TIDM53HO
RNS Number : 7079S
South East Water Limited
15 July 2022
South East Water Limited
Preliminary results
for the year to 31 March 2022
Chair and CEO joint report
This is a joint statement and as CEO, I'd like to take the
opportunity to formally welcome Chris to the organisation. Chris is
a former CEO of Cadent, Britain's largest gas distribution network.
His knowledge and experience will be of invaluable benefit to us as
we face new challenges ahead.
Chris succeeds Nick Salmon, who stepped down as Chair on 31
March 2022 after seven years' service, having presided over a
crucial period of transformation and improvement for the business.
Chris and I would like to thank Nick for his leadership and I would
like to personally thank him for his support.
Nick presided over a period where we have continued to evolve
the strength of the business. We intend to build on the firm
foundation he has given us. We remain committed to our 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 feel that this review should start with a huge 'thank you' to
everyone in the business, our contractors and our partner
organisations who have continued to adapt and respond to the
challenges that this past year has sent in our direction. Despite
the overall level of Covid-19 restrictions lifting slightly during
the year, the hurdles that we've had to overcome have been
significant, whilst also focussing on returning to normal
operations and preparing for the future.
It seems expecting the unexpected has become normal, as we
reflect on another year of achievement, ambition and challenges and
as we enter the mid-point year of the five year business plan
period.
Despite considerable challenges from the impact of the pandemic,
this has been a strong year for the business. We have made
significant progress in the year on our regulated performance
commitments. We achieved 87 per cent of our financial performance
measures, and overall saw an improved performance in 80 per cent of
our financial performance measures. The highlights include the
lowest level of leakage that the company has ever recorded and our
best ever performance for CRI, the DWI's lead measure of water
quality.
We are proud to supply high quality drinking water to our
customers at a time when other water companies are under scrutiny
regarding storm water overflows. Protecting and enhancing our local
environment is integral to what we do and you will see in this
report the industry leading commitment we have made to planning how
we protect our environment over the next 25 years.
The impact of the Covid-19 global pandemic has continued to be
felt, affecting everything we do. As we entered the second year of
Covid-19, the depth of the strong foundations we set in 2020/21 has
reaped huge benefits. However economic conditions have worsened
impacting our costs and this is set to continue in 2022/23. High
energy costs and the rising cost of living are affecting our
customers.
We have a number of key engineering projects underway to deliver
improved resilience across our network. The temporary water
treatment works in Aylesford, Kent - built in just eight months to
replace the loss of a key strategic service reservoir caused by a
sinkhole that opened up - continues to support the area.
Construction is now underway on a permanent water treatment works
solution on the site.
This project is just one of a number of significant investments
we're making, such as the strategic pipeline being laid between
Fleet and Greywell in Hampshire to enable more water to be pumped
into the region as the population increases. We've also been
working to upgrade our existing network. In Chilham we've invested
GBP2.1 million installing new equipment in the area to prevent
customers going without water during power cuts, and in Pluckley,
Kent a GBP700,000 new 1.2 km water main will reduce the likelihood
of bursts and supply interruptions.
The multi-million-pound expansion of our flagship Keleher
treatment site in Bray was officially unveiled in February by the
Rt Hon Theresa May MP, in her role as constituency MP for
Maidenhead. The site is now capable of pumping up to 68 million
litres of water a day - a 50 per cent capacity increase and enough
to fill 27 Olympic-sized swimming pools.
Our ability to respond to increased demand has therefore
increased, putting in place extra capacity where needed.
We have found opportunities to learn more about our customers,
their expectations of us and our services and to promote water
efficiency initiatives to protect the environment and help with the
cost of living pressures.
We have increased our support for vulnerable customers and to
help those customers who are facing financial hardship. An industry
first data partnership with two councils in Kent has enabled us to
automatically enrol customers onto our social tariff, helping those
most financially at risk in our communities. We will continue to
review the provision of these partnerships to reflect the changing
economic climate in the future, supporting the most vulnerable in
our society.
Once again our colleagues across the business have risen to the
trials of lockdowns and the restrictions which have been placed on
all of us, responding quickly and with professionalism. Those
attributes extend to our contractors and partner organisations who
once again supported us in every way.
We have reacted with agility to all the challenges that we have
faced as an organisation, including macro environmental challenges
such as those created by the instability in the global energy
market and, of course, Storm Eunice - more of which later.
We are very pleased to present our group annual report and the
audited financial statements for the year ended 31 March 2022.
Across the business we have continued to make progress on
delivering on the commitments we have made in our five year plans
and have ambitious targets. We are particularly proud of our
achievements in the environment area of our business, as we know
our connection to the natural world is crucial.
Climate change is - and will continue to be - a huge challenge
for us. It's an area of uncertainty in terms of risk. We operate in
an area of water-stress and in recent years have done a lot to
overcome this, including our hugely successful Customer Metering
Programme, where we have the highest level of meter penetration of
any water company in the UK.
However, as population growth continues we must make further
changes and as new evidence and research emerges, we will use
innovation and best practice to overcome the challenges that this
will bring.
This year we have prepared our draft 25 year environment plan.
This is a first in the water industry and we believe that this
ambitious approach will make significant improvements to our
environment within a generation.
We have sought feedback from stakeholders and customers alike.
We invited over 500,000 customers to give us their views, which is
the largest consultation we have ever undertaken. This feedback
will be vital in helping us to develop our plan, and protect the
unique environment which is an integral part of everything we
do.
In addition, we have shown our commitment to working in
partnership to make sure we secure our resources for the future by
working with Water Resources in the South East (WRSE) to create a
regional plan which looks forward to 2100. This will be the basis
of our own water resources management plan designed for the
long-term.
For a long time, we've been talking to the farmers in our region
to see how we can join together to keep our water sources and
rivers cleaner, to reduce the amount of fertilisers going in to
them in the first place. This proactive partnership approach is
making a marked difference in helping to clean our rivers.
Our commitment to achieve net zero carbon by 2030 is also on
track. We will continue to track our progress and make robust
decisions which will ensure we achieve our goal as it edges
ever-closer. We are always looking towards renewable energy
sources, as well as how we operate more generally to improve the
environment.
Of course, we consider ourselves a service industry and people
are at the very heart of every area of service.
Whether it's our own colleagues whose expertise we want to
harness and nurture or our consumers in the communities we serve,
we aim to put service front and centre.
We have committed to learn more about our customers, their
expectations of us and how we can help them to reduce their water
bills and play their part in water efficiency drives.
We have continued to reach out to the sectors of the community
that are more difficult to engage with and to learn more about how
we can offer extra support.
An industry-leading data share initiative, where we are working
in partnership with two local authorities to auto enrol customers
onto a social tariff, is a great example of this. We are actively
seeking to offer assistance as an early intervention to avoid
customers becoming unable to pay their bills, especially where
there may be financial pressures for families and individuals.
Providing excellent customer service across the board is not
just an ambition for us, it is embedded in our vision and
values.
That's why being awarded the ServiceMark Accreditation with
Distinction from The Institute of Customer Service - one of only a
handful of companies to receive it - was so important to us. We are
extremely proud of that achievement and it is a reflection of the
teamwork across the business.
Among the areas highlighted by ServiceMark were knowledge and
empathy, both attributes we encourage in all our colleagues.
That's why we have produced our people plan. This important
accreditation is a validation of our people plan, which clearly
sets out our vision and plans for how we will attract and retain
the very best professionals to South East Water.
We are particularly pleased to be promoting apprenticeships as a
means of training or retraining in all areas of our business,
before moving on to focus on continuous professional
development.
This programme has resulted in the number of apprenticeships in
the company increasing by 250 per cent.
Bringing in new and diverse talent is also a long-term aim and
we have engaged with the Leonard Cheshire Foundation to give
talented graduates with a disability access to internships before
they enter the workplace full time.
Our on-going training services have been enhanced as we are keen
to keep and develop our talent. Many of our workforce live in our
supply area and they are our best ambassadors.
Supporting our colleagues beyond the work environment is also
important to us and the change in the way we work has presented an
opportunity to reassess how work-life balance can be achieved.
We have created our hybrid working plan with the objective of
moving towards an agile working approach, which we believe will
also support our goal of attracting and retaining the best
talent.
Of course, the year was not without adversity, most notably
Storm Eunice, the worst storm to hit our region in more than a
generation.
Sussex bore the brunt of the issues caused by the high winds,
which hit again when Storm Franklin swept in immediately after.
Despite significant planning for the storm, including the
provision of alternative power sources, unprecedented power outages
left us in a very difficult position. In the aftermath of the
storms, over 100 assets were inoperable due to lack of power. This
represented the most significant loss of power in our company's
history.
Whilst we worked closely with UK Power Networks to restore
electricity, the power cuts also caused damage to vital equipment
in some areas, which meant we weren't able to pump water into the
network as soon as power was restored. Once again, our colleagues
rose to the challenges, but some customers were affected whilst
power supplies were impacted.
We were in direct contact with hospitals, supplying tankers to
various NHS sites, and other healthcare centres to make sure they
were prioritised, and supported our livestock farmers and their
specialist needs. At the same time, we prioritised our vulnerable
customers and made over 5,000 deliveries to those customers.
During the height of the emergency we set up and had volunteers
at more bottled water stations than we have had in any previous
incidents, the logistics of which alone were immense.
Our early and intense engagement with our stakeholders was also
crucial in our success in getting essential messages to our
communities in extremely testing circumstances, especially where
many were without power and internet access.
We are doing all we can to support the communities worst
affected and, as always, reflecting on any lessons to be learned,
working with local stakeholders to gather feedback on how we can
respond better in the future.
For impacted customers who fell outside our General Standards of
Service (GSS), specifically those in East Grinstead, we set up a
Community Fund of GBP100,000 to be distributed to charities,
community groups and not for profit organisations, selected by the
local community. Our customers are currently voting on how this
fund should be distributed and we look forward to making a real
difference in the community.
Overall we have made good progress against our plans set out
under our four strategic themes and you will see more of those
throughout this report.
As we return to more normal times, with the pandemic behind us,
we will continue to develop the positive outcomes that we have
delivered in challenging times. I am sure that this will put us in
a great position to build strongly in the coming year.
The year ahead
This year has shown again how we are facing ever-increasing
challenges from the weather and rapidly changing economic pressures
on our business and our customers.
In the year ahead we are looking to build on the improved
performance from this year. We will focus on building resilience in
our existing networks and creating plans to ensure we have the
right investment in place for future generations via the up and
coming Price Review process.
As part of this we will be publishing our 25 year environment
plan which aims to understand and engage on the complex trade-offs
between different environmental priorities and affordability using
feedback from customers, staff and stakeholders.
This will be supported by our strategic direction statement
bringing all our long-term plans and ambitions together in one
place and set the long-term direction of the business driven from
our overriding purpose.
We will continue to assist more customers in need of financial
support, or our help during interruptions to supply, through our
innovative data sharing exercise with our local authority partners.
This is particularly important given the rising cost of living
challenge our customers are facing.
We remain very confident that we will continue to deliver
excellent service and deal with the challenges immediately ahead of
us whilst beginning to plan the key activities and investment
needed to sustain the vital service we provide for future
generations and the good of the environment.
Chris Train OBE David Hinton
Chair CEO
14 July 2022 14 July 2022
Group income statement
for the year ended 31 March 2022
2022 2021
Notes GBP000 GBP000
Revenue 2 251,276 248,156
Bad debt (5,010) (3,788)
Net operating costs 3 (184,364) (178,285)
Other income 2 21,928 11,439
---------- ----------
Profit from operations 83,830 77,522
Finance income 5 705 3,093
Finance expense 5 (67,565) (42,956)
Profit before taxation 16,970 37,659
Taxation 6 (45,880) (6,343)
---------- ----------
Profit for the year (28,910) 31,316
Earnings per share attributable to
the ordinary equity holders of the parent
Basic and diluted 8 (58.63p) 63.51p
---------- ----------
The group activities above are derived from continuing
operations.
Group statement of other comprehensive income
for the year ended 31 March 2022
Notes 2022 2021
GBP000 GBP000
Profit for the year (28,910) 31,316
Other comprehensive income:
Items that will not be reclassified
to profit or loss:
Net actuarial (loss)/gain on pension
schemes 17,408 (14,967)
Deferred tax (credit)/charge on net
actuarial (loss)/gain 7 (4,352) 2,844
Impact of deferred tax rate change in
respect of pension schemes 7 1,639 -
Other comprehensive income for the year 14,695 (12,123)
--------- ---------
Total comprehensive income (14,215) 19,193
--------- ---------
Group statement of financial position
Registered number: 02679874
as at 31 March 2022
31 March 31 March
2022 2021
GBP000 GBP000
Assets
Non-current assets
Property, plant and equipment 1,678,147 1,631,312
Right of use assets 10,980 11,952
Intangible assets 8,294 8,787
Defined benefit pension surplus 57,346 34,368
-------------- --------------
1,754,767 1,686,419
-------------- --------------
Current assets
Inventories 851 673
Trade and other receivables 84,037 86,735
Cash and cash equivalents 14,539 41,617
-------------- --------------
99,427 129,025
-------------- --------------
Total assets 1,854,194 1,815,444
-------------- --------------
Liabilities
Non-current liabilities
Trade and other payables (4,154) (4,623)
Loans and borrowings (1,120,478) (1,038,371)
Deferred income (4,315) (3,625)
Defined benefit pension liabilities (2,869) (3,172)
Deferred tax liability (228,790) (167,228)
(1,360,606) (1,217,019)
-------------- --------------
Current liabilities
Loans and borrowings (339) (80,318)
Trade and other liabilities (99,851) (88,961)
Deferred income (5,740) (5,336)
Provisions (8,314) (7,983)
-------------- --------------
(114,244) (182,598)
-------------- --------------
Total liabilities (1,474,850) (1,399,617)
-------------- --------------
Net assets 379,344 415,827
-------------- --------------
I ssued capital and reserves attributable
to owners of the parent
Share capital 49,312 49,312
Revaluation reserve 217,906 235,774
Retained earnings 112,126 130,741
-------------- --------------
Total equity 379,344 415,827
-------------- --------------
The financial statements were approved and authorised for issue
by the board of directors on 14 July 2022 and were signed on its
behalf by:
David Hinton Andrew Farmer
CEO CFO
14 July 2022 14 July 2022
Group statement of changes in equity
for the year ended 31 March 2022
Issued
share Revaluation Retained Total
capital reserve earnings equity
Notes GBP000 GBP000 GBP000 GBP000
========================================== ============= ============= ============== ================
At 1 April 2020 49,312 241,386 252,949 543,647
Comprehensive income for the year
Profit for the year - - 31,316 31,316
Other comprehensive loss - - (12,123) (12,123)
========================================= ============= ============= ============== ================
Total comprehensive income for
the year - - 19,193 19,193
========================================= ============= ============= ============== ================
Dividends 7 - - (147,013) (147,013)
Amortisation of revaluation reserve - (6,127) 6,127 -
Revaluation of infrastructure assets - (783) 783 -
Release revaluation reserve on disposals - (15) 15 -
Deferred tax on revaluation and
retained earnings transfer 1 - 1,313 (1,313) -
========================================= ============= ============= ============== ================
- (5,612) (141,401) (147,013)
========================================= ============= ============= ============== ================
At 31 March 2021 49,312 235,774 130,741 415,827
========================================= ============= ============= ============== ================
At 1 April 2021 49,312 235,774 130,741 415,827
Comprehensive loss for the year
Loss for the year - - (28,910) (28,910)
Other comprehensive income - - 14,695 14,695
========================================= ============= ============= ============== ================
Total comprehensive loss for the
year - - (14,215) (14,215)
========================================= ============= ============= ============== ================
Dividends 7 - - (9,000) (9,000)
Amortisation of revaluation reserve - (6,112) 6,112 -
Revaluation of infrastructure assets - 283 - 283
Release revaluation reserve on disposals - (21) 21 -
Deferred tax on revaluation and
retained earnings transfer 1 - 1,533 (1,533) -
Impact of deferred tax rate change - (13,551) - (13,551)
========================================= ============= ============= ============== ================
- (17,868) (4,400) (22,268)
========================================= ============= ============= ============== ================
At 31 March 2022 49,312 217,906 112,126 379,344
========================================= ============= ============= ============== ================
All transactions relate to the equity holders of the group.
1 The movement between the revaluation reserve and retained earnings
arises from the depreciation and associated deferred tax
on the fair value uplift of assets at the time of transition to
IFRS.
Group statement of cash flows
for the year ended 31 March 2022
2022 2021
============================================
Notes GBP000 GBP000
============================================ ====== ================ ================
Cash flows from operating activities
(Loss)/profit for the year (28,910) 31,316
Adjustments for
Depreciation and impairment of property,
plant and equipment 55,666 55,259
Amortisation of intangible assets
including impairment 3,013 3,497
Finance income 5 (705) (3,093)
Finance expense 5 67,565 42,956
Loss on disposal of property, plant
and equipment 884 723
Insurance proceeds from loss of property, (6,000) -
plant and equipment
Difference between pension contributions
paid and amounts recognised in the
income statement (5,181) (12,605)
Taxation on profit 6 45,880 6,343
132,212 124,396
Movements in working capital
Decrease/(increase) in trade and other
receivables 3,286 (2,435)
(Increase)/decrease in inventories (178) 16
Increase/(decrease) in trade and
other payables 533 (2,053)
====== ================ ================
Cash generated from operations 135,853 119,924
======
Income taxes paid (1,100) (1,623)
======
Interest element on lease liability
payments (100) (128)
Interest received 6 2,341
Interest paid (36,913) (35,919)
============================================ ====== ================ ================
Net cash generated from operating
activities 97,746 84,595
============================================ ====== ================ ================
Cash flows from investing activities
======
Purchase of property, plant and equipment (89,016) (92,129)
======
Proceeds from disposal of property,
plant and equipment 314 215
Purchase of intangible assets (2,520) (2,716)
Insurance proceeds from loss of property, 6,000 -
plant and equipment
============================================ ====== ================ ================
Net cash outflow from investing activities (85,222) (94,630)
============================================ ====== ================ ================
Cash flows from financing activities
Loan to Parent undertaking repaid 0 136,013
Credit facility (repayment)/drawdown
of borrowings (80,000) 50,000
Debenture redemption (5) -
Loan notes issued 50,000 -
Payment of lease liabilities (337) (329)
Issue costs of debt (260) -
Dividends paid to shareholders 7 (9,000) (147,013)
-------------------------------------------- ------ ---------------- ----------------
Net (used in)/generated from financing
activities (39,602) 38,671
============================================ ====== ================ ================
Net (decrease)/increase in cash and
cash equivalents (27,078) 28,636
======
Cash and cash equivalents at the beginning
of year 41,617 12,981
============================================ ====== ================ ================
Cash and cash equivalents at the
end of the year 14,539 41,617
============================================ ====== ================ ================
Notes to the group financial statements
for the year ended 31 March 2022
1. Basis of preparation and authorisation of financial
statements
The financial statements of South East Water and its subsidiary
(the "group") for the year ended 31 March 2022 were authorised for
issue by the board of Directors on 14 July 2022 and the Statement
of Financial Position was signed on the board's behalf by David
Hinton and Andrew Farmer. South East Water is a private company
that has limited liability by shares and is incorporated in the
United Kingdom and domiciled in England and Wales.
On 31 December 2020, International Financial Reporting Standards
("IFRS") as adopted by the European Union at that date was brought
into UK law and became UK-adopted International Accounting
Standards, with future changes being subject to endorsement by the
UK Endorsement Board. The Group transitioned to UK-adopted
International Accounting Standards in its consolidated financial
statements on 1 April 2021.
These consolidated and Company only financial statements have
been prepared under IFRS as adopted by the UK Endorsement Board.
This change in basis of preparation is required by UK company law
for the purposes of financial reporting as a result of the UK's
exit from the EU on 31 January 2020 and cessation of the transition
period on 31 December 2020. This change does not constitute a
change in accounting policy but rather a change in framework which
is required to ground the use of IFRS in company law. However,
there is no impact on recognition, measurement or disclosure in the
period reported as a result of the change in framework.
The group financial statements are presented in Sterling and all
values are rounded to the nearest thousand pounds (GBP000) except
where otherwise indicated.
Basis of measurement
The financial statements have been prepared on the historical
cost basis except for the following items, which are measured on an
alternative basis on each reporting date.
Items Measurement basis
Pension assets Fair value
Certain assets in property, Measured at deemed cost by reference
to fair
plant and equipment value on adoption of IFRS on 1 April
2014
Going concern
The directors have, at the time of approving the financial
statements, a reasonable expectation that the company and the group
have adequate resources to continue in operational existence for
the foreseeable future. In coming to this decision they have
considered the implications of the current economic uncertainty
associated with various factors including the on-going Covid-19
pandemic, supply chain constraints and pressures on household
finances, and the impact these may have on the business. The
directors have concluded that it is appropriate to continue to
adopt the going concern basis of accounting in preparing the
financial statements.
Basis of consolidation
These financial statements incorporate the financial information
of South East Water Limited and its subsidiary, South East Water
(Finance) Limited (together the "group").
Transactions and balances between the company and its subsidiary
have been eliminated fully on consolidation. Subsidiaries are
consolidated from the date on which control is transferred to the
group and cease to be consolidated from the date on which control
is transferred out of the group.
Notes to the group financial statements
for the year ended 31 March 2022
2. Total Income
The following is an analysis of the group and company's revenue
and other income for the year from continuing operations:
2022 2021
Group GBP000 GBP000
======================= ======= =================
Revenue
Unmetered water income 20,343 19,983
Metered water income 219,244 219,168
Other sales 11,689 9,005
======================= ======= =================
Total revenue 251,276 248,156
Other income
Rent receivable 1,134 1,174
Other income 20,794 10,265
======================= ======= =================
Total other income 21,928 11,439
======================= ======= =================
273,204 259,595
======================= ======= =================
All revenue is from customers within the United Kingdom.
Other sales comprise a number of income streams, including those
associated with activities typically performed for property
developers, which impact the group's infrastructure network assets,
including diversions works to relocate water assets, and activities
that facilitate the creation of an authorised connection through
which properties can obtain water services. Other sales includes
new connections income of GBP5.2 million (2021: GBP3.9 million),
infrastructure income of GBP2.7 million (2021: GBP1.8 million) and
capital contributions of GBP2.3 million (2021: GBP1.8 million).
Other income includes charges for billing and cash collection
services amounting to GBP6.9 million (2021:
GBP8.0 million), interim insurance proceeds in respect of an
insurance claim relating to the Aylesford sinkholes of GBP10.0
million (2021: GBPnil) and laboratory income of GBP2.7 million
(2021: GBP2.3 million).
Under the terms of the Group's insurance policies we are able to
claim for the additional costs of working, or business
interruption, arising from the damage to the service reservoirs at
Aylesford in 2020 caused by a series of sinkholes. The cover is for
additional costs of working incurred for up to a year from the date
of the damage. An interim payment of GBP4.0 million was received in
respect of business interruption cover in March 2022. We also
received insurance proceeds of GBP6.0 million in respect of the
damage caused to the service reservoirs.
3. Net Operating Costs
2022 2021
GBP000 GBP000
Employee benefits expense 32,416 26,919
---------- ----------
Asset expense/(income):
Depreciation - owned assets 54,702 51,922
Depreciation - right-to-use 964 985
Amortisation of intangible assets 2,994 3,497
Impairment of property, plant and equipment 19 2,353
Loss/(gain) on disposal of property, plant
and equipment 884 723
---------- ----------
59,563 59,480
---------- ----------
Other operating expenses:
Operating lease rentals:
vehicles and office equipment 364 255
land and buildings 63 16
Fees payable to the group's auditor (see below) 410 434
Energy costs 20,858 19,795
Rates 18,470 18,403
Contractors 26,894 28,727
Bulk water supplies and abstraction licences 8,326 9,251
Chemicals 4,037 3,797
Insurance and related costs 2,840 3,350
Other 14,674 13,500
Other operating expenses charges to capital
projects (4,551) (5,642)
92,385 91,886
---------- ----------
Total operating costs 184,364 178,285
---------- ----------
Fees payable to the group's auditor in respect
of:
Audit of the group and company financial statements 329 325
Audit of subsidiary 1 1
---------- ----------
Total audit 330 326
---------- ----------
Regulatory accounts 65 84
Other assurance services 15 22
Services relating to iXBRL account coding - 2
---------- ----------
Total non-audit services 80 108
---------- ----------
Total fees payable to the group's auditor 410 434
---------- ----------
4. Employees and directors
2022 2021
Group GBP000 GBP000
======================================= ======= ================
Employee costs (including directors)
comprise:
Wages and salaries 34,549 34,842
National insurance 3,465 3,501
Defined contribution pension cost 2,512 2,481
Defined benefit scheme charge/(credit) 586 (6,895)
Labour costs capitalised (8,696) (8,513)
======================================= ======= ================
32,416 25,416
======================================= ======= ================
The defined benefit scheme credit for the prior year included a
past service credit of GBP7.8 million due to the change in
indexation in pension increases from RPI to CPI.
Key management personnel compensation
Emoluments of the directors, who are the group's key management,
were:
2022 2021
GBP000 GBP000
======================================= ======= ================
Aggregate emoluments including bonuses 1,176 1,092
Defined contribution scheme costs 4 14
======================================= ======= ================
1,180 1,106
======================================= ======= ================
Emoluments of the highest paid director including bonuses were:
GBP528,000 (2021: GBP439,000).
One director (2021: one) has a deferred pension from the defined
benefit pension schemes which closed to future accrual in 2015.
There are currently two directors (2021: two) under a defined
contribution scheme
The monthly average number of persons, including the directors,
employed by the group during the year was as follows:
2022 2021
No. No.
=============================== ============================================= ==============
Operations 429 416
Management and Administration 572 570
=============================== ============================================= ==============
1,001 986
=============================== ============================================= ==============
5. Finance income and expense
2022 2021
GBP000 GBP000
Finance income
Interest receivable on bank balances and short-term
deposits 13 59
Interest receivable from group companies - 2,273
Net interest income on defined benefit asset 692 761
-------- --------
Total finance income 705 3,093
-------- --------
Finance expense
Debenture interest 42 30
Effective interest on listed debt 13,997 13,755
Interest on lease liabilities 100 128
Financing guarantee fees 1,291 949
Bank interest and other finance charges 8,419 8,350
Amortisation of loan issue costs 624 616
Indexation on variable rate bonds 13,563 2,383
Interest payable on index linked loans 13,114 12,745
Indexation on index linked loans 18,601 6,694
Interest capitalised (2,186) (2,694)
-------- --------
Total finance expense 67,565 42,956
-------- --------
Interest is capitalised at the weighted average rate of interest
on the group senior long-term debt of 3.7 per cent (2021: 3.7 per
cent).
Indexation on index linked bonds and loans are higher due to the
increased inflation and higher RPI compared to prior year.
6. Taxation expense
6.1 Income tax recognised in profit or loss
2022 2021
Group GBP000 GBP000
=============================================== ======= ===============
Current tax
Current tax on profits for the year 1,476 2,855
Adjustments in respect of prior years (894) (232)
=============================================== ======= ===============
Total current tax 582 2,623
=============================================== ======= ===============
Deferred tax expense
Origination and reversal of timing differences 1,383 4,495
Adjustments in respect of prior years 3,091 (775)
Impact of rate change 40,824 -
=============================================== ======= ===============
Total deferred tax 45,298 3,720
=============================================== ======= ===============
Total tax expense 45,880 6,343
=============================================== ======= ===============
Total tax expenses above consists of GBP45,877,000 (2021:
GBP6,339,000) for South East Water Limited and
GBP3,000 (2021: GBP4,000) for South East Water (Finance)
Limited.
The reasons for the difference between the actual tax charge for
the year and the standard rate of corporation tax in the United
Kingdom applied to profits for the year are as follows:
2022 2021
Group GBP000 GBP000
================================================ ============================= ================
Profit before income taxes 16,970 37,659
Tax using the company's domestic tax rate
of 19% (2021:19%) 3,224 7,155
Expenses not deductible for tax purposes,
other than goodwill,
amortisation and impairment 607 130
Adjustments to current tax charge in respect
of prior periods (894) (232)
Adjustments to deferred tax charge in respect
of prior years 3,091 (775)
Tax effect of income not taxable in determining
taxable profit (972) 137
Other - research and development depreciation
allowed - (72)
Impact of rate change 40,824 -
================================================ ============================= ================
Total tax expense 45,880 6,343
================================================ ============================= ================
As enacted by the Finance Act 2021, the main rate of UK
corporation tax increases from 19 per cent to 25 per cent,
effective 1 April 2023. The impact of the change in corporation tax
has been included in the deferred tax liability. The total impact
amounts to GBP52.7 million, of which GBP40.8 million is charged to
the income statement; a liability of GBP13.5 million relating to
revaluation reserves is charged directly to equity and an asset of
GBP1.6 million relating to pension is recognised in other
comprehensive income.
The deferred tax on temporary differences as at 31 March 2022
have been calculated using 25 per cent, the enacted future rate for
the periods during which the temporary differences are expected to
unwind.
The adjustments to current and deferred tax charge in respect of
previous years represent the changes between the prior year
financial statements and the prior year tax computations submitted.
The expenses not deductible for tax purposes are primarily driven
by the movement on general provisions, non-deductible entertainment
expenditure, and depreciation on non-qualifying capital
expenditure.
Changes in tax rates and factors affecting the future tax
charges
The UK Government's Budget announcement to grant 130 per cent
super-deduction capital allowance for qualifying plant and
machinery (and 50 per cent allowance for special rate assets)
expenditures from 1 April 2021 provides greater incentive to boost
capital allowance availability to mitigate future tax charges.
Notes to the group financial statements
for the year ended 31 March 2022
6. Taxation expense continued
6.2 Income tax recognised directly in equity
2022 2021
GBP000 GBP000
Deferred tax
Impact on deferred tax rate change on revaluation (13,551) -
reserve
--------- --------
The impact of the rate change in respect of revaluation reserves
amounts to GBP13.5 million, which is recognised directly in
equity.
6.3 Income tax recognised in other comprehensive income
2022 2021
Group GBP000 GBP000
================================================= ========================== ================
Deferred tax
Deferred tax on defined benefit pension schemes (4,352) (2,844)
Impact of deferred tax rate change in respect
of pension schemes 1,639 -
================================================= ========================== ================
(2,713) (2,844)
================================================= ========================== ================
The net liability recognised in other comprehensive income at 31
March 2022 of GBP2.7 million (2021: GBP2.8 million net asset)
consists of a liability of GBP4.3 million relating to pension
valuation and an asset of GBP1.6 million relating to the impact of
rate change on pension that goes to equity.
6.4 Deferred tax balances
The following is the analysis of deferred tax
(assets)/liabilities presented in the consolidated statement of
financial position:
2022 2021
Group GBP000 GBP000
========================= ======= =================
Deferred tax liabilities 228,790 167,228
========================= ======= =================
Recognised Recognised
Opening in profit Recognised directly Closing
balance or loss in OCI in equity balance
GBP000 GBP000 GBP000 GBP000 GBP000
2022
Deferred tax liabilities/(assets) in
relation to:
Property, plant and equipment 161,330 2,976 - - 164,306
Impact of rate change
on property, plant and
equipment - 37,314 - 13,551 50,865
General provision - NI
& incentive plan (29) 29 - - -
Remeasurement if defined
benefit obligation 5,927 1,469 4,352 - 11,748
Impact of deferred tax
rate change in respect
of pension scheme - 3,510 -1,639 - 1,871
---------- ----------- ------------- ----------- ----------
167,228 45,298 2,713 (13,551) 228,790
---------- ----------- ------------- ----------- ----------
Notes to the group financial statements
for the year ended 31 March 2022
6. Taxation expense continued
6.5 Deferred tax balances continued
Recognised
in other
Opening Recognised comprehensive Closing
balance in profit income balance
Group GBP000 or loss GBP000 GBP000
GBP000
======================================= ============== ============== ======================== ============
2021 Deferred tax liabilities/(assets)
in relation to:
Property, plant and equipment 160,319 1,011 - 161,330
General provisions - NI & Incentive
plan (198) 169 - (29)
Remeasurement of defined benefit
obligation 6,231 2,540 (2,844) 5,927
======================================= ============== ============== ======================== ============
166,352 3,720 (2,844) 167,228
======================================= ============== ============== ======================== ============
Deferred tax assets and liabilities are only offset where there
is a legally enforceable right of offset and there is an intention
to settle the balances net. All of the deferred tax assets were
available for offset against deferred tax liabilities and hence the
net deferred tax liability at 31 March 2022 was GBP228.8 million
(2021: GBP167.2 million).
Temporary timing differences
All temporary timing differences are recognised in the deferred
tax calculation.
The total amount of Tangible Fixed Assets (TFA) for R&D
claims recognised in deferred tax asset for the year ended 31 March
2022 is GBP169,000 (2021: GBP236,000).
7. Dividends
2022 2021
GBP000 GBP000
================================================== ================= =================
Interim dividend of 4.56 pence (2021: 5.58 pence)
per Ordinary share paid during the year 2,250 2,750
Interim dividend of 4.56 pence (2021: 5.58 pence)
per Ordinary share paid during the year 2,250 2,750
Interim dividend of 4.56 pence (2021: 5.58 pence)
per Ordinary share paid during the year 2,250 2,750
Special restructuring dividend of 275.8 pence
per Ordinary share paid during 2020/2021 - 136,013
Final dividend of 4.56 pence (2021: 5.58 pence)
per Ordinary share paid during the year 2,250 2,750
================================================== ================= =================
9,000 147,013
================================================== ================= =================
There were no dividends proposed for approval as at 31 March
2022 and 31 March 2021.
The company issued a special restructuring dividend of GBP136
million in December 2020 to its parent company South East Water
Holdings. These funds were used by the parent company to repay its
intercompany loan to South East Water Limited on the same day
resulting in a net nil cash impact.
8. Earnings per share
2022 2021
Group GBP000 GBP000
=========================================== ================================== ================
(Loss)/profit for the year from continuing
operations (28,910) 31,316
=========================================== ================================== ================
2022 2021
Number Number
========================================== ================================ =============
Basic and diluted weighted average number
of shares 49,312,354 49,312,354
========================================== ================================ =============
2022 2021
Pence Pence
========================================== ========================= =============
Basic and diluted earnings per share from
continuing operations (58.63p) 63.51p
========================================== ========================= =============
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END
FR SFWFIIEESEIW
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