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TIDMDVW
RNS Number : 2273F
Dee Valley Group PLC
13 June 2012
DEE VALLEY GROUP plc ("Dee Valley" or the "Group")
Annual Results Announcement
Year ended 31 March 2012
Summary 2012 2011
Revenue (GBP000) 22,100 21,347
--------
Profit before depreciation and finance costs
(GBP000) 12,206 11,309
Profit before tax (GBP000) 3,421 4,002
Profit after tax (GBP000) 3,926 4,228
Basic earnings per ordinary share (pence) 84.8 91.3
----------------------------------------------- -------- --------
Total dividend per ordinary share (pence) 60.5 58.4
----------------------------------------------- -------- --------
Highlights
-- Leakage target achieved
-- Continued high customer satisfaction
-- Rebuilding of Llwyn Onn treatment works progressing on programme
-- Operating costs reduced
-- Total dividend for the year increased by 3.6% from 58.4p to 60.5p per share
Enquiries
Dee Valley Group plc Norman Holladay (Managing Director)
Tel. 01978 846946 David Guest (Finance Director)
Investec Investment Banking Jeremy Ellis
Tel. 020 7597 5970
Chairman's Statement
"The Company has had another successful year of providing good quality water to its customers at some of the lowest prices in the industry."
Financial Results
Revenue in the year ended 31 March 2012 increased by 3.5% to GBP22.1 million. The increase was less than the annual average increase in prices of 5.3% due to a decrease in consumption in both commercial/industrial and domestic sectors. The effect of household customers continuing to switch from the unmeasured tariff to measured charging during the year also contributed to the difference.
Operating costs for the year reduced by 0.9% to GBP11.8 million, largely due to the absence of severe conditions in winter, which had been the cause of higher costs in the previous year.
Profit before depreciation and finance costs increased by GBP0.9 million to GBP12.2 million. However, an accelerated GBP1.5 million depreciation charge due to the rebuilding of the Llwyn Onn treatment works meant that profit before tax reduced by GBP0.6 million to GBP3.4 million.
Despite the reduction in pre-tax profit, earnings per share only fell by 7% owing to an increase in the current year tax credit relating to capital allowances claimed in previous years.
Dividend
The Board recommends a final dividend of 41.4p which, together with the interim dividend of 19.1p, makes a total for the year of 60.5p (2011 - 58.4p). The final dividend will be paid on 2 August 2012 to shareholders on the register at the close of business on 6 July 2012.
In setting the dividend, the Board has had regard to its policy of increasing annual dividends by at least inflation during the period 2010-2015.
Capital Expenditure
Gross capital investment in the year, the second of the current five-year investment programme, increased to GBP9.0 million compared to GBP3.4 million in the previous year. The increase was due to the move into the construction phase of the contract for the rebuilding of Llwyn Onn treatment works.
Regulation
The review of the water industry in England and Wales continued during the year. Some aspects of how Ofwat regulates water companies have already changed, such as the reporting process by which it ensures companies comply with their regulatory obligations. Other aspects are under consideration. Both Westminster and Welsh Governments are in the process of formulating new strategies for the management of water.
I look forward to the uncertainty about changes to the water industry reducing in the coming year as the various consultations come to an end and Ofwat, governments and others put their plans for the future into practice.
People
I was pleased to see 4 new apprentices join Dee Valley Water during the year. Careful succession planning of the various specialised skills in a company such as this is vital for its continued successful operation. At board level, there is an agreed succession plan for the orderly retirements of both executive and non-executive directors.
Finally, I would like to thank all of the staff for their skill, commitment and effort that has contributed so much to another successful year.
Graham Scott
Chairman
Operating and Financial Review
Operating Review
Overview
The Group's operating company is Dee Valley Water plc, which is a licensed water company. It operates in an area of 835 square kilometres in north east Wales and west Cheshire centred on Wrexham and Chester. Dee Valley Water supplies potable water to 110,000 households and 8,000 commercial, industrial and business customers. It also provides non-potable water to some industrial customers.
The main source of raw water is the River Dee, with the remainder coming from eight local impounding reservoirs and two underground sources. The table below shows the quantities abstracted from the sources during the year.
Abstracted Percentage
-------------------------
Source (Million Litres) of Supply
------------------------- ----------------- -----------
River Dee 20,864 87%
Local upland reservoirs 1,667 7%
Springs and boreholes 1,462 6%
------------------------- ----------------- -----------
Total 23,993 100%
------------------------- ----------------- -----------
Dee Valley Water is a water-only company. It does not provide sewerage services although it does bill customers for these services on behalf of the providers.
Water is treated to the required high standards at six treatment works. The quantity treated at each of the treatment works during the year is shown in the table below. It is then distributed through a network of almost 2,000 kilometres of pipes that vary in diameter up to 800 millimetres. The age of the pipe network reflects the historic roots of the original water undertakings that have been amalgamated over the years to form Dee Valley Water, with some pipes laid in the 1860s still in use today.
Treated Percentage
-----------------
Treatment Works (Million Litres/Day) of Supply
----------------- --------------------- -----------
Llwyn Onn 28.4 46%
Boughton 21.1 34%
Legacy 7.1 11%
Oerog 2.7 4%
Pendinas 1.9 3%
Plemstall 1.2 2%
Total 62.4 100%
----------------- --------------------- -----------
As a monopoly water supplier in its area, Dee Valley Water is subject to strict regulation covering financial, water quality and environmental aspects of the business. Ofwat is the economic regulator responsible for financial regulation and ensuring customers receive a good quality service and value for money. The Drinking Water Inspectorate is the regulator responsible for ensuring that water is safe to drink and acceptable to customers. The Environment Agency controls the interface with the environment, ensuring in particular that abstractions from and discharges to water bodies are within licensed limits.
Dee Valley Water operates mainly in Wales and is therefore responsible to the Welsh Government which has devolved powers and provides the strategic direction for water policy in Wales. Dee Valley Water also works with the Consumer Council for Water, which represents water consumers' interests, and the Countryside Council for Wales and Natural England on issues relating to protecting the natural environment.
Every five years, Ofwat determines limits on the prices that water companies can charge their customers for the five years following a periodic review process. The basis of the price limits is that they will be sufficient for an efficiently-run company to adequately remunerate its investors. Price limits for the period from April 2010 to March 2015 (known as the AMP5 period) were determined in November 2009. The period that this Announcement covers is therefore the second year of the current five-year period.
Regulation
This is a period of change for the water industry in England and Wales. The pressure for change has come from several directions although it is most commonly said that now, being some 23 years after privatisation of the industry, is an appropriate time to consider whether the industry is still suitable for the challenges ahead. There is no suggestion that the regulatory framework has not been successful to date, only that it might not be able to cope with the expected challenges of climate change, growing demand for dwindling water resources and affordability.
In December, in its White Paper "Water for Life", Defra set out the Government's vision for future water management. Changes proposed include extending retail competition to business customers in England, reform of the upstream water trading and abstraction regimes and a loosening of the special regime that restricts water company mergers. The Welsh Government is due to publish its own water strategy paper later this year, which will be more relevant to Dee Valley Water.
Ofwat is changing the way in which it regulates water companies. It has dispensed with the data intensive return (the "June return") that companies were required to submit annually, and replaced it with a risk-based approach to regulation. Companies are also required to publish annually a suite of key performance indicators covering service to customers, performance of operational assets, environmental impact and financial health.
The outcome of Ofwat's current review of the process for setting price limits at the next periodic review and beyond will be important for Dee Valley Water. One confirmed change is the requirement for greater customer involvement than previously in the price setting process to ensure local issues and priorities are properly reflected. This emphasis on local issues should play to Dee Valley Water's strength as a small, community-focused company. With planning for the next periodic review already in progress, Dee Valley Water is setting up an independently-chaired panel to advise and challenge its customer engagement and business planning process.
Operational Performance
Dee Valley Water's performance in the reporting year as measured by the new performance indicators prescribed by Ofwat is tabulated below.
Key Performance Indicators
The indicators are grouped into four high-level areas providing a broad overview of the performance of Dee Valley Water.
KPI Performance Status Measurement
Customer experience
Service incentive mechanism 70 Green Score
(SIM)
Water supply interruptions 0.2 Green Hours per properties
served
Reliability and availability
Serviceability water non-infrastructure Stable Green
Serviceability water infrastructure Marginal Amber
Leakage 8.5 Green Million litres per
day
Security of supply index 100 Green Index score
(SoSI)
Environmental impact
Greenhouse gas (GHG) emissions 9.7 Green ktCO2e
Pollution incidents (water) 0 Green Category 1-3 incidents
per 1,000 km of main
Financial
Gearing 69%
Interest cover 3.1
Against the important Service Incentive Mechanism ("SIM") indicator, which measures the customer experience through the number of complaints received by companies and customer satisfaction surveys, Dee Valley Water improved its score compared to the previous year. For the part of the assessment based on satisfaction surveys, Dee Valley Water was ranked 6th out of the 21 companies.
There were no water resource problems during the year despite 2011 having amongst the lowest rainfall totals on record and the dry start to 2012. The overall leakage target agreed with Ofwat for the year was achieved.
2011/12
------------------------ -----------------------
Target Actual Performance
------------------------ -----------------------
Average leakage of 10.2 Average leakage of 8.5
Ml/day Ml/day
------------------------ -----------------------
Overall consumption of water reduced by about 2.7% compared to the previous year. This follows the 1.1% increase in the previous year. Whilst there was reduced consumption in both the commercial/industrial and domestic sectors, the reduction was more marked in the commercial/industrial sector. About 930 new properties were connected to Dee Valley Water's network during the year, an increase of about 200 on the previous year.
The uptake by unmetered customers of the option of having a water meter fitted free of charge continued steadily through the year. 52% of the households in Dee Valley Water's area are now metered.
The quality of water supplied remained at a high level with an overall compliance rate with regulatory standards of 99.93% in 2011, which was an improvement on the previous year.
Capital Investment
In this second year of the five-year investment planning cycle, capital expenditure increased significantly to GBP9.0 million (GBP8.0 million net of third party contributions). This increase was as planned and mainly due to the contract for the rebuilding of Llwyn Onn treatment works entering its construction stage. Expenditure on this important project was GBP5.0 million in the year and completion remains on programme for April 2013.
Renewal of water mains, the other significant capital expenditure scheme in the five-year programme, continued although mainlaying resources had to be redirected for part of the year to work diverting large mains as part of Wrexham Council's major road diversion scheme for the Wrexham Industrial Estate. Other significant capital expenditure projects included replacement of the water tank roof at the top of the water tower in Chester and a replacement telephone system to help improve customer service.
Risks
Significant risks to the business are listed in a risk register which also identifies the scale of each risk and its control measure. Risks are considered across the various areas of Dee Valley Water's business and its responsibilities as follows:
-- Health and safety
-- Environmental
-- Operational
-- Reputation and image
-- Business and financial
-- Regulatory and statutory
The risk register is kept under regular review to take account of changing circumstances and experience. The Board reviews the risk register and management strategy at regular intervals during the year and monitors indicators of risk level and key failure modes monthly. The risk indicators are similar to the key performance indicators that Ofwat requires water companies to publish annually, as described in this Review.
Many of the major risks are operational, being associated with the potential for water quality failures or interruptions of supply to customers, although they could also have severe reputational, financial or legal consequences. Management of these operational risks is largely based on control measures such as procedures and method statements which are well-developed, although other mitigations such as capital investment interventions also have an important part to play.
The risk of water quality failures is addressed by a drinking water safety plan which ensures the safety of drinking water through all the steps in the water supply process from catchment to consumer by means of a specific and comprehensive risk assessment and risk management process. Some risk mitigations identified in the plan then feed into the capital investment strategy. Management of the drinking water safety plan is overseen by an internal Water Quality Management Group that meets quarterly and is chaired by the Managing Director.
Asset failures are a major risk to Dee Valley Water's ability to maintain a continuous supply of good quality water to its customers. The risks associated with failure of various assets such as water pipes and treatment works are therefore considered in considerable depth in the development of the capital investment strategy and were significant drivers for the current major investments in the rebuilding of the Llwyn Onn treatment works and the mains renewal scheme referred to in this Review.
Another significant operational risk identified in the risk register is the potential flooding of a vital river intake. The mitigation for this is a flood protection scheme, which is another project included in the current five-year investment programme.
A new risk to emerge during the year relates to the uncertainty around the regulatory changes currently under consideration and being implemented, as described in this Review. One adverse consequence could be that Dee Valley Water suffers from an inadequate price limits settlement at the next review in 2014 by not adapting to a changed framework. At this stage, close monitoring of developments is required but other measures might become necessary as the picture becomes clearer.
Risks are considered not only at the strategic level but also at the level of individual operational activity. To guard against serious consequences arising from activities which are not routine, and therefore not covered by standard operating procedures, they are individually risk assessed.
Financial risks include volatility of costs of electricity and pensions. The uncertainty about electricity costs has been partly mitigated as 65% of the Group's expected consumption has now been contracted up to 2015.
Environment
Dee Valley Water's aim is to reduce, as far as possible, the adverse effect of its operations on the environment. Water abstraction from rivers is kept to a minimum by ensuring that leakage levels are maintained at the lowest economic level. Leakage targets are kept under review taking account of both social and carbon costs. Dee Valley Water also actively promotes efficient water use by its customers to minimise consumption of water.
Much of the material excavated during activities such as pipe-laying is reused after suitable onsite treatment rather than it being sent to landfill. Recyclable material is segregated from normal waste with a consequent reduction in disposal costs.
The treatment and distribution of water uses a considerable amount of energy. An energy reduction strategy has therefore been introduced during the year with a target of a 10% decrease in energy use by 2013/14. Reductions in energy and associated carbon emissions are being targeted through all areas of the business. Energy usage was cut by 17% within the first year at the Packsaddle headquarters site. Some of the capital schemes planned for this five year period will provide the opportunity to replace existing inefficient pumping plant with more energy efficient equipment that will make the most significant contributions to achieving the target. Energy savings will also make a contribution towards the savings target for operating costs.
As a principle, Dee Valley Water factors the cost of carbon emissions into investment planning so that it is taken into account fully in the decision-making process.
Relationships
Customers
As a small, locally-based company, Dee Valley Water's relationship with its customers is fundamental to its overall strategy and sets it apart from larger water companies.
Dee Valley Water aims to provide a personal service in all aspects of its dealings with customers, ensuring that all enquiries and complaints are dealt with in a fair and prompt manner. Customers telephoning in are offered direct contact with knowledgeable employees and appointment times are agreed when there is a need to visit their premises. This applies to all customers from large industrial to single household customers. All written complaints from customers are answered personally by either the Managing Director or the Finance Director.
The Consumer Council for Water audits a sample of the written complaints received by Dee Valley Water and scores the quality of response. During the year, 100% of the sample was rated as good.
Quality of response to written complaints
from customers 10/11 11/12
------------------------------------------- ------ ------
Good 96% 100%
Acceptable - -
Not acceptable 4% -
------------------------------------------- ------ ------
Employees
The average number of employees during the year was 159. Of these, 48 are in the Services Division, which is the in-house contracting arm of Dee Valley Water.
No. of employees 05/06 06/07 07/08 08/09 09/10 10/11 11/12
------------------- ------ ------ ------ ------ ------ ------ -----
Dee Valley Water 109 109 113 115 118 114 111
Services Division 58 57 56 56 55 51 48
------------------- ------ ------ ------ ------ ------ ------ -----
Total 167 166 169 171 173 165 159
------------------- ------ ------ ------ ------ ------ ------ -----
Dee Valley Water has well-developed policies covering all aspects of its relationship with its employees. The aim is to be able to recruit and retain employees with a broad range of skills, experience and background and to provide them with opportunities to enhance and develop their skills by training, so equipping them with the tools required to be successful in their roles at Dee Valley Water.
Dee Valley Water monitors, measures and investigates all accidents in the workplace and these are discussed at two-monthly meetings of the Health & Safety Committee that are chaired by the Managing Director. Health & safety performance is also monitored at Dee Valley Water's monthly Board meetings.
The total number of reportable accidents during the year was four. The associated time lost reduced to 5 days from 29.5 days in the previous year.
Employees' attendance at work is monitored continually as a measure of general health, morale and motivation.
Regulators
Dee Valley Water has developed and maintains good working relationships with the water industry's various regulatory bodies and increased its engagement with the Welsh Government during the year in order to contribute to its strategy development. Dee Valley Water also works closely with local authorities on matters such as planning and working in highways.
Suppliers
Dee Valley Water maintains good relationships with its suppliers.
Financial Review
Financial Position
The balance sheet shows an increase in net assets of GBP1.7 million over the reporting period. The major portion of this was the net profit for the year less dividends paid. There was also a significant movement in other receivables owing to VAT input tax due on the Llwyn Onn project and to a corporation tax refund due. This follows agreement on the capital allowances due on the expenditure in refurbishing the Boughton treatment works during the period 2008 to 2010. In addition, accruals in "trade and other payables" increased by GBP2.1 million as a result of capital expenditure accruals relating to the Llwyn Onn project currently in progress.
Depreciation in the year includes an additional charge of GBP1.5 million relating to a reassessment of the useful lives of assets at Llwyn Onn that will be taken out of use and disposed of once the new treatment works is completed and operational.
Cash Flows
Net cash flow showed a small increase of approximately GBP0.2 million over the year. This represented a decrease of almost GBP3.2 million when compared to the previous year's net cash flow of GBP3.4 million. The main reason for the reduction was the increase in capital expenditure of GBP3.7 million, relating to greater levels of activity on the Llwyn Onn project.
In summary, net cash flow from operating activities (GBP8.9 million) was absorbed by capital expenditure (GBP6.0 million) and dividends (GBP2.7 million) leaving a small cash surplus of GBP0.2 million. The higher capital expenditure was financed through internal resources without the need to borrow under the revolving credit facility.
Operating Costs
Operating costs for the year ended 31 March 2012 reduced by GBP108,000 (0.9%) to GBP11.8 million. The absence of severe freezing conditions in winter, which had been the cause of increased operational costs in the previous year, contributed GBP143,000 of direct costs to this improvement. Pension service costs in the year reduced by GBP125,000 as a result of an increase in the applicable real discount rate from 1.6% to 2.5%. Of this increase of 0.9%, 0.7% related to the adoption of CPI rather than RPI as the appropriate basis for measuring inflation (note 12).
The charge for bad debts increased by GBP79,000 in the year, but is still below 2% of revenue. Power costs also increased by GBP91,000. Carbon reduction commitment costs will be payable from next year and will add approximately GBP80,000 to operating costs. A restructuring to reduce costs and improve performance was concluded satisfactorily during the year and will result in annual savings in operating costs of GBP88,000 from the next financial year. The one-off charge for restructuring costs in the year is not material.
Capital Structure
The Group's capital structure was established in 2002 following a Scheme of Arrangement and return of funds to shareholders. In view of the stable and predictable nature of Dee Valley Water's cash flows, the Board considers that a high level of gearing is both appropriate and financially efficient.
Financing
The financing of capital expenditure is through retained earnings and drawings under a revolving credit facility. This facility of GBP9 million was renegotiated on improved terms during the first quarter of 2012 and is now committed until 2016. The interest rate is fixed at each drawdown. The majority of the Group's borrowings are at a fixed rate, although there is an exposure to the Retail Prices Index as a result of the index-linked nature of the long-term borrowings, which are repayable in 2032. The original loan was drawn down in 2002 for a sum of GBP35 million. By 31 March 2012, the total outstanding had increased to GBP47.4 million.
Liquidity
The Group finances its operations by a combination of retained profits, long-term debt and bank borrowings. The objective is to ensure continuity of funding whilst the policy is to arrange funding ahead of requirements and to maintain sufficient undrawn committed bank facilities. During the year, the Group was able to utilise its internal cash flow to fund capital expenditure, and did not need to draw down on the revolving credit facility either to fund capital expenditure or to meet the covenants on the index-linked long-term borrowings.
Borrowings are expected to reach a peak during 2012/13 coincident with the majority of the expenditure on rebuilding the Llwyn Onn treatment works, as discussed in the Chairman's Statement.
Other
There has been no change in accounting policies during the financial period. In respect of the carrying value of long life assets, the Directors continue to believe that asset lives are appropriate and similar to those adopted by comparator companies.
The assumptions underlying the calculation of liabilities of the Defined Benefit Pension Scheme represent the current central estimates recommended by the Group's actuarial advisers, bearing in mind the duration of the liabilities.
GROUP INCOME STATEMENT
for the year ended 31 March 2012
Notes 2012 2011
GBP000 GBP000
Revenue 22,100 21,347
Other operating income 1,882 1,846
Raw materials and consumables used (656) (669)
Employee benefits expense (4,405) (4,404)
Other operating expenses (6,715) (6,811)
Profit before depreciation and finance
costs 12,206 11,309
Depreciation (4,980) (3,535)
Finance income 4 2,519 2,470
Finance expenses 4 (6,324) (6,242)
Profit before tax 3,421 4,002
Taxation 5 505 226
Profit for the year 3,926 4,228
Basic and diluted earnings per ordinary
share 6 84.8p 91.3p
Dividends:
Interim paid 11 19.1p 18.1p
Final proposed 11 41.4p 40.3p
----------------------------------------- ------ -------- --------
Total 60.5p 58.4p
----------------------------------------- ------ -------- --------
All results arise from continuing
operations
GROUP STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2012
2012 2011
GBP000 GBP000
Profit for the year 3,926 4,228
Actuarial gain on defined benefit pension
scheme 483 5,888
Deferred tax charge on actuarial gain (116) (1,531)
Effect of change in corporation tax rate on 142 -
accumulated actuarial gains
--------------------------------------------- -------- -----------
Other comprehensive income for the year 509 4,357
--------------------------------------------- -------- -----------
Total comprehensive income for the year net
of tax 4,435 8,585
============================================= ======== ===========
GROUP BALANCE SHEET
as at 31 March 2012
Notes Group Group 2011
2012 GBP000
GBP000
ASSETS
Non-Current Assets
Goodwill 5,381 5,381
Property, plant and equipment 8 77,076 74,260
Retirement benefit surplus 12 4,965 3,999
Investments 2 2
87,424 83,642
Current Assets
Inventories - raw materials and
consumables 192 154
Trade receivables 2,694 2,605
Other receivables 2,412 1,869
Cash and cash equivalents 9,563 9,290
--------------------------------------- ------ -------- -----------
14,861 13,918
TOTAL ASSETS 102,285 97,560
======================================= ====== ======== ===========
LIABILITIES
Current Liabilities
Interest-bearing loans and borrowings 10 1,689 1,668
Trade and other payables 12,052 9,988
Current income tax liabilities 397 658
--------------------------------------- ------ -------- -----------
14,138 12,314
Non-Current Liabilities
Interest-bearing loans and borrowings 10 47,473 45,232
Deferred tax 15,907 16,930
--------------------------------------- ------ -------- -----------
63,380 62,162
TOTAL LIABILITIES 77,518 74,476
--------------------------------------- ------ -------- -----------
NET ASSETS 24,767 23,084
======================================= ====== ======== ===========
EQUITY
Issued share capital 232 232
Other reserves 5,964 5,924
Retained earnings 18,571 16,928
TOTAL EQUITY 24,767 23,084
======================================= ====== ======== ===========
GROUP STATEMENT OF CHANGES IN EQUITY
Share Capital Other Fair value Retained Total
capital redemption reserves reserve earnings equity
reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 April
2010 232 30,036 (32,316) 7,943 11,212 17,107
Total comprehensive
income for the year
Profit - - - - 4,228 4,228
Actuarial gain (net
of deferred tax) on
defined benefit pension
scheme - - - - 4,357 4,357
----------------------------- --------- ------------ ---------- ----------- ---------- --------
Total comprehensive
income for the year - - - - 8,585 8,585
----------------------------- --------- ------------ ---------- ----------- ---------- --------
Transactions with owners
of the Company, recognised
directly in equity
Contributions by, and
distributions to, owners
of the Company
Repayment of B shares - 261 - - (261) -
Dividends - - - - (2,608) (2,608)
----------------------------- --------- ------------ ---------- ----------- ---------- --------
Total contributions
by, and distributions
to, owners of the Company - 261 - - (2,869) (2,608)
----------------------------- --------- ------------ ---------- ----------- ---------- --------
Balance at 1 April
2011 232 30,297 (32,316) 7,943 16,928 23,084
Total comprehensive
income for the year
Profit - - - - 3,926 3,926
Actuarial gain (net
of deferred tax) on
defined benefit pension
scheme - - - - 509 509
----------------------------- --------- ------------ ---------- ----------- ---------- --------
Total comprehensive
income for the year - - - - 4,435 4,435
----------------------------- --------- ------------ ---------- ----------- ---------- --------
Transactions with owners
of the Company, recognised
directly in equity
Contributions by, and
distributions to, owners
of the Company
Repayment of B shares - 40 - - (40) -
Dividends - - - - (2,752) (2,752)
----------------------------- --------- ------------ ---------- ----------- ---------- --------
Total contributions
by, and distributions
to, owners of the Company - 40 - - (2,792) (2,752)
----------------------------- --------- ------------ ---------- ----------- ---------- --------
Balance at 31 March
2012 232 30,337 (32,316) 7,943 18,571 24,767
============================= ========= ============ ========== =========== ========== ========
GROUP CASH FLOW STATEMENT
for the year ended 31 March 2012
2012 2011
Notes GBP000 GBP000
Cash flows from operating activities
Profit before taxation 3,421 4,002
Adjustments for:
Depreciation 4,980 3,535
Loss on disposal of assets 151 164
Net finance costs 3,805 3,772
------------------------------------------- ------- -------- --------
12,357 11,473
(Increase) in inventories (38) (2)
(Increase)/decrease in trade &
other receivables (355) (190)
Increase in trade & other payables 158 347
(Increase) in retirement benefit
surplus (246) (134)
------------------------------------------- ------- -------- --------
Cash generated from operations 11,876 11,494
Interest paid (1,891) (1,779)
Tax paid (1,021) (982)
------------------------------------------- ------- -------- --------
Net cash from operating activities 8,964 8,733
------------------------------------------- ------- -------- --------
Cash flows from investing activities
Purchase of property plant and
equipment (7,069) (3,416)
Third party contributions 1,019 867
Proceeds from sale of property
plant and equipment 8 32
Interest received 82 49
------------------------------------------- ------- -------- --------
Net cash used in investing activities (5,960) (2,468)
------------------------------------------- ------- -------- --------
Cash flows from financing activities
Repayment of B shares (40) (261)
Equity dividends paid 11 (2,752) (2,608)
------------------------------------------- ------- -------- --------
Net cash used in financing activities (2,792) (2,869)
------------------------------------------- ------- -------- --------
Net increase in cash and cash equivalents 212 3,396
Cash and cash equivalents at beginning
of period 9,290 5,894
------------------------------------------- ------- -------- --------
Cash and cash equivalents at end
of period 9 9,502 9,290
=========================================== ======= ======== ========
Notes
1. The Board of Directors approved this annual results announcement
on 12 June 2012.
2. Basis of Preparation
The preparation of financial statements requires management
to make judgements, estimates and assumptions that affect
the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates. In preparing this
annual results announcement, 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 that applied to the consolidated financial statements
for the year ended 31 March 2011.
3. Accounting Policies
There has been no change in accounting policies from those
disclosed in the 2011 Annual Report.
4. Finance Income and Finance Expenses
2012 2011
GBP000 GBP000
Finance Income
Demand deposits 88 49
Expected return on pension scheme assets 2,431 2,421
------------------------------------------ -------- --------
2,519 2,470
------------------------------------------ -------- --------
Finance Expenses
Interest on pension scheme liabilities 2,193 2,404
Loan interest 1,828 1,706
Loan indexation 2,240 2,059
Fixed dividend on B shares 63 73
------------------------------------------ -------- --------
6,324 6,242
------------------------------------------ -------- --------
5. Taxation
2012 2012 2011
Analysis of charge in the year GBP000 GBP000 GBP000
Current year tax
Current tax expense: continuing operations 763 995
Adjustment in respect of prior years (273) 49
-------- ----------
Current tax charge 490 1,044
Deferred tax
Accelerated capital allowances:
Current year 222
Prior years (1,395)
--------
(1,173) (1,350)
Retirement benefits:
Current year 116
Prior years 62
--------
178 80
-------- ----------
Deferred tax credit (995) (1,270)
-------- ----------
Total tax credit (505) (226)
-------- ----------
6. Earnings per Share
Basic and diluted earnings per ordinary share (EPS) have
been calculated on the basis of the weighted average number
of ordinary shares in issue during the year of 4,632,170
(2011 - 4,632,170)
The net profit for the period used in the calculated of
EPS was as follows:
2012 2011
GBP000 GBP000
Continuing operations 3,926 4,228
----------------------- ------- -------
7. Related Parties
During the year ended 31 March 2012, key management (Directors)
received remuneration in the form of salaries, fees and
benefits amounting to GBP306,000 (2011 - GBP303,000).
8. Property, Plant and Equipment
During the year ended 31 March 2012, the Group acquired
assets with a gross cost of GBP9.0 million (2011 - GBP3.4
million).
9. Cash and Cash Equivalents
2012 2011
GBP000 GBP000
For the purpose of the cash flow statement,
cash and cash equivalents comprised
the following at 31 March:
Cash at bank and in hand 238 -
Demand deposits 9,325 9,340
Overdrafts (61) (50)
9,502 9,290
--------------------------------------------- ---------------- -------------
10. Interest-Bearing Loans and Borrowings
2012 2011
GBP000 GBP000
Current
Overdrafts 61 -
B shares 1,628 1,668
1,689 1,668
------------------------------------------------ ------- -------
2012 2011
GBP000 GBP000
Non-Current
3.5% Irredeemable Consolidated Debenture
Stock 99 99
3.635% Secured Index-Linked Loan 2032:
Principal 35,000 35,000
Indexation 12,374 10,133
------------------------------------------------ ------- -------
47,473 45,232
------------------------------------------------ ------- -------
Repayment of Debt
During the financial year, the Group redeemed 17,406 (2011
- 113,721) B shares at par, with consideration amounting
to GBP40,034 (2011 - GBP261,558).
11. Dividends
The following equity share dividends were paid by the Group
during the financial period:
2012 2012 2011 2011
Pence Pence
per share GBP000 per share GBP000
------------------------------- ----------- -------- ----------- --------
Ordinary shares
Previous year final dividend 40.3 1,668 38.2 1,582
Current year interim dividend 19.1 791 18.1 749
Non-voting ordinary shares
Previous year final dividend 40.3 199 38.2 188
Current year interim dividend 19.1 94 18.1 89
------------------------------- ----------- -------- ----------- --------
2,752 2,608
------------------------------- ----------- -------- ----------- --------
The following equity share dividends are proposed in respect
of the financial period under review:
2012 2012 2011 2011
Pence Pence
per share GBP000 per share GBP000
Ordinary shares
Current year interim dividend
- paid 19.1 791 18.1 749
Current year final dividend
- proposed 41.4 1,714 40.3 1,668
Non-voting ordinary shares
Current year interim dividend
- paid 19.1 94 18.1 89
Current year final dividend
- proposed 41.4 204 40.3 199
------------------------------- ----------- -------- ----------- --------
2,803 2,705
------------------------------- ----------- -------- ----------- --------
The final dividend for 2011/12 of GBP1,918,000 (equivalent
to 41.4p per share) will be proposed for approval at the
AGM on 26 July 2012 and has not been provided for as a liability
at 31 March 2012.
12. Pension Scheme
The Group's trading company, Dee Valley Water plc ("DVW"),
participates in a defined benefit pension scheme, the Water
Companies Pension Scheme. This is a sectionalised scheme
and DVW participates in the Dee Valley Water plc section
of the Scheme. The Section funds are administered by trustees
and are independent of DVW's finances. Contributions are
paid to the Section in accordance with the recommendations
of an independent actuarial adviser. The Section is closed
to new entrants.
The results of the formal actuarial valuation as at 31 March
2011 were updated to the accounting date by an independent
qualified actuary in accordance with IAS19. As required
by IAS19, the value of the defined benefit obligation and
the current service cost have been measured using the projected
unit credit method.
During the year ended 31 March 2012, employer contributions
of GBP851,000 (2011 - GBP865,000) were paid to the Section.
The estimated amount of total employer contributions expected
to be paid to the Section during 2012/13 is GBP1,138,000.
The following table sets out the key IAS19 assumptions used
for the Section.
Assumptions (per annum) 2012 2011 2010
--------------------------------- ------------ ------------ ------------
Retail Prices Index inflation 3.50% 3.70% 3.90%
Consumer Prices Index inflation 2.50% 3.00% -
Discount rate 4.70% 5.50% 5.50%
Pension increases in payment:
- uncapped 2.50% 3.00% 3.90%
- capped at 5% per annum 2.50% 3.00% 3.70%
General salary increases 3.50% 4.95% 5.40%
Life expectancy of a male aged
60 at balance sheet date 26.9 years 26.5 years 26.4 years
Life expectancy of a male aged
60, 25 years after the balance 28.9 years 29.1 years 29.0 years
sheet date
The amounts included in the balance sheet arising from obligations
in respect of the Section were as follows:
2012 2011 2010
GBP000 GBP000 GBP000
--------------------------------------------- ---------- ---------- ----------
44,004
Present value of defined benefit obligation 42,644 40,387 (41,964)
Fair value of assets (47,609) (44,386)
--------------------------------------------- ---------- ---------- ----------
Net (asset)/liability recognised in
the balance sheet (4,965) (3,999) 2,040
--------------------------------------------- ---------- ---------- ----------
The amounts recognised in the Group Income Statement were
as follows:
2012 2011 2010
GBP000 GBP000 GBP000
---------------------------------------- --------
Employer's part of current service
cost 606 731 425
Interest cost 2,193 2,404 2,172
Expected return on assets (2,431) (2,421) (1,837)
---------------------------------------- -------- ----------- --------
Total expense included in Group Income
Statement 368 714 760
---------------------------------------- -------- ----------- --------
The employer's part of the current service cost is recognised
in operating costs and the interest cost and expected return
on assets are recognised in finance expenses and finance
income.
13. Responsibility Statement
The Directors confirm to the best of their knowledge:
* the financial statements, prepared in accordance with
the applicable set of accounting standards, give a
true and fair view of the assets, liabilities,
financial position and profit or loss of the Company
and the undertakings included in the consolidation
taken as a whole; and
* the management report includes a fair review of the
development and performance of the business and the
position of the issuer and the undertakings included
in the consolidation taken as a whole, together with
a description of the principal risks and
uncertainties that they face.
14. Contents of this Report
The financial information set out above does not constitute
the Group's statutory accounts for the years ended 31 March
2012 or 2011 but is derived from those accounts.
Statutory accounts for 2011 have been delivered to the Registrar
of Companies. The auditor, KPMG Audit Plc, has reported
on the 2011 accounts; the report (i) was unqualified, (ii)
did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying
their report, and (iii) did not contain a statement under
section 498(2) or (3) of the Companies Act 2006.
The statutory accounts for 2012 will be delivered to the
Registrar of Companies following the Annual General Meeting.
The auditors have reported on these accounts; their report
is unqualified and does not include a statement under either
section 498(2) or (3) of the Companies Act 2006.
The Annual Report will be posted to shareholders on or before
18 June 2012 and will be available from that date on the
Company's website: www.deevalleygroup.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SFAFIEFESEIM
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