TIDM53HO
RNS Number : 0467V
South East Water Limited
09 December 2021
South East Water Limited
Condensed group financial statements
for the six months ended 30 September 2021
Chair's statement
I am pleased to present our interim report for the six months
ended 30 September 2021.
Although the Covid-19 pandemic has continued to impact all
aspects of society, I am pleased to be able to report that we have
made a strong operational start to the year with significant
progress being made against many of our performance commitments and
in line with our company purpose; "to provide today's public water
service and create tomorrow's water supply solutions, fairly and
responsibly, working with others to help society and the
environment to thrive."
We are, of course, one of the six water only companies amongst
13 water and waste water companies.
As a business, our focus has been very much on supporting our
colleagues and customers and adapting quickly to the imposition and
easing of Covid restrictions. This has seen us ensure that our
colleagues who did not work from home had the necessary training
and equipment to work safely in all environments, including
streetworks and inside cu stomers' houses and we have continued to
be sympathetic to our customers in our approach to debt management
where they are struggling to pay.
High levels of household demand continue and are consistently
above the levels seen before the start of the Covid-19 pandemic.
This is due to many customers in our region continuing to work from
home and therefore consuming water from home rather than in their
workplaces. Whilst this phenomenon is easing as customers return to
more normal working patterns it is not clear whether or not our
customer base will eventually return to pre-Covid patterns. In
light of these changing demand patterns, Ofwat has agreed to assess
our performance on our PCC (per capita consumption) and
non-household void property performance commitments at the end of
this regulatory cycle in 2025, when the long-term effect of
Covid-19 on these measures should be better understood.
Whilst we did not experience a summer as hot as the last year,
the lessons learned in 2020 ensured that this year's summer demand
was managed well and passed without incident. Our efforts over the
last 12 months have been on delivering key projects to provide
extra resilience to our network. This has included building a new
water treatment works in Aylesford, Kent, which was just eight
months in construction and delivered extra capacity quickly to
cover the loss of a key strategic service reservoir in Kent which
was damaged by a sinkhole which appeared in September 2020. In
addition we have now completed the extension to the Bray Keleher
water treatment works in the western region adding an additional
23ML of new water to the area.
We have continued to work on improving our operational response
times to unplanned interruptions using a variety of approaches,
this has included the implementation of new leakage detection
software WaterNet which helps us identify and respond to leaks
faster. Furthermore, we have continued a programme of calm valve
and network optimisation training for our operational teams and
supply chain partners which includes modules on network hydraulics
and transient pressures.
This is all alongside the provision of additional resources,
plant and machinery available to deal with complex repairs.
This is the second year of the 2020 to 2025 investment period
known as AMP7 in which we are focused on delivering our purpose-led
plan including capital expenditure of GBP433.0 million (2017/18
prices) in improvements across the region. We are tracking our
progress against more than 30 challenging performance commitments
together with an additional 10 responsible business
commitments.
Looking ahead and in conjunction with Water Resources South East
we are developing a draft regional resilience plan which will be
consulted upon between 10 January and 7 March 2022. The revised
regional plan will then form the basis of our own draft Water
Resources Management Plan 2024 which we will consult on in the
autumn of 2022, with publication due in 2023.
To support our customers we have ensured we are sympathetic to
those who may have suffered financial challenges over the last
year. This includes re-writing our credit management customer
communications to ensure they are clear, supportive and
engaging.
We have also continued to promote our payment holiday and
affordability schemes. We are working with key stakeholders to
offer mutual support including our work with Kent County Council to
distribute GBP150k of Government Covid funding direct to our
customers who were impacted financially and struggling to pay
bills.
In addition we have a scheme to auto enrol lower income
households onto our affordability schemes through collaborative
working with local councils, the first initiative of its kind in
the industry. We have also worked with independent organisations
such as National Energy Action to ensure our support meets customer
needs in our region.
Covid-19 restrictions and the swift change to work from home has
however provided us with an opportunity to review our wider working
practices across the business.
Now that colleagues are returning to sites and offices we have
adopted a hybrid working model with a combination of home working
and on site attendance to give greater flexibility. Of course, many
roles cannot be carried out from home, but for those colleagues we
are also looking at ways where we can provide greater
flexibility.
Thriving together as a fair and responsible business
Our responsible business strategy is an intrinsic part of our
corporate plan and we have four strategic themes across the
organisation. Some of the highlights and challenges in the first
six months include:
Trusted and reliable service
How we build trust in what we do and deliver a high quality
service to our customers
-- 99.97% of our water quality samples have met DWI standards.
-- A new, state-of-the-art water treatment works started pumping additional water to homes in Kent in August after
just eight months of construction.
-- With the increased focus on optimising our distribution network and pressure reducing valves (PRV) as part of
leakage strategy to 2025, the PRV operational field colleagues are undergoing a technical training enhancement
programme supported by many of our framework suppliers of the equipment / technology. This takes the form of
field demonstrations and competency assessments in how to operate, set up and maintain our PRVs alongside general
pressure and network hydraulic awareness.
-- We received a five star rating from global ESG benchmarking organisation, GRESB. Increasing our score to 92 out
of 100 versus a peer group average of 81, putting us in the top five companies in our sector globally.
-- We have now completed the extension to the Bray Keleher water treatment works in the western region adding an
additional 23ML of new water to the area.
-- All operational colleagues are undertaking calm valve training. Practical exercises are undertaken specifically
designed to simulate a water network and demonstrate the surges that can occur through incorrect valve
operations. It also includes theory modules on network hydraulics and transients to improve technical competence.
Thriving people
How we help the people who work with us to thrive
-- A mobile app, called PikaVoid, which aims to help the company identify void properties has been shortlisted for
the employee engagement award at the Customer Services Institute Awards. PikaVoid offers incentives to colleagues
to identify voids in their local area or while working in the field.
-- A new Wellbeing strategy is in operation. It has four pillars: Mental Wellbeing, Physical Wellbeing, Financial
Wellbeing and Social Wellbeing. This builds on previous work undertaken to promote a greater understanding of
mental health within the workplace.
-- Our employee survey in September had a high overall response rate of 79%. Of those responding, 93% felt their
manager was considerate of their wellbeing which is 8% higher than external benchmarking. In response to
wellbeing, 81% stated they were either thriving or coping.
-- 91% said they were proud to work for South East Water.
-- 94% said they believe that the company is committed to being ethical and responsible and 96% said South East
Water responds to the individual needs of our different customers.
-- 90% believed that they could be their authentic self at work.
Community and society focused
How we understand and respond to the needs of society
-- We have concentrated on providing customers with full details
of partner organisations offering support in
a variety of areas including disability, ill-health, wellbeing and financial.
-- Following a public consultation, where we received 21
responses, we published our revised dry weather plan
in September 2021. This outlines our actions in preparation for,
and during drought. We are now waiting for Defra to approve
publication of the final plan.
-- An industry leading innovative data sharing project with
Maidstone Borough Council has been helping identify
householders on low income who are eligible for our
affordability tariffs. This project has since provided a framework
for roll out with other local authorities.
-- Customer complaints in the last six months are down 15% compared to 2020/21.
-- We were shortlisted in the Utility Week Awards for our work
to support vulnerable customers. Keeping communities informed while
we carry out our work has also led to being shortlisted in the
Communications Leadership category in the Street Works UK Awards
2021
Flourishing environment
How we contribute to an environment that flourishes today and
tomorrow
-- We published our route map to net zero operational carbon by
2030. We will achieve this through energy efficiency, renewable
sources, avoiding direct emissions, water efficiency and investing
in nature-based solutions.
-- Work has started with a third party using high definition
aerial imagery to identify land use and nutrient
pollution sources within the North Kent and Stockbury
catchments.
-- There has been a high level of interest in this year's capital grants funding in Woodgarston, Boxalls Lane,
Hartlake and Pembury catchments. Farmers are working with us collaboratively to improve raw water quality and
quantity. The capital grants encourage farmers to farm in a way which is less environmentally damaging -- helping
to protect current and future water supplies as well as the wider environment too.
-- More than 20 different stakeholder groups and colleagues took
part in online workshops to help us develop our draft 25 year
environment plan.
-- Our "let's save this summer" campaign led to 51,734 water
saving devices being ordered by customers in the first six months
and we have updated our online customer portal, My Account, to
include a neighbourhood comparison for water use to encourage
behaviour change. We have developed ongoing communications to
customers relevant to their specific water usage and specific
circumstances.
Results and key financial performance indicators
The results published in this statement summarise our
performance for the six months ended 30 September 2021. The
financial statements are prepared under International Financial
Reporting Standards ("IFRS") and incorporate the performance of
South East Water Limited and our subsidiary, South East Water
(Finance) Limited.
Revenue for the period was GBP136.7 million compared with
GBP133.7 million for the same period in the previous year.
The increase of GBP3.0 million (+2.2%) is due to the following
factors:
-- water demand was higher this year than last year and was due to circa 14,000 additional properties in the
measured portfolio, amounting to around GBP1.4 million. Of this, circa 9,000 related to newly built
-- properties and the remainder associated with reducing void properties through South East Water's new PikaVoid
app.
-- this additional demand was part offset by GBP0.4 million relating to lower summer demand this year on existing
properties although the effect of Covid-19 on demand remained high.
-- also offsetting this was a reduction in the allowed average price of 0.6%, reducing revenue by GBP0.6 million.
-- developer contributions and other income are GBP2.1 million and GBP0.3 million respectively higher than last year
due to the reduction in Covid-19 restrictions.
Net operating costs for the period to 30 September 2021 were
GBP91.7 million compared with GBP84.7 million for
the same period in the previous year. The increase of GBP7.0
million (+8.3%) was due to:
-- the prior year costs included a one-off credit of GBP7.8
million in respect of past service costs on one of the group's
defined benefit pension schemes, which was a result of changing
from RPI to CPI in measuring the liabilities of the scheme.
-- increased depreciation for the six months of GBP1.4 million
in line with the continued investment in the group's fixed
assets.
-- other inflationary pressures, particularly around
consumables, adding GBP0.9 million of costs.
-- lower contractor costs as a result of fewer major operational
incidents, saving GBP1.5 million.
-- lower bulk supply cost driven by cost provision reductions
which delivered efficiencies of GBP0.7 million.
Finance costs have increased from GBP20.1 million to GBP23.2
million. This is due to increased indexation
on our loans due to higher inflation during the period to 30
September 2021.
Profit before tax was GBP20.1 million compared with GBP29.8
million for the same
period last year. This represents
14.7 per cent of revenue, down from 22.3 per cent for the
corresponding period last year.
The group tax charge of GBP38.6 million in the period ending 30
September 2021 includes GBP36.0 million of deferred tax resulting
from the corporation tax rate change from 19 per cent to 25 per
cent commencing in April 2023. Excluding this deferred tax
adjustment, the tax charge for the period was GBP2.6 million
compared to GBP1.7
million for the same period last year. The tax expense for the
period comprises GBP0.6 million of current tax and GBP2.0
million
of deferred tax.
The group has recorded a loss after tax of GBP18.6 million for
the six months ended 30 September 2021 compared to a profit after
tax of GBP28.1 million in the corresponding period in the prior
year. This loss after tax in the year is largely a result of the
deferred tax charge due to the future tax rate change from 19 per
cent to 25 per cent.
In September the group successfully replaced its revolving
credit facility with an increased facility of GBP125.0 million, up
from GBP90.0 million. The group had a balance of GBP50.0 million on
the previous facility which has been repaid from the new
facility.
The outstanding balance on the credit facility will be repaid
with new loan finance of GBP50.0 million on 9 December 2021. The
new loan is a fixed rate 14 year loan at an interest rate of 2.04
per cent.
We continue to comply with the financial covenants set out in
our securitisation structure and continue to hold ratings from
Moody's and Standard & Poor's consistent with the requirements
of both our securitisation and our instrument of appointment.
The dividend paid for the six months ended 30 September 2021 of
GBP4.5 million is GBP1.0 million lower compared to the same period
last year and this represents a nominal dividend yield of 1.8 per
cent. The dividend is in line with our dividend policy and is lower
than Ofwat's view of what is a reasonable nominal dividend yield,
which is 4 per cent.
Net cash generated from operations was GBP80.3 million for the
six months to 30 September 2021 compared to GBP63.9 million in the
same period for the previous year. This is largely a result of
improved collection of revenue when compared to the prior year.
Principal risks and uncertainties
The principal risks and uncertainties facing the business are
set out in the strategic report within the group's annual report
for the financial year ended 31 March 2021, which can be found on
the South East Water website.
Going concern
We continue to comply with the financial covenants set out in
our securitisation structure and continue to hold ratings from
Moody's and Standard & Poor's consistent with the requirements
of both our securitisation and our instrument of appointment.
In preparing the financial statements the directors considered
the group's ability to meet its debts as they fall due for a period
of one year from the date of this report, especially in light of
the on-going Covid-19 pandemic.
The group's business activities, together with the factors
likely to affect its future development, performance and position
were set out in the strategic report included in the group's annual
report for the financial year ended 31 March 2021.
The group finances its working capital requirements through cash
generated from operations and committed facilities that can be
called upon as required.
The group prepared an annual budget in March. The financial
results for the six months to 30 September 2021 are in line with
our budget. The directors are therefore satisfied that the group
has sufficient resources to continue in operation for a period of
not less than 12 months from the date of this report.
In coming to this decision the board has considered the
implications of the on-going Covid-19 pandemic and the impact this
may have on the business. The board has considered a range of
plausible scenarios and is satisfied that there is sufficient
headroom on all financial covenants.
Looking ahead
While building on our good start to this financial year we will
be particularly focused on longer term plans including the PR24 and
WRMP processes. In addition we will be progressing with the 25 Year
Environment Plan, an industry first, working closely with our
partners through Water Resources in the South East (WRSE) to engage
on a regional 75 year plan to ensure across the south east there is
a sustainable public water supply for the future.
In October 2021 we published our draft climate change adaptation
report. This covered 12 key risk areas including changes to
rainfall patterns and rising sea levels. The report sets out
exactly how we plan to modify our approach as the climate evolves.
This consultation has now concluded and we will be publishing our
final report in December.
Through the remainder of the winter months we will continue to
work with our suppliers, industry partners and local resilience
forums to make sure we are prepared for potential impacts on our
services, including winter weather and current supply chain
concerns.
Our water resources are in a very good position for this time of
year following a wet summer and an early start to the recharge
season. We expect with normal winter rainfall we will be ready for
spring 2022 with good resource levels. Water efficiency will
continue to be a focus as we expect a continuation of some degree
of home
working across the south east region will again influence demand
during 2022.
On behalf of the board I would like to thank all the employees
and business partners at South East Water for their focused efforts
over the last six months - it has seen us through a potentially
challenging summer and their purpose-led energy is evident across
the organisation.
I would also like to take this opportunity to say a personal
thank you to everyone at South East Water as I will retire from the
Board in March after seven years as Chair.
NICK SALMON
CHAIR
9 DECEMBER 2021
Condensed group income statement
for the six months ended 30 September 2021
Six months Six months
ended 30 ended 30
September September
2021 2020
Note GBP000 GBP000
=============================================== ======== ======================= =======================
Revenue 6 136,727 133,736
Group net operating costs Bad debt 8 (91,691) (84,732)
(2,128) (1,146)
=============================================== ======== ======================= =======================
Group profit from operations 42,908 47,858
Finance income Finance expense 9 345 2,055
9 (23,194) (20,130)
=============================================== ======== ======================= =======================
Profit before taxation 20,059 29,783
Taxation 10 (38,631) (1,677)
=============================================== ======== ======================= =======================
(Loss)/profit for the six months (18,572) 28,106
=============================================== ======== ======================= =======================
Other comprehensive income:
Items that will not be reclassified to profit
or loss:
Remeasurements of defined benefit pension
schemes' surplus or (deficit) Deferred tax
on defined benefit pension schemes 4,463 (19,446)
(1,375) 1,663
=============================================== ======== ======================= =======================
Other comprehensive income for the six months,
net of tax 3,088 (17,783)
=============================================== ======== ======================= =======================
Total comprehensive income (15,484) 10,323
=============================================== ======== ======================= =======================
Six months Six months
ended 30 ended 30
September September
2021 2020
Pence Pence
=============================================== ======== ======================= =======================
Earnings per share attributable to the
ordinary equity holders of the parent
Basic and diluted 12 (37.66) 57.00
=============================================== ======== ======================= =======================
Condensed group statement of financial position
as at 30 September 2021
30 September 31 March 30 September
2021 2021 2020
GBP000 GBP000 GBP000
========================================= ============ ========= ============
Assets
Non-current assets
Property, plant and equipment 1,653,840 1,631,312 1,612,026
Right of use assets 11,525 11,952 12,440
Intangible assets 8,624 8,787 8,925
Amount due from parent undertakings - - 135,941
Defined benefit pension surplus 41,653 34,368 27,344
========================================== ============ ========= ============
1,715,642 1,686,419 1,796,676
========================================= ============ ========= ============
Current assets
Inventories 668 673 690
Trade and other receivables 88,821 86,735 94,293
Cash and cash equivalents 22,749 41,617 59,288
========================================== ============ ========= ============
112,238 129,025 154,271
========================================= ============ ========= ============
Total assets 1,827,880 1,815,444 1,950,947
========================================== ============ ========= ============
Liabilities
Non-current liabilities
Trade and other payables 4,062 4,623 5,207
Loans and borrowings 1,044,540 1,038,371 1,032,213
Defined benefit pension liability 3,221 3,172 3,302
Deferred tax liability 220,122 167,228 165,553
Deferred income 3,235 3,625 4,663
========================================== ============ ========= ============
1,275,180 1,217,019 1,210,938
========================================= ============ ========= ============
Current liabilities
Trade and other payables 102,997 88,961 102,687
Loans and borrowings 50,324 80,318 80,324
Deferred income 6,712 5,336 3,899
Provisions 10,375 7,983 4,629
========================================== ============ ========= ============
170,408 182,598 191,539
========================================= ============ ========= ============
Total liabilities 1,445,588 1,399,617 1,402,477
========================================== ============ ========= ============
Net assets 382,292 415,827 548,470
========================================== ============ ========= ============
Issued capital and reserves attributable
to owners
of the parent
Share capital 49,312 49,312 49,312
Revaluation reserve 219,922 235,774 238,893
Retained earnings 113,058 130,741 260,265
========================================== ============ ========= ============
Total equity 382,292 415,827 548,470
========================================== ============ ========= ============
The financial statements on pages 7 to 15 were approved and authorised
for issue by the board of directors and were signed on its behalf
by:
David Hinton Andrew Farmer
Director Director
9 December 2021 9 December 2021
The notes on pages 11 to 15 form part of these financial
statements.
Condensed group statement of changes in equity
for the six months ended 30 September 2021
Share Revaluation Retained Total
capital reserve earnings equity
Note GBP000 GBP000 GBP000 GBP000
================================== ====== =============== ============ ============== ===============
At 1 April 2021 49,312 235,774 130,741 415,827
======
Comprehensive income for the
six months
Loss for the six months Other
comprehensive income - - (18,572) (18,572)
- - 3,088 3,088
================================== ====== =============== ============ ============== ===============
Total comprehensive income for
the six months - - (15,484) (15,484)
================================== ====== =============== ============ ============== ===============
Dividends 11 - - (4,500) (4,500)
Transfer to retained earnings - (3,056) 3,056 -
Transfers between other reserves - (9) 9 -
Deferred tax on releases from
revaluation reserve - 764 (764) -
Impact of rate change on deferred
tax - (13,551) - (13,551)
================================== ====== =============== ============ ============== ===============
- (15,852) (2,199) (18,051)
================================== ====== =============== ============ ============== ===============
At 30 September 2021 49,312 219,922 113,058 382,292
================================== ====== =============== ============ ============== ===============
At 1 April 2020 49,312 241,386 252,949 543,647
Comprehensive income for the
six months
Profit for the six months Other
comprehensive income - - 28,106 28,106
- - (17,783) (17,783)
================================= ====== =============== ==================== ============= =============
Total comprehensive income for
the six months - - 10,323 10,323
================================= ====== =============== ==================== ============= =============
Dividends 11 - - (5,500) (5,500)
Transfer to retained earnings - (2,953) 2,953 -
Transfers between other reserves - (11) 11 -
Deferred tax on releases from
revaluation reserve - 471 (471) -
================================= ====== =============== ==================== ============= =============
- (2,493) (3,007) (5,500)
================================= ====== =============== ==================== ============= =============
At 30 September 2020 49,312 238,893 260,265 548,470
================================= ====== =============== ==================== ============= =============
Condensed group statement of cash flows
for the six months ended 30 September 2021
Six months Six months
ended 30 September ended 30
2021 September
GBP000 2020
GBP000
================================================ ================================= =====================
Cash flows from operating activities
(Loss)/profit for the six months (18,572) 28,106
Adjustments for
Depreciation of property, plant and equipment 28,404 26,582
Amortisation and impairment of intangibles 1,432 1,855
Finance income (345) (2,055)
Finance expense 23,194 20,130
Loss/(gain) on sale of property, plant and
equipment 67 23
Difference between pension contributions paid
and amounts recognised (2,773) (10,309)
Income tax expense 38,631 1,677
================================================ ================================= =====================
Operating cashflows before movements in working
capital 70,038 66,009
Movements in working capital:
Increase in trade and other receivables (1,474) (10,045)
Decrease/(increase) in inventories 5 (1)
Increase in trade and other payables 11,730 8,057
================================================ ================================= =====================
Cash generated from operations 80,299 64,020
Interest paid (14,048) (13,113)
Interest received 345 1,679
Tax (paid)/received (518) (765)
================================================ ================================= =====================
Net cash from operating activities 66,078 51,821
================================================ ================================= =====================
Cash flows from investing activities
Purchases of property, plant and equipment (48,587) (48,822)
Sale of property, plant and equipment 143 (20)
Purchase of intangibles (1,269) (1,212)
Contributions to infrastructure assets received (562) 210
================================================ ================================= =====================
Net cash used in investing activities (50,275) (49,844)
================================================ ================================= =====================
Cash flows from financing activities
Issue costs of listed debt (66) (15)
Proceeds from revolving credit facility - 50,000
Repayment of revolving credit facility (80,000) -
Proceeds from new revolving credit facility 50,000 -
Dividends paid to the holders of the parent (4,500) (5,500)
Payment of lease liabilities (105) (155)
================================================ ================================= =====================
Net cash (used in)/from financing activities (34,671) 44,330
================================================ ================================= =====================
Net cash (decrease)/increase in cash and cash
equivalents (18,868) 46,307
Cash and cash equivalents at the beginning
of six months 41,617 12,981
================================================ ================================= =====================
Cash and cash equivalents at the end of the
six months 22,749 59,288
================================================ ================================= =====================
Notes to the condensed group financial statements
for the six months ended 30 September 2021
1. Reporting entity
South East Water Limited (the 'company') is a limited company
incorporated in the United Kingdom. The company's registered office
is at Rocfort Road, Snodland, Kent, ME6 5AH. These consolidated
financial statements comprise the company and its subsidiary
(collectively the 'group'). The group's principal activities are
the supply of water to a population of 2.3 million in an area of
5,700 kms and the provision of certain ancillary services for
customers, developers and other bodies within the limits of the
relevant legislation.
2. Basis of preparation
The condensed consolidated financial statements for the six
months ended 30 September 2021 are set out on pages 18 to 31, and
have been prepared in accordance with the Disclosure and
Transparency Rules of the Financial Conduct Authority and IAS 34
Interim Financial Reporting as endorsed by the United Kingdom. The
statements should be read in conjunction with the financial
statements for the year ended 31 March 2021, which were prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and International
Financial Reporting Standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union.
The condensed group financial statements are presented in
sterling.
These interim financial results have not been audited or
reviewed by our auditor. The information herein for the year ended
31 March 2021 does not comprise statutory accounts within the
meaning of section 434 of the Companies Act 2006. Statutory
accounts for the year ended 31 March 2021 were approved by the
Board of Directors on 15 July 2021 and delivered to the Registrar
of Companies. The report of the auditors on those accounts was not
qualified, did not include any reference to any matters to which
the auditors drew attention by way of emphasis without qualifying
the report and did not contain any statement under section 498(2)
or (3) of the Companies Act 2006.
(i) New standards, interpretations and amendments not yet
effective
In April 2021, the IFRS Interpretations Committee ('IFRIC')
agenda decision on the treatment of configuration and customisation
costs in a cloud computing arrangement was ratified by the
International Accounting Standards Board. The group is expecting to
reallocate some costs associated with cloud computing from capital
to operating expenditure. The group is currently investigating the
quantum of the impact from this guidance and will include any
adjustments in the financial statements for the year ending 31
March 2022.
3. Key judgements and sources of estimation uncertainty
The preparation of interim financial statements requires the
application of judgements and assumptions by management which
affects the value of assets and liabilities at the balance sheet
date and income and expenditure for the six months ended 30
September 2021. Actual results may differ from those arrived at
based on management's judgements and assumptions. In preparing
these condensed interim financial statements, the significant
judgements made by management in applying the group's accounting
policies and the key sources of estimation uncertainty were the
same as those applied to the Group Annual Report for the year ended
31 March 2021.
Notes to the condensed group financial statements
for the six months ended 30 September 2021
4. Going concern
The directors have, at the time of approving the financial
statements, a reasonable expectation that the group has adequate
resources to continue in operational existence for the foreseeable
future. The directors have also considered the potential impact of
the cessation of LIBOR and introduction of SONIA on the group's
financial liabilities. The directors have concluded that it is
correct to continue to adopt the going concern basis of accounting
in preparing the financial statements. Further details are provided
in the Chair's statement on page 6.
5. Accounting policies
The accounting policies applied in these condensed interim
financial statements are the same as those applied in the last
annual financial statements for the year ended 31 March 2021.
6. Revenue
Six months Six months
ended 30 September ended 30
2021 September
GBP000 2020
GBP000
======================= ================================================================ =====================
Revenue
Unmetered water income 10,233 9,986
Metered water income 114,556 114,222
Other sales 5,986 3,898
======================= ================================================================ =====================
Total revenue 130,775 128,106
======================= ================================================================ =====================
Other income
Rental income 624 579
Sundry income 5,328 5,051
======================= ================================================================ =====================
Total other income 5,952 5,630
======================= ================================================================ =====================
Total income 136,727 133,736
======================= ================================================================ =====================
Notes to the condensed group financial statements
for the six months ended 30 September 2021
7. Segmental analysis
Wholesale Retail Other
activities activities activities Total
GBP000 GBP000 GBP000 GBP000
============================= ========================== ==================== ==================== =================
Period to 30 September
2021
Total income 118,226 10,280 8,221 136,727
============================= ========================== ==================== ==================== =================
Operating profit 39,401 1,435 2,072 42,908
============================= ========================== ==================== ==================== =================
Finance costs Finance income (23,194)
345
============================= ========================== ==================== ==================== =================
Profit before taxation
Taxation 20,059
(38,631)
============================= ========================== ==================== ==================== =================
Profit for the period (18,572)
============================= ========================== ==================== ==================== =================
Period to 30 September
2020
Total income 117,494 8,835 7,407 133,736
============================= ========================== ==================== ==================== =================
Operating profit 45,741 616 1,501 47,858
============================= ========================== ==================== ==================== =================
Finance costs Finance income (20,130)
2,055
============================= ========================== ==================== ==================== =================
Profit before taxation
Taxation 29,783
(1,677)
============================= ========================== ==================== ==================== =================
Profit for the period 28,106
============================= ========================== ==================== ==================== =================
8. Net operating costs
Six months Six months
ended 30 September ended 30
2021 September
GBP000 2020
GBP000
============================================= ============================================= ====================
Employees benefits expenses 16,899 9,070
Asset expenses 29,903 28,460
Operating lease rentals:
Vehicles and office equipment 178 123
Land and buildings 8 8
Fee payable to group's auditor 239 152
Energy costs 9,708 9,643
Rates 9,235 9,187
Contractors 14,023 15,577
Bulk water supplies and abstraction licences 3,962 4,646
Chemicals 1,849 1,923
Insurance and related costs 1,600 1,432
Other 7,014 7,061
Other operating expenses charged to capital
projects (2,927) (2,550)
============================================= ============================================= ====================
91,691 84,732
============================================= ============================================= ====================
Notes to the condensed group financial statements
for the six months ended 30 September 2021
9. Finance income and expense Six months Six months
ended 30 September ended 30
2021 September
GBP000 2020
GBP000
============================================== =========================================== =====================
Finance income
Interest receivable on bank balances and
short-term deposits Interest receivable
from group companies 1 53
Net interest income on defined benefit
assets - 344 1,620
382
============================================== =========================================== =====================
Total finance income 345 2,055
============================================== =========================================== =====================
Finance expense
Effective interest on listed debt Indexation
on listed debt Interest on index linked
loans Indexation on index linked loans
Other finance costs 6,964 6,880
Interest capitalised 5,048 962
6,437 6,348
982 2,096
5,039 5,167
(1,276) (1,323)
============================================== =========================================== =====================
Total finance expense 23,194 20,130
============================================== =========================================== =====================
10. Taxation
Six months Six months
ended 30 ended 30
September September
2021 2020
GBP000 GBP000
================================= ============================================================ =====================
Current taxation charge Deferred
taxation charge 663 813
37,968 864
================================= ============================================================ =====================
38,631 1,677
================================= ============================================================ =====================
The current tax charge is based on management's estimate of the
weighted average annual corporation tax rate expected for the
full financial year.
The total deferred tax is estimated to be GBP38.0 million and
includes a one-off charge of GBP36.0 million for the impact of
the change in the rate of corporation tax from 19 per cent to
25 per cent announced in the 2021 budget. This change in tax rate
is effective from 1 April 2023.
11. Dividends
Six Six
months months
ended 30 ended 30
September September
2021 2020
GBP000 GBP000
====================================================================================================================== ====================
Interim dividend of 4.6 pence (2020: 5.6 pence) per Ordinary
share
paid during the the six months 2,250 Interim dividend 2,750
of 4.6 pence (2020: 5.6 pence) per Ordinary share
paid during the six months 2,250 2,750
====================================================================================================================== ====================
4,500 5,500
====================================================================================================================== ====================
Notes to the consolidated financial statements
for the six months ended 30 September 2021
12. Earnings per share
Six months Six months
ended 30 September ended 30
2021 September
GBP000 2020
GBP000
================================================= ======================================== =====================
(Loss)/profit for the six months from continuing
operations (18,572) 28,106
================================================= ======================================== =====================
Six months Six months
ended 30 September ended 30
2021 September
Number 2020
Number
================================================= ======================================== =====================
Basic and diluted weighted average number
of shares 49,312,354 49,312,354
================================================= ======================================== =====================
Basic and diluted earnings per share from
continuing operations (37.66p) 57.00p
================================================= ======================================== =====================
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END
IR BIBDDSUGDGBI
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