areas. We rank third behind the National By April 2006 we aim to have a Best Environmental Award from SITA Trust and the Church of England for Biodiversity Action Plans in place for Environmental Trust. The islands provide ownership of Listed Buildings in Britain, every waterway, which will help us to habitat for microbes that help reduce and at our recent Heritage conference, evaluate and manage our assets in the production of algae blooms and Simon Thurley, chief executive of English a consistent manner. also provide habitat for water birds. Heritage said that: “British Waterways is We are involved in many projects all over Other elements of the project included guardian of one of the five largest heritage the country and include some examples the installation of an otter holt and estates in England… it’s easy to see why here. improvements to walkways for local British Waterways role in conserving a people. The judges felt that: “this project 1 Natural Environmental Award at significant proportion of Britain’s history deserved an award because it dealt with Waterways Renaissance Awards is so important.” the problem of algae in such a clever way. Fradley Pool Nature Reserve, which Rather than resort to using chemicals, the We have Heritage Actions Plans, and opened in July 2004, won the natural man-made islands enable natural processes in 2004/05 we produced our first ever environment category (sponsored by to work. The project was also run extremely ‘State of the Waterways Heritage’ report. English Nature) at the Waterways well and received national press coverage We will update the report annually and it Renaissance Awards presented by The when it launched last year.” As a result of will become a benchmarking sustainability Waterways Trust and the British Urban the win, the Earlswood Lakes Partnership, indicator for the state of the historic Regeneration Association in March 2005. an organisation made up of local residents, environment of the waterways. The reserve, near Burton-upon-Trent at has been awarded an additional £1,250 the junction of the Trent & Mersey and to pay for further improvements at the site. We list here a few of the projects we are involved with.

14 ANNUAL REPORT & ACCOUNTS OPERATING & FINANCIAL REVIEW OUR CORPORATE SOCIAL RESPONSIBILITY 6 1 3 Fradley Pool Natural Reserve Natural Fradley Pool Survey launch Wildlife Waterway Earlswood Lakes on the Leeds &Weevils Liverpool Canal Canal & Avon Dundas Aqueduct on the Kennet of the Calder & Sowerby warehouses, junction Canal Hebble Navigation and Rochdale 1 2 3 4 5 6 4 5 2 ENVIRONMENT HERITAGE & rade ritish dge had xpensive. aqueduct’s 19 he historic bri newly refurbished ware- Restoration of Our Historic Bridges Restoration of Our In November 2004 we were awarded In November 2004 we national historic a commendation in the restoration of the bridges awards for our Dundas Aqueduct Georgian Grade I listed three Canal. The & Avon on the Kennet structure, built in 1804,arch is a Scheduled Ancient Monument and widely regarded work. as John Rennie’s finest architectural two-year restoration was completed The in 2004 and included repairing age and as well as unsym- frost damaged brick had been made pathetic repairs which won an award for also over the years. We our work with partners, on restoring the ‘lost’ Union the Grand Brunel bridge over Canal T in London. 5 National for the Recognition been hidden from sight under the brick parapets of the modern road bridge, until our team uncovered and rebuilt it. Telford’s refurbishment of Thomas The Aqueduct, iconic aqueduct, the Pontcysyllte Basin, near Llangollen and nearby Trevor also won an award. The Urban Regeneration Association. The g II which listed Salt Warehouses, include saw half a million a working wet dock, tonnes of coal, cotton, worsted and corn each year in their heyday in the mid-19th century. The two houses are now being let as offices and artisans’ workshops. spans are carried high above the River Dee on masonry piers, making maintenance and repair difficult and e the first major this was Consequently, refurbishment since the structure was opened in 1805. judges commented The great preservation scheme that it was: ‘A ensuring that this revolutionary structure with a minimum of attention will be safe 50 years’. for the next 6 Restoration Sowerby Warehouses In July 2004 we completed the careful restoration of Sowerby Warehouses, on the junction of the Calder & Hebble Canal, Navigation and the Rochdale Fund, with funding from Heritage Lottery and ourselves, and Forward, Yorkshire input from the Sowerby Bridge Partnership. 2005 the £2 million restoration In March won the historic environment category (sponsored by English Heritage) at the presented Renaissance Awards Waterways B and the Trust Waterways by The 1. Accumsan et iusto odio dignissim qui epist blandit praesent luptatum zzril OUR CORPORATEdelenit SOCIAL augue duis dolore RESPONSIBILITY te feugait nulla facilisi. Lorem ipsum dolor sit amet. 2. Consectetuer amet adipiscing elit, sed diam nonummy nibh euismod tincidunt

Resource Efficiency 2 Environmentally Acceptable Reduction in Energy Consumption We are committed to managing our assets Lubricants During 2003/04 we started work on our and our businesses based on the principle We now use vegetable-based campaign to reduce energy consumption of ‘resource efficiency’, where the environmentally acceptable lubricants across the business. We are working with consumption of materials, water and for chainsaw chainbar oil, after introducing Action Energy and the Carbon Trust energy is minimised and the use of internal standards on the use of focusing initially on our use of electricity. secondary or recycled resource is environmentally acceptable lubricants We are actively seeking to reduce maximised. Resource efficiency is achieved in 2003. In February 2005 we signed employee car mileage, predominately by ensuring a balance between the a national agreement with Shell by the introduction of video conferencing consumption of primary resources and Lubricants for the supply of Naturelle at all our offices. Our target for the last the re-use of secondary materials HF-E hydraulic fluid, which is produced year was to reduce this by 5%, we greatly through the procurement of products from over 50% renewable resources exceeded this, and reduced car mileage with a maximum recyclable content or (rape seed oil) and complies with by 15%. where materials are reused to maximise European standards for both benefit. Resource efficiency is incorporated biodegradability and toxicity. We will We also surpassed our target to reduce in our post project appraisals, as part phase this into all our mobile (eg boats) energy consumption at major sites by 5% of the environmental appraisal. and fixed (eg bridges and locks) plant in 2004/05 (compared with 2003/04), as equipment is replaced, rolling it out by reducing it by 7%. Our target for next We list some of our recent projects here. to other relevant equipment over the year is to reduce all metered consumption 1 Auchinstarry Basin – a Sustainable next five years. We have also asked by 10% (compared to 2003/04). Approach our contractors to comply with these During the year we used a sustainable standards for their mobile plant by 2010. approach to build Auchinstarry basin on 3 Using Fallen Trees the Forth & Clyde Canal. We sourced Timber from a fallen elm on the Llangollen local recycled aggregates mainly for the Canal has been recovered and used to road surfacing, and used surplus steel make lock paddles. Not only is this a very and concrete submarine support pads sustainable use of what is the traditional from Rosyth Dockyard for the slipway wood for the purpose (and now, of course, and crane pad. An alternative sewage rare in the UK), but it has produced cost filtration system was developed for savings of around £1,000. An otter holt waste-water, and discharges sent to was also built at Anderton using timber a newly created reed bed. Run-off surface from trees felled near the canal. water was reduced by having permeable surfaces for the car park and boat hard standing. We used canal water and heat pump technology to heat the water in the showers. The basin edge used reinforced soil techniques to create soft green edges, in-keeping with the rural location. This also helped to develop biodiversity on the site. Using these sustainable techniques also reduced the cost of the project.

16 ANNUAL REPORT & ACCOUNTS RESOURCE EFFICIENCY RESPONSIBILITY CORPORATEOUR SOCIAL REVIEW FINANCIAL & OPERATING

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2 3 1 Auchinstarry Basin, on the Forth & Clyde Canal 2 Using a chainsaw on the Peak Forest Canal 3 Using timber from fallen trees to build an otter holt at Anderton OUR CORPORATE SOCIAL RESPONSIBILITY

2 Sit Down and Be Quiet! public artwork and a canalside trail linking Social Inclusion Often the focus of ‘Access for All’ is for Ellesmere Port and Chester. This has Waterways bring enormous social wheelchair users. The need for greater culminated in a number of spin-off benefits and opportunities, enhancing and easier accessibility for everyone collaborative schemes. The route now community wealth and quality of life. requires us to think beyond this. An provides a safe link between communities, Our resources are limited and we will example of improving canal visits and places of work, visitor attractions and continue to focus predominately on encouraging greater use is the installation urban and rural areas. A recent survey providing access for all, community of benches or resting places. Working showed that the project, funded by relations and education. with the Kennet & Avon Canal Trust various sources including Single We are involved in a large number on the Kennet & Avon Canal we have Regeneration Bid, European Regional of diverse projects, and for reporting installed benches on the towpath Development Fund, landfill tax, the former purposes have selected a number of so that, as the locals say, ‘you can sit DETR transport fund, Local Transport examples from around the country down and be quiet’. It also encourages Plans and Ecocert, increased usage far to demonstrate our work in this area. the less-able to walk further. Since the above expectations. start of the scheme 68 benches have 5 Nottingham Improvements Access for All been installed. Involvement in projects with socially A partnership with Nottingham City excluded groups including minorities, 3 Better Access - Forth & Clyde Canal Council has created a safe, accessible people with low incomes and people with In October 2004, we formed the route for walkers, cyclists and wheelchair disabilities, with a particular emphasis on ‘Disabled Access Group’ in Scotland to users into the heart of Nottingham meeting the requirements of the Disability address wheelchair access issues and City Centre from the highly populated Discrimination Act, are key aims for us. offer guidance. The group comprises residential areas of The Meadows, West various disabled users and experts in the Bridgford, Lenton and Beeston via the 1 Improving Access to Nantwich field, including Eva McCracken, British existing Nottingham & Beeston Canal Embankment Waterways Scotland Group Member, and towpath. Improvements have been made Through community involvement and wheelchair user. One of the first items to approximately four miles of towpath building on existing partnerships, this raised was the number of barriers to the surface, width, access ramps and general project regenerated the Shropshire Union paths alongside the Lowland canals. access on the Nottingham & Beeston Canal’s waterside in Nantwich, Cheshire. A three-point plan was promptly produced Canal within the Nottingham City boundary. Access improvements were made from to tackle this. The plan states that we will Community Relations the local residential area to the canal, achieve better access by: carrying out an Our plan is to encourage greater use as well as creating a gateway for boat audit and risk assessment of barriers and of the waterways by a diverse range visitors into the town. The previous access deciding which can be removed; moving of people, helping to reduce vandalism was poor and hazardous in wet weather the inner sections on the chicanes; and and threatening behaviour. and during winter months. The project creating an ‘s’ type barrier to ensure landscaped the embankment and improved cyclists continue to slow down. We plan 6 Stonebridge Lock Waterside Centre access for a wider range of users including to remove the middle sections of all The £0.4 million Stonebridge Lock those with disabilities. One-mile of towpath chicane barriers on the Lowland canals Waterside Centre project, on the Lee was upgraded with three wheelchair access by the end of summer 2005. This work Navigation is a multi-purpose facility for ramps installed, as well as angling pegs ties in with The Waterways Trust Scotland’s the local community. The Centre goes for wheelchair users. This £250,000 consultation report ‘The Lowland canals beyond providing showers and a laundry project also combines interspersed art Access For All’, which is available at for boaters to include public toilets, installations celebrating the heritage www.thewaterwaystrust.org. a meeting/classroom with kitchen and of the canal. a purpose built kayak store and changing 4 Shropshire Union Canal Access room for a locally based canoe club, Eleven miles of towpath between Ellesmere Haringey Youth Paddlers. We are working Port and Chester were enhanced as part with the local Haringey Council of a £1.5 million project with Cheshire Neighbourhood team to identify local County Council, Ellesmere Port & Neston support to help manage the facility by Borough Council and Chester City Council. capacity building and fostering the Existing access onto the canal pathway development of a ‘Friends’ group. was improved, and new ramped and stepped access onto the canal was created. New lighting throughout Chester city centre was put in, as was CCTV,

18 ANNUAL REPORT & ACCOUNTS OPERATING & FINANCIAL REVIEW OUR CORPORATE SOCIAL RESPONSIBILITY 9 5 7 1 3 SOCIAL INCLUSION Nantwich Embankment, Nantwich on the Shropshire Union Canal &Kennet Canal Avon &Forth Clyde Canal Shropshire Union Canal Nottingham & Beeston Canal Lee Navigation Calder & Hebble Canal Regent’s Canal Monmouthshire & Brecon Canal 1 2 3 4 5 6 7 8 9 8 6 2 4 tasks on the ntenance at Goytre Wharf Wharf at Goytre boats. well as the intrinsic As value of of benefit in terms the work, offenders developing social skills, particularly when working with elderly mental health groups and people with learning disabilities. supports that these benefits Research are reflected in a reduced rate of 2005 the probation From re-offending. service has been concentrating their efforts on the workboats. 8 Safety at Camden of the Regent’s Canal A half-mile stretch has been the through Camden in London subject of a £250,000 community safety project, funded by us and the London Borough of Camden, in partnership with 21, Thames the Metropolitan Police, Service, Street Warden Camden Town Market and other local Camden Lock measures follow safety businesses. The consultation with regular canal users, crime prevention advisors, local residents and the include specially They Metropolitan Police. designed lighting for eight bridges and of towpath, a quarter of a mile of stretch as well as graffiti cleaning, CCTV cameras, street wardens, canal keepers, planting new signs and walls replaced schemes, with railings at access points, fencing-off hidden corners and increased patrolling of the canal by police. 9 Trail Literacy Sculpture Gore’s A new literacy sculpture trail at Goytre opened alongside in Wales, Wharf, the Monmouthshire & Brecon Canal main aim of the trail in April 2005. The as storytellers is to stimulate children and writers and to provide them with and enhance their to enrich experiences trail was developed literacy skills. The Commission in partnership with Forestry and is accompanied by a teacher’s Wales, available in bothpack English and Welsh. took part Five Monmouthshire schools in specially created storytelling activities trail is open daily The on its opening day. trips and public visits. for free school 7 Services Probation Partnership with Canal, 66On the Calder & Hebble by supervised waterway trips were crewed punishment on community offenders with the orders through a partnership performed Service. Offenders Probation cleaning and mai OUR CORPORATE SOCIAL RESPONSIBILITY

1

Our future plan is that by 2009 each of our waterway units will have established Targets and Progress strong relationships with all primary In 2003 we analysed our five business schools within a two-mile corridor of areas and the way in which they interact the waterway, and we have a central with economic, social, environmental and education team helping our waterway heritage sustainability themes. units to achieve this. We developed lead indicators so that our 1 Foxton Locks progress can be measured in the future, As part of the continuing regeneration and first published them in Our Plan for work at Foxton Locks, on the Grand the Future 2003-2007. Union Canal, local school children and We have assessed our progress in each community groups were involved with area against our targets, and list the a key phase of the work, planting 2,500 outcomes in the table, right. We will 2 trees. The children learnt about the review and replace targets in the table background to the locks and inclined where they have been met or exceeded. plane and then visited the site to see them first-hand. Working with rangers from Leicestershire County Council, British Waterways staff and members of the Foxton Locks Partnership, the children from six local schools planted trees, worked the locks and investigated the Plane. To celebrate the work that they had done, many came back at the weekend to finish the planting with their parents at the public event. 2 Canals - Then & Now, Tameside & Manchester ‘Canals – Then & Now’, was a joint project in the summer term 2004 between us, 1 Foxton Locks on the Grand Union Canal the Tameside Museums & Galleries 2 Portland Basin on the Ashton Canal Service, and the East Manchester Community Boat Project. Schools close to the canal in Tameside and East Manchester were invited to spend the day at Portland Basin. Children took part in a range of activities including Education a museum session, schoolroom role-play, Our main delivery vehicle for education a canalside walk, and a boat trip with is Wild Over Waterways (WOW), which the East Manchester Community Boat is a partnership between us, The Project. They were taught about water Waterways Trust and the Inland safety, environmental and heritage issues, Waterways Association. On our website, and the work we do to look after inland wow4water.net, we provide formal waterways. All the activities were provided education resources linked to the by the partners free of charge. national curricula of England, Scotland and Wales for: seven to eleven year old children; teachers; and group leaders. The WOW website currently gets in excess of 30,000 hits per month and around 2,000 education resources are downloaded every month.

20 ANNUAL REPORT & ACCOUNTS OPERATING & FINANCIAL REVIEW OUR CORPORATE SOCIAL RESPONSIBILITY 21 6 2 7 5 March 05: 82% 2003/04: No measure 2004/05: Sept 04: 71% 2003/04: 9 days days 2004/05: 7.3 Progress 2003/04: 64 (versus mid-point of 82) 2004/05: 68 (versus mid-point of 84.5) 2003/04: 6.6 million 2004/05: 5.64 million 2003/04: Baseline 2004/05: 7% reduction 2003/04: 3.2 million 2004/05: 2.85 million 2003/04: 13 2004/05: 22 2003/04: 25.3 2004/05: 0 (as planned) 2003/04: 10 2004/05: 0 (as planned) 2003/04: 710 2004/05: 849 English Heritage: 2003/04: 3 2004/05: 2 Authority: Local 2003/04: 159 2004/05: 117 2003/04: 2.8 million 2004/05: 6.4 million 2003/04: 100% 2004/05: 100% 2003/04: 10% 2004/05: 12% ANNUAL REPORT & ACCOUNTS Targets By 2008: at least mid-point on the 12) survey (see page tracking By 2008: 6 million miles pa 2005/06: reduce by 10% from baseline 2012: 6.4 million 2003-2008: 100 (cumulative) 2003-2008: 120 miles (cumulative) 2003-2008: 10 miles (cumulative) 2003-2008: 1385 (cumulative) English Heritage: 2008: 0 Authority: Local 2008: 27 2003-2008: 50 million (cumulative) 100% < 10% 2008/09: 90% 7 days 4 3 This year we produced a ‘State of the Waterways Heritage’ report for year we produced a ‘State of the Waterways This better heritage reporting by our has led to much the first time. This Units and we have been able to better quantify the number Waterway Authority registers. Risk on English Heritage and Local of Buildings At figures shown here are therefore a more up-to-date version from The 2005-2009those that appear in Our Plan for the Future Industry average: 16% UK norm: 75% UK norm (private sector): 7 days 4 5 6 7 1 emissions from company cars 2 We piloted a Waterway Wildlife Survey in August in Survey Wildlife Waterway a piloted We they wildlife on back to report people asking 2004 that we was so positive response The had seen. 2005. media in May via the it nationally launched VENTURES Hits on waterscape.com website of ISISPercentage meeting projects sustainable development criteria PEOPLE Employee turnover Employee job satisfaction levels Absence days per employee LEISURE Number of visitors completed Number of interpretation schemes RESTORATION Miles of newly accessible waterway Miles of historic waterway restored PROPERTY housing units planned Affordable Reduce the number of buildings on the English Risk’ registers Heritage and local authority ‘At Business Area WATERWAY Improved appreciation through attitudes changed Reduced CO Reduction in energy consumption by reducing mileage limits for any new company cars 2 E&H Social E&H Social E&H Social E&H Social E&H Social For the first time, we have comparative year on year data (Sept-Dec). For although it repeats September as shows falls in visitor numbers, This a peak month. It is too early to draw firm conclusions from this data. A preliminary review of weather patterns in the two years suggests worse in this period in 2004 than in 2003. that the weather was much is delivered or planned to be delivered on affordable housing Where are promoted by us, our partners, or our which development schemes joint venture companies, or on land owned, or intended to be owned by largest element is made us, or partners or joint venture companies. The up of our joint venture activities. We have also set CO We 3 E&H = Environment and Heritage 1 2 OUR PEOPLE Managing and caring for the inland waterways requires a very special blend of skills and experience. We rely greatly on the accumulated expertise of our people. We have a very dedicated workforce that has seen us through a period of major change and restructuring.

We usually carry out comprehensive HI Europe, our independent consultants Executive Directors’ Discussion Groups employee surveys every two years to help commented: “We have been working During the year our Directors piloted a us understand the feelings and aspirations with British Waterways since 1999, and series of round-the-table discussion groups of our people. Participation in our autumn have seen the organisation make positive at waterway units. With no set programme, 2004 employee survey was up 5% on progress during times of significant staff talk informally to Directors about our 2001 survey, with a record 72% of internal and external change. British matters important to them. Executive people responding. However, because of Waterways has traditionally performed Directors listen to, learn from, and act the recent changes we also carried out a very strongly in its employee satisfaction upon points raised. This will continue survey in March 2005 amongst a random surveys, comparing very favourably with throughout 2005/06 and beyond. sample of 500 of our people. 60% of our the best UK companies. Although British Improved Team Briefing people responded, which is a high level Waterways’ scores in the 2003 employee To improve our internal communications of response for this type of interim survey. survey fell quite sharply, this is typical for processes we reinvigorated our staff an organisation undergoing major internal Employee Survey Results teamtalk meetings with the issue of change, restructure and redundancies. There is no doubt that the level of change a monthly briefing document that forms we implemented in 2003 and 2004 had “At some point, all organisations have to the basis of discussion. This brief concen- some negative effects on our people’s undergo major internal change if they are trates on two or three topical issues and motivation and satisfaction levels, as well to survive and adapt to their changing opportunities that the business faces. as their view of our leadership. However, external environment. So the key strength We also initiated training for line managers our March 2005 survey results clearly of an organisation is really about how well to improve the delivery of teamtalk. demonstrate a significant steady increase it recovers after the uncertainty and Better Local Communications in our peoples morale and confidence upheaval; in other words, how fast it To help improve communication and (see table top right). We will continue to can pass through the change curve. As understanding at our waterway units we work hard to further improve these results illustrated by the latest employee survey have introduced local monthly newsletters. during 2005/06. results, British Waterways is clearly making These complement our company-wide strong progress since 2003. This has The graph (below right), produced by the newspaper, BW Monthly, and concentrate happened in a relatively short time period, independent research firm HI Europe, on local topics, issues and people news. which underlies the base strength of the shows what has been happening to the organisation; normally we would expect Better Focus on Customer Service motivation of our people. The curve tracking an organisation to take around two years Our 2004 employee survey results show the reaction of our people is typical of a to effect this level of improvement. that 93% of our people believe they response to change. Motivation hit a low have a good understanding of who our point during the height of our restructure “British Waterways’ employees once again customers are and what they expect, with in the summer of 2003. Since then things report higher levels of job satisfaction than 89% believing that providing excellent have improved to the point where on very the UK norm (by 7 percentage points). customer service is an important part recent data we have passed the level The key challenge facing the organisation of their job, and 90% saying they experienced on average by companies is to return to the very high standard of understand how they can deliver it. across the UK. We are on target to employee satisfaction it set itself prior to Almost 70% of our people say they achieve our aim of returning to upper 2003, and again be amongst the best understand how their job contributes to quartile levels of satisfaction experienced 100 UK organisations.” our vision, and support it. This is a good prior to 2003. Improving Leadership platform on which to build our aspirations Satisfaction levels with leadership in to deliver excellent customer service. British Waterways have improved We have introduced a new programme substantially during the year. In March to measure customer satisfaction, which 2005 43% of our people were satisfied we have reported on page 12. We have with our leadership, compared with 30% also reorganised and refocused our central in September 2004, when we first added marketing team with an increased the question to the survey. We expected emphasis on customer service. We will that people’s feelings about leadership also use customer service as one of the would improve as we settled into our new key competencies on which to measure structure and roles became more clearly our people’s performance. understood. The recovery in leadership satisfaction levels has been helped by the following improvements we have made to internal communications during the year.

22 ANNUAL REPORT & ACCOUNTS OPERATING & FINANCIAL REVIEW OUR PEOPLE 23 ANNUAL REPORT & ACCOUNTS Sept 2004 2005 March UK Norm The Motivation of Our People Motivation The The £3.5 million renovation of Hayhurst Swing Bridge across the of Hayhurst Swing Bridge across £3.5 million renovation The awards. was commended in the historic environment River Weaver included blast cleaning all the metal, refurbishment repairing The of the mechanical elements, refurbishment any corroded or replacing of electrical to right): Resident elements and replacement (Left works. Graduate Engineer North, Fran Brownrigg; Engineer North, Tim Littlewood; and Project Manager, Mark Duquemin. Extract of March 2005 survey results (compared to September 2004) September to 2005 (compared results survey of March Extract Feeling positive about British Waterways’ work about British Waterways’ positive Feeling as a company British Waterways Loyalty towards 62% 22% 79% 27% n/a 31% Very or fairly motivated in current job or fairly Very satisfied or fairly current job with Very 60% 71% 69% 82% 66% 75% OUR PEOPLE

Commitment to the Long-Term – Improving Our People’s Quality of Life Our Approach to Pensions We are committed to helping our people • people managing contractors and Our pension scheme is an important part stay healthy and in doing so have a better contracts to attend a safety in the of our rewards package, and provides quality of life. Our approach to occupational management of contractors course a long-term benefit for our people. health has continued to concentrate Our training is designed around roles: It was therefore difficult when, like many on preventative measures identified by management, supervisory, technical, companies, our financial evaluation reported regular health screening and rehabilitation operational and administrative. We that we had a deficit in the fund of £42 to assist in early return to work. Our recommend the appropriate training for million. We worked in partnership with the objective of screening all at-risk employees each role group. We have identified a pool pension fund trustees, our people and within two years of the programme of training providers, which will make our trades union representatives to agree a starting was achieved during 2004. training more consistent and quicker to solution accepted by all. To come to the In the past year the number of absence obtain, as well as offering us better value solution we consulted on options and kept days per employee fell to 7.3 days per for money. everyone informed at all stages. employee (2003/04: 9 days). We are In 2005/06 we will introduce an improved, The changes to our pension fund that on track to meet our target of 7 absence and more comprehensive, Induction CD came into effect from 1 April 2005 were: days per employee, in line with the UK for all new starters. We will continue to • British Waterways’ contribution rate of private sector norm. develop our formal training for supervisors, 15% of pensionable pay increased to During 2004, around 900 health surveill- comprising safety, customer service, 19.7% (meaning we will contribute an ance assessments were undertaken people management, and planning & extra £1 million a year) whilst the covering hearing, lung function, eyesight, finance modules. We will also continue current employee rate of pensionable hand/arm vibration and lifestyle issues. to roll-out our length inspection training pay remains unchanged at 5.7% Results indicate that lifestyle rather than to support existing standards, and lock • the point from which the early work-related factors continue to be the gate training to support new standards retirement reduction applies increased most significant threats to the well-being currently being developed. from age 60 to age 63, but for future of our people. service only Succession Planning • calculation of pension is now based We will continue to develop our We want to develop our people so that on the average of the best three occupational health practices in partnership we grow our own leaders. We have consecutive years pensionable salary with Nationwide Occupational Health, twice-yearly employee performance in the last five years, again for future our specialist provider, to ensure that and development reviews which aim service only the risks to health in our business are to identify training needs. • a two-year waiting period before new proactively managed. Tailored development programmes are employees join the pension scheme has Training and Development put together for individuals so that when been introduced. During this period life We are committed to developing our appropriate opportunities arise they can assurance cover of one times annual people, and providing them with the be advanced through internal promotion. salary, or length of contract if less, appropriate training to carry out their will be paid via the Pension Fund and Our Commitment to Equal work effectively and grow their potential. underwritten by British Waterways Opportunities During 2004/05 our people had an Raising awareness and understanding of The changes have been assessed by our average of three days training (lower the importance of diversity will continue independent actuary as having a 67% than the 2003/04 average of four days, to support our objective of improving the chance of success, and although this due to restructure and redundancies). balance of our workforce to reflect the compares well with success rates used Safety training continues to be our major diversity of society. During the year we by similar schemes we will be keeping focus, and during the year it was carried out an equality and diversity a close watch on the fund’s future mandatory for: survey. The key objective of the survey performance to make sure we stay • operational employees to attend an was to assess any unfair treatment of on track. IOSH 2-day working safely course our people related to a variety of equality • operational supervisors to attend an categories. The results in the table, right, IOSH 2-day managing safely course demonstrate that we treat our people well, • office workers to attend a half-day with only low levels of feelings of unfair working safely for low risk environments treatment recorded. course • office managers to attend a one-day managing safely for low risk environments course

24 ANNUAL REPORT & ACCOUNTS OPERATING & FINANCIAL REVIEW OUR PEOPLE 25 ANNUAL REPORT & ACCOUNTS Number of Employees Expressing by of Unfair Treatment Feelings Subject Matter Average number of employees for 2004/05Average was 1935 Number of Employees Expressing of Unfair Treatment Feelings Because of Age, by Age Our people are increasingly focusing on satisfying on focusing increasingly are people Our levels for ‘excellent’ and striving customers, our Hill, Customer here, Jenny Pictured of service. at to a customer gives advice Advisor, Service Boat Show. London Schroders this year’s rities using We are determined to remove all factors We create unfairness and people feel which this survey creates the platform for further progress. have begun to hold a series of We so we Equality and Diversity Workshops better can understand the barriers that mino ethnic deter people from the waterways the for leisure, and applying use will We for jobs in British Waterways. to help us focus our efforts to feedback experts, Professional improve diversity. QED, the first workshops, will facilitate will be attended by people from which local ethnic communities, and QED will train our people to continue this work in the future. We are committed to providing our people with committed to providing are We training. Our dedicatedappropriate SAP training Goodacre, Lesley team includes (left to right): SAP Training Wilkinson, Wendy SAP Trainer, SAP Training Manager and Phillip Bootland, Administrator. MANAGING OUR WATERWAYS Our largest single commitment is to the maintenance and operation of our waterways and during the year we spent £114.2 million (2003/04: £112.1 million).

Maintenance Expenditure Strategy We have a long-term strategy to maintain our waterways to agreed standards, comprising: • Invisible maintenance – mostly planned engineering work (such as repairs to locks, tunnels, bridges and embankments) which is carried out over the winter months when less people use the waterways. Most of this work is invisible once it is completed. • Visible operations – the very visible day-to-day work which keeps the waterways secure, attractive and serviceable for visitors (such as cutting the grass, painting lock gates, cleaning and updating notice boards). Total exenditure in 2004/05 on the maintenance and operations of our waterways was £114.2 million. This included £73.9 million on service and operations, and £27.3 million on statutory maintenance arrears.

Invisible Maintenance Safe, secure and functional assets are fundamental to our business as they create reliable and enjoyable waterways. We have focused our efforts on eliminating our statutory maintenance arrears, improving our programme of replacing lock gates and managing our water supplies.

Dave Pearce, Waterway Operative, cuts the grass at Adderley Locks on the Shropshire Union Canal, helping us achieve our pledge of a full edge-to- edge towpath vegetation cut in 2004/05. WATERWAYS OUR MANAGING REVIEW FINANCIAL & OPERATING

Eliminating Our Statutory Maintenance Annual Statutory Arrears Expenditure £m Arrears Managing Our Water Levels 35 Government underfunding in the late We actively manage our water supplies, 1980s and early 1990s led to a backlog and successfully completed the 2004/05 30 of serious structural engineering work, boating season with no restrictions to 25 valued at over £300 million – we call navigation due to a shortage of water. this our statutory maintenance arrears. Over the year we completed a number of 20 We have a plan in place to eliminate the initiatives which will continue to improve 15 arrears by 2012. This year, we spent our management of water. We added 50 10 a record £27.3 million net of contributions more sites to our SCADA (Supervisory from third parties (2003/04: £21 million) Control and Data Acquisition) monitoring 5 on further reducing it, keeping and control network, and extended our 0 us on target. GPRS (General Packet Radio Service) 03/04 04/05 05/06 06/07 07/08 network which will both reduce our costs We continually update our plans through and improve data availability. We also a comprehensive system of regular completed hydraulic trials on the inspections which look at the general Operating and Maintenance Expenditure £m Bridgwater & Taunton and Llangollen condition of our assets, the likelihood canals, and now have the technical ability and consequence of them worsening 140 to accurately predict the characteristics or even failing. of water flows when it is transferred 120 Lock Gate Replacement around the network. 100 In 2003 we reviewed our five workshops We also successfully obtained a new 80 and consolidated them into three centres licence to abstract additional water from to provide a more effective and efficient Birmingham groundwater which will 60 service for the waterways. These changes provide water for the Droitwich Canal, have enabled us to continue to introduce new marinas and the predicted increase 40 new manufacturing techniques and in boat traffic. 20 improved procurement practices, including This year we modelled the impacts of the use of high quality, ready cut, prepared 0 climate change, growth in boat traffic 03/04 04/05 05/06 06/07 07/08 timber certified by the Forest Stewardship and new regulation, including the Water Council (FSC) from sustainable sources. Act 2003 and the European Water Regeneration The workshops now produce longer Framework Directive over the next lasting lock gates that can be fitted more 25 years. Dowry Funded quickly and easily, leading to faster turn Asset Expenditure around and shorter stoppages. The review Statutory also identified the capacity for greater Arrears preventative maintenance, which will lead Preventative to fewer and less costly stoppages. In Maintenance turn, this delivers an improved service Service and for our customers. Operations We own and operate around 5,300 lock gates on our network. We now have a cyclical replacement programme with185 lock gates replaced during the year, and a further 262 planned for replacement in 2005/06. We are also benefiting from better forward-planning brought about following our 2003 restructure and we estimate replacing an average of 200 lock gates each year in the future.

ANNUAL REPORT & ACCOUNTS 27 MANAGING OUR WATERWAYS

Dredging Waterways Utilities Visible Operations This year we spent £2.5 million on By far the largest source of waterway Much of our visible operations make an dredging, and in 2005/06 we will income comes from charging utility immediate impact on our visitors, and in increase our expenditure to £7 million. companies for access to our land. In response to customer feedback during 2004/05 we earned £13 million from We have a policy to dredge our waterways the year we have invested heavily on utility companies (2003/04: 20.6 million). for current use and prospects of use. vegetation management and dredging. The 2003/04 income included £10.8 Overall, £20 million has been spent We also launched our ‘Towpath Tidy’ million of one-off payments of arrears. on dredging in the last five years. Our campaign, to spring clean the waterways programme is based on prioritising sections Our planned income for 2005/06 is in readiness for the summer season. of waterway below standard and dredging £15.3 million. This planned increase Vegetation Management them back, whenever possible, to their is due to projected new income arising One of the main concerns our customers original profile. Our current plans estimate from arrears payments for surface water had this year was overgrown towpaths. that all channels falling below standard discharge agreements with water They wanted us to remove more will have been dredged by the end of companies. From 2006/07 our annual vegetation, more often. We agreed, and 2007/08. income is planned to be around £12 our new organisational structure allowed million. Our target for doubling freight by 2010 us to react quickly. During the year we and, in the long-term, the Water Framework We currently earn £6.5 million each year completed a full edge-to-edge towpath Directive, will both have an impact on the from our largest customer, Easynet, which cut, taking into account any environmental standards to which we will dredge in the has its telecommunication fibres buried restrictions. We removed around 95 per future. beneath our towpaths. This income cent of trees and saplings between the comes with a responsibility to avoid towpath and water’s edge, including Removing Litter damaging the cable through our day-to- vegetation growing out of wash walls. We regularly remove litter from our day operations. This risk is proactively This cut enables our customers, especially waterways, as well as our land. In March managed to ensure that we preserve boaters, to have better access to the 2005 we removed 121.5 tonnes of litter this income. waterways. The Towpath Mowing from the towpath, as a direct result of Guidelines that are currently being our clean-up campaign ‘Towpath Tidy’. In 2004/05 we earned £3.9 million from prepared will make sure there is a more Our staff, working alongside volunteers, water sales (2003/04: £3.7 million). consistent standard, understood by all. spent a week clearing litter from the The main priorities for our water sales towpath. The clean-up resulted in improved business are to explore new opportunities, This is a continuous commitment and waterways for people to enjoy for the efficiently manage our existing business, we will spend a further £6.1 million summer season, as well as a sense of increase our water supply to the major in 2005/06. achievement and co-operation between utility companies, and further grow our We have also begun a programme to better our people and volunteer groups. Plans income at contractual rate review points. manage trees on the offside of the canal are already in place for another scheme In June 2004 we entered into a new that impede navigation. in 2006, and the campaign will continue mast partnership agreement with NET and expand in future years. and have hit our target of six sites, with a further 24 targeted for 2005/06. We always work within the Health Protection Income Strategy Agency’s health and safety guidance. Our waterways also earn us considerable A number of other smaller utility-related revenues from activities associated with business opportunities are also being their operation. explored and crucially we will continue Our direct waterway income is earned to maintain quality relationships to protect from wayleaves for utility crossings, our income from the gas, electricity and freight, water sales, as well as third party telecoms industries. contributions and government grants. Excluding government grants, our waterway income for 2004/05 fell by £7.2 million to £49.8 million.

28 ANNUAL REPORT & ACCOUNTS OPERATING & FINANCIAL REVIEW MANAGING OUR WATERWAYS This year we spent £2.5 million million £2.5 spent we year This in 2005/06 and dredging, on £7 spend a further we will million. Our two-week long Towpath Tidy campaign in March 2005 campaign Tidy in March Our two-week long Towpath encouraged our people to clean-up 121.5 tonnes of litter to the boating the towpaths, prior from season. Billed as team-building promoted the Tidy ‘an enjoyable day’s work’, amongst our office and bank-based staff, and volunteer Service (left to right): Janet Baverstock, here Pictured groups. Bone, Customer Operations Manager, Manager and Louise waterways. Yorkshire’s litter from help remove glamorously 1. Accumsan et iusto odio dignissim qui epist blandit praesent luptatum zzril MANAGING OUR WATERWAYSdelenit augue duis dolore te feugait nulla facilisi. Lorem ipsum dolor sit amet. 2. Consectetuer amet adipiscing elit, sed diam nonummy nibh euismod tincidunt

Waterway Income £m Freight Construction & Demolition Material

100 Like-for-like income is down by £0.1 We will actively pursue schemes for million (8%) at £0.6 million. We are waterside waste recovery and recycling planning for steady growth in our freight of construction materials. income in 2005/06, and in future years In West London we are supporting 75 as our marketing strategy, which Powerday plc’s project to establish commenced in 2003, begins to bring a ‘state of the art’ facility capable of in new business. This includes new processing approximately 1.5 million 50 freight due to start on the River Severn, tonnes of waste, demolition and and new waste and recyclables projects construction materials. Up to 750,000 in the Midlands due to start at the end tonnes could ultimately be transferred of 2005/06. 25 to this site by water each year. We are concentrating our efforts on Containers attracting more freight to the waterways We are surveying our commercial 0 in the areas of minerals, waste and 03/04 04/05 05/06 06/07 07/08 waterways to establish what needs to recyclables (including construction and be done to make them more suitable 2003/04 and 2004/05 both include one-off demolition wastes) and containers. arrears payments from utility companies. for modern vessels and container sites. Minerals Some of the 80,000 container movements We have mapped the commercial mineral into the Leeds and Wakefield area could sites alongside our larger waterways and potentially go by water. One key element Government Grants £m will continue to meet with aggregate to this proposal is the development of an suppliers to persuade them to consider 100 intermodal terminal at Goole which is water transport. being pursued in partnership. Trials will In 2004, with our support, a £1 million help prove the feasibility and enable an 80 Freight Facilities Grant was awarded economic case to be developed. to RMC for new wharves on the River To effectively carry freight, waterways Severn for 275,000 tonnes per annum 60 often need substantial additional of aggregate traffic. investment, and we need the same Also, with the aid of a Freight Facilities upfront investment whether we move 40 Grant, a new traffic of mineral oil in bulk one or one hundred freight vessels. This by barge commenced on the Sheffield & additional investment is therefore high- 40 South Yorkshire Navigation to Rotherham. risk, and while we support the additional public benefits this investment would Waste bring we must weigh up the financial risk Carrying waste and recyclables by water 40 involved when making these decisions. 03/04 04/05 05/06 06/07 07/08 has considerable potential, but requires waste collection and handling to be Third Party Contributions 2003/04 includes one-off grant payments reorganised. We will continue to In 2004/05 we received £13.1 million for specific infrastructure projects. demonstrate the benefits of waterborne of third party funds to pay for local freight to Local Authorities, who are waterside improvement works. under pressure to recycle. Wider corporate These contributions rarely cover the full social responsibility, not just economic value of the agreed works and we would benefits, would justify some investment. normally contribute a small amount from Trials have been undertaken in 2004 our core programme. In 2005/06 we by Intermodal Solutions on a new way expect to receive £4.6 million, rising to of transporting waste from Hackney £8.2 million in 2006/07 and £7.6 million to the Edmonton incinerator. They have in 2007/08. developed a special waste collection vehicle which has been operating in Hackney Council’s fleet, and transfers skips directly onto a barge without the need for a waste transfer station. In the Midlands trials have been carried out for collecting recycled clothing from Solihull to a recycling unit in Smethwick.

30 ANNUAL REPORT & ACCOUNTS WATERWAYS OUR MANAGING REVIEW FINANCIAL & OPERATING

The Government’s Freight Facilities Grant award to RMC Materials Limited means that from Spring 2005, 275,000 tonnes of aggregates will be carried by barge on the River Severn each year, rather than by road.

Photograph courtesy of CEMEX UK Operations

Funded Acquisitions (or Management) of Waterspace Following recent successes of acquiring In England & Wales we accrued grant The governments’ review, published waterspace in return for a dowry payment, totalling £60.7 million for 2004/05. in March 2005, supported our vision such as Liverpool Docks, there are other This figure is lower than for 2003/04. for the waterways. It also endorsed the significant opportunities available which This is primarily due to expected principles of funding British Waterways we intend we pursue. differences in one-off payments from on a long-term contractual basis, and Defra for work on arrears of asset greater commercial freedoms with wider Government Grants maintenance and an unexpected powers to invest near to waterways we We receive an annual grant from the reduction in grant for the 2004/05 do not manage, within the context of Westminster and Scottish governments. year of £2.5 million. our increasing self-sufficiency. We will In 2004/05 we accrued total UK grants continue our discussions with Defra and to the value of £73.4 million in our We are pleased that the Westminster the Scottish Executive to progress these accounts. This figure is higher than government has reinstated this cut in (also see page 100). planned due to additional receipts of grant for 2005/06. However index £3.7 million from the Scottish Executive linking has not been restored. This late in the year. Grant accrued in Scotland constitutes an important shortfall in our totalled £12.6 million, the third successive income, and it will require our commercial year at this level. activities to generate even greater value if not reinstated.

ANNUAL REPORT & ACCOUNTS 31 LEISURE Our leisure income is earned from boat licences, moorings, angling, visitor centres and outlets. We report on our two leisure subsidiaries, British Waterways Marinas Ltd (BWM Ltd) and Waterscape as ventures (see pages 38 to 41).

Reducing Licence Evasion In 2004/05 our leisure income fell by Although the vast majority of our customers In June 2004, after consultation with £1.1 million to £18.1 million, although buy licences, a small percentage do not. user groups, we introduced new ‘Mooring underlying growth is at 7%. This is because In 2003/04 we reported an increase in Guidance for Continuous Cruisers’. This set 2003/04 income included nine months of licence evasion due to the fact that as out simple guidelines for those who have trading at marinas that we transferred into we reorganised and faced up to job cuts, declared themselves as continuously BWM Ltd in January 2004, which is now this important area of our work did not cruising ie holding a licence but not having reported under ‘Ventures’ on page 39. receive the attention it needed. a home mooring. In 2005/06 we expect an 8% growth In 2004/05 we set about tackling this New guidance was required because we followed by 5% in 2006/07 and 4% in problem. We began by checking every have experienced difficulty where those 2007/08. boat on our waterways, every three holding a continuous cruising licence The income growth in the first year of the months. Consequently our evasion rate moor for long periods in locations that are plan relates to improving retail sales from fell from 7.4% in September 2004 to not suitable for long-term mooring, thus The Falkirk Wheel (£0.4 million) and further 5.7% in April 2005. denying temporary mooring locations for development of a small number of retail other users. During the year, 49 boats were removed opportunities around the network (£0.3 from the water because they failed to take Providing More Moorings million). out a licence after due process and 378 We have begun an important project to Section 8 notices, given prior to removal, unlock investment in marinas by the Boats and Boating were issued. private sector and thus fulfil our medium- term projections for growth in leisure Our new structure is ensuring we have a Boats and boating are vital to our strategy income, and income from connection consistent and concerted effort on evasion and we want to see more boats on the agreements and rents. network each year. across the whole network, and from 2005/06 – 2007/08 we aim to reduce We are preparing new guidance to Craft Licensing average annual evasion rates at 3% or less. encourage potential marina investors, We use a cost-reflective index to determine which will explain: Moorings price increases and in April 2004 they • the nature and scale of the marina Income from moorings in 2004/05 increased by 2.9%. market in the next 5-10 years increased by 15% to £4.3 million. This Income from craft licences increased in • areas of potential demand was mainly due to greater occupancy 2004/05 by 7% to £10.5 million. Of this • typical business models and better revenue collection. This does increase, 2.9% is attributable to the general • what a potential investor can expect not include the mooring income of our price increase and the remaining 4.1% from British Waterways subsidiary marina company, BWM Ltd. from an increase in the number of boats A more detailed report on BWM Ltd is in We have full and active support for licensed during the year. our ventures section on pages 38 to 41. this project from The Yacht Harbour Issuing Craft Licences More Efficiently Association and British Marine Federation. We use a market-led pricing methodology We processed over 27,000 licences in We hope to have the new guidance to price our moorings and our national 2004/05. In 2003/04 the time it took available by the end of 2005. average price increase in April 2004 to process each licence significantly was 3.8%. increased, as we experienced some initial difficulties following the introduction of Guidance for Continuous Cruisers Sponsorship SAP IT software. In 2004/05, we made One of the advantages of the waterway Our waterways offer a range of essential improvements to our licensing network is the opportunity it offers for sponsorship opportunities, and we are processes and to SAP, which resulted in extended and relaxed cruising and it is developing a strategy to pursue these. our seven-working-day processing targets important that we offer fair access to Sponsoring organisations will be chosen being met. appropriate moorings for our boating who maximise the blend of: supporting customers. our values; helping to increase the During 2005/06 we intend to sustain our awareness of our network; improving seven-day target. In summer 2005 we will our customer service; and increasing also improve our service to customers by our revenue. introducing licence renewals on-line, through Waterscape.

32 ANNUAL REPORT & ACCOUNTS OPERATING & FINANCIAL REVIEW LEISURE 07/08 06/07 05/06 04/05 03/04 5 0 Leisure Expenditure £m Expenditure Leisure 25 20 15 10 We want more vibrant inland waterways, want more We boatswith more and boating. Pictured gate whilst boating lock a family opens a here Grand Union Canal. on the at Foxton 07/08 06/07 05/06 04/05 03/04 5 0 Leisure Income £m Leisure 25 20 15 10 44 426 445 401 303 7, 2 6 9 1,656 3,586 2,082 3,630 19,824 20,225 23,855 23,410 26,240 2003/04 74 91 ** 378 452 395 3,677 3,603 2,043 1,648 21,267 24,492 20,889 * 24,944 2004/05 houseboat as a vessel that is not ‘bona fide used Our records indicated that a number for navigation’. of craft had been erroneously classified in recent years as houseboats, simply because they were in reduction used for residential purposes. This houseboat numbers reflects the corrective action we have been taking in licence processing. the explains BW marinas into BWM Ltd which reduction in mooring permits issued Visitor Attractions Visitor Income from our attractions saw an overall reduction of 4% to £2 million, following a rationalisation of our income from our activities. However, primary waterside attraction, the Falkirk Centre, increased by and Visitor Wheel 3% to £1.7 million (details of trading in Scotland is shown on pages 46 to 53). will continue to operate our existing We Wheel, Falkirk leisure attractions – The Anderton Boat Lift and the Standedge Experience – but do not expect Visitor to invest in new attractions on the same scale in the near future. Private Pleasure Boats – Canals & Rivers Private Pleasure Powered Unpowered Mooring Permits issued***Mooring Permits 5,985 * Gold Licences Includes ** a defines Act 1971 Waterways British The *** a further five During 2004/05 we transferred TOTAL Licences Long-Term Total 27,078 Private Pleasure Boats – Rivers Private Pleasure Powered Unpowered Houseboats TOTAL Business Craft business craft Leisure plates, freight Trade and workboats TOTAL TOTAL TOTAL Licences and Moorings in England & Wales Licences and Moorings Unpowered Private Pleasure Boats – All Waterways Boats – All Private Pleasure Powered RESTORATION As well as helping to improve the waterway network for millions of people, restoration provides a major income source and plays a key part in the delivery of the government’s regeneration objectives.

Mildenham Mill on the Droitwich Canals, one of our Priority One projects

Restoration Income Better Managed Restoration Restoration projects are long-term Prior to the Millennium, the little restoration Progress on Priority commitments, taking many years to that took place was piecemeal and One Projects come to fruition. Our income fluctuates sporadic. As we reached the Millennium, Ashby Canal (to Measham) considerably in line with project activity, waterway restoration activity and funding We are currently working with Leicester and in 2004/05 it increased to £4.7 dramatically increased. We reached County Council on the engineering designs million. We have experienced slower a high-point, and working closely with for this project which they are leading. progress on our current restoration our partners were successful in securing A public enquiry for a Transport & Works projects because of the greater £192 million lottery and other funding Act Order has now been completed, and competition for increasingly scarce over six years, resulting in reopening we are awaiting the results. This Act will funds from the Lottery and European over 200 miles of restored waterways. enable construction to begin and give Bodies. However, due to our recent compulsory purchase powers. endeavours, we are planning to receive This changed attitudes, and a new culture over £18 million in 2005/06 with emerged to support high and sustainable Bedford & Milton Keynes Waterway further increases expected in the levels of waterway restoration in terms It has proved impossible to achieve the following year, subject to full funding of both funding and activity. We are now necessary levels of funding needed for packages being put in place. planning to spend at an annual rate of the construction of the Bedford & Milton Restoration Strategy - Waterways 2025 around half of that seen during the Keynes Waterway. A decision was made with the B&MK Waterway Partnership to Our strategy for restoration is outlined Millennium years. Having learned a great scale down our involvement in line with in our 2004 document, Waterways 2025 deal, we now have a more staged and the level of available funding. We will, (britishwaterways.co.uk/waterways2025). better managed approach to long-term however, endeavour to ensure the line This document sets out how we have restoration. of the canal is safeguarded by planners, prioritised our many restoration projects. although we no longer regard Bedford It lists 11 Priority One projects (outlined and Milton Keynes Waterway as a priority right), which we will focus on delivering. project because it is not capable of being However, we will also use our expertise delivered in a reasonable timescale. to help prepare funding bids and act However if this situation were to change as contractors to help other waterway we would reassess our level of support. restoration projects where possible. In our restoration document Waterways 2025, published in 2004, we state that we would only support schemes that might be completed within a 20-year horizon.

34 ANNUAL REPORT & ACCOUNTS OPERATING & FINANCIAL REVIEW RESTORATION 35 07/08 07/08 06/07 06/07 05/06 05/06 04/05 04/05 ANNUAL REPORT & ACCOUNTS 03/04 03/04 5 0 5 0 25 20 15 10 Restoration Expenditure £m Restoration Expenditure Restoration Income £m Restoration Income 25 20 15 10 Liverpool Link already have a commitment for £7.5 We and scheme, million for this £15 million considering our partners are currently funding. Planning the availability of further approved by Liverpool permission has been City Council. So long as adequate funding is in place we aim to start building the link at the end of 2005/06 and complete it when Liverpool in time for by 2007/08 becomes the European Capital of Culture in 2008. Bolton & Bury Canal Manchester, million from have so far received £4.5 We Agency, Development the North West European Regional Development Fund, including £1 million direct from the private One could start for Phase Work sector. at the end of 2005, subject to completing the final details of the funding package. Montgomery Canal will publish the conservation We management strategy early in 2005/06 and complete a 500-metre channel in 2006/07. construction at Llanymynech for the main want to secure funding We restoration by 2006/07. LancasterNorthern Reaches, Canal Development Agency, West North The South Lakeland District Council, and the main funding partners have contributed study for to deliver a feasibility £750,000 the restoration of the Northern Reaches (Phase One) of the Lancaster Canal. will complete this study along with We developing a Master Plan in 2005/06. Navigation River Carron study has now A £200,000 feasibility study identifies been completed. The options for the improvement of navigation on the River Carron, and easier entry onto & Clyde Canal. the Forth ng by the end of 2005. Physical work could then start in early 2006. Canals Droitwich In September 2004 the Heritage Lottery awarded a stage 2 pass for £4.65 Fund million grant. A full application was Midlands submitted to Advantage West along in April 2005 for £3 million which, with £1 million support from both District Council and Wychavon County Council, we hope Worcestershire will lead to confirmation of 85% of the total necessary funding by early summer 2005. Depending on funding we plan to start work in 2005/06. Link Waterways Fens An Implementation Plan has been reports, published, supported by technical of in detail the feasibility explore which project is being led by the the Link. The Environment Agency and is made up of more information many small projects. For visit www.fenswaterways.com Bow Back Rivers Bow Back stages of restoration is in the early This of its completion planning and the speed success in is closely aligned to London’s Games. If the securing the 2012 Olympic will agree our land bid is successful we strategy with government agencies and agree a construction plan in 2005/06, with a view to starting construction in 2006/07. Cotswold Canals (Phase1) Fund In July 2004 the Heritage Lottery (HLF) for a gave a Stage One Pass £11.3 million grant towards Phase One of the restoration of the Cotswold Canals, meaning HLF has earmarked these funds stage is to submit next for the project. The second stage detailed applications to both Regional Development HLF and South West we hope will lead to Agency which confirmation of fundi PROPERTY We own more than 1,800 property assets comprising investment properties (held for rental income and capital growth) and operational properties (from which we operate our business). The non-operational estate generated a record £26.4 million rental income in 2004/05 (2003/04: £24 million).

Our property portfolio is an essential a balance of risk and return while working Operational Property and integral part of our overall business. within a set of documented investment Our operational land and buildings are It creates vital sustainable income principles. These principles include accounted on a historical cost basis, and streams and, because of our limited capitalising on the competitive advantages at 31 March 2005 the net book value borrowing powers, it is our main source of waterside locations; increasing the was £42.3 million (2004: £42.5 million). of capital for investment in the future attraction and accessibility of the Risks of the waterways and the growth of our waterways; focusing on locations where The investment estate is largely well-let business. Through property ownership we we can influence most growth in returns; on long-term leases and exposed to low provide social and amenity benefits to the and delivering our core values. In all cases risk in the event of a market downturn. communities we serve, and we have a we should add value to the asset we We also have a development property platform to enhance neglected areas. acquire or the asset should add value portfolio whereby development land is to our estate. We have an enviable track record for sold on to property developers, usually delivering and supporting both urban and Investment and Development after we have secured planning permission. rural regeneration through our involvement In 2004/05 we earned £26.4 million We rarely engage in development in its in property investment and development. rental income from our investment own right. Where it is considered We have supported the regeneration of property portfolio, an increase of 10% appropriate to take a higher risk and some of the country’s most high-profile from the previous year. The main reasons return position in a given site we partner urban areas including Leeds, Sheffield, for this growth in income were our previous with the private sector to spread equity Birmingham, London’s Limehouse Basin, year’s high level of investment into property risk and bring in additional expertise. and Glasgow. We have also supported and more active estate management in Any ventures in which we invest are ring- regeneration in many rural locations the current year. fenced meaning our other assets are not including Stroud, Foxton, Aylesbury and exposed to the activities of those ventures. Last year’s business reorganisation Goytre Wharf, near Pontypool. To achieve created more focused property Our total property estate is diversified this level of regeneration we work through development and estate management in both geographical spread and sector our various property joint ventures, and in teams. Combined with better financial exposure. Approximately 40% of the total partnership with many public authorities. information from SAP, this has enabled property estate is located in Greater Over the course of the last five years we some significant uplifts on the London and 15% in the Yorkshire area. have continued to rationalise our property development estate through achieving The remainder is spread across England, estate by selling small uneconomic land and planning permissions, site assembly Wales and Scotland. property holdings and realising value from and development agreements, as well Approximately 32% of the property estate assets which have matured. The assets as a more proactive approach to the is classified as development with the remaining within our property portfolio have management of our rented properties. balance classified as investment. been classified to identify the principal During the year we sold a number of high Within the investment estate our tenants reason for holding that asset. These include maintenance but low financial return are spread across industrial, office, leisure customer service; heritage; estate properties. Alongside this we also took and residential sectors. management and control; and development advantage of a buoyant property market potential. We still have further rationalisation Internally we seek to mitigate property to sell a number of our larger sites which of our estate to deliver. risks by co-ordinating our property teams also delivered relatively low annual both at a local level (creating the links to We have around 1,400 property assets percentage returns. We reinvested the our other waterway activities) and national which are classified as investment proceeds from these sales into more level (regulatory compliance, and strategy). properties. At 31 March 2005 these were efficient, higher return properties, including These teams are supported by detailed valued at £449.5 million, an increase of a £22.7 million investment in the historic monthly management information which £30 million which includes £56 million Interchange Warehouse in Camden, London. monitors historical performance and like-for-like capital growth. We are also continuing to develop our assesses future trends. Our property estate disposals are projected property estate through our ventures which to provide in the order of £40 million have the expertise and resources required Our strategy to focus our investments capital receipts per annum over the next to make the most of the land we own in areas where we and our partners have three years which we will reinvest, subject (eg ISIS Waterside Regeneration and the most influence and the balance of to payment of Corporation Tax on capital the Waterside Pub Partnership). Further our activity between investment and gains. We have an investment strategy information on our ventures can be found development is intended to reduce our which sets out how those receipts are on pages 38 to 41. risk to the property market, though clearly invested across different areas of our this risk cannot be eliminated. business – property, leisure, ventures and waterway. In all cases we seek to achieve

36 ANNUAL REPORT & ACCOUNTS OPERATING & FINANCIAL REVIEW PROPERTY We have received planning permission for a new via mixed-use canalside in Manchester, scheme ISIS development venture, our property Waterside computer-generated image Regeneration. This will building, which depicts a striking 21-storey house 200 one, two and three-bedroomed apartments next to the Ashton Canal. 12 % 1,883 £9.8m 10.9% £63.2m £24.0m £16.1m 2003/04 £419.3m 20% 5.6m 1,783 26.4m 32.4m 18.4m 18.3% 449.5m 2004/05 4.8 (9.8) 63.2 43.5 317.6 317.6 419.3 2003/04 07/08 07/08 5.6 0.2 56.8 (32.4) 06/07 06/07 419.3 449.5 2004/05 05/06 05/06 04/05 04/05 03/04 03/04 0 5 0 5 Other movements Value at 1 April Value Additions Disposals Group Investment Properties £m Properties Investment Group Revaluation at Value 31March 2004 Property Expenditure £m Expenditure Property Property Income £m Property Historical Performance Number of properties Property disposals £ Total return Total totalIndustry benchmark return Property acquisitions £ Property incomeProperty Property contributionAsset value £ £ £ 10 15 20 25 30 35 10 15 20 25 30 35 VENTURES

In February 2005 we formed a new 50/50 joint venture with Scottish & Newcastle Pub Enterprises to develop a chain of waterside pubs. This venture will help increase visitor numbers by providing attractive locations to eat and drink, as enjoyed by visitors to this waterside pub at Little Venice, on the Regent’s Canal. Waterscape, our internet-based marketing vehicle, VENTURES REVIEW FINANCIAL & OPERATING was heavily promoted on BBC Breakfast News last summer, when presenters broadcast live from the Waterscape branded boat.

Waterscape Our ventures are wholly owned we trade fairly and do not use any grant Waterscape, our internet-based waterway subsidiaries and commercial joint from government to subsidise it. Ensuring marketing vehicle and business, reported ventures. They are projected to be a key and demonstrating the separation of our over one million on-line visitors to the site. source of additional future profit and cash, marina business from our public funds Waterscape acts as an ‘umbrella’ brand which can be re-invested in the waterways. was one of the reasons why we created for all inland waterways and will help They allow us to gear up our available BWM Ltd. us increase our waterside visitor numbers equity through bank funding and enable by targeting new audiences via the internet. We have published a protocol that sets us to earn greater profits through a out how we will prevent cross-subsidy Waterscape fell slightly short of its higher level of participation in activities and unfair trading, and the Board has budgeted targets for the year, reporting than we could manage in our own right. established a Fair Trading Group to a loss of £1.3 million. During the year It is these new profit streams that will oversee our trading activity as a further we carried out a strategic review of the make a significant step towards our vision safeguard. Our auditors, Pricewaterhouse- company’s business plan and the revised of self-sufficiency. The ventures will also Coopers LLP, independently undertook plan is intended to deliver modest profits enable us to build our priority destination a review of controls and procedures that from 2006/07. sites and consequently help increase our we put in place to comply with the protocol visitor numbers. We will work towards achieving additional and found that controls have been, or are growth in turnover alongside furthering In 2004/05 our consolidated accounts being, put in place. the benefits of promoting the waterways include £6.9 million (2003/04: £1.8 Like-for-like income from our marinas and in 2005/06 will bring IT management million) share of turnover from subsidiary, business increased by 28% to £4.9 million. in-house to further reduce costs, and joint venture and associate companies. The main areas of growth were in moorings improve marketing effectiveness. Our equity investment into these ventures (with improved occupancy from 73% Waterside Pubs Partnership comes from our commercial capital, in turn to 85% and an additional 250 berths generated through property disposals. created) and boat sales (through the In February 2005 we formed this new expansion of operations at Sawley and 50/50 joint venture company with our Our ventures cover a wide range of White Bear marinas). partner Scottish & Newcastle Pub business activities as well as a number Enterprises. The company commenced of structures including limited companies, The return from BWM Ltd in the first full trading by acquiring 29 of our existing limited partnerships and trade investments. year of trading (1 April 2004 to 31 March pub assets with an option to acquire 20 Our main ventures are listed here. 2005) was £645,000 before the deduction more in the future. As well as improving of arms-length payments to us for rent, the waterside facilities that are available rates-equivalent and holding company to our customers, we have received a Leisure Ventures service charge. During 2004/05 BWM Ltd significant return on the property assets BWM LTD was not required to pay rates to local already transferred into the venture and In January 2004 we created British authorities and in accordance with the we anticipate dividends going forward Waterways Marinas Limited (BWM Ltd). protocol BWM Ltd has paid £162,000 from as early as 2005/06. It brought together ten of our largest to us as a notional arms length rates By 2008/09 we plan to have over 50 pub marinas into one subsidiary company, expense. We have ringfenced this money sites earning the partnership £3 million with a dedicated management team. for marketing the inland waterways. After rent each year. The partnership will: help By focusing on delighting customers, payment of rent, rates-equivalent and to increase visitor numbers by providing setting industry standards, and expanding service charge, BWM Ltd earned attractive locations; increase waterside the mooring capacity of the network, a pre-tax profit of £32,000. The pre-tax spend; and improve visitor satisfaction. it helps us to deliver our objectives. It will loss of BWM Ltd for the 15-month period support future growth in boat numbers to 31 March 2005 was £20,000. by constructing and bringing new marinas The performance of BWM Ltd is expected to the marketplace, and encouraging the to improve in 2005/06 and 2006/07 supply of new boats. as expansion of activities from a solid BWM Ltd competes directly with other foundation created in 2004/05 delivers marinas and mooring operators on the greater profits. In April 2005, we waterways and we must therefore ensure transferred five more marinas to BWM Ltd: Poplar and Limehouse marinas in London along with Lemonroyd, Goytre and Gloucester Docks marinas. This completes the transfers from us to BWM Ltd. During 2005/06 BWM Ltd will continue to review opportunities for new marina developments and acquisitions. ANNUAL REPORT & ACCOUNTS 39 VENTURES

Multisite Property Site Specific Property Ventures Ventures ISIS Waterside Regeneration Edinburgh Quay ISIS is our national property development Edinburgh Quay is a 50/50 joint venture The application is in accordance with the partnership with AMEC Developments with Miller Developments and has masterplan and a decision is expected and Igloo Regeneration Fund (managed developed some 100,000 sq ft of office in late 2005. The venture will then decide by Morley Fund Management). and leisure space at the Lochrin Basin if it wishes to develop this space itself site in Edinburgh. Some 75% of the office or sell the land with planning permission ISIS seeks to deliver well designed, space has been let and we anticipate that to another developer. The scheme is mixed-use, waterside property we will receive our first significant dividend progressing well and we anticipate developments, assisting in the in 2005/06 from the sale of the let office dividends in each of the next few years. regeneration of urban areas and local and leisure units. Over the next five years communities, with a strong commitment Wood Wharf Edinburgh Quay plans to develop phase 2 to sustainability. ISIS’ schemes will create Wood Wharf is our venture to develop of the office space (55,000 sq ft) and vibrant new places along our waterways, our 20-acre freehold site adjacent to work in collaboration with the adjoining improving the experience for visitors Canary Wharf in London Docklands. landowners to develop nearby sites which and residents, and improving the The development will act as a catalyst can benefit from access onto the waterside commerciality of our waterways. to further regenerate a large part of the setting. This venture has helped regenerate surrounding area. In April 2005 we entered After the successful sale of a property the surrounding area, including into a partnership with Canary Wharf in Stourport, and Techno Park in improvements to the waterspace Group plc and Ballymore Properties Birmingham, the venture currently has (also see page 50). Limited. We own 50% of the partnership, a portfolio of nine sites. Further British City Road Basin with Canary Wharf and Ballymore being Waterways sites are expected to be sold This venture was established in 2001 equal partners in the other 50%. to ISIS at arms length values in 2005/06. with Miller Developments to enable a The masterplan for the development of In 2004/05 ISIS generated revenue comprehensive redevelopment of the the site was produced with the London of £4.5 million, and net profits of £1.2 canal at City Road, Islington. A masterplan Borough of Tower Hamlets, and was million. We received a dividend of £1.4 was adopted for the area in May 2004 adopted as Supplementary Planning million during the year from the sale of comprising principally residential units Guidance in December 2003. the site at Stourport. Further dividends plus retail, restaurant, boat club and open are anticipated in 2005/06 as the ISIS space. In 2005 the company submitted We originally acquired the site from Port business plan progresses. During a planning application for part of the site of London Properties and have now 2005/06 ISIS intends to submit planning comprising a 28-storey residential tower transferred it to the partnership on a applications at three major sites and with 203 units and 9,000 sq ft of long-lease, having added substantial begin development contracts if planning commercial space plus other residential value over the last few years through permission is granted. space with 111 units. the planning process.

H2O Urban The scale of Wood Wharf and its potential

H2O Urban is a 50/50 joint venture returns to us over the next 10 years company with Bloc Limited. This company make it critical to our future plans. was formed in 2003 to develop and regenerate small areas of canalside land in London. Three schemes are being progressed and planning consent was received in February 2005 for one of these.

40 ANNUAL REPORT & ACCOUNTS Lochrin Basin, the location for Edinburgh Quay, VENTURES REVIEW FINANCIAL & OPERATING our joint venture with Miller Developments to develop a 100,000 sq ft site, was formally opened by Nicol Stephen, Minister for Transport, Scottish Executive, in March 2005.

Ventures Ventures Income £m Watergrid Business Barges 35 Watergrid, the water supply and treatment Business barges provide small, floating partnership formed in 2002 with AWG, and flexible office and rental accom- 30 Bristol Water Holdings and Partnerships modation. We have a local joint venture UK, is set to become a British Waterways for business barges in Paddington, 25 wholly-owned subsidiary. The proposal London with a property developer and follows the partners’ reassessment of the have built business barges for local 20 prospects for Watergrid which concluded occupiers in Sturts Lock, Hackney. that the market for alternative treated 15 These barges create employment water supply and wastewater services opportunities, attract new visitors and is not yet suitably developed, and that 10 generate expenditure in the local economy. breaking into the established sector is They contribute to the canal environment 5 not a sufficiently attractive medium-term and can act as a catalyst for regeneration. prospect. 0 The Paddington joint venture has proven 03/04 04/05 05/06 06/07 07/08 The proposed change in Watergrid’s the concept and we are currently corporate structure is subject to approval identifying potential locations nationally from our sponsoring government (for example Tottenham Hale, North departments. Through this change, we London and Edinburgh Quay). will concentrate on growing our core water sales supplying raw water from Waterwise Ventures Expenditure £m our canals and rivers to water utilities Waterwise is our water safety training and waterside industry. business which was set-up in 2001 to 35 provide watersports training and water The cost of setting up Watergrid was safety guidance to customers such as the 30 accounted for in 2000/01 to 2002/3 Fire Brigade, Police, Environment Agency using cash from property disposals. 25 and Fell Rescue. It is a 50/50 partnership Running costs since launch have been with Four Seasons. It also offers a facility funded by our equity investments. 20 for training our staff, customers and This investment has been written-off partners in water safety, and provides subsequently as an expense in this year’s 15 us with minimal profits. accounts. 10 Smaller Companies Alongside these there are a number of 5 other smaller companies, in which we have an interest, many of which are 0 formed to manage common areas of 03/04 04/05 05/06 06/07 07/08 property developments, eg West India Quay Management Company Limited.

ANNUAL REPORT & ACCOUNTS 41 FIXED AND OPERATING COSTS

Fixed and Operating Costs as a Realising the Benefits of SAP percentage of Total Expenditure We currently spend around £27 million on We have been using SAP software for operational support, managing strategy, and two years now, and it’s firmly embedded 15% development. This includes the cost of our into our business. The benefits of better operational offices and their running costs. management reporting are already being 12% We intend to grow our business without realised with: more accurate quarterly a corresponding increase in fixed and forecasts; improved business area operating costs. We will do this by reporting; Economic Value Created 9% identifying more administration functions analysis; and project costing. SAP has to move into our shared services centre; enabled us to create our central Shared 6% minimising occupancy space in our offices; Service Centre and with it economies of using group buying power and better scale. In the future we will take advantage buying processes; and trialling model of the full range of SAP software to help 3% ways of working. further improve our efficiency, and will enable our non-office based staff to have Setting up a Shared Service Centre to 0% mobile access to our IT systems. We will Release Resource for Customer Service 03/04 04/05 05/06 06/07 07/08 also develop our e-business initiatives Our new Shared Service Centre for particularly e-procurement and e-learning. finance and administration processes In the two years from the start of the opened for business in Leeds in February SAP project in April 2002, cost savings 2004. During autumn 2004 we added of almost £0.4 million have been realised a second wave of processes. As a result, in the direct costs of running IT. Over the we have been able to achieve efficiency next five years, cost savings are forecast gains that have been reinvested in to rise to £2.8 million per year mainly customer service in our core business. in reduced administration. In addition, Our long-term strategy is to bring further improvements to business processes ‘back office’ processes into the Shared are expected to realise estimated annual Service Centre wherever appropriate. productivity benefits of £3.4 million. This approach is intended to help in Introducing New Ways of Working maximising the resources we can invest During the year we looked at ‘model’ new in front line customer service going forward. ways of working. Our North West Waterway Reducing Our IT Running Costs and Unit is piloting effective and efficient Gaining a Specialist Service ways to work, and others will adopt the The maintenance and support of our IT subsequent best practice. One of the key equipment was outsourced to Fujitsu areas where we can significantly make Services during the year. The first stage savings is on office space. We only need of the five-year contract is now complete desk space for 60% of our workforce, and we have new PC equipment running as many more people work away from the most up-to-date Microsoft software. their desks or work flexibly from home. Remote management is provided from This change alone will reduce our Fujitsu’s data centre and a new 24-hour accommodation costs by around 50%. helpdesk has been set up at their support centre. By delivering our IT support in this way we benefit from a specialist service, and we are saving almost 30% on our IT running costs and we saved £0.5 million this year.

42 ANNUAL REPORT & ACCOUNTS OPERATING & FINANCIAL REVIEW FIXED AND OPERATING COSTS Eric Shipley, Senior Buyer for Senior Buyer Eric Shipley, which Service Centre our Shared efficiency achieving is already into gains for reinvestment customer service. FINANCE AND TAX

Treasury Management Accounting Policies We invest short-term cash surpluses in Overall interest payable exceeded interest Our accounting policies have been the low-risk overnight money markets. receivable by £3.0 million (2003/04: reviewed during the year by the Audit In the longer term any surplus cash is £0.8 million net receivable reflecting Committee, in accordance with FRS18 deposited in low-risk, higher interest, the one-off receipt of £2.0 million interest ‘Accounting policies’. The policies are bank accounts. on arrears of utility agreements that presented on page 75. There have been were settled in 2003/04). no significant changes during the year. Our current policy is not to invest cash in equities, treasury bills, certificates of Interest payable during the year comprised: Pension Fund deposit, financial derivatives, or in high payments on fixed term; fixed interest In common with many other companies return/high risk deposits. We do not loans; interest credited to provisions; and this year we are reporting a deficit in our have any significant level of exposure interest earned from cash deposits held pension scheme under the transitional to foreign currencies. on behalf of external project funding arrangements of accounting standard partners, and subsequently repaid as FRS17. The deficit on this basis has We have a bank overdraft facility of £3 additional funding to the project. increased to £46.2 million net of a million which was unused at both the deferred tax credit of £19.8 million, a rise end of 2004/05 and at the end of the Cash Flows of £7.3 million since last year. This reflects previous year. Net cash outflow from operating activities increases in the present value of the totalled £7.9 million (2004: cash inflow No new loans were taken out in the year, scheme liabilities being greater than of £31.6 million). In addition to of the however, in the past we took out a limited the rise in the fair value of the assets operating loss of £5.1 million, which is number of fixed term, fixed interest loans in the same period. This deterioration offset by £4.0 million non-cash items from the National Loans Fund. Most of has occurred not withstanding an (mainly depreciation), there were reductions those loans still in existence date back increase of £29.7 million in asset of £5.3 million working capital and £1.5 to the 1970’s and 1980’s and were related valuations in the year. million provisions. The previous year to activities in which we are no longer benefited from the receipt of the £32.5 We have also separately undertaken the engaged, such as freight carrying and million Liverpool Dowry. latest of our routine triennial actuarial handling. valuations of the pension fund this year. The receipts from the sale of fixed assets In 1999, the government decided to This was completed during the year of £46.0 million was significantly higher make capital contributions to us to enable based on a valuation date of March 31 than the gross investment spend of loans maturing before 2013 (£11.0 2004. The triennial valuation is completed £32.8 million. As a result net cash was million at March 2005) to be repaid as on a different basis to FRS17 with £3.8 million higher at £24.9 million. they matured, without us having to take corresponding differences in the level out new loans to replace them. During Corporation Tax of funding indicated. 2004/05 we repaid one loan for £0.6 Our income and expenditure is subject to The triennial valuation resulted in a deficit million, receiving an equal amount as tax under the Income and Corporations of £42 million, and plans have been capital contribution. In 2005/06 a further Taxes Act 1988. Taxable profits generally agreed with trustees and employee £3.6 million loans will be repaid. Details arise from our success in the property representatives to eliminate this over of outstanding loans are set out in Note market place. a period of 15 years from April 2005. 19 in the accounts. A provision of £6.8 million (2004: £2.1 The company has increased its Financial gearing at 31 March 2005 fell million) is held in the balance sheet for contributions to the fund whilst holding to 2.9% from 3.5% last year. The average current and previous year corporation tax existing employee contribution levels. rate of interest payable increased slightly liabilities which have arisen on trading A number of member benefit changes and from 11.5% to 11.6% reflecting prevailing account and capital gains. a two-year waiting period for new joiners interest rates at the time the loans have been introduced to complement the were taken out. We are prevented from higher employer contributions. Further refinancing these liabilities by government details are given on page 24 and in Note accounting rules. 8 to these accounts.

44 ANNUAL REPORT & ACCOUNTS OPERATING & FINANCIAL REVIEW FINANCE AND TAX 0.7 5.1 (3.8) (5.4) (1.9) (1.5) 37.6 37.6 31.6 (33.8) 2003/04 - - 4.0 (7.9) (1.5) (3.8) (5.1) (5.3) (11.7) 2004/05 Computer-generated image of our regeneration Computer-generated image Leeds. Dock, at Clarence scheme Movement on provisions Net cash (outflow)/inflow from operating activities Financing Increase/(decrease) in cash Summary consolidated cash flows £m Operating loss Exceptional costs of business reorganisation Non-cash items (Decrease)/Increase in working capital Investment, acquisitions and servicing of finance SCOTLAND’S OPERATING & FINANCIAL REVIEW

British Waterways Scotland manages A further aim is to facilitate waterway five canals in Scotland: the Caledonian; Strategic Priorities transport and freight. Timber shipments the Crinan; the Forth & Clyde; the Union; The safety of visitors, contractors and through our improved facilities at Ardrishaig and Monkland canals. We work within our people is our main priority and we continue to outperform our expectations the framework of British Waterways’ are committed to working together to and are at capacity. In 2004 timber corporate objectives while seeking to achieve excellence in Health and tonnage shipped from the pier increased meet the aspirations of the Scottish Safety performance. by 36.5% to 132,660 (2003/04: 97,149 Executive as laid out in their policy We wish to see our canals fulfil their tonnes). In the Lowlands, as an initiative document, ‘Scotland’s Canals – potential and add value to people living supported by the Lowland Canals Steering an Asset for the Future’. in Scotland as set out in ‘Scotland’s Group, a Freight Action Plan is to be developed to investigate canalside freight The figures quoted here are incorporated Canals – An Asset for the Future’. Our facilities and potential freight movements. in our Group Operating & Financial strategic priorities are to deliver busier Review on pages 6 to 45. and more vibrant waterways, in particular We continue to consult with the Scottish to ensure that the Lowland canals fulfil Executive and the Scottish Environment their economic and leisure potential now Protection Agency to ensure that we will Scottish Executive they are restored. Wherever compatible comply with the new control regimes with our vision and priorities we will use expected to be phased in from October Grant the waterways as a catalyst for urban and 2005 as a result of the Water Framework rural regeneration. We receive grant funding from the Directive which promotes sustainable Scottish Executive. In 2004/05 our We aim to satisfy our customers by water use. baseline grant grew by 5.9% to £8.9 providing a secure infrastructure and million (2003/04: £8.4 million). We were improved level of service. During the year delighted to receive an additional ad-hoc we adjusted the way we manage our British Waterways grant of £3.7 million during the year. The business to adopt a clear, integrated, Scotland Group total grant accrued for the financial year Scotland-wide approach. We have clear 2004/05 was £12.6 million (2003/04: plans, which enable local teams to The British Waterways Scotland Group, £12.6 million). concentrate on delivering good service is a non-statutory advisory group, chaired to meet the demands of our customers, by Campbell Christie, British Waterways’ In October 2004 we welcomed the partners and staff. Vice-Chairman. It plays a key role in advising announcement by the Transport Minister and influencing our corporate and of the Scottish Executive’s continued We wish to encourage all public bodies commercial interests within the devolved funding of £8.9 million for 2005/06, sponsored by the Scottish Executive to political environment. It meets three to increasing to £10.9 million for 2006/07 continue to work together and support four times each year at various locations and £11.4 million for 2007/08. This is a the sustainable development and throughout Scotland where the public, very clear indication of the Scottish regeneration of canals and their and interested organisations have the Executive’s commitment to continue to surrounding areas. The unique built opportunity to discuss their needs and support the transformation of Scotland’s heritage and environment of Scotland’s issues with the wide range of Group canals. In response to this strong support, canals makes them special and attracts members. This is in addition to our formal we have pledged to improve future millions of visitors every year. They are public Annual Meeting, and two regular revenue streams by investing further all protected by Scheduled Ancient local user group meetings each year. commercial capital in Scotland. Monument status and are surrounded by environ-mentally sensitive sites (except the Monkland Canal). A close working relationship with Historic Scotland, Scottish Environmental Protection Agency and Scottish Natural Heritage is imperative to the success of our business. Working with the Waterways Trust Scotland we also wish to promote voluntary sector and community involvement, with particular regard to the educational value and the positive impact on quality of life.

46 ANNUAL REPORT & ACCOUNTS SCOTLAND’S OPERATING & FINANCIAL REVIEW Our second Scottish Boat Show was held at Our second Scottish Boat in August 2004. Wheel again It was Falkirk The Valley, by Scottish Enterprise Forth sponsored of visitors to see a and attracted thousands selection of over 60 boats. (Left to right): Jim Stirling, Director, British Waterways British Director, Stirling, Jim to right): (Left for Transport, Minster Stephen, with Nicol Scotland British Christie, and Campbell Executive Scottish Vice-Chairman of the British and Chair Waterways Canal. on the Union Group Scotland Waterways SCOTLAND’S OPERATING & FINANCIAL REVIEW

Leisure Working in Review of Key The total number of boats licensed Partnership Business Areas remained fairly constant with 2,920 in 2004/05 (2003/04: 2,858), see Significant progress to encourage The key business areas in which table top right. partnership working has been made we operate include: during the year with the creation of the The Falkirk Wheel Waterway Management Scottish Canals Development Group – During the year, The Falkirk Wheel, the Safety remains top of our agenda and a new pan-Scotland partnership, chaired world’s only rotating boat lift, reinforced underpins all that we do. We need a safe by the Scottish Executive, involving all those its position as one of the country’s and secure infrastructure so that people bodies who can contribute to and benefit leading visitor attractions. Despite very feel assured when visiting our waterways, from vibrant canals. A key objective of poor weather last summer visitor numbers and businesses are confident about the Group is to work together to develop have remained strong – 154,155 visitors investing in them. the canal corridors to maximise leisure, from all over the world enjoyed a boat trip tourism and business use and so unlock Our statutory maintenance arrears are through The Wheel in 2004/05 compared their economic potential whilst taking estimated at £7.8 million, and we are to 152,493 in 2003/04. In August 2004 account of social and environmental needs. on target to eliminate them by 2012. alone, 27,000 visitors enjoyed a boat trip and 251 private vessels transited To help identify, implement and progress With the help of ad-hoc funding from The Wheel. projects – both long-term and short-term the Scottish Executive, we were able two project development groups, which to complete a further stage of the The experience of our customers at The meet quarterly, have also been set up. Caledonian Lock stabilisation programme Wheel is critical to the success of our These comprise the Highland Canals to improve the reliability and efficiency of business and we are constantly striving Steering Group, chaired by the chief the Caledonian Canal. These major works to enhance the visitor experience. Due executive of Lochaber Enterprise; and were undertaken at Dochgarroch Lock, to the high demand for boat trips since the Lowland Canals Steering Group, Clachnaharry Sea Lock and Corpach it opened in 2002, we have increased chaired by the chief executive of Double Lock during the winter of 2004/05. capacity with the introduction during the Scottish Enterprise Forth Valley. The lock repair programme is expected year of two specially constructed 96-seater to be completed by 2005/06. passenger boats. Easy access, all round It is clear from the initial meetings that visibility, and manoeuvrability were the top there is a common agenda and shared On the Crinan Canal stabilisation works priorities throughout the design stages. vision surrounding the positive impact were undertaken at locks 4, 5, 6 & 7 during They are proving to be very popular with Scotland’s canals can have at both the winter of 2004/05, in addition to our visitors. national and local level on all the embankment leak repairs at Badden Bend. organisations involved. By working with The Scottish Boat Show With the financial support of European all our partners in the public and voluntary The second Scottish Boat Show, Regional Development Fund and Scottish sectors to identify projects of mutual sponsored by Scottish Enterprise Forth Enterprise Dunbartonshire, improved benefit we are determined to make real Valley, attracted around 15,000 visitors customer facilities at Bowling on the progress to ensure that the momentum to see a selection of over 60 boats of all Forth & Clyde Canal will soon be available, for developing Scotland’s canals, their types, shapes and sizes. The brand new with an amenity block and the installation corridors and canalside communities leisure puffer Maryhill formally opened the of additional mooring pontoons under is maintained. show at the end of her maiden voyage construction. along the Forth & Clyde Canal.

48 ANNUAL REPORT & ACCOUNTS Boat Licences in Scotland REVIEW & FINANCIAL OPERATING SCOTLAND’S Under 3 months Over 3 months Total (04/05) (03/04) (04/05) (03/04) (04/05) (03/04) Caledonian Canal 948 1,151 171 140 1,119 1,291 Lowland canals 98 128 200 164 * 298 292 Crinan Canal** 1,440 1,214 63 61 1,503 1,275 Total 2,486 2,493 434 365 2,920 2,858

* The 2003/04 figure, overstated as 220 in last year’s report, has been corrected as above ** There were 119 commercial freight ship visits to the Crinan Canal

Boaters at Clachnaharry, Inverness, on the Caledonian Canal.

© Christine Spreiter

The Lowland Canals The Highland Canals The continuing regeneration of Scotland’s We have concluded a review of operations Loch Ness is an outstanding, world- Lowland canals took a major step forward on the Caledonian Canal leading to the renowned waterways asset. It needs with the completion of a new mooring introduction of more flexible, customer- to come alive but this requires the basin at Auchinstarry near Kilsyth on the focused working practices. We are now development of amenities around the Forth & Clyde Canal. The development, looking at arrangements across Scotland loch including safe moorings and tourism for which we used a sustainable approach, to achieve a modern framework allowing facilities. We will work with our partners includes hard standing for 40 boats, a car us to quickly adapt our business to to find ways to achieve this. park and facilities block (also see page respond to the needs of our customers. 16). Plans are being discussed for a We expect the new consistent and possible hotel, bar and restaurant transparent system of commercial fees complex on the site. for all businesses operating on the Caledonian Canal to become the model To address the shortage of visitor for all Scotland’s waterways to assist moorings across the Lowland canals, growth by encouraging true business during the year we have installed over to business relationships with our 0.75 miles (1.2 kms) of new moorings at commercial customers. various locations including Leamington, Harrison Park, Linlithgow and The Wheel.

ANNUAL REPORT & ACCOUNTS 49 SCOTLAND’S OPERATING & FINANCIAL REVIEW

Restoration We are seeking to expand our network We reported last year that we recognise We acquired the former Rosebank by encouraging more waterway the need to improve the entrances to the Distillery in Falkirk in 2002 and received restoration and creation. Lowland canals at both the River Carron planning consent for a mixed use and Bowling. Feasibility studies are development comprising leisure, offices The re-connection of Speirs Wharf to Port underway to investigate the navigation and housing. We have concluded the sale Dundas, two of Glasgow’s most historic windows on the River Carron to improve of the residential site and residential canalside locations is scheduled for access to and from the Forth & Clyde construction has started. completion in late 2005. The £5.6 million Canal from the east to the Firth of Forth restoration includes the provision of 300 We have also identified several potential at Grangemouth. The studies are jointly metres of new canal and two new lock high quality sites in Scotland to put forward funded by us and the Scottish Executive, structures. It builds on the regeneration to our Waterside Pub Partnership venture and outcomes will include increased process started by The Millennium Link to develop waterside pubs. canal use for through passage. A major and will bring a new and exciting Canal part of the study is focused on the In conclusion, the priorities for us are clear. Quarter to the Forth & Clyde Canal very environment of the River Carron itself. By having a much stronger focus on the close to Glasgow’s vibrant city centre. needs and wishes of our customers, by It will unlock 30 hectares of vacant and In addition, the prospect of re-linking working together as one team in Scotland unused land in Port Dundas for mixed- Loch Lomond to the Clyde via a and by working in partnership with bodies use development and environmental navigable River Leven has the potential who can contribute to and benefit from improvements. The restored canal basin to be enormously beneficial for tourism vibrant canals we are striving to add will also provide opportunities for the and leisure. value to the economy, the environment creation of a thriving waterspace. Property and Ventures and the social welfare of Scotland by The project has been made possible Phase One of Edinburgh Quay, comprising delivering safer and thriving waterways. through a strong partnership approach, offices, restaurants and housing, is now Thanks to our committed and supportive with funding support received from complete and well on its way to becoming team in Scotland we are confident that Glasgow City Council, European Regional fully occupied. The £60 million joint we shall achieve our aims. Development Fund, ISIS and the Garfield venture with Miller Developments on the Weston Foundation. Port Dundas is the Union Canal is transforming the area flagship initiative in a programme being around Lochrin Basin and there is already pushed forward in partnership by ISIS strong interest in the Phase Two and Glasgow City Council to regenerate development which has planning consent a significant part of North Glasgow for offices and retail outlets. With the around the canal. official opening of Lochrin Basin at the James M Stirling beginning of 2005 by Nicol Stephen, Director, Scotland our Scottish Minister we have created a lively canal destination point in the centre of Edinburgh. We hope to influence the shape of future development in the heart of Edinburgh at the adjacent Fountainbridge Brewery, now that brewing has ceased, by highlighting the advantages and value to be gained by creating vibrant, colourful waterspace.

50 ANNUAL REPORT & ACCOUNTS SCOTLAND’S OPERATING & FINANCIAL REVIEW The Falkirk Wheel, where the Forth & Clyde Canal the Forth where Wheel, Falkirk The meets the Union Canal. SCOTLAND’S ACCOUNTS

Financial Review British Waterways Scotland made a loss During the year we increased our The value of fixed assets reduced by of £953,000 in 2004/05 (2003/04: loan capital to Edinburgh Quay Ltd, £1.1 million to £15.8 million, mainly £379,000 profit). This loss increases the an associate company set up to develop as a result of the sale for residential cumulative loss over the five years since property in Edinburgh, by £1.3 million to development on the site of the former devolution to £9.0 million, which represents £7.7 million. Interest receivable on loans Rosebank Distillery in Falkirk. the continued commitment of the British made to Edinburgh Quay Ltd amounted Waterways Group to the long-term to £0.3 million. potential of the waterways in Scotland. Detailed comments on trading are included in the review of our ‘key business areas’ above.

Profit and Loss Account Scotland year to 31 March 2005 2004/05 2003/04 £000 £000 Direct income 7, 4 3 5 3,977 Scottish Executive grant 12,634 12,646 Total Revenue 20,069 16,623

Major repairs and renovations (7,014) (4,915 ) Other operating charges (8,911) (5,760 ) Staff costs (4,990) (5,386 ) Depreciation (369) (415 ) Own work capitalised or charged to major works - - Total Expenditure (21,284) (16,476 ) Operating (loss)/profit (1,215) 147

Profit on sale of investment properties 1,495 209 Interest receivable 262 232 Profit for the financial year 542 588 Transfer of profits on sale of property (1,495) (209 ) (Loss)/Profit transferred (from)/to reserves (953) 379

52 ANNUAL REPORT & ACCOUNTS SCOTLAND’S ACCOUNTS SCOTLAND’S

Grant receivable from Scottish Executive 2004/05 2003/04 £000 £000 Grant received in year 12,977 14,534 Accrued grant at 1 April (2,417) (4,351) Accrued grant at 31 March 2,040 2,417 12,600 12,600 Deferred capital grant released to profit and loss account 34 46 Total revenue grant accrued during the year 12,634 12,646

Analysis of fixed assets

a) Tangible fixed assets (net book value) 31 March 2005 31 March 2004 £000 £000

Freehold land, building and structures - operational 4,726 4,326 Freehold land, building and structures - investment 9,086 9,630 Craft plant and equipment 2,048 2,982 15,860 16,938

b) Investments 31 March 2005 31 March 2004 £000 £000 Shares at cost: Balance at 31 March 1 1 Loan to Edinburgh Quay Limited: Balance at 1 April 6,472 2,695 Additions 1,263 3,777 Balance at 31 March 7,735 6,472 Net book amount at 31 March 7,736 6,473

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 (31 December 2004) (3,239) (2,690)

ANNUAL REPORT & ACCOUNTS 53 NON-EXECUTIVE BOARD MEMBERS

Dr George Greener CBE, Chairman 1 4 5

George is a Director of Reckitt Benckiser plc and Director of JP Morgan Fleming American Investment Trust plc. He stepped down as Chairman of The Big Food Group plc in February 2005. 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 59.

Susan Achmatowicz 1 2 5 Professor George Fleming 2 5 Susan is a leisure entrepreneur, who has developed her George is Emeritus Professor of Civil Engineering at own award-winning cycle tourism business. She is an the University of Strathclyde and is Managing Director advisor on cycle tourism, rural business start-up and of EnviroCentre (an environ-mental consultancy based sustainable development; her work in the areas of rail- at the University). He is a past President of the cycle integration, e-commerce and sustainable tourism Institution of Civil Engineers. He is also Non-Executive has been hailed as UK best practice. Formerly a vice- Director of WRAP (Waste and Resource Action president of Bankers Trust in the City, she holds an Programme). Age 60. MBA in Marketing & Finance from the University of Alberta. Susan is a member of the New Forest National Park Authority and Non-Executive Director of the NHS Pensions Agency. She Chairs the BW Pension Fund Trustee Board. Age 50.

Richard Bowker CBE 2 6 Helen Gordon 1 2 7 Richard is the former Chairman and Chief Executive of Helen is Property Director of Legal and General Life the Strategic Rail Authority, prior to which he was Group Fund. Prior to that she was Property Director at Commercial Director for the Virgin Group of Companies. Railtrack. She is an expert in enhancing ‘Brownfield’ He is a Trustee of the Settle Carlisle Railway Trust, the sites and development of under-utilised resources. Deputy President of the Heritage Railway Association She was Managing Director of John Laing Property and a member of the Business Development Board Ventures Ltd and has also advised on many major of SCOPE. He is a member of the BW Board’s Fair regeneration projects. Age 46. Trade Group and the Audit Committee. Richard is also a keen boater having cruised extensively around the network on his own boat. Age 39.

Dr Campbell Christie CBE, Vice Chairman 1 3 4 5 Dr Derek Langslow CBE 2 4 Campbell was General Secretary of the Scottish TUC Derek is Chairman of the Rail Passenger Committee for for 12 years until retiring in 1998. He joined the BW Eastern England, a trustee of the Heritage Lottery Fund, Board in 1998 and was recently re-appointed for a a Non-Executive Director of Harwich Haven Authority further three year period and was appointed as Vice- and is an external consultant to Defra on Quinquennial Chairman of the Board. He is the Chair of the BW Review. He is the former Chief Executive of English Scotland Group and represents Scottish interests on the Nature, having set up the organisation following its Board. He is a Trustee of the BW Pension Scheme and demerger from the Nature Conservancy Council. a member of the Remuneration Committee and the He also Chairs the Audit Committee. Age 60. Nominations Committee. In addition to his BW positions he is Chairman of Falkirk Football Club, Chairman of the NHS Forth Valley Acute Operating Division, President of the Scottish Civic Forum, and a Non-Executive Director on the Board of South West Trains Ltd. Age 67.

Ian Darling 3 5 7 Terry Tricker 3 4 6 Ian is a chartered surveyor and former Director of Terry is currently Chairman of Burton Hospitals NHS Chesterton (Scotland) Property Consultants. He is Acute Trust. He has recently Chaired an Independent a member of the Lands Tribunal for Scotland and Review of an NHS Mental Health Unit in Birmingham a member of the Court of Edinburgh University. and was previously the Director of Operations and He also serves on the Council and Scottish Committee a Board Member of Severn Trent Water Ltd, and of the RSPB and is a past Chairman of the Royal Non-Executive Director of the Employment Needs Institution of Chartered Surveyors in Scotland. Training Agency. He is a mentor with ‘Jigsaw’, a young He is a regular user of Scotland’s canals and people’s mentoring organisation, part of the National represents Scottish interests on the board. Age 60. 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 is Chairman of his own leisure company, Derby Caravan Centre Ltd. Age 61.

1 DIRECTOR OF BRITISH WATERWAYS PENSION TRUSTEES LTD 2 MEMBER OF THE AUDIT COMMITTEE 3 MEMBER OF THE REMUNERATION COMMITTEE 4 MEMBER OF THE NOMINATIONS COMMITTEE 5 MEMBER OF THE BRITISH WATERWAYS SCOTLAND GROUP 6 MEMBER OF THE FAIR TRADING GROUP

7 MEMBER OF THE PROPERTY GROUP EXECUTIVE DIRECTORS EXECUTIVE BOARD MEMBERS & DIRECTORS

Robin Evans BSc, FRICS Chief Executive 1 Robin joined British Waterways in 1999 as Commercial Director and became Chief Executive in December 2002. Prior to that he spent four years as Palaces’ Director for Historic Royal Palaces and was Chief Executive of The Landmark Trust for eight years. Age 51.

Jim Stirling OBE, BSc, MBA, CEng, FICE, MIStructE Nigel Johnson BSc (Econ), Solicitor Director, Scotland Legal Director Jim joined British Waterways as Manager, Scotland A corporate lawyer for most of his career, Nigel was in 1992 and became Director, Scotland in 1997. Chief Solicitor to Cheltenham & Gloucester plc from Jim spent many years in civil engineering and 1987 to 1997. He was then Official Solicitor to construction, both in the UK and abroad. Age 52. the Church Commissioners, before joining British Waterways as Legal Director and Secretary to the Board in April 2001. Age 50.

Mark Bensted IEng, AMIStructE Vincent Moran BA, FCIPD Director, London Personnel Director Mark has been responsible for the operational, property, Vince joined British Waterways in 1997 following leisure and regeneration activities of British Waterways extensive personnel and general management London since 1990. Prior to joining British Waterways experience in production, manufacturing and service in 1980 Mark worked in the construction industry for activities with the coal industry and Chubb Security plc. Taylor Woodrow and Kyle Stewart. Age 47. Age 49.

Derek Cochrane BSc, MEng, CEng, FICE Simon Salem BA, MBA Managing Director, Northern Waterways Marketing and Customer Service Director Derek has worked for British Waterways for over 25 Simon has over 20 years’ experience of marketing, PR, years commencing in Scotland. Prior to that he worked corporate affairs and fundraising. Before joining British for a water authority and in private sector consultancy. Waterways he worked for London Transport. He has Age 54. worked extensively in the leisure and tourism industry. Age 48.

John Lancaster FCA Stewart Sim OBE CEng, FICE, MCIWEM Managing Director, Southern Waterways Technical Director John joined British Waterways in 1996 following Stewart was Operations Director until May 2003 when a career in the accountancy profession, followed he became Technical Director. A civil engineer by by 20 years in general management positions profession, Stewart has worked across the country within the dairy industry. Age 58. for British Waterways for over 30 years and has been involved in most parts of the business. Age 59.

James Froomberg MA Mark Smith FCCA Commercial Director Finance Director (until May 2005) From 1983 to 1999 James was at KPMG where, A fellow of the Chartered Association of Certified as a partner, he headed the firm’s management Accountants, Mark has spent much of his professional consultancy to the leisure industry. He was then career in retailing, and held senior finance and appointed to Wembley plc as Director of Corporate business development positions in Marks and Spencer Development, before joining British Waterways in plc before joining British Waterways in March 2001. March 2003. Age 49. Age 46.

ANNUAL REPORT & ACCOUNTS 55 Enjoying the tranquility of the Grand Union Canal at Tring. CONTENTS OF ACCOUNTS

58 Statutory and Financial Framework 60 Board Members’ Report 62 Corporate Governance 66 Directors’ Remuneration Report 70 Auditors’ Report 72 Consolidated Profit and Loss Account 72 Statement of Consolidated Total Recognised Gains and Losses 72 Note of Consolidated Historical Cost Profits and Losses 73 Balance Sheets 74 Consolidated Cash Flow Statement 75 Notes to the Accounts 97 Five Year Summaries 98 Accounts Direction

ANNUAL REPORT & ACCOUNTS 57 STATUTORY AND FINANCIAL FRAMEWORK

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

58 ANNUAL REPORT & ACCOUNTS Borrowing and Capital Determination of Grant Investment Available Funding BW receives annual grants in monthly The government sets the maximum The financial resources available to BW instalments from the governments, 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 and Wales are being funded by Defra long-term borrowings other than from of bi-annual Comprehensive Spending and in Scotland are being funded by the National Loans Fund. The limit of all Reviews spanning three years. BW the Scottish Executive. BW’s borrowings was increased to £35 manages its expenditure to remain million under an order of the Secretary of within these budgets and finances the Conditions for the payment of grant State 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 by guarantees of bank overdraft facilities from the government during 2004/05 government. in order for BW to meet day-to-day was £72.1 million. Part of the grant received from fluctuations in receipts and payments. government is used for the purchase BW’s profit generating capital expenditure of vehicles, plant and equipment for can be funded through access to maintaining the waterways as economically Preparation of National Loans Fund loans, subject to as possible but on which no return on government limits. In recent years BW investment can be obtained. This is treated Accounts has only been permitted to borrow in the accounts as a capital grant and BW is required to prepare audited amounts equal to the total of earlier loans the income deferred and brought into Annual Accounts which comply with due for repayment. Within these limitations, account in line with the depreciation Companies Act requirements and best BW has been restructuring its asset charges on the assets concerned. commercial accounting practice, although portfolio by disposal and reinvestment to the information to be disclosed is amended BW is precluded from drawing improve its ability to achieve its business and extended by Direction of the Secretary government grant in advance of need. objectives. In February 1999 the Deputy of State for Environment, Food and Rural Prime Minister announced that the Affairs as shown on page 98. government had decided to phase out most of BW’s outstanding debt as it Expenditure on repairs and renewals of Objective to Avoid Loss matures, thus removing from BW the the basic canal infrastructure is written need to take out new loans to repay off to profit and loss account as it is and Not Draw Grant in existing loans. incurred. Investment property is revalued annually by external valuers. Advance of Need BW is also required to obtain government The above requirement of not drawing consent for all expenditure projects over grant in advance of need, combined with £3 million or when there are novel or the statutory responsibility to avoid a loss contentious features or to take an interest on revenue account, taking one year with in a body corporate in excess of 49%. another, leads BW to target to break-even It is furthermore required to consult Defra on profit and loss account each year. or the Scottish Executive at the earliest stage, in the case of major development 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 59 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 2005.

Principal Activities Board Members Fixed Assets BW’s principal activities are set out Details of the present Board Members Details of movements in fixed assets on page 100. are shown on page 54. Sir Peter Soulsby during the year, including the revaluation retired from the Board in June 2004 and of investment properties, are set out in Business Review Janet Lewis-Jones and Adeeba Malik Note 9 to the accounts. retired in October 2004. Richard Bowker BW does not incorporate revaluations A detailed review of BW’s performance joined the Board in September 2004. of operational properties in the accounts. during the year and expected future A Register of Interests is maintained by Based upon external valuations at 31 developments is contained in the the Legal Director through whom public December 2004, it is the opinion of the Operating and Financial Review. inspection can be arranged. Board Members that the operational property, excluding the canal track, Results Statutory Maintenance towpaths and reservoirs, has a market The audited accounts for the year ended 31 value in the region of £56 million (2004: March 2005 are shown on pages 72 to 97. Obligations £49 million) at 31 March 2005. A tax The analysis of income and expenditure in Under its Framework Document, BW is liability would not be expected to arise if the accounts is based on the current use required by the government to maintain land and buildings were sold at that value. of waterways rather than their Transport its waterways to standards that reflect Act 1968 classification. This provides a use and prospects of use. Such standards Charitable and Political more meaningful presentation but does do not always fully reflect the historic not affect BW’s statutory obligations set standards prescribed by the Transport Contributions Act 1968. The Board consider compliance out in the Transport Act 1968. BW has not made any charitable or with the Framework Document political contributions during the year. requirements to be appropriate, notwithstanding the statutory standards, in light of the power of the government Payment Policy (and Scottish Ministers) to make Orders It is BW’s policy to agree payment terms varying the statutory prescribed standards with its suppliers at the outset of a and to intervene in any enforcement transaction, and abide by these terms, proceedings. Further details are given subject to satisfactory performance by under the description of BW’s statutory the supplier and the timely presentation and financial framework on page 58. 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 15 days credit (2004: 8 days).

60 ANNUAL REPORT & ACCOUNTS Environment Equal Opportunities and 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. BW’s natural and cultural heritage and Employees the requirements to conserve or improve BW places considerable value on the it are described in a range of Conservation involvement of its employees and has Plans, Biodiversity Action Plans, Heritage continued its practice of keeping them Principles, Standards and Action Plans. informed on matters affecting them as Further information on such plans and employees and on the various factors strategies are available on request. affecting its performance. This is achieved through formal and informal Audit meetings allowing the two-way flow of PricewaterhouseCoopers LLP were information between management and appointed as external auditors of BW employees, and a monthly newspaper for the year ended 31 March 2005 by supplemented by occasional regional the Secretary of State for Environment, information sheets, and employee surveys. Food and Rural Affairs in accordance with BW has common terms and conditions of Section 24(2) of the Transport Act 1962. employment and single table bargaining By order of the Board with employee representatives through National and Waterway 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 annual performance and development review process. Nigel I Johnson Legal Director and Secretary to the Board

ANNUAL REPORT & ACCOUNTS 61 CORPORATE GOVERNANCE

The Board is committed to achieving the objectives of BW. Reporting to the Board independence to the Board and has not highest standards of corporate governance. are Executive Directors who have nominated any one Non-Executive This is key to the objective of BW being responsibility for operations and Member to be a senior independent an exemplar public organisation that management. They are also responsible Board Member. The roles of Chairman maximises the public benefit it creates. for the development of business strategy and Chief Executive are clearly separated Accordingly the Board has resolved that, and policies, subject to approval by the and the division of responsibilities is save for necessary adaptations consequent Board. Biographical details of the Board defined in the delegation arrangements. upon its actual status as a statutory public Members and Executive Directors can All Board Members have access to the corporation, it should adhere to and apply be found on pages 54 and 55. advice and services of the Secretary the standards of corporate governance to the Board, and may take independent All the Non-Executive Board Members applicable to a quoted public limited professional advice at BW’s expense after are independent from management and company. In doing so, it also meets notifying the Chairman. The Secretary the majority are free from any business (and exceeds) the Accounts Direction ensures that new Board Members receive or other relationship which could materially to meet the disclosure requirements appropriate induction on appointment. interfere with the exercise of their ‘of companies legislation currently in force’. Where necessary, BW provides the independent judgement. On specific issues necessary resources for professional The applicable standards for this reporting where there may be a potential conflict development and updating the knowledge year are those set out in the version of interest, members declare their interests and capabilities of both the Board Members of the Combined Code on Corporate and withdraw from the meeting. This is and Executive Directors. The Secretary Governance published in July 2003 noted in the minutes. Mr Tony Hales, the may only be removed with the approval (when the Code was last revised) and new Chairman from July 2005, met the of the Board. this statement explains how the Board independence criteria on his appointment. has applied those standards throughout His appointment, and that of Mr Richard The Board has a prescribed methodology the reporting year. Bowker in September 2004, were made for determining appropriate levels of in accordance with the guidance of the governance and control for subsidiaries, Board – Operations and Membership Office of the Commissioner for Public joint ventures and associated undertakings One of the principal differences between Appointments (OCPA) and therefore of BW. The methodology provides a risk BW and a quoted company relates to the on merit and against objective criteria. profile that is used as a guide to the structure of the Board and the appointment appointment of Directors and the of its members. As such, sections A4, A7 The Chairman has ensured that the appropriate level of management reporting. and B of the Combined Code relating Board Members have been provided with to the appointment, re-election and appropriate and timely information and Conduct and Performance Evaluation remuneration of Board Members are that their enquiries have been properly The Board is committed to achieving not applicable to BW. met. Board papers are distributed a week high standards of conduct. The Seven in advance of the relevant meeting to allow Principles of Public Life recommended BW is governed by a Board comprising the members fully to prepare for meetings, by the Committee on Standards in Public a Chairman and Vice-Chairman and and minutes of Committee meetings are Life (formerly the ‘Nolan Committee’) has (currently) seven other Non-Executive circulated to all members. The Board is been applied to the Board and its people Members appointed by the Secretary of kept informed of developments within the and is complemented by a code of State for Environment, Food and Rural business through regular presentation by conduct and ethics statement. Affairs and (in respect of two members) management. All Executive Directors are by Scottish Ministers. Their appointment The Board has a rigorous methodology normally present during Board meetings is fixed for a period of three years and to evaluate its performance. A probing though the Chairman held meetings, or their remuneration is set by the Secretary questionnaire on performance of the parts of meetings, of the Board without of State and Scottish Ministers. Subject Board, its Committees and members is the Executive Directors present. Board to performance, Board Members may completed annually (and non-attributably) meetings are held at different locations be reappointed once without competitive by each member and a summary of around the business and are preceded by selection. The appointments are intended responses prepared by the Secretary visits and meetings with BW employees to ensure a balance of skills and to the Board. The summary is discussed and local stakeholders. experience relevant to the various sectors by the Board as a whole and a Board of the business. The Board has a schedule of matters Improvement Plan prepared in the light of specifically reserved to it for decision and its outcomes. The evaluation methodology The Board meets regularly (six times has also defined those matters delegated also requires the Board to meet without during the year) and brings an to Board Committees and the Executive the Chairman present at least once a independent judgement to its oversight Directors. The Board considers that its year to appraise his performance. of the direction, strategy and corporate exclusively non-executive membership brings a sufficient strength of

62 ANNUAL REPORT & ACCOUNTS Board Audit Remuneration Nominations FTG Attendance Total number of Meetings 7 3 2 2 2 Details of attendance at the principal Dr George Greener* 7 3 2 2 - Board and Committee meetings in Sir Peter Soulsby** 1 - 1 - - 2004/05 were: Helen Gordon 7 3 - - - * Dr George Greener is not a member of the Audit Committee, nor of the Dr Derek Langslow 7 3 - 2 - Remuneration Committee but attends Dr Campbell Christie 6 - 2 2 - their meetings by invitation Janet Lewis-Jones*** 3 - 0 1 - ** Sir Peter Soulsby resigned on Prof George Fleming 5 2 - - - 24 June 2004 Ian Darling 6 - 1 - - *** Janet Lewis-Jones and Adeeba Malik Adeeba Malik*** 2 1 - - - retired from the Board on 9 October 2004 Susan Achmatowicz 7 2 - - - **** Richard Bowker was appointed to the Terry Tricker 6 - 2 1 2 Board on 1 September 2004 Richard Bowker**** 4 1 - - 2 FTG - Fair Trading Group

Audit Committee Remuneration Committee The Board’s Audit Committee comprises performed by the external auditors are The Remuneration Committee, comprising five non-executive Board Members. required to be approved by the Audit three non-executive Board Members Details of the current members are given Committee. The Board’s policy is for (details of whom are given on page on page 54. The Board is satisfied that a presumption that non-audit work will 54 and 66), has, as its main task, at least one Member of the Audit be put out to competitive tender. Details consideration annually of the performance Committee has recent and relevant of the external auditors’ fees are given of the Executive Directors and financial experience. Before its last in Note 4 on page 80. determination of their remuneration levels. meeting of the year, Adeeba Malik left The Chairman of the Board attends by The external auditors are appointed by the Committee and Richard Bowker invitation but is not a member of the the Secretary of State (in consultation joined it. The Committee has written Committee. Terms of reference for the with Scottish Ministers) as required by terms of reference that are available Remuneration Committee are also statute. on the BW website, and meets at least available on the BW website. Further three times a year to review the internal Nominations Committee details of the work of the Committee are audit plan, progress against that plan, The Board has a Nominations Committee given in the Directors’ Remuneration and summary findings of the internal and and its terms of reference are available Report on pages 66 to 69. external auditors. In addition to reviewing on the BW website. It comprises four Fair Trading Group the financial results and accounting Non-Executive Board Members, details of During the year the Board established the policies, the Committee monitors the whom are given on page 54. It provides Fair Trading Group, a sub-group of the effectiveness of risk management and support and advice to the Chairman when Board that normally reports to the Audit internal control systems for the Board. he is consulted by Ministers on the Committee but has power to report direct By invitation the Chairman attends the appointment of persons to the Board and to the Board whenever it considers it meetings, together with the Chief reviews the Board composition (its mix necessary or appropriate. It comprises Executive and the Head of Audit and, of skills, experiences and characteristics) two Non-Executive Board Members when appropriate, Executive Directors from time to time. (details of whom are given on page 54), and the external auditors. The Committee and has as its main task an informed also meets the external auditors and During the year, it prepared a description scrutiny and oversight of compliance Head of Audit each without Executive of the role and capabilities required for by BW and its subsidiaries of their fair Directors present. The Committee reviews the appointments to fill the vacancy on trading commitments and obligations. the effectiveness of the external auditors the Board and for the new Chairman. Terms of reference for the Fair Trading and of internal audit annually. The Committee also reviews the succession Group are available on the BW website. planning arrangements for the Executive The Audit Committee oversees the nature and amount of non-audit work undertaken and key management posts in BW. by PricewaterhouseCoopers LLP each year to ensure that the external auditors’ independence is safeguarded. All non- audit services above £12,000 to be

ANNUAL REPORT & ACCOUNTS 63 CORPORATE GOVERNANCE

Since its establishment the Fair Trading State for Environment, Food and Rural users and others that have not been Group has focused its attention on the Affairs and to Scottish Ministers and resolved under BW’s internal complaints competition and fair trading implications maintains an ongoing dialogue at all procedure. It is a non-statutory scheme of the operation, by the subsidiary British levels within both governments. This funded by BW. More information on the Waterways Marinas Limited (BWM Ltd), includes regular contact by the Chairman, work of the Ombudsman since the last of inland marinas in competition with Annual Report is given on page 13. Chief Executive and Finance Director. other marina operators. In order to The Chairman’s meetings include reference Also, as part of the Openness and address the risk of unfair competitive Accountability initiative, the Waterways advantage being gained by BWM Ltd to the Board Members’ performance Ombudsman Scheme is being updated through its ownership by BW, BW has evaluation, and whether those reappointed and modernised. To ensure the committed itself to the ‘Marinas Protocol’ would continue to be effective by adequate independence of the Ombudsman, which sets out the principles by which the commitment to the role and time. a Waterways Ombudsman Committee commercial relationships between BW The Board holds an Annual Meeting at has been formed to take on oversight and both BWM Ltd and other marina which it communicates the key business of the scheme, including responsibility operators shall be conducted. Through results and plans for the future to the for appointment of the Ombudsman the Audit Committee, the Fair Trading main user groups, its partners and and ensuring the scheme is properly Group commissioned a report by the individual users. resourced. The committee comprises external auditors on compliance by a Chairman (Professor Jeffrey Jowell BW with the terms of the Protocol. BW has established an advisory group, QC, Professor of Public Law at University the British Waterways Scotland Group The ongoing work of the Fair Trading College London), three ‘user’ members (BWSG) to support the development of Group concerns the further development selected by the BWAF, two independent the business in Scotland within the new by BW of published fair trading policies non-aligned members and two BW devolved political environment. The BWSG in connection with a wider range of its members (the Chairman and the is a non-statutory group working to support commercial activities or those of its Legal Director). BW’s Board and its Executive Directors. subsidiaries as well as continuing It has a counselling, consultative and Internal Control oversight of its compliance with influencing function externally and The Board has maintained the procedures competition law. internally, rather than a decision-making necessary to comply with the requirements Pensions Trustees role and has an open remit to bring to of the Combined Code relating to internal A subsidiary, BW Pension Trustees the Board and/or the Executive Directors control. It has conducted a review of the Limited, the trustee of the BW Pension for consideration any issue of concern effectiveness of the system of internal Fund, is responsible for its own governance. to a majority of the members. Further controls, including financial and operational, The trustee directors, who meet twice information on the BWSG, including and risk management systems. yearly, are four members of the Board, details of the external appointments, The Board members acknowledge their the Chief Executive, three employee is given in the Scotland’s Operating ultimate responsibility for BW’s system representatives and a representative & Financial Review on page 46. of internal control and for reviewing its elected by current pensioners. Fund In England & Wales, under its Openness effectiveness. These internal controls are management is overseen by an and Accountability initiative, BW has designed to manage rather than eliminate Investment Sub-Committee and is facilitated the creation of the new British the risk of failure to achieve business delegated to external professional Waterways Advisory Forum (BWAF). objectives, and can only provide reasonable investment managers. This is a body, independent of BW, whose and not absolute assurance against membership comprises organisations material misstatement or loss. Responsibility for the management and of national scope with an interest in the administration of the Fund is vested in a Risk Identification and Management waterways managed by BW. Through Committee of Management. Ongoing day- meetings between BWAF and BW such There is an ongoing process for identifying, to-day supervision of the administration stakeholder organisations will have direct evaluating and managing the significant of the Fund is carried out by the Pensions access to the Chairman, Board Members risks faced by BW. The Board regularly Manager and staff, under an administration and senior management to raise significant reviews this process. agreement between BW Pension Trustees issues of concern or common interest. Risks are identified in each business unit Limited and BW. These new arrangements incorporate and plan and are reviewed by the Executive Relations with Shareholders enlarge upon the former arrangements Directors and the Board. The key risks Unlike a listed company, BW does not for national user group meetings. are subject to regular review by the have shareholders so that Section D of Under the Waterways Ombudsman Executive Directors to identify new the Combined Code does not apply. The Scheme the Ombudsman (Stephen Edell) and changing risks. The results are incorporated into the Chief Executive’s Board is responsible to the Secretary of may consider complaints against BW by operating report to the Board.

64 ANNUAL REPORT & ACCOUNTS Monitoring The Board also considers specific reports During the year the Audit Committee: The Board is also responsible for on key risks, including the statutory • reviews the internal and external safeguarding the assets of BW and arrears. Each Director completes annually audit plans hence for taking reasonable steps a letter of assurance outlining how risk • considers reports from management, to prevent and detect fraud and other management and the control environment internal and external audit on the irregularities. system of risk management, internal has provided reasonable assurance of Compliance with the Combined Code effective and efficient operations control and any significant control The Board considers it has complied throughout the period. The Chief Executive weaknesses throughout the financial year and up to considers this with each Director during • discusses with management the the date of approval of the Annual Report the annual corporate governance review actions and progress in dealing with and Accounts with the Combined Code, and a statement is given to the Audit identified problem areas except for those matters disclosed in this Committee summarising the significant The Chairman of the Audit Committee statement or those that cannot be applied risks, controls and required action points. reports the outcome of the Audit to BW because of its status as a statutory This is supplemented by ongoing risk Committee meetings and any significant public corporation rather than a quoted assessments at each business unit jointly internal control issues to the Board. The public limited company. by management and internal audit. Board receives the minutes of all Audit BW is additionally subject to public sector Committee meetings. Control environment controls, government monitoring and There is a clear organisation structure Board Members’ Responsibilities in approval, Parliamentary scrutiny and with delegated responsibilities and respect of the Group Accounts external reviews. The Board is required to prepare group authorities. The Board is committed to Going Concern achieving high standards from its people. accounts for each financial year which The funding arrangements of BW differ A code of conduct and ethics statement, comply with the Accounts Direction from those of a public limited company. which includes a whistle-blowing issued by the Secretary of State for BW receives an annual grant from procedure, is supported by high safety, Environment, Food and Rural Affairs in government to assist it in meeting its customer care and recruitment standards, respect of BW (see pages 98 and 99). statutory obligations, as referred to in the an appraisal process and a policy of In preparing those accounts, the Board Statutory and Financial Framework on unlocking the potential of staff. The key is required to: page 58. The grant available for the year control processes are documented and • select suitable accounting policies ending 31 March 2006 has been notified available on-line throughout BW. and then apply them consistently as £71.5 million. It is anticipated that Information and communication • make judgements and estimates that grant will continue at levels sufficient The Executive Directors submit a rolling are reasonable and prudent to enable BW to continue in operational three-year Business Plan, detailed annual • state whether applicable accounting existence for the foreseeable future. budgets and key performance indicators standards have been followed, on BW’s strategic priorities to the Board subject to any material departures for approval. The plan describes the disclosed and explained in the accounts implementation of the Board’s long-term • prepare the group accounts on a strategic vision and is supported by going concern basis unless it is individual business unit plans that apply inappropriate to presume that the consistent economic and financial organisation will continue in business assumptions. Monthly operational reports The Board confirms that the group and financial summaries together with accounts comply with the above regular forecasts are produced for requirements. each business unit and reviewed by the Executive. Progress against the The Board is responsible for ensuring key performance indicators is supplied that proper accounting records are kept on a quarterly basis to the Executive for and that these disclose with reasonable review. Detailed reports and projections accuracy, at any time, the financial position are presented to the Board. of BW and enable them to ensure that the accounts comply with the Direction.

ANNUAL REPORT & ACCOUNTS 65 DIRECTORS’ REMUNERATION REPORT

The Committee operate to a The BW Board The Remuneration Remuneration Policy designed to The terms of Board Members’ appointments specifically reflect BW’s business are determined by the Secretary of State Committee requirements taking account of the for Environment, Food and Rural Affairs The Board has established a Remuneration specialist independent advice received. or (in the case of two Board Members) Committee responsible for determining The Executive Directors have agreed Scottish Ministers. They are for a fixed and reviewing the terms of employment with the recommendation to publicly term with the option for this to be and remuneration for Executive Directors. disclose their remuneration. Following the extended by a further term. The contracts The remuneration principles established restructuring of BW in 2003, Operating are terminable upon notice not exceeding for this senior group of employees Directors are included in the Executive six months. The Secretary of State, or provide the framework for remuneration team. Full details are included in the Scottish Ministers as appropriate, policy within the business. The Committee table on page 68. determines Board Members’ emoluments. comprises from three to five Board Members. The Committee members are: Dr George Greener has private medical insurance as a benefit-in-kind. No other Terry Tricker, Chairman Remuneration Policy Board Member receives a benefit-in-kind. (from 25 June 2004) The Remuneration Committee’s overriding objective is to ensure that BW’s The Chairman’s pension entitlement Sir Peter Soulsby, Chairman remuneration policy and remuneration is calculated by analogy to the British (to 24 June 2004) packages are sufficient to attract, retain Waterways (1990) Pension Fund. Dr Campbell Christie and motivate a high quality team of The increase in the provision required Executive Directors to deliver the business for the year is calculated by a qualified Ian Darling strategy where growth is the fundamental actuary using the discount rates consistent Janet Lewis-Jones requirement for a sustainable business, with those required under FRS17 as (to 9 October 2004) taking account of BW’s financial position shown in Note 7 to the Annual Accounts. and the wider remuneration context in The Chairman, Chief Executive and There were no contracts or transactions the business. Personnel Director attend the Committee in which the Board Members had a by invitation to present recommendations Based on the information and disclosable interest. and provide technical support but have recommendations provided by TPRC the Details of Board Members’ fees no input into decisions affecting their Committee have agreed that BW should are shown in the table on page 68. own remuneration. match base salaries to market median levels with a proportion of variable pay Reporting to the Board, but not Board In determining appropriate remuneration in the form of annual bonus. TPRC have Members, are Executive Directors who levels, the Committee commissions recommended that, unlike the private have responsibility for management and specialist independent advice, surveys sector, a Long-Term Incentive Plan has for the development of business strategy conducted by external consulting firms not been applicable so far in BW’s and policies, subject to approval and and remuneration information on development. The committee has general oversight by the Board. comparable organisations. All Executive recognised that as the business strategy Director roles are fully evaluated by develops it may be appropriate to Towers Perrin Remuneration Consultants introduce a Long-Term Incentive Plan (TPRC) with responsibility levels assessed at a future stage. and compared with organisations of similar size in the public and private A summary of each element of the sectors. TPRC recommend that the remuneration package is set out closest match of responsibility, liability and on page 67. risk are to be found in the private sector.

66 ANNUAL REPORT & ACCOUNTS 1. Basic Salary 2.1 Corporate Performance Element Basic salaries are normally reviewed Of the total bonus potential up to 17.5% Inland Revenue regulations the shortfall annually on 1 June and increases are (20% for the Chief Executive) of basic is covered by a separate insurance determined by reference to comparator salary may be awarded for the achievement arrangement and the premium is paid information taking into account each of EVC targets. In broad terms the by BW. The Committee has been Director’s contribution during the year. achievement of budgeted EVC would monitoring the potential impact of changes The initial evaluation by TPRC during indicate that half Corporate performance to pension taxation. Arrangements to 2002 indicated that Executive Director bonus would be appropriate with full compensate for these effects have salaries were significantly below the bonus applicable only where EVC exceeds remained under consideration. Details appropriate median market levels and budget by a significant proportion. Failure of accrued pension levels are shown this information is updated annually. The to significantly achieve budget EVC levels in the table on page 69. would normally indicate that no corporate Remuneration Committee recommended 5. Notice Period that salaries should be increased towards bonus is payable. Executive Directors are entitled to 12 the market levels in a staged way and The bonus payments shown on page 68 months notice of termination of contract this was confirmed in 2004/05. Details relate to the 2003/04 year when income by BW. Directors are required to give BW of basic salary levels for 2004/05 for generation was the key financial target 6 months notice. each Executive Director are shown in prior to the introduction of EVC. Whilst the table on page 68. 6. External Appointments the income generation targets were for Executive Directors 2. Annual Bonus exceeded, the Remuneration Committee The Board recognises that Executive A maximum total annual bonus of 30% decided to exercise its available discretion Directors may be invited to become Non- (40% for the Chief Executive) of basic described under 2 (left), and chose Executive Directors of other companies salary may be awarded subject to the to reduce the corporate bonus from unconnected with BW’s activities and that achievement of Corporate performance that which could have been awarded, such appointments can broaden their targets measured by Economic Value due to less than acceptable customer knowledge and experience to the benefit Created (EVC) and personal performance satisfaction performance. of BW. On the basis that it does not impact measured against the achievement of 2.2 Personal Performance Element upon their executive duties Directors are individual targets. Fundamental measures Of the total bonus potential, up to 12.5% generally allowed to accept one such of safety and customer satisfaction are (20% for the Chief Executive) of basic appointment and retain any resulting fee. in place and have to be satisfactorily salary may be awarded for the achievement In addition Executive Directors may also achieved before consideration is given of a range of stretching targets set to serve as Non-Executive Directors of joint to any bonus payment. The Remuneration encourage each Director to achieve venture companies. In such circumstances Committee requires internal audit and performance levels over and above the fees are not payable to Executive Directors external verification of these non-financial normal expectations of their role. Targets as activities of this nature are part of the measures. The Remuneration Committee are directly linked to the achievement normal responsibilities of the Directors. reserves total discretion to award or of key strategic business activities. The disclosable external interests of withhold bonus payments taking account Executive Directors are set out in Note of any mitigating factors. 3. Benefits 23 to the accounts on page 96. The Executive Directors are entitled to This level of potential total annual bonus a company car, health insurance and was recommended by the Remuneration critical illness insurance. Details of the Committee to reflect in part the absence levels of taxable benefit are shown in of Long-Term Incentive Plan arrangements the table on page 68. that normally exist in the private sector. Bonus payments are normally made on 4. Pensions 1 June each year. Total bonus payments All Executive Directors participate in the for each Executive Director are shown BW (1990) Pension Fund, which provides in the table on page 68 and reflect a pension on a defined benefit basis and performance in the 2003/04 financial based on basic salary. Executive Directors year. Bonus payments for 2004/05 will are required to retire at age 60 rather be paid on 1 June 2005 and reported than 65 as is normal in BW and are in the 2005/06 accounts. compensated for this by the purchase on their behalf by BW of 5 years pension service. Where death in service benefit for an Executive Director is limited by

ANNUAL REPORT & ACCOUNTS 67 DIRECTORS’ REMUNERATION REPORT

Summary of Directors’ Remuneration 2004/05 The information provided below in respect of the BW Board complies with the provisions of Schedule 7A of the Companies Act 1985, as required by the Accounts Direction of the Secretary of State. In addition, and with their agreement, BW has chosen to include information on the remuneration of the Executive Directors.

Taxable 2004/05 2003/04 Date of expiry of Fees Benefits Total Total BW Board current term £ £ ££ Dr George Greener, Chairman 9/7/05 69,542 851 70,393 70,198 Sir Peter Soulsby, Vice Chairman (to 24/6/04) - 3,325 - 3,325 14,332 Campbell Christie, Vice Chairman 30/6/07 13,513 - 13,513 10,866 Susan Achmatowicz 9/10/07 10,894 - 10,894 10,866 Richard Bowker (from 1/9/04) 31/8/07 6,386 - 6,386 - Ian Darling 3/9/06 10,894 - 10,894 10,866 George Fleming 9/10/07 10,894 - 10,894 10,866 Helen Gordon 3/9/06 10,894 - 10,894 10,866 Derek Langslow 3/9/06 10,894 - 10,894 10,866 Janet Lewis-Jones (to 9/10/04) - 5,681 - 5,681 10,866 Adeeba Malik (to 9/10/04) - 5,681 - 5,681 10,866 Terry Tricker 9/10/07 10,894 - 10,894 10,866 169,492 851 170,343 182,324

Taxable 2004/05 Taxable Termination 2003/04 Salary Bonus benefits Total Salary Bonus benefits payments Total ££££ ££ £ £ £ Executive Directors Robin Evans, Chief Executive 171,875 42,900 11,887 226,662 164,336 33,180 9,259 - 206,775 James Froomberg (from 24 March 2003 ) 135,417 26,000 13,534 174,951 130,179 - 8,052 - 138,231 Nigel Johnson 125,000 26,400 11,264 162,664 117,676 25,200 12,050 - 154,926 Vincent Moran 109,375 25,725 9,214 144,314 102,167 20,250 7,731 - 130,148 Simon Salem 102,917 19,000 11,530 133,447 93,833 16,720 10,142 - 120,695 William Schlegel (to 30 September 2003) - - - - 47,563 14,250 7,023 94,642 163,478 Stewart Sim 123,917 26,620 9,666 160,203 120,333 22,250 10,463 - 153,046 Mark Smith 135,126 27,500 7,369 169,995 124,407 27,500 9,379 - 161,286 Mark Bensted 86,793 17,000 13,318 117,111 78,897 10,800 10,966 - 100,663 Derek Cochrane 98,460 19,800 8,879 127,139 88,293 11,850 7,511 - 107,654 John Lancaster 98,460 19,800 9,208 127,468 87,543 9,685 7,914 - 105,142 Jim Stirling 88,460 16,000 8,680 113,140 79,293 9,000 7,482 - 95,775 1,275,800 266,745 114,549 1,657,094 1,234,520 200,685 107,972 94,642 1,637,819

68 ANNUAL REPORT & ACCOUNTS Accrued Pension Increase in 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 2005 31 March 2005 year year 2005 2004 contributions £pa £ £ £pa £ £ £ BW Board Member Dr George Greener 6,428 - 1,224 - 120,500 91,500 25,177

Executive Directors Robin Evans 32,098 - 4,454 - 350,783 279,047 62,174 James Froomberg 6,800 - 3,500 - 67,650 30,843 17,112 Nigel Johnson 12,971 - 3,400 - 138,433 95,214 36,329 Vincent Moran 16,683 - 3,317 - 165,152 124,287 34,865 Simon Salem 38,799 7,492 5,508 576 368,165 296,853 65,680 Stewart Sim 71,701 40,272 5,600 947 1,323,255 1,137,122 179,304 Mark Smith 11,242 - 3,592 - 96,711 61,814 27,437 Mark Bensted 36,617 24,374 5,196 1,874 344,278 278,157 61,416 Derek Cochrane 47,638 35,874 7,529 3,038 662,015 518,013 138,632 John Lancaster 17,667 - 6,198 - 306,722 184,974 116,378 Jim Stirling 18,139 - 3,942 - 218,602 158,410 55,392

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 2005 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. 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. The figures shown for the transfer values as at 31 March 2004 for Simon Salem and Stewart Sim have been restated to allow for a minimum pension age of 60 in respect of all service and, in the case of Simon Salem, to allow for an additional period of 120 days pensionable service.

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

ANNUAL REPORT & ACCOUNTS 69 INDEPENDENT AUDITORS’ REPORT TO THE SECRETARY OF STATE FOR ENVIRONMENT, FOOD AND RURAL AFFAIRS

We have audited the financial statements Respective responsibilities of Board We report to you our opinion as to which comprise the profit and loss Members and auditors whether the financial statements give account, the balance sheet, the cash The Board Members’ responsibilities a true and fair view and are properly flow statement, the statement of total for preparing the annual report and the prepared in accordance with the provisions recognised gains and losses and the financial statements in accordance with of the Transport Act 1962 and any related Notes (Notes 1 to 24) which applicable United Kingdom law and directions issued by the Secretary of have been prepared under the historical accounting standards are set out in State for Environment, Food and Rural cost convention (as modified by the the statement of Board Members’ Affairs. We also report to you if, in our revaluation of certain fixed assets) responsibilities. opinion, the Board Members’ report is and the accounting policies set out not consistent with the financial statements, Our responsibility is to audit the financial in the statement of accounting policies. if British Waterways has not kept proper statements in accordance with relevant accounting records, if we have not legal and regulatory requirements and received all the information and United Kingdom Auditing Standards explanations we require for our audit, issued by the Auditing Practices Board. or if information specified by law This report, including the opinion, has regarding Board Members’ remuneration been prepared for and only for the and transactions is not disclosed. Secretary of State for Environment, Food and Rural Affairs and British We read the other information contained Waterways Board’s Members as a body in the annual report and consider the in accordance with the provisions of the implications for our report if we become Transport Act 1962 and for no other aware of any apparent misstatements purpose. We do not, in giving this opinion, or material inconsistencies with the accept or assume responsibility for any financial statements. The other information other purpose or to any other person to comprises only the Board Members’ whom this report is shown or into whose Report, the Directors’ Remuneration hands it may come save where expressly Report, the Chairman’s Statement, the agreed by our prior consent in writing. Operating and Financial Review and the Corporate Governance Statement.

70 ANNUAL REPORT & ACCOUNTS Basis of audit opinion Opinion We conducted our audit in accordance In our opinion: with auditing standards issued by the • The financial statements give a true Auditing Practices Board. An audit and fair view of the state of affairs of includes examination, on a test basis, British Waterways and the group at of evidence relevant to the amounts and 31 March 2005 and of the loss and disclosures in the financial statements. cash flows of the group for the year It also includes an assessment of the then ended and have been properly significant estimates and judgements prepared in accordance with the made by the Board Members in the directions of the Secretary of State preparation of the financial statements, for Environment, Food and Rural Affairs; and of whether the accounting policies are appropriate to British Waterways’ • In all material respects, the circumstances, consistently applied expenditure and income have been and adequately disclosed. applied to the purposes intended by Parliament and the financial We planned and performed our audit transactions conform to the so as to obtain all the information and authorities which govern them. explanations which we considered necessary in order to provide us with PricewaterhouseCoopers LLP sufficient evidence to give reasonable Chartered Accountants and Registered assurance that the financial statements Auditors are free from material misstatement, whether caused by fraud or other London irregularity or error, and in all material June 2005 respects, the expenditure and income have been applied to the purposes intended by Parliament and the financial transactions conform to the authorities that govern them. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.

ANNUAL REPORT & ACCOUNTS 71 Consolidated Profit and Loss Account for the year to 31 March 2005

Total

Note 2004/05 2003/04 £000 £000 Group turnover including joint ventures 110,098 102,926 Less: joint ventures (4,411) (319) Turnover 105,687 102,607 Government grant 373,37294,770 Total revenue 2179,059197,377 Major repairs and renovations (37,614) (65,613) Staff costs (56,674) (60,702) Other operating charges (85,614) (69,032) Depreciation (4,874) (6,071) Own work capitalised or charged to major works 551 263 Total expenditure 2 (184,225) (201,155) Operating loss 4(5,166)(3,778) Share of operating profits and losses of associates and joint ventures 1,088 (946) Profit on sale of investment properties 14,790 7, 5 70 Exceptional costs of business reorganisation - (5,402) Profit/(loss) for the financial year before interest 10,712 (2,556) Interest receivable 2,836 5,269 Interest payable 5(5,859)(4,532) Profit/(loss) for the financial year before taxation 7,689 (1,819) Taxation 6(3,502) 346 Profit/(loss) for the financial year after taxation 4,187 (1,473) Transfer to realised capital reserve 17 (5,970) (3,352) Loss transferred to reserves 18 (1,783) (4,825)

Statement of Consolidated Total Recognised Gains & Losses

Note 2004/05 2003/04 £000 £000 Profit/(loss) for the financial year after taxation 4,187 (1,473) Net increase in revaluation reserve resulting from transfers between investment and operational properties - 22,907 Unrealised surplus on revaluation of investment properties 17 56,769 24,552 Corporation tax charge on capital gains 6(6,808)(1,182) Total gains recognised since last Annual Report 54,148 44,804

Note of Consolidated Historical Cost Profits & Losses

Note 2004/05 2003/04 £000 £000 Profit/(loss) for the financial year after taxation 4,187 (1,473) Realisation of property revaluation gains of previous years 17 25,521 7, 6 0 1 Corporation tax charge on capital gains 6(6,808)(1,182) Historical cost profit for the financial year 22,900 4,946

72 ANNUAL REPORT & ACCOUNTS Balance Sheets as at 31 March 2005

Group BW Note 2005 2004 2005 2004 £000 £000 £000 £000 Restated Restated Fixed assets Intangible assets - Goodwill 3,109 3,109 - - Tangible assets 9 516,565 489,606 514,341 488,404 Investments in joint ventures: Share of gross assets 11,731 3,389 Share of gross liabilities (8,575) (671) Goodwill - (87) 3,156 2,631 - - Investments in associates 7,75 4 6,627 - - Other investments 148 148 30,509 21,176 Total investments 10 11,058 9,406 30,509 21,176 530,732 502,121 544,850 509,580 Current assets Stocks 11 2,074 939 770 449 Debtors Trade debtors 15,155 13,504 14,380 13,203 Other debtors 12 19,354 25,812 19,289 25,435 Prepayments and accrued income 20,773 18,490 20,532 18,315 55,282 57,806 54,201 56,953 Cash at bank and in hand 13 24,882 21,116 22,636 20,333 82,238 79,861 77,607 77,735 Less: Creditors: Amounts falling due within one year 14a 72,523 73,185 79,178 77,995 Net current assets 9,715 6,676 (1,571) (260) Total assets less current liabilities 540,447 508,797 543,279 509,320

Creditors: Amounts falling due after more than one year 14b (45,658) (66,349) (45,658) (66,260) Provisions for liabilities and charges 15 (10,276) (10,359) (10,835) (10,359) Deferred capital grant 16 (11,620) (13,344) (11,620) (13,344) 472,893 418,745 475,166 419,357 Financed by Reserves Investment property revaluation reserve 17 290,593 259,345 290,568 259,339 Realised capital reserve 17 162,425 137,742 162,425 13 7,74 2 Unrealised capital reserve 17 4,121 4,100 4,100 4,100 Capital contribution 17 4,050 3,450 4,050 3,450 Other reserves 17 - 21 - - Profit and loss account 18 (2,432) (649) (113) (10) 458,757 404,009 461,030 404,621 Debt Due to National Loans Fund 20 14,136 14,736 14,136 14,736 472,893 418,745 475,166 419,357

Dr G.P. Greener R Evans Chairman Chief Executive 20 June 2005

ANNUAL REPORT & ACCOUNTS 73 1. Accumsan et iusto odio dignissim qui epist blandit praesent luptatum zzril Consolidated Cash Flow Statementdelenit augue duis year dolore teto feugait 31 nulla March facilisi. Lorem 2005 ipsum dolor sit amet. Reconciliation of operating loss to net cash inflow2. fromConsectetuer operating ametactivities adipiscing elit, sed diam nonummy nibh euismod tincidunt

2004/05 2003/04 £000 £000 £000 £000 Operating loss (5,166) (3,778) Business re-organisation costs - (5,402) (5,166) (9,180) Items not involving the flow of cash: Depreciation 4,874 6,071 Loss on sale of operational fixed assets 793 32 Write down in value of fixed assets 91 463 Release of deferred capital grant (1,724) (1,480) 4,034 5,086 (1,132) (4,094) Decrease/(increase) in stocks (1,135) 109 Decrease in debtors 3,623 8,627 (Decrease)/increase in creditors (7,816) 28,814 (5,328) 37,550 Decrease in provisions (1,500) (1,896) Net cash (outflow)/inflow from operating activities (7,960) 31,560

Cash flow statement 2004/05 2003/04 Note £000 £000 £000 £000 Net cash inflow/(outflow) from operating activities (7,960) 31,560 Returns from servicing of finance Interest received 3,376 3,564 Interest paid (1,589) (3,452) Net cash inflow from servicing of finance 1,787 112

Taxation (3,156) - Capital expenditure and financial investment Payments to acquire fixed assets (32,795) (49,687) Receipts from sale of fixed assets 46,048 19,711 Net cash inflow/(outflow) from capital expenditure and financial investment 13,253 (29,976) Acquisitions Investments in joint ventures and associated undertakings (158) (405) Purchase of subsidiaries - (3,567) Net cash outflow from acquisitions (158) (3,972) Net cash inflow/(outflow) before financing 3,766 (2,276) Financing Capital grant in respect of fixed assets 16 - 700 Capital contribution from Defra 600 - Repayment of loans to National Loans Fund 20 (600) - Net cash inflow from financing - 700 Increase/(decrease) in cash in the period 3,766 (1,576)

Reconciliation of net cash flow to movement in net funds 2004/05 2003/04 Note £000 £000 £000 £000 Increase/(decrease) in cash in the period 3,766 (1,576) Repayment of loans to National Loans Fund 600 - Change in net debt from cash flows during period 4,366 (1,576) Net funds at 1 April 6,380 7,956 Net funds at 31 March 13 10,746 6,380

74 ANNUAL REPORT & ACCOUNTS NOTES TO THE ACCOUNTS

1. Accounting Policies A summary of the principal accounting A joint venture is an entity in which BW Tangible Fixed Assets policies, all of which have been applied has a long-term interest and is jointly (a) Operational Assets consistently throughout the year and the controlled by BW and one or more other Waterways, reservoirs and towing preceding year, is set out below. venturers under a contractual arrangement. paths were written off in the capital The accounts include the relevant Basis of Accounting reconstruction on 1 January 1969 percentage of all joint ventures’ turnover resulting from the Transport Act 1968. Under Section 24(1)(b) of the Transport and operating profit/loss on the face of Act 1962, BW is required to prepare an the profit and loss account and the share Land, buildings, and structures annual Statement of Accounts in such of gross assets and gross liabilities on the capitalised are: form and containing such particulars as face of the balance sheet. The notes to the Secretary of State for Environment, (i) Purchases of land and the the accounts disclose the names of joint Food and Rural Affairs may, with the construction and major improvement ventures, the nature of the business and approval of H.M. Treasury, from time of buildings. details of the shares held by BW. to time direct. A copy of the Accounts (ii) Additional assets and improvements Direction at present in force is set out An associate is an entity (other than to existing assets of BW, provided on pages 98 to 99. a subsidiary) in which BW has a the financial return meets the participating interest and over whose Accounting conventions commercial viability criteria laid down operating and financial policies BW The accounts are prepared in accordance by BW. exercises a significant influence. The with the historical cost convention modified accounts include the relevant percentage All other expenditure on by the revaluation of investment properties of all associates’ operating profit/loss improvements, repairs and renewals and generally accepted accounting on the face of the profit and loss account, is charged to the profit and loss principles in the United Kingdom, with as well as the relevant percentage of any account as it arises. the following exception, required by the item below the operating profit line. The Accounts Direction: (b) Craft, Plant and Equipment interest in the associates’ net assets is All expenditure on additions, In the balance sheet, National Loans shown on the face of the balance sheet. improvements and replacements Fund loans from the Secretary of State Intangible Fixed Assets is capitalised. are grouped with capital and reserves, Goodwill related to joint ventures and rather than as creditors falling due after (c) Gross Book Value associated undertakings is included more than one year. The gross book value of fixed assets in the carrying value of the investment. other than investment properties is Consolidation An impairment review of goodwill is shown at the valuation at 1 January The BW Group comprises the British carried out annually by Directors, and 1969 or at subsequent cost. Waterways Board (BW) and their any amortisation charged to the profit subsidiaries incorporated to act solely and loss account. Tangible fixed assets are stated at cost on behalf of, and for the benefit of, BW. or valuation, net of depreciation and The acquisition method of accounting any provision for permanent diminution has been adopted. Under this method, in value. Depreciation is provided on the results of subsidiaries acquired in all tangible fixed assets, other than the year are included in the consolidated investment properties and freehold land, profit and loss account from the date at rates calculated to write off the cost of acquisition. or valuation, less estimated residual value (if any), of each asset on a straight-line basis over its expected useful life, as follows: Freehold buildings 40 years Leasehold land Over the term and buildings of the lease Plant, machinery Between 5 and structures and 25 years Vehicles 5 years

ANNUAL REPORT & ACCOUNTS 75 Notes to the Accounts

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

76 ANNUAL REPORT & ACCOUNTS Deferred tax is not recognised when fixed Provisions for an unfunded pension assets are revalued unless by the balance entitlement for the Chairman and to cover sheet date there is a binding agreement the present value of the future costs of to sell the revalued assets and the gain reduced cost travel benefits are included or loss expected to arise on sale has in the balance sheet. These provisions been recognised in the financial statements. for unfunded arrangements have been Neither is deferred tax recognised when calculated in accordance with FRS17 fixed assets are sold and it is more likely based on the assumptions set out in than not that the taxable gain will be Note 8 to these accounts. rolled over, being charged to tax only if Finance Costs and when the replacement assets are sold. Finance costs of debt are recognised in Deferred tax is measured at the average the profit and loss account over the term tax rates that are expected to apply in the of such loans at a constant rate on the periods in which the timing differences carrying amount. are expected to reverse, based on tax Deferred Income rates and laws that have been enacted BW has received cash dowries to take or substantively enacted by the balance on the asset maintenance and operational sheet date. Deferred tax is measured obligations of other public sector on a non-discounted basis. organisations. Each dowry is accounted Pensions for as deferred income and released BW operates a single funded defined to the profit and loss account in line benefit scheme for all employees. with the net operating expenditure. Pension costs are charged to the profit Segmental Disclosure and loss account so as to spread the For the purpose of Statement of Standard cost over the employees’ working lives Accounting Practice No. 25, BW is, in the with BW. The regular cost is attributed opinion of its Board Members, engaged to individual years using the projected in one class of business. unit method. Variations in pension costs which are identified as a result of actuarial valuations, are amortised over the average expected remaining working lives of employees in proportion to their expected payroll costs. Differences between the amounts funded and the 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. BW has adopted the transitional arrangements for pension cost disclosure detailed in FRS17 and has therefore included the new disclosures within the notes to the accounts.

ANNUAL REPORT & ACCOUNTS 77 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 Revenue Costs before tax reserves 31 March 2004/05 £000 £000 £000 £000 £000 British Waterways Board 172,199 176,313 9,936 (9) 475,813 Leisure subsidiaries 5,230 6,523 (1,291) (1,293) (2,822) Property subsidiaries 895 710 235 164 2,835 Other subsidiaries 735 679 57 48 48 Joint venture undertakings - - 598 598 (1,192) Associated undertakings - - (1,846) (1,291) (1,789) 179,059 184,225 7,689 (1,783) 472,893

2003/04 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 Figures are reported after incorporating Group consolidation adjustments

b) Analysis of BW direct income and expenditure (excludes group undertakings and consolidation adjustments) Not fully Multiple use Leisure use navigable waterways waterways waterways Total 2004/05 2003/04 2004/05 2003/04 2004/05 2003/04 2004/05 2003/04 £000 £000 £000 £000 £000 £000 £000 £000 Income from property Rents from investment properties 6,775 5,669 16,027 14,351 396 1,346 23,198 21,366 Rents from leisure properties 395 335 2,618 2,273 235 61 3,248 2,669 Other rents, wayleaves, licences and easements 5,440 6,330 21,302 21,077 1,614 1,176 28,356 28,583 12,610 12,334 39,947 37,701 2,245 2,583 54,802 52,618 Income from leisure uses Craft licences and moorings 1,902 2,177 12,513 11,563 392 522 14,807 14,262 Retail 162 417 2,565 3,912 - 121 2,727 4,450 Angling 38 58 481 364 5 27 524 449 2,102 2,652 15,559 15,839 397 670 18,058 19,161 Income from commercial uses Water charges 1,443 1,454 2,052 2,033 406 223 3,901 3,710 Tolls and dues 495 135 107 606 - - 602 741 1,938 1,589 2,159 2,639 406 223 4,503 4,451 Income from other uses Contributions to non-statutory works 2,416 2,026 13,891 11,500 709 777 17,016 14,303 Other income 148 1,259 986 4,708 37 268 1,171 6,235 Maintenance agreements 1,044 279 2,165 3,740 150 107 3,359 4,126 3,608 3,564 17,042 19,948 896 1,152 21,546 24,664

Total direct income 20,258 20,139 74,707 76,127 3,944 4,628 98,909 100,894 Government grant 73,372 94,770 Total revenue 172,281 195,664

78 ANNUAL REPORT & ACCOUNTS Not fully Multiple use Leisure use navigable waterways waterways waterways Total 2004/05 2003/04 2004/05 2003/04 2004/05 2003/04 2004/05 2003/04 £000 £000 £000 £000 £000 £000 £000 £000 Expenditure Major repairs and renovations 8,439 11,930 28,459 51,559 716 2,124 37,614 65,613 Staff costs 10,365 11 , 8 79 43,811 45,192 2,216 2,901 56,392 59,972 Other operating charges 13,990 11,3 8 8 63,167 49,999 1,331 4,292 78,488 65,679 Depreciation 1,147 1,414 3,475 4,294 189 259 4,811 5,967 Own work capitalised or charged to major works (240) (49) (311) (201) - (13) (551) (263) Total expenditure 33,701 36,562 138,601 150,843 4,452 9,563 176,754 196,968 Waterway lengths* 358 miles 1,522 miles 124 miles 2,004 miles

* Waterway lengths have been updated from previous years using improved measurement technology

The following waterways have been categorised as multiple use waterways: Aire & Calder Navigation New Junction Canal Tees Navigation Caledonian Canal River Ouse South Yorkshire Navigation Crinan Canal River Trent Weaver Navigation Gloucester & Sharpness Canal 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 BWs’ obligations set out in the Transport Act 1968.

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 on a mileage basis.

ANNUAL REPORT & ACCOUNTS 79 Notes to the Accounts

3. Grants Receivable from Central Government 2004/05 2003/04 £000 £000 Grant receivable from Defra Grant received in year 59,090 76,590 Accrued grant at 1 April (4,800) - Accrued grant at 31 March 4,800 4,800 59,090 81,390 Allocated to deferred capital grant - (700) Deferred capital grant released to profit and loss account 1,648 1,434 60,738 82,124 Grant receivable from the Scottish Executive Grant received in year 12,977 14,534 Accrued grant at 1 April (2,417) (4,351) Accrued grant at 31 March 2,040 2,417 12,600 12,600 Deferred capital grant released to profit and loss account 34 46 12,634 12,646 Total revenue grant accrued during the year 73,372 94,770 Grant received on 1 April, for expenditure incurred but not paid before 31 March, is accrued in these accounts. Government Resource Accounting Budget During the year limits set by Defra and the Scottish Executive for resource Departmental Expenditure Limit (DEL) and capital DEL, as defined by the government’s Resource Accounting Manual and set out in BW’s Financial Memorandum, have not been exceeded. 4. Consolidated Operating Loss 2004/05 2003/04 £000 £000 This is stated after charging: Depreciation of tangible fixed assets 4,874 6,071 Loss on sale of operational fixed assets 793 32 Rents on leased properties 2,504 1,531 Auditors’ remuneration - audit services* 172 187 - non-audit services 43 22 Board Members’ emoluments (Note 7) 171 183 Inland Waterways Amenity Advisory Council expenses 156 16 8

* The audit fee for BW was £119,000 (2004: £169,000)

5. Consolidated Interest Payable 2004/05 2003/04 £000 £000 Interest payable on sums wholly repayable within five years: Interest on loans from Defra under Section 19 of the Transport Act 1962 1,129 1,082 Unwinding of discount 2,188 1,925 Other short-term interest 2,027 919 5,344 3,926 Interest payable on all other loans: Interest on loans from Defra under Section 19 of the Transport Act 1962 515 606 Total interest payable 5,859 4,532

80 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: 2004/05 2003/04 £000 £000 Current tax UK Corporation tax on profits for the period 634 1,238 Adjustments in respect of prior years 324 (435) Overseas tax 8 - Group current tax 966 803 Share of joint ventures’ and associates’ current tax, including adjustments in respect of prior years (23) (195) Total current tax 943 608

Deferred tax Origination and reversal of timing differences 2,561 (1,588) Adjustments in respect of prior years 528 634 Group deferred tax 3,089 (954) Share of joint ventures’ and associates’ deferred tax, including adjustments in respect of prior years (530) - Total deferred tax 2,559 (954) Taxation charged/(credited) on profit/(loss) for the financial year 3,502 (346) b) Charged/(credited) to reserves: 2004/05 2003/04 £000 £000 Provision required for capital gains in the current year 6,648 1,788 Adjustments in respect of prior years 160 (606) Total current tax 6,808 1,182 c) Factors affecting current tax charge The current tax provision (credited)/charged to the profit and loss account for the current year is higher/(lower) than the standard rate of corporation tax in the UK (30%). The differences are explained below: 2004/05 2003/04 £000 £000 Loss for the financial year before taxation 7, 6 8 9 (1,819) Corporation taxation at 30% 2,307 (546) Effects of: Expenses not deductible for tax purposes/income not taxable 615 571 Accelerated capital allowances (517) (221) Other short term timing differences (1,769) 1,682 Losses (brought forward utilised)/arising in the year carried forward 252 127 Losses arising in the year not recognised 185 90 Indexation and base cost -(372) Adjustments relating to prior years 324 (435) Overseas tax rate (lower)/higher than UK rate (12) - Tax rate (lower)/higher than standard UK rate (1) - Associates and joint ventures prior year adjustments (25) (12) Capital loss on write off of investment (194) - Non taxable gain on disposal to partnership (222) (310) Appropriation of stock to investment property - 34 (1,364) 1,154 Total current tax 943 608

ANNUAL REPORT & ACCOUNTS 81 Notes to the Accounts

d) Deferred tax Recognised Not Recognised 2004/05 2003/04 2004/05 2003/04 £000 £000 £000 £000 Group Accelerated Capital Allowances 1,874 1,084 - - Short Term Timing Differences 1,527 (234) - - Losses (590) (1,133) - - Potential deferred tax liability/(asset) 2,811 (283) - - Rolled over gains 10,168 10,055

BW Accelerated Capital Allowances 1,772 1,085 - - Short Term Timing Differences 1,527 (234) - - Losses (590) (1,124) - - Potential deferred tax liability/(asset) 2,709 (273) - - Rolled over gains 10,168 10,055

In accordance with FRS 19 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 £86 million (£76 million for revalued properties, £10 million for rolled over gains). At present, it is not envisaged that any tax will become payable in the foreseeable future. 7. BW Board Members’ Emoluments Basic remuneration Benefits 2004/05 2003/04 Fees in kind Total Total £000 £000 £000 £000 Dr George Greener, Chairman 69 1 70 70 Sir Peter Soulsby, Vice Chairman (retired 24 June 2004) 3 - 3 14 Campbell Christie (Vice Chairman from 1 August 2004) 14 - 14 11 Richard Bowker (appointed 1 September 2004) 6 - 6 - Ian Darling 11 - 11 11 George Fleming 11 - 11 11 Helen Gordon 11 - 11 11 Derek Langslow 11 - 11 11 Janet Lewis-Jones (retired 9 October 2004) 6 - 6 11 Adeeba Malik (retired 9 October 2004) 6 - 6 11 Terry Tricker 11 - 11 11 Susan Achmatowicz 11 - 11 11 170 1 171 183

The Board Members’ appointment and remuneration is determined by the Secretary of State for Environment, Food and Rural Affairs. Dr George Greener has private medical insurance as a benefit-in-kind. No other 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 68 to 69. 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, Dr George Greener, had accrued entitlements under this defined benefit arrangement as follows: 2004/05 2003/04 £pa £pa Accrued pension at 1 April 2004 5,204 3,939 Indexed on accrued pension at 1 April 2004 161 111 Accrued pension during the year 1,063 1,154 Accrued pension at 31 March 2005 6,428 5,204 Transfer value of increase after indexation is £19,900. The Chairman contributed £3,823 to the scheme during the year. 82 ANNUAL REPORT & ACCOUNTS 8. Employee Costs a) The average number of persons (excluding Board Members) employed during the year was:

2004/05 2003/04 Number Number Total employed 1,935 2,255 Full-time equivalent 1,884 2,214 b) Total employment costs (excluding Board Members’ emoluments stated in Note 7 to these Accounts) were:

2004/05 2003/04 £000 £000 Wages and salaries 47,078 50,698 Social security costs 3,867 4,081 Pension costs 5,729 5,923 Total employment costs 56,674 60,702

There was a £6.0 million prepaid pension contribution at 31 March 2005 (2004: £nil). 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:

2004/05 2003/04 £ Number Number 50,000 - 60,000 32 40 60,001 - 70,000 20 17 70,001 - 80,000 9 6 80,001 - 90,000 - 2 90,001 - 100,000 3 2 100,001- 110,000 1 3 110,001- 120,000 2 - 120,001- 130,000 2 1 130,001- 140,000 1 3 140,001- 150,000 1 - 150,001- 160,000 - 2 160,001- 170,000 3 1 170,001 - 180,000 1 - 200,001- 210,000 - 1 220,001- 230,000 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 2004 using the following main financial assumptions: Rate of return on existing assets 6.0% Rate of return on future contributions 6.5% Rate of salary and wage increases 4.3% Rate of pension increases 2.75%

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 2004 amounted to £189.2 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 £231.2 million. The Scheme was therefore £42.0 million in deficit and 82% funded on an ongoing basis. On the solvency basis prescribed by the statutory Minimum Funding Requirement, the Scheme’s assets were 94% of accrued liabilities.

ANNUAL REPORT & ACCOUNTS 83 Notes to the accounts

Agreement has been reached by the Board, the Committee of Management and the Trustees on changes to ensure the continuation of a defined benefit pension scheme for BW employees. Under the agreement the employee contribution rate remains unchanged at 5.7% and pension rights for service up to 1 April 2005 are fully protected. The employer contribution rate was reviewed by the Scheme actuary as part of the valuation, and additional contributions will be paid to eliminate the deficit of £42.0m as at 31 March 2004 over a period of 15 years from 1 April 2005. Having paid contributions at the rate of 15% of pensionable earnings since 31 March 2004 the Board is to pay contributions from 1 April 2005 of 12% of pensionable earnings plus average additional contributions calculated to be broadly equivalent to just under a further 8% of current pensionable pay. The next full actuarial valuation will be carried out as at 31 March 2007 and the valuation report will be issued in March 2008. 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 2004 and updated to 31 March 2005 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 2005 2004 2003 Rate of inflation 2.75% 2.75% 2.5% Rate of increase in salaries 4.3% 4.3% 4.0% Rate of increase for pensions in payment and deferred pensions 2.75% 2.75% 2.5% Rate used to discount scheme liabilities 5.4% 5.5% 5.4%

The assets in the Scheme at 31 March 2005 and the expected future rates of return on them were:

31 March 2005 31 March 2004 31 March 2003 £ million £ million £ million Equities 115.5 8.0% 109.3 8.1% 99.4 7.5% Property 10.6 8.0% 8.9 8.1% 5.0 7.5% Bonds 79.2 4.8% 68.4 4.9% 46.5 5.0% Other assets 0.9 4.0% 0.3 4.0% 3.0 3.75% Total fair value of assets 206.2 186.9 153.9 Present value of scheme liabilities 272.2 242.5 221.7 Deficit in the scheme (66.0) (55.6) (67.8) Related deferred tax asset 19.8 16.7 20.3 Net pension liability (46.2) (38.9) (47.5)

If FRS17 had been adopted in the financial statements, the Group’s net assets and profit and loss reserve at 31 March 2005 would be as follows: 31 March 31 March 2005 2004 Net assets £million £million Net assets excluding pension liability 472.9 418.7 Pension liability (46.2) (38.9) Net assets including pension liability 426.7 379.8

31 March 31 March 2005 2004 Reserves £million £million Profit and Loss account reserve excluding pension liability (2.4) (0.6) Pension reserve (46.2) (38.9) Profit and loss account reserve (48.6) (39.5)

84 ANNUAL REPORT & ACCOUNTS If FRS17 had been adopted in the financial statements, the following amounts would have been recognised in the performance statements for the financial year to 31 March 2005:

31 March 31 March 2005 2004 Amounts charged to the profit and loss account £million £million Current service cost 8.0 7. 1 Past service costs 0.6 - Total charged to operating profit 8.6 7. 1

The amount charged/(credited) to other finance income Interest on scheme liabilities 13.4 12.0 Expected return on scheme assets (12.9) (10.2) Net charge to other finance income 0.5 1.8 Total charged to profit and loss account before deduction of tax 9.1 8.9

Amounts recognised in the Statement of Recognised Gains and Losses (STRGL) 31 March 31 March 2005 2004 £million £million Gain on assets 7. 5 22.8 Experience loss on liabilities (3.4) (1.6) Loss on change of assumptions (financial and demographic) (11.8) (6.1) Total (loss)/gain recognised in STRGL before adjustment of tax (7.7) 15.1

31 March 31 March 2005 2004 History of experience gains and losses £million £million Gain on scheme assets (amount) 7. 5 22.8 % of scheme assets at end of year 3.6% 12.2% Experience loss on scheme liabilities (amount) (3.4) (1.6) % of scheme liabilities at end of year 1.2% 0.7% Total actuarial (loss)/gain recognised in STRGL (amount) (7.7) 15.1 % of scheme liabilities at end of year 2.8% 6.2%

31 March 31 March 2005 2004 Movement in surplus/(deficit) in the Scheme during the year £million £million Deficit in the scheme at 1 April (55.6) (67.8) Contributions paid 6.4 6.0 Current service cost (8.0) (7.1) Past service cost (0.6) - Other finance charges (0.5) (1.8) Actuarial (loss)/gain (7.7) 15.1 Deficit in the scheme at 31 March before tax (66.0) (55.6)

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 85 Notes to the Accounts

9. Tangible Fixed Assets Group Freehold Land Leasehold Buildings and Structures Land and Buildings Craft, Plant Operational Investment Operational Investment and Equipment Total £000 £000 £000 £000 £000 £000 Cost or valuation At 1 April 2004 56,123 417,734 1,000 1,559 61,023 537,439 Transfers (1,771) (441) (204) 754 723 (939) Additions 936 5,502 - 59 4,185 10,682 Reduction in value - (11) - (80) - (91) Disposals (164) (32,351) - - (8,577) (41,092) Revaluation - 51,076 - 5,699 - 56,775 At 31 March 2005 55,124 441,509 796 7,991 57,354 562,774

Depreciation At 1 April 2004 14,479 - 150 - 33,204 47,833 Transfers (341) - (16) - (582) (939) Additions ------Provision for year 1,477 - 17 - 3,380 4,874 Disposals - - - - (5,559) (5,559) At 31 March 2005 15,615 - 151 - 30,443 46,209 Net book value: At 31 March 2005 39,509 441,509 645 7,991 26,911 516,565 At 31 March 2004 41,644 417,734 850 1,559 27,819 489,606

BW Freehold Land Leasehold Buildings and Structures Land and Buildings Craft, Plant Operational Investment Operational Investment and Equipment Total £000 £000 £000 £000 £000 £000 Cost or valuation At 1 April 2004 56,123 416,793 1,000 1,559 59,904 535,379 Transfers (1,771) (441) (204) 754 723 (939) Additions 936 5,502 - - 3,083 9,521 Reduction in value - (11) - (80) - (91) Disposals (164) (32,296) - - (8,528) (40,988) Revaluation - 51,051 - 5,699 - 56,750 At 31 March 2005 55,124 440,598 796 7,932 55,182 559,632

Depreciation At 1 April 2004 14,479 - 150 - 32,346 46,975 Transfers (341) - (16) - (582) (939) Provision for year 1,477 - 17 - 3,318 4,812 Disposals - - - - (5,557) (5,557) At 31 March 2005 15,615 - 151 - 29,525 45,291 Net book value: At 31 March 2005 39,509 440,598 645 7,932 25,657 514,341 At 31 March 2004 41,644 416,793 850 1,559 27,558 488,404

The value of fixed assets includes assets in the course of construction valued at £2.5 million (2004: £3.8 million).

86 ANNUAL REPORT & ACCOUNTS Group BW The surplus on revaluation at 31 March comprises: 2004/05 2003/04 2004/05 2003/04 £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 56,775 20,753 56,750 24,553 56,775 43,460 56,750 47,260

The net book value of investments properties at 31 March comprises: Cost 158,907 159,948 157,962 159,013 Revaluation surpluses 290,593 259,345 290,568 259,339 449,500 419,293 448,530 418,352

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 £449.5 million in these accounts. BW continues to reposition its property portfolio through disposals and re-investment. In the event that the investment properties were to be sold for their revalued amount, tax on such disposals would be approximately £76 million (2004: £70 million).

ANNUAL REPORT & ACCOUNTS 87 Notes to the Accounts

10. Fixed Assets Investments Group BW 2004/05 2003/04 2004/05 2003/04 £000 £000 £000 £000 Shares in group undertakings At 1 April - - 7, 9 8 8 1,316 Additions in year Joint ventures and associated undertakings - - 158 405 Subsidiary companies - - 4,601 6,267 Reduction in year - - (648) - At 31 March --12,099 7, 9 8 8

Loans to group undertakings At 1 April - - 13,040 5,903 Additions in year - - 5,486 7,142 Repayments in year - - (264) (5) At 31 March --18,262 13,040

Interests in joint ventures (see Note 10b below) Additions -net assets 3,156 2,718 - - -goodwill - (87) - - At 31 March 3,156 2,631 - -

Interests in associates (see Note 10b below) At 1 April -net assets 6,627 4,045 - - -goodwill - 549 - - 6,627 4,594 - -

Additions -net assets 1,127 2,582 - - Transfer to subsidiary undertakings - (549) - - At 31 March - net assets 7,75 4 6,627 - - - goodwill - - 7,75 4 6,627

Other investments At 1 April 148 148 148 148 At 31 March 148 148 148 148

Total fixed asset investments 11,058 9,406 30,509 21,176

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

88 ANNUAL REPORT & ACCOUNTS b) Investments in 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.

Issued Accounting Share Equity Period End Capital Interest Main Date £ Held Activity Joint Ventures ISIS Waterside Regeneration Ltd Partnership 31 December 2004 9,900 50% Property Watergrid Ltd 31 December 2004 648,000 45% Water Supply Waterside Pub Partnership LLP 31 December 2004 100,000 50% Leisure Associated Undertakings Nottingham Waterside Ltd 31 December 2004 1,000 49% Property Paddington Business Barges 31 December 2004 1,000 49% Office Development Waterwise UK Ltd 31 December 2004 1,000 49% Water Safety City Road Basin Ltd 31 December 2004 100 49% Property Edinburgh Quay Ltd 31 December 2004 100 49% Property

H2O Urban Ltd 31 December 2004 100 49% Property Euro-waterways Ltd 30 April 2004 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 2005 31 March 2004 31 March 2005 31 March 2004 £000 £000 £000 £000 Raw materials and consumables 203 195 203 195 Held for resale 1,871 744 567 254 2,074 939 770 449

12. Other Debtors

Group BW 31 March 2005 31 March 2004 31 March 2005 31 March 2004 Note £000 £000 £000 £000 Deferred consideration sale agreements 12a 10,995 10,993 10,995 10,993 Grant-in-aid 6,840 7,217 6,840 7, 217 Value added tax 47 5,580 34 5,575 Deferred tax asset 6d - 283 - 273 Others 12b 1,472 1,739 1,420 1,377 19,354 25,812 19,289 25,435

a) Deferred consideration sale agreements Of the deferred consideration sale agreements £nil (2004: £2.5 million) will fall due after more than one year. b) Other long term debtors Of the others, £115,000 (2004: £115,000) will fall due after more than one year.

ANNUAL REPORT & ACCOUNTS 89 Notes to the Accounts

13. Analysis of Net Funds

1 April Cash 31 March 2004 Flows 2005 Group £000 £000 £000 Cash at bank and in hand 21,116 3,766 24,882 Capital debt (Note 19) - due within one year (600) (2,984) (3,584) - due after one year (14,136) 3,584 (10,552) 6,380 4,366 10,746

1 April Cash 31 March 2004 Flows 2005 BW £000 £000 £000 Cash at bank and in hand 20,333 2,303 22,636 Capital debt (Note 19) - due within one year (600) (2,984) (3,584) - due after one year (14,136) 3,584 (10,552) 5,597 2,903 8,500

14. Creditors

a) Amounts falling due within one year

Group BW 31 March 2005 31 March 2004 31 March 2005 31March 2004 £000 £000 £000 £000 Restated Restated Trade creditors 9,845 5,955 9,162 5,907 Taxation and social security 2,393 1,601 2,286 1,587 Corporation tax 6,812 2,125 6,752 2,358 Amounts owed to group undertakings - - 4,264 3,061 Other creditors 13,833 16,683 14,114 16,511 Accruals 19,124 22,746 17,604 22,529 Deferred income (see Note 14c) 20,516 24,075 24,996 26,042 72,523 73,185 79,178 77,995

b) Amounts falling due after more than one year

Group BW 31 March 2005 31 March 2004 31 March 2005 31 March 2004 £000 £000 £000 £000 Restated Restated Deferred income (see Note 14c) 45,658 46,910 45,658 46,910 Other creditors - 19,439 - 19,350 45,658 66,349 45,658 66,260

Of the other creditors £nil (2004: £19.4 million) will fall due after more than one year.

2004 balances have been restated to include corporation tax as a creditor (previously included in provisions for liabilities and charges).

90 ANNUAL REPORT & ACCOUNTS c) Deferred income The balance on creditors 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 1st July 2003. Movements during the year were as follows: 2004/05 2003/04 £000 £000 Balance at 1 April 2004 Amounts falling due within one year 2,853 993 Amounts falling due after more than one year 46,910 16,871 49,763 17,8 64 Acquisition of Liverpool Docks - 32,486 Unwinding of discount 2,188 1,924 51,951 52,274 Payments (3,494) (2,511) Balance at 31 March 2005 48,457 49,763 Balance at 31 March 2005 analysed as follows: Amounts falling due within one year 2,806 2,853 Amounts falling due after more than one year 45,651 46,910 48,457 49,763

Other deferred income includes property rentals, craft licences and mooring that will be recognised in the following year and is analysed as follows:

2004/05 2003/04 £000 £000 Balance at 31 March 2005 Amounts falling due within one year 17,710 21,222 Amounts falling due after more than one year 7 - 17,717 21,222 Total deferred income at 31 March 2005 Amounts falling due within one year 20,516 24,075 Amounts falling due after more than one year 45,658 46,910 66,174 70,985

ANNUAL REPORT & ACCOUNTS 91 Notes to the Accounts

15. Provisions for Liabilities and Charges

Provision 1 Charged/ Provision 31 April 2004 On acquisitions Paid (released) March 2005 Group Note £000 £000 £000 £000 £000 Restated Deferred taxation 6d - 5 - 2,806 2,811 Chairman’s pension costs 15a 78 - - 23 101 Other post retirement benefits 15b 327 - (42) (9) 276 Business reorganisation 15c 4,616 - (4,616) - - Other provisions 15d 5,338 - (1,756) 3,506 7, 0 8 8 Group 10,359 5 (6,414)6,326 10,276

Provision 1 Charged/ Provision 31 April 2004 On acquisitions Paid (released) March 2005 BW Note £000 £000 £000 £000 £000 Restated Deferred taxation 6d - - - 2,709 2,709 Chairman’s pension costs 15a 78 - - 23 101 Other post retirement benefits 15b 327 - (42) (9) 276 Business reorganisation 15c 4,616 - (4,616) - - Other provisions 15d 5,338 - (1,750) 4,161 7,74 9 BW 10,359 - (6,408) 6,884 10,835

2004 balances have been restated to include corporation tax as a creditor (previously included in provisions for liabilities and charges). a) Chairman’s pension costs An unfunded pension entitlement has been arranged for the Chairman. The provision has been calculated using discount rates consistent with those required for pension liabilities under FRS17 as shown in Note 8 to these accounts. b) Other post retirement benefits Under the terms of the Transport Act 1962, 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 2 BW employees and 265 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 2005 by independent qualified actuaries using discount rates consistent with those required for pension liabilities under FRS17 as shown in Note 8 to these accounts. c) Business reorganisation The business reorganisation provision related principally to redundancy costs arising from the significant change in the organisation’s structure announced in May 2003, and was fully utilised during the year. d) Other provisions The other provisions relate principally to third party claims and a provision arising from leasehold properties previously occupied by BW.

92 ANNUAL REPORT & ACCOUNTS 16. Deferred Capital Grant

Group and BW 2004/05 2003/04 £000 £000 Balance at 1 April 13,344 14,130 Defra grant allocated to capital - 700 13,344 14,830 Released to profit and loss account Government grant (1,682) (1,480) Non government grants (42) (6) Balance at 31 March 11,620 13,344

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 2004 137,742 259,339 4,100 3,450 - Realisation of property revaluation gains of previous years 25,521 (25,521) - - - Corporation tax on capital gains of previous years (6,808) - - - - Unrealised surplus on revaluation of investment properties - 56,750 - - - Transfer of profit on sale of investment properties from profit and loss account 14,777 - - - - Transfer of other costs from profit and loss account (4,832) - - - - Corporation tax on capital gains in current year (993) - - - - Reduction in provision for deferred taxation on property gains (2,982) - - - - Repayment of Defra loan - - - 600 - Balance at 31 March 2005 162,425 290,568 4,100 4,050 -

Group share of reserves in associated undertakings Balance at 1 April 2004 - 6 - - 21 Unrealised surplus on revaluation of investment properties - 19 - - - Movement on other reserves - - 21 - (21) Balance at 31 March 2005 - 25 21 - -

Total Group 162,425 290,593 4,121 4,050 -

The realised capital reserve includes the value of profits arising from the sale of property and other property rights, net of corporation tax. The investment property revaluation reserve includes unrealised gains on property valuation. The unrealised capital reserve includes the excess of the fair value of assets acquired on acquisition of a business over the fair value of the consideration paid. Capital contributions are from Defra to enable BW to repay National Loans Fund loans maturing before 2013 as they mature (see Note 20).

ANNUAL REPORT & ACCOUNTS 93 Notes to the Accounts

18. Profit and Loss Account

Group BW 2004/05 2003/04 2004/05 2003/04 £000 £000 £000 £000 Balance at 1 April (649) 4,176 (10) 4,043 Loss transferred to reserves (1,783) (4,825) (103) (4,053) Balance at 31 March (2,432) (649) (113) (10)

19. Financial Instruments

FRS13, Derivatives and Other Financial Instruments, requires disclosure of the role that financial instruments have had during the period in creating or changing the risks an entity faces in undertaking its activities. Details of BW’s statutory and financial framework are set out on pages 58 and 59 and because of BW’s status as a public corporation, BW is not exposed to the degree of financial risk faced by business entities. Financial instruments play a much more limited role in creating or changing risk than would be typical of the listed companies to which FRS13 mainly applies. BW has limited powers to borrow or invest surplus funds and financial assets and liabilities are generated by day-to-day operational activities rather than being held to change by the risks facing BW in undertaking its activities. BW is not exposed to risks from currency fluctuations as business is conducted solely in sterling. Liquidity risk BW maintains short term liquidity by judicious management of its cash deposits. BW is not exposed to significant liquidity risk due to ongoing government funding and the ability to release cash as necessary from investment properties or borrow from the National Loans Fund. Interest rate risk The main risk arising from BW’s financial instruments is interest rate risk. With the exception of National Loans Fund (NLF) loans all financial instruments are subject to the prevailing UK floating rate of interest. Fair values BW’s financial instruments comprise borrowings, cash deposits, trade debtors, trade creditors and provisions that arise directly from operations. The fair value of debt to the National Loans Fund (see Note 20) at 31 March 2005 is £18 million, calculated using a discount factor of 3.5%. The book value of BW’s other financial instruments approximates to fair value because of their short-term maturity. 20. Amounts due to National Loans Fund Group and BW 31 March 31 March 2005 2004 £000 £000 Loans are repayable as follows: In one year or less 3,584 600 Between one and two years 2,688 3,584 Between two and five years 2,912 3,712 In more than five years 4,952 6,840 Total 14,136 14,736

94 ANNUAL REPORT & ACCOUNTS 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 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 1,000

2 Oct 2005 133/8 960 2 Apr 2009 101/4 896 2 Apr 2021 81/2 1,000

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

2 Apr 2007 133/4 1,344 2 Apr 2012 101/4 640

The government has decided to make capital contributions to BW to enable BW to repay those loans maturing before 2013 (£11.0 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 2005 2004 £000 £000 Amount of debt due to National Loans Fund 14,136 14,736 Bank overdraft facility 3,000 3,000 Borrowing authorised by Defra 17,136 17,73 6

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

Analysis of changes in financing during the year

2004/05 2003/04 Capital Debt £000 £000 At 1 April 14,736 14,73 6 Loans repaid (600) - At 31 March 14,136 14,736

21. Capital Commitments All capital commitments arise within BW. Capital expenditure for which BW had contracted at 31 March 2005 was £1,152,000 (2004: £2,232,000).

22. Operating Leases At 31 March 2005 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 2005 2004 2005 2004 Group £000 £000 £000 £000 Leases due to expire: Within one year 108 139 243 239 Within two to five years 623 778 1,127 1,158 In more than five years 1,418 815 245 52 2,149 1,732 1,615 1,449

BW Leases due to expire: Within one year 108 139 242 239 Within two to five years 623 669 1,124 1,158 In more than five years 1,418 815 245 52 2,149 1,623 1,611 1,449

ANNUAL REPORT & ACCOUNTS 95 Notes to the Accounts

23. 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.

Amount receivable/(payable) Amount receivable at during the year 31 March 2005 £000 £000 Transactions with the Millennium Link Trust, a charitable company limited by guarantee of which Jim Stirling (Scotland Director) is a Director. Rent receivable 80 - Rent payable (80) - Transactions with the Heritage Lottery Fund, a non-departmental public body of which Derek Langslow (Board Member) is a trustee Contribution to restoration works 94 182 BW entered into the following transactions with other bodies sponsored by the Department of Environment, Food and Rural Affairs Transactions with the Environment Agency Contributions to maintenance and the Boat Safety Scheme 218 170 Transactions with the Countryside Agency Contributions to BW costs of promoting the countryside 65 22 Waterscape Ltd our online travel and leisure website subsidiary entered into the following transactions with other bodies sponsored by the Department of Environment, Food and Rural Affairs Transactions with the Environment Agency Contributions towards costs of promoting the waterways on waterscape.com 18 - Transactions with the Broads Authority Contributions towards costs of promoting the waterways on waterscape.com 6 -

24. Contingent Liabilities Contingent liabilities arising from third party claims, valued at £450,000 (2003: £4,600,000), are not included in the balance sheet as it is not considered likely that the amounts will fall due for payment. BW’s accounts include a distribution of £1,423,000 from ISIS, the property joint venture partnership. Under the provisions of the ISIS Waterside Regeneration Ltd Partnership’s Development Partnership Agreement dated 18 July 2002, ISIS is required to make distributions on account of ultimate Partnership profits. During the year to 31 March 2005, ISIS made a profit of £1.4 million and as such distributed Partnership profits. However, at 31 March 2005, ISIS had a negative profit and loss reserve of £0.9 million arising from costs that will be allocated to development profits as each of the remaining 10 sites are sold. There is a risk that any over-distributions are reclaimable from the Partners. In the opinion of the Board Members, it is unlikely that any distributions made to date will prove to be over-distributions.

96 ANNUAL REPORT & ACCOUNTS Five Year Summaries

PROFIT AND LOSS ACCOUNT BW Group* BW Group BW Group BW BW 2004/05 2003/04 2002/03 2001/02 2000/01 £000 £000 £000 £000 £000 Direct income from: Property 55,698 53,057 49,873 40,040 36,391 Leisure uses 23,287 20,435 18,121 15,566 13,971 Commercial uses 4,503 4,451 4,449 4,889 6,089 Contributions to non-statutory works 17,017 14,303 27,866 43,019 66,645 Other income 1,823 6,235 7,422 6,418 5,087 Maintenance agreements 3,359 4,126 1,895 1,047 771 Direct income 105,687 102,607 109,626 110,979 128,954 Government grant 73,372 94,770 81,970 64,637 62,055 Total revenue 179,059 197,377 191,596 175,616 191,009

Operating loss (5,166) (3,778) (19,450) (9,938) (287) Share of operating profit and losses of associates and joint ventures 1,088 (946) 1,059 - - Profit on sale of investment properties 14,790 7,570 3,771 2,078 5,103 Profit on sale of other property rights - - - 45,882 - Exceptional costs of business reorganisation - (5,402) - - - Net interest (payable)/receivable (3,023) 737 (34) (1,472) (188) Profit/(loss) for the financial year before taxation 7, 6 89 (1,819) (14,654) 36,550 4,628 Taxation on profits (3,502) 346 4,362 (2,665) (73) Profit/(loss) for the financial year after taxation 4,187 (1,473) (10,292) 33,885 4,555 Transfers to realised capital reserve (5,970) (3,352) (8,775) (5,926) (5,030) Revenue (loss)/profit retained (1,783) (4,825) (19,067) 27,959 (475)

BALANCE SHEET Assets employed Fixed assets 530,732 502,121 396,599 362,716 351,555 Current assets 82,238 79,861 90,929 101,330 66,721 Creditors: Amounts falling due within one year 72,523 71,060 69,502 58,951 66,609 Net current assets 9,715 8,801 21,427 42,379 112

Total assets less current liabilities 540,447 510,922 418,026 405,095 351,667 Creditors: Amounts falling due after more than one year (45,658) (66,349) (16,949) (17,124) - Provisions for liabilities and charges (10,276) (12,484) (13,021) (12,452) (33,188) Deferred capital grant (11,620) (13,344) (14,130) (10,469) (7,251) 472,893 418,745 373,926 365,050 311,228 Financed By Reserves Reserves 458,757 404,009 359,190 348,714 294,492 Debt 14,136 14,736 14,736 16,336 16,736 472,893 418,745 373,926 365,050 311,228

INVESTMENT PROPERTIES Net book value of investment properties (£000) 449,500 419,293 217,599 292,900 293,158 Annual re-valuation of investment properties (£000) 56,775 43,460 25,224 15,752 18,239 Rental yield per accounts 6.3% 7.7% 6.3% 6.3% 6.8%

*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 97 ACCOUNTS DIRECTION

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

The Secretary of State for Environment, 2. The annual accounts referred to 3. The balance sheet shall be prepared Food and Rural Affairs in exercise of the above shall give a true and fair view under the historical cost convention powers conferred by section 24 of the of the profit or loss, state of affairs modified by the revaluation of Transport Act 1962 and of all other and cash flows of British investment properties. powers enabling her in that respect, and Waterways and its subsidiaries. 4. Clarification of the application of with the consent of the Treasury and in Subject to the foregoing the accounting and disclosure consultation with the Scottish Executive, requirements, without limiting the requirements of the Companies Act hereby makes the following direction. information given, and save as and accounting standards is given described in Schedule 1 to this 1. The annual accounts, which it is the in Schedule 1 to this Direction. The direction, the annual accounts shall duty of the British Waterways Board annual accounts shall include the also, where applicable, comply with: (hereinafter referred to as British information set out in Schedule 2 to Waterways) to prepare in respect of (a) the accounting and disclosure this direction. each accounting year until further requirements of companies 5. The Direction shall be reproduced notice, shall comprise in respect of legislation currently in force; British Waterways: as an annex to the annual accounts. (b) the accounts disclosure 6. The Direction issued on 27 January (a) in respect of the Board and its requirements of paragraph 43 2003 is hereby revoked. subsidiaries of Chapter 12 of the Financial Services Authority listing rules; (i) a Board Members’ report Dated May 2005 Signed by authority of the (c) the best commercial accounting (ii) a Consolidated Profit and Secretary of State practice as defined by UK Generally Loss Account Accepted Accounting Practice (UK J Roberts (iii) a Consolidated Statement of GAAP) and accounting standards A Senior Civil Servant in the Department Recognised Gains and Losses adopted or issued by the for Environment, Food and Rural Affairs. Accounting Standards Board; and (iv) a Consolidated Balance Sheet; and (d) any additional disclosure or Schedule 1 accounting requirements that the (v) a Consolidated Cash Flow In the balance sheet, loans from the Treasury may issue from time to Statement Secretary of State shall be grouped with time in respect of public corporations’ capital and reserves. Interest on these (b) in respect of the Board accounts. loans shall be separately disclosed in the (public corporation) profit and loss account. When preparing (i) a balance sheet; its balance sheet, British Waterways shall have regard to the balance sheet format including in each case such notes as may 1 prescribed in Schedule 4 to the be necessary for the purposes referred to Companies Act 1985. Items A to J in in paragraph 2, right. Format 1 shall be presented so as to show the total 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.

98 ANNUAL REPORT & ACCOUNTS Schedule 2 (I) The Board Members’ report shall: (d) indebtedness to the Secretary of (a) contain the information which the State (National Loans Fund) at the Companies Act 1985 requires to be year end including details of disclosed in the directors’ report, maturity dates, interest rates and where appropriate; information about the use of British Waterways’ borrowing powers. (b) state that the accounts have been prepared in a form notified by the (e) the Chairman’s and Board Members’ Secretary of State with the consent emoluments for the year provided of the Treasury in accordance with written consent has been obtained the relevant statute and to disclosure under the Data Protection Act 1998 and if consent (c) include a brief history and statutory to disclosure is withheld then a background of British Waterways. statement to that effect against the (II) The annual accounts, or the notes name of the individual (this consent thereto, shall disclose the turnover is not required where a requirement and other operating income, and other to disclose is a condition in the operating costs, each analysed employment contract); as follows: (f) staff costs for the year, excluding (a) British Waterways (public corporation) Non-Executive Board Members, to include an analysis of expenditure on: according to categories of staff; (i) multiple use waterways (g) a statement of the number of (ii) leisure waterways; and employees during the year, (iii) waterways not fully navigable excluding Board Members, whose emoluments excluding pension (b) British Waterways’ subsidiary contributions fell in each bracket companies of a scale in multiples of £10,000, (c) British Waterways’ share of joint starting at £50,000; ventures and associates (h) a statement that the resource (III) The annual accounts shall also Departmental Expenditure Limit disclose details of: (DEL), capital DEL and resource annually managed expenditure (a) rents receivable for the year showing budget limits set by the Department separately rents from investment and Scottish Ministers have not property and rents from other property; been exceeded. (b) interests during the year in other transport undertakings and other trade investments; (c) government grant received during the year reconciled to income from grant as shown in the profit and loss account;

ANNUAL REPORT & ACCOUNTS 99 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 In summary the policy statement: British Waterways will continue to receive accounting, employment, environmental, • sees the inland waterways as ‘an Scottish Executive grant to meet its planning and safety legislation that important asset for future generations statutory duties and help progress new affects any modern organisation, we are to enjoy’ initiatives, but are encouraged to develop specifically governed by the Transport • wants to see waterways ‘maintained new and existing earned income streams. Acts of 1962 and 1968 as well as many and developed in a sustainable way so In 2003 we produced the consultation of the original canal enabling Acts. that they fulfil their social, economic document, Waterways for Wales, at the and environmental potential’ Our sponsoring government departments request of the National Assembly for • wants to ensure that ‘the many are the Department for Environment, Wales. Waterways for Wales places inland benefits and opportunities they Food and Rural Affairs in England and waterways in a strategic context and sets provide are used to the full’ Wales and, in Scotland, the Enterprise, out the positive contribution they can Transport and Lifelong Learning (Waterways for Tomorrow, page16, make to the future of Wales. Department. We also liaise closely published 2000). We use all of these documents to guide with the Department for Economic It describes British Waterways as: us in our business planning. Development and Transport in Wales. A map of our waterway network can ‘A public corporation which runs its affairs The Future be found in the inside back cover of on a commercial basis consistent with Our continued aim is to remain an exemplar this document. its statutory powers and obligations for public body, delivering public benefit. navigation and the environment; and its Our relationship with governments We need to be less exposed to the objectives agreed by the government. The Westminster government has set uncertainty of government funding, and It is expected to promote the use of its out its objectives for us in the published will do this by operating more commercially. waterways for leisure and recreation, Framework Document for British Our aspiration is to be in a position where tourism, regeneration, and transport while Waterways (DETR, 1999). Our aims, as we are not financially obliged to accept also conserving their built and natural explained in the Framework Document, government funding over and above what heritage.’ can be summarised as follows: is in our contract. In 2002 the Scottish Executive published • maintain and develop Britain’s inland Our ultimate objective is to operate as Scotland’s Canals – An Asset for the waterways in a sustainable manner so a successful public interest company Future, the first ever policy document for that they fulfil their full economic, social enjoying a high degree of freedom Scotland’s canals. The Scottish Executive and environmental potential and reinvesting all net income into the believes that our canals are an asset that, • fulfil statutory navigation functions waterways on a not-for-dividend model. if used wisely, can enhance the future • conserve waterways heritage and quality of life in Scotland. We welcome the findings of Defra and environment for the future the Scottish Executive’s five yearly, End- • promote and enable rural and urban Their strategy to achieve this is based to-End, review of British Waterways which regeneration on four main principles: recognises the important contribution • maintain and enhance leisure, • increasing awareness of canals in thriving canals and rivers make to local recreation, tourism and educational general and encouraging more private communities, boaters and other waterway opportunities for the general public sector investment visitors and users, and supports our aim • facilitate waterway transport • encouraging all public bodies to become largely self-sufficient. • play a lead role in co-ordinating other sponsored by the Executive and local UK navigation authorities authorities to continue to work together The review, published in March 2005, • act commercially and support the sustainable development supported our vision for the waterways. and regeneration of canals and their It also endorsed the principles of funding Waterways for Tomorrow is the surrounding areas British Waterways on a long-term Westminster government’s policy • promoting voluntary sector and contractual basis, and greater commercial statement all for inland waterways in community involvement in canals, with freedoms with wider powers to invest England and Wales. particular regard to their educational near to waterways we do not manage. value and their positive impact on We will continue our discussions with quality of life Defra and and the Scottish Executive • promoting the need for other public in 2005/06 to progress these. policy decisions to take account of the sustainable development and regeneration aims for our canals

100 ANNUAL REPORT & ACCOUNTS Waterway Map ADDRESSES

British Waterways BRITISH WATERWAYS Willow Grange Church Road Watford WD17 4QA

T +44 1923 201120 Head Office Customer Service Centre F +44 1923 201400 Willow Grange, Church Road, Willow Grange, Church Road, E [email protected] Watford WD17 4QA Watford WD17 4QA www.britishwaterways.co.uk T: 01923 226422 T 01923 201120 Discover the best of the UK’s waterside & REPORT ANNUAL F 01923 201304 with Waterscape.com [email protected] ISBN 0 903218 48 8 This document is printed on Greencoat Velvet Plus and Cyclus Offset. Greencoat is 80% recycled, 20% pulp from sustainable sources and Design by 55 Design Ltd has been awarded the NAPM and Eugropa recycled marks. 2004 05 Printed by Greenshires Group Cyclus Offset is 100% de-inked post consumer recycled waste / and has been awarded the NAPM. The document has been printed July 2005 using soya based inks. ANNUAL REPORT & ACCOUNTS

BW Scotland Northern Waterways Southern Waterways ACCOUNTS 2004/05 Canal House, Middle Warehouse, Castle Quay, Canal Lane, Hatton, Applecross Street, Manchester M15 4NJ Warwick CV35 7JL Glasgow G4 9SP T 0161 838 5580 T 01926 626100 T 0141 332 6936 F 0161 838 5590 F 01926 626101 F 0141 331 1688 enquiries.scotland@ North West Waterways Central Shires Waterways britishwaterways.co.uk Trafalgar House, Temple Court, Peel’s Wharf, Lichfield Street, Birchwood, Warrington WA3 6GD Fazeley, Tamworth B78 3QZ BW London T 01925 847700 T 01827 252000 1 Sheldon Square, F 01925 847710 F 01827 288071 Paddington Central, enquiries.northwest@ enquiries.centralshires@ London W2 6TT britishwaterways.co.uk britishwaterways.co.uk T 020 7985 7200 F 020 7985 7201 Yorkshire Waterways South West Waterways enquiries.london@ Fearns Wharf, Neptune Street, Harbour House, West Quay, britishwaterways.co.uk Leeds LS9 8PB The Docks, Gloucester GL21 2LG T 0113 281 6800 T 01452 318000 F 0113 281 6886 F 01452 318076 enquiries.yorkshire@ enquiries.southwest@ britishwaterways.co.uk britishwaterways.co.uk

East Midlands Waterways South East Waterways The Kiln, Mather Road, Ground Floor, 500-600 Witan Gate, Newark NG24 1FB Milton Keynes MK9 1BW T 01636 704481 T 01908 302500 F 01636 705584 F 01908 302510 enquiries.eastmidlands@ enquiries.southeast@ britishwaterways.co.uk britishwaterways.co.uk

Wales & Border Counties Waterways West Midlands Waterways Navigation Road, Albert House, Quay Place, Northwich CW8 1BH 92-93 Edward Street, T 01606 723800 Birmingham B1 2RA F 01606 871471 T 0121 200 7400 [email protected] F 0121 200 7401 enquiries.westmidlands@ britishwaterways.co.uk

Back Cover: A family enjoy the rural Oxford Canal at Thrupp.