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Name | Symbol | Market | Type |
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Sutton E.s.bds | LSE:BM50 | London | Bond |
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RNS Number:4754O Sutton & East Surrey Water PLC 21 December 2006 Sutton and East Surrey Water plc Interim Results Announcement The Company today announces its Interim Results for the six months to 30 September 2006. Chairman's Statement This last half year has been a challenging period for the Company. We have encountered a severe drought and a very hot summer, yet have still managed to supply high quality water to our customers for all essential purposes. The period covered by these accounts includes the aftermath of a second dry winter, with resources at their lowest recorded levels, resulting in the necessity of obtaining a Drought Order in May. Through the combined efforts of our customers and our staff, demand and resources were managed in such a manner that we were able to meet all reasonable requirements. However, we inevitably incurred costs that were materially greater than normal, and these have adversely affected the operating profitability of the Company. Water resources and leakage As we emphasised in our last report, our ability to meet customers' demands depends upon the level of rainfall, particularly in the winter months, which replenishes the aquifers and reservoirs for use in the summer. The recent winter rainfall pattern has been the worst since the 1930's, significantly below the long-term average, and, as a result, we have experienced one of the severest droughts in the Company's history. Our resources will generally be able to cope when one winter's rainfall is below average, but when two successive winters are dry they become very stressed. All of South-East England has been affected in this way, and as a consequence our boreholes, which supply 85% of our water, fell to record low levels. Faced with this unprecedented situation we took appropriate action to reduce demand. In April 2005 we instituted a ban on using garden sprinklers, then a full hosepipe ban in March 2006. We also applied to the Secretary of State for a Drought Order to allow us to restrict water used for "non-essential" purposes, and this was granted in mid-May. We implemented it in stages, so that the Company benefited from the maximum reduction in demand while causing the minimum disturbance to customers. These measures proved effective, reducing average demand by 11% and peak demand by 21% relative to the previous year. Compared to the previous very hot summer of 2003, average demand was reduced by 23% and peak demand by 41%. These remarkable reductions were mainly due to the efforts of our customers in using water very wisely during this summer, and consequently we were able to supply all their essential demands. The current position is that, after the very hot and dry months of June and July, we have had above average rainfall between August and October. Despite this welcome respite our boreholes are still at levels well below average, and would be vulnerable to a third dry winter. Bough Beech, our surface reservoir, is currently filling well, due to prudent management by the Company and an extended river extraction period allowed by the Environment Agency. Despite lingering concerns as to the potential impact of a third dry winter when resources are already at a low level, we decided to lift the Drought Order restrictions on November 15 and not to seek to extend them, following discussions with the Environment Agency and DEFRA. These took into account the success that we had achieved in protecting water resources this year by means of the restrictions imposed by the Drought Order, and the cooperative assistance which the Company continues to receive from its customers. We will continue to monitor the resource and demand situation very carefully, and to maintain our publicity campaigns. Our environmental track record remains strong - indeed, we continue to be one of the most successful companies in minimising water loss from the network. We have made additional efforts, at significant cost, to minimise leakage during this period. As a result it has fallen to 23.9Mld from 24.3Mld, but this is insignificant when compared to the effect of the reduction in demand by our customers. Customer service We have held our position among the best performing companies in the water industry, leading the way in distributing high quality water - we achieved 99.98% compliance with mandatory standards - and backing this up with very high levels of service. Our latest improvement, allowing payments over the telephone network 24 hours a day, 7 days a week, has been so successful it has won one national and two international awards. Capital expenditure During the period the company has spent #9.2m on new plant and infrastructure, a significant increase on last year's expenditure of #5.0m. Work is progressing on the second stage of refurbishing our Cheam works and developing new resources at Warwick Wold, Dorking and Oaks Park to enhance supplies. We have invested #3.5m in improving our mains network, and a further #1.1m installing customer meters. We fully expect to achieve our spending targets, as set by Ofwat, within this quinquennium. Financial results The results for the period have been adversely affected by the drought, which has reduced revenue and increased costs. Turnover was #22.9m (#22.6m) for the period, benefiting from the 4.3% increase in prices allowed by Ofwat in respect of inflation and the "K" factor, but negatively affected by a reduction in demand from our measured customers which resulted in income from this source falling #0.6m below our expectations for a typical year. Operating costs have risen owing to the need to purchase additional water (#0.4m), additional leakage control costs (#0.2m) and the expenses incurred in applying for the Drought Order (#0.2m). Additionally, we have experienced increased power and chemical costs reflecting recent movements in these markets. Pension costs, calculated in accordance with FRS17, increased by #0.3m at the operating level. Operating profits fell to #4.7m (2005 #6.6m), while interest charges fell by #0.4m to #2.4m (#2.8m), as a result of lower indexation charges on our Bond. Other finance income, arising from the good performance of our pension fund investments, increased to #0.7m from the #0.4m achieved last year. These factors together led to the profit before tax reducing by #1.1m to #3.0m for the period. Our final salary pension scheme continues to remain in surplus, on an FRS17 basis. Our contributions of 30% of salary and the investment performance mentioned above have contributed to that position, and demonstrate our effective management of the scheme. A special dividend of #12.0m, comprising surplus cash in the business, was paid during the period. Finally I would like to thank all our staff for the special effort that they have made on the Company's and customer's behalf during this very difficult time. Pat Barrett 21 December 2006 Sutton and East Surrey Water plc Profit and Loss Account for the six months ended 30 September 6 months 6 month Year to 30 September 30 September 31 March 2006 Restated 2005 2006 (unaudited) (unaudited) #'000 #'000 #'000 Turnover 22,920 22,561 45,390 Operating costs (18,183) (15,990) (33,227) ------------- ------------ ----------- Operating profit 4,737 6,571 12,163 Net interest payable and similar charges (2,452) (2,840) (6,448) Other finance income 676 368 737 ------------- ------------ ----------- Profit on ordinary activities before taxation 2,961 4,099 6,452 Taxation on profit on ordinary activities (393) (1,676) (2,786) ------------- ------------ ----------- Profit on ordinary activities after taxation 2,568 2,423 3,666 ============= ============ =========== Sutton and East Surrey Water plc Statement of total Recognised Gains and Losses for the six months ended 30 September 6 months 6 month Year to 30 September 30 September 31 March 2006 Restated 2005 2006 (unaudited) (unaudited) #'000 #'000 #'000 Profit for the period 2,568 2,423 3,666 Actuarial gain recognised in the 921 2,340 4,679 pension scheme Deferred tax arising on (gains) in (568) (702) (1,404) the pension scheme ------------- ------------ ----------- Total recognised gains and losses relating to the period 2,921 4,061 6,941 ------------- ------------ ----------- Prior year adjustment following full adoption of FRS 17 (2,958) (2,958) Effect of adoption of FRS 25 (12,384) (12,384) ------------- ------------ ----------- Total gains and losses recognised since last annual report 2,921 (11,281) (8,401) ------------- ------------ ----------- Sutton and East Surrey Water plc Balance Sheet as at 30 September 6 months 6 month Year to 30 September 30 September 31 March 2006 Restated 2005 2006 (unaudited) (unaudited) #'000 #'000 #'000 Fixed assets Intangible assets 9,241 10,213 9,727 Tangible assets 144,199 140,814 140,781 ------------- ------------ ----------- 153,440 151,027 150,508 ------------- ------------ ----------- Current assets Stocks 894 828 818 Debtors 9,776 8,269 8,320 Cash at bank and in hand 19,642 32,587 30,370 ------------- ------------ ----------- 30,312 41,684 39,508 Creditors: amounts falling due within one year (24,220) (23,622) (21,558) ------------- ------------ ----------- Net current assets 6,092 18,062 17,950 ------------- ------------ ----------- Total assets less current liabilities and charges 159,532 169,089 168,458 ------------- ------------ ----------- Creditors: amounts falling due after more than one year (115,090) (113,001) (114,168) Provisions for liabilities and charges (8,831) (8,077) (8,860) ------------- ------------ ----------- Net assets 35,611 48,011 45,430 ------------- ------------ ----------- Capital and reserves Called up share capital 3,105 3,105 3,105 Profit and loss account 32,506 44,906 42,325 ------------- ------------ ----------- Shareholders' funds - equity 35,611 48,011 45,430 ------------- ------------ ----------- Sutton and East Surrey Water plc Cash Flow Statement for the six months ended 30 September 6 months 6 month Year to 30 September 30 September 31 March 2006 Restated 2005 2006 (unaudited) (unaudited) #'000 #'000 #'000 Cash flow from operating activities 12,334 10,978 21,089 Return on investment and servicing of finance: Interest received 534 658 1,388 Interest paid (1,691) (1,584) (3,255) Interest element of finance lease rentals (21) 0 0 Preference dividends to shareholders (483) (483) (966) ------------- ------------ ----------- Net cash outflow from returns on investemnts and servicing of finance (1,661) (1,409) (2,833) UK corporation tax received 36 151 151 Capital expenditure and financial investment Purchase of tangible fixed assets (9,247) (4,963) (10,508) Sale of tangible fixed assets 21 45 146 Dividends paid on shares classified in shareholders' funds (12,000) 0 (5,460) ------------- ------------ ----------- Cash outflow/(inflow) before management of liquid resources and financing (10,517) 4,802 2,585 Management of liquid resources 10,182 (1,481) (774) ------------- ------------ ----------- Decrease/(increase) in cash in the period (335) 3,321 1,811 ------------- ------------ ----------- Financing: Capital element of finance lease rental payments (210) 0 0 ------------- ------------ ----------- Decrease/(increase) in cash in the period (545) 3,321 1,811 ------------- ------------ ----------- This information is provided by RNS The company news service from the London Stock Exchange END IR FEFFLFSMSELE
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