RNS Number:0765Y
Mid Kent Water PLC
08 June 2007
Mid Kent Water Limited
Preliminary results
for the year to 31 March 2007
Chairman's Statement
Introduction
I am pleased to present the Financial Report and Accounts for Mid Kent Water
Limited for the year ending 31 March 2007. The year presented challenges from
the outset. In the latter half of 2005/6, significant effort had been undertaken
in the business to prepare for a dry summer. This continued into the first
quarter of 2006/7 due to lower than average rainfall during the previous autumn
and winter. The capital programme continued to include projects that would
increase our water resources and capacity to supply during times of drought. I
am pleased to report that these actions, coupled with our customers' response to
our requests to conserve water, enabled the Company to avoid implementing the
restrictions granted under the Non-Essential Use Order in May 2006, although a
hosepipe ban remained in place. The hosepipe ban was lifted on 28 February 2007
and the water resources position is now well placed to continue an unrestricted
supply through the summer following a very wet period early in 2007.
On 2 October 2006, our owners acquired South East Water Limited with the stated
intention of merging their new acquisition with Mid Kent Water Limited. The
acquisition of South East Water by our owners prompted a number of changes on
the Board, with the resignation of the Chairman, Managing Director, and Finance
Director who took up positions with South East Water. A new Managing Director,
Paul Seeley, was appointed and I took over the role of Executive Chairman and my
place as an independent non executive director has been taken by Robert Weeden.
Paul Seeley and I were previous members of the Board. The proposed merger was
referred to the Competition Commission who issued its report on 1 May 2007. The
Competition Commission concluded that the merger could proceed subject to
certain benefits being granted to Mid Kent Water and South East Water customers.
Our owners' boards of Directors have approved the merger and merger plans are
now underway in both businesses.
Results
The financial year to 31 March 2007 was a year impacted by the dry Summer, both
operationally and financially. Consumption levels were 5% down on the previous
year and turnover reduced from #48.1m in 2005/6 to #47.1m in 2006/7, a net
reduction of #1.0m, despite an increase in water charges of 2.93% with effect
from 1 April 2006, as permitted by OFWAT.
Operating profit of #16.0m reduced by #0.6m on the previous year. The impact of
the loss of revenue was offset by a reduction in operating costs of the business
in the year (#31.1m in 2006/7 compared to #31.5m in 2005/6). Profit on disposal
of assets increased from #0.2m to #0.5m in the financial year.
Interest payable has increased from #11.5m in 2005/6 to #12.9m for the current
financial year. The increase of #1.4m relates to the increase in interest
charges and RPI indexation on our senior borrowing.
Profit before tax has reduced in the year from #9.1m to #7.8m, a reduction of
14%.
Dividend
The Company 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 finance its business and meet the
requirements of its licence of appointment. The company declared dividends for
the year of #5.1m (#5.5m in 2005/6).
Capital Expenditure
The Company spent #26.8m on capital assets in 2006/7. Our commitment to the
capital programme set down in the Final Determination remains strong and
expenditure in the year continues to strengthen our network and water supply
resilience. This is the highest capital expenditure in a single year for Mid
Kent Water. Significant expenditure in the year has been incurred on many
projects including the Bewl to Ashford main, our ongoing metering programme and
projects to reduce the level of leakage. The Company has spent #5.7m on
infrastructure renewals with 8.3km of obsolete mains having been replaced and
19.9km of new mains laid.
Water Quality
The supply of potable water remains the priority for the Company and our results
for the year testify to this. The Drinking Water Inspectorate water quality
measures for the year were at 99.97% compliance which is slightly better than
the industry average of 99.96%.
Non-Regulated Activity
The non-regulated business has experienced a reduced level of trade in the year,
in particular in respect of developer connections. Turnover for the year has
reduced from #4.2m to #3.8m, and as with the core business, a reduction in the
cost base has minimised the effect of the loss of revenue. The non-regulated
business contributed #1.0m to operating profit.
Corporate Social Responsibility
We continue to work with the local community, ensuring that stakeholders are
consulted in relation to our activities. We have worked closely with the
Environment Agency during the year particularly on the drought in the south east
of England. I am grateful for their contribution and support. We have liaised
closely with customer groups and in particular the Consumer Council for Water in
relation to the water resources position throughout the year and in relation to
customer debt. Our support for various charities continues and in particular we
sponsored the Wateraid trip to India.
The year ahead
At the time of writing, our owners' Boards of Directors have recently approved
the merger of South East Water and Mid Kent Water. This presents further
interesting challenges in the year ahead, as we plan and begin to execute the
joining together of the two businesses in order to achieve the customer
benefits. I would like to thank the staff for their hard work and dedication
over the past 12 months, particularly during the challenging drought conditions
and I look forward to working with them in continuing to provide excellent
customer service in the forthcoming year.
Graham Setterfield
Executive Chairman
1 June 2007
Profit and loss account
Year ended 31 March 2007
--------- ---------
Notes Turnover 2007 2006
1 Operating costs #000 #000
2 47,125 48,094
(31,096) (31,544)
--------- ---------
3 Operating profit 16,029 16,550
Profit on sale of fixed assets 476 152
--------- ---------
6 Profit on ordinary activities before interest 16,505 16,702
7 Interest receivable and similar income 3,826 3,777
8 Interest payable and similar charges (12,864) (11,534)
Return on pension scheme assets 364 188
--------- ---------
9 Profit on ordinary activities before taxation 7,831 9,133
Tax (charge)/credit on profit on ordinary 2,298 (2,179)
activities --------- ---------
Profit on ordinary activities after taxation 10,129 6,954
--------- ---------
Earnings per ordinary share - basic and diluted 51.2p 35.2p
--------- ---------
Dividends per ordinary share 25.64p 35.48p
--------- ---------
All turnover and operating profit is derived from continuing operations.
Statement of recognised gains and losses
Year ended 31 March 2007
--------- ---------
Notes Profit for the financial year 2007 2006
Pension schemes actuarial gain #000 #000
Deferred tax on actuarial gain 10,129 6,954
1,804 3,544
(541) (1,063)
--------- ---------
Total recognised gains and losses relating to the 11,392 9,435
year and since last annual report --------- ---------
Balance sheet
At 31 March 2007
--------- ---------
Notes Fixed assets 2007 2006
Tangible assets #000 #000
214,137 198,150
--------- ---------
Current assets 618 636
Stocks 9,242 8,870
Debtors: amounts falling due within one year 41,033 37,873
Debtors: amounts falling due after more than one 10,662 15,312
year
Investments 1,703 1,229
Cash at bank and in hand
--------- ---------
Creditors: amounts falling due within one year 63,258 63,920
(27,349) (20,173)
--------- ---------
Net current assets 35,909 43,747
--------- ---------
Total assets less current liabilities 250,046 241,897
Creditors: amounts falling due after more than one (187,058) (180,989)
year
Provision for liabilities (11,656) (14,033)
--------- ---------
Net assets excluding pension asset/liability 51,332 46,875
Pension asset 2,738 875
--------- ---------
Net assets including pension asset/liability 54,070 47,750
--------- ---------
Capital and reserves 19,781 19,781
Called up ordinary share capital 5,672 5,672
Share premium 28,617 22,297
Profit and loss reserve
--------- ---------
Capital and reserves 54,070 47,750
--------- ---------
Cash flow statement
Year ended 31 March 2007
--------- ---------
Notes Net cash inflow from operating activities 2007 2006
Returns on investments and servicing of finance #000 #000
Taxation and group relief 25,326 24,352
Net capital expenditure (6,133) (6,220)
Equity dividends paid (300) -
(24,562) (21,734)
(5,307) (5,517)
--------- ---------
Cash outflow before management of liquid resources (10,976) (9,119)
and financing
4,650 (3,288)
Management of liquid resources 6,800 12,500
Financing
--------- ---------
Increase in cash during the year 474 93
--------- ---------
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 2007.
(ii) The information shown for the years ended 31 March 2007 and 31 March 2006
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 2007. 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 2007 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 1 June 2007.
2 Analysis of turnover
2007 2006
#000 #000
Unmeasured supplies 22,903 23,069
Measured supplies 20,514 20,858
Other activities 3,708 4,167
--------- ---------
47,125 48,094
--------- ---------
3 Corporation tax
2007 2006
#000 #000
The tax charge is made up as follows:
Current tax
UK Corporation tax - 146
Tax over provided in previous years (552) (490)
--------- ---------
Total current tax (552) (344)
--------- ---------
Deferred tax
Origination and reversal of timing differences (478) 2,666
Movement on pensions deferred asset 258 274
Increase in discount (1,526) (417)
--------- ---------
Total deferred tax (1,746) 2,523
--------- ---------
Total tax on profit on ordinary activities (2,298) 2,179
--------- ---------
4 Dividends
An interim dividend of 12.82p per share (2006: 6.24p) was paid on 15 December
2006, a second interim dividend of 6.41p per share (2006: 6.24p) was paid on 29
March 2007. No third interim dividend (2006: 7.60p) was paid. A final dividend
of 6.41p per share (2006: 7.60p) will be paid on 15 June 2007 to shareholders on
the register on 1 June 2007. This will make the total dividend for the year
25.64p per share (2006: 35.48p).
5 Earnings per ordinary share - basic and diluted
Earnings per ordinary share are calculated on the profit for the year of
#10,129,000 (2006: #6,954,000) and the weighted average number of shares in
issue of 19,781,000 (2006: 19,781,000).
6 Reconciliation of operating profit to net cash inflow from operating
activities
2007 2006
#000 #000
--------- ---------
Operating profit 16,029 16,550
Depreciation charge 10,642 10,239
Decrease/(increase) in stocks 18 162
Increase in debtors (371) (1,168)
Decrease in creditors (498) (708)
Adjustment for pension funding (494) (723)
--------- ---------
Net cash inflow from operating activities 25,326 24,352
--------- ---------
7 Analysis of cash flows for headings netted in cash flow statement
2007 2006
#000 #000
Returns on investments and servicing of finance 665 906
Interest received (6,770) (6,764)
Interest paid (28) (362)
Loan issue costs
--------- ---------
(6,133) (6,220)
--------- ---------
Taxation and group relief (300) -
Group relief paid
Net capital expenditure (28,217) (24,035)
Purchase of tangible fixed assets 3,054 2,124
Contributions to infrastructure assets 601 177
Sale of tangible fixed assets
--------- ---------
(24,562) (21,734)
--------- ---------
Management of liquid resources (4,650) (3,288)
Increase in cash deposits
--------- ---------
Financing - 34,000
Index linked loan 6,800 (21,500)
Bank loans
--------- ---------
6,800 12,500
--------- ---------
8 Analysis of net debt
At Cash flow Non-cash changes At
1 April #000 #000 31 March
2006 2007
#000 #000
Cash at bank and in hand 1,229 474 - 1,703
Short term deposits 15,312 (4,650) - 10,662
--------- --------- --------- ---------
Index linked loan 16,541 (4,176) - 12,365
Bank loans (183,057) - (6,002) (189,059)
Issue costs - (6,800) - (6,800)
Debenture stock 2,529 28 (95) 2,462
(461) - - (461)
--------- --------- --------- ---------
(164,448) (10,948) (6,097) (181,493)
--------- --------- --------- ---------
The above table excludes the loan to the Company's parent undertakings of
#35,000,000 (2006: #35,000,000) plus capitalised interest of #6,033,000 (2006:
#2,873,000).
9 Reconciliation of net cash flow to movements in net debt
2007 2006
#000 #000
--------- ---------
Increase in cash in the year 474 93
Cash inflow from increase in debt financing (6,772) (12,140)
Cash outflow from movement in liquid resources (4,650) 3,288
--------- ---------
Movement in net debt resulting from cash flows (10,948) (8,759)
Loan indexation (6,002) (4,825)
Amortisation of loan issue costs (95) (90)
Net debt at 1 April (164,448) (150,774)
--------- ---------
Net debt at 31 March (181,493) (164,448)
--------- ---------
The above table excludes the loan to the Company's parent undertakings of
#35,000,000 (2006: #35,000,000) plus capitalised interest of #6,033,000 (2006:
#2,873,000).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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