RNS Number:2747M
Mid Kent Water PLC
12 June 2003
Mid Kent Water plc
Preliminary results
for the year to 31 March 2003
Chairman's Statement
Introduction
This year has seen continuing operational improvement and changes within the
activities of Mid Kent Water plc. Since my appointment as Chairman in March
2003, following the resignation of Keith Tozzi, I have been determined to see
the Company strive for even greater innovation and improvement.
A major restructuring programme has been undertaken during the year which has
delivered significant improvement in processes, quality of service and
operational efficiencies. At the same time, we have introduced new management
training programmes and increased our intake of graduates - both essential for
our future success.
Results
Turnover for the year was #41.1m, an increase of 6.2% from #38.7m. Water income
increased by 2.5% on last year reflecting a water price rise of 4.07% as allowed
by OFWAT, the Water Industry Regulator, offset by the impact of metering and a
reduction in the metered volume of water actually taken. Additional turnover was
generated by a further increase in our commercial (non regulated) activities.
Operating profit would have been #13.8m before restructuring and refinancing
costs of #2.3m, set out in note 3, compared with #14.2m for last year.
Additional charges for depreciation associated with the maintenance of the
infrastructure and additional provision for bad debts, together amounting to
#1.3m, have been incurred in the year.
Net interest payable has increased from #4.3m to #5.9m, reflecting the increased
borrowing as a result of refinancing.
There have been a number of significant disposals of surplus property and land,
which have resulted in a profit of #1.9m (2002: #0.5m).
Refinancing and dividends
In December, the Company restructured its balance sheet and has replaced the
bulk of its previous borrowing with long term debt funded by way of an index
linked 30 year loan.
As part of this process, the Company has paid a one-off restructuring dividend
of #26.8m. A second interim dividend of 16.85p per share (2002: 14.16p per
share) was paid on 25 April 2003.
The Company's dividend policy is to limit its distributions to its parent
company by reference to performance and customer service standards, in addition
to any other restrictions imposed under the terms of the new loan arrangements.
Capital expenditure
Cash payments for capital expenditure in the year amounted to #22.0m compared to
#28.5m last year. A new treatment plant at Goudhurst and a new granular
activated carbon process at our only surface water treatment facility at Bewl
have both been commissioned ahead of the Drinking Water Inspectorate milestone
dates.
84km of mains were either relined or replaced in the year. This is part of our
mains rehabilitation project which was underpinned by an undertaking given to
the Drinking Water Inspectorate on behalf of the Secretary of State. A new
undertaking has now been signed which will enable the Company to complete its
rehabilitation programme. This includes the relining of 26km of trunk mains over
the next two years.
Water quality
The quality of water at our customer's taps continues to improve, with expected
compliance for 2002 being 99.89% compared with 99.84% for the previous year.
Non regulated activity
We have continued to refocus our contracted services for the industrial and
commercial market place and have delivered a contract for rehabilitation works
outside our supply area with a value in excess of #0.5m. The re-branding of the
Company was launched in September, and this has enabled us to develop further
water related activity within the Mid Kent area, including a dedicated plumbing
service to domestic households.
Community
We continue to play our part in both the local and wider community through
advice and participation in local events and through involvement in the
worldwide charity, WaterAid.
Price review 2004
In 2004, OFWAT will be setting price limits for water and sewerage companies for
2005-2010. We are currently preparing our business plan for submission to OFWAT
in August of this year. The plan will set out our view on future prices and
appropriate levels of service necessary to balance the needs of our customers
and other stakeholders.
Employees
Our employees continue to be dedicated and committed. They have experienced a
year of considerable change whilst continuing to deliver improved services to
our customers. I would like to take the opportunity to thank them for their
combined hard work and support.
Bob Atwood
Chairman
12 June 2003
Profit and loss account
Year ended 31 March 2003
Notes 2003 2002
#000 #000
2 Turnover 41,116 38,710
Operating costs (29,622) (24,478)
------------------------------ ----------- -----------
3 Operating profit 11,494 14,232
Profit on sale of fixed assets 1,931 477
------------------------------ ----------- -----------
Profit on ordinary activities before 13,425 14,709
interest
Interest receivable and similar 863 106
income
Interest payable and similar (6,800) (4,357)
charges ----------- -----------
------------------------------
Profit on ordinary activities before 7,488 10,458
taxation
4 Tax on profit on ordinary (2,764) (1,464)
activities ----------- -----------
------------------------------
Profit on ordinary activities after 4,724 8,994
taxation
5 Dividends paid and proposed (29,892) (4,402)
------------------------------ ----------- -----------
Retained (loss)/profit for the year (25,168) 4,592
6 Earnings per ordinary share - basic 25.3p 48.2p
------------------------------ ----------- -----------
5 Dividends per ordinary share 160.31p 23.61p
------------------------------ ----------- -----------
Summarised balance sheet
At 31 March 2003
2003 2002
#000 #000
Fixed assets
Tangible assets 161,763 151,978
Current assets
Stocks 681 567
Debtors 46,157 7,922
Investments 14,928 -
Cash at bank and in hand 1,572 1,370
63,338 9,859
Creditors: amounts falling due within one (35,752) (33,200)
year
Net current assets/(liabilities) 27,586 (23,341)
Total assets less current liabilities 189,349 128,637
Creditors: amounts falling due after more than (144,059) (56,107)
one year
Provision for liabilities and charges (10,826) (12,898)
------------------------------- ----------- -----------
Net assets 34,464 59,632
Capital and reserves
Attributable to equity interests
Called up ordinary share capital 18,646 18,646
Profit and loss account 15,818 40,986
------------------------------- ----------- -----------
Equity shareholders' funds 34,464 59,632
------------------------------- ----------- -----------
Summarised cash flow statement
Year ended 31 March 2003
2003 2002
#000 #000
Net cash inflow from operating activities 15,034 17,727
Returns on investments and servicing of (7,590) (4,009)
finance
Taxation (840) 682
Net capital expenditure (16,253) (27,456)
Equity dividends paid (29,388) (4,283)
----------------------------------- ----------- -----------
Cash outflow before management of liquid (39,037) (17,339)
resources and financing
Management of liquid resources (14,928) -
Financing 54,167 13,525
----------------------------------- ----------- -----------
Increase/(decrease) in cash in the year 202 (3,814)
----------------------------------- ----------- -----------
Notes 7 to 10 are part of this statement.
NOTES
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 2002.
ii. *The information shown for the years ended 31 March 2003 and 31 March 2002
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 2003 and 31 March 2002 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 2002 have been filed with the Registrar
of Companies. The accounts for the year ended 31 March 2003 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 12 June 2003.
2 Analysis of turnover
2003 2002
#000 #000
Unmeasured supplies 21,144 21,200
Measured supplies 15,595 14,645
Other activities 4,377 2,865
-------------------------------- ----------- -----------
41,116 38,710
-------------------------------- ----------- -----------
3 Operating profit
2003 2002
#000 #000
-------------------------------- ----------- -----------
Operating profit is stated after charging
Refinancing costs 751 -
Restructuring costs 1,536 -
-------------------------------- ----------- -----------
4 Corporation tax
-------------------------------- -------------------
2003 2002
#000 #000
-------------------------------- ----------- -----------
Current tax
UK Corporation tax - 1,878
-------------------------------- ----------- -----------
Tax under/(over) provided in previous years 1,625 (1,208)
Group relief surrendered by other group 3,211 -
undertakings ----------- -----------
--------------------------------
4,836 670
Deferred tax
Discounted origination and reversal of timing (2,072) 794
differences ----------- -----------
--------------------------------
2,764 1,464
-------------------------------- ----------- -----------
5 Dividends
A second interim dividend of 16.85p per ordinary share in respect of
the year ended 31 March 2003 was paid on 25 April 2003 to shareholders
on the register at 22 April 2003. The second interim dividend is in
addition to the interim dividend of 143.46p, already paid, making a
total of 160.31p for the year. This compares with a second interim
dividend last year of 14.16p and an interim dividend of 9.45p, making a
total of 23.61p for that year. No final dividend is proposed.
6 Earnings per ordinary share - basic
Earnings per ordinary share are calculated on the profit for the year of
#4,724,000 (2002: #8,994,000) and the weighted average number of shares
in issue of 18,646,142 (2002: 18,646,142).
7 Reconciliation of operating profit to net cash inflow from operating
activities
2003 2002
#000 #000
Operating profit 11,494 14,232
Depreciation charge 7,866 6,637
Increase in stocks (114) (108)
Increase in debtors (2,933) (249)
Decrease in creditors (1,279) (2,785)
-------------------------------- ----------- -----------
15,034 17,727
-------------------------------- ----------- -----------
8 Analysis of cash flows for headings netted in cash flow statement
2003 2002
#000 #000
Returns on investments and servicing of
finance
Interest received 223 106
Interest paid (5,355) (4,100)
Issue costs (2,450) -
Interest element of finance lease rental (8) (15)
payments ----------- -----------
--------------------------------
(7,590) (4,009)
-------------------------------- ----------- -----------
Net capital expenditure
Purchase of tangible fixed assets (22,016) (28,473)
Contributions to infrastructure assets 3,120 805
Sale of tangible fixed assets 2,643 212
-------------------------------- ----------- -----------
(16,253) (27,456)
-------------------------------- ----------- -----------
Management of liquid resources
Cash deposits (14,928) -
-------------------------------- ----------- -----------
Financing
Capital element of finance lease rental (53) (75)
payments
Loans from other group undertakings (45,780) 13,600
Loan to parent undertaking (35,000) -
Index linked loan 135,000 -
-------------------------------- ----------- -----------
54,167 13,525
-------------------------------- ----------- -----------
9 Analysis of net debt
At At
1 April Cash flow Non-cash 31 March
changes
2002 #000 #000 2003
#000 #000
Cash at bank and in 1,370 202 - 1,572
hand
Short term deposits - 14,928 - 14,928
---------------------- --------- --------- --------- ---------
1,370 15,130 - 16,500
Finance leases (53) 53 - -
Loans from other group (51,600) 45,780 - (5,820)
undertakings
Loan to parent - 35,000 - 35,000
undertaking
Index linked loan - (135,000) (1,203) (136,203)
Issue costs - 2,450 (25) 2,425
Debenture stock (4,461) - - (4,461)
---------------------- --------- --------- --------- ---------
(54,744) (36,587) (1,228) (92,559)
---------------------- --------- --------- --------- ---------
10 Reconciliation of net cash flow to movements in net debt
2003 2002
#000 #000
Increase/(decrease) in cash in the year 202 (3,814)
Cash inflow from increase in debt and lease
financing (net of issue costs paid of
#2,450,000)
(51,717) (13,525)
Cash outflow from increase in liquid 14,928 -
resources
Movement in net debt resulting from cash (36,587) (17,339)
flows
Loan indexation (1,203) -
Amortisation of loan issue costs (25) -
Net debt at 1 April (54,744) (37,405)
--------------------------------- ----------- ----------
Net debt at 31 March (92,559) (54,744)
--------------------------------- ----------- ----------
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