RNS Number:3035E
Mid Kent Water PLC
09 June 2006
Mid Kent Water Limited
Preliminary results
for the year to 31 March 2006
Chairman's Statement
Introduction
I am pleased to present the Report and Accounts for Mid Kent Water for the year
ending 31 March 2006, a year which has been dominated operationally by the
drought conditions currently affecting the South East of England. The period
since October 2004 has seen the lowest rainfall since 1932 with only 4 months
of average or above average rainfall. This lack of rainfall severely impacted
aquifer recharge through the 2004/05 winter period and meant that it was
appropriate for the Company to introduce hosepipe restrictions from August 2005.
A dry winter in 2005/06 further reduced aquifer and reservoir recharge. This
has meant that it remained prudent to keep these restrictions in place. In
addition, the Company submitted an application to the Department of the
Environment, Farming and Rural Affairs for a Non Essential Use Drought Order on
20 March 2006. This application was granted by the Secretary of State on 25 May
2006.
During this challenging period Mid Kent Water has focused on ensuring its
customers continued to receive the excellent service they expect from the
Company. In line with our Water Resource Plan, further reductions in leakage
totalling 0.9 Ml/d have been achieved in the last year, and the continued
timely delivery of capital schemes has ensured that Company's security of
supply index score has improved as planned from 99% to 100% this year.
Since November 2004, a dedicated drought team has been tasked with managing the
drought and has been focused on prioritising key capital schemes to improve
transfer and robustness of available supplies; refocusing operational
management for sources and supply zones; and communication with customers to
explain the current situation and to promote and assist the wiser use of water.
Certainly communication has proven to be a key component of the Company's
drought management overall, and we are in general very appreciative of the
response made by our customers.
I am pleased that overall levels of customer service have broadly been
maintained at, and in some cases improved on, the high levels seen last year
and I would like to take this opportunity to once more extend my thanks to all
the Company's employees for their continuing commitment to the Company and its
customers.
On 28 February 2005 Utilities Trust of Australia and Hastings Diversified
Utilities Fund purchased 100% of the share capital of Swan Group, Mid Kent
Water's holding company. Since that time our new owners have shown themselves
to be extremely supportive of the priorities for Mid Kent Water and its Board
and I look forward to continuing to work with them in the continued development
of the Mid Kent Water business.
Results
Turnover for the year was #48.1m, up by 11.1% on last year. Water income
increased by 13.7% compared to last year, largely reflecting an average water
service price rise of 12.45%. Non-regulated turnover was #0.4m lower than last
year at #4.2m.
Operating profit was #16.5m compared to #12.8m in the previous year although
the prior year figure has been re-stated from the previously reported figure of
#14m to reflect the impact of the new reporting standard FRS17 "Retirement
Benefits". The depreciation charge increased in the year by #0.8m reflecting
the Company's continued investment in its infrastructure but increases in other
Operating costs were limited to a net #0.3m.
Net interest payable has increased by #162,000 reflecting the increase in net
debt in the business necessary to support our Capital Expenditure to enhance
our infrastructure.
After profit on the disposal of fixed assets of #0.2m (2005: #0.2m), profit
before tax has increased to #9.1m from a restated figure of #5.2m in 2005.
Chairman's Statement
Dividend
The Company's Dividend policy is to pay out an appropriate proportion of its
profit after tax so as to provide a suitable return to its shareholders, whilst
ensuring that the Company is able to continue to finance its business and meet
the requirements of its license of appointment. The total dividend proposed
against the profits for the year was #5.5m compared to #4.8m in 2005.
With the adoption of FRS 21 "Events after the Balance Sheet Date", the accounts
reflect that where past years' final dividends were declared by the Directors
after the balance sheet dates, they have been accounted for in the financial
years in which they were declared (see note 11).
Capital Expenditure
Cash payments for capital expenditure in the year were #24.0m (2005: #24.6m).
Significant investment in the year was delivered in network improvements to
enhance the resilience and flexibility of the Company's infrastructure and to
maximize the deployable outputs of our water sources. With a potential drought
looming and the forecast growth in properties and demand in the South East, Mid
Kent Water's top priority has been to ensure it maximizes the water available
for its customers. As such, #13m has been invested on the network, including
laying 45 km of new mains to increase the water available (an increase in
excess of 50% over previous years) and replacing 24 km to target leakage
reduction (over twice the rate of previous years). The Company has invested
#6.3m in maintaining and refurbishing its operational assets to ensure that
maximum outputs are achievable, delivery is reliable and that its high level of
water quality is maintained.
Water Quality
The quality of water we deliver to our customers' taps is of fundamental
importance to the Company and I am pleased to report compliance with DWI
standards at 99.96% for 2005.
Non-Regulated Activity
This year has seen another good performance from the Company's non-regulated
commercial business with the contribution to operating profit increasing to
#1.1m (2005: #1.0m). This has been achieved despite this part of the business
being reorganized during the year to concentrate more acutely on utilising the
core skills inherent in our staff coupled with the Mid Kent Water brand. Key
revenue streams include water related consultancy services, environmental and
fishery management and the provision of water operational services to the
owners of private water infrastructure.
Corporate Social Responsibility
The community in which Mid Kent Water operates is vital to the Company and we
strive to ensure that all stakeholders are consulted and involved in our plans.
During the year we wrote to all domestic customers to explain how we are
responding to the current drought conditions and we also visited all local
councils to ensure they were fully briefed. We also support staff in a range of
charitable activities and in particular in fund-raising for Water Aid. This
year a staff member went with Water Aid to Burkina Faso to support the work of
the charity at first hand.
The Year Ahead
The Board believes the Company has responded in an effective and efficient
manner to the challenges posed by the current drought conditions and has
ensured that customers, stakeholders and Regulators are fully briefed on the
Company's plans and activities. During the year ahead we will continue to take
action in line with our published Water Resource and Drought plans whilst also
focusing on some of the other challenges posed by the PR04 determination. I
look forward to working with the staff, my fellow Directors and our owners in
ensuring that the Company efficiently continues to provide ongoing high quality
customer service.
Gordon Maxwell
7 June 2006
Profit and loss account
Year ended 31 March 2006
Notes 2006 2005
#000 (restated)
#000
2 Turnover 48,094 43,200
Operating costs (31,544) (30,424)
--------- ---------
Operating profit 16,550 12,776
Profit on sale of fixed assets 152 177
--------- ---------
Profit on ordinary activities before interest 16,702 12,953
Interest receivable and similar income 3,777 3,383
Interest payable and similar charges (11,534) (11,372)
Return on pension scheme assets 188 218
--------- ---------
3 Profit on ordinary activities before taxation 9,133 5,182
Tax (charge)/credit on profit on ordinary
activities (2,179) 2,447
--------- ---------
Profit on ordinary activities after taxation 6,954 7,629
--------- ---------
5 Earnings per ordinary share - basic and diluted 35.2p 40.8p
--------- ---------
4 Dividends per ordinary share 35.48p 23.98p
--------- ---------
All turnover and operating profit is derived from continuing operations.
Statement of recognised gains and losses
Year ended 31 March 2006
2006 2005
#000 (restated)
#000
Profit for the financial year 6,954 7,629
Pension schemes actuarial gain 2,481 2,678
--------- ---------
Total recognised gains and losses relating to the year 9,435 10,307
--------- ---------
Prior year adjustments:
FRS 17 - Retirement Benefits (2,243)
FRS 21 - Events after the Balance Sheet date 1,543
FRS 25 - Financial Instruments: Disclosure and
presentation 4,507
---------
Total gains and losses recognised since last annual
report 13,242
---------
Balance sheet
At 31 March 2006
2006 2005
#000 (restated)
#000
Fixed assets
Tangible assets 198,150 184,561
--------- ---------
Current assets
Stocks 636 798
Debtors: amounts falling due within one year 8,870 7,704
Debtors: amounts falling due after more than one year 37,873 35,000
Investments 15,312 12,024
Cash at bank and in hand 1,229 1,136
--------- ---------
Creditors: amounts falling due within one year 63,920 56,662
(22,484) (41,738)
--------- ---------
Net current assets 41,436 14,924
--------- ---------
Total assets less current liabilities 239,586 199,485
Creditors: amounts falling due after more than one
year (180,989) (142,434)
Provision for liabilities and charges (11,722) (9,473)
--------- ---------
Net assets excluding pension asset/liability 46,875 47,578
Pension asset/(liability) 875 (2,243)
--------- ---------
Net assets including pension asset/liability 47,750 45,335
--------- ---------
Capital and reserves
Called up ordinary share capital 19,781 19,781
Share premium 5,672 5,672
Profit and loss reserve 22,297 19,882
--------- ---------
Capital and reserves 47,750 45,335
--------- ---------
Cash flow statement
Year ended 31 March 2006
Notes 2006 2005
#000 #000
6 Net cash inflow from operating activities 24,352 22,079
7 Returns on investments and servicing of finance (6,220) (2,521)
Taxation and group relief - (4,048)
7 Net capital expenditure (21,734) (22,270)
Equity dividends paid (5,517) (4,507)
--------- ---------
Cash outflow before management of liquid resources
and financing (9,119) (11,267)
7 Management of liquid resources (3,288) (1,964)
7 Financing 12,500 13,237
--------- ---------
Increase in cash during the year 93 6
--------- ---------
NOTES
1 Basis of preparation
(i) The financial information included within this statement has been prepared
on the basis of accounting policies consistent with those set out in the Report
and Accounts for the year ended 31 March 2006.
(ii) The information shown for the years ended 31 March 2006 and 31 March 2005
does not constitute statutory accounts within the meaning of section 240 of the
Companies Act 1985 and has been extracted from the full accounts for the year
ended 31 March 2006. The reports of the auditors on those accounts were
unqualified and did not contain a statement under either Section 237(2) or
Section 237(3) of the Companies Act 1985. The accounts for the year ended
31 March 2006 will be delivered to the Registrar of Companies in due course.
(iii) The financial information included in this statement was approved by the
Board on 7 June 2006.
2 Analysis of turnover
2006 2005
#000 (restated)
#000
Unmeasured supplies 23,069 20,950
Measured supplies 20,858 17,691
Other activities 4,167 4,559
--------- ---------
48,094 43,200
--------- ---------
3 Corporation tax
2006 2005
#000 (restated)
#000
The tax charge is made up as follows:
Current tax
UK Corporation tax 146 300
Tax over provided in previous years (490) (300)
--------- ---------
Total current tax (344) -
--------- ---------
Deferred tax
Origination and reversal of timing differences
on fixed assets 2,666 (399)
Movement on pensions deferred asset 274 (2,110)
Decrease/(increase) in discount (417) 62
--------- ---------
Total deferred tax 2,523 (2,447)
--------- ---------
Total tax on profit on ordinary activities 2,179 (2,447)
--------- ---------
4 Dividends
A final dividend for the year ended 31 March 2005 of 7.80p per share (2005
restated: 6.83p) was paid on 23 September 2005. An interim dividend of 6.24p per
share (2005: 9.65p) was also paid on 23 September 2005, a second interim
dividend of 6.24p per share (2005: 7.50p) was paid on 9 December 2005 and a
third interim dividend of 7.60p per share (2005: nil) was paid on 24 March 2006.
A final dividend of 7.60p per share (2005 restated: nil) was paid on 8 May 2006
to shareholders on the register on 2 May 2006. This will make the total dividend
for the year 35.48p per share (2005 restated: 23.98p).
5 Earnings per ordinary share - basic and diluted
Earnings per ordinary share are calculated on the profit for the year of
#6,954,000 (2005 restated: #7,629,000) and the weighted average number of shares
in issue of 19,781,000 (2005: 18,693,000).
6 Reconciliation of operating profit to net cash inflow from operating
activities
2006 2005
#000 (restated)
#000
--------- ---------
Operating profit 16,550 12,776
Depreciation charge 10,239 9,488
Decrease/(increase) in stocks 162 (76)
Increase in debtors (1,168) (945)
Decrease in creditors (708) (476)
Adjustment for pension funding (723) 1,312
--------- ---------
Net cash inflow from operating activities 24,352 22,079
--------- ---------
7 Analysis of cash flows for headings netted in cash flow statement
2006 2005
#000 (restated)
#000
Returns on investments and servicing of finance
Interest received 906 4,667
Interest paid (6,764) (7,188)
Loan issue costs (362) -
--------- ---------
(6,220) (2,521)
Net capital expenditure
Purchase of tangible fixed assets (24,035) (24,568)
Contributions to infrastructure assets 2,124 2,082
Sale of tangible fixed assets 177 216
--------- ---------
(21,734) (22,270)
--------- ---------
Management of liquid resources
Increase in cash deposits (3,288) (1,964)
--------- ---------
Financing
Issue of ordinary share capital - 6,807
Loans (repaid to)/from other group undertakings - (11,070)
Index linked loan 34,000 -
Bank loans (21,500) 21,500
Repayment of debentures - (4,000)
--------- ---------
12,500 13,237
--------- ---------
8 Analysis of net debt
At Cash flow Non-cash changes At
1 April #000 #000 31 March
2005 2006
#000 #000
Cash at bank and in hand 1,136 93 - 1,229
Short term deposits 12,024 3,288 - 15,312
--------- --------- --------- ---------
13,160 3,381 - 16,541
Index linked loan (144,232) (34,000) (4,825) (183,057)
Bank loans (21,500) 21,500 - -
Issue costs 2,259 360 (90) 2,529
Debenture stock (461) - - (461)
--------- --------- --------- ---------
(150,774) (8,759) (4,915) (164,448)
--------- --------- --------- ---------
The above table excludes the loan to the Company's parent undertakings of
#35,000,000 (2005: #35,000,000) plus capitalised interest of #2,873,000 (2005:
nil).
9 Reconciliation of net cash flow to movements in net debt
2006 2005
#000 #000
--------- ---------
Increase in cash in the year 93 6
Cash inflow from increase in debt financing (12,140) (6,430)
Cash outflow from movement in liquid resources 3,288 1,964
--------- ---------
Movement in net debt resulting from cash flows (8,759) (4,460)
Loan indexation (4,825) (4,247)
Amortisation of loan issue costs (90) (82)
Net debt at 1 April (150,774) (141,985)
--------- ---------
Net debt at 31 March (164,448) (150,774)
--------- ---------
The above table excludes the loan to the Company's parent undertakings of
#35,000,000 (2005: #35,000,000) plus capitalised interest of #2,873,000 (2005:
nil).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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