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| Name | Symbol | Market | Type |
|---|---|---|---|
| Sth.e.wtr.5%db | LSE:53HO | London | Debenture |
| Price Change | % Change | Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0 | - |
From May 2019 to May 2024
TIDM53HO
RNS Number : 2395E
South East Water Limited
15 July 2016
South East Water Limited
Preliminary results
for the year to 31 March 2016
Chairman's Statement
On behalf of the Directors of South East Water, I am pleased to present our Preliminary Results for the year ended 31 March 2016 which is the first reporting year of the current five year regulatory period. We are focusing specifically on continuing to improve customer satisfaction, using our scientific and engineering expertise to deliver a reliable service of high quality drinking water and also in preparing for the water industry opening up to retail competition for non-household customers in 2017. I am pleased to report we have made significant progress in these areas during the year.
Customer satisfaction
We are committed to putting our customers' priorities at the heart of everything we do. Our innovative approach to outcome delivery incentives (ODIs) for the current regulatory period means we are financially rewarded or penalised based on how satisfied our customers are on their priority outcomes, as well as by our underlying performance.
We developed incentives that made us look critically at the decisions we make as a business to ensure we are focused on all our customers, not just those who contact us. We aim to empower and inform both our customers and our people to support this effort which has led to a commitment to delivering a "five-out-of-five" service across the business.
Increased investment in the training and development of our frontline teams and working throughout the year with our customer panel, listening to customers and improving our internal processes have led to significant improvements in customer service levels across the business. It is clear that this investment has yielded benefit to our customers. We received 38% less complaints than last year and improved customer satisfaction which helped us achieve a service incentive mechanism (SIM) score of 82.0 out of 100.
We know we have further work to do to reach our target of industry leading performance and during 2016/17 we will be implementing further plans to achieve this.
We have a strong sense of social responsibility in the communities in which we work as our primary duty is to supply people with a reliable service of high quality drinking water. For those customers that have difficulty with paying their bills we have developed a social tariff. The social tariff caps the water bill at a fixed amount for the year and those on a low income or who are in receipt of specific benefits may be eligible and are encouraged to apply. During the year 4,600 people have benefited from this tariff following assistance from our dedicated customer care team to find the right support for their individual needs.
Science and engineering excellence to deliver quality water
In February we opened our new state of the art laboratory in Farnborough, Hampshire. The new laboratory, which operates 24 hours a day, 365 days a year, is able to test 700,000 water samples each year, ensuring that the water that we provide to our customers continues to be top quality. The establishment of this new laboratory has been an important milestone for the business.
Our leakage target for the year was 91.8 million litres per day (Ml/d), compared with 93Ml/d in 2014/15. We are pleased to report that we have made significant progress in delivering our five-year leakage strategy, beating the target by reducing leakage to 88.1 million litres per day. This is equivalent to 16.3% (2014/15 industry average 30.1%) of our total supply and includes leaks occurring on our customers properties, which represent around a quarter of the total leakage. It has been achieved by significant improvements in performance across our leakage programme, including investment in the latest technology, increases in the number of technicians and a record number of leaks detected by our teams.
We have continued to focus on minimising interruptions to supply for our customers, on both our planned engineering works and in response to unplanned events. The engineering team has been working hard to ensure that in particular we minimise interruptions over three hours. I am pleased to report we only had eight interruptions during planned work on our network, which was an average of 0.1 minutes per property. At the beginning of the year there was a significant incident at Hailsham, East Sussex as a result of a burst in a large underground supply main, installed over 40 years ago. This meant we missed our overall target of an average of less than 11 minutes interruption per property for the year. We wrote to all customers impacted to apologise and credited their accounts in recognition of the inconvenience caused. Thankfully incidents like this one are rare and if the Hailsham interruption was not included the year would have seen an average of 9.1 minutes which was a very good performance. The team is working hard to ensure we have a successful year in 2016/17.
During the year we invested GBP89.2 million in new and existing assets, this includes continued investment in installing a new 7km pipeline, which now runs between Leybourne Lakes Country Park and the water treatment works at Burham, Kent and laying a 5.5km strategic water main in Swinley Forest through to Birch Hill, bringing the total investment in these two projects to GBP9.8 million and GBP5.9 million respectively. Schemes such as these are supporting our efforts to improve services for our customers and help safeguard the environment, and we are committed to continue this level of investment.
Retail competition
From April 2017 businesses and other non-household customers will be able to choose their supplier of retail services, including South East Water. Retail services include all the customer related services, such as talking with customers, advising on water usage, reading water meters, billing and collecting payments. The water supplied to such customers will continue to be provided by South East Water's wholesale business (the part of the business that is responsible for the abstraction, treatment and distribution of drinking water). Household customers are not presently affected by this change. South East Water has been preparing for this new era for the industry.
The introduction of competition by the Government aims to drive down prices and improve customer service.
We currently supply approximately 55,000 non-household customers. All of these customers will be able to choose whether they stay with us or move to another retailer and therefore our business retail team has been preparing its strategy to ensure we are a player in the new market.
At the same time the wholesale and household retail teams have been ensuring they are ready for the introduction of new market codes and ensuring there is a "level playing field" for all retailers.
Since early 2015, a cross department project team has been working hard to translate the market codes into everyday business processes, ensure we have the necessary organisational structure and systems in place to operate and interface with the market and ensure the data we are uploading into the market is robust.
From now through to April 2017 we will need to pass many milestones to ensure we are ready to operate, we have to pass market testing and most important of all we have to ensure that come April 2017 should a customer wish to switch retailer we have done everything within our power to make sure this is a good customer experience.
Working with Ofwat and Market Opening Services Limited (MOSL), we have been preparing the business to be ready for the shadow operation period beginning 1 October 2016. There is a lot of work to do during 2016/17 and I am pleased to report the team is making good progress and is on track to a successful outcome for the business and our customers.
Financial results
In the year ended 31 March 2016 our total revenue was GBP214.4m. This is marginally less than the previous year owing to a reduction in tariffs of 1.1% which was part offset by an increase in consumption from new and existing customers. Net operational costs increased by GBP5.0m. This increase is due to inflationary pressure on the cost base and additional expenditure in the year on leakage detection, water treatment and bulk supply of water. Our group operating profit has decreased by GBP4.9 million to GBP74.8 million compared to GBP79.7 million (*) in the previous year and our profit before tax was GBP42.4 million compared to GBP35.3 million (*) in the prior year, primarily due to a reduction in finance costs. Our financial performance was in line with the board's expectations. ( * please see note 3 on Restatement of prior year balances)
The results published in this report summarise our performance for the year and incorporate the performance of South East Water Ltd and South East Water (Finance) Ltd.
Our people, working together towards future success
It is thanks to the passion of the people at South East Water that the company has been recognised with a number of awards during the year. We were delighted to be awarded with the silver accreditation by Investors in People (IIP). This is a great achievement for the business and puts us in the top seven per cent of businesses who are accredited by IIP and underpins our commitment to our people. We received the Institute of Water Innovation Award for our work using eDNA to identify endangered species ahead of engineering works, while our customer care team was named Credit Today's Utilities and Telecoms Water Team of the Year.
During the year there have been a number of changes at board level. In August, Andrew Farmer joined the board as Finance Director to replace Jo Stimpson, who retired from the company after 12 years' service. In January, Graham Setterfield retired as Non-Executive Director, after serving for 15 years to be replaced by John Barnes who brings with him extensive water sector experience. I would like to thank Jo and Graham for their hard work and significant achievements over their time with the business and to welcome Andrew and John to the company.
The board is pleased with the business performance and achievements this year but recognises that continued improvement will be required to address the challenges and achieve our ambitions over the coming years. We believe we have the right management team in place, supported by a great team of people at both South East Water and our key business partners, to deliver on our plans, both now and in the longer term, to the benefit of today's and tomorrow's customers. We would like to thank our people and our partners for their continued hard work and support.
Nick Salmon
Chairman
15 July 2016
Group income statement
for the year ended 31 March 2016
Hot Features
Premium
2016 2015
Notes (restated)
GBP000 GBP000
Revenue 4 214,430 215,080
---------- ------------
Group net operating costs (146,125) (141,082)
---------- ------------
Other income 4 6,467 5,686
Group operating profit 74,772 79,684
Finance costs (37,458) (49,526)
Finance income 5,122 5,127
Profit before taxation 42,436 35,285
Taxation 5 4,043 (4,012)
---------- ------------
Profit for the year 46,479 31,273
---------- ------------
Earnings per share
Basic and diluted from continuing
operations 94.25p 63.42p
---------- ------------
Profit for the current and prior year is generated entirely from continuing operations.
Group statement of comprehensive income
for the year ended 31 March 2016
2016 2015
(restated)
GBP000 GBP000
Profit for the year 46,479 31,273
Items that will not be reclassified
subsequently to profit or loss:
Remeasurement of defined benefit
asset/liability 11,121 20,319
Deferred tax on defined benefit
pension schemes (2,223) (4,061)
Impact of deferred tax rate
change in respect of the pension (509) -
schemes
8,389 16,258
--------- ------------
Total comprehensive income
for the year attributable to
Owners of the Company 54,868 47,531
--------- ------------
The prior year restatement relates to changes in the accounting policy for property, plant and equipment.
Group statement of financial position
as at 31 March 2016
31 March 31 March
2016
2015
GBP000 (restated)
GBP000
Non-current assets
Intangible assets 11,046 10,651
Property, plant and equipment 1,412,184 1,369,190
Amount due from parent undertaking 190,013 190,013
Defined benefit pension surplus 9,003 2,794
-------------- --------------
1,622,246 1,572,648
-------------- --------------
Current assets
Inventories 185 245
Trade and other receivables 66,650 65,614
Cash and cash equivalents 16,947 28,719
-------------- --------------
83,782 94,578
-------------- --------------
Total assets 1,706,028 1,667,226
-------------- --------------
Current liabilities
Loans and borrowings - -
Trade and other payables (85,257) (89,597)
Deferred income (6,803) (5,590)
Provisions (3,834) (4,130)
-------------- --------------
(95,894) (99,317)
-------------- --------------
Non-current liabilities
Loans and borrowings (869,880) (863,418)
Trade and other payables (2,589) (1,751)
Derivative financial instruments (87,226) (88,811)
Net deferred tax liabilities (140,566) (150,295)
Defined benefit pension liability (1,466) (9,783)
Deferred income (65,633) (61,876)
(1,167,360) (1,175,934)
-------------- --------------
Total liabilities (1,263,254) (1,275,251)
-------------- --------------
Net assets 442,774 391,975
-------------- --------------
Equity
Ordinary share capital 49,312 49,312
Capital redemption reserve - -
Revaluation reserve 264,134 264,155
Retained earnings 129,328 78,508
-------------- --------------
Total equity 442,774 391,975
-------------- --------------
The Group's statement of financial position for 31 March 2015 contains a number of restated values due to the adoption of IFRS by the Company.
The accompanying notes are an integral part of this statement of financial position.
Group statement of changes in equity
for the year ended 31 March 2016
Issued Capital Revaluation Retained
share redemption reserve earnings Total
capital reserve (restated) (restated) equity
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 April
2014 49,312 4,000 269,424 48,852 371,588
--------- ------------ ------------ ------------ ----------
Profit for the
year - - - 31,273 31,273
Other comprehensive
income - - - 16,258 16,258
--------- ------------ ------------ ------------ ----------
Total comprehensive
income - - - 47,531 47,531
Dividends (see
note 5) - - - (27,144) (27,144)
Issue of bonus
shares 22,768 - - - 22,768
Cancellation of
capital redemption
reserve - (4,000) - 4,000 -
Cancellation of
share capital (22,768) - - - (22,768)
Amortise revaluation
reserve - - (6,138) 6,138 -
Release revaluation
on disposals - - (447) 447 -
Deferred tax on
reserve releases - - 1,316 (1,316) -
--------- ------------ ------------ ------------ ----------
Balance at 31 March
2015 49,312 - 264,155 78,508 391,975
--------- ------------ ------------ ------------ ----------
Profit for the
year - - - 46,479 46,479
Other comprehensive
income - - - 8,389 8,389
--------- ------------ ------------ ------------ ----------
Total comprehensive
income - - - 54,868 54,868
Dividends (see
note 5) - - - (9,000) (9,000)
Amortise revaluation
reserve - - (6,130) 6,130 -
Release revaluation
on disposals - - (57) 57 -
Deferred tax on
reserve releases - - 1,235 (1,235) -
Impact of deferred
tax rate change - - 4,931 - 4,931
--------- ------------ ------------ ------------ ----------
Balance at 31 March
2016 49,312 - 264,134 129,328 442,774
--------- ------------ ------------ ------------ ----------
All transactions relate to the equity holders of the Company.
The prior year restatement relates to changes in the accounting policy for property, plant and equipment.
Group statement of cash flows
for the year ended 31 March 2016
Notes 2016 2015
(restated)
GBP000 GBP000
Operating activities
Net cash flow from operating
activities 8 120,182 119,494
Interest received 5,094 5,247
Interest paid (34,947) (34,703)
Group tax relief paid (2,530) (3,023)
----------- ------------
Net cash flow before investing
and financing activities 87,799 87,015
----------- ------------
Investing activities
Proceeds from sale of property,
plant and equipment 142 160
Purchase of property, plant
and equipment (88,214) (81,177)
Purchase of intangible assets (3,368) (2,371)
Fixed asset contributions received 878 811
Net cash flow used in investing
activities (90,562) (82,577)
----------- ------------
Financing activities
Finance lease principal payments - (1,237)
Repayments of borrowings (9) (48)
Dividends paid to shareholder 6 (9,000) (27,144)
Net cash flow used in financing
activities (9,009) (28,429)
----------- ------------
Decrease in cash and cash equivalents (11,772) (23,991)
Cash and cash equivalents at
the beginning of the year 28,719 52,710
----------- ------------
Cash and cash equivalents at
the year end 16,947 28,719
----------- ------------
The statement of cash flows of the Group is provided in accordance with IFRS 1 First time adoption of International Financial Reporting Standards.
The prior year restatement relates to changes in the accounting policy for property, plant and equipment.
Notes
1 Basis of preparation
(i) The financial information included within this statement has been prepared on the basis of accounting policies consistent with those set out in the Annual Report and Financial Statements for the year ended 31 March 2016.
(ii) The information shown for the years ended 31 March 2016 and 31 March 2015 does not constitute statutory accounts within the meaning of section 435 of the Companies Act 2006 and has been extracted from the full accounts for the year ended 31 March 2016. The reports of the auditors on those accounts were unqualified and did not contain a statement under either Section 498(2) or Section 498(3) of the Companies Act 2006. The accounts for the year ended 31 March 2016 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 15 July 2016.
2 Going concern
The Group finances its working capital requirements through cash generated from operations and committed facilities that can be called upon as required. Its facilities were undrawn during the year and at the date of signing these financial statements. The Group's annual budget and forecasts together with its five year plan and longer-term resources planning all indicate that the Group should be able to continue in operation utilising its current financial resources and the proceeds of future borrowing opportunities expected to become available.
The directors believe that the Company and Group are well placed to manage its business risks successfully. After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and financial statements.
3 Restatement of prior year balances
South East Water Limited has previously reported under UK GAAP at a company level. It has adopted IFRS in the year, with a transition date of 1 April 2014.
An extensive exercise has been performed to determine the most appropriate accounting policies for the Company under the new accounting framework. This has highlighted that the Group's previous accounting for property, plant and equipment ("PP&E") did not adequately reflect our current understanding of our PP&E valuation and componentisation, and as a result of this, it has been necessary to correct the Group's accounts to be consistent with the Company's new accounting policies and practices.
The information available to the Group now in relation to fixed assets was not available at the date of the original IFRS transition and it is therefore impracticable to restate the accounts back to the original date. The earliest date at which it is practicable to obtain corrected information is as at 1 April 2014.
The following restatements have been recognised at Group level:
Statement of financial Income statement
position
Property,
plant Intangible Deferred Operating Tax
& equipment assets tax profit charge
GBP000 GBP000 GBP000 GBP000 GBP000
1 April 2014
Amounts as previously
reported 1,206,508 9,713 (120,619)
Adjustments 116,292 1,333 (23,645)
------------- ------------- ------------
1,322,800 11,046 (144,264)
------------- ------------- ------------
31 March 2015
Amounts as previously
reported 1,266,462 9,237 (130,896) 92,787 (8,256)
Adjustments 102,728 1,414 (19,399) (13,103) 4,244
1,369,190 10,651 (150,295) 79,684 (4,012)
------------- ------------- ------------ ------------ ---------
Property, plant & equipment: As described above, the Group has adopted new accounting policies in respect of componentisation and useful economic lives in relation to fixed assets. The principles and methodology adopted by the Group have now been applied to the Group's PP&E balances together with the related corrections to the subsequent accounting for additions, disposals and depreciation.
Intangible assets: During the review of PPE it was identified that an amount of work in progress, previously included in PPE, related to intangible assets. The values of intangible assets and PPE have been adjusted to reflect this correction.
Deferred tax: The increase in deferred tax relates to the change in valuation of the fixed assets. The revaluation of fixed assets will be amortised over the lives of the underlying fixed assets and the appropriate proportion of deferred tax will be released to the income statement in line with these transactions.
Operating profit: The changes to the accounting policies in respect of useful economic lives and the recognition of reactive maintenance charges has resulted in changes to the depreciation and reactive maintenance charges recorded within the income statement, as well as the level of customer contributions amortised within revenue. These changes have caused depreciation and reactive maintenance charges to increase by GBP6.1m and GBP7.3m respectively. Additionally customer contributions recognised as revenue total GBP0.3m with a corresponding reduction in the level of deferred income recorded at 31 March 2015 within the statement of financial position.
Other presentational changes: A number of presentational adjustments have been made to better reflect the nature of certain balances. The revaluation reserve relating to PP&E has been reclassified from retained earnings into a separate revaluation reserve and adjusted for the PP&E revaluation discussed above. An amount of GBP1.7m has also been reclassified from Trade and other payables to Deferred income.
4 Total income
2016 2015
GBP000 GBP000
Revenue
Unmetered water income 56,850 71,255
Metered water income 151,935 138,711
Other sales 5,645 5,114
---------- ----------
Total Revenue 214,430 215,080
---------- ----------
Other income
Rental income 1,138 1,168
Sundry income 5,329 4,518
---------- ----------
Total other income 6,467 5,686
---------- ----------
Total income 220,897 220,766
---------- ----------
5 Corporation tax
Major components of the tax expense for the years ended 31 March 2016 and 2015 are:
2016 2015
GBP000 GBP000
Group income statement
Current tax:
Current UK tax charge 3,391 2,041
Amounts under provided in previous
years 96 1
3,487 2,042
Deferred tax:
Relating to origination and reversal
of temporary differences 4,398 1,970
Impact of deferred tax rate change (11,928) -
(7,530) 1,970
---------- --------
Tax (credit)/charge reported in
the group income statement (4,043) 4,012
---------- --------
Tax charge to equity
Deferred tax on defined benefit
pension schemes 2,223 4,061
Impact of deferred tax rate change 509 -
in respect of the pension schemes
---------- --------
Tax reported in comprehensive income
statement 2,732 4,061
---------- --------
6 Dividends
2016 2015
GBP000 GBP000
Equity dividends paid during
the year:
First interim dividend of 4.56p
per ordinary share (2015: 13.76p
per ordinary share) 2,250 6,786
Second interim dividend of
4.56p per ordinary share (2015:
13.76p per ordinary share) 2,250 6,786
Third interim dividend of 4.56p
per ordinary share (2015: 13.76p
per ordinary share) 2,250 6,786
Final dividend of 4.56p per
ordinary share (2015: 13.76p
per ordinary share) 2,250 6,786
-------- ---------
9,000 27,144
-------- ---------
There were no dividends proposed for approval as at 31 March 2016 and 31 March 2015.
7 Earnings per ordinary share - basic and diluted
The following reflects the income and shares data used in the basic and diluted earnings per share computations:
2016 2015
GBP000 GBP000
Profit for the year 46,479 31,273
----------- -----------
Number Number
Basic and diluted weighted average
number of shares 49,312,354 49,312,354
----------- -----------
Basic and diluted earnings per
share 94.25p 63.42p
----------- -----------
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements.
8 Group Cash flow from operating activities
2016 2015
GBP000 GBP000
Profit for the year 46,479 31,273
Adjustments for:
Income tax expense (4,043) 4,012
Finance income (5,122) (5,127)
Finance costs 37,458 49,526
Depreciation and impairment of
property, plant and equipment 42,776 42,923
Amortisation and impairment of
intangibles 2,973 2,841
(Loss)/Profit on disposal of fixed
assets (70) 89
Difference between pension contributions
paid and amounts recognised in
the income statement (3,626) (7,113)
Changes in working capital:
Increase in trade and other receivables (1,002) (2,230)
Decrease in inventory 60 22
Increase in trade and other payables 4,299 3,278
---------- ----------
Net cash flow from operating activities 120,182 119,494
---------- ----------
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SFEFDLFMSEEW
(END) Dow Jones Newswires
July 15, 2016 02:00 ET (06:00 GMT)
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