RNS Number:9945A
Mid Kent Water PLC
19 July 2004
Mid Kent Water plc
Preliminary results
for the year to 31 March 2004
Chairman's Statement
Introduction
Mid Kent Water plc has again achieved a strong all round performance. Good
progress in our financial performance is again matched by improved service
levels to customers. The results demonstrate the benefits of the changes to the
Company's Board and its new management team with our continued commitment to
customer service delivery, regulatory performance and the efficient management
of our business. All of this firmly underpins our Periodic Review submission to
Ofwat which sets out our plans for our future (2005-2010). We are also
continuing to work more closely with our ultimate controlling party, WestLB.
The marked improvements in our customer service delivery continue to further
enhance our regulatory performance with all regulatory measures either improved
or broadly maintained. I am particularly proud of these achievements since they
have been secured against a backdrop of an exceptionally hot and dry summer in
2003 which led to record demands for water. These unprecedented demands were met
with a first class operational performance, and this was supported by our
commitment to communicate with our customers and our community throughout.
Results
Turnover for the year was #43.0m, an increase of 4.70% from #41.1m. Water income
increased by 4.75% on last year reflecting a water price rise of 2.65% together
with an increase in measured water income reflecting the high summer demand.
Additional turnover was generated by a further increase in our non-regulated
activity of #0.2m.
Operating profit was #14.2m compared to #11.5m last year, although the latter
was affected by one-off restructuring and refinancing costs of #2.3m. The
depreciation charge has increased by #0.9m year on year reflecting the Company's
continued investment in its infrastructure.
Net interest payable has increased from #5.9m to #7.2m, reflecting the full year
effect of the refinancing undertaken in December 2002.
After property disposals generating a profit of #1.7m (2003: #1.9m) profit
before tax has climbed to #8.6m from #7.5m.
Dividend
The company has declared a final dividend of #1.3m, giving a total dividend for
the year of #5.0m. (2003: #29.9m includes exceptional dividend as part of
refinancing our business last year).
Capital Expenditure
Cash payments for capital expenditure in the year were #22.2m (2003: #22.0m).
Key projects in the year included the completion of the mains renovation project
which saw 102km of mains either relined or replaced in line with our undertaking
given to the Drinking Water Inspectorate on behalf of the Secretary of State.
We also commenced a major project to build a new service reservoir at our Ford
Pumping station which will improve the operational service and the security of
supply in the Herne Bay and Whitstable area.
Water Quality
Once more the quality of water at our customer's taps continues to improve each
year, with expected compliance for 2003 being 99.92%, up on our 2002 performance
of 99.89%.
Non-Regulated Activity
Our non-regulated commercial businesses have continued to develop and are now
delivering sustainable performance year on year. The commercial activities are
being developed by utilising the core skills inherent in our staff coupled with
our brand in the utility services market. Early successes are being developed in
environmental management, innovative services to new developments and water
operational services to owners of private water infrastructure.
Corporate Social Responsibility
The role Mid Kent Water plays in the community continues to be of importance to
the company. We continue to integrate and participate with our community
stakeholders, wherever possible adapting our approach and activities to meet the
needs of others. We also continue our commitment to sustainability and work with
a range of organisations in this respect, including statutory and non statutory
environmental groups. This year we have also implemented a new sustainable
procurement policy in line with 'Industry Best Practice'.
The Company encourages and supports our staff in a range of charitable
activities and we are particularly involved in the WaterAid charity. For the
second year running one of our staff members participated in a WaterAid visit,
this time to Malawi, to appreciate the work of the charity close at hand.
Employees
Since I joined the Company as Chairman in July 2003 I have been impressed with
the ability and commitment of our staff at all levels. This year they have met
the twin challenges of the high summer demand and of the Periodic Price Review
2004 whilst safely delivering improved services to customers. I would like to
take the opportunity to thank them for their combined hard work and support and
look forward to working with them in the year ahead.
Looking forward and Price Review 2004
Our Final Business Plan was submitted to OFWAT in April this year and their
final determination of prices for the period 2005 -2010 will be published in
December. Throughout this process we have continued to work closely with our
Regulators, maintaining constructive dialogue and a positive relationship. We
are confident of a balanced determination which will enable us to fulfil our
functions and make appropriate longer term investments in our infrastructure to
maintain future service levels for our customers.
Gordon Maxwell
15 July 2004
Profit and loss account
Year ended 31 March 2004
---------------------------------------------------------------
Notes 2004 2003
#000 #000
2 Turnover 43,039 41,116
Operating costs (28,837) (29,622)
---------------------------------------------------------------
3 Operating profit 14,202 11,494
Profit on sale of fixed assets 1,656 1,931
---------------------------------------------------------------
Profit on ordinary activities before 15,858 13,425
interest
Interest receivable and similar 2,976 863
income
Interest payable and similar (10,218) (6,800)
charges
---------------------------------------------------------------
Profit on ordinary activities before 8,616 7,488
taxation
4 Tax on profit on ordinary (716) (2,764)
activities
---------------------------------------------------------------
Profit on ordinary activities after 7,900 4,724
taxation
5 Dividends paid and proposed (4,973) (29,892)
---------------------------------------------------------------
Retained profit/(loss) for the year 2,927 (25,168)
---------------------------------------------------------------
6 Earnings per ordinary share - basic 42.4p 25.3p
---------------------------------------------------------------
5 Dividends per ordinary share 26.67p 160.31p
---------------------------------------------------------------
Summarised balance sheet
At 31 March 2004
-----------------------------------------------------------------------
2004 2003
#000 #000
Fixed assets
Tangible assets 173,986 161,763
-----------------------------------------------------------------------
Current assets
Stocks 722 681
Debtors - amounts falling due within one year 8,043 11,157
- amounts falling due after more than one
year 35,000 35,000
Investments 10,060 14,928
Cash at bank and in hand 1,130 1,572
-----------------------------------------------------------------------
54,955 63,338
Creditors: amounts falling due within one year (43,635) (35,752)
-----------------------------------------------------------------------
Net current assets/(liabilities) 11,320 27,586
-----------------------------------------------------------------------
Total assets less current liabilities 185,306 189,349
Creditors: amounts falling due after more than (138,105) (144,059)
one year
Provision for liabilities and charges (9,810) (10,826)
-----------------------------------------------------------------------
Net assets 37,391 34,464
-----------------------------------------------------------------------
Capital and reserves
Attributable to equity interests
Called up ordinary share capital 18,646 18,646
Profit and loss account 18,745 15,818
-----------------------------------------------------------------------
Equity shareholders' funds 37,391 34,464
-----------------------------------------------------------------------
Summarised cash flow statement
Year ended 31 March 2004
-----------------------------------------------------------------------
2004 2003
#000 #000
Net cash inflow from operating activities 21,501 15,034
Returns on investments and servicing of finance (4,550) (7,590)
Taxation (411) (840)
Net capital expenditure (20,259) (16,253)
Equity dividends paid (6,841) (29,388)
-----------------------------------------------------------------------
Cash outflow before management of liquid resources (10,560) (39,037)
and financing
Management of liquid resources 4,868 (14,928)
Financing 5,250 54,167
-----------------------------------------------------------------------
(Decrease)/increase in cash in the year (442) 202
-----------------------------------------------------------------------
Notes 7 to 10 are part of this statement.
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 2003.
(ii)The information shown for the years ended 31 March 2004 and 31 March 2003
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
years ended 31 March 2004 and 31 March 2003 respectively. 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 2003 have been filed with the Registrar
of Companies. The accounts for the year ended 31 March 2004 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 15th July 2004.
2 Analysis of turnover
2004 2003
#000 #000
Unmeasured supplies 21,072 21,144
Measured supplies 17,407 15,595
Other activities 4,560 4,377
-----------------------------------------------------------------------
43,039 41,116
-----------------------------------------------------------------------
3 Operating profit
2004 2003
#000 #000
----------------------------------------------------------------------
Operating profit is stated after charging
Refinancing costs - 751
Restructuring costs - 1,536
----------------------------------------------------------------------
4 Corporation tax
-----------------------------------------------------------------------
2004 2003
#000 #000
Current tax
-----------------------------------------------------------------------
Tax (over)/under provided in previous years (875) 1,625
Group relief surrendered by other group 2,607 3,211
undertakings
-----------------------------------------------------------------------
1,732 4,836
Deferred tax
Discounted origination and reversal of timing (1,016) (2,072)
differences
-----------------------------------------------------------------------
716 2,764
-----------------------------------------------------------------------
5 Dividends
A final dividend of 6.83p per ordinary share in respect of the year
ended 31 March 2004 was paid on 2 June 2004 to shareholders on the
register at 28 May 2004. The final dividend is in addition to the
interim dividend of 19.84p, already paid, making a total of 26.67p for
the year. This compares with a final dividend last year of 16.85p and an
interim dividend of 143.46p, making a total of 160.31p for that year.
6 Earnings per ordinary share - basic and diluted
Earnings per ordinary share are calculated on the profit for the year of
#7,900,000 (2003: #4,724,000) and the weighted average number of shares
in issue of 18,646,142 (2003: 18,646,142).
7 Reconciliation of operating profit to net cash inflow from operating
activities
2004 2003
#000 #000
Operating profit 14,202 11,494
Depreciation charge 8,745 7,866
Increase in stocks (41) (114)
Decrease/(Increase) in debtors 3,748 (2,933)
Decrease in creditors (5,153) (1,279)
------------------------------------------------------------------------
21,501 15,034
------------------------------------------------------------------------
8 Analysis of cash flows for headings netted in cash flow statement
2004 2003
#000 #000
Returns on investments and servicing of
finance
Interest received 2,342 223
Interest paid (6,884) (5,355)
Issue costs - (2,450)
Interest element of finance lease rental (8) (8)
payments
------------------------------------------------------------------------
(4,550) (7,590)
------------------------------------------------------------------------
Net capital expenditure
Purchase of tangible fixed assets (22,180) (22,016)
Contributions to infrastructure assets 234 3,120
Sale of tangible fixed assets 1,687 2,643
------------------------------------------------------------------------
(20,259) (16,253)
------------------------------------------------------------------------
Management of liquid resources
Cash deposits 4,868 (14,928)
------------------------------------------------------------------------
Financing
Capital element of finance lease rental - (53)
payments
Loans from other group undertakings 5,250 (45,780)
Loan to parent undertaking - (35,000)
Index linked loan - 135,000
------------------------------------------------------------------------
5,250 54,167
------------------------------------------------------------------------
9 Analysis of net debt
At
1 April 31 March Non-cash At
2003 Cash flow changes 2004
#000 #000 #000 #000
Cash at bank and in 1,572 (442) - 1,130
hand
Short term deposits 14,928 (4,868) - 10,060
-----------------------------------------------------------------------
16,500 (5,310) - 11,190
Loans from other group (5,820) (5,250) - (11,070)
undertakings
Loan to parent 35,000 - - 35,000
undertaking
Index linked loan (136,203) - (3,782) (139,985)
Issue costs 2,425 - (84) 2,341
Debenture stock (4,461) - - (4,461)
-----------------------------------------------------------------------
(92,559) (10,560) (3,866) (106,985)
-----------------------------------------------------------------------
10 Reconciliation of net cash flow to movements in net debt
2004 2003
#000 #000
(Decrease)/Increase in cash in the year (442) 202
Cash inflow from increase in debt and lease
financing (net of issue costs paid of nil
(2003: #2,450,000)) (5,250) (51,717)
Cash (inflow)/outflow from movement in liquid (4,868) 14,928
resources
Movement in net debt resulting from cash (10,560) (36,587)
flows
Loan indexation (3,782) (1,203)
Amortisation of loan issue costs (84) (25)
Net debt at 1 April (92,559) (54,744)
-----------------------------------------------------------------------
Net debt at 31 March (106,985) (92,559)
-----------------------------------------------------------------------
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